Haripriya Traders Vs Commissioner of Customs (CESTAT Bangalore)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore, in Haripriya Traders v. Commissioner of Customs, Cochin and three connected appeals, Final Order Nos. A/20257-20260/2022 dated 12 July 2022, set aside customs valuation enhancement, differential duty, interest, confiscation, redemption fines and penalties arising from imports of betel nuts. The dispute concerned consignments imported from Indonesia and Thailand and the department’s rejection of declared transaction values under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, followed by redetermination under Rule 9. The Tribunal held that the department had failed to establish undervaluation through reliable evidence of comparable contemporaneous imports, examination of the imported goods’ quality or proof of payments exceeding the declared invoice values.
The litigation had reached the Tribunal for a third time following earlier remand orders and proceedings before the Supreme Court. The importers challenged the use of a trade-information report prepared by the First Secretary (Commerce), High Commission of India, Singapore, whose author had subsequently become the Commissioner of Customs, Cochin, and adjudicated the dispute. The appellants argued that the report lacked supporting source records, that other importers’ prices related to materially different consignments, and that the department had failed to undertake the tests necessary to establish similarity of goods. They also questioned the adjudicating officer’s competence, the refusal of cross-examination and the reliance on findings from earlier adjudication orders already set aside.
The Tribunal examined Section 14 of the Customs Act, 1962 and Rules 3 to 12 of the 2007 Valuation Rules. It noted that the adjudicating authority itself had found an absence of identical or similar contemporaneous imports justifying valuation under Rules 4 to 8. In those circumstances, the declared transaction values could not be discarded merely because international prices fluctuated or because unrelated imports were assessed at higher rates. The Tribunal relied upon Supreme Court decisions including Commissioner of Central Excise and Service Tax v. Sanjivani Non-Ferrous Trading Pvt. Ltd., Commissioner of Customs v. South India Television (P) Ltd. and Century Metal Recycling Pvt. Ltd. v. Union of India, which require cogent evidence, objective reasons and compliance with the statutory valuation procedure before a declared value may be rejected.
The Tribunal also found that no testing had been carried out to compare the age, size, quality or nature of the betel nuts imported by the appellants with the consignments relied upon by the department. There was no evidence of any payment or remittance beyond the invoice values. The imported goods of other traders were either under investigation, not shown to be comparable or supported by material that had not been disclosed to the appellants. Further, the report prepared by the First Secretary (Commerce) could not be regarded as reliable valuation evidence because the High Commission’s records did not disclose the underlying information or the method by which the reported prices had been obtained.
On the procedural objections, however, the Tribunal rejected the appellants’ challenge to the adjudicating Commissioner’s competence, observing that the Central Board of Excise and Customs had declined to substitute another officer and that this decision had not been challenged. It also rejected the request for cross-examination of the First Secretary because the appellants had not sought that opportunity during the first round of adjudication or explained the delay. Nevertheless, the Tribunal found that the adjudicating authority had improperly relied upon earlier findings despite an open remand for fresh consideration. Given that the dispute had continued for more than ten years and had already undergone multiple rounds of proceedings, the Tribunal declined to order yet another remand.
Having found that the department failed to establish undervaluation or excess consideration, the Tribunal held that confiscation under Section 111(m) and penalty under Section 112(a) of the Customs Act could not survive. It also found no violation of the EXIM Policy warranting consequential action. Accordingly, the differential customs duty, interest, redemption fine and penalties were set aside, and all the appeals were allowed with consequential relief.
Cases Discussed
1. Commissioner of Central Excise and Service Tax, Noida v. Sanjivani Non-Ferrous Trading Pvt. Ltd., (2019) 2 SCC 378 (Supreme Court) — Followed on the requirement of cogent reasons and supporting evidence before rejecting the transaction value declared in import documents.
2. Commissioner of Customs v. Prabhu Dayal Prem Chand, (2010) 13 SCC 535 (Supreme Court) — Relied upon for the principle that customs valuation enhancement cannot be based on unrelated market-price information without supporting evidence of contemporaneous imports.
3. Commissioner of Customs, Calcutta v. South India Television (P) Ltd., 2007 (214) ELT 3 (Supreme Court) — Followed on the Revenue’s burden to prove undervaluation by reliable evidence and comparable import prices.
4. H.S. Chadha v. Commissioner of Customs (Preventive), 2021 (378) ELT 193 (CESTAT New Delhi) — Relied upon regarding the requirement for contemporaneous import data or other reliable evidence before discarding declared transaction values.
5. Century Metal Recycling Pvt. Ltd. v. Union of India, 2019 (367) ELT 1 (Supreme Court), as cited in the order — Relied upon for the requirement that reasonable doubt under Rule 12 must be based on objective, ascertainable material rather than mere suspicion.
6. Global Industries v. Commissioner of Customs, Cochin, 2011 (272) ELT 724 (CESTAT Bangalore) — Followed regarding comparison of imported betel nuts by quality, quantity and commercial level.
7. Eicher Tractors Ltd. v. Commissioner of Customs, 2000 (122) ELT 321 (Supreme Court) — Cited on the circumstances in which a declared transaction value may be rejected and an alternative valuation method adopted.
8. Keeveeyem Company Supariwala v. Commissioner of Customs, 2006 (194) ELT 447 (CESTAT) — Cited concerning the quality and processing of betel nuts and the valuation of differing grades.
9. Keeveeyem Company v. Commissioner of Customs, MANU/CB/0010/2008 (CESTAT) — Cited by the appellants on valuation principles applicable to imported betel nuts.
10. KSE Ltd. v. Commissioner of Customs, MANU/CB/0151/2016 (CESTAT) — Cited as applying the reasoning of the Global Industries decision.
11. Mahaveer Tobacco Company v. Assistant Collector of Central Excise, Guntur, 2000 (123) ELT 61 (Andhra Pradesh High Court) — Cited by the Revenue regarding the competence of the adjudicating officer.
12. Bharti Airtel Ltd. v. Commissioner of Customs, 2012 (286) ELT 270 (CESTAT Bangalore) — Cited by the Revenue concerning adjudication and procedural objections.
13. K.P. Abdul Majeed v. Collector of Customs and Central Excise, Trichy, 1995 (79) ELT 554 (Madras High Court) — Cited by the Revenue regarding the adjudicator-related challenge.
14. Shubham Impex v. Commissioner of Customs, New Delhi, 2017 (4) TMI 1307 (CESTAT New Delhi) — Cited by the Revenue in support of customs valuation enhancement.
15. NPT Papers Pvt. Ltd. & Others v. Commissioner of Customs, Mundra & Others, MANU/CS/0120/2021 (CESTAT) — Referred to on the evidentiary requirement for establishing payments exceeding declared invoice values.
16. Bayer India Ltd. v. Commissioner of Customs, Mumbai, 2006 (198) ELT 240, upheld by the Supreme Court in 2015 (324) ELT 17 — Referred to in the context of proof of additional consideration.
17. Tele Brands (India) Pvt. Ltd. v. Commissioner of Customs (Import), Mumbai, 2016 (336) ELT 97 (CESTAT Mumbai) — Referred to regarding the absence of extra payments beyond the invoice value.
18. SRR International v. Commissioner of Customs, Mundra, MANU/CS/01616/2018 (CESTAT) — Relied upon regarding the unreliability of uncorroborated information used for customs valuation.
FULL TEXT OF THE ORDER OF CESTAT BANGALORE
1. The present appeals are one among a batch of appeals, visiting this Tribunal in its third round of litigation, challenging valuation, confiscation of goods, consequential demand of duty, redemption fine and penalty, imposed by the Adjudicating Authority, in relation to the import of betel nuts made by the Appellant. Since the orders impugned in all appeals originate from different Order-in-Originals, cases are considered individually.
1.1 The brief facts of the case are that the Appellant imported 05 consignments of betel nuts from Thailand and 17 consignments of betel nuts from Indonesia. The Commissioner of Customs, Cochin, issued Show Cause Notice, proposing rejection of transaction value, confiscation of goods and violation of Exim Policy, issued through the Director General of Foreign Trade vide Notification No.49 (RE-2006)/2004-2009 dated 20.02.2007, whereby import of betel buts was allowed only through the port of Mangalore. Appellant challenged the said Notification before the Hon’ble High Court of Kerala in W.P.C No. 9624 of 2007 but pending disposal of the case, the said notification was withdrawn.
1.2 The Show Cause Notice, adjudicated by the Commissioner of Customs, Cochin, culminated in Order-in-Original No. 05/2010 dated 17.05.2010, whereby the Adjudicating Authority ordered rejection of transaction value, confiscation of goods, re-determination of value and demanded differential duty, besides imposing redemption fine and penalty. The Appellant challenged this Order-in-Original before the Tribunal and one among other grounds of appeal was the competency of the First Secretary (Commerce), High Commission of India, Singapore, to furnish authentic trade information from ASEAN countries. This Tribunal, even though remanded the case for de-novo consideration as per Order No.222-226/2012 dated 15.03.2012, uphold the competency of the First Secretary (Commerce), High Commission of India Singapore in this regard.
1.3 Appellants challenged this part of the findings of the Tribunal before the Hon’ble Supreme Court and as per order in Civil Appeal No.8383-8386 of 2012, the Hon’ble Apex Court held that since the Tribunal has remanded the matter for de novo consideration before the Adjudicating Authority, even the issue as to whether the First Secretary (Commerce) is a competent authority to furnish authentic trade information from ASEAN countries could have been kept open, so that parties could have agitated this issue as well.
1.4 In the meantime, the First Secretary (Commerce), High Commission of India, Singapore, was appointed as the Commissioner of Customs, Cochin and based on the orders of the Hon’ble Supreme Court as well as this Tribunal, the Commissioner of Customs initiated next round of adjudication proceedings, after providing documents requested by the Appellant. In the adjudication proceedings, the Appellant sought cross examination of the First Secretary (Commerce), High Commission of India, Singapore, and requested the Commissioner to recuse himself from adjudication. Vide Order-in-Original No. 07-10/ 2012, the Adjudicating Authority, rejected the request and contentions of the Appellant and the said order was challenged before this Tribunal. As per Order No.25499-25502/2013 dated 27.6.2013 the Tribunal, again remanded the matter for de-novo consideration, finding that the data obtained by the Appellant under the Right to Information Act (Appeal) was not considered for adjudication. The prayer of the Appellant to cross examine the First Secretary (Commerce) was rejected and the question as to whether the Commissioner of Customs should recuse himself from conducting adjudication was left to the judgment of the Commissioner.
1.5 In response to the letter issued by the Commissioner of Customs, the Central Board of Excise and Customs, vide communication in F.No.450/106/2014 Cus.IV dated 07.11.2014 decided not to change the adjudicating authority. Therefore, the Commissioner of Customs, based on the decision of the board, adjudicated the show cause notice and passed Order-in-Original No.COC-CUSTOM-000-COM-48-15-16 dated 30.03.2016, rejecting the transaction value under Rule 12 (1) of the Customs Valuation Rules 2007, re-determining the same under Rule 9 and ordered confiscation of goods besides imposing redemption fine and penalty, which is impugned in this Appeal.
02. Learned Counsel for the Appellant Shri C.K. Karunakaran, Advocate assisted by Shri. M.S. Sajeev Kumar, Advocate made the following submissions;
a) That the Appellant is a regular importer of bulk quantities of Betel nuts from Indonesia and other countries. They imported 2nd quality ungarbled betel nuts from Indonesia. The period of import in all cases are between March 2007 and June 2008 and during the relevant period, imports of the Appellant at declared value of USD 300/MT was allowed.
b) That, it is the trite law that justice not only needs to be done but also should appear to have been done and therefore the action of CBEC forcing the officer, who decided to recuse himself from adjudication, was incorrect.
c) That when the Letter issued by the very same officer was under challenge, the officer will have a natural bias to uphold the contents of the letter, even though the High Commission at Singapore had stated that the subject letter had no official basis.
d) That there is nothing on record to show that the letter of the First Secretary was prepared after collecting any information from the Indonesian Customs or other reliable sources in Indonesia and therefore the same having no evidentiary value, is liable for rejection.
e) That the valuation done by the Original Authority, relying upon some documents recovered from another importer namely M/s. Integral Traders, having different quality and quantity is illegal, especially when such document never formed part of the proceedings or was confronted by the Appellant.
f) That the order of the Adjudicating Authority, relying upon the findings in the previous Order-in-Original passed by another officer, which was set aside in Appellate Proceedings is illegal. There was no independent application of mind on the part of the Adjudicating Authority.
g) That the Adjudicating Authority, while passing the impugned order, didn’t consider the arguments and contentions of this Noticee, especially with regard to the quality and nature of Betel nut, which was of low quality, without undergoing processing in the country of export; that there was no allegation or evidence about fabrication of invoice; that revenue neither established nor alleged any payment of amount in excess to invoice value; that no quality test was conducted; that since the goods imported by M/s. Integral Traders and M/s. Nageswari Match Works didn’t relate to import of same goods, in comparable quantity, during the same period or tested in adjudication, those are inadmissible as evidences; that there is nothing on record to suggest that the imports of these two importers were finally assessed and therefore provisionally assessed values cannot be made the basis for enhancing value of other importers; that in the identical case of Global Industries, the Tribunal was pleased to reject the proposal for enhancing transaction value.
h) That the Adjudicating Authority had erred in comparing the price of Betel Nuts imported from Sri Lanka. While doing so, the Adjudicating Authority had conveniently over looked the fact that the Indonesian Betel Nuts was dutiable at 108% while Sri Lankan Betel Nuts was permitted to be imported duty free under various notifications and therefore Indonesian traders had to keep their price low in order to compete with Sri Lanka.
i) That the Adjudicating Authority rightly rejected the allegations in the Show Cause Notice that the declared value were below contemporaneous imports as there were no imports of identical or similar goods. After rejecting the allegations in the show cause notice and the proposed assessable value thereon, invocation of rule 12 of Customs Valuations Rules was incorrect. The adjudicating authority also held that provisions of rule 4 to 8 can’t be applied and hence adopted rule 9 of CVR 2007. However, the adjudicating authority failed to follow the binding precedent in Global Industries case and Keveeyem Supariwala V. Commissioner of Customs.
j) That the rejection of declared value under Rule 12 (1) and resorting to Rule 9 was erroneous. The only reason for rejection of declared value was that there were alleged contemporaneous imports through other ports. After the Adjudicating Authority finding that the aforementioned contemporaneous imports didn’t relate to similar or identical goods, the Adjudicating Authority couldn’t have rejected the declared value and relied on Rule 9.
k) That the Rule 9 of CVR 2007 corresponds to Rule 8 of CVR 1988. As to how and when the residual method could be resorted to is dealt with in Eicher Tractor Case [2000(122) ELT 321 (SC)]. The rejection of the declared value in the Appellants’ cases was not based on any of the grounds under Rule 3. Before rejecting transaction value, there has to be a finding that the transaction value could not be accepted. The only allegation in the SCN was that there are contemporaneous imports. Once the Adjudicating Authority finds that there are no contemporaneous imports of similar or identical goods, the very foundation of the allegations in the SCN disappears and then the only option is to accept the transaction value under Rule 3 of CVR 2007. This was not done.
l) That the Apex Court has further explained the scope of various Rules under CVR 2007 in Century Metal Recycling (P) Ltd case (MANU/SC/0781/2019). After rejecting the allegations in the SCN, the Adjudicating Authority ought to have accepted the declared value as there was no evidence before him of any import of similar goods or identical goods or any reason to doubt the correctness of the declared value which was only based on the alleged contemporaneous imports. It is held that “a doubt to justify detailed enquiry under the proviso to Section 14 read with Rule 12 should not be based on initial apprehension, be imaginary or a mere prediction on grounds and material in the form of ‘certain reasons’ and not mere ipse dixit. Subjecting imports to enquiry on mere suspicion because one is distrustful and unsure, without reasonable and certain reasons, would be contrary to the scheme and purpose behind the provisions which ensure quick and expeditious clearance of goods. (paragraph 18)”.
m) That after holding that there are no similar or identical imports in the so called “contemporaneous imports”, the Adjudicating Authority had relied on the records from M/s. Integral Traders and M/s. M.S. Enterprises to arrive at a value of USD 640 per MT. This process is pre-conceived and contrary to the law as laid down in the judgment of the Apex Court.
n) That the Adjudicating Authority did not consider the fact that consistent business relationship built over years could also obtain favourable terms and it is just not a single bulk purchase that gives such benefit as was the case in Global Industries case.
o) That the quantities imported by the Appellants through Cochin port in the periods that preceded the instant imports would show that the Appellants have imported quantities far in excess of that contracted by M/s. Global Industries. The original authority did not consider the question as to whether the alleged discount in Global Industries would justify the reduction in price from the assessed value of USD 750/MT to USD 275 per M.T (the value as upheld by this Hon’ble Tribunal). The normal price even in Global Industries case could reasonably have been only around USD 300/MT from which the discount granted could have brought the price down to USD 275/MT, as upheld by the Hon’ble Tribunal. To assume, as the adjudicating officer has done, that the discount in Global Industries case had brought the price down from USD 750/MT to USD 275/MT is unreasonable and is an example of total non-application of mind.
p) That as regards imports from Thailand, a neighbouring country with a long and free border with Indonesia the declared prices which were much lower was accepted without demur. Without testing the imports from Thailand, Sri Lanka or from Indonesia, the Adjudicating Authority had concluded that the quality, nature etc., were not comparable.
q) That the Appellants have their own processing facilities, and the imported ungabled Betel Nuts are processed and normally the percentage of Nuts of various qualities obtained after processing was stated in the Written Notes submitted before the Adjudicating Authority. In fact the same submissions made before this Hon’ble Tribunal have been taken note of and the same are reflected in the order reported in Keeveeyem Company Supariwala .v. Commissioner of Customs Annexure (2006(194) ELT 447) and in Keeveeyem Company .v. Commissioner of Customs (MANU/CB/0010/2008). The ratio of the above orders have been followed in Global Industries Case (Annexure 7). This Hon’ble Tribunal had followed the ratio of Global Industries case in subsequent order passed in KSE Ltd case (KSE Ltd .v. Commissioner of Customs – MANU/CB/0151/2016 – Annexure 12)
r) That the Invoice and packing list generally indicate the quality of Nuts forming the largest percentage of the consignment. Over some years, Indonesian traders have started to refer to the mixed variety of Nuts as Indonesian Quality. Unless the imported Nuts were tested, and found to be non-conforming to the declared quality, the Revenue could not have rejected the value. Description in the invoice prepared by different exporters may differ in the absence of standard specifications. The real test as to the quality of the imported goods ought to have been done through testing. In this case, no testing was done of any of the several imports done.
s) That the price of betel nut also varies depending on the size, quality, age etc. Therefore, to rely on unrelated bills of entry based only on the declared values in those bills of entry is arbitrary. Another aspect which was not considered by the original authority as well as the first Appellate Authority was whether the contemporaneous imports were based on advance licenses/authorisations, in which case, no duty was to be paid. These details were never provided nor verified by the authorities.
03. On the other hand, Smt. Sangeetha, learned Additional Commissioner (Authorised Representative) appearing on behalf of the Revenue made the following submissions;
a) That even though the Adjudicating Authority was formerly First Secretary (Commerce), High Commission of India, Singapore, there is no illegality in conducting adjudication by the same officer. It was submitted that the adjudication was conducted as per the decision of the Board. In support of this contention, learned AR placed reliance on the judgment of Hon’ble High Court of Andhra Pradesh in Mahaveer Tobacco Company V. Asst. Collector Of Central Excise, Guntur [2000 (123) ELT 61(AP)], Bharati Airtel Ltd. V. Commissioner Of Customs [2012 (286) E.L.T 270 (TRI.BANGALORE)] and K.P.Abdul Majeed V. Collector Of Customs & Central Excise, Trichy [1995 (79) ELT 554 (MAD.)].
b) That the Appellant never sought cross examination of the First Secretary (Commerce), High Commission of India, Singapore when the matter was taken up for adjudication in the first round, leading to the issuance of Order-in-Original No.5/2010 dated 17.5.2010, even though there was a contention not to adopt the report of the First Secretary (Commerce). The request for cross examination was raised only after the First Secretary (Commerce), High Commission of India, Singapore took charge as the Commissioner of Customs, Cochin and refused to recuse himself from conducting adjudication. Hence the contention about denial of cross examination is unsustainable.
c) That the First Secretary (Commerce), High Commission of India, Singapore is competent to provide trade information pertaining to ASEAN countries. It is further submitted that reference for enquires were sent from the Cochin Customs to Directorate of Revenue Intelligence, who in turn forwarded it to the First Secretary (Commerce), High Commission of India, Singapore, who, based on such request wrote to Customs Administration in Indonesia for gathering data. Hence both DRI and Customs Administration in Indonesia approved the authority of the First Secretary (Commerce), High Commission of India, Singapore for coordinating with Indonesian Customs and for collecting information regarding anti-smuggling activities. Therefore, the Ld.AR vehemently argued that the First Secretary (Commerce) is a competent authority to procure data and that the decision was unbiased. It was further submitted that the Appellant has no case that the Adjudicating Authority has personal interest in the matter.
d) That all contentions of the Appellant were considered by the Adjudicating Authority and there is no error in comparing the price of betel nuts in Sri Lanka as the same was done to ascertain the international price fluctuations. It was submitted that even though there was fluctuations in the international market, the price at Indonesia, as declared by the Appellant, remained stable.
e) That the Commissioner of Customs rightly formed sufficient grounds to reject the assessable value under Rule 12(1) CVR, 2007, on account of the stability in the fluctuation value for imports from Indonesia when there are high fluctuations in the international market. The Ld. AR submitted that existence of higher transaction value in the case of M/s Integral Traders and M/s Rajeswari Match Works, unearthed during investigation, supported the findings of the Adjudicating Authority.
f) That since there are no imports of goods identical to the goods imported by the Appellant, except those which were under investigation and that since there are no similar imports at or about the same time of imports made by the Appellant and due to the inadequacy of data, the Adjudicating Authority rightly followed sequential valuation, under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007.
g) The proposals in the show cause notice with regard to contemporaneous imports through Cochin and Chennai was rejected due to dis-similarity and non-identical nature and the same would not absolve or support the undervaluation done by the Appellant.
h) That the imports by M/s Integral Traders made between November 2005 to March 2007 showed transaction value in the range of USD 600-1000/MT and the value during the said period for imports from Sri Lanka was also within the range of USD 815-907/MT but the imports made by the Appellant during the period April 2007 to May 2008 was declared to be between USD 225-300/MT. It was further submitted that the possibility of having price for same commodity in one part of the world is high and fluctuating and in the other part it’s static is illogical. Therefore, the Adjudicating Authority has rightly found that transaction cannot be ascertained under Rule 3 of Customs Valuation Rules 2007 and hence value was rejected under Rule 12.
i) That decision in M/s Global Industries [2011(272)ELT 724 (Tri-Bang)] has no applicability in this case as there existed a contract for bulk purchase from a single supplier.
j) That acceptance of transaction value of imports made from Thailand can’t be a reason for rejecting the transaction value of the present as prices of products from the countries are not comparable. As the betel nuts of Indonesia and Sri Lanka has difference, in the same manner betel nuts from Indonesia and Thailand also hold difference and hence not comparable.
k) In support of the various submissions, Learned Authorised Representative has placed reliance on the following case law:-
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- Shubham Impex V/S. Commissioner Of Customs, New Delhi- 2017 (4) TMI 1307- CESTAT New Delhi.
04. We have carefully considered various submissions made by both sides and perused the records. The main issues involved in this case are:-
(i) rejection of transaction value and its re-determination and its collateral issues are
(ii) acceptability of the report of the First Secretary (Commerce), High Commission of India, Singapore for rejecting the transaction value,
(iii) competency of the Commissioner of Customs, who was formerly First Secretary (Commerce), High Commission of India, Singapore, to adjudicate the impugned case, when his report was relied upon among various documents for adjudication and
(iv) Rejection of request for cross examination.
4.1 We find that the Adjudicating Authority, as per the impugned order under challenge, rejected the transaction value under Rule 12 (1) of the Custom (Determination of Value of Imported Goods) Rules 2007 and re-determined the same under Rule 9, after discussing non-adoptability of sequential valuation under Rule 4 to 8 of the Customs Valuation Rules 2007.
4.2 The word “value”, as defined under Section 2 (41) of Customs Act, 1962, in relation to any goods, to mean the value determined in accordance with provisions of Section 14(1). The value to be declared in bill of entry is the value referred to above and not merely the invoice price. On the plain reading of Section 14, it envisages that the value of any goods chargeable to ad valorem duty has to be the deemed price as referred to in Section 14(1). Therefore, determination of such price has to be in accordance with the relevant rules and subject to the provisions of Section 14(1) of the act ibid. The transaction value under Rule 3(1) of CVR, 2007 must be the price paid or payable on such goods at the time and place of importation in the course of international trade, when the seller and buyer have no interests in the business of each other and price is the sole consideration for the sale. Therefore, what has to be seen by the department is the value or cost of the imported goods at the time of importation, that is, at the time when the goods reach customs barrier. Therefore, the invoice price is not sacrosanct. However, before rejecting the invoice price the department has to give cogent reason for such rejection. This is because the invoice price forms the basis of transaction value. Therefore, before rejecting the transaction value as incorrect or unacceptable, department has to find whether there are any imports of identical or similar goods at higher price around the same time. Unless evidence is gathered in that regard, question of rejecting the invoice price or transaction value cannot arise and in the absence of such evidence, invoice price has to be accepted as the transaction value. In the present case, the Adjudicating Authority, in the impugned order, finds that there are no imports of identical or similar goods at higher rate at or around the same time and therefore he chose not to adopt valuation under Rule 4 to 8 of the Customs (Determination of Value of Imported Goods) Rules 2007.
4.3 In the case of Commissioner of Central Excise and Service Tax, Noida V. Sanjivani Non-Ferrous Trading Pvt Ltd. (2019) 2 SCC 378, the Hon’ble Supreme Court, held as follows:-
“The law, thus, is clear. As per Sections 14(1) and 14(1-A), the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in that provision. Section 14(1) is a deeming provision as it talks of ‘deemed value’ of such goods. Therefore, normally, the Assessing Officer is supposed to act on the basis of price which is actually paid and treat the same as assessable value/transaction value of the goods. This, ordinarily, is the course of action which needs to be followed by the Assessing Officer. This principle of arriving at transaction value to be the assessable value applies. That is also the effect of Rule 3(1) and Rule 4(1) of the Customs Valuation Rules, namely, the adjudicating authority is bound to accept price actually paid or payable for goods as the transaction value. Exceptions are, however, carved out and enumerated in Rule 4(2). As per that provision, the transaction value mentioned in the Bills of Entry can be discarded in case it is found that there are any imports of identical goods or similar goods at a higher price at around the same time or if the buyers and sellers are related to each other. In order to invoke such a provision it is incumbent upon the Assessing Officer to give reasons as to why the transaction value declared in the Bills of Entry was being rejected; to establish that the price is not the sole consideration; and to give the reasons supported by material on the basis of which the Assessing Officer arrives at his own assessable value”.
In the case of Commissioner of Customs V. Prabhu Dayal Prem Chand (2010) 13 SCC 535, Hon’ble Supreme Court, while dismissing the appeal held that
“On the basis of the information received subsequently from the London Metal Exchange (for short ‘LME’) to the effect that the price of the two metals, viz., brass scrap and copper scrap, in LME, as on the date of import was more than the price declared by the Respondent, demanded additional duty amounting to Rs.90,248/- and Rs.1,94,035 respectively, from the Assessee on the said two Bills of Entry. This order was set aside by the Tribunal and appeals against there against by the Customs were dismissed by this Court. The Court noted, while accepting the plea of Assessee, that they were not confronted with any contemporaneous material relied upon by the Revenue for enhancing the price declared by them in the Bill of Entry”.
Hon’ble Apex Court in case of Commissioner of Customs Calcutta vs. South India Television P. Ltd. reported in MANU/SC/2966/2007 : 2007 (214) ELT 3 (SC) where in para 6, para 7 and para 8 it has been laid down as under:-
“6. We do not find any merit in this civil appeal for the following reasons. Value is derived from the price. Value is the function of the price. This is the conceptual meaning of value. Under Section 2(41), “value” is defined to mean value determined in accordance with Section 14(1) of the Act. Section 14 of the Customs Act, 1962 is the sole repository of law governing valuation of goods. The Customs Valuation Rules, 1988 have been framed only in respect of imported goods. There are no rules governing the valuation of export goods. That must be done based on Section 14 itself. In the present case, the Department has charged the respondent-importer alleging mis-declaration regarding the price. There is no allegation of mis-declaration in the context of the description of the goods. In the present case, the allegation is of under-invoicing. The charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like goods. It is for the Department to prove that the apparent is not the real. Under Section 2(41) of the Customs Act, the word “value” is defined in relation to any goods to mean the value determined in accordance with the provisions of Section 14(1). The value to be declared in the Bill of Entry is the value referred to above and not merely the invoice price. On a plain reading of Section 14(1) and Section 14(1A), it envisages that the value of any goods chargeable to ad valorem duty has to be deemed price as referred to in Section 14(1). Therefore, determination of such price has to be in accordance with the relevant rules and subject to the provisions of Section 14(1). It is made clear that Section 14(1) and Section 14(1A) are not mutually exclusive. Therefore, the transaction value under Rule 4 must be the price paid or payable on such goods at the time and place of importation in the course of international trade. Section 14 is the deeming provision. It talks of deemed value. The value is deemed to be the price at which such goods are ordinarily sold or offered for sale, for delivery at the time and place of importation in the course of international trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or for offer for sale. Therefore, what has to be seen by the Department is the value or cost of the imported goods at the time of importation, i.e., at the time when the goods reaches the customs barrier. Therefore, the invoice price is not sacrosanct. However, before rejecting the invoice price the Department has to give cogent reasons for such rejection. This is because the invoice price forms the basis of the transaction value. Therefore, before rejecting the transaction value as incorrect or unacceptable, the Department has to find out whether there are any imports of identical goods or similar goods at a higher price at around the same time. Unless the evidence is gathered in that regard, the question of importing Section 14(1A) does not arise. In the absence of such evidence, invoice price has to be accepted as the transaction value. Invoice is the evidence of value. Casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. Under-valuation has to be proved. If the charge of under-valuation cannot be supported either by evidence or information about comparable imports, the benefit of doubt must go to the importer. If the Department wants to allege under-valuation, it must make detailed inquiries; collect material and also adequate evidence. When under-valuation is alleged, the Department has to prove it by evidence or information about comparable imports. For proving under-valuation, if the Department relies on declaration made in the exporting country, it has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to adjudication proceedings. They apply strictly to the courts proceedings. However, even in adjudication proceedings, the AO has to examine the probative value of the documents on which reliance is placed by the Department in support of its allegation of under-valuation. Once the Department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus shifts to the importer to establish that the invoice relied on by him is valid. Therefore, the charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like goods. Section 14(1) speaks of “deemed value”. Therefore, invoice price can be disputed. However, it is for the Department to prove that the invoice price is incorrect. When there is no evidence of contemporaneous imports at a higher price, the invoice price is liable to be accepted. The value in the export declaration may be relied upon for ascertainment of the assessable value under the Customs Valuation Rules and not for determining the price at which goods are ordinarily sold at the time and place of importation. This is where the conceptual difference between value and price comes into discussion”.
The Principal Bench of this Tribunal at Delhi, in the case of H.S. Chadha & V. Commissioner of Customs (Preventive) [2021 (378) ELT 193 (Tri.Delhi) held as follows:-
“We find that it is trite law that since the goods were assessed by proper officer based on transaction value, onus lies on the Revenue to prove undervaluation, which it has failed miserably to do so since it did not show any contemporaneous import data of identical or similar items or NIDB data to indicate undervaluation and therefore the invoice value is required be accepted and the transaction value itself and hence could not have been discarded, as held by various judgements of the Hon’ble Supreme Court like CCE Vs Sanjivani Non-Ferrous Trading Pvt. Ltd. MANU/SC/1456/2018 : (2019) 2 SCC 378 and CC Vs South India Television Pvt. Ltd. MANU/SC/2966/2007 : (2007) 6 SCC 373. We find that there is no allegation or finding that the buyer and seller being related or of any extra payment to the supplier beyond the normal authorized banking channels and thus undervaluation is not established as held by this tribunal in Kelvin Infotech Pvt. Ltd. (supra).
In the case of M/s Century Metal Recycling Pvt.Ltd. V. Union of India and Ors [2019(367) ELT 1(SC)] Hon’ble Supreme Court held that
“a doubt to justify detailed enquiry under the proviso to Section 14 read with Rule 12 should not be based on initial apprehension, be imaginary or a mere prediction on grounds and material in the form of ‘certain reasons’ and not mere ipse dixit. Subjecting imports to enquiry on mere suspicion because one is distrustful and unsure, without reasonable and certain reasons, would be contrary to the scheme and purpose behind the provisions which ensure quick and expeditious clearance of goods.”
4.4 In the case of Global Industries Vs. Commissioner Of Customs, Cochin [2011(272)ELT724 (Tri.Bang)] it was held that in the absence of data relating to the imports of goods of same quality, quantity and commercial level with higher transaction value, contemporaneous import cannot be accepted. In this instant case, Revenue has not placed any data to evidence contemporaneous imports, rather the Adjudicating Authority found that there are no contemporaneous imports.
4.5 In so far as the present case is concerned, the Adjudicating Authority finds that there were fluctuations in the international price of betel nuts during the relevant period and that the value declared by M/s Integral Traders is corroborative. Learned Counsel for the Appellant rightly invited our attention to the observation in the impugned order that the case of M/s Integral Trading was under investigation and the same has not attained finality. Details of import data of M/s M.S. Enterprises, referred to in the impugned order was not made available for confrontation to the assessee and the same is not part of the show cause notice. Our attention was also invited to the absence of quality assessment test report of the goods, conducted by the Department, in order to compare the goods imported by M/s Integral Trading, M/s M.S Enterprises and the Appellant to ascertain whether the goods are identical or similar.
4.6 We find that the Adjudicating Authority, in the impugned order under challenge, holds that there are no imports of goods identical / similar to the goods imported by the appellant, on higher transaction value, at or about the same time. For this reason, the Adjudicating Authority opted not to apply provisions of Rule 4 to 8 of Customs Valuation Rules, 2007. The Adjudicating Authority, while accepting the transaction value of goods imported from Thailand, finds that products from different countries are not comparable. Adjudicating Authority held that betel nuts of Indonesia and Sri Lankan origin are different in nature, quality and price. We find that the aforesaid reasoning for rejection of transaction value would not meet the mandate of section 14 of the Customs Act and Rules as elucidated in M/s Sanjivani Non-Ferrous Trading Pvt Ltd (supra). In view of the above judgments, it is clear that the rejection and re-determination of transaction value are not based on any contemporaneous imports and therefore the findings of the Adjudicating Authority are illegal and incorrect.
4.7 Learned Counsel for the Appellant submitted that no test was conducted to ascertain the size, quality and age of the betel nuts, which are vital to ascertain and determine price. Revenue has not placed any test report or records before us to prove that they have drawn samples and conducted quality assessment. In the absence of quality test report, it is not possible to compare the price of the goods involved in the case of M/s Integral Traders and M/s Rajeswari Match Works. Moreover, in the impugned order it is stated that those cases are under investigation. Revenue has not submitted any evidence before us to prove the outcome of investigation. In such circumstances, comparison of goods imported by M/s Integral Traders and M/s Rajeswari Match Works cannot be justified.
4.8 The Learned Counsel for the Appellant, after inviting our attention to the impugned order, submitted that there are no findings in the order impugned about any payment effected by the Appellant, in excess to the invoice value. Similarly Revenue has not placed any evidence to show that the Appellant has paid any amount, in excess to the invoice value declared before customs.
4.9 In the case of NPT Papers Pvt Ltd & Others V. C. C. Mundra & Others, (MANU/CS/0120/2021) Tribunal, by following the judgments in Bayer India Ltd. V. Commissioner Of Customs, Mumbai [2006 (198) ELT 240], upheld by Hon’ble Supreme Court [2015 (324) ELT 17 SC] and Tele Brands (India) Pvt. Ltd. V. Commissioner Of Customs (Import) Mumbai reported in [2016 (336) ELT 97 (Tri.Mum)] held that there should be evidence on record to show that the importers have paid directly or indirectly any amount over and above the invoice value. Once it is proved that there is no evidence of extra remittance, transaction value cannot be discarded.
4.10 Learned Counsel for the Appellant submitted that the procedure adopted by the Adjudicating Authority to reject the transaction value is incorrect and against the settled principles of law, in as much as the Adjudicating Authority has relied upon the report of the First Secretary (Commerce), High Commission of India, Singapore, for ascertaining the domestic price of the goods. Ld. Counsel, by inviting our attention to Order-in-Appeal No.3 of 2012 dated 17.8.2012, passed by the Deputy High Commissioner and Appellate Authority, High Commission of India, Singapore, argued that the High Commission of India at Singapore doesn’t have any documents, based on which the First Secretary (Commerce) communicated the value of betel nuts, as quoted by the suppliers of Indonesia; that they do not have copy of the letter issued by the Commissioner of Customs to the High Commission of India at Singapore; that they do not have file noting sheet and that the Appellate Authority has found that in the letter of the First Secretary dated 16.4.2008, there is nothing to suggest that the information has been gathered from local or from market sources. Based on these findings, the learned counsel for the Appellant argued that the report of the First Secretary (Commerce) cannot be relied upon for the purpose of value assessment.
4.11 Learned Authorised Representative on the other hand, argued that the reference for enquiries in Indonesia was sent by Cochin Customs to Directorate of Revenue Intelligence and they have forwarded it to First Secretary (Commerce), High Commission of India, Singapore. DRI, working under aegis of Central Board of Excise and Customs, interacts and liaises with customs administration of foreign countries on anti-smuggling matters. Based on the reference from the Commissioner of Customs, Cochin as well as DRI, the First Secretary (Commerce) sought report from Customs Administration in Indonesia. Therefore, it is submitted that there is no infirmity in collecting data by the customs formation in India from the First Secretary (Commerce), High Commission of India, Singapore, and that the data provided are authentic.
4.12 We have considered the Letter of the First Secretary (Commerce), High Commission of India at Singapore, Order-in-Appeal No.3/2012 dated 17-08-2012 passed by the Deputy Commissioner and the Appellate Authority, High Commission of India, Singapore and arguments advanced by both sides. From the appellate Order supra, it is clear that the High Commission of India at Singapore doesn’t have any records, based on which the First Secretary (Commerce) communicated the value of betel nuts. Moreover, there is no specificity in the report as to whether such data was gathered from local market or from other sources, by following legal mandates. In such circumstances, we find that the report of the First Secretary (Commerce) is inconclusive and not reliable for valuation. Therefore, placing reliance on this report, even as collateral evidence, for determination or redetermination of value of imported goods, cannot sustain in the eyes of law and therefore we are unable to uphold the arguments of the Revenue. Reliance is placed on the following judgment in this regard:-
(i) SRR International V. Commissioner of Customs, Mundra. Reported in MANU/CS/01616/2018
Therefore, we are of the considered view that, in the absence of any quality assessment of the goods, evidences of contemporaneous imports on higher transaction value of identical/similar goods at or about the same time and in the absence of any evidence leading to the payment of any amount directly or indirectly, over and above the invoice value presented before customs, the rejection of transaction value and its re-determination is not in agreement with the procedure established by law. The Order-in-Original is flawed and contrary to law, for it doesn’t give any cogent reason for rejecting transaction value in terms of section 14(1) of the Customs Act, 1962 and Rule 12 of the Customs Valuation Rules, 2007. The impugned order is not in accordance with Section 14 and Rule 3 and 12 as the mandates of these provisions are ignored.
4.13 Another issue is the competency of the Commissioner of Customs, who was formerly First Secretary (Commerce), High Commission of India, Singapore, to adjudicate the impugned case, when his report was relied upon among various documents for adjudication. Ld. AR submitted that the Commissioner of Customs, Cochin, who was formerly the First Secretary (Commerce) in the High Commission of India, Singapore, requested Central Board of Excise and Customs vide Letter F.No. S66/7/2013 CCU (Pt) dated 09.10.2013 to consider appointing a different adjudicating authority but vide communication in F.No.450/106/2014 Cus IV dated 07.11.2014, Board declined to change the adjudicating authority. From records, it is clear that the Appellants have not challenged the said decision of the Board before any forum and therefore the said issue is no more res integra. We therefore reject the argument of the Appellant with regard to the competency of the Adjudicating Authority to adjudicate this case.
4.14 The next issue is about rejection of request for cross examination of the First Secretary (Commerce) in the High Commission of India, Singapore. As rightly pointed out by the Ld. A.R the request was made only in the second round of adjudication and no such requests were placed before passing Order-in-Original No. 5/2010 dated 17.5.2010. Ld. Counsel for the Appellant had not pointed put any circumstances, which prevented them from making such request in the first round of adjudication. As submitted by the Learned A.R, show cause notice in this case was issued on 09.02.2010 and Order was passed on 17.5.2010. Even when the First Secretary (Commerce) in the High Commission of India, Singapore, took charge as Commissioner of Customs, Cochin on August 2012, no such requests were made. Later, in September 2012 the Appellants demanded opportunity to cross examine the First Secretary (Commerce) in the High Commission of India, Singapore. We are of the view that the request of the Appellant for cross examination, after one round of adjudication is not justified with any supporting evidences and therefore the same is liable to be rejected.
4.15 Learned Counsel for the Appellant, during the course of arguments submitted that even though Tribunal has remanded the case for de-novo consideration, Adjudicating Authority has not considered the contentions of the Appellant afresh and has borrowed findings from the first adjudication order. It is further submitted that the said non-consideration is evident in the Order-in-Original. Learned A.R, on the other hand submitted that Adjudicating Authority has considered all contentions raised by the Appellant and that the impugned order is a well-considered order. We have perused the impugned order in detail and found that the Adjudicating Authority has observed that certain contentions of the Appellant have been already considered by the Original Authority, while passing orders. We are unable to agree with the said findings of the Adjudicating Authority when there is an open remand for de-novo consideration is on records. Therefore, we hold that the impugned order, passed by the Adjudicating Authority, is not a well-considered order. Since this matter is under lis for the past more than 10 years and since this matter is in its third round before this Tribunal, we are not inclined to remand this case again.
4.16 We find that the Commissioner of Customs, Cochin, has ordered confiscation of goods under section 111(m) of the Customs Act, 1962 with an offer to redeem the goods on payment of redemption fine besides imposing penalty under section 112(a) of the Customs Act, 1962. We have already found that Revenue has failed in establishing undervaluation on the part of the Appellant and no evidences are brought before us to establish remittance, in excess to the invoice value submitted before the Customs. Therefore, we are of the view that, order of confiscation of goods under section 111(m) is not sustainable and consequentially redemption also fails. Penalty under section 112(a) of the Customs Act being a confiscation related penalty, the same is also held to be unsustainable. Since there is no violation of EXIM Policy, nothing survives more.
05. In view of the discussions and decisions cited supra, demand of differential duty, interest, redemption fine and penalty cannot be sustained. Resultantly the impugned order is set aside. The appeals are allowed with consequential reliefs.
(Pronounced in the open court on 12/07/2022)
