1998 (6) TMI 406 - AT - Customs

Summary

Issues Involved:
1. Undervaluation of imported goods.
2. Validity of transaction value.
3. Application of Customs Valuation Rules.
4. Confiscation of goods and imposition of redemption fine.

Detailed Analysis:

Undervaluation of Imported Goods:
The primary issue revolves around the alleged undervaluation of 2700 Kgs. of "Lupofresh Hop Extracts with 30% Alpha Crop 90" imported by the appellants. The declared value was DM 57706 CIF, whereas the authorities confirmed the value at DM 97200 CIF. The investigation revealed that the goods were sold to the importers at a lower price compared to the prices at which identical goods were sold to other parties in India. Various documents indicated that the price of Lupofresh Hop Extract with 30% Alpha acid content was never as low as DM 21.37 per kg. CIF, the price at which the goods were sold to the importers.

Validity of Transaction Value:
The appellants argued that the transaction value should be accepted as there was no mutuality of interest or any allegation of excess payment to the foreign supplier. They contended that the suppliers and the importers were not related persons, and the value should be determined in accordance with Rule 3 of the Customs Valuation Rules, which states that the value of the imported goods shall be the transaction value. However, the authorities found that the price agreed upon and finalized for the import was not a normal price for an independent importer in India and such a favored price could not be considered under Section 14(1) of the Customs Act, 1962.

Application of Customs Valuation Rules:
The Commissioner did not find values under Rules 5 and 6 of the Valuation Rules due to fluctuations in the market value for Hop Extract during the period of import. Instead, the value was determined under Rule 8 of the Valuation Rules, 1988, fixing the value for the consignment at DM 97200 at the rate of DM 36 per Kg. CIF. This valuation was consistent with the principles and general provisions of Section 14(1) of the Customs Act, 1962, and Valuation Rules, 1988. The Commissioner noted that the importers had received a favored price due to their established trade relationship with the suppliers, which could not be considered the normal price.

Confiscation of Goods and Imposition of Redemption Fine:
The goods were ordered to be confiscated under Section 111(d) of the Customs Act, 1962, read with Section 3(2) of the Import and Export (Control) Act, 1947. A redemption fine of Rs. 5 lakhs was imposed in lieu of confiscation. The Commissioner also noted that the importers had a license valid for the import of brewery hops, which included Hop Extract, but the value of the consignment exceeded the license value. The shortfall in the import value was Rs. 5,88,145. The Commissioner rejected the transaction value and confirmed the value at DM 36 per Kg. CIF, considering it consistent with the evidence on record.

Conclusion:
The appeal was rejected, upholding the Commissioner's order of confirming the value at DM 36 per Kg. CIF and the imposition of a redemption fine of Rs. 5 lakhs. The authorities found substantial evidence of undervaluation and determined that the transaction value could not be accepted due to the favored price received by the importers, which was not reflective of the normal market price. The decision was based on a thorough analysis of the evidence and adherence to the Customs Valuation Rules.