Radhey Shyam Ratanlal Vs Commissioner of Customs (General) (CESTAT Mumbai)
SEO Title: Customs Valuation Enhancement Without Valid Comparable Imports Set Aside: CESTAT Mumbai
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, in Radhey Shyam Ratanlal Vs Commissioner of Customs (General), Mumbai, allowed the importer’s appeal against enhancement of the assessable value of cloves imported from Indonesia and Tanzania. The dispute concerned four bills of entry filed in February and March 2004, for which the importer had declared values ranging from US$1,300 to US$1,710 per metric tonne. During provisional assessment under Section 18 of the Customs Act, 1962, the declared values were enhanced to US$2,185 or US$2,300 per metric tonne. Following earlier appellate proceedings and directions for finalisation of assessment, the customs authorities sought supporting documents relating to the original sale and the importer’s claim that the cloves belonged to an old crop. As the importer did not furnish the requested evidence, the authorities rejected the declared value under Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, and determined a substitute value of US$2,900 per metric tonne under Rule 8, resulting in a differential customs duty demand of ₹28,94,227. The Commissioner of Customs (Appeals) upheld the enhancement.
The Tribunal distinguished between the legality of rejecting the declared transaction value and the validity of the substitute value adopted by the Department. It found no reason to interfere with the rejection under Rule 10A because the importer had failed to provide supporting invoices, evidence of the quality of the cloves or other material demonstrating that the declared prices were reliable. However, the Tribunal held that the residual valuation method under Rule 8 could not be applied arbitrarily. Although that provision allowed flexibility, the substitute value still had to conform to the general valuation principles and the specific restrictions prescribed under the 1988 Rules. The Department had relied upon prices published in the Public Ledger and declarations contained in 19 other bills of entry without establishing that those transactions satisfied the criteria for similar goods in customs valuation” target=”_blank” rel=”noopener”>identical or similar goods or otherwise provided a legally acceptable basis for determining value.
The Tribunal observed that the Public Ledger material did not establish that the published prices related to cloves of the relevant country of origin. Similarly, the 19 bills of entry could not be treated as valid comparables merely because their declared prices were close to the enhanced value. The authorities had not explained why those transactions were suitable substitutes under the applicable valuation framework. CESTAT held that rejection of the declared value under Rule 10A must be followed by lawful determination of a substitute value under Rules 5 to 8. Since no valid substitute value had been established, the enhancement lacked legal authority. Accordingly, the Tribunal set aside the impugned order and allowed the appeal.
FULL TEXT OF THE ORDER OF CESTAT MUMBAI
1. This appeal of M/s Radhey Shyam Ratanlal may be disposed off within the narrow compass of applicability of rule 8 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 to the circumstances of import for revision of declared value of imports of ‘cloves’ originating from Indonesia/Tanzania effected vide bill of entry no. 464/16.02.2004, 413/17.03.2004, 510/19.02.2004 and 550/20.02.2004 and especially in the light of the adjudication by original authority have been undertaken thrice only to be demanded once by the Tribunal on challenge to loading adopted for provisional assessment under section 18 of Customs Act, 1962 and once by the Commissioner of Customs (Appeals) who found it appropriate to remand the matter back to the original authority upon finalization.
2. The assessment of imports of the appellant were made provisional with the declaration of US $ 1300 to 1710 PMT enhanced to US $ 2185 PMT on two of the bills of entry and to US $ 2300 on the other two bills of entry. The loading was not interfered with by the first appellate authority for being premature challenge and, consequently, upon being carried to the Tribunal, was restored to the original authority for assessment to be finalized within three months thereof following which the importer was directed, vide letter dated 24th October 2006, to furnish documentary evidence of original sale as also evidence of the impugned goods being ‘old crop’, and, upon non-response, the declared value was rejected under rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 to be re- determined at US $ 2,900 PMT under rule 8 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 with differential duty of ₹ 28,94,227 recoverable thereon. The 1 Commissioner of Customs (Appeals), Mumbai-II vide order upheld the order leading to the present appeal.
3. We have heard Learned Counsel for appellant and Learned Authorized Representative. Learned Counsel for the appellant raised several objections to the manner in which the value was rejected and the revision adopted for recovery of differential duty. However, it is on record that the importer had failed to furnish any evidence of value being likely to be lower than the prices of contemporary transactions, through preceding invoices, or, through preceding test reports, of quality of the cloves, leaving no option, consequent upon the direction of the Tribunal, but to finalize the assessment on available documents and declaration. In the circumstances, recourse to rule 10A of Valuation (Determination of Price of Imported Goods) Rules, 1988 for discard of the declared value is not exceptionable as upheld in the impugned order. We, too, find no reason to concur with the Learned Counsel that the declared value should not have been rejected in the circumstances.
4. Turning to the manner in which the scheme of ‘surrogate value’ under rule 8 of Valuation (Determination of Price of Imported Goods) Rules, 1988 was to be adopted, it is seen that the order of the original authority relied upon prices in ‘Public Ledger’, as well declarations in 19 other bills of entry as hovering around the finally assessed value and as being in conformity with ‘8. Residual method.
(1) Subject to the provisions of rule 3 of these rules, where the value of imported goods cannot be determined under the provisions of any of the proceeding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub- section (1) of Section 14 of the Customs Act, 1962 (52 of 1962), and on the basis of data available in India.
(2) No value shall be determined under the provisions of this rules on the basis of
(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs purpose of the highest of the two alternative values;
(iii) the price of the goods on the domestic market of the country of exportation; (iiia) the cost of production other than computed values which have been determined for similar goods in customs valuation” target=”_blank” rel=”noopener”>identical or similar goods in accordance with the provision of rule 7-A. (iv) the price of the goods for the export to a country other than India;
(v) minimum customs values; or
(vi) arbitrary or fictitious values.’
of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. There is no doubt that rule 8 of the said Rules afforded a flexibility, not available now under the extant Rules notified in terms of section 14 of Customs Act, 1962, but was, yet, subject to conformity with the general principle of value espoused in rule 3 therein and specific exclusions. The impugned order is not reticent in referring to 19 bills of entry which, admittedly, are not in conformity with scheme of ‘surrogate value’ set out in rule 5 of the said Rules. ‘Public Ledger’ is not a document that affords justification for adoption of value therein owing to the disbursement of prices stipulated in rule 8(2) (iv) of the said Rules as it is not on record that the prices therein are of ‘cloves’ of the country of origin. It is also surprising that the adjudicating authority has relied upon bills of entry which do not fit the criteria of ‘identical goods’ or ‘similar goods’ and yet chose to accord weightage under a different rule which is required to be consistent with principle of valuation. It is quite clear that the 19 bills of entry, relied upon by the lower authorities for discard within the frame work of the prevailing Rules is silent on reasons for drawal of the same as surrogate for transaction value in terms of rule 8 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
5. Recourse to rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 is required to be brought to a logical conclusion within the signification of rule 5 to rule 8 of the said Rules. Failure to do so, by non-availability of substitute value, rescinds the finding of non – acceptance of the declared value.
6. Consequently, the revision in value is without authority of law and on facts which do not find acceptance of substituted value within the framework of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. Accordingly, the impugned order is set aside to allow the appeal.
(Order pronounced in the open court on 25/03/2025)
Notes:-
1 [order-in-appeal no. 151 (CFS MULUND)/2014(JNCH)/IMP-143 dated 20th January 2014]
