2024 (1) TMI 1123 - AT - Customs

Claim of duty drawback, refund of IGST and state levies - Valuation of export goods - determination of the fact whether it amounted to over valuation or not - proper determination of consequential benefits available to the exporter upon exportation of such goods - whether the export goods are liable for confiscation and whether the appellants are liable for imposition of penalties under the Customs Act, 1962? - HELD THAT - The appellants have declared the FOB value of export goods as given in their commercial invoices, which is the transaction value. Further, submitting the declaration form in terms of Rule 7 above, is primarily the responsibility of the exporter. In the present case, it is not in dispute that the values indicated in the Shipping Bills were matching the value particulars declared in the commercial invoices. Further, any exercise in re-determination of value other than the transaction value has to be adopted step-by-step approach on the basis Rule 3 ibid, and after rejection of transaction value as per Rule 8 ibid. In order to establish the allegation of over-valuation of export goods, it is required to go by an evidence or fact indicating that there was a mis-declaration of value at the time of exports in the shipping bills and the value was re-determined as per the above legal provisions. It is not the case of Revenue that the FOB value of export goods declared in the shipping bills was different from the prices indicated in the invoices. The FOB value and the invoice value of the export goods are same and there is no mismatch. There is not even an iota of evidence produced, either in the form of data relating to value of exports of goods of like kind and quality from the data base maintained by the department, to establish prima facie case of over valuation to reject the transaction value. There is no discussion in the order of the original authority or in the impugned order of the Commissioner (Appeals) as to whether in valuation of export goods each of the Rules have sequentially been approached as provided therein and how they adopted the Rule 6 as a last resort and how the other methods of valuation under other Rules were not feasible. Despite the submission of the appellants that they had received the entire FOB value of export proceeds in the form of foreign exchange remittances though the banking channel and submitted the e-BRCs, the original authority in disregard to this factual evidence had simply concluded that the exporter had not produced any documentary evidence in the form of purchase order or contract with overseas buyer; the exporter had admitted in his written submission dated 24.02.2021 that they had received only part payment for six S/Bs so far; and the goods were mis-declared for size and composition. In the present case, none of the instructions, either with respect to determination of value in terms of the extant Rules, or with regard to issue a query memo specifying reasons for raising a doubt about truth or accuracy of the declared value in terms of Rule 8 was raised; further, the instruction for allowing/release of the goods for export against a simple undertaking after drawl of representative sample was also not followed. Even in case warranting seizure or detention of export goods, the provisional release of such goods were not allowed within the prescribed time for allowing it to be exported. In fact, in the present case, the goods had already been exported out of the country and subsequently, the same were brought back into the country, for examination of the export goods and to establish the case of overvaluation. The conclusion arrived by the learned Commissioner of Customs (Appeals) on this valuation issue in the impugned order is not supported by any evidence or factual detail, to fasten the penal liability for such over valuation on the appellants and thus the impugned order rejecting the transaction value by confirming the re-determination of assessable value of export goods arrived at by the original authority in his order dated 27.02.2021, is contrary to the legal provisions and the manner provided under Customs Valuation (Determination of Value of Export Goods) Rules, 2007, and thus the same is not legally sustainable. It is also on record that the Customs authorities did not seize the goods during its examination and panchnama proceedings conducted on 10.04.1019; however they drew representative samples in order to determine the alleged over-valuation and mis-declaration of export goods. It is already seen that in the earlier round of litigation, the appellants had prayed for provisional release of the export goods covered under detention by the Customs authorities, and they filed an appeal on the ground that the order of provisional release under Section 110A ibid, was too harsh on them. On perusal of the Circular No 01/2011-Customs dated 4th January 2011, it is found that the Government had intended to alleviate the difficulties faced by exporters which was arising on account of detention of export goods and consequential delays in fulfillment of export order, payment of demurrage charges by exporters to the Custodians, reducing the period of detention to the minimum, by streamlining the customs procedure of provisional release/exportation of seized goods/goods under investigation on account of mis-declaration in terms of quantity and value etc. We find that by applying the above instructions to the facts of the present case, it is clear that the export goods which were suspected of mis-declaration and where such declaration is to be confirmed and further enquiry/confirmatory test is required (as it is the case textiles materials), the goods should have been allowed for exportation provisionally, in order to safeguard the interest of the genuine exporters as well as the revenue. Further, in the absence of any document or other evidence proving overvaluation of export goods, the claim of the Revenue that the appellants have mis-declared the description of the goods to claim higher ineligible export benefits does not sustain. Thus, the action taken by the department in the impugned order for confirmation of the adjudged demands along with confiscation of goods and imposition of penalty on the appellants is not legally sustainable. Thus, the impugned order upholding the order of original authority in confirmation of adjudged demands, confiscation of goods and imposition of penalty on appellants, is not legally sustainable and hence the same is set aside. Further, for the limited extent of determination of eligible amount of drawback, arising on account of change in drawback rate alone and not on account of redetermination of the FOB value, we remand the case back to the original authority for this limited purpose. Needless to say that adequate opportunity for personal hearing is given to the appellants, so that all the relevant facts are taken into consideration while arriving at such re-determination of eligible amount of drawback in this case. Appeal allowed.

Summary

Issues Involved:
1. Valuation of export goods and determination of overvaluation.
2. Determination of consequential export benefits.
3. Confiscation of goods and imposition of penalties.

Summary of Judgment:

Valuation of Export Goods and Determination of Overvaluation:
The Tribunal examined whether the declared transaction value of the export goods was accurate. The appellants claimed the declared FOB value was genuine, supported by commercial invoices and Electronic Bank Realisation Certificates (e-BRCs). The Customs authorities, however, suspected overvaluation based on a market survey. The Tribunal found no evidence of overvaluation, noting that the full FOB value was realized through banking channels. The Customs' reliance on a market survey without following the Customs Valuation Rules sequentially was deemed insufficient. The Tribunal concluded that the declared transaction value should be accepted, and the finding of overvaluation was set aside.

Determination of Consequential Export Benefits:
The Tribunal addressed the reduction in export benefits such as Drawback, IGST refund, ROSL, and MEIS benefits, which were recalculated based on the alleged overvaluation. Given the lack of evidence supporting overvaluation, the Tribunal ruled that the original export benefits should be restored. The Tribunal remanded the case to the original authority solely to determine the eligible drawback amount based on the correct classification of goods as per test reports, excluding any reassessment of the FOB value.

Confiscation of Goods and Imposition of Penalties:
The Tribunal reviewed the confiscation of goods and penalties imposed on the appellants under Sections 113(i), 113(i)(a), 114(iii), and 114AA of the Customs Act, 1962. The Tribunal found that the Customs authorities did not follow proper procedures for provisional release and detention of goods. The Tribunal concluded that the confiscation and penalties were not legally sustainable due to the lack of evidence for overvaluation and mis-declaration. The Tribunal set aside the confiscation and penalties, emphasizing that the appellants had realized the full export proceeds.

Conclusion:
The appeals were allowed, the impugned order was set aside, and the case was remanded to the original authority for limited re-determination of eligible drawback based on correct classification without reassessing the FOB value. The Tribunal emphasized the need for adequate opportunity for personal hearing during the re-determination process.

(Order pronounced in open court on 20.11.2023)