2004 (4) TMI 142 - AT - Customs

Summary

Issues Involved:
1. Classification of long pepper under the Customs Tariff.
2. Valuation of imported long pepper.
3. Allegations of misdeclaration and undervaluation of goods.

Issue-wise Detailed Analysis:

1. Classification of Long Pepper:
The primary issue revolves around whether long pepper (pippali) should be classified under Chapter Heading 12.11 or Chapter Heading 09.04 of the Customs Tariff. The appellants argued for classification under Chapter Heading 12.11, while the department contended it should fall under Chapter Heading 09.04. The Tribunal examined the supplementary note to Chapter 9, which clarifies that the legislature considers long pepper a spice, specifically mentioned under sub-heading 090411.10. The Tribunal noted that even though long pepper is used in Ayurvedic medicine, it is also used as a condiment, aligning with the legislative intent. The Tribunal rejected the argument that long pepper should be excluded from Chapter 9 based on the HSN Explanatory Notes and Chapter Note 2, emphasizing that products specifically mentioned in Chapter 9 cannot be excluded by a chapter note. Consequently, the Tribunal upheld the classification of long pepper under Chapter Heading 09.04.

2. Valuation of Imported Long Pepper:
The valuation issue arose from the department's rejection of the transaction value declared by the appellants and the adoption of a higher value (US $ 835 PMT) based on previous imports. The Commissioner invoked Rule 10A of the Valuation Rules, citing the inability to correlate sale contracts with invoices and the acceptance of the higher value in previous imports. The Tribunal found the Commissioner's approach justified, stating that the declared value might not always represent the transaction value. The Tribunal upheld the Commissioner's determination of the value at US $ 835 PMT, noting that the Commissioner could have used the best judgment method under Rule 8 if necessary.

3. Allegations of Misdeclaration and Undervaluation:
The Commissioner had confiscated the goods on the grounds of misdeclaration of description and value, arguing that describing long pepper as pippali constituted misdeclaration. The Tribunal disagreed, stating that using a Sanskrit term for long pepper does not amount to misdeclaration. The Tribunal also addressed the charge of undervaluation, noting that while the Commissioner re-determined the value based on contemporaneous imports, the charge of undervaluation was not consistently applied in similar cases. The Tribunal found insufficient grounds to sustain the charge of undervaluation and set aside the confiscation and penalties imposed under Section 111(m) and Section 112 of the Customs Act.

Judgment Summary:
The Tribunal upheld the classification of long pepper under Chapter Heading 09.04, confirmed the valuation at US $ 835 PMT, but set aside the confiscation of goods and penalties related to misdeclaration and undervaluation. The appeals were thus partly allowed.