2015 (11) TMI 377 - SC - Customs

Violation of EXIM policy - Undervaluation of goods - assessee had imported the same material declaring higher price which was cleared at Mumbai port - Held that - Tribunal has not only misinterpreted the statements of two partners of the assessee, it has also sidetracked and ignored other relevant material. We have gone through the statements of the two partners of the assessee and find that there is a categorical admission on their part that the prices/values declared by them for imports through Chennai port for similar items was much less compared to the values declared at Mumbai port. - The factory of the assessee is at Daman and, thus, Mumbai port was much closer. On this basis, specific query was put to the assessee as to why certain imports were made through Chennai port instead of Mumbai port. However, no satisfactory reply was given to this question except making a bald averment that landing charges etc. were much less compared to rates at Mumbai which does not inspire any confidence, that too in the absence of any material given by the assessee in support of this plea. - no documentary evidence was produced by the assessee to support the plea that the goods at Chennai port were inferior in quality than the goods imported and cleared at Mumbai port and there was no warranty clause of the goods imported at Chennai The goods imported by the assessee which were cleared at Mumbai port were found to be similar in nature. These imports were by the assessee itself. Therefore, price declared therein could be made the basis of valuation. Minimum price was taken as the transaction value. It was clearly permissible under Rule 8 read with Rules 5 and 6 of the Valuation Rules. - impugned order is set aside - Decided in favour of Revenue.

Summary

Issues Involved:
1. Allegation of undervaluation of imported goods.
2. Comparison of declared values at different ports.
3. Application of Customs Valuation Rules.
4. Admissibility of evidence and statements.
5. Justification for different import values at different ports.
6. Tribunal's interpretation and findings.

Detailed Analysis:

1. Allegation of Undervaluation of Imported Goods:
The respondent/assessee imported secondary/defective CRGO Electrical Steel and declared unit prices of US$ 250 PMT for strips and US$ 300 PMT for other varieties. The Directorate of Revenue Intelligence (DRI) suspected undervaluation and examined the goods, leading to their seizure. Four show cause notices were issued, alleging that the actual value of the goods ranged between US$ 475 to US$ 750 PMT.

2. Comparison of Declared Values at Different Ports:
The main ground for the undervaluation allegation was that the assessee declared higher prices for similar goods cleared at Mumbai port. The assessee argued that the goods imported at Mumbai were of better quality and had supplier warranties, unlike those imported through Chennai port. However, this defense was dismissed by the Adjudicating Authority due to lack of documentary evidence.

3. Application of Customs Valuation Rules:
The Customs Excise & Service Tax Appellate Tribunal (CESTAT) set aside the Adjudicating Authority's order, accepting the assessee's plea that the declared values represented the true transaction value under Rule 4 of the Customs Valuation Rules. The Tribunal noted that the Commissioner had wrongly applied Rule 8, as there were no similar or identical goods imported elsewhere in India to justify valuation under Rules 5 or 6.

4. Admissibility of Evidence and Statements:
The Department's counsel argued that the Tribunal misinterpreted the partners' statements and ignored other relevant evidence. The Adjudicating Authority had discussed evidence showing higher values for similar imports through Mumbai and Nhava Sheva ports. The partners admitted that the values declared at Chennai port were much lower than those at Mumbai port, with one partner agreeing to pay the duty differentials.

5. Justification for Different Import Values at Different Ports:
The assessee's factory was closer to Mumbai port, raising questions about why imports were made through Chennai port. The assessee's explanation of lower landing charges at Chennai was not supported by any material evidence. The Tribunal accepted the plea that goods imported at Chennai were defective based on photographs, but the Supreme Court found this approach faulty, as no documentary evidence supported the claim of inferior quality.

6. Tribunal's Interpretation and Findings:
The Supreme Court found the Tribunal's judgment unsustainable, noting that it misinterpreted the partners' statements and ignored other material evidence. The Tribunal erred in holding that the Commissioner wrongly applied Rule 8. The Order-in-Original had taken into account 55 Bills of Entry showing higher prices for similar goods imported by the assessee at Mumbai port. The minimum price was taken as the transaction value, which was permissible under Rule 8 read with Rules 5 and 6.

Conclusion:
The Supreme Court allowed the appeals, set aside the Tribunal's order, and restored the Order-in-Original passed by the Commissioner. The judgment emphasized the importance of documentary evidence and proper application of Customs Valuation Rules in determining the correct value of imported goods.