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TMI Blog2025 (3) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Rules, it has to be re-determined sequentially under Rules 4,5,6,7,7A and 8 of 1988 Rules. The SCN has specifically recorded in paragraph 7.4 that Rules 4,5,6,7,and 7A cannot be applied to this case and for that reason proceeded to determine the value under Rule 8 of the 1988 Rules. Therefore, remanding the matter to the Commissioner would serve no purpose whatsoever because the only Rule which could have been applied in the facts of the case as per the SCN itself is Rule 8 but in view of the prohibition in sub-rule (2) (iii) of this Rule, the value cannot be determined based on the auction prices. The entire allegation of undervaluation is only based on the auction prices.
The proposals for demand of duty, confiscation, fine and penalties are solely based on the re-determination of the values of the horses based on the auction prices.
Conclusion - i) The rejection of the declared transaction value under Rule 10A was justified due to significant discrepancies with auction prices. ii) The imposition of penalties and fines was set aside as they were based on the flawed re-determination of value.
Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation with interest and to impose penalties on Doaba and Singh. 5. Doaba and Singh resisted the proposals which were however, confirmed by the Commissioner in the impugned order. Aggrieved, these appeals have been filed before this Tribunal. 6. We have heard learned counsel for the appellants (Doaba and Singh) and learned authorised representative for the Revenue and perused the records. 7. Several submissions were advanced by the learned counsel for the appellants the most important of which is that the value was wrongly determined under Rule 8 of the 1988 Rules based on the domestic sale price of the horses in the country of export. 8. We proceed to examine this submission because if this question is answered in favour of the appellants, it may not be necessary to examine the other submissions because the essential part of the impugned order is re-determination the value of the horses. The demand of differential duty, interest and penalties are consequential to the rejection of the declared value under Rule 10A of the 1988 Rules and its re-determination under Rule 8 of the 1988 Rules. 9. As per Section 14 of the Customs Act, the value of the imported goods shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 4. (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1)." 14. In this case, applying Rule 10A, the SCN, proposed to reject the transaction value for the reason that the very horses which were imported from Ireland had been sold in auction in Ireland just a few months before at much higher prices and the declared price was just a fraction of the auction price. 15. If the transaction value is rejected under Rule 10A, it must be re-determined as laid down in Rule 3 (ii) by following sequentially Rules 4 to 8. In other words, Rule 4 must be applied first and if it is not possible to determine the value as per Rule 4 and Rule 5 must be applied and so on up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, these were the domestic prices in Ireland, the country of export. Re-determination of the value under Rule 8 of the 1988 Rules cannot be done on the basis of the price of the goods in the domestic market of the country of export in view of explicit stipulation to this effect in sub-rule 2(iii) of Rule 8 of the 1988 Rules. 20. Learned authorised representative for the Revenue, on the other hand, submits that we must first consider if the rejection of the declared value under Rule 10A is correct. Since the goods in question were thoroughbred horses, there was a complete record of them. Undisputedly, the very horses which were auctioned in Ireland for certain prices were, shortly thereafter, in a few months imported by Doaba declaring a fraction of the auction price as the transaction value. Therefore, there was an extremely strong reason to reject the declared price. 21. On the question of application of Rule 8 of the 1988 Rules, learned authorised representative submits that the auction price of the horses in Ireland cannot be considered as the domestic price in Ireland because anyone in the world could have participated in the auction and bought the horses. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) a system which provides for the acceptance for customs purposes of the highest of the two alternative values; (iii) the price of the goods on the domestic market of the country of exportation; (iv) the cost of production other than computed values which have been determined for identical or similar goods in accordance with the provisions of rule 8; (v) the price of the goods for the export to a country other than India; (vi) minimum customs values; or (vii) arbitrary or fictitious values." 25. Both the 1988 Rules and the 1997 Rules are based on India's international Commitments as a signatory to the General Agreement on Tariffs And Trade 1994 (GATT) under which various rules of international trade were agreed to. Article VII of GATT dealt with the valuation of the goods. In order to elaborate on implementation of Article VII of the GATT, Rules on Customs Valuation were signed Article 7 of which is the residual method of determination of value. This Rule also specifically prohibits determination of value based on the domestic price of the goods in the country of export or the country of import. Article 7 reads as follows: "Article 7 1. If the customs value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prices. It would only mean that anyone from within Ireland or from outside could have purchased the horses in the domestic market of Ireland. The mere fact that the horses were sold through auction and not through a fixed price would make no difference whatsoever to the fact that the market was the domestic Irish market. 29. Another submission of the learned authorised representative for the Revenue is that if Rule 8 of 1988 is said to be wrongly applied, the matter may be remanded to the Commissioner to apply the correct Rules and re-determine the value because, evidently, the declared price is just a fraction of the actual price as was evident from the auctions. 30. However, we find that if the declared value is rejected under Rule 10A of the 1988 Rules, it has to be re-determined sequentially under Rules 4,5,6,7,7A and 8 of 1988 Rules. The SCN has specifically recorded in paragraph 7.4 that Rules 4,5,6,7,and 7A cannot be applied to this case and for that reason proceeded to determine the value under Rule 8 of the 1988 Rules. Therefore, remanding the matter to the Commissioner would serve no purpose whatsoever because the only Rule which could have been applied in the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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