2025 (3) TMI 16 - AT - Customs

Valuation of imported aluminum scrap - rejection of declared value - enhancement of declared value on the basis of related party transaction and LME prices as bench mark based on contemporaneous import data which indicates the undervaluation done by the Appellant - impugned order passed without properly appreciating the facts and the law - violation of principles of natural justice. Related party transaction - HELD THAT - The departmental officers never even claimed the re-assessment done by them on the basis of related party transaction and it is the Commissioner (Appeals) who for the first time has made out a new case of related party transaction in order to distinguish the binding precedents in favour of the assessee. Further it is found that the Commissioner (Appeals) has unilaterally and erroneously relied upon the Order-in-Original dated 14.12.2017 to come to a conclusion that CMR America LLC USA is a related party of the Appellant. This finding of the learned Commissioner (Appeals) is perverse for the reason that the said OIO was rendered in the case of M/s Sanjeevani Non-Ferrous Trading Pvt Ltd and not in the case of the Appellant and imported the said OIO without assessing the facts of the present case reflects complete non-application of mind. Whether the enhancement of value solely on the basis of coerced consent letters DGoV Circular and in the absence of contemporaneous import data is legal and valid? - HELD THAT - This issue has been considered by various benches of the Tribunal and also in the Appellant s own case which has gone upto the Supreme Court and has been decided in favour of the assessee in 2019 (5) TMI 1152 - SUPREME COURT . Further the Hon ble High Court of Delhi in a bunch of appeals has considered the identical issue in detail after considering the various judgments of the Tribunal as well as of the Supreme Court. After considering all the judgments the Hon ble High Court of Delhi in the case of Hanuman Prasad Sons Vs Commissioner of Customs 2024 (11) TMI 1361 - DELHI HIGH COURT has decided the issue in favour of the importer-assessee by setting aside the Tribunal s order dated 20.10.2020. Conclusion - i) The related party transaction argument was unfounded and could not justify the reassessment. ii) The appellant s acceptance under duress did not bar them from appealing the reassessment. iii) The procedural lapses rendered the reassessment invalid. The impugned order is not sustainable in law - Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the enhancement of the declared value of imported aluminum scrap, based solely on coerced consent letters, DGoV Circulars, and without contemporaneous import data, is legally valid.

2. Whether the rejection of the transaction value by the Commissioner (Appeals) based on alleged related party transactions and LME prices is justified.

3. Whether the appellant's acceptance of the reassessed value under duress precludes them from challenging the reassessment.

4. Whether the procedural requirements under Section 17 and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, were adhered to by the authorities.

ISSUE-WISE DETAILED ANALYSIS

1. Enhancement of Declared Value

- Relevant Legal Framework and Precedents: The Customs Act, 1962, particularly Section 14, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, govern the valuation of imported goods. Rule 12 requires that any doubt regarding the declared value must be based on reasonable grounds and communicated to the importer.

- Court's Interpretation and Reasoning: The Tribunal found that the enhancement of value based solely on DGoV Circulars and coerced consent letters, without contemporaneous import data, was not legally sustainable. The Tribunal referenced previous judgments, including those from the Supreme Court, which emphasized the need for empirical and legally justifiable factors to doubt the declared value.

- Key Evidence and Findings: The Tribunal noted that the enhancement was based on LME prices and DGoV Circulars, without providing the appellant with NIDB/LME data or other documents relied upon for enhancement, violating principles of natural justice.

- Application of Law to Facts: The Tribunal applied the principles from past judgments, concluding that the enhancement lacked a reasonable basis and was not supported by the necessary evidence.

- Treatment of Competing Arguments: The Tribunal dismissed the department's argument that the appellant's acceptance of the reassessed value precluded them from challenging it, noting that the acceptance was under duress.

- Conclusions: The Tribunal concluded that the enhancement of the declared value was not justified and set aside the reassessment.

2. Related Party Transactions and LME Prices

- Relevant Legal Framework and Precedents: The Customs Act and related rules require that any influence on price due to related party transactions must be proven by the department.

- Court's Interpretation and Reasoning: The Tribunal found that the Commissioner (Appeals) incorrectly introduced the issue of related party transactions, which was not originally claimed by the department. The reliance on an unrelated Order-in-Original was deemed erroneous.

- Key Evidence and Findings: The Tribunal noted that most of the bills-of-entry were not from alleged related parties, and the Commissioner (Appeals) had relied on an unrelated case to justify the reassessment.

- Application of Law to Facts: The Tribunal applied the principle that the onus to prove price influence due to related parties lies with the department, which failed to do so.

- Treatment of Competing Arguments: The Tribunal rejected the department's argument that common directors and shareholdings automatically indicated price influence.

- Conclusions: The Tribunal concluded that the related party transaction argument was unfounded and could not justify the reassessment.

3. Acceptance Under Duress

- Relevant Legal Framework and Precedents: Section 17(5) of the Customs Act and related judicial precedents allow for appeals even if the reassessed value is accepted under duress.

- Court's Interpretation and Reasoning: The Tribunal, referencing the Delhi High Court's decision in Hanuman Prasad & Sons, held that acceptance under duress does not preclude an appeal.

- Key Evidence and Findings: The Tribunal found that the appellant's acceptance was coerced due to commercial pressures, such as demurrage charges.

- Application of Law to Facts: The Tribunal applied the legal principle that coerced acceptance does not waive the right to appeal.

- Treatment of Competing Arguments: The Tribunal dismissed the department's argument that acceptance constituted a waiver of the right to challenge.

- Conclusions: The Tribunal concluded that the appellant's acceptance under duress did not bar them from appealing the reassessment.

4. Procedural Requirements Under Section 17 and Rule 12

- Relevant Legal Framework and Precedents: Section 17 and Rule 12 require that any reassessment be based on a reasonable doubt, with reasons recorded and communicated to the importer.

- Court's Interpretation and Reasoning: The Tribunal found that the department failed to adhere to these procedural requirements, as no reasons were recorded or communicated.

- Key Evidence and Findings: The Tribunal noted the absence of recorded reasons for doubting the declared value and the lack of communication to the appellant.

- Application of Law to Facts: The Tribunal applied the statutory requirements, concluding that the reassessment process was flawed.

- Treatment of Competing Arguments: The Tribunal rejected the department's argument that the reassessment was valid despite procedural lapses.

- Conclusions: The Tribunal concluded that the procedural lapses rendered the reassessment invalid.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Delhi High Court's decision, emphasizing that "the imperative of reasons being recorded in support of the doubt with respect to declared value and the same being communicated to the importer were aspects on which due emphasis was laid by the Supreme Court in Century Metal Recycling."

- Core Principles Established: The Tribunal reaffirmed that reassessment must be based on reasonable doubt, with reasons recorded and communicated, and that coerced acceptance does not preclude appeals.

- Final Determinations on Each Issue: The Tribunal set aside the reassessment, ruling in favor of the appellant on all issues, and allowed the appeals with consequential relief.