2024 (6) TMI 20 - AT - Customs

Challenged the revision in duty liability of antenna - Validity of re-determination of assessable value - Compliance with Customs Valuation Rules - Influence of relationship on transaction value -Sequential application of alternative methods for valuation - Adequacy of investigation and evidence - HELD THAT - The peremptory discard of transfer pricing policy , and apparently because the investigation had failed to address any lacunae in the show cause notice, suffices to question recourse to relationship having influenced price as the basis for proceeding under rule 3(4) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It was essential that each of the different models should have been subject to the process stipulated in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on the basis of comparison with prices of similar or identical goods or otherwise. Instead, we find that the impugned order has referred to rule 4 and rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 in one breath without any indication of circumstances and the imports in which rule 4 would apply or those relating to rule 9 for adjustment of transaction value of identical goods should. Thus, we find that the rejection of declared value as transaction value , for the purpose of assessment and for confiscation, is not in consonance with section 14 of Customs Act, 1962 and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It would appear that the investigation had failed to take note of the altered paradigm of valuation and preferred to regress to an erstwhile regime that appeared more conducive to proceeding against imports; it could well be that the investigation was also undertaken far too soon after the change in rules for the evidence that had been marshaled to be fitted into the altered paradigm. We are constrained to observe so as show cause notice is the root of any detriment under customs law. That a show cause notice is not congruent with a valuation system that has been enacted is merely demonstrative of disrespect for the law but for an adjudication order to draw upon it as sanctified, and probably from its provenance, conclusion is erroneous implementation of law. That caveat is necessary because an inferential show cause notice, while not desirable, does comprise evidence that may be remarshalled for determination of value in accordance with the law. The statutory obligation of the proper officer to dispose off the show cause notice in accordance with the conformity of the proposals therein with the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, over the conclusions arrived at in the show cause notice, must be taken to its logical conclusion. The impugned order was set aside due to non-compliance with section 14 of Customs Act, 1962, and the Customs Valuation Rules, 2007. The case was remanded to the original authority for fresh disposal of the show cause notice, with detailed scrutiny of the imported goods' description, submissions by the noticee, and findings for adopting a particular value for assessment. All issues were left open for consideration in the de novo proceedings.

Issues Involved:
1. Validity of re-determination of assessable value.
2. Compliance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
3. Influence of relationship on transaction value.
4. Sequential application of alternative methods for valuation.
5. Adequacy of investigation and evidence.

Summary:

1. Validity of Re-determination of Assessable Value:
The appellant, M/s Commscope (India) Pvt Ltd, challenged the revision in duty liability for imported antennas valued at Rs. 78,19,24,167. The Commissioner of Customs, CSMIA, Mumbai, ordered recovery of Rs. 2,28,22,168/- u/s 28 of Customs Act, 1962, with interest u/s 28AA, and imposed a penalty of like amount u/s 114A. The primary contention was that the adjudication order lacked legal sanctity and was cryptic.

2. Compliance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007:
The appellant argued that the findings were contrary to legal provisions for rejecting declared value and re-determining it. The adjudicating authority failed to follow the principle of sequential application of alternative methods in the Customs Valuation Rules, 2007. The order lacked details of imports considered and contemporaneity of the bills of entry used for benchmarking.

3. Influence of Relationship on Transaction Value:
The appellant contended that the relationship between the buyer and seller did not influence the price, as previously scrutinized and cleared by the Special Valuation Branch (SVB). The impugned order did not provide clear evidence of the relationship affecting the price, contrary to rule 3 of the Customs Valuation Rules, 2007.

4. Sequential Application of Alternative Methods for Valuation:
The adjudicating authority did not follow the required sequential application of rules 4 to 9 for determining assessable value. The impugned order superficially referenced annexures to the show cause notice without proper discussion on the correctness of the formulation for adjusting the transaction value of identical goods.

5. Adequacy of Investigation and Evidence:
The investigation compared the appellant's imports with those of unrelated buyers, finding higher prices for identical goods. However, the adjudication order did not distinguish between 'ex-factory' and 'free-on-board' prices, which was irrelevant for determining transaction value. The investigation failed to address the altered paradigm of valuation under the new rules, leading to an erroneous implementation of the law.

Conclusion:
The impugned order was set aside due to non-compliance with section 14 of Customs Act, 1962, and the Customs Valuation Rules, 2007. The case was remanded to the original authority for fresh disposal of the show cause notice, with detailed scrutiny of the imported goods' description, submissions by the noticee, and findings for adopting a particular value for assessment. All issues were left open for consideration in the de novo proceedings.

← Previous Next →