1991 (4) TMI 269 - AT - Customs

Summary

Issues Involved:

1. Enhancement of the value of imported goods.
2. Imposition of penalty and redemption fine.
3. Method of valuation under Customs Valuation Rules.
4. Rejection of transaction value based on telex reply.
5. Determination of assessable value.

Detailed Analysis:

1. Enhancement of the Value of Imported Goods:

The appellants contested the enhancement of the value of goods from 72,687 CIF to 4,24,416. The Collector enhanced the value based on a telex reply indicating higher prices from the same supplier. The Collector determined the value under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, stating that the transaction value under Rule 4 was "abnormally low" and not acceptable. The Collector allowed a price concession of 30% on the price offered to the department, fixing the values at US $ 0.85/pc. FOB and US $ 1.54/pc. FOB for the items.

2. Imposition of Penalty and Redemption Fine:

The Collector imposed a penalty of Rs. 20,000/- and permitted the appellants to redeem the goods on payment of a redemption fine of Rs. 50,000/-. The show cause notice proposed to confiscate the goods under Section 111(d) and (m) of the Customs Act and levy a penalty under Section 112 of the Act.

3. Method of Valuation under Customs Valuation Rules:

The judgment emphasized that Section 14(1) of the Customs Act provides for the valuation of goods for assessment purposes, stating that the value shall be the price at which such or like goods are ordinarily sold or offered for sale at the time and place of importation in international trade. Rule 3 of the Customs Valuation Rules, 1988, specifies that the value of imported goods shall be the transaction value, and if it cannot be determined, the value shall be determined sequentially through Rules 5 to 8.

4. Rejection of Transaction Value Based on Telex Reply:

The Collector rejected the transaction value based on a telex reply from the supplier quoting higher prices. The appellants sought clarification from the supplier, who confirmed that the telex was sent by another department and explained that the higher prices included replacement guarantees and commissions to agents. The goods sold to the appellants lacked quality certification and replacement guarantees, justifying the lower prices. The judgment found that the reliance on the telex reply was "misplaced and misconceived" as there was a material difference in the conditions of sale between the goods imported and those referred to in the telex.

5. Determination of Assessable Value:

The judgment concluded that the transaction value should be accepted unless there are reasons for rejecting it. Since the department failed to prove under-valuation and the supplier provided reasonable explanations for the price differences, the value should be determined based on the transaction value under Rule 4. The department cannot jump to Rule 8 without exhausting Rule 4. The appeal was allowed, and the Collector's order was set aside, directing the assessable value to be determined based on the transaction value.

Conclusion:

The appeal was allowed, and the Collector's order was set aside, directing the assessable value to be determined based on the transaction value. The judgment emphasized the importance of following the sequential method of valuation under the Customs Valuation Rules and highlighted the material differences in the conditions of sale that justified the lower transaction value.