2018 (7) TMI 34 - AT - Customs

Valuation of imported goods - it has been alleged by the department that the value of the imported goods namely, dog food / snacks was grossly under-invoiced - it is the case of appellant that the lower authorities have arbitrarily rejected the transaction value of the imported consignment without giving any valid ground of its rejection - Held that - Firstly the department did not have any concrete evidence at the time of assessment of the Bill of Entry for rejecting the transaction value declared by the appellant under section 14 of the Customs Act 1962 as the prices indicated on the website cannot primarily form the basis for undertaking the inquiry of an imported consignment. There should have been more concrete evidence before the investigating authority for prompting them to undertake detailed investigation and seizure of imported consignment. The contemporary import prices of the similar goods were very much available at the time of import on the Customs NIDB data which are almost very close to the transaction value declared by the appellant at the time of import of various consignments. The transaction value declared by the appellant were comparable or almost same as that of similar goods and therefore, the Department did not have any acceptable and legal evidence to reject the transaction value of the six imported consignments - appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged under-invoicing of imported dog food/snacks, rejection of transaction value, application of Customs Valuation Rules, demand of differential duty, confiscation of live consignment.

Detailed Analysis:

1. Alleged Under-Invoicing:
The Customs Officers detained a consignment of imported dog food/snacks based on suspicion of gross under-invoicing. The department conducted a detailed investigation into the actual value of the imported goods under multiple Bills of Entry cleared by the appellant between September 2012 to September 2013. The investigation was prompted by discrepancies between the declared value and the prices listed on the manufacturer's website.

2. Rejection of Transaction Value:
The show cause notice alleged under-valuation and demanded a differential duty of ?15,74,395 under Section 28(4) of the Customs Act, 1962. The department conducted a market inquiry under Rule 7 of the Customs Valuation Rules, rejecting the declared transaction value. The appellant argued that the rejection lacked valid grounds and violated the sequential application of valuation rules.

3. Application of Customs Valuation Rules:
The appellant contended that the Customs Department failed to follow the sequential valuation process as mandated by the Customs Valuation Rules, 2007. They argued that Rule 5, which requires the adoption of contemporaneous import prices of similar goods, was not considered before invoking Rule 7. The appellant provided NIDB data showing comparable prices of similar goods imported contemporaneously.

4. Demand of Differential Duty:
The total assessable value of the goods under the Bills of Entry was recalculated, resulting in a demand for differential duty. The Additional Commissioner and the Commissioner (Appeal) upheld the demand, leading to the appeal before the CESTAT. The appellant argued that the authorities arbitrarily rejected the transaction value without concrete evidence.

5. Confiscation of Live Consignment:
The department also sought confiscation of the live consignment under Section 111(m) of the Customs Act, 1962. The CESTAT found that the rejection of the transaction value lacked legal evidence and failed to follow the sequential application of Customs Valuation Rules. The contemporaneous import prices of similar goods were available and should have been the basis for re-determination.

In conclusion, the CESTAT allowed the appeal, finding no merit in the rejection of the transaction value and ordering consequential relief for the appellant. The judgment emphasized the importance of concrete evidence and sequential application of Customs Valuation Rules in cases of alleged under-valuation of imported goods.