2025 (1) TMI 857 - AT - Customs

Violation of principles of natural justice - ex-parte decision by the adjudicating authority - rejection of delared value - evidence presented was sufficient to support the allegations of undervaluation or not - appellant's statement, allegedly obtained under coercion, could be used as a basis for the determination of the value of goods or not - confiscation - penalties. HELD THAT - Before rejecting the transaction value the department has to find out as to whether there are any import of identical goods or similar goods at a higher price at or around the same time as that of imports in question. It has been clarified by the Hon ble Apex Court in the case of Ganpati Overseas 2023 (10) TMI 364 - SUPREME COURT that unless the evidence is gathered in that regard the question of importing Section 14(1A) of the Customs Act does not arise. Thus casting suspicion on invoice produced by the importer is denied to be sufficient to reject it as the evidence of value of imported goods. It has been categorically held that the under valuation has to be proved that too, in the form of evidence about comparable imports. In the absence thereof, the benefit of doubt must go to the importer. In the present case, admittedly there is no evidence of comparable imports at the relevant time with respect to the value of PVC panels and accessories imported by the appellant. In the absence thereof, there is no basis even to arrive at the re-determined value. The undervaluation of the impugned goods has been confirmed solely on the basis of the statement of the appellant. The said statement is alleged to be recorded under coercion, not only the said statement, but the payment of Rs. 20 lakhs made by the appellant by two demand drafts is also alleged to be involuntary. Indisputably a confession would come within the purview of Section 24 of Indian Evidence Act, 1872. According to which confession is irrelevant except if making the confusion appears to have been caused by any inducement, threat or promise. The statement of the proprietor which has been alleged to be under coercion, the sole evidence is held to have been wrongly relied upon by the department to reject the value of imported goods shown in the invoice attached to the Bill of Entry. More for the reason that the appellant had requested for the copy even of the non relied documents time to file its defense - there are no document on record which may be called as the document of proving the intelligence of DRI officers or which may be the document proving the actual FOB price. Conclusion - The department has wrongly rejected the declared assessable value of the impugned import vide four Bill of Entries. The re-determined value is, therefore, not acceptable. The confirmation of the differential duty of Rs. 9,60,376/- is, therefore liable to be set aside along with the order of confiscation and the order imposing various penalties. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the principles of natural justice were violated due to the ex-parte decision by the adjudicating authority.
• Whether the reassessment of the declared value of imported goods was justified under the Customs Valuation Rules, 2007.
• Whether the evidence presented was sufficient to support the allegations of undervaluation and the subsequent imposition of penalties.
• Whether the appellant's statement, allegedly obtained under coercion, could be used as a basis for the determination of the value of goods.
• Whether the penalties and confiscation of goods were legally justified under the Customs Act, 1962.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice

• Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case. The appellant cited the case of Reankhan Belin Vs. State of Gujarat to support their claim of violation.
• Court's Interpretation and Reasoning: The court noted that the original adjudicating authority proceeded ex-parte, which was contested by the appellant due to COVID-19 travel restrictions.
• Key Evidence and Findings: The appellant argued that they were not given sufficient opportunity to be heard, and the decision was rushed.
• Application of Law to Facts: The court found that the adjudicating authority did not provide adequate opportunity for the appellant to defend themselves.
• Treatment of Competing Arguments: The Departmental Representative argued there was no violation, but the court sided with the appellant.
• Conclusions: The court concluded that the principles of natural justice were violated.

Issue 2: Reassessment of Declared Value

• Relevant Legal Framework and Precedents: Section 14 of the Customs Act and Rules 3 and 4 of the Customs Valuation Rules, 2007, govern the determination of the value of imported goods.
• Court's Interpretation and Reasoning: The court emphasized that the declared value should be accepted unless there is evidence to prove otherwise, citing Eicher Tractors Limited and Varsha Plastics Pvt. Ltd. cases.
• Key Evidence and Findings: The Department failed to provide evidence of comparable imports to justify the reassessment.
• Application of Law to Facts: The court found no evidence to support the reassessment of the value of the imported goods.
• Treatment of Competing Arguments: The appellant argued that the reassessment was arbitrary, and the court agreed.
• Conclusions: The reassessment of the declared value was unjustified.

Issue 3: Sufficiency of Evidence for Undervaluation

• Relevant Legal Framework and Precedents: The burden of proof lies with the Department to show undervaluation, as held in Mirach Exports Pvt. Ltd. and other cases.
• Court's Interpretation and Reasoning: The court held that mere suspicion is insufficient to prove undervaluation.
• Key Evidence and Findings: The Department relied heavily on the appellant's statement, which was alleged to be coerced.
• Application of Law to Facts: The court found no substantial evidence to support the allegations of undervaluation.
• Treatment of Competing Arguments: The Department argued that the appellant's admission was sufficient, but the court disagreed.
• Conclusions: The evidence was insufficient to support the undervaluation claim.

Issue 4: Use of Appellant's Statement

• Relevant Legal Framework and Precedents: Section 24 of the Indian Evidence Act deals with the admissibility of confessions.
• Court's Interpretation and Reasoning: The court emphasized that confessions made under coercion are inadmissible.
• Key Evidence and Findings: The appellant's statement was alleged to be coerced, and the Department failed to prove it was voluntary.
• Application of Law to Facts: The court found the statement inadmissible as evidence for undervaluation.
• Treatment of Competing Arguments: The Department claimed the statement was voluntary, but the court required more evidence.
• Conclusions: The appellant's statement could not be used to determine the value of goods.

Issue 5: Legality of Penalties and Confiscation

• Relevant Legal Framework and Precedents: Sections 111(m), 114A, and 114AA of the Customs Act relate to penalties and confiscation for misdeclaration.
• Court's Interpretation and Reasoning: The court found that without evidence of undervaluation, penalties and confiscation were unjustified.
• Key Evidence and Findings: The lack of evidence for undervaluation rendered the penalties and confiscation baseless.
• Application of Law to Facts: The court held that the penalties and confiscation were not legally supported.
• Treatment of Competing Arguments: The Department argued for penalties based on the appellant's admission, which the court rejected.
• Conclusions: The penalties and confiscation were set aside.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The department has wrongly rejected the declared assessable value of the impugned import vide four Bill of Entries."
• Core Principles Established: The declared value should be accepted unless there is substantial evidence to prove otherwise; confessions made under coercion are inadmissible.
• Final Determinations on Each Issue: The appeal was allowed, setting aside the reassessment, penalties, and confiscation due to lack of evidence and violation of natural justice principles.