2024 (11) TMI 1361 - HC - Customs

Challenge to the decision rendered by CESTAT - appellants right to question the enhancement made concerning the valuation of the imported goods once the appellants had given up their right to seek issuance of a show cause notice and/or speaking order under Section 17 of the Customs Act 1962 - Decision to enhance the declared values relied exclusively on data from the NIDB - Declared values and the power of reappraisal - HELD THAT - Section 17 (5) then proceeds further and constitutes the next fundamental step which the statute constructs in respect of reassessment. Shorn of unnecessary details it prescribes that where the reassessment done under Section 17 (4) is at variance with the self-assessment of the importer the proper officer would proceed to pass a speaking order in support of such reassessment. A combined reading of sub-sections (4) and (5) of Section 17 thus leads one to the irresistible conclusion that a reassessment provisional or preliminary would already exist and would have been formulated prior to sub-section (5) getting triggered. It is also important to bear in mind that Rule 12 (2) is essentially concerned with the first limb of the reassessment exercise and is connected with Section 17 (4). This would clearly appeal to reason since the information or documentation that may be elicited from the importer would have to be concerned with the reasonable doubt which the proper officer harbours and thus obliged to communicate to the importer upon request the grounds on the basis of which it doubts the truthfulness or accuracy of the value declared. It is also pertinent to note that sub-section (4) of Section 17 is prefaced by the use of the expression Where it is found on verification examination or testing . It is this verification exercise which would necessarily entail the importer being provided a reasonable opportunity to be heard before a final decision is taken. It is perhaps in the aforesaid light that Century Metal Recycling observed that neither the opportunity of questioning an opinion with respect to reassessment as formed nor an opportunity of hearing can be waived. In fact it held that the aforesaid procedure would clearly be mandatory. Exploring the concepts of abandonment and waiver - Whether that right itself can be said to have been abandoned ? - As it becomes more than apparent that the assertion of abandonment and waiver of a right is clearly misconceived. The tone and tenor of the communications which were addressed by the appellants cannot possibly be interpreted or construed as amounting to a conscious waiver of a right to question the reassessment further. Not only do those documents appear to be the submission of a without prejudice request tendered in order to facilitate expeditious clearance of goods the same cannot possibly be viewed or interpreted as amounting to an abandonment of the right to institute an appeal itself. When we revert to the view expressed by the CESTAT in CUSAA 126/2022 we find that there is a clear absence of consideration of the various communications which had been addressed by the appellant to the customs authorities and which had preceded the finalization of re-evaluation of declared value. The CESTAT thus appears to have proceeded on the premise that the importer had all along agreed to the enhancement of the declared value and raised no protest. The CESTAT thus appears to have incorrectly proceeded on the basis that the communications addressed itself implied that the importers had willingly accepted the value as suggested by the customs authorities and consequently the respondents being relieved of undertaking any adjudication as contemplated under Section 17 of the Act in light of the abandonment and waiver of the appellant s right to challenge the reassessment. The appellants had registered their protest on more than one occasion and had also sought expeditious clearance of goods subject to an exercise of provisional reassessment being undertaken. These facts and circumstances clearly detract from the argument of a conscious abandonment of the right to question the reassessment or to accept the re-evaluation exercise undertaken without reservation of a right to challenge. Rejection of declared values Assessing its validity - The proper officer could not be said to have been relieved of its obligation to pass a speaking order in terms of Section 17 (5). The process of rejecting the declared value and reassessing the transaction value is statutorily required to be preceded by the proper officer having drawn an opinion of why the declared value was not liable to be accepted before consequently proceeding to reassess the value. While the said reassessment may not be framed in elaborate terms it would necessarily have to be reflective of the reasons which weighed upon the respondent to form the opinion that the declared value was not liable to be accepted. Value enhancement on the basis of NIDB data - whether the enhancement or re-evaluation of the declared value can be based solely on the data available in the NIDB in Agarwal Foundries the Hyderabad Bench of the CESTAT had held that the customs authorities would be unjustified in enhancing the declared import values solely on the basis of NIDB data? - Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules 1988 1988 Rules as analysed by the CESTAT in this decision was similar to Rule 12 of the 2007 Rules. The CESTAT ruled in favour of the appellant holding that NIDB data alone would be insufficient for value reassessment without corroborative evidence or contemporaneous import comparisons. This decision underscored the importance of comprehensive evidence and procedural compliance in customs disputes cautioning against arbitrary reliance on NIDB data Tribunal has consistently found that a valuation addition based solely on NIDB data would wholly unwarranted and that any such reassessment would have to be shored by independent and cogent evidence. The legal position so articulated would ensure fairness and transparency in the determination of import values. The body of precedent noticed above have in unison held that mere reliance on external data without corroborative evidence or clear justification would fail to meet the tests and principles underlying the provisions enshrined in the 1988 Rules and 2007 Rules. They correctly lay emphasis on the imperatives of a reasoned approach to customs valuation and a deviation from declared values being founded on tangible and justiciable material. A reassessment or rejection of declared value would thus have to necessarily be established as being compliant with the aforenoted requirements of pre-eminence. Relieving the respondents of this obligation would clearly lead to pernicious consequences. We would answer the question framed in the affirmative and in favour of the importers. The appeals are consequently allowed and the impugned orders of the CESTAT set aside. The order of the Commissioner (Appeals) shall in consequence stand restored.

Summary

Issues Involved:

1. Whether the Tribunal misdirected itself in holding that the appellants could not question the enhancement made concerning the valuation of imported goods after conceding to the valuation undertaken by the proper officer.
2. The validity of rejection of declared values and enhancement based on NIDB data.
3. The scope and application of Section 17 of the Customs Act, 1962, and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
4. The concepts of waiver and abandonment in the context of customs valuation and the rights of importers.

Issue-wise Detailed Analysis:

1. Tribunal's Misjudgment on Valuation Concession:

The Tribunal's decision that the appellants could not challenge the enhanced valuation once they conceded to it was scrutinized. The court emphasized that the concession made by importers under Section 17(5) of the Customs Act, 1962, does not preclude them from questioning the reassessment. The court noted that the concession relates only to the waiver of a speaking order and not the right to appeal or challenge the valuation. The court highlighted that the statutory right to question the correctness of the assessment is not waived by a mere concession for expeditious clearance of goods.

2. Validity of Rejection of Declared Values Based on NIDB Data:

The court examined whether the enhancement of declared values based solely on NIDB data was valid. It was held that NIDB data alone could not justify the rejection of declared values without additional evidence or contemporaneous import data. The court referenced past precedents where reliance solely on NIDB data was deemed insufficient for valuation reassessment. The court concluded that the customs authorities must provide cogent reasons and evidence for rejecting declared values, and mere reliance on NIDB data does not meet this requirement.

3. Scope and Application of Section 17 and Rule 12:

The court provided a detailed interpretation of Section 17 of the Customs Act and Rule 12 of the Customs Valuation Rules. It emphasized that the proper officer must have a reasonable doubt about the declared value, supported by empirical evidence, before proceeding with reassessment. The court underscored the importance of recording reasons for doubting the declared value and communicating these reasons to the importer upon request. The statutory framework mandates that the reassessment process be transparent, fair, and based on justifiable grounds.

4. Concepts of Waiver and Abandonment:

The court explored the concepts of waiver and abandonment in the context of customs valuation. It clarified that a waiver must be intentional and informed, and cannot be presumed from mere conduct. The court reiterated that waiver or abandonment of the right to challenge a reassessment must be explicit and cannot be inferred from actions taken under duress or to avoid financial losses. The court concluded that the appellants' actions, aimed at avoiding demurrage charges, did not constitute a waiver of their right to appeal the reassessment.

Disposition:

The court allowed the appeals, setting aside the Tribunal's orders and restoring the orders of the Commissioner (Appeals). It directed that the reassessment be reconsidered in light of the legal principles articulated in the judgment, ensuring that the customs authorities adhere to the statutory requirements for valuation and reassessment.