2024 (10) TMI 635 - AT - Customs

Under-valuation of imported goods - rejection of declared transaction value and redetermination of the value of the goods imported - recovery of differential duty under section 28(4) of the Customs Act 1962 along with interest under Section 28AA of the Act ibid - confiscation - penalty - HELD THAT - Once the transaction value is rejected under Valuation Rule 12 in terms of Valuation Rule 3 it should be re-determined sequentially from Valuation Rules 4 to 9. The Commissioner has followed Valuation Rule 9 after recording that the deductive method under Valuation Rule 7 or the computed value under Valuation Rule 8 were not feasible in the case of these goods. Consistent with the principles laid down in these rules the Commissioner adopted the actual value of goods found in the excel sheet produced by Nitin in respect of three Bills of Entry - He further recorded that in respect of 16 Bills of Entry no values were found in the excel sheets but the goods which were imported were similar to the goods which were found in the three Bills of Entry in respect of which the excel sheets were found. The Commissioner was not only correct in adopting the Valuation Rule 9 after examining and excluding the applicability of Valuation Rules 4 to 8 but he has also accepted the declared value in majority of the items and only enhanced the value in such cases where it was warranted. In the absence of any evidence either in the excel sheet or in the statements that values in the excel sheet were on FOB basis it cannot be concluded that they were FOB values and freight and insurance have to be added as per Valuation Rule 10(2). In his statement Nitin had stated that they were CIF values. Transaction both in FOB and CIF are common in international transactions. When the value is being re-determined based on excel sheet the benefit of doubt should go to the importer and these values should be taken as CIF values - the addition of 20% towards freight and 1.125% insurance by the Commissioner under Valuation Rule 10(2) cannot be sustained and it needs to be set aside. The value of the goods liable for confiscation is Rs. 5, 47, 66, 445/- and therefore we find that the penalty of Rs. 9 lakhs imposed on Nitin under section 112 is fair and calls for no interference. Penalty of Rs. 20 lakhs was also imposed on Nitin under section 114AA. This penalty needs to be set aside because there was no separate mis-declaration by the Nitin apart from a mis-declaration in the Bills of Entry filed on behalf of KLM and an penalty has already been imposed on KLM for that mis-declaration. Penalty of Rs. 2 lakhs was imposed on Anshul under section 112. It is true that he was the non-active partner of KLM and had limited role in its operations but had nevertheless filed the papers. Considering his limited role penalty of Rs. 2 lakhs imposed on Anshul needs to be upheld. Penalty of Rs. 5 lakhs were imposed under section 114AA on Anshul. Since there was no separate mis-declaration by Anshul other than the mis-declarations in the Bills of Entry for which a penalty under section 114AA was already imposed on KLM we find that this penalty under section 114AA on Anshul needs to be set aside. The rejection of the declared transaction value in the 19 Bills of Entry under rule 12 of the Customs Valuation Rules is upheld - Re-determination of the transaction value is upheld partly. The values found in the excel sheet must be considered as a CIF values instead of FOB values in the absence of any evidence to support that they were FOB values. Consequently the assessable value and duty must be re-determined. The matter is remanded to the Commissioner only for the purpose of re-computing of amount of duty interest and penalty under Section 114A - Appeal allowed by way of remand.

Summary

Issues Involved:

1. Rejection of declared transaction value and re-determination of value under Customs Valuation Rules.
2. Liability of goods for confiscation under Section 111(m) of the Customs Act, 1962.
3. Imposition of penalties on KLM under Sections 114A and 114AA.
4. Imposition of penalties on Nitin and Anshul under Sections 112(a)(ii) and 114AA.

Issue-wise Detailed Analysis:

1. Rejection of Declared Transaction Value and Re-determination of Value:

The Commissioner rejected the declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, due to reasonable doubt about the truth and accuracy of the declared values. The investigation, which stemmed from a related case involving Wide Impex, revealed that Nitin, a partner in KLM, was involved in undervaluing goods by using fake invoices. The Commissioner re-determined the value under Rule 9, using values from parallel invoices found in Nitin's email. The declared value was rejected for 19 Bills of Entry, and the values were re-determined based on evidence from excel sheets. However, it was concluded that the values in the excel sheets should be considered as CIF values, not FOB values, due to lack of evidence supporting the latter. Consequently, the assessable value and duty must be recalculated.

2. Liability of Goods for Confiscation:

The Commissioner held that the goods with re-determined value were liable for confiscation under Section 111(m) of the Customs Act, 1962, due to discrepancies and evidence of undervaluation. However, since the goods were not available for confiscation, no redemption fine was imposed. The Tribunal upheld the decision that the goods were liable for confiscation but recognized that they were not actually confiscated.

3. Imposition of Penalties on KLM:

KLM was penalized under Section 114A for non-payment or short payment of duty due to collusion or willful misstatement or suppression of facts. The penalty was equal to the differential duty. Additionally, a penalty of Rs. 30,00,000 was imposed under Section 114AA for knowingly making false declarations. The Tribunal upheld the penalty under Section 114AA but directed recalculation of the penalty under Section 114A in line with the revised duty amount based on CIF values.

4. Imposition of Penalties on Nitin and Anshul:

Nitin was penalized Rs. 9,00,000 under Section 112(a)(ii) and Rs. 20,00,000 under Section 114AA. The Tribunal upheld the penalty under Section 112(a)(ii) but set aside the penalty under Section 114AA, as there was no separate mis-declaration by Nitin apart from that by KLM. Anshul was penalized Rs. 2,00,000 under Section 112(a)(ii) and Rs. 5,00,000 under Section 114AA. The Tribunal upheld the penalty under Section 112(a)(ii) but set aside the penalty under Section 114AA, recognizing Anshul's limited role in the operations.

Conclusion:

The appeals were partly allowed, with modifications to the impugned order. The rejection of declared transaction values was upheld, but the re-determination of values was modified to consider CIF values. The penalties on KLM under Section 114AA were upheld, while penalties on Nitin and Anshul under Section 114AA were set aside. The matter was remanded to the Commissioner for recalculating duty, interest, and penalties based on the revised valuation.