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TMI Blog2018 (12) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to Rule 3(2) of the Customs Valuation (Determination of Value of Imported goods) Rules, 2007 are attracted to the facts of the instant case, thereby warranting rejection of the transaction value. It is settled law laid down by the Hon ble Apex Court in the case of Eicher Tractors Ltd vs Commissioner of Customs [2000 (11) TMI 139 - SUPREME COURT OF INDIA] that it is only when the transaction value is liable to be rejected, based on the exceptions provided for in Rule 3(ii) of the erstwhile Customs Valuation Rules, 1988, could the assessable value be determined in terms of the valuation provisions - The ratio laid down in the aforesaid judgement applies in all fours even under the amended Section 14 and the Customs Valuation Rules, 2007. In the instant case, the adjudicating authority has not come to a conclusion that the transaction value as adjusted in accordance with the provisions of Rule 10, was incorrect or mis-declared and was required to be rejected and the assessable value re-computed under the valuation rules. The adjudicating authority has in a completely ad-hoc and arbitrary manner, without any reference to any provisions of the law and as also without followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal dated 29.10.2015 passed by the Principal Commissioner, Customs Mundra, wherein the following order was passed:- (i) I order confiscation of 2605.480 (2281.112+324.368) MTs of HR Steel Plates valued at Rs.Rs.13,80,54,382/- (122999765/- + 1,50,54,617/-) under Section 111(d)(j)(l)(m) and (o) of the Customs Act, 1962 read with Section 120 of the Customs Act, 1962. (ii) I order for confiscation of 75524.588 (55486.79 + 20037.798) MTs of HR Steel Plates totally valued at ₹ 385,94,21,322/- (298,98,47,535/- + 86,95,73,787/-) covered under 9 (4+5) Bills of Entry under Section 120 of the Customs Act, 1962. I impose a redemption fine of ₹ 2,00,00,000/-(Rs. Two Crores only) under Section 125 ibid in lieu of confiscation as the goods have been already cleared on furnishing a bond and Bank Guarantee. (iii) I determine and confirm the demand of duty amounting to ₹ 3,56,89,819 (3,17,97,899/- + 38,91,920/-) on the undeclared 2605.480 (2281.112+324.368) MTs HR Plates totally valued at ₹ 13,80,54,382/- (122999765/- + 1,50,54,617/-) under Section 28(4) of the Customs Act, 1962 with interest at applicable rate in terms of Section 28AA of the Customs Act, 1962. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in Advance License. Subsequently, on furnishing an undertaking by the appellant, the goods after weighment were cleared on provisional basis. On the weighment of the goods, it was found that the goods physically imported were not found in excess as compared to the weight declared in the respective bills of entry. Therefore, the excess cargo was provisionally cleared on furnishing the bank guarantee of 25% value of excess HR Steel Plates. Thereafter, the appellant vide their letter dated 14.05.2013 furnished bank guarantee dated 10.05.2013 of ₹ 60 Lakhs and an undertaking of ₹ 8 Crore. Vide their letter dated 21.05.2013, the appellant provided another bank guarantee dated 19.05.2013 for ₹ 2 Crore. After clearance of the goods, the appellant vide their letter dated 18.07.2013 and letter dated 07.08.2013 requested the customs authorities to consider the theoretical weight declared in the Mill Test certificate and bill of lading and to finalize the bills of entry with request to release their bank guarantee. 3. Thereafter, a show cause notice F. No. S/48-147/Import/Misc/MP SEZ/13-14 dated 06.01.2014 was issued to the appellant proposing confiscation of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces as also the weight based on the universally approved formula as declared in the supplier s documents, were found to be correct and unexceptionable. He submits that it is not in dispute that world over as also in India, the standards which have been laid down in respect of steel plates envisage that the mass of the steel plates shall be expressed with reference to the density of the steel plate by applying the formula 7.85kg/dm3. This formula finds mention not only in the Indian Standards IS 1730:1989 but also in JIS Handbook for Ferrous Materials and Metallurgy issued by the Japanese Standard Association. The said formula also finds a mention in the ASTM. The impugned order does not dispute that the international standards provide for computation of weight of steel plates with reference to their length, width and thickness by applying a scientific formula. This accepted basis on which the steel plates are being traded internationally is not in dispute. He submits that the sheets imported by the appellant had a length of approximately 12.5 metres and a width of 3-4 metres. The surface area of the sheets imported by the Appellant was approximately 502 metres. The appellant pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders, the tolerance prescribed was with respect to the thickness, width and length of the plates being ordered. He submits that the Adjudicating Authority, without taking note of the fact that the purchase orders themselves contemplated of positive tolerance in the weight by up to 2% and did not provide for a negative tolerance and consequently no adverse inference could have been drawn against the appellant based on the alleged variation in physical weight vis-a-vis that computed on a theoretical basis. He submits that IS 1730:1989 which deals with the dimension, mass and surface area of the steel plates in Clause 8 thereof refers to IS 1852:1985 with respect to the tolerance limits. As per the said IS, the tolerance with respect to width ranges from -0.0 to +2Omm/+0.5% of width! +0.3% of length. The tolerance for length ranges from -0.0 to +4Omm/+0.5% while the tolerance limit for thickness ranges from -5 to +12.5%. The standard further provides that the consignment weight shall not vary from the theoretical weight specified in Table 3 of IS 1730:1974 which was subsequently revised to 1989 by more than +5% / -2.5%. He submits that it is clear from IS-1852:1985 that the weight o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while taking delivery of the goods from the custodian, the appellant had not disputed the manner in which the weighment was undertaken. This finding in the impugned order clearly shows that the Adjudicating Authority has failed to discharge his obligation. The Adjudicating Authority was required to examine whether there was any infirmity in the procedure of weighment and thereafter to decide whether the manner in which the weighment was undertaken could be accepted or not, without applying his mind to this issue the authorities have left the issue by contending that the appellant not having objected to the manner of weighment while taking delivery of the goods, it could not raise such an objection subsequently. 4.3 Ld. Counsel further submits that for steel products, it is a well-accepted practice that if the said steel products are accompanied by Mill Test Certificate issued by the Manufacturer which gives details such as the manufacturer s name, Heat No., dimensions, finish, chemical composition, weight etc., the same are required to be accepted by the customs department. It is not in dispute that the Mill Test Certificate which had been filed along with the import docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... license and it has produced the license for this purpose. The Adjudicating Authority has however ignored the same for the reasons best known to him. He submits that the Notification No. 96/2009 dated 11.09.2009, in terms of which the advance licenses have been issued provide for exemption from the levy of customs duty subject to the condition that: (i) the authorization is produced before the proper officer at the time of clearance of debit. (ii) the authorization bears the name of the importer and the description and other specifications were applicable of the imported material and the description, quantity and value of the resultant product. (iii) the material imported corresponds with the specifications applicable of the imported material and that the value and quantity thereof are within the limits of the specified in the authorization. The appellant submits that there is no dispute that it fulfills all the stipulations referred to in the Notification No. 96/2009. This being the case, there is no basis whatsoever to deny the benefit of exemption to the alleged differential quantity. He submits that the Adjudicating Authority has erred in relying upon the Public Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in invoking the extended period for demanding duty as he has failed to appreciate that weight declared by it on the import documents was what had been declared by the supplier who were manufacturer/ traders of international repute. The Adjudicating Authority has overlooked the fact that for the extended period to be invoked there had to be deliberate suppression, misstatement with an intention to evade payment of duty. In the instant case, there is no such evidence which would suggest let alone established that the appellant had suppressed or misstated any fact with an intention to evade payment of duty and consequently the extended period of limitation was clearly not invokable. Without prejudice to the above submissions, he also submits that goods procured were to be cleared against the advance license without suffering any duty incidence. The value declared for the goods was true and correct transaction value, therefore, except for the quantity, to be debited against the license for which also there was sufficient balance available, there was absolutely nothing else required to be done. Accordingly, the transaction value in question did not entail any duty liability and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that any of the exceptions provided for in proviso to Rule 3(2) of the Customs Valuation (Determination of Value of Imported goods) Rules, 2007 are attracted to the facts of the instant case, thereby warranting rejection of the transaction value. 8. It is settled law laid down by the Hon ble Apex Court in the case of Eicher Tractors Ltd vs Commissioner of Customs reported in 122 ELT (321) that it is only when the transaction value is liable to be rejected, based on the exceptions provided for in Rule 3(ii) of the erstwhile Customs Valuation Rules, 1988, could the assessable value be determined in terms of the valuation provisions. The relevant observations of the Apex Court are extracted for use of reference. 13. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other Rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, was incorrect or mis-declared and was required to be rejected and the assessable value re-computed under the valuation rules. The adjudicating authority has in a completely ad-hoc and arbitrary manner, without any reference to any provisions of the law and as also without following the provisions of the Valuation Rules, which lay down a codified manner of re-computing the value, arrived at an assessable value which has no legal basis or sanctity. It is settled law laid down by the Apex Court in the case of CCE vs South India Television Pvt Ltd reported in 2007 (214) ELT 3 that even if the declared value is to be rejected the department has to apply the valuation rules, sequentially and cannot arrive at the value in an arbitrary and ad-hoc manner. The relevant observations of the Apex court in this regard are extracted herein below for ease of reference. 8 .. .Lastly, it is important to note that in the above decision of this Court in Eicher Tractors (supra) this Court has held that the Department has to proceed sequentially under Rules 5, 6 onwards and it is not open to the Department to invoke Rule 8 without sequentially complying with Rules 5, 6 and 7 even in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etres and a surface area of above approximately 50 sq. metres, it is completely unreasonable and illogical to apply 1% as the acceptable difference between the declared and the actual weight. In coming to this conclusion we are guided by the Indian Standard specification 1852:1985 which provides the specification for rolling and cutting tolerance for hot rolled steel products. 9.3. The said standard in clause 1.1 while explaining the scope thereof states that the said standard lays down rolling and cutting tolerance for hot rolled structural steel, beams, channels, equal and un-equal leg angles, Tee bars, bulb angles, round and square bars, flats, plates, strips and sheets rolled from structural steels including medium and high strength steel. Part 7 of the said standard deals with rolling and cutting tolerance for plates. Clause 7.1 stipulates the tolerance with respect to the width of the plates; Clause 7.2 provides for the tolerance with respect to the length of the plates; Clause 7.3 provides for the tolerance with respect to the thickness of the plates. Clause 7.4 provides for the tolerance with respect to the weight of the plates and reads as under: 7.4 The consignmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the difference between the declared weight and the actual weight exceeds the tolerance limits prescribed in the Indian Standards specification can the matter be taken up for adjudication for examining whether any fine is leviable or penalty is imposable. 11. In the facts of the present case it is not in dispute that the difference between the theoretical weight that has been declared on the bill of entry vis-a-vis the weight that has been physically computed worked out to 3.57% and is well within the 5% tolerance provided for, in the Indian Standard specifications. 12. We also take note and find merit in the appellant s grievance to the effect that the manner of computing the physical weight was not the most scientific one inasmuch as the physical weight was arrived at by first arriving at the tare weight of the truck trailer and thereafter arriving at the weight of the truck trailer with the steel plates loaded on it. It is common knowledge that in addition to the weigh scale calibration error, the direction in which the vehicle is parked on the weigh scale, the breeze factor, the extent of fuel present in the vehicle, etc can all play a role in causing a weight varia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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