2013 (10) TMI 809 - AT - Customs

Valuation of goods - Transaction value and enhancement of the value - Held that - department could not show any evidence that the transaction value declared by the appellant was not price actually paid and that buyer and seller of the goods are related persons and the price was not a sole consideration. No investigation what so ever has been carried out beyond the point that director of the appellant a NRI was residing at Taiwan for 25 years. Further the rejection of transaction value is not supported by evidence of contemporaneous import. However the department took recourse to the theory of preponderance of probability to prove the case. The said theory cannot be a substitute for lack of investigation and absence of evidences - Rejection of the transaction value and enhancement of the value by the department in this case are not sustainable in law - Following decision of EICHER TRACTORS LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI 2000 (11) TMI 139 - SUPREME COURT OF INDIA and Pushpanajali Silk Pvt. Ltd. vs. Commissioner of Customs 2008 (8) TMI 310 - CESTAT CHENNAI - Decided in favour of assessee.

Issues Involved:
1. Early hearing of stay application.
2. Rejection of transactional value and enhancement of value for imported PVC Coated Cloths.
3. Validity of evidence and methodology used by the department for value determination.
4. Application of Customs Valuation Rules, 2007.
5. Reliance on contemporaneous imports and cost construction method.
6. Legitimacy of the department's reliance on DRI alerts and Chief Commissioner's letters.

Detailed Analysis:

1. Early Hearing of Stay Application:
The applicant/appellant requested an early hearing of the stay application due to heavy demurrage incurred on a live consignment. The tribunal allowed the early hearing of the stay application and decided to dispose of the appeal itself after waiving the requirement of pre-deposit.

2. Rejection of Transactional Value and Enhancement of Value:
The appellants imported PVC Coated Cloths and filed eleven Bills of Entry. The department rejected the transactional value and enhanced it based on several grounds, including:
- A DRI/MZU Alert suggesting gross undervaluation.
- A letter from the Chief Commissioner of Customs suggesting a minimum value.
- Cost construction method based on previous test reports.

The appellants contended that there was no indication of under-invoicing or non-genuine transactions. They argued that the department's assumptions about the relationship between the importer and supplier were speculative and unsupported by evidence.

3. Validity of Evidence and Methodology Used by the Department:
The appellants argued that:
- The DRI alert was related to Artificial Leather Cloth, not PVC Coated Cloth.
- The Chief Commissioner's letter suggesting a minimum value was not relevant as the department itself assessed values lower than the suggested minimum.
- The Commissioner (Appeals) did not consider the explanations provided by the appellants and upheld the rejection of the assessable value without proper justification.

The department's reliance on 26 Bills of Entry as evidence of contemporaneous imports was challenged by the appellants, who pointed out errors and inconsistencies in these Bills.

4. Application of Customs Valuation Rules, 2007:
The tribunal noted that valuation in customs is governed by Section 14 of the Customs Valuation Rules, 2007, which emphasizes the acceptance of transaction value unless specific conditions are met. The tribunal referred to precedents like Eicher Tractors Ltd. and Pushpanjali Silk Pvt. Ltd., which upheld the concept of transaction value unless proven otherwise.

5. Reliance on Contemporaneous Imports and Cost Construction Method:
The tribunal observed that the lower authorities rejected the value based on Rule 12 and re-determined it under Rule 5 read with Rule 9 of CVR. However, Rule 12 only provides a mechanism for rejecting declared value and does not itself determine value. The tribunal found that the department's evidence of contemporaneous imports was insufficient and that the cost construction method was not properly justified.

6. Legitimacy of the Department's Reliance on DRI Alerts and Chief Commissioner's Letters:
The tribunal found that the DRI alert and Chief Commissioner's letter were not directly relevant to the appellant's case. The department's reliance on these documents without concrete evidence was deemed inappropriate.

Conclusion:
The tribunal concluded that the rejection of the transaction value and the enhancement of the value by the department were not sustainable in law. The appeal was allowed, and the impugned order was set aside. The tribunal emphasized the need for concrete evidence and proper investigation, which were lacking in this case.

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