2003 (11) TMI 144 - AT - Customs

Undervaluation by customs authorities in import of nylon/polyester cloth with PVC backing - HELD THAT - There is no finding in the order to claim that the amount reflected in the L/C was ultimately paid to the supplier in connection with the said supplies or whether a part of it was adjusted against subsequent supplies. The adjudication order proceeds to accept the price mentioned in the L/C as the correct price in respect of goods covered by 8 B/Es. In the face of the contemporary correspondence between the appellants and the suppliers whereby ongoing negotiation of price between buyer and seller is established and the genuineness of this correspondence has not even been doubted the adoption of price as shown in the L/C is totally without the authority of law. It is more so for the reason that the department in the impugned order has not alleged even a single import at the price reflected in the said L/C whereas there is a supplier s commitment to adjust the excess payment reflected in the L/C against future shipments. Though the Commissioner s order does not spell out as to under which rule the value is determined and the Ld. DR could not throw any light on this aspect it appears to have been done under the residual rule viz. Rule 8. Determination of value under Rule 8 cannot be done without exhausting the provisions contained in the earlier rules especially Rules 5 and 6 dealing with valuation based on the value of identical goods (Rule 5) and similar goods (Rule 6). When the date for import of identical goods and similar goods was available in the ICD (even the appellants furnished such data) as well as other customs formation taking recourse to valuation as adopted in the impugned order is totally against the provisions contained in the Customs (Valuation) Rules 1988. The impugned order therefore deserves to be set aside. Accordingly we set aside the impugned order and allow the appeal. The appellants shall consequentially be entitled to the refund of the entire amount paid by them as deposits.

Summary

Issues Involved: Allegation of undervaluation by customs authorities in import of nylon/polyester cloth with PVC backing.

Summary:
The appellants contested the undervaluation allegation by customs authorities regarding the import of cloth. The dispute centered around discrepancies in values declared in Bills of Entry (B/Es) compared to Letter of Credit (L/C) amounts and insurance values. The authorities proposed value enhancements based on L/C prices and insurance values, leading to a show cause notice and subsequent adjudication by the Commissioner of Customs.

In response, the appellants presented evidence of comparable import prices and ongoing negotiations with suppliers regarding pricing discrepancies. However, these grounds were not considered in the impugned order. The appellate tribunal highlighted the necessity for the department to justify disregarding the importers' evidence and the sequential valuation process outlined in Customs Valuation Rules.

The tribunal found flaws in the department's valuation methods, particularly in adopting L/C prices without verifying actual payments to suppliers and using insurance values without deducting applicable taxes. The tribunal criticized the inconsistent application of valuation grounds for different B/Es and emphasized the need to exhaust valuation rules before resorting to Rule 8 for determination.

Ultimately, the tribunal set aside the impugned order, granting the appeal and entitling the appellants to a refund of the deposited amount.