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2025 (3) TMI 977 - AT - CustomsUndervaluation of transaction value of impoted to evade Customs Duty - HELD THAT - The Hon ble Supreme Court in Century Metal Recycling Pvt. Ltd. v. Union of India 2019 (5) TMI 1152 - SUPREME COURT has examined the whole procedure of determining the transaction value of goods the transaction value of which is doubtful and requires to be redetermined. It held that where the proper officer has reason to doubt the truth or accuracy of the value declared for the imported goods a two-step verification and examination exercise is required to be carried out. It is found that the Original Authority has not complied with the two-step verification and examination exercise as stated by the Hon ble Supreme Court. Revenue has not followed the procedure under sub-rule (2) of Rule 12 of CVR 2007. This was all the more necessary when the proper officer only relied upon a value declared in a statement to arrive at the transaction value. The appellants request for cross-examination of certain witnesses was also denied. The averments made by the appellant in this case show that there has been a challenge to procedural fairness. Rule 9 cannot be given an interpretation which is in violation of Section 14 of the Act. Rules are subservient to the Act and cannot deviate from the provisions of the parent Act. Conclusion - The impugned order is vitiated by the vice of arbitrariness rendered by adopting a fictitious value which has no sanction under CA 1962 and CVR 2007 framed there under and hence merits to be set aside. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Alleged Undervaluation of Imported Goods The relevant legal framework for this issue includes Section 14 of the Customs Act, 1962, which governs the valuation of goods for the purpose of customs duty, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR 2007). The Court examined whether the appellants had declared a lower value for the imported goods than the actual transaction value to evade customs duty. Evidence indicated discrepancies between the declared value and the actual invoice value. The appellants admitted in their statements that the actual prices were higher than those declared. However, they argued that these statements were obtained under duress and that the valuation method used by the authorities was arbitrary. The Court found that the appellants had indeed undervalued the goods, as evidenced by the discrepancies in the declared and actual values. However, the Court also noted procedural lapses in the valuation process. 2. Procedural Compliance with Customs Valuation Rules The Court referred to the precedent set by the Supreme Court in Century Metal Recycling Pvt. Ltd. v. Union of India, which outlines a two-step verification process for determining the transaction value of goods. This process requires the proper officer to request further information from the importer and provide a reasonable opportunity for the importer to be heard. The Court found that the Original Authority failed to comply with this two-step process. The appellants were not given a proper opportunity to justify their declared values, and their request for cross-examination was denied. This constituted a breach of procedural fairness and natural justice. 3. Valuation Methodology and Legal Consistency The valuation of goods under Rule 9 of the CVR 2007 was contested. The Rule requires that the value of imported goods be determined using reasonable means consistent with the principles of the Rules and based on available data in India. It prohibits the use of arbitrary or fictitious values. The Court found that the valuation method used by the authorities was inconsistent with Rule 9. The authorities relied on a statement from an individual, which was not a permissible basis for valuation under the Rule. The use of such a method was deemed arbitrary and lacking legal sanction. SIGNIFICANT HOLDINGS The Court held that the impugned order was vitiated by procedural unfairness and the use of an arbitrary valuation method. The key legal reasoning included:
The core principles established include the necessity for procedural compliance with the Customs Valuation Rules and the prohibition against using arbitrary or fictitious values for customs valuation. The final determination was that the impugned order was set aside due to the procedural and substantive deficiencies identified. The appellants were deemed eligible for consequential relief as per the law.
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