2025 (4) TMI 1199 - AT - Customs

Mis-declaration of the quantity of imported goods - violation of provisions of Section 40(4) of the Customs Act 1962 read with the provisions of Section 111(m) of the Customs Act 1962 - HELD THAT - The filing of an appeal itself can be taken as a protest thereby uprooting the consented value which might have been given at the time for taking clearance of goods. Of course this will be with the caveat that the value which has been consented is contested further as per law before the higher Judicial fora. On the other issue regarding the effect of declaring units and therefore the variation in weight being detected and its consequences it is found that the decision in the case of NILKAMAL LTD. VERSUS COMMR. OF CUS. (IMPORT) NHAVA SHEVA 2018 (11) TMI 1767 - CESTAT MUMBAI held that when the goods are in excess for items which are assessable as units and not by weight and excess weight noticed at the time of physical verification of import by Customs authorities could not be considered as requiring change in the transaction value disclosed in invoices. Further it is also found that Grasim Industries Ltd Vs. Commissioner of Central Excise Rajkot 2007 (5) TMI 468 - CESTAT NEW DELHI have clearly brought out that weight cannot be considered to be influencing the transaction value. When purchase order was given on per piece basis. It is also agreed that there is nothing on record to show that there was any excess remittance made for the excess weight which was found at the time of examination in impugned goods which were Proof Machined Low Alloy Steel Shell Belt Carbon Steel Forged Hemi Machined Carbon Steel Forged Test Plate. The very nature of the goods indicate that they are sold in the market by units and not by weight. Conclusion - In the absence of evidence showing remittance above invoice value the declared transaction value must be accepted. The declared transaction value and quantity as per units should be accepted for customs duty assessment. Appeal allowed.

Summary

The core legal questions considered by the Tribunal in this matter include:

1. Whether the mis-declaration of the quantity of imported goods, based on excess weight found during examination, constitutes a violation of the Customs Act warranting confiscation and penalty.

2. Whether weight is a determinative factor for assessing the transaction value of imported goods under the Customs Act, especially when goods are sold and invoiced on a per unit/piece basis.

3. The legal effect of the importer's acceptance of enhanced value and payment of additional duty without protest, and whether such acceptance precludes contesting the declared value subsequently.

4. Whether filing an appeal against enhancement of duty while paying the duty amounts to payment under protest, preserving the right to challenge the valuation.

5. The applicability of confiscation and redemption fine for alleged mis-declaration of quantity when the discrepancy arises from declaring units instead of weight.

Issue-wise Detailed Analysis:

1. Mis-declaration of Quantity and Violation of Customs Act

Legal Framework and Precedents: The adjudicating authority invoked Section 40(4) and Section 111(m) of the Customs Act, 1962, which relate to mis-declaration and evasion of duty, and imposed penalties under Sections 112(a) and 125 of the Act. The importer was found to have declared lesser gross weights than those physically verified, leading to confiscation and penalties.

Court's Reasoning and Findings: The Tribunal noted that the adjudicating authority relied on the excess gross weight found during examination to conclude mis-declaration and duty evasion. However, the Tribunal scrutinized whether weight was the appropriate criterion for valuation in this case, given the nature of goods and invoicing practices.

Application of Law to Facts: The Tribunal observed that the goods in question-Proof Machined Low Alloy Steel Shell Belt, Carbon Steel Forged Hemi, and Machined Carbon Steel Forged Test Plate-are typically sold and invoiced on a per unit basis, not by weight. Therefore, the discrepancy in weight alone, without evidence of excess remittance or altered transaction value, does not constitute mis-declaration under the Customs Act.

Treatment of Competing Arguments: The Revenue argued that the discrepancy in weight indicated mis-declaration to evade duty. The appellant contended that weight is not the relevant parameter for valuation and that the declared value should stand unless disproved by evidence of excess payment or other factors. The Tribunal aligned with the appellant's position, citing relevant precedents.

Conclusion: The Tribunal concluded that the mere excess weight detected during physical examination does not amount to mis-declaration warranting confiscation or penalty when goods are sold by units and no excess payment is made.

2. Weight as Criterion for Assessable Value under Customs Act

Legal Framework and Precedents: The Tribunal extensively relied on decisions such as Nilkamal Ltd. v. Commissioner of Customs (Import), Arebeen Star Maritime Agencies Pvt. Ltd., Grasim Industries Ltd., and Binani Cement Ltd., which establish that weight is not determinative of transaction value when goods are sold and invoiced per piece or unit. The transaction value principle under Section 14 of the Customs Act requires the declared invoice value to be accepted unless rebutted by evidence.

Court's Interpretation and Reasoning: The Tribunal emphasized that the transaction value is the primary basis for customs duty assessment and that weight discrepancies are irrelevant if the goods are sold by number of units. The Tribunal held that excess weight found during examination does not justify reassessment or rejection of declared value.

Key Evidence and Findings: The Tribunal noted absence of any evidence indicating remittance beyond invoice value or manipulation of declared value. The nature of goods and market practice supported valuation on per unit basis.

Application of Law to Facts: Applying the legal principle that transaction value governs customs valuation, the Tribunal held that the declared value should be accepted as correct and the excess weight is not a ground for reassessment.

Treatment of Competing Arguments: The Revenue's reliance on weight as a basis for reassessment was rejected in light of binding precedents and absence of evidence of excess payment.

Conclusion: Weight is not a criterion to determine assessable value for goods sold by units; the declared invoice value must be accepted unless rebutted.

3. Effect of Acceptance of Enhanced Value and Payment of Duty Without Protest

Legal Framework and Precedents: The Revenue relied on a recent decision holding that acceptance of enhanced value and payment of duty without protest binds the importer to that value, precluding later challenge. The Tribunal examined this principle in light of the importer's subsequent appeal.

Court's Interpretation and Reasoning: The Tribunal referred to the decision in Sukhdev Exports Overseas, which states that acceptance of enhanced value without protest converts that value into the declared value. However, the Tribunal also considered the later decision of the Delhi High Court in Principal Commissioner of Customs v. CISCO Systems India Pvt. Ltd., which clarified that filing an appeal against enhancement while paying the duty amounts to payment under protest, preserving the right to contest the valuation.

Key Evidence and Findings: The appellant had filed appeals against the enhancement and penalty, indicating protest against the enhanced value despite payment.

Application of Law to Facts: The Tribunal accepted that the filing of an appeal itself constitutes protest, thereby negating the argument that acceptance of enhanced value precludes challenge. This aligns with the principle that payment of duty under protest preserves the right to seek refund or reduction.

Treatment of Competing Arguments: The Revenue's contention that acceptance equates to waiver was countered by the appellant's appeal and supported by authoritative judicial pronouncements.

Conclusion: Payment of duty concurrent with filing an appeal is payment under protest, preserving the right to challenge the enhanced valuation.

4. Applicability of Confiscation and Redemption Fine

Legal Framework and Precedents: The adjudicating authority imposed confiscation and redemption fine under Section 125 of the Customs Act for mis-declaration. The appellant relied on precedents such as Bhagyanagar Metals Ltd. and Hindalco Industries Ltd., which held that mere clerical errors or discrepancies not amounting to mis-declaration do not justify confiscation or fine.

Court's Interpretation and Reasoning: The Tribunal examined whether the excess weight discrepancy was a clerical or technical error arising from declaring goods by units rather than weight. Given the nature of goods and absence of intent to evade duty, the Tribunal found confiscation and redemption fine unwarranted.

Application of Law to Facts: Since the Tribunal held that weight discrepancy does not amount to mis-declaration, the consequential confiscation and fine were also set aside.

Conclusion: Confiscation and redemption fine are not justified in cases where the discrepancy arises from non-weight-based declaration and no evasion of duty is established.

Significant Holdings:

"Weight is not a criterion to determine Assessable Value under Customs Act, 1962, especially where goods are sold and invoiced on a per unit basis."

"The mere excess weight detected during physical verification cannot be considered as requiring change in the transaction value disclosed in invoices."

"Filing of an appeal against enhancement of duty while paying the duty amounts to payment under protest, preserving the right to contest the valuation."

"In the absence of evidence showing remittance above invoice value, the declared transaction value must be accepted."

"Mere clerical or technical discrepancies do not amount to mis-declaration warranting confiscation or penalty."

The Tribunal allowed the appeals, set aside the confiscation, redemption fine, and penalty imposed, and held that the declared transaction value and quantity as per units should be accepted for customs duty assessment.