Sree Rajendra Textiles Vs Commissioner of Customs (CESTAT Chennai)
The appellant imported Raw Silk Yarns in hanks and declared the goods under CTH 50020010 in the Bills of Entry. The department considered the declared transaction value incorrect and initiated proceedings for enhancement of the value. After adjudication, the Original Authority rejected the transaction value, enhanced the value, ordered confiscation of the goods and imposed redemption fine and penalties. The Commissioner (Appeals) rejected the appellant’s appeal for non-compliance with pre-deposit. The appellant thereafter filed the present appeals before the Tribunal and submitted that the entire pre-deposit of 10% of the confirmed duty demand had been made before the Tribunal.
On merits, the appellant submitted that the issue of enhancement of value of imported silk yarn in hank form had already been considered by the Tribunal in earlier cases. In Final Order No. 40631 – 40635 / 2023 dated 03.08.2023, the Tribunal had dismissed departmental appeals against an order setting aside enhancement of value. In the case of M/s. Hanuman Weaving Factory, by Final Order No. 40772 and 40773 / 2023 dated 12.09.2023, the Tribunal had also set aside enhancement of value, redemption fine and penalties concerning imports of the same goods. The appellant contended that the reasons for enhancement in the present case were identical and that there was no evidence supporting enhancement of the declared value.
The Tribunal noted that the department had enhanced the value based on contemporaneous imports made by other importers from other suppliers. It referred to its earlier decision in Final Order No. 40631 – 40635 / 2023 dated 03.08.2023. The Tribunal observed that although the proper officer could raise doubts regarding the truth or accuracy of declared value for certain reasons, determination of contemporaneous imports required consideration of commercial-level details including quality, quantity, type, contractual terms, physical characteristics, brand, reputation, country of origin, time of import and whether the transaction involved stock lot or manufacturer sales.
The Tribunal stated that merely providing details of Bills of Entry involving identical or similar goods, or goods from the same country of origin imported at the same time, was insufficient. Transaction values could be affected by various commercial factors, including quantity, quality differences, reputation, relationship between supplier and importer and advance payments. In the absence of the relevant details concerning the imports relied upon as contemporaneous prices, the reasonableness and conformity of the enhancement with the valuation provisions could not be determined.
The Tribunal also considered imports made under contracts with overseas suppliers. It observed that where contractual conditions were allegedly not fulfilled, the contracting parties could settle the matter between themselves. In the absence of evidence that a contract was entered into with an ulterior motive affecting the price, raising doubts about the validity of the contract was considered improper. The Tribunal further noted that the records did not establish the actual total quantity imported, the shortfall from the contracted quantity or how any shortfall affected the declared transaction prices.
The Tribunal referred to M/s. Agarwal Industries v. Commissioner of Customs, Vizag [2006 (193) E.L.T. 421 (Tri. – Bangalore)], concerning acceptance of transaction value arrived at on commercial considerations under contracts. The decision was stated to have been affirmed by the Hon’ble Apex Court as reported in 2011 (272) E.L.T. 641 (S.C.).
The Tribunal further relied on its decision in M/s. Hanuman Weaving Factory, Final Order No. 40772 & 40773 / 2023 dated 12.09.2023. In that case, the Tribunal had found that the department had not provided proper reasons for rejecting transaction value and had enhanced the value based on a Bill of Entry without establishing comparison of relevant commercial parameters such as quality, quantity and manufacturer.
Following the earlier decisions and finding the facts and issue identical, the Tribunal held that the demand of duty, confiscation, redemption fine and penalty could not sustain. The impugned order was therefore set aside, and the appeals were allowed with consequential reliefs, if any.
Cases Discussed
- M/s. Hanuman Weaving Factory (CESTAT), Final Order No. 40772 & 40773 / 2023 dated 12.09.2023
- M/s. Agarwal Industries v. Commissioner of Customs, Vizag (Tribunal, Bangalore), [2006 (193) E.L.T. 421 (Tri. – Bangalore)]
- M/s. Agarwal Industries v. Commissioner of Customs, Vizag, 2011 (272) E.L.T. 641 (S.C.)
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant imported Raw Silk Yarns in hanks and filed Bills of Entry for clearance of goods classifying the goods under CTH 50020010. The department was of the view that the declared value is incorrect for which proceedings were initiated. After due process of law, the Original Authority rejected the transaction value, and enhanced the value. The goods were ordered to be confiscated. The Original Authority imposed redemption fine as well as penalties. Against such order, the appellant filed the appeal before the Commissioners (Appeals) who vide impugned order rejected the appeal for non compliance of pre deposit. Aggrieved by such order, the appellant has preferred these appeals.
2. The Ld. Counsel Shri M.A. Mudimannan appeared and argued for the appellant. In regard to the non compliance of pre deposit, it is submitted that the appellant has complied with entire pre deposit before the Tribunal. The appellant has thus paid 10% of the confirmed duty demand.
2.1 On merits, it is submitted that the very same issue as to enhancement of value of silk yarn hank form imported had come upfor consideration before the Tribunal. In that case, the Commissioner (Appeals) had allowed the appeal filed by the appellant and set aside the enhancement of value. Against such order, the department filed appeals before the Tribunal. As per Final Order No. 40631 – 40635 / 2023 dated 03.08.2023 the appeals filed by the department were dismissed. Further, in the case of M/s. Hanuman Weaving Factory vide Final Order No. 40772 and 40773 / 2023 dated 12.09.2023 the issue of enhancement of value with regard to import of the very same goods the Tribunal set aside the enhancement of value, redemption fine and penalties.
3. It is submitted by the Ld. Counsel that in the instant case, the reason for enhancement are exactly the same as in the above cases. The facts and issue being identical these decisions would apply. It is stressed by the Ld. Counsel that there is no evidence for enhancement of the declared value. It is prayed that, since the issue has been decided by the Tribunal in regard to the imports made by the appellant on earlier Bills of Entry the same may be applied in this case, and the appeals may be allowed.
4. The Ld. AR Shri Harendra Singh Pal appeared for the department.
5. Heard both sides
6. The issue is whether the demand of duty, imposition of redemption fine and penalties alleging that the transaction value declared by the appellant is incorrect is sustainable or not. On perusal of records, it is seen that department has enhanced the value on the basis of contemporaneous imports made by some other importers from other suppliers. The Tribunal after considering the entire facts has set aside the enhancement of value. The decision of the Tribunal in Final Order No. 40631 – 40635 / 2023 dated 03.08.2023 is as under:-
21. No doubt, the proper officer can on „certain reasons‟ raise doubts about the truth or accuracy of declared value and these certain reasons can be higher value of identical / similar goods of comparable quantities in a comparable transaction, abnormal discounts or abnormal deduction from competitive prices, misdeclaration on parameters such as description, quality, quantity, country of origin, year of manufacture or production, non-declaration of parameters such as brand and grade and fraudulent or manipulated documents. 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.
22. The impugned goods in all these appeals are imported in terms of various contracts entered into with the suppliers abroad. If any condition of the contract is contravened, it is for the contracting parties to settle among themselves and raising a doubt about the validity of the contract is not proper in the absence of any evidence that such a contract is entered into with any ulterior motive affecting the price. Further, revenue has discredited the contract prices as the respondent has not reportedly imported the entire contracted quantities. From the Show Cause Notice, the Order-in-Original and records, contract numbers and the quantity contracted for import are only mentioned as detailed in paragraph 10 (b) supra. Actual total quantity imported and how much is the shortfall and how it is to affect the transaction prices declared is not forthcoming.
23. On the issue of accepting the declared transaction value under a contract, we find it relevant to refer the decision rendered by the Tribunal, Bangalore in the case of M/s. Agarwal Industries v. Commissioner of Customs, Vizag [2006 (193) E.L.T. 421 (Tri. – Bangalore)] in the context of old Valuation Rules, wherein it has been observed as under: –
“2. … …. In all the cases, we find that the transaction value has been arrived at purely on commercial considerations based on contracts. The supplier, in order to honour the contracts, supplied the goods at the contracted price. There is also no allegation that the appellants paid to the 19 Appeal No(s).: C/41617 & 41619/2013-DB supplier more than the contracted value. Under these circumstances, there are actually no grounds to reject the transaction value….” The above decision was affirmed by the Hon’ble Apex Court in its judgement as reported in 2011 (272) E.L.T. 641 (S.C.).”
24. All the facts / events pertaining to these appeals have been captured in detail in the above paragraphs in order to emphasise the fact that the lower adjudicating and assessing authorities have to necessarily consider all the commercial factors to arrive at contemporaneous prices of identical or similar goods before resorting to enhancement of the declared transaction values in terms of Rule 4 or Rule 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. No doubt, the proper officer can raise doubts as to the truth or accuracy of the declared value for certain reasons, but, doubts would be reasonable only if they are free from assumption or speculation. To constitute a reasonable doubt it must be clear from assumptions. Doubts must be actual and supported by facts. A fair doubt is based on reason and common sense.
7. The said decision was adopted and applied by the Tribunal in the case of M/s. Hanuman Weaving Factory vide Final Order No. 40772 & 40773 / 2023 dated 12.09.2023. The relevant para of the order reads as under:-
6. On perusal of the Order in Original, we do not find any proper reasons given by the department to reject the transaction value. In para 15 of the Order in Original, the original authority has discussed the various provisions relating to transaction value without giving reasons for rejecting the transaction value. Further, it is seen that in para 21 of Order in Original that the value has been enhanced on the basis of a Bill of Entry dated 25.11.2010 which is an import directly from Uzbekistan. In the present case, the appellant has imported the goods from Dubai, UAE, though the country of origin is Uzbekistan. It is also not brought out in evidence as to the comparison of the various parameters with regard to quality, quantity of the goods imported. The appellant has furnished data with regard to various Bills of Entry for imports made from Uzbekistan for the period from 12.4.2010 to 30.11.2010. The value declared in these imports range from 13 to 13.75, 14.10 to 15.50 USD per kilogram. The department has accepted the value declared for these imports. In present case, merely because the value declared for the goods in a single Bill of Entry dated 25.11.2010 is 28 USD, the department has rejected the transaction value. It is not established that the commercial parameters as to quality, quantity, manufacturer are similar. The Tribunal in the case of Sree Rajendra Textiles (supra) had occasion to consider a similar issue and observed that the transaction value cannot be rejected without cogent reasons.
7. After appreciating the facts and following the proposition of law in the above case, we are of the considered opinion that the demand of duty, confiscation, imposition of redemption fine and penalty 5 C/41630 & 41631/2013 imposed cannot sustain and requires to be set aside, which we hereby do.
8. The facts and issue being identical, the decision passed by the Tribunal in the above Final Order would be applicable to this case on hand. In the result, the impugned order is set aside. The appeals are allowed with consequential reliefs, if any.
(Order dictated and pronounced in the open court)
