2016 (3) TMI 7 - AT - Customs

Valuation of Ceramic tableware as per Rule 4 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and the Interpretative Notes Schedule to the said Rule - Goods manufactured in SEZ meant for export were damaged by floods- Auction was conducted for realizing salvage value by issuing tender and inviting the bids in association with Insurance Company- Held that Department has not been able to prove that how did the appellant not observe the right procedure, when the procedure adopted by the appellant was approved by the United Insurance Company Ltd., which was mentioned in the invoice also. No fault found when the goods were delivered to the final bidder at the price quoted by the said bidder and accepted by the auctioneer with the approval of the insurance company. It is not right to question this by the Customs and to say that there has to be value refixed as per Rule 6 of the Customs Valuation Rules, 1998 when there is no reasonable basis for this refixation of the said value. Also, damage in the goods in question were of different degree when compared with the goods which were auctioned earlier, where the damage was not to this much extent. Therefore, the value fetched during the auction as cum-value accepted. Decided in favour of appellant with consequential relief

Summary

Issues: Valuation of damaged ceramic tableware for customs duty assessment

Issue 1: Valuation of damaged goods
The case involves the valuation of ceramic tableware damaged due to flash floods, sold in an auction without departmental permission. The appellant, Tata Ceramics Ltd., declared a lower value for the damaged goods in the Bill of Entry. However, the Deputy Commissioner of Customs revalued the goods at a higher price under Rule 6 of the Valuation Rules, 1998, leading to increased duty assessment.

Issue 2: Appeal against assessment order
The appellant appealed before the Commissioner (A) against the assessment order of the Deputy Commissioner, which was upheld. The appellant contended that the goods were sold at a reasonable price in a competitive auction approved by the Insurance Company, and the Department lacked justification for revaluing the goods under Rule 6.

Issue 3: Procedural compliance during auction
The Department argued that the auction was not conducted under competitive conditions, leading to undervaluation of the goods. However, the Tribunal found that the auction procedure followed by the appellant, in association with the Insurance Company, was appropriate and approved, with no procedural lapses.

Issue 4: Customs duty assessment based on auction value
The Tribunal held that the value realized through the auction, approved by the Insurance Company, should be considered as the transaction value for customs duty assessment. The appellant paid duty based on the auction value, including all tax elements, as indicated in the invoices submitted.

Issue 5: Distress situation and salvage value
The Tribunal noted that the auction for the damaged goods was conducted in a distress situation to realize salvage value after the factory premises were affected by floods. The appellant's actions in conducting the auction and paying duty based on the auction value were deemed acceptable under the circumstances.

In conclusion, the Tribunal allowed the appeal, recognizing the validity of the auction value for customs duty assessment and providing consequential benefits to the appellant.