2016 (10) TMI 725 - AT - Customs

Valuation - rejection of declared value - transaction value in terms of Section 14 of the Customs Act read with Rule 4 of the Customs Valuation rules (Determination of Price of Imported Goods) Rule 1988 - Polyester Metallic Yarn / Polyester Metallised Film - demand of differential duty u/s 28 of the (1) of the CA, 1962 - Pure Silver Metallic Polyester Yarn - Held that - the investigation was initiated on the basis of intelligence that the Appellant firm had been importing Pure Silver Metallic Yarn/ Film at an undervalued price and the visit was made to the premises of jobworker M/s Divyesh Bros. The authorities did not conduct any test of goods as it turned out that the test report No. TC/LM/SE4464/2006-07 dt. 15.09.2006 issued by the Textiles Committee, Ministry of Textiles, Govt. of India, Textile Laboratory and Research Center, Mumbai on the drawn by the Customs, Shava from the B/ E No. 892058 dt. 05.09.2006 revealed that there is no silver or gold content in the films imported by the Appellant firms. The revenue thus accepted that the imported goods were Polyester Silver metallised polyester film/ yarn with no content of silver or gold. Only for the reason that the insurance policy of some of the consignments of being higher amount the value cannot be enhanced. The decision in the case of ANAND MAHINDRA Versus COMMR. OF CUS. (IMPORT), MUMBAI 2008 (2) TMI 104 - CESTAT MUMBAI relied upon. In order to hold the imports as contemporaneous and to invoke Rule 6 of Customs Valuation Rules, it is necessary to show that the goods are identical goods' or similar goods'. Such goods have to be same in all specifications such as physical characteristics, quality, country of origin, quantity - the allegation of undervaluation against the Appellant firms does not establish. Demand of duty, penalty and fine not sustainable - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Differential duty demand and undervaluation of imported goods.
2. Confiscation and imposition of fine and penalties.
3. Validity of insurance documents as evidence of actual transaction value.
4. Contemporaneous imports as a basis for valuation.
5. Reliability of statements made by the appellant's director.
6. Adjudicating authority's method of copying show cause notice in the order.

Issue-wise Detailed Analysis:

1. Differential Duty Demand and Undervaluation of Imported Goods:
The appellants were accused of importing Metallised Polyester Film and Yarn at undervalued prices. The differential duty demand was based on the rejection of declared values and re-determination under Section 14 of the Customs Act, read with relevant rules. The appellants argued that the goods were correctly valued and that the insurance documents, which showed higher values, were not reliable indicators of actual transaction values. The Tribunal found that the insurance values might have been inflated for higher compensation in case of loss and were not consistent across all consignments. No independent evidence supported the undervaluation claim, leading to the conclusion that the differential duty demand was not sustainable.

2. Confiscation and Imposition of Fine and Penalties:
The show cause notice proposed confiscation of imported goods and imposition of fines and penalties under Sections 112 and 114A of the Customs Act. The adjudicating authority confirmed these penalties, but the Tribunal found no evidence of undervaluation or complicity between the appellants and their suppliers. Consequently, the penalties and fines were deemed unsustainable.

3. Validity of Insurance Documents as Evidence of Actual Transaction Value:
The insurance documents from M/s Nipponkoa Insurance Co. Ltd., Japan, were used to allege undervaluation. The Tribunal held that insurance values, which might be higher to cover potential losses, could not be used to enhance the declared values of imported goods. The absence of consistent higher values across all consignments and lack of independent evidence undermined the reliability of insurance documents as indicators of actual transaction values.

4. Contemporaneous Imports as a Basis for Valuation:
The show cause notice cited contemporaneous imports by other firms to justify higher valuations. However, the Tribunal found that the goods imported by the appellants were of B grade, whereas the cited contemporaneous imports were of A grade and in smaller quantities. This discrepancy in quality and quantity meant that the cited imports could not be considered contemporaneous or comparable, thus invalidating this basis for revaluation.

5. Reliability of Statements Made by the Appellant's Director:
The statements of Shri Pragnesh Jariwala, director of M/s Surat Metlon Pvt. Ltd., were used to support the undervaluation claim. The Tribunal noted that these statements were retracted and lacked corroborative evidence. No investigation was conducted to substantiate the claims of parallel invoices or additional payments. The Tribunal concluded that the statements alone were insufficient to prove undervaluation.

6. Adjudicating Authority's Method of Copying Show Cause Notice in the Order:
The appellants argued that the adjudicating authority's order was a verbatim copy of the show cause notice, indicating a perfunctory approach. The Tribunal agreed, noting that the order did not address the appellants' submissions or provide independent findings. This lack of proper adjudication further weakened the case against the appellants.

Conclusion:
The Tribunal found that the allegations of undervaluation and the resultant differential duty demand, fines, and penalties were not substantiated by reliable evidence. The reliance on insurance documents, uncorroborated statements, and non-contemporaneous imports was insufficient to support the claims. The adjudicating authority's failure to provide independent findings and address the appellants' submissions rendered the order unsustainable. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief.

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