2025 (4) TMI 893 - AT - Customs

Misclaration of value of Melamine of Chinese Origin - over invoicing to evade payment of incidence of ADD - redetrmination of value based on NIDB and ICIS data - rejection for ADD assessment - alleged contravention of Rule 3 (2) of CVR 2007 - HELD THAT - There is nothing on record to suggest that the respondent had resorted to under valuation and deliberately suppressed real transaction value of Melamine of Chinese origin imported by them under third country invoices raised by the suppliers based out of Malaysia and Hong Kong. The fact that the respondent has claimed that the price of Melamine imported by them from other countries like Japan Qatar Indonesia and New Zealand were also in the same bandwidth has not been disputed by the Department. The Revenue has not been able to controvert the arguments in respect of the market forces and chemical/technical considerations driving imports of Chinese Origin Melamine through Malaysia and Hong Kong. It is on record that the seller of Malaysia and Hong Kong of subject consignments were not related to the respondent and all payments were made to suppliers by them through Letter of Credit/through Banking Channels. There is no evidence for payment of extra sums over and above the declared values. Thus it does not come out that the invoice price was not the sole commercial consideration. The Department has not produced even a single piece of evidence to suggest any parallel invoicing to prove that the goods were misdeclared to evade ADD or the backflow of the alleged variation in prices made to overseas suppliers. Suspicion howsoever grave is no substitute for proof. It is settled law that published price data like Price List or a Financial Journal is no ground to justify valuation and is required to be buttressed by hard evidence in respect of contemporaneous import data at the same level of comparable commercial parlance. Notification of prices is a well accepted norm in international trade but serves as a mere guide the real test being invoice value in the absence of any other evidence to contradict it. Mere reliance of NIDB Data for valuation of imported melamine cannot be the sole consideration for fixing and burdening the respondent for payment of ADD. Further non-supply of hardproof of NIDB Data also vitiates the case of the Revenue. The re-determination of the value of the subject goods imported under cover of 17 Bills of Entry during the relevant period and imposing ADD of Rs.1, 81, 87, 239/- is completely unsubstantiated. In order to establish its contention of suspected over- valuation direct evidence by way of parallel invoice or any authentic communication between the importer and the suppliers to the said effect or proof of squaring up of accounts etc. is necessary. Knowledge or the lack of it in respect of another case cannot be imputed to other rival trading partner. Suppression has to be established by way of positive action and not merely presumption specific and explicit averments are required in order to establish the same. In the present case there is no such finding by the Department. Conclusion - The rejection of declared value is ex-facie illegal and arbitrary and not sanctioned in law. There is no contravention of Rule 3 (2) of CVR 2007. Appeal of Revenue dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal primarily revolve around the alleged mis-declaration of the transaction value of imported Melamine of Chinese origin for the purpose of evading Anti Dumping Duty (ADD) under Section 9A of the Customs Tariff Act, 1975. The issues include:

(i) Whether the respondent engaged in mis-declaration or suppression of the true transaction value of imported Melamine to evade ADD;

(ii) The validity and legality of the Department's methodology in re-determining the assessable value for ADD purposes, particularly the use of NIDB and ICIS data;

(iii) Whether the Department's acceptance of the declared value for Basic Customs Duty (BCD) but rejection for ADD assessment is sustainable under Section 14 of the Customs Act, 1962;

(iv) Whether the evidence produced by the Department suffices to establish deliberate overvaluation or undervaluation warranting invocation of Valuation Rules, 2007;

(v) The applicability and interpretation of Rule 3(2) and Rule 5 of the Customs Valuation Rules (CVR), 2007 in the context of this case;

(vi) The burden and standard of proof required to establish suppression or mis-declaration in customs valuation matters.

Issue-wise Detailed Analysis

1. Alleged Mis-declaration and Suppression of Transaction Value

The Department, through the Directorate of Revenue Intelligence (DRI), initiated a PAN India investigation into imports of Melamine of Chinese origin, suspecting that the respondent imported such goods under third country invoices (Malaysia and Hong Kong) to suppress actual value and evade ADD. The Show-Cause Notice alleged over-invoicing and mis-declaration based on patterns observed in import data and intelligence inputs.

The respondent contended that all imports were conducted through legitimate banking channels via Letter of Credit, with no manufacturing activity of their own, and that the import prices of Melamine from other countries such as Japan, Qatar, Indonesia, and New Zealand were in the same price range as Chinese origin Melamine. This, the respondent argued, negated any suspicion of undervaluation or mis-declaration. They also highlighted commercial reasons for sourcing via third countries post-2013, including price competitiveness.

The Tribunal noted that the Department failed to produce any direct evidence such as parallel invoices, communications, or proof of payments beyond declared values to establish mis-declaration. Mere patterns or intelligence without cogent documentary proof were insufficient. The Tribunal emphasized that suspicion, no matter how grave, cannot substitute for proof, especially in valuation matters where the declared invoice value is the primary basis unless rebutted by clear evidence.

2. Legality of Department's Methodology in Value Re-determination

The Department accepted the declared transaction value for levy of Basic Customs Duty but re-determined the value for ADD purposes using NIDB and ICIS data, thereby imposing ADD on a higher value. The respondent challenged this approach as arbitrary and contrary to Section 14 of the Customs Act, which mandates a single transaction value for all customs duties.

The Tribunal expressed puzzlement at the Department's dual valuation approach, holding that the law does not permit acceptance of one value for BCD and rejection for ADD. It underscored that the Department's reliance solely on published price data (NIDB and ICIS) without providing the respondents access to underlying documentation or contemporaneous import data was flawed. Published price lists serve only as guides and cannot override declared invoice values absent direct contradictory evidence.

The Tribunal further held that the Department's failure to produce hard evidence such as parallel invoices or transactional communications vitiated the case. The re-determination of value and consequent ADD demand of approximately Rs.1.82 Crores was thus found unsubstantiated and arbitrary.

3. Application and Interpretation of Customs Valuation Rules

The Department invoked Rule 5 of the CVR, 2007 to reject the declared value and re-determine the assessable value for ADD. However, the Tribunal noted that Rule 12 allows rejection of declared value only on grounds such as suspicion of undervaluation, mis-declaration, or manipulation of documents, which must be supported by clear evidence.

In the present case, although the Department suspected mis-declaration based on comparative data, it failed to produce direct evidence to justify rejection under Rule 12. The Tribunal observed that the Department did not apply the Valuation Rules consistently, as the declared value was accepted for BCD but rejected for ADD, which is impermissible under Section 14 of the Customs Act.

The Tribunal also cited precedents emphasizing that price lists or financial journals cannot alone justify valuation adjustments without corroborative evidence. The respondent's reliance on case laws reinforcing the principle that price depends on negotiation and that declared transaction value is presumptively correct was accepted.

4. Burden and Standard of Proof for Suppression or Mis-declaration

The Tribunal reiterated settled legal principles requiring positive and explicit evidence to establish suppression or mis-declaration. Knowledge of value manipulation in other importers or competitors cannot be imputed to the respondent without specific findings. Mere conjectures or assumptions about illegal money transfers or parallel invoicing are insufficient.

The adjudicating authority's detailed findings were upheld, noting that all payments were made through banking channels, no direct evidence of overvaluation was found, and the threshold value for ADD was exceeded legitimately. The Tribunal held that the Department's case rested on assumptions unsupported by tangible proof, which is inadequate to sustain serious charges involving substantial financial demands.

Significant Holdings

"Suspicion howsoever grave is no substitute for proof."

"Published price data like Price List or a Financial Journal is no ground to justify valuation and is required to be buttressed by hard evidence in respect of contemporaneous import data at the same level of comparable commercial parlance."

"When there is no justification for the enhancement and re-determination, the charge of mis-declaration and the question of suppression does not arise."

"Having accepted the declared assessable value for the purposes of quantifying Basic Customs Duty, the same cannot be rejected while imposing ADD on the basis of re-determined value."

"The use of NIDB and ICIS data therefore do not make good for lack of incriminating direct evidences in this case."

"Suppression has to be established by way of positive action and not merely presumption, specific and explicit averments are required in order to establish the same."

The Tribunal conclusively determined that the Department's rejection of the declared transaction value for ADD purposes was illegal, arbitrary, and unsustainable in law. The absence of direct evidence of mis-declaration or suppression and the acceptance of the declared value for BCD assessment precluded any enhancement of value for ADD. The impugned Show-Cause Notice was rightly dropped by the Commissioner, and the appeal filed by the Revenue was dismissed.