Murugan K.S Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that enhancement of assessable value in absence of all the details the imports whose values have been relied upon as contemporaneous prices by the lower adjudicating authority is unsustainable as reasonability of the same cannot be decided.
Facts- Mr. Murugan K.S., who is the appellant herein, has filed the Bill of Entry No. 5401513 dated 07.12.2011 for import of 1976.10 kgs of Polyester Nylon Warp Knitted Fabrics and 8511.90 kgs of Nylon Warp Knitted Fabrics which were purchased on “High Seas Sales”.
Post investigation, the Show Cause notice was issued to M/s. Murugan K.S. proposing therein for enhancement of the assessable value, confiscation of the imported goods and also for imposition of penalty u/s. 112(a) and 114A of the Customs Act, 1962.
The Additional Commissioner of Customs, Custom House, rejected the assessable value and re-determined the assessable value. He has ordered for confiscation of the goods u/s. 111(m) of the Customs Act, 1962 and imposed redemption fine of Rs.20,00,000/- u/s. 125 of the Customs Act, 1962 and a penalty of Rs.13,04,806/-was also imposed on the importer M/s. Murugan K.S., Tuticorin u/s. 112(a) of the Customs, Act 1962. A penalty of Rs.5,00,000/- was also imposed on M/s. MKS Shipping Agencies P Ltd., Tuticorin u/s.112(a) and 114AA of the Customs Act, 1962 who handled the above consignment whose operations are also reported to be managed by Mr. Murugan K.S. But, it is to be pointed out that it is not known whether there is any appeal by M/s. MKS Shipping Agencies P Ltd., Tuticorin CHA regarding the penalty imposed on them as above.
Commissioner (A) rejected the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that in these appeals, the only reason for rejecting the transaction value is on account of noticing higher values of the contemporaneous imports. However, while determining a particular import to be considered as a contemporaneous import for enhancement, it is necessary to match all commercial level details like quality, quantity, type whether under a contract, physical characteristics, brand, reputation, country of origin, time of import, stock lot sale, manufacturers sale, etc. This is a necessary requirement. Merely giving the details of the Bills of Entry may be of identical / similar goods or of same country of origin and may be at the same time would not be sufficient because the transaction values are affected by various commercial factors like the quantity imported, the quality differences, reputation and relationship between the supplier and the importer, whether any advance paid or not, etc. In the absence of all the details of the imports whose values have been relied upon as contemporaneous prices by the lower adjudicating authority it is not possible to decide whether the decision of enhancement is reasonable or whether it is in accordance with the valuation provisions or not.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Mr. Murugan K.S., who is the appellant herein, has filed the Bill of Entry No. 5401513 dated 07.12.2011 for import of 1976.10 kgs of Polyester Nylon Warp Knitted Fabrics and 8511.90 kgs of Nylon Warp Knitted Fabrics which were purchased on “High Seas Sales” basis from M/s. Sainath Knitex Pvt. Ltd., Surat who originally purchased the said goods from M/s. J.S. Fashions (L.L.C), Dubai, UAE but supplied directly by M/s. Changle Foreign Trade Corporation, Fujian, China, the manufacturer. Suspecting that the said import consignment was undervalued, officers of DRI, Tuticorin have seized the goods on 27.12.2011 as the declared value at US$ 5.15 per Kg for Nylon Knitted Grey Fabrics, and at US$ 3.90 per Kg for Polyester Nylon Knitted Grey Fabrics was considered low compared to the contemporaneous imports which were valued at US$ 8.55 per kg for “Grey Warp Knitting Fabrics” specification square net 52” “semi dull” and US$ 9.2 per kg for “grey warp knitting fabric” specification square net 52” “bright” in respect of Invoice No. H07HD054 dated 31.05.2011 of Fujian Holy Trading Company Ltd., China pertaining to the importer M/s. Sai Enterprise, Surat which were imported thorugh Nhave Sheva, Mumbai.
2. On examination, it was found that the imported consignment contained 1976.10 kgs of square net fabrics with slip as “Semi Dull” and 8511.9 kgs of square net fabrics with slip as “Bright”.
3. Further, the Revenue noticed two imports of Warp Knitted Fabrics at Tuticorin by M/s. Sainath Knittex Pvt. Ltd., Surat where the value declared of Nylon Warp Knitted Fabrics was at US$ 9.0 and US$ 7.22 respectively. The consignment under seizure was bought on high seas sales basis by M/s. Murugan K.S., on 15.11.2011 from M/s. Sainath Knitex P Ltd., Surat, and value declared by them for the said consignment of Chinese Origin received under the invoice of Ms. J.S. Fashions, Dubai was at US$ 5.15/Kg. Further, the Revenue believed that the person who declared to have bought the goods for US$ 9.30/Kg and US$ 7.22/Kg during the above period could not have sold the same variety of goods at far lesser value at US$ 5.15 Kg. Thus, the value adopted appeared to have been suppressed as seen from the values adopted also by other importer M/s. Star Mint Fields P Ltd., Surat who had imported identical or similar goods where the value declared of Nylon Warp Knitted Fabrics was found to be US$ 8.9 kg and the value of Polyester Nylon Warp Knitted Fabrics was at US$ 7.8 kg.
4. Consequent to the above investigation, the Show Cause notice dated 09.06.2012 was issued to M/s. Murugan K.S. proposing therein for enhancement of the assessable value, confiscation of the imported goods and also for imposition of penalty under Section 112(a) and 114A of the Customs Act, 1962.
5.1. On adjudication of the above Show Cause Notice, the Additional Commissioner of Customs, Custom House, Tuticorin vide order dated 29.08.2012 have rejected the assessable value of Rs.23,75,423/- based on US$ 5.15/kg adopted for Nylon Warp Knitted Fabrics and assessable value of Rs.4,17,620/- based on US$ 3.90/kg adopted in respect of Polyester Nylon Warp Knitted Fabrics under Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determined the assessable value at Rs.40,24,608/- based on unit price $ US8.9/kg in respect of Nylon Warp Knitted Fabrics under Rule 4 of ibid read with Section 14(i) of the Customs Act, 1962 and the assessable value at Rs.8,35,239/- based on unit price US$ 7.8/kg in respect of Polyester Nylon Warp Knitted Fabrics under Rule 5 of ibid for the above Bill of Entry No. 5401513 dated 07.12.2011. He has ordered for confiscation of the above goods under Section 111(m) of the Customs Act, 1962 and imposed redemption fine of Rs.20,00,000/- under Section 125 of the Customs Act, 1962 and a penalty of Rs.13,04,806/-was also imposed on the importer M/s. Murugan K.S., Tuticorin under Section 112(a) of the Customs, Act 1962. A penalty of Rs.5,00,000/- was also imposed on M/s. MKS Shipping Agencies P Ltd., Tuticorin under Section 112(a) and 114AA of the Customs Act, 1962 who handled the above consignment whose operations are also reported to be managed by Mr. Murugan K.S. But, it is to be pointed out that it is not known whether there is any appeal by M/s. MKS Shipping Agencies P Ltd., Tuticorin CHA regarding the penalty imposed on them as above.
5.2. Being aggrieved, the appellant have filed an appeal with the Commissioner of Customs and Central Excise (Appeals), Tiruchirapalli who rejected their appeal. As such Mr. K.S. Murugan (appellant) came on appeal before this forum.
6. The appellant has submitted the following contentions as revealed from their reply to the Show Cause Notice and also the grounds of appeal.
(i) The proposal for rejection of the declared value and enhancement of value was misconceived and contrary to specific legal provisions in the Customs Act and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 as well as the law laid down in the case of M/s. Eicher Tractors Ltd., [2000 (122) ELT 321 (SC)]. The imported goods need to be assessed to Customs Duty at their transaction value, unless for valid reasons for rejection of the same. In order to reject the transaction value, the circumstances enumerated in Rule 3(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 should warrant and it is mandatory on the part of the Department to indicate under which provision of Rule 3(2) of Valuation Rules, the transaction value cannot be accepted. The circumstances enumerated in Rule 3(2) ibid have not been brought out in the Show Cause Notice for rejection of the value declared. The appellant has relied on the decisions rendered in Motor Industries Co. Ltd., Vs. Commissioner of Customs [2009 (224) ELT 4 (SC)], Eicher Tractors Ltd. [2000 (122) ELT 321 (SC)], Bureau Viritas Vs. Commissioner of Customs [2005 (181) ELT 3 (SC)], Commissioner of Customs, Calcutta Vs. South India Television (P) Ltd [2007 (214) ELT 3 (SC)] and Varsha Plastics Pvt. Ltd. Vs. UOI [2009 (235) ELT 0193 (SC)]. Therefore, it was submitted that the proposal to reject the declared value is against valuation rules provisions of the Customs Act and the judgments of the Hon’ble Supreme Court, CESTAT and hence, on this score alone the proposal to reject/enhance the declared value is liable to be set aside.
(ii) The declared value has been proposed to be enhanced on the basis of Bills of Entry relating to the import of M/s. Star Mint Fields P. Ltd., Surat considering them as a contemporaneous import. While comparing the value of the goods all parameters should match in respect of physical characteristics, quality, quantity and reputation of the products, country of origin and also timing of import as envisaged under Rule 4 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Rule 2(d)
(iii) The contemporaneous import prices cited in the Show Cause Notice and in the impugned consignment are not same in respect of quality, quantity, and hence cannot be compared for enhancing the value. The following summary captures the arguments of the Revenue for enhancement and the appellant’s reply in this regard as given below:-
