2013 (9) TMI 546 - AT - Customs

Illegal import of goods misdeclaration of value - import of aluminium scrap Held that - The valuation done in the order was not in accordance with the law and consequently the demand of differential duty and imposition of penalties cannot be sustained in law - no formal public study conducted indicating any co-relation between the prime metal price and the scrap price - the department cannot adopt any procedure which LME itself does not recognize. Violation of principles of natural justice - the department had denied the cross examination - When the appellants had raised serious doubts about the procedure adopted with respect to the examination - it was incumbent upon the adjudicating authority to clear and clarify the matter by allowing cross examination of the concerned witnesses - Thus there was a clear violation of the principles of natural justice - denial of cross examination of the officer who examined the pen drive has caused prejudice to the appellants - on this ground alone the order was not sustainable. Matter remanded back to the adjudicatory authority for fresh consideration - The appellant has to be given opportunity to cross examine decided in favour of assessee

Summary

Issues:
1. Violation of principles of natural justice regarding cross-examination of witnesses.
2. Method of valuation adopted by the department for determining the value of imported goods.

Analysis:

Issue 1: Violation of Principles of Natural Justice
The appellant contended that there was a discrepancy in the examination of the pen drive seized during the search operation. They argued that the denial of cross-examination of the investigating officer and the officer from the Directorate of Forensic Science, who examined the pen drive, violated principles of natural justice. The appellant raised concerns about the re-examination of the pen drive without their knowledge, leading to the retrieval of additional files. The tribunal acknowledged the violation of natural justice principles due to the denial of cross-examination, emphasizing the importance of clarifying doubts raised by the appellant.

Issue 2: Method of Valuation
Regarding the method of valuation for imported goods, the appellant challenged the department's approach. The department had determined the value of the goods by considering LME prices for prime metal and applying discounts to establish the value of different types of scrap. The appellant argued that this method was arbitrary and not in line with Customs Valuation Rules. They provided data on contemporaneous imports to support their claim that their declared values were higher than those accepted by the customs authorities for similar goods. The tribunal found the department's valuation method to be unconventional and not supported by law. They highlighted a statement from the London Metal Exchange stating the absence of a formal study linking prime metal prices to scrap prices. Consequently, the tribunal concluded that the valuation in the impugned order was not lawful, leading to the unsustainable demand for differential duty and penalties.

Conclusion:
The tribunal allowed the appeals by remanding the matter back to the adjudicating authority for a fresh consideration. They directed the authority to allow cross-examination of relevant witnesses, reevaluate the valuation based on contemporaneous imports data provided by the appellant, and ensure a fair opportunity for the appellant to present their case. The stay applications were also disposed of in light of the remand decision.