2015 (11) TMI 812 - AT - Customs

Valuation - Doubting the declared transaction value the department obtained a quotation - Demand of differential duty - Confiscation of goods - Imposition of redemption fine - Held that - It is indeed surprising that the whole case has been made on the basis of one quotation. The value has been determined by proceeding sequentially through the Valuation Rules. No contemporaneous data was available. Therefore as the value could not be determined under Rules 4, 5, 7 & 8 resort was made to Rule 9 residual method. And as a residual method by way of best judgment the quotation has been made the basis. - There is a fundamental flaw in the manner of obtaining quotation in that the market enquiry was not conducted in the presence of the appellant or their authorized representative. This amounts to violation of natural justice. The department could have at least verified from two or three more sources for credible evidence. From the procedure adopted it seems the Department was not serious in conducting investigations through a proper market enquiry. For authentic enquiries the department should have at least sought the purchase invoices and the sale invoices of M/s. Max Flex & Imaging System Pvt. Ltd. to lend credibility to their evidence. Valuation Law under Section 14 read with the Valuation Rules provide a proper method to determine the assessable value if there is a doubt regarding the accuracy of the declared value. A mere suspicion is not enough to reject the transaction value. In the present case the department relies on a quotation without checking whether Star Flex is a Brand or not. The test of satisfying criteria under Rule 4(2) of the Valuation Rules must be passed first before seeking to enhance the value. It has not even been explained how contemporaneous data was not available. Fixing of floor prices indicates that the goods are frequently imported . A question arises why floor prices should be fixed if there are no other imports. Transaction value cannot be rejected on basis of a quotation which gives domestic retail sale price. If this were to be accepted it would cause unimaginable distortion in interpreting the Valuation Law. - percentage of excess miniscule. Moreover the duty is on specific rate basis i.e. on weight basis. And the weight was declared correctly. We see no mischief or any attempt to evade duty. Therefore we hold that confiscation is not warranted. - re-determined values are unsustainable in law. Consequently confiscation the demands of duty and penalties are set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Determination of assessable value for imported goods based on discrepancy in declared value.
2. Reliance on quotation for valuation and rejection of declared value.
3. Compliance with Valuation Rules and legal principles in customs valuation.
4. Consideration of contemporaneous data and evidence in determining assessable value.
5. Cross-examination rights and natural justice principles in customs adjudication.

Analysis:

Issue 1: Determination of assessable value
The case involved an appeal against an Order-in-Original concerning the import of Flex Sheeting Frontlit and Backlit. The department doubted the declared transaction value and redetermined the assessable values based on a quotation obtained from another company. The differential duty was calculated, and penalties were imposed on the appellants. The Commissioner confirmed the duty demands and ordered confiscation of the goods.

Issue 2: Reliance on quotation for valuation
The appellant argued that the redetermination of value lacked a rational method and relied solely on one quotation, which was deemed unreliable. The appellant provided documents to support the declared values, emphasizing that the quotation did not provide essential details such as country of origin or product specifications. The Tribunal agreed that the quotation was not credible and criticized the lack of market inquiry and cross-examination, highlighting violations of natural justice.

Issue 3: Compliance with Valuation Rules
The Tribunal analyzed the case in light of Valuation Rules and legal precedents. It noted that the reliance on a quotation without sufficient evidence or contemporaneous data was improper. The Tribunal emphasized the need for credible evidence to reject declared values and criticized the department's failure to conduct a proper market inquiry or consider authentic invoices.

Issue 4: Consideration of contemporaneous data
The Tribunal highlighted the importance of contemporaneous data in customs valuation and criticized the reliance on a single quotation without verifying essential details. It questioned the department's failure to obtain multiple sources of evidence or conduct thorough market inquiries, emphasizing the need for credible evidence to support value determinations.

Issue 5: Cross-examination rights and natural justice
The appellant's request for cross-examination was denied, raising concerns about procedural fairness and natural justice. The Tribunal noted that the department's refusal to allow cross-examination of relevant parties undermined the credibility of the evidence relied upon. It emphasized the importance of procedural fairness in customs adjudication and criticized the department's failure to consider the appellant's evidence appropriately.

In conclusion, the Tribunal found multiple flaws in the department's valuation methodology, emphasizing the lack of credible evidence, procedural violations, and reliance on unreliable sources. The appeals were allowed, and the confiscation, duty demands, and penalties were set aside, highlighting the importance of adhering to legal principles and procedural fairness in customs adjudication.