2024 (1) TMI 1128 - AT - Customs

Fraudulent availment of higher drawback or not - export of sub-standard readymade garments at highly overvalued prices - rejection of transaction value under rule 8 - reason to doubt - HELD THAT - Rule 8 clearly provides that if the proper officer has reason to doubt in the first place, he can call for further information and documents and after examining them or if they are not provided if he still has reasonable doubt that the declared transaction value is not true and accurate, it can be rejected. In this case the proper officer had no doubt at all. The officers of DRI, based on intelligence and their subjective opinion and the opinion of another trader, doubted the transaction value and proceeded to seize the consignment and issued the show cause notice. Therefore, there was neither any reason to doubt under rule 8 by the proper officer nor a reasonable doubt at the time of issue of show cause notice. An exporter declares the transaction value and self-assesses the shipping bill as per his understanding which must be accepted unless there is reasonable doubt by the proper officer. And this reasonable doubt cannot be based on the mere opinion of some DRI officers who physically examined the goods. It is surprising that the Joint Commissioner adjudicated the matter solely based on the subjective opinion of the DRI officers ignoring all the documents on record produced by the appellant in support of transaction value. The entire case of the Revenue is that the opinion of the officers of DRI who inspected the goods that they were over-valued is sufficient to form a reasonable doubt regarding the transaction value in the shipping bills and reject it under rule 8, regardless of all the documents produced by the appellant including the bank realization certificates which reflect the transaction value. Nothing in the Act or the Export Valuation Rules provide for rejection of the transaction value based on the intelligence received by the officers of DRI or their subjective opinion rejecting the value of the goods. Needless to say, such an order cannot be sustained. Once the rejection of the transaction value under rule 8 is found to be not tenable, its re-determination, consequential confiscation of the export goods and imposition of redemption fine or penalties cannot be sustained. The declared transaction value was wrongly rejected under Export Valuation Rules 8. The impugned order is, therefore, set aside - Appeal allowed.

Summary

Issues Involved:

1. Whether the transaction value declared by the appellant for export goods can be rejected under Rule 8 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.
2. Whether the re-determination of the export goods' value by the DRI officers is valid.
3. Whether the confiscation of goods under Section 113 and imposition of penalties under Sections 114 and 114AA of the Customs Act are justified.

Summary:

Issue 1: Rejection of Transaction Value under Rule 8
The appellant, an exporter, filed five shipping bills to export readymade garments under a claim for drawback. The DRI officers, suspecting overvaluation to fraudulently avail higher drawback, examined and seized the goods. They doubted the declared value based on their judgment and the opinion of a local trader, leading to the issuance of a show cause notice. The Joint Commissioner upheld the DRI's findings, rejecting the transaction value under Rule 8. However, the Tribunal found that the proper officer did not have a "reason to doubt" the declared value initially, as required by Rule 8. The DRI officers' subjective opinion and intelligence alone were insufficient to constitute a reasonable doubt.

Issue 2: Re-determination of Value
The DRI officers attempted to re-determine the value under Rules 4 to 6 after rejecting the transaction value under Rule 8. They failed to find comparable goods in the market and relied on the opinion of a trader and their cost calculations. The Tribunal noted that the proper officer must first have a reasonable doubt before rejecting the transaction value, which was not the case here. The re-determination of value based on the DRI officers' subjective opinion was deemed invalid.

Issue 3: Confiscation and Penalties
The Joint Commissioner and Commissioner (Appeals) upheld the confiscation of goods under Section 113 and imposed penalties under Sections 114 and 114AA, based on the alleged overvaluation. The Tribunal found that the rejection of the transaction value was not tenable, making the subsequent re-determination, confiscation, and penalties unsustainable. The appellant's submission of bank realization certificates, showing remittances equal to the declared values, was dismissed by the Commissioner (Appeals) but considered valid by the Tribunal.

Conclusion:
The Tribunal set aside the impugned order, holding that the declared transaction value was wrongly rejected under Rule 8 of the Export Valuation Rules. Consequently, the re-determination of value, confiscation of goods, and imposition of penalties were also invalid, providing consequential relief to the appellant.

[Order pronounced on 25.01.2024]