2024 (9) TMI 254 - AT - Customs

Old and used second hand goods or unused new goods - valuation of goods - rejection of transaction value - value determined by the adjudicating authority on the basis of the Chartered Engineer's report - confiscation - levy of penalties. Whether evidence available on record indicate that the goods imported by the appellant are old and used second hand goods as claimed by the department or unused new goods which looks old because of keeping them in stock for a longer period, as claimed by the appellant? - HELD THAT - On perusal of the report issued by the Chartered Engineer, it is observed that the report is not in consonance with the physical availability of the goods in the consignment. In the examination report, the Chartered Engineer reported that, the date of manufacture is not available on the goods, ignoring the fact that the 19 LCD Panels of Lenovo Brands of 2876 pcs was manufactured on 01.08.2021, which was embossed on it. It is also observed that the Chartered Engineer s report is not conclusive as he suggested for further laboratory test to ascertain its functionality, residual life etc. Accordingly, the adjudicating authority could not have come to the conclusion that the impugned goods are old and used only on the basis of this Chartered Engineer's report, which is inconclusive on the nature of the imported goods in its findings. The evidence available on record does not indicate that the goods imported are old and used. On the contrary, the letter submitted by the appellant indicate that the supplier has categorically stated that the imported goods are new, supplied from the old stock. Unused goods supplied from old stock may look old and obsolete, but for the purpose of import policy, they cannot be called as second hand goods which require an authorization for importation. Accordingly, on the basis of evidences available on record and the decisions cited above, we hold that the goods imported by the appellant in this case cannot be considered as second hand goods which require authorization for import. Thus, there is no violation of EXIM policy warranting confiscation of the goods imported under the bills of entry - the order of confiscation and imposition of redemption fine for violation of foreign policy by the appellant set aside. Valuation of the goods - HELD THAT - There is no evidence brought on record to establish that the transaction value between the parties was influenced by any other consideration. Value may be diminished on account of variety of reasons, such as wear and tear, non-use, obsolescence or the like. Depreciation on account of wear and tear is a well-known concept. So also depreciation on account of obsolescence. Hence as the goods are supplied out of stock lot, a slight variation in value as compared to the new item of similar goods is permissible. The adjudicating authority has not made any effort to find out the value of similar goods in the market. He has rejected the transaction value declared by the appellant only on the basis of the Chartered Engineer's report - the value determined by the adjudicating authority on the basis of the Chartered Engineer's report is arbitrary and not supported by any corroborative evidence - the value redetermined by the adjudicating authority is rejected. The differential customs duty confirmed in the impugned order on account of re-determination of the assessable value set aside. Since, the duty re-determined is set aside the question of demanding interest does not arise. Imposition of penalty - HELD THAT - The penalty has been imposed on the appellant on account of redetermination of value and on the basis of allegation of mis-declaration. In the instant case, the goods from old stock has been sent on account of the mistake of the overseas supplier, which is beyond the control of the appellant. Since, the allegation of mis-declaration and under valuation is not sustained, the goods are not liable for confiscation. The question of imposition of Penalties u/s 112(a), 112(b) 114AA of Customs Act 62 does not arise - Regarding imposition of penalty under Section 114AA, it is observed that no evidence has been brought on record that the appellant used any false and incorrect materials or made any declaration, statement or document which is false or incorrect, in transaction of his business. Hence, imposing of penalty on the importer under section 114AA does not arise in this case. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the imported goods were old and used second-hand goods or new goods appearing old due to prolonged storage.
2. Validity of the value enhancement of the imported goods.
3. Legality of penalties imposed under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962.

Detailed Analysis:

1. Whether the imported goods were old and used second-hand goods or new goods appearing old due to prolonged storage:

The appellant imported LCD panels, which were declared as "Electronic Components LCD Panels for LCD TV." Upon examination, officers believed the goods were old and used, violating the Foreign Trade Policy 2015-2020. The appellant contended that the goods were new but appeared old due to being stored for a long period in the UAE. They supported this claim with a letter from the exporter stating that the goods were new and directly imported from the USA and Canada before being stored in the UAE.

The adjudicating authority based its conclusion on a Chartered Engineer's report, which suggested the goods were old and used but was inconclusive and recommended further laboratory tests. The Tribunal found that the Chartered Engineer's report was not conclusive and ignored the appellant's evidence, such as the manufacturing date embossed on the goods. The Tribunal held that the goods could not be considered second-hand merely because they appeared old due to prolonged storage. Consequently, the Tribunal set aside the confiscation and imposition of redemption fine for violating the Foreign Trade Policy.

2. Validity of the value enhancement of the imported goods:

The adjudicating authority enhanced the value of the goods based on the Chartered Engineer's certificate, which was not supported by corroborative evidence. The appellant argued that the transaction value should be accepted as the assessable value unless exceptions under Rule 4 of the Customs Valuation Rules applied. The Tribunal observed that the adjudicating authority did not consider the comparable market prices provided by the appellant and solely relied on the Chartered Engineer's report. The Tribunal cited various precedents, including the Supreme Court's decisions, emphasizing that transaction value should be accepted unless influenced by non-commercial considerations.

The Tribunal concluded that the value enhancement was arbitrary and unsupported by evidence. It accepted the transaction value declared by the appellant and set aside the differential customs duty confirmed by the adjudicating authority.

3. Legality of penalties imposed under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962:

Penalties were imposed on the appellant for alleged mis-declaration and under-valuation. The Tribunal found that the goods were sent from old stock due to an overseas supplier's mistake, which was beyond the appellant's control. Since the allegations of mis-declaration and under-valuation were not sustained, the Tribunal held that the goods were not liable for confiscation, and the imposition of penalties under Sections 112(a), 112(b), and 114AA did not arise. The Tribunal noted that no evidence was presented to show that the appellant used false or incorrect materials or made false declarations.

Conclusion:

The Tribunal set aside the impugned order, including the confiscation, value enhancement, imposition of redemption fine, and penalties. The appeal filed by the appellant was allowed, and the transaction value declared by the appellant was accepted as the assessable value.