2022 (12) TMI 567 - AT - Customs

Misdeclaration of description and value - Validity of test report - Cross examination of Chemical Examiner - Import of Suspension grade PVC Resin - consignment was declared to be off grade and wet - On examination, the goods imported found to be PVC resin but without any marking off grade or wet on any of the bags - Recovery of dues in view of CIRP proceedings under IBC HELD THAT - Appellant objected on the said test report right from the investigation on the ground that non-mention of method of testing, not testing relevant parameters, quantity of remnants not mentioned, delay in re-testing and there are other parameters like density, VCM in residual PPM, absorbing amount of plasticizer for 100Gms resin, degree of polymerization has not been tested. We also find that the appellant had requested for cross-examination of the Chemical Examiner. However, no such opportunity was granted to them.In the present proceeding the Test reports are the only evidences with the Revenue to say that imported goods are Prime Grade , therefore, adjudicating authority was not right in rejecting the cross-examination of the chemical examiner. In the present matter, refusal to allow cross-examination of the Chemical Examiner is to be viewed as a serious violation of principles of natural justice. Had the cross examination been allowed, the appellant could have availed an opportunity to enquire the testing methodology and standards adopted by CRCL and its suitability vis-a-vis the ISI. As regard quality of the imported goods in question, we find that there is clear understanding between the supplier and the appellant importer that the goods in question has more moisture content and therefore the quality of goods is inferior to the prime material and on that basis the supplier agreed to sell the goods at lower price. As against this fact, the revenue could not adduce any evidence to reject this fact. Therefore the claim of the appellant that the goods in question is off grade is legitimate and convincing. Recovery of dues in view of CIRP proceedings under IBC - HELD THAT - For the reason of aforesaid NCLT order in the appellant case and the above cited Apex Court judgments, the dues of the Government, including the present dues, if any, is not prima facie recoverable. However, since we decide this appeal on its merit and fact of the case, we do not incline to give conclusive finding on the basis of NCLT order. Decided in favor of importer / assessee.

Summary

Issues Involved:
1. Misdeclaration of the imported goods.
2. Rejection of transaction value and enhancement of assessable value.
3. Violation of principles of natural justice.
4. Impact of NCLT order and IBC proceedings on government dues.

Issue-wise Detailed Analysis:

1. Misdeclaration of the Imported Goods:
The appellant imported 400.5 MTs of Suspension grade PVC Resin from Venezuela, declared as "off grade and wet." However, the Customs department found discrepancies, including the absence of "off grade or wet" markings, and inconsistencies in packaging and declared value. The samples tested by the Central Excise & Customs Laboratory indicated the goods were of "prime grade" PVC Resin, contradicting the appellant's declaration. The department issued a show cause notice for misdeclaration under Sections 111(d) and (m) of the Customs Act, proposing differential duty, confiscation, and penalties.

2. Rejection of Transaction Value and Enhancement of Assessable Value:
The appellant's declared CIF value was USD 450/- PMT, which the department found significantly lower compared to PLATTS price and NIDB data. The adjudicating authority re-determined the value at Rs. 1,55,22,713/- and imposed a differential customs duty. The appellant argued that the enhancement was unjustified as the declared transaction value should be accepted unless valid reasons for rejecting it exist, as per Section 14 of the Customs Act and Customs Valuation Rules, 2007. The appellant cited several judicial precedents supporting the acceptance of transaction value unless proven otherwise.

3. Violation of Principles of Natural Justice:
The appellant contended that the samples were not drawn as per BSI standards, and the test reports lacked details on the methods used. The appellant's request for cross-examination of the Chemical Examiner was denied, violating principles of natural justice. The Tribunal noted that the test reports were the only evidence for the department's claim of "prime grade" PVC Resin, and the rejection of cross-examination was unjustified. The Tribunal emphasized that the test report did not explicitly state the goods were not "PVC Resin Off Grade" and highlighted the importance of cross-examination to verify testing methodologies.

4. Impact of NCLT Order and IBC Proceedings on Government Dues:
Post-hearing, the appellant submitted an NCLT order approving a resolution plan under IBC proceedings, which extinguished all liabilities, including government dues. The Tribunal referred to the Supreme Court's judgment in Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited, which held that post-approval of a resolution plan, all claims against the corporate debtor, including those by government authorities, stand extinguished. The Tribunal acknowledged this but decided the appeal on its merits without conclusively relying on the NCLT order.

Conclusion:
The Tribunal found that the department failed to provide sufficient evidence to reject the transaction value and support the claim of "prime grade" PVC Resin. The denial of cross-examination of the Chemical Examiner was a significant procedural lapse. The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, in accordance with law. The Tribunal also noted that due to the NCLT order, the government's dues might not be recoverable, but this was not the basis for their decision.