2024 (6) TMI 919 - AT - Customs

Valuation of imported goods - ball valves/check valves/cartridges of brass - rejection of declared value - Redetermination of value - HELD THAT -The discard of applicability of rule 4 and rule 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 by the proper officer in both proceedings under section 28 of Customs Act, 1962 was not founded on proper scrutiny of availability of such information but solely on account of disinclination, from point of view of practical convenience, to do so. That is not appropriate discharge of responsibility devolving on the adjudicating authorities taking recourse to section 28 of Customs Act, 1962. Furthermore, it is noticed that, in the dispute by M/s Tisha International, the first appellate authority has not rendered a finding on the plea that disregard of procedure has jeopardized the survival of the computed value. There are no hesitation in holding that re-determination of assessable value has been undertaken in breach of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and has proceeded whimsically after rejection of declared value as transaction value. There has been no effort to ascertain availability of transaction value of identical goods or similar goods contemporaneously imported. It is worth noting that the appellants, too, had failed to adduce evidence of these and, thus, disabuse the presumption that such imports had not taken place. The resort to computed value under rule 8 of the said rules is entirely at variance with the Interpretative Notes to the said Rules. It is only appropriate that the disputes are restored to the original authorities for subjecting the respective show cause notices to a proper disposal in accordance with the framework stipulated in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - appeals are allowed by way of remand.

Issues Involved:

1. Rejection of Declared Value u/r 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
2. Sequential Application of Rules for Re-determination of Value.
3. Applicability of Penalties on Corporate Entities.
4. Adherence to Interpretative Notes in Customs Valuation.

Summary:

1. Rejection of Declared Value u/r 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007:
The value declared in the bills of entry for the import of 'ball valves/check valves/cartridges of brass' by M/s Tisha International and M/s Damian International was doubted due to significant discrepancies when compared to the 'tariff value' of 'brass scrap' notified u/s 14(2) of Customs Act, 1962. Show cause notices were issued proposing rejection of declared values under rule 12, re-determination of values, and recovery of differential duty u/s 28 of Customs Act, 1962, along with interest u/s 28AB, and proposing confiscation of goods u/s 111(m) with penalties u/s 112, 114A, and 114AA.

2. Sequential Application of Rules for Re-determination of Value:
The adjudicating and first appellate authorities erred by affirming the proposal for rejection of declared value under rule 12 merely based on the 'tariff value' of 'brass scrap' fixed by CBEC, which is not recognized as a benchmark in the Customs Valuation Rules. The authorities failed to sequentially apply rules 4 to 9 as mandated by rule 3(4). The rejection of declared value was not flawed, but the subsequent re-determination did not follow the required procedural rigor.

3. Applicability of Penalties on Corporate Entities:
It was argued that corporate entities should not be subjected to penalties proposed under section 112 as they are incapable of acts of omission and commission. Reliance was placed on the Supreme Court decision in Century Metal Recycling Pvt Ltd v. Union of India [2019 (367) ELT 3 (SC)] to support this submission.

4. Adherence to Interpretative Notes in Customs Valuation:
The lower authorities failed to adhere to the Interpretative Notes appended to the Customs Valuation Rules, specifically the notes to rule 8, which outline the methodology for determining the 'computed value'. The authorities did not make adequate efforts to obtain necessary information from the producer and relied on domestic market values, which is contrary to the rules.

Conclusion:
The re-determination of 'assessable value' was undertaken in breach of the Customs Valuation Rules and proceeded whimsically after the rejection of declared value. There was no effort to ascertain the availability of 'transaction value' of 'identical goods' or 'similar goods' contemporaneously imported. The disputes are restored to the original authorities for proper disposal in accordance with the Customs Valuation Rules. The appeals are allowed by way of remand after setting aside the impugned orders.

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