2025 (3) TMI 584 - AT - Customs

Valuation of imported goods - two Containers containing assorted Gillette brand goods - undervaluation/suppression of value - prohibited goods or not - principles of natural justice - HELD THAT - The dispute pertains only to the valuation of the goods since the Original Authority at para 29 of the OIO has held that the impugned goods cannot be treated as prohibited goods under section 11 of the Customs Act 1962 read with the Trade Marls Act 1999 and Intellectual Property (Imported Goodfs) Enforcement Rules 2007. This is a case where investigations revealed that there was a mis-declaration of the transaction value. The proprietor of M/s Royal Trades has in his statement admitted that the invoices shown to him were the actual invoices received by him and that he had filed fraudulent invoices along with the impugned Bills of Entry to avoid payment of duty. It is also seen that the MRP values accepted by the appellant for assessment tallied with the market enquiries conducted. Hon ble Supreme Court in United India Insurance Co. Ltd. and Anr. Vs Samir Chandra Chaudhary 2005 (7) TMI 701 - SUPREME COURT has held that the effect of admission is that it shifts the onus on the person admitting the fact on the principle that what a party himself admits to be true may reasonably be presumed to be so and until the presumption is rebutted the fact admitted must be taken to be established. An admission is the best evidence that an opposing party can rely upon and though not conclusive is decisive of matter unless successfully withdrawn or proved erroneous. There has thus been a violation of the principles of natural justice but it is curable. In such a case it would be appropriate to set aside the order and require the Original Authority to decide the cases de novo after providing the requisite documents relied upon in the SCN. Conclusion - The principles of natural justice were violated due to the non-disclosure of essential documents in the SCN. The admission of undervaluation by the appellant was binding but the lack of consideration for the retraction warranted a remand for de novo adjudication. Matter remanded back to the Original Authority for de novo adjudication - appeal disposed off by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment revolve around the following questions:

1. Whether the declared value of the imported goods was accurate and in compliance with the Customs Valuation Rules, 2007.

2. Whether the appellant's admission regarding the undervaluation of invoices is binding and conclusive.

3. Whether the principles of natural justice were violated due to the lack of disclosure of documents relied upon in the Show Cause Notice (SCN).

4. Whether the imposition of penalties and fines was justified under the relevant sections of the Customs Act, 1962.

ISSUE-WISE DETAILED ANALYSIS

1. Valuation of Imported Goods

Relevant legal framework and precedents: The Customs Valuation Rules, 2007, particularly Rule 12, were pivotal in determining the transaction value of the goods. The adjudicating authority had rejected the declared value based on the appellant's admission of undervaluation.

Court's interpretation and reasoning: The Tribunal noted that the appellant had admitted to filing fraudulent undervalued invoices to avoid duty payments. This admission was considered under Section 58 of the Indian Evidence Act, which states that facts admitted need not be proved.

Key evidence and findings: The appellant's voluntary statement admitting to the use of incorrect invoices was central to the case. The original invoices indicated a higher value than declared, leading to the rejection of the declared value.

Application of law to facts: The Tribunal applied Rule 12 of the Customs Valuation Rules, 2007, to reject the declared value and redetermine it based on the actual invoices.

Treatment of competing arguments: The appellant argued that the rejection of the declared value was erroneous due to a lack of market value inquiry details. However, the Tribunal found that the admission of undervaluation was sufficient to uphold the decision.

Conclusions: The Tribunal upheld the rejection of the declared value and the redetermination of the value based on actual invoices.

2. Admission and Its Binding Nature

Relevant legal framework and precedents: Section 58 of the Indian Evidence Act was cited, which establishes that admitted facts do not require further proof.

Court's interpretation and reasoning: The Tribunal emphasized that an admission is a strong piece of evidence and shifts the burden of proof to the party making the admission.

Key evidence and findings: The appellant's admission under Section 108 of the Customs Act, 1962, was deemed voluntary and binding.

Application of law to facts: The Tribunal held that the appellant's admission was sufficient to establish the undervaluation, despite the appellant's retraction of the statement.

Treatment of competing arguments: The appellant's retraction was noted, but the Tribunal found no discussion on this in the Order in Original (OIO), indicating a need for further examination.

Conclusions: The admission was upheld as binding, but the Tribunal noted the lack of consideration for the retraction.

3. Violation of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that all documents relied upon in an SCN be disclosed to the respondent to allow for a proper defense.

Court's interpretation and reasoning: The Tribunal found that the SCN did not include essential documents, such as the relied-upon invoices and market inquiry reports, thereby violating natural justice principles.

Key evidence and findings: The absence of these documents in the SCN was a significant oversight, impacting the appellant's ability to defend the case effectively.

Application of law to facts: The Tribunal determined that the violation of natural justice warranted a remand for de novo adjudication.

Treatment of competing arguments: The Tribunal acknowledged the appellant's contention regarding the lack of document disclosure and found merit in this argument.

Conclusions: The Tribunal set aside the impugned order and remanded the case for fresh adjudication, ensuring compliance with natural justice principles.

4. Imposition of Penalties and Fines

Relevant legal framework and precedents: Sections 111(m), 114AA, and 125 of the Customs Act, 1962, were relevant for the imposition of penalties and fines.

Court's interpretation and reasoning: The Tribunal noted that the imposition of penalties and fines involves discretion, which must be exercised fairly and reasonably.

Key evidence and findings: The appellant's admission and the subsequent undervaluation justified the penalties, but the Tribunal emphasized the need for a fair process.

Application of law to facts: The Tribunal found that the penalties and fines were justified but required a fair process, including document disclosure.

Treatment of competing arguments: The Tribunal considered the appellant's arguments regarding the lack of a fair process and found merit in the need for a de novo adjudication.

Conclusions: The Tribunal remanded the case for fresh adjudication, ensuring a fair process in the imposition of penalties and fines.

SIGNIFICANT HOLDINGS

The Tribunal held that the principles of natural justice were violated due to the non-disclosure of essential documents in the SCN. The admission of undervaluation by the appellant was binding, but the lack of consideration for the retraction warranted a remand for de novo adjudication. The Tribunal emphasized the need for a fair process in the imposition of penalties and fines, requiring the Original Authority to provide all relevant documents and allow the appellant to present their case effectively.

"With regard to valuation of the goods, the proprietor of M/s. Royal Traders, Chennai Shri S. Shanawaz Basha was examined under section 108 of the Customs Act, 1962. When he was shown the copies of the original invoices forwarded by DRI, in his voluntary statement given before the proper officer of customs on 12.12.2011, he has admitted that the invoices nos. 2194/14.09.2011 for S$62,247/- and 2197/19.9.2011 for S$62,137/- raised by M/s. HMN International Pte. Ltd. Singapore shown to him are the correct invoices received by them and that they had filed the subject bills of entry by furnishing fraudulent undervalued invoices, in order to avoid payment of duty."

The Tribunal's final determination was to set aside the impugned order and remand the matter to the Original Authority for de novo adjudication, ensuring compliance with the principles of natural justice and providing the appellant with an opportunity for a fair hearing.