2014 (3) TMI 800 - AT - Customs

Project Import - Valuation - inclusion of value of certain costs and services forming part of Off-Shore Engineering/Technical Assistance Contract (OETAC) - Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988 - - miss-declaration of value of plant and machinery imported under Project Import Regulations Act, 1986 - Held that - Other than the opinion of the consulting engineer, there is not much else provided by the appellants. While we agree that substance has to be preferred to form, in this case, we find that it is the appellant who is requiring the adjudicators to prefer form over substance. - Further it is also seen that the opinion of the expert consulting engineer to a specific question on the fact of use, is hypothetical. As submitted by the learned special counsel, references to equipment design and connected engineering work in the contract have not been reflected upon in the expert opinion. The analysis of the different contracts and the type of services rendered by KHIL as per OETAC would show that the submissions made by the learned special counsel for the Revenue regarding addition to be made in terms of Rule 9(1)(b)(iv) of Customs Valuation Rules have to be upheld and accepted. - Decided against the assessee. Issuance of SCN when assessments were provisional - Held that - A question of res judicata may not arise in view of the fact that provisional assessments are resorted for specific purposes and once the assessee is able to specify the purpose for which provisional assessment was resorted to, the assessment can be finalized. Therefore, even if short-levy is disputed, notice issued, adjudicated, the finalization of provisional assessment or assessment process as per the document can be a separate subject and in both cases issues involved will be different. In the present self-assessment regime, there may be many occasions where the assessee may assess and pay higher duty and assessment be provisional. In our opinion, the conclusions reached by us above are more valid today than ever before especially in view of the complications involved in application of law to the facts and difficulties involved in making self-assessment. - Decided against the assessee. Regarding confiscation of goods and penalty penalty imposed by the Commissioner - Held that - In this case what the appellant s submission is whether action of the importer does not amount to defrauding revenue or not has to be based on the gravity of offence. It is submitted that in this case, the appellant had a bona fide belief. However, the submission of Revenue is contrary and we happen to agree with the submission of Revenue. - Confiscation and penalty confirmed.

Summary

Issues Involved:

1. Misdeclaration of the value of plant and machinery.
2. Issuance of a show-cause notice for short-levy under Section 28 of the Customs Act, 1962.
3. Confiscation of goods and imposition of penalty without finalizing provisional assessments.

Issue-Wise Detailed Analysis:

1. Misdeclaration of the Value of Plant and Machinery:

The core issue was whether the appellant resorted to misdeclaration by not adding the value of certain costs and services under the Offshore Engineering/Technical Assistance Contract (OETAC) to the declared value of plant and machinery under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. The Tribunal examined the provisions of Rule 9(1)(b) of the Customs Valuation Rules, which require the addition of the value of goods and services supplied directly or indirectly by the buyer free of charge or at a reduced cost for use in connection with the production and sale for export of imported goods. The Tribunal found that the services rendered by KHIL under OETAC were used in connection with and necessary for the production/sale of the imported goods. The Tribunal upheld the Commissioner's conclusion that the value of services under OETAC should be added to the declared value of the imported goods, noting that the Commissioner had only added 53.26% of the total amount paid under OETAC to the assessable value.

2. Issuance of Show-Cause Notice for Short-Levy Under Section 28 of the Customs Act, 1962:

The appellant argued that a show-cause notice for short-levy could not be issued when the assessments were provisional. The Tribunal examined several precedents and noted that the provisions of Section 124 of the Customs Act require a show-cause notice before any order of confiscation or penalty. The Tribunal found that the finalization of provisional assessments and the issuance of a show-cause notice for short-levy could be undertaken simultaneously. The Tribunal upheld the Commissioner's actions, noting that the Commissioner had finalized the provisional assessments and demanded differential duty under Section 18(2) of the Customs Act, 1962. The Tribunal also noted that the decision in the case of Dabhol Power Company supported the simultaneous finalization of provisional assessments and the issuance of a show-cause notice for short-levy.

3. Confiscation of Goods and Imposition of Penalty Without Finalizing Provisional Assessments:

The Tribunal found that the appellant had indulged in gross undervaluation and non-declaration of OETAC, amounting to suppression of facts and misdeclaration of value. The Tribunal upheld the Commissioner's decision to confiscate the goods and impose a penalty under Section 114A of the Customs Act, 1962, noting that the Commissioner had elaborately considered the issue and the facts supported the conclusion that the appellant's actions rendered the goods liable for confiscation and the appellant liable for a penalty. The Tribunal also noted that the redemption fine of about 2.1% imposed by the Commissioner was nominal and reasonable, and the penalty under Section 114A was mandatory once suppression and misdeclaration were sustained.

Conclusion:

The Tribunal rejected the appeal, upholding the Commissioner's order demanding differential duty, confiscating the goods, and imposing a penalty. The Tribunal found that the appellant had misdeclared the value of the imported goods by not including the value of services under OETAC, that the issuance of a show-cause notice for short-levy was in order even when assessments were provisional, and that the confiscation of goods and imposition of penalty were justified.