2023 (7) TMI 1423 - AT - Customs

Valuation of imported goods - undervaluation - valuation adapted by the adjudication authority based on the report of chartered engineer - price of the goods are not existing in the pricelist maintained by the manufacturer - HELD THAT - The goods were detained on reasonable believe that they are illegally imported by mis-declaring the value and description of the goods. Preliminarily, when details were sought, manufacturer of the goods informed that the value of the imported RCR products are lower than the market value of the goods. Based on the above email and data from Internet, further investigation was carried out. However, on inspection of the goods by Advocate Commissioner appointed by the Hon ble High Court of Kerala, it is found that there is no such mis-declaration regarding quantity as alleged. There is no such finding in impugned order as well. Valuation of goods - HELD THAT - If respondent has reasons to believe that the value declared by the appellant is lower than the actual value of at least one brand i.e. RCR, investigation officer ought to have directed local agent of RCR in India M/s Homemaker Enterprises, Haryana to disclose the import price of the said goods, when imported by them rather than taking assistance from Chartered Engineer as was done in the present case. Regarding the report submitted by the Chartered Engineer, the Chartered Engineer relied on the market value of goods in India to ascertain the assessable value. In view of above facts, the method adopted by respondent to reject the transaction value based on such report of Chartered Engineer seems to be without any legal basis. In the impugned order there is no reference to transaction value and the value paid by the importer for procurement of the goods. Further, if the transaction value is found not acceptable, the customs authority is bound to proceed sequentially under rule 5 to 6 onwards and it is not open to the Department to invoke Rule 8 without sequentially complying with the Rule 5, 6 and 7 even in the cases, where the transaction value is to be rejected under Rule 4. However, in the present case, the transaction value is rejected without considering the law laid down by the Hon ble Supreme Court in EICHER TRACTORS LTD. VERSUS COMMISSIONER OF CUSTOMS, MUMBAI 2000 (11) TMI 139 - SUPREME COURT and without following the Customs Valuation Rules. This kind of valuation of the imported goods is incorrect and an improper appreciation of the Customs Valuation Rules, 2002 - Appeal allowed.

Summary

Issues Involved:
1. Allegation of undervaluation of imported goods.
2. Method of valuation adopted by the Customs Authority.
3. Compliance with Customs Valuation Rules.
4. Rejection of transaction value.
5. Use of Chartered Engineer's report for valuation.

Detailed Analysis:

1. Allegation of Undervaluation of Imported Goods:
The appellant imported various goods and filed a Bill of Entry. The Customs Authority alleged undervaluation, initiating an investigation which led to a show cause notice. The appellant contended that the goods were bought as a stock lot in a clearance sale, implying a depreciated value rather than a new price list value. The High Court of Kerala intervened, directing the release of goods upon furnishing a bank guarantee.

2. Method of Valuation Adopted by the Customs Authority:
The Customs Authority relied on a valuation report from a Chartered Engineer who assessed the value based on local market data. The appellant argued that this method was unsustainable and not applicable for cutlery and home appliances, as it is typically used for machinery. The Chartered Engineer's report was criticized for using local market prices and making assumptions in valuing unique items.

3. Compliance with Customs Valuation Rules:
The appellant cited the Supreme Court's judgment in Commissioner of Customs, Calcutta v. South India Television (P) Ltd., emphasizing that the Department must prove undervaluation with evidence of contemporaneous imports at higher prices. The Customs Valuation Rules require sequential compliance, starting from Rule 5 onwards if transaction value is rejected under Rule 4. The adjudication authority failed to follow these rules, directly invoking Rule 8 without sequential compliance.

4. Rejection of Transaction Value:
The appellant argued that the rejection of transaction value was illegal as the Customs Authority did not provide cogent reasons or evidence of contemporaneous imports at higher prices. The Supreme Court mandates that invoice price should be accepted unless proven otherwise with substantial evidence. The adjudication authority overlooked this, relying instead on the Chartered Engineer's report.

5. Use of Chartered Engineer's Report for Valuation:
The Chartered Engineer's report was deemed inappropriate as it relied on local market prices rather than the transaction value or import prices of similar goods. The adjudication authority's reliance on this report was criticized for lacking legal basis and not adhering to the Customs Valuation Rules. The Tribunal highlighted previous judgments where similar valuation methods were deemed unsustainable.

Conclusion:
The Tribunal found that the Customs Authority's method of valuation and rejection of transaction value were flawed and not in compliance with the Customs Valuation Rules. The appeal was allowed with consequential relief, emphasizing the need for proper adherence to legal standards in valuation processes. The order pronounced in the open court on 26/07/2023 concluded that the valuation method used was incorrect and an improper appreciation of the Customs Valuation Rules, 2002.