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2025 (3) TMI 1198 - AT - CustomsScope for re-determination of value under Customs Valuation (Determination of Value of Imported Goods) Rules 2007 and consequential penalty under section 112 of Customs Act 1962 - no differential duty to be levied - HELD THAT - The issue decided in Prakash Sancheti 2013 (8) TMI 506 - CESTAT AHMEDABAD where it was held that The extent of over-invoicing is so high that the actual value of the goods was found to be 3.56% of the actual. In fact the learned advocate on behalf of the Hong Kong exporters submitted that the Commissioner has discussed the earlier import and export but since she has not based her conclusions on those transactions he did not contest those findings nor made any submissions thereon. It would not be fair on our part also to consider the past activity for the purpose of deciding whether goods have to be absolutely confiscated or not. The only issue before the Tribunal then was the exercise of discretion by the adjudicating authority insofar as offer of redemption on payment of fine under section 125 of Customs Act 1962 is concerned. Furthermore the matter of certification under Kimberley Process Certificate (KPC) was not an issue adjudged by the Tribunal and it was solely on the ground of mis-declaration of value that the confiscation had been upheld. In re Dinesh Dhola and others the Tribunal took note of failure to have Kimberley Process Certificate (KPC) verified on which was premised the prescription claimed to warrant absolute confiscation. In circumstances of the taint attached to handling of allegedly conflict diamonds that the importer assumed responsibility to re-export the confiscation of the goods without offer of redemption is held to be inappropriate. The manner in which the value has been determined in accordance with the provisions of Customs Valuation (Determination of Value of Imported Goods) Rules 2007 bears further evaluation to comply with section 2(41) of Customs Act 1962. Such was not the requirement under section 17 of Customs Act 1962 on every shipping filed under section 50 of Customs Act 1962 but also wherever value find reference insofar as the handling of the imported goods is concerned. Conclusion - i) Absolute confiscation of the rough diamonds was inappropriate due to the lack of a valid ground based on the Kimberley Process Certificate mismatch. The goods should have been allowed for re-export. ii) The re-determination of value under the Customs Valuation Rules was flawed and required re-evaluation in accordance with the proper legal framework. iii) The imposition of penalties was contingent upon the re-determination of value and thus required reconsideration. iv) There is a need for proper verification of the Kimberley Process Certificate and cautioned against hasty actions leading to absolute confiscation. The matter remanded back to the original authority for a fresh decision - Appeal allowed by way of remand.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment involve:
ISSUE-WISE DETAILED ANALYSIS 1. Absolute Confiscation of Rough Diamonds The Tribunal examined whether the absolute confiscation of the rough diamonds was justified. The confiscation was initially upheld due to alleged discrepancies between the Kimberley Process Certificate (KPC) and the goods themselves, as well as the mis-declaration of value. The relevant legal framework includes Section 113(d) of the Customs Act, 1962, which empowers authorities to confiscate goods attempted to be exported contrary to any provision of the Act or any other law. The Court interpreted this to mean that non-compliance with import/export conditions renders goods prohibited, thus subject to confiscation. However, the Tribunal noted that the Kimberley Process Certificate's primary purpose is to suppress trade in conflict diamonds, and its mismatch with invoices was not a sufficient ground for absolute confiscation. The Tribunal found that the goods should have been allowed for re-export rather than being absolutely confiscated, as absolute confiscation could inadvertently result in conflict diamonds entering the domestic market. 2. Re-determination of Value The Tribunal considered the re-determination of the value of the imported goods. The original authority had re-determined the value from US$ 735,000 to US$ 50,000 under rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Tribunal found that the adoption of appraised value under rule 12 was inappropriate as it does not provide a method for determining value but rather a mechanism for rejecting declared value. The Tribunal emphasized that value should be determined sequentially according to rules 4 to 9, and the re-determination should be revisited to comply with the Customs Act, 1962. 3. Imposition of Penalties The penalties under sections 112 and 114AA of the Customs Act, 1962, were also scrutinized. The Tribunal noted that penalties were imposed based on the re-determined value, which was found to be inappropriate. Consequently, the penalties were subject to reconsideration upon re-evaluation of the goods' value. 4. Handling of Kimberley Process Certificate (KPC) The Tribunal addressed the handling of the Kimberley Process Certificate, which was not verified by the original authority. The Tribunal pointed out that the lack of a match in the certificate was not sufficient grounds for absolute confiscation and that checks should have been conducted with the relevant authority instead of adopting precipitate action. SIGNIFICANT HOLDINGS The Tribunal made several significant holdings:
The Tribunal concluded that the appeals were allowed by way of remand, instructing the original authority to re-evaluate the case in line with the Tribunal's findings and the applicable legal provisions for the valuation of imported goods.
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