2024 (7) TMI 939 - AT - Customs

Valuation of imported goods - undervaluation of aluminium scrap and zinc scarp of various grades imported from overseas suppliers - redetermination of the value of scrap items was based on the fact that the import price of the said items were much lower than the prevailing prices contained in the bulletin published by the London Metal Exchange (LME) - HELD THAT - The valuation of imported goods for the purpose of assessment is contained in Section 14 ibid, which mandates that the value of goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale for delivery at the time and place of importation, in the course of international trade. The said statutory provision also provides for consideration of the deemed value in the ordinary course of trade, where the seller and the buyer should not have any interest in the business of each other and the price should be the sole consideration for the sale or offer for sale. In the case in hand, the appellant M/s. NICO had entered into contract with the overseas suppliers for importation of the scrap items in question. Pursuant to the contractual norms, the goods were supplied by the overseas entities under the cover of commercial invoices, bearing the reference of description of goods, quantity, price etc. On the basis of the import documents, the appellant had filed the B/Es before the jurisdictional Customs Authorities for duty assessment and for clearance of the imported consignments for home consumption. It is not the case of Revenue that over and above the contractual amount, the appellant had paid any other amount either to the overseas supplier or any other person in context with importation of the subject goods. There is no evidence on record in this context. Further, Revenue has also not alleged that the appellant had any interest in the business of the overseas suppliers and vice-versa. It is a settled position of law that if the declared value is to be rejected, then in that case, for re-determination of the value, the proper officer has to proceed sequentially through Rule 5 to Rule 8 of the CVR, 1988 - LME prices cannot be the sacrosanct evidence to substantiate the charge of undervaluation, especially when contemporaneous import of almost same price was available during the material time. The law is well settled in the following cases, that transaction value cannot be rejected, unless there is contemporaneous evidence to reject the invoice value. The adjudged demands confirmed against the appellant M/s. NICO are not sustainable. For the same reason, the penalty imposed upon the co-appellants namely, Shri Nitul B. Shah and Shri Tushar A. Porwal is also not sustainable - the impugned order is set aside - appeal allowed.

Issues Involved:
1. Alleged undervaluation of imported aluminium and zinc scrap.
2. Rejection of declared transaction value by the adjudicating authority.
3. Reliance on statements of company officials and their retraction.
4. Use of London Metal Exchange (LME) prices and Directorate General of Valuation (DGOV) Circular for value determination.
5. Contemporaneous import data and its consideration.
6. Time-barred nature of the show cause notice.
7. Imposition of penalties on company officials.

Detailed Analysis:

1. Alleged Undervaluation of Imported Aluminium and Zinc Scrap:
The Directorate of Revenue Intelligence (DRI) initiated proceedings against M/s. NICO for allegedly undervaluing imported aluminium and zinc scrap to evade customs duties. The investigation revealed discrepancies in the declared values compared to the prevailing market prices, leading to the issuance of a show cause notice (SCN) proposing the rejection of declared values and redetermination under Section 14 of the Customs Act, 1962.

2. Rejection of Declared Transaction Value by the Adjudicating Authority:
The adjudicating authority rejected the declared transaction values based on the SCN, invoking Section 14 of the Customs Act and relevant rules under the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The authority relied on the sales contract and statements of company officials to conclude that the actual transaction values were higher than declared, with differential amounts allegedly paid through non-banking channels.

3. Reliance on Statements of Company Officials and Their Retraction:
The appellants contended that the rejection of transaction values based on statements of Shri Tushar Porwal and Shri Nitul B. Shah was untenable as these statements were retracted. The retractions were sent to DRI but were disregarded by the adjudicating authority. The Tribunal noted the lack of corroborative evidence to support the statements and emphasized that retracted statements, without substantiation, cannot form the basis for rejecting transaction values.

4. Use of London Metal Exchange (LME) Prices and DGOV Circular for Value Determination:
The department's reliance on LME prices and DGOV Circular No. 14/2005 for redetermining values was challenged. The Tribunal highlighted that LME prices cannot be the sole basis for valuation, especially when contemporaneous import prices are available. The Tribunal referred to several judgments, including those of the Hon’ble Supreme Court, establishing that transaction values cannot be rejected without contemporaneous evidence.

5. Contemporaneous Import Data and Its Consideration:
The appellants provided contemporaneous import data showing that their declared prices were comparable to other importers. The Tribunal agreed that the adjudicating authority overlooked this data and instead relied on the DGOV circular. The Tribunal emphasized that re-determination of value should follow the sequential rules under the Customs Valuation Rules, giving precedence to contemporaneous import prices.

6. Time-Barred Nature of the Show Cause Notice:
The appellants argued that the SCN issued on 31.03.2008 for imports made between April 2003 and October 2006 was time-barred. The Tribunal noted that the larger period of limitation could not apply as the valuation issue was already examined at the time of import, and no mala fides were established to justify the extended period.

7. Imposition of Penalties on Company Officials:
Penalties were imposed on Shri Nitul B. Shah and Shri Tushar A. Porwal under Section 112(b) of the Customs Act. Given the Tribunal's findings that the charges of undervaluation were unsubstantiated, the penalties on the officials were also deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order dated 13.03.2019, holding that the adjudged demands and penalties were not sustainable. The appeals filed by M/s. NICO and the co-appellants were allowed with consequential relief as per law. The Tribunal emphasized the importance of contemporaneous import data and the necessity of corroborative evidence when relying on retracted statements. The judgment reinforced the legal principle that transaction values cannot be rejected without substantial evidence and that procedural rules for valuation must be followed sequentially.

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