2023 (10) TMI 364 - SC - Customs

Valuation of imported goods - Tuners - Enhancement of value - under-valuation based on contemporaneous import - evasion of customs duty - levy of penalty - Reliance on the statement made before the customs officers - recording of statement u/s 108 - HELD THAT - The export declarations relied upon by the appellant and earlier by the Directorate of Revenue Intelligence were unattested photocopies. Since those documents were used as a piece of evidence against the respondents, it was necessary that those documents were required to have been proved as is understood in law. Rule 5 deals with transaction value of identical goods, Rule 6 deals with transaction value of similar goods. On the other hand, Rule 6A provides for determination of value when transaction value is not available. Rule 7 which comes after Rule 6A provides for determination of deductive value and Rule 7A provides for computed value - Where the value of imported goods cannot be determined under the provisions of any of the aforesaid rules, the value shall be determined using reasonable means as provided in Rule 8 i.e. the residual method. The dispute involved in South India Television (P) Ltd. 2007 (7) TMI 9 - SUPREME COURT , was as regards the assessable value of ceramic capacitors and diodes imported by the importer from the foreign supplier at Hongkong. The price declared by the importer was not accepted by the customs authority on the basis of overseas investigation report whereafter Rule 8 of the Customs Valuation Rules was invoked - This court held that before rejecting the invoice price, the department has to give cogent reasons for such rejection. This is because the invoice price forms the basis of the transaction value. In this regard, this court held that under valuation has to be proved. If the department wants to allege under valuation, it must make detailed inquiries, collect material and also adequate evidence. If the charge of under valuation cannot be supported either by evidence or information about comparable imports, the benefit of doubt must go to the importer. The charge of under invoicing has to be supported by evidence of prices of contemporaneous imports of like goods. Reverting to Section 14(1) of the Customs Act, this court held that it is for the department to prove that the invoice price is incorrect. When there is no evidence of contemporaneous imports at a higher price, the invoice price is liable to be accepted. On a cumulative analysis of the facts and the legal position, there are no hesitation in coming to the conclusion that both the department as well as the adjudicating authority were not justified in rejecting the import invoice price of the goods as not correct and enhancing the price by straightaway invoking Rule 8 of the Customs Valuation Rules when there was no evidence before them to do so. In these circumstances, CESTAT was justified in setting aside the order in original. Reliance on the statement made before the customs officers - recording of statement u/s 108 - HELD THAT - Since the objective is to ascertain the truth, the customs officer must ensure the truthfulness of the statement so recorded. If the statement recorded is not correct, then, the very utility of recording such a statement would get lost. It is in this context that the customs officer who is empowered under Section 108 to record statement etc. has the onerous responsibility to see to it that the statement is recorded in a fair and judicious manner providing for procedural safeguards to the concerned person to ensure that the statement so recorded, which is admissible in evidence, can meet the standard of basic judicial principles and natural justice. It is axiomatic that when a statement is admissible as a piece of evidence, the same has to conform to minimum judicial standards. Certainly a statement recorded under duress or coercion cannot be used against the person making the statement. It is for the adjudicating authority to find out whether there was any duress or coercion in the recording of such a statement since the adjudicating authority exercises quasi-judicial powers. Conclusion There are no error or infirmity in the impugned judgment and order of CESTAT - appeals filed by the department are devoid of merit and those are accordingly, dismissed.

Summary

Issues Involved:
1. Justification of CESTAT's decision on enhancement of value and penalties.
2. Admissibility and reliability of evidence, including statements and export declarations.
3. Correct application of Customs Valuation Rules for determining the value of imported goods.

Summary:

1. Justification of CESTAT's Decision:
The Supreme Court evaluated whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was justified in holding that the enhancement of the value of imported goods and the penalties imposed could not be sustained. The CESTAT had set aside the order of the adjudicating authority, which had enhanced the value of the goods based on unattested photocopies of export declarations and imposed penalties.

2. Admissibility and Reliability of Evidence:
The CESTAT had found that the export declarations filed by the foreign supplier before the Hong Kong customs authority could not be relied upon for the purpose of enhancement of value due to several reasons, including that they were unattested photocopies and the supplier had filed another set of declarations indicating the correct price. The CESTAT also noted that there was no investigation carried out by the customs authority with the Hong Kong customs authority revealing anything to the contrary. The Supreme Court concurred with this view, emphasizing that unattested photocopies without proper verification do not have evidentiary value.

3. Correct Application of Customs Valuation Rules:
The Supreme Court analyzed whether the department correctly applied the Customs Valuation Rules. The adjudicating authority had invoked Rule 8 of the Customs Valuation Rules straightaway, bypassing Rules 5, 6, and 7. The Supreme Court held that the department and the adjudicating authority were not justified in rejecting the import invoice price and enhancing the price without evidence. The Court reiterated that the burden lies upon the department to prove under-valuation by evidence or information about comparable imports, and if the charge of under-valuation is not supported by such evidence, the benefit of doubt has to be given to the importer.

Conclusion:
The Supreme Court upheld the CESTAT's decision, finding no error or infirmity in its judgment. The appeals filed by the department were dismissed, confirming that the enhancement of the value of imported goods and the penalties imposed could not be sustained due to lack of reliable evidence and incorrect application of the Customs Valuation Rules.