Commissioner Vs V. K. Metcast Pvt. Ltd. (CESTAT Delhi)
FACTS – The respondent/importer had filed three bills of entry dated 27.01.2021 for clearance of imported goods ‘Zinc Scrap, Saves/Scope’ which were imported from M/s Olympic Metal, Miami, USA. As the Department noticed that the declared value of the goods was lower than the contemporaneous import of similar goods and that the sale involved an abnormal discount and abnormal rejection from ordinary competitive prices, a query was raised from the importer to provide material/evidence to justify the declared value in terms of Section 17(3) of the Customs Act, 1962.
The assessing officer vide rejected the declared value under Rule 12(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred as CVR, 2007) on the ground that the declared value of impugned goods was lower than the value of similar goods being cleared as per the details of bills of entry given. Being aggrieved, by the said order, the importer filed appeal.
CONCLUSION- The case of Mirah Exports (P) Ltd. v. C.C., 1998 (98) E.L.T. 3 (S.C.) was referred which says that the burden of proving a charge of undervaluation lies upon the Revenue and Revenue has to produce the necessary evidence to prove the said charge. Ordinarily the Court should proceed on the basis of the apparent tenor of the agreement reflects the real state of affairs and what is to be examined is whether the Revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price.
The opportunities were given to the Revenue to adduce the evidence to prove that the invoice price was not the correct sale price. Further, there is no indication as to when the contract for those imports was entered into. Therefore, it was held that Revenue has not succeeded in showing that the price shown in the invoices does not reflect the true sale price.
In the light of the statutory provisions under Section 14 of the Customs Act, 1962, Rule 3 and 4 of CVR, 2007 and the observations made in the various case laws, it was safely concluded that the revenue erred in rejecting the invoice price. Revenue is unable to provide any clinching evidence to prove undervaluation by the importer so as to reject the transaction value given in the invoice. The impugned order, is therefore affirmed and the present appeal filed by the Department was dismissed and the consequential relief, if any in favour of the respondent was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
1. This is an appeal filed by the Revenue challenging the Order-in-appeal No. 120(SM)/CUS/JPR/2022 Dated 29.07.2022 whereby the appeal filed by the respondent/importer was allowed and the Order-in-original was set aside.
2. The facts of the present case in short are that the respondent/importer had filed three bills of entry dated 27.01.2021 for clearance of imported goods ‗Zinc Scrap, Saves/Scope‘ which were imported from M/s Olympic Metal, Miami, USA. As the Department noticed that the declared value of the goods was lower than the contemporaneous import of similar goods and that the sale involved an abnormal discount and abnormal rejection from ordinary competitive prices, a query was raised from the importer to provide material/evidence to justify the declared value in terms of Section 17(3) of the Customs Act, 1962. In response, the importer submitted his reply, however, the same was not accepted. The assessing officer vide Order-in-original dated 17.02.2021 rejected the declared value under Rule 12(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred as CVR, 2007) on the ground that the declared value of impugned goods, i.e., Rs. 107/- per kg. was lower than the value of similar goods being cleared at Rs. 157/- to Rs. 169/- per kg. as per the details of bills of entry given in Table ‘B’.
3. Being aggrieved, by the said order, the importer filed appeal which find favour with the Commissioner (Appeals). Referring to the provisions of Section 14 and 17 of the Customs Act, 1962 and Rule 12 of CVR Rules, 2007 and also various decisions on the subject, he concluded that the assessing officer failed to elaborate as to how the bills of entries referred for enhancement are comparable with the goods imported through disputed bills of entries and in view thereof held that the rejection of transaction value is unsustainable. The revenue has filed the present appeal before this Tribunal challenging the said order.
4. The question that arises for my consideration is whether the assessing officer has rightly rejected the declared value/ transaction value and whether the Revenue has discharged his obligation to prove undervaluation.
5. I have heard the learned Authorised Representative forthe Revenue and also the learned Counsel for therespondent/importer and perused the records of the case.
6. The revenue referred to other bill of entries and submitted that it is a case of undervaluation by the importer and therefore declared value has been rightly rejected by the assessing On the other hand, the learned counsel for the importer has submitted that the imports relied on by revenue are not at all identical goods to the goods in question in the absence of any evidence in that regard, also for the reason that the imported goods being scrap was not homogeneous commodity and therefore cannot be compared. In support of his submission he referred to the decision of the Apex Court in Century Metal Recycling Pvt. Ltd., 2019 (367) ELT 3. He also submitted that transaction value cannot be discarded as the revenue has failed to produce any evidence to prove undervaluation as mandated under the rules.
7. The provisions of Section 14 of the Customs Act, 1962 and the Rules made thereunder for determination of value of imported goods have been interpreted and settled in various decisions by the Higher Courts as well as by this Tribunal. Before examining the issue, it is relevant to extract the provisions of Section 14 of the Customs Act and the relevant rules of CVR, 2007:-
Section 14 of Valuation of goods.-
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf:
Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf:
Provided further that the rules made in this behalf may provide for,—
(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;
(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section:
Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.
(2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value.
Explanation. —For the purposes of this section—
(a) ‘rate of exchange’ means the rate of exchange—
(i) determined by the Board, or
(ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
(b) ‘foreign currency’ and ‘Indian currency‘ have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).]
Rule 2(g)
(g) “transaction value” means the value referred to in sub-section (1) of section 14 of the Customs Act, 1962;
Rule 3 and 4
3. Determination of the method of valuation.-
(1) Subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10;
(2) Value of imported goods under sub-rule (1) shall be accepted: Provided that –
(a) there are no restrictions as to the disposition or use of the goods by
the buyer other than restrictions which –
(i) are imposed or required by law or by the public authorities in India; or
(ii) limit the geographical area in which the goods may be resold; or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued;
(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of rule 10 of these rules; and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below.
(3) (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price.
(b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time.
(i) the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods:
Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related;
(c) substitute values shall not be established under the provisions of
clause (b) of this sub-rule.
(4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through rule 4 to 9.
4. Transaction value of identical goods. –
(1) (a) Subject to the provisions of rule 3, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued;
Provided that such transaction value shall not be the value of the goods provisionally assessed under section 18 of the Customs Act, 1962.
(b) In applying this rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods.
(c) Where no sale referred to in clause (b) of sub-rule (1), is found, the transaction value of identical goods sold at a different commercial level or in different quantities or both, adjusted to take account of the difference attributable to commercial level or to the quantity or both, shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value.
(2) Where the costs and charges referred to in sub-rule (2) of rule 10 of these rules are included in the transaction value of identical goods, an adjustment shall be made, if there are significant differences in such costs and charges between the goods being valued and the identical goods in question arising from differences in distances and means of transport.
(3) In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of imported goods.”
8. The first step in considering the issue of rejection of the declared value and undervaluation is whether the Revenue has produced cogent reasons for disallowing or rejecting the transaction value. In the present case, the Revenue has given instances of contemporaneous import by giving the details of bills of entry as noted by the adjudicating authority, which is quoted below:-
