2019 (5) TMI 979 - AT - Customs

Valuation of imported goods - dry containers - undervaluation - rejection of declared value - Rule 12(1) of the Customs (Determination of the value of Imported Goods) Rules, 2007 issued vide Notification No 94/2007-Cus (NT) dated 13.09.2007 - HELD THAT - The issue of under valuation has been in depth examined by the Commissioner in his impugned order as is evident from the paras of order reproduce above. Nothing has been brought on record to show that the value determined by the Commissioner is erroneous. The value has been determined by the Commissioner on the basis of replacement cost agreed between Appellant 1 and Appellant 2. Since the replacement cost represent the intrinsic value of container, agreed upon between the lessor and lessee in the one way lease, the same is basis of value. Confiscation redemption fine u/s 111 (d), (f) and (m) and Confiscation Penalty u/s 112 (a) and (b)(iii) - HELD THAT - The goods imported are not prohibited goods or subjected to any import restrictions in terms of Custom Act, 1962 or under any other law for time being in force, hence clause d to Section 111 is not applicable. Similarly the goods were assessed to duty by the Custom Authority and cleared on payment of duty assessed. There cannot be misdeclaration when there is no dispute about the that entries made in the Bill of Entry were on the basis of an invoice of foreign supplier without holding that the invoice was forged or manipulated. Since it is not so clause m of Section 111 will not be applicable. Similarly when the appellants have followed the practice in manner of making the declarations in Import Manifest, and existence of such practice is admitted by the Commissioner JNCH, Nhava Sheva, in his Public Notice, case of appellants cannot be covered under clause f of Section 111. In our view the order of Commissioner holding goods liable u/s 111 (d) (f) and (m) is bad in law and cannot be sustained. Since we have held that imported dry containers are not liable for confiscation u/s 111, penalties u/s 112 (a) and (b) (iii) cannot be sustained and hence they are set aside. Thus, while upholding the demand of duty and interest against Appellant 1, we set aside the order confiscating the goods, fine imposed and penalties imposed - appeal allowed in part.

Summary

Issues Involved:
1. Rejection of declared value and re-determination of assessable value.
2. Liability for differential duty and interest.
3. Confiscation of imported containers.
4. Imposition of penalties on the appellants.

Issue-wise Detailed Analysis:

1. Rejection of Declared Value and Re-determination of Assessable Value:
The Commissioner rejected the declared value of the containers under Rule 12(1) of the Customs (Determination of the value of Imported Goods) Rules, 2007, and re-determined the assessable value based on the replacement cost agreed in the one-way lease agreement. The appellants argued that the transaction value should be accepted unless specific conditions under Rule 3(2) of the Customs Valuation Rules, 2007, are met. They contended that the replacement cost should not be considered as the transaction value and that the assessable value should be determined sequentially under Rules 4 to 9. The tribunal found that the Commissioner had adequately examined the issue of undervaluation and determined the value based on the intrinsic value agreed upon in the lease agreement, citing the Supreme Court's decision in Garden Silk Mills.

2. Liability for Differential Duty and Interest:
The Commissioner determined the total re-determined assessable value for the containers and calculated the total customs duty payable. The appellants had already paid a portion of the duty, and the Commissioner demanded the differential duty along with interest. The tribunal upheld the demand for duty and interest against the importer (Appellant 1).

3. Confiscation of Imported Containers:
The Commissioner ordered the confiscation of the containers under sections 111(d), 111(f), and 111(m) of the Customs Act, 1962, giving an option to redeem them on payment of a fine. The tribunal found that the containers were not prohibited goods or subjected to import restrictions, and the appellants had followed the practice laid down in Public Notice No. 79/2008. The tribunal held that sections 111(d), 111(f), and 111(m) were not applicable, and the order of confiscation was bad in law and could not be sustained.

4. Imposition of Penalties on the Appellants:
The Commissioner imposed penalties on both appellants under Section 112(a) and (b)(iii) of the Customs Act, 1962. The tribunal held that since the imported containers were not liable for confiscation, the penalties under Section 112(a) and (b)(iii) could not be sustained and were set aside.

Conclusion:
The tribunal upheld the demand for duty and interest against the importer (Appellant 1) but set aside the order of confiscation, redemption fine, and penalties imposed. The appeals filed by the importer were partly allowed, and the appeals filed by the steamer agent (Appellant 2) were allowed to the extent of setting aside the penalties. All four appeals were disposed of accordingly.