2017 (2) TMI 663 - AT - Customs

Classification - valuation - brass scrap - brass scrap arisen during the course of manufacture of artificial jewellery - whether classified under 74072110 as brass ingots, or under 74040022 as brass scrap? - Held that - Looking to the shapes in which the goods are being cleared, the classification as a brass bar is more appropriate than the classification as brass scrap. There is no difference in rate of duty between the two classifications - Since two views are easily possible in the classification of a product, mis-declaration with intend to evade payment of duty cannot be alleged. Valuation - Held that - Revenue is not in possession of any evidence to conclude that the transaction value is to be disregarded - By considering the goods as other than brass scrap, Revenue has gone ahead with enhancement of the value of the goods. We find that such a step adopted by Revenue does not have the sanction of law. Valuation of imported goods is required to be done on the basis of normal transaction value. To disregard transaction value, sufficient reasons should be available - enhancement of value ordered by Revenue is without justification. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Classification of goods as brass scrap or brass ingots
- Valuation of goods for duty purposes

Classification Issue:
The appellants, engaged in manufacturing artificial jewelry, faced a dispute regarding the classification of the compressed scrap material they were selling. The department believed it should be classified as brass ingots (74072110) instead of brass scrap (74040022) as claimed by the appellants. The laboratory test did not provide a clear opinion on the classification. The appellants argued that the goods were merely brass scrap compacted into a brick form, supported by a technical opinion from a Chartered Accountant. The tribunal noted that while the duty implications were the same for both classifications, the mis-declaration allegation was due to a classification dispute rather than an intentional act to evade duty. Consequently, the order of confiscation was deemed unjustified and set aside under Sections 111(k) and 111(m) of the Customs Act.

Valuation Issue:
Regarding the valuation of the goods, the Revenue had enhanced the value without following Customs Valuation Rules, based on the nature of the goods and not the transaction value. The tribunal found that the appellant had declared the value based on the transaction, supported by payment evidence. The Revenue's decision to enhance the value lacked legal justification as there were no valid reasons to disregard the transaction value. The tribunal emphasized that valuation should be based on normal transaction value unless there are valid reasons to do otherwise. As such, the enhancement of value ordered by Revenue was deemed unjustified, and the impugned order was set aside, allowing the appeals.

In conclusion, the tribunal ruled in favor of the appellants on both the classification and valuation issues, setting aside the impugned order and allowing the appeals.