2005 (12) TMI 116 - HC - Customs

Waiver of pre-deposit Valuation undervaluation - The Commissioner of Customs (Appeals), Delhi by an interim order, impugned in this writ petition, passed under Section 129-E of the Customs Act, 1962 directed the petitioner to pre-deposit a sum of Rs. 5 crores, while waiving the remainder of the duty amount held recoverable from it. Dissatisfied with the said order, the petitioner has filed the present writ petition and prayed for a complete waiver of the pre-deposit. Held that - That is not only because some of the invoices raised by the seller company show the value of the goods as 0% of GPL but also because the value varied over a long range between 10% to 90% of the value shown in the GPL. The Commissioner has, keeping those circumstances in view, found that almost 70% of the invoices raised to unrelated buyers were at a price ranging from 52% to 69% of GPL. It was on that broad and prima fade basis that the Commissioner arrived at a pre-deposit figure of Rs. 5 crores which represents almost 50% of the total duty amount demanded from the petitioner. There is neither any illegality nor any perversity in that line of reasoning to call for interference by this Court.

Issues Involved:
1. Interim order for pre-deposit under Section 129-E of the Customs Act, 1962.
2. Correct valuation of imported spare parts.
3. Discretionary power of the Commissioner in waiver of pre-deposit.
4. Applicability of the Customs Valuation Rules, 1988.
5. Financial hardship and undue hardship considerations.

Issue-wise Detailed Analysis:

1. Interim Order for Pre-deposit under Section 129-E of the Customs Act, 1962:
The Commissioner of Customs (Appeals), Delhi, directed the petitioner to pre-deposit Rs. 5 crores while waiving the remainder of the duty amount. The petitioner sought a complete waiver of the pre-deposit. The court noted that the power to waive pre-deposit is discretionary and should not be interfered with unless exercised arbitrarily or whimsically.

2. Correct Valuation of Imported Spare Parts:
The petitioner, a subsidiary of M/s. Cisco Systems Management B.V., imported goods at prices based on Cisco Inc.'s Global Price List (GPL). The valuation of imported spare parts, set at 35% of GPL, was disputed. The Special Valuation Branch (SVB) at Delhi assessed the value at 58% of GPL, considering similar goods supplied to unrelated parties. The Commissioner noted discrepancies in the invoicing pattern, with goods sold at varying percentages of GPL, indicating an arbitrary system.

3. Discretionary Power of the Commissioner in Waiver of Pre-deposit:
The Commissioner partly allowed the waiver application, directing a pre-deposit of Rs. 5 crores against a demand of Rs. 9.22 crores. The court upheld this decision, emphasizing that the discretion was not exercised arbitrarily. The court reiterated that the policy underlying Section 129-E is to ensure pre-deposit unless waived to avoid hardship.

4. Applicability of the Customs Valuation Rules, 1988:
The petitioner argued that the valuation based on similar goods sold to unrelated buyers was inconsistent with Rules 4(3) and 5(1) and (3) of the Customs Valuation Rules, 1988. The Commissioner found that a mechanical application of these rules would lead to absurd results, as the value of goods varied widely. The court agreed with the Commissioner's reasoning, noting that 70% of invoices to unrelated buyers ranged from 52% to 69% of GPL, justifying the pre-deposit figure.

5. Financial Hardship and Undue Hardship Considerations:
The petitioner did not plead financial hardship before the appellate authority or the court. The court noted that undue hardship must be demonstrated with specific facts, which the petitioner failed to do. The court referenced Supreme Court decisions emphasizing that stay of tax recovery should be exceptional and not granted for the mere asking.

Conclusion:
The court found no error of jurisdiction or law in the Commissioner's order directing a pre-deposit of Rs. 5 crores. The court dismissed the writ petition, concluding that the petitioner did not demonstrate undue hardship or financial hardship, and the valuation and pre-deposit decisions were justified based on the facts and circumstances. No costs were awarded.

← Previous Next →