National Steel and Agro Pvt. Ltd. Vs Commissioner of Customs (CESTAT Mumbai)
Summary: CESTAT Mumbai allowed the appeal filed by National Steel and Agro Pvt. Ltd. against the order dated 29.11.2012 of the Commissioner of Customs (Appeals), Mumbai Zone-I, which had upheld the Assistant Commissioner’s order dated 24.03.2010 enhancing the value of three consignments of HR Alloy Steel Coils from USD 392.70 PMT to USD 460 PMT under Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The goods had been imported under three Bills of Entry dated 07.08.2009 and were classified as Alloy Steel under CTI 7225 30 90. The Department had rejected the declared transaction value under Rule 12 primarily on the basis of NIDB data showing higher values for HR Steel Plates and London Metal Exchange Bulletin prices. The Appellant contended that the transaction value represented the price actually agreed and paid under the Sales Order dated 10.04.2009 and that HR Steel Plates could not be treated as comparable to HR Steel Coils, particularly where the quantities and commercial circumstances differed. The Tribunal examined Section 14 of the Customs Act, 1962 and Rules 3, 5, 10, 11 and 12 of the Valuation Rules. It noted that the declared value was supported by the Sales Order and Bank Remittance Certificate and that the Department had not alleged any additional payment or consideration. The Tribunal further noted that the contemporaneous imports relied upon involved substantially different quantities and, in relevant instances, HR Steel Plates rather than HR Steel Coils. Referring to the Supreme Court decision in CCE & ST, Noida v. Sanjivani Non-Ferrous Trading Pvt. Ltd., the Tribunal observed that the declared transaction value could be rejected only for cogent reasons supported by material. It also relied on Commissioner Customs (EP), Mumbai v. Yatin Steels India Pvt. Ltd., where HR Coils and HR Steel Plates were held not to be similar or identical goods for the purpose of contemporaneous valuation. The Tribunal concluded that the value declared by the Appellant could not have been rejected under Rule 12 and that sequential valuation under Rules 4 to 9 could arise only after the transaction value was validly rejected. Accordingly, the order dated 29.11.2012 was set aside and the appeal was allowed with consequential benefits. The order was pronounced on 01.02.2022.
Background
The Appellant claimed to be importing Hot Rolled Steel Coil from foreign suppliers. Till November 2008, it imported HR Non-Alloy Steel Coil falling under Customs Tariff Heading 7208. Pursuant to Notification dated 27.11.2008, under which Steel falling under CTH 7208 was made a restricted item for the purpose of import, the Appellant started importing HR Alloy Steel Coil falling under CTH 7225 until the restriction remained in force. By Notification dated 08.01.2010, the restriction on import of Non-Alloy Steel was lifted.
The Appellant entered into a contract with M/s Duferco SA, Switzerland for supply of 3000 MT of HR Alloy Steel Coils at USD 385.90 PMT. The price was subsequently increased to USD 392.70 PMT by Sales Order dated 10.04.2009. Three Bills of Entry dated 07.08.2009 were filed declaring USD 392.70 PMT as the value of the imported goods.
At the time of assessment, Customs had doubts regarding classification and valuation. Samples were sent for testing and the assessment was provisionally made with bonds covering hundred percent of assessable value and a bank guarantee of Rs. 47,48,458/-. The test report dated 12.08.2009 confirmed that the goods were Alloy Steel.
The Department also questioned the declared value. According to the Department, NIDB data showed the price of HR Plate at USD 485 PMT, while the London Metal Exchange Bulletin indicated HR Steel values of USD 490 to USD 550 for August 2009 and USD 510 to USD 550 for July 2009. The Appellant insisted that the declared value should be accepted.
Orders of the Lower Authorities
The Assistant Commissioner, by order dated 24.03.2010, classified the goods as Alloy Steel under CTI 7225 30 90 and proceeded to determine their value under Section 14(1) of the Customs Act read with the Valuation Rules. After examining Rules 2, 3 and 12, metal bulletins and contemporaneous imports, and noting that the importer had failed to submit an actual payment certificate, the Assistant Commissioner rejected the transaction value under Rule 12.
The Assistant Commissioner held that the value could not be determined under Rule 4 because import of identical goods in the same quantity was not noticed. He therefore proceeded under Rule 5 and determined the value of the goods at USD 460 PMT CIF based on contemporaneous imports of similar goods.
The resulting duty difference was determined at Rs. 47,48,458/-, comprising Rs. 9,82,563/- in respect of Bill of Entry No. 906019/07.08.09, Rs. 12,62,686/- in respect of Bill of Entry No. 906022/07.08.09 and Rs. 25,03,209/- in respect of Bill of Entry No. 906024/07.08.09.
The Commissioner (Appeals), by order dated 29.11.2012, dismissed the appeal. It held that the declared value had rightly been rejected under Rule 12 and that the Assistant Commissioner had correctly determined the value under Rule 5. It also held that the decisions relied upon by the Appellant were distinguishable.
Submissions of the Appellant
The learned Counsel for the Appellant submitted that, in the absence of evidence to the contrary, the transaction value contemplated under Rule 3 had to be accepted. Reliance was placed on the Supreme Court decision in CCE & ST, Noida v/s Sanjivani Non-Ferrous Trading Pvt. Ltd.
It was submitted that payment had been made against a letter of credit and documents evidencing payment to the supplier were on record. It was therefore contended that Rule 12 could not have been invoked.
The Appellant further submitted that re-determination of the transaction value was contrary to the Valuation Rules; that HR Coils were not similar to the goods relied upon by the Department; that the Department had incorrectly relied upon HR Plate values; that commercial adjustments contemplated under Rule 5 had not been considered; and that the LME Price Bulletin could not form the sole basis for rejection of the transaction value.
The Department supported the impugned order and submitted that it did not call for interference.
CESTAT Mumbai’s Observations and Findings
The Tribunal examined Section 14 of the Customs Act, 1962, including the amendment made in 2007. Referring to the Supreme Court decision in Wipro Ltd. vs. Assistant Collector of Customs,, it noted the change from the earlier principle based on the price at which such or like goods were ordinarily sold to the transaction-value principle based on the price actually paid or payable for the goods.
The Tribunal also examined the definition of “similar goods” under Rule 2(1)(f) of the Valuation Rules. It noted that similar goods are imported goods which, although not alike in all respects, have like characteristics and like component materials enabling them to perform the same functions and to be commercially interchangeable, having regard to quality, reputation and the existence of trade mark.
Under Rule 3(1), subject to Rule 12, the value of imported goods is the transaction value adjusted in accordance with Rule 10. Rule 3(4) provides that where the value cannot be determined under Rule 3(1), the value is to be determined sequentially through Rules 4 to 9.
The Tribunal noted that Rule 5 concerns transaction value of similar goods and requires the transaction value of similar goods sold for export to India and imported at or about the same time as the goods being valued, subject to the conditions specified in that rule.
On the facts, the Tribunal observed that the Sales Order dated 10.04.2009 mentioned HR Coil, with country of origin as Ukraine, shipment by 31 May, 2009, payment against confirmed L/C at 180 days after the B/L date and a price of USD 392.70 PMT.
The Tribunal further noted that the contemporaneous imports relied upon by the Assistant Commissioner were mostly substantially lesser quantities of HR Steel Plates. In one case involving prime HR Steel Coils Alloy, the quantity was 4964.9 MTs and the unit price was USD 385.00.
The Tribunal found that the value declared by the Appellant was based on the Sales Order entered into and mutually agreed upon with the supplier. It was not the Department’s case that any additional payment had been made by the Appellant pursuant to which under-invoicing was resorted to. The Bank Remittance Certificate evidenced payment to the supplier in terms of the Sales Order dated 10.04.2009.
The Tribunal observed that the only ground for rejection of the transaction value was that other importers had imported at higher prices. However, the quantities of the imports relied upon were substantially different from the quantity imported by the Appellant.
The Tribunal further observed that Rule 5 required, amongst others, that the transaction value of identical goods should be at the same commercial level and in substantially the same quantity as the goods being valued. In the present case, neither were the goods identical nor were they of substantially the same quantity.
Referring to Sanjivani Non-Ferrous Trading Pvt. Ltd., the Tribunal noted the Supreme Court’s position that the Assessing Officer is ordinarily required to act on the basis of the price actually paid and treat it as the assessable value or transaction value. It further noted that the declared price could be rejected only with cogent reasons supported by material and after undertaking the exercise necessary to establish that the paid price was not the sole consideration.
The Tribunal also considered Commissioner Customs (EP), Mumbai v/s Yatin Steels India Pvt. Ltd., wherein HR Coil and HR Steel Plates were treated as different goods and the value of HR Steel Plates was not accepted as a basis for enhancement of the declared value of HR Coils.
The Tribunal observed that what was required to be ascertained was the value of similar goods which were commercially interchangeable with the goods being valued. It noted that while the Appellant had declared USD 392.70 PMT, the contemporaneous data relied upon by the Department showed a unit price of USD 385.00 for a sale of 4964.9 MTs of Prime HR Steel Alloy.
On this basis, the Tribunal held that the value declared by the Appellant in the three Bills of Entry could not have been rejected under Rule 12 of the Valuation Rules.
The Tribunal further observed that it is only when the value of imported goods is not taken to be the transaction value that the value has to be determined sequentially in the manner provided under Rules 4 to 9.
Final Decision
CESTAT Mumbai held that the impugned order dated 29.11.2012 passed by the Commissioner (Appeals) could not be sustained. The order was accordingly set aside and the appeal was allowed with consequential benefits.
Cases Discussed
- CCE & ST, Noida v/s Sanjivani Non-Ferrous Trading Pvt. Ltd. – Supreme Court decision relied upon regarding rejection of declared transaction value only for cogent reasons supported by material. TaxGuru has discussed the decision in its customs valuation coverage.
- Wipro Ltd. vs. Assistant Collector of Customs – Supreme Court decision considered in relation to the amended Section 14 of the Customs Act and the transaction-value principle. TaxGuru has separately covered the decision and its effect on customs valuation rules.
- Commissioner Customs (EP), Mumbai v/s Yatin Steels India Pvt. Ltd. – Tribunal decision relied upon concerning the distinction between HR Coils and HR Steel Plates for contemporaneous valuation.
- Basant Industries VS Addl. Commissioner of Customs – 1996 (81) ELT 195 (SC), cited before the Commissioner (Appeals).
- Boichem Synergy Ltd. VS CC, Mumbai – 2003 (162) ELT 379 (TRI-MUM), cited before the Commissioner (Appeals).
- Kainya & Associates Pvt. Ltd. Vs CC (import), Mumbai – 2006 (204) ELT 72 (TRI-Mum), cited before the Commissioner (Appeals).
FULL TEXT OF THE CESTAT MUMBAI ORDER
The order dated 29.11.2012 passed by the Commissioner of Customs (Appeals) Mumbai Zone -I, Mumbai 1, by which the appeal filed by M/s National Steel and Agro Pvt. Ltd. 2 was dismissed, has been assailed in this appeal. The said appeal was filed before the Commissioner (Appeals) to challenge the order dated 24.03.2010 passed by the Assistant Commissioner of Customs 3 by which the three Bills of Entries were finalized by classifying the goods as alloy of steel under Customs Tariff Item 4 7225 30 90 with a further direction, after rejecting the value declared by the Appellant, that the assessment should be carried out at unit price of USD 460 PMT under rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 5. The Assistant Commissioner also confirmed the duty difference with interest under section 18(3) of the Customs Act, 1962 6.
2. The Appellant claims to be importing Hot Rolled 7 Steel Coil from foreign suppliers. Till November 2008, it imported HR Non-Alloy Steel Coil falling under Customs Tariff Heading 8 7208, but pursuant to the issuance of a Notification dated 27.11.2008 wherein Steel falling under CTH 7208 was made a restricted item for the purpose of import, the Appellant started importing HR Alloy Steel Coil falling under CTH 7225 till such time the restriction remained in force. However, by Notification dated 08.01.2010, the restriction to import Non-Alloy Steel was lifted.
3. The Appellant asserts that it entered into a contract with M/s Duferco SA, Switzerland 9 for supply of 3000 MT of HR Alloy Steel Coils at USD 385.90 PMT, which was subsequently raised to USD 392.70 PMT by sales order dated 10.04.2009. Three Bills of Entries dated 07.08.2009 were filed by the Appellant declaring USD 392.70 PMT as the value of the imported goods.
4. At the time of assessment, the customs had doubts regarding the classification of the imported goods for the purpose of free importability and also regarding the value of the goods declared. Accordingly, samples were sent for finding out whether the imported Coils were Alloy Steel or Non-Alloy Steel and pending the receipt of the test reports, the assessment of the goods were made provisional with bonds covering hundred percent of assessable value and bank guarantee of Rs. 47,48,458/-. The test report dated 12.08.2009 confirmed that the goods were Alloy Steel. The Department had also raised objection as to the value of the imported HR Coils declared by the Appellant in the Bills of Entries. According to the Department, the value of imported Alloy Steel (in plate forms) as available in NIDB showed the price of HR Plate as USD 485 PMT and London Metal Exchange 10 Bulletin indicated value of HR Steel at USD 490 to USD 550 for the month of August 2009, and USD 510 to 550 for month of July, 2009. The Appellant, however, insisted that the value declared by it should be accepted.
5. The Assistant Commissioner then pa ssed an order on 24.03.2010 holding that the goods deserve to be classified as Alloy Steel under CTI 7225 30 90. The A ssistant Commissioner then proceeded to determine the valuation of the goods under section 14(1) of the Customs Act read with the provisions of the Valuation Rules. After examining the provisions of rules 2, 3 and 12 and various metal bulletins and the contemporaneous imports of Alloy Steel during the relevant period and the fact that the importer had failed to submit actual payment certificate, the Assistant Commissioner rejected the transaction value und er rule 12 and proceeded to determine the value of the goods in accordance with rules 4 to 9. The findings of the Assistant Commissioner are as follows:-
“a. The value of the goods cannot be determined under Rules 4 of the Valuation Rules-2007 as the import of identical goods in same Quantity is not noticed. However the value of similar goods is available and, therefore, I proceed to re-determine the value of impugned goods in terms of Rule 5 of the Valuation Rules-2007. From the data of Contemporaneous import of similar goods it is ascertained that minimum value of same grade of steel was assessed at a minimum price of USD 460 PMT CIF.
b. As the value of similar goods as shown above in chart to Para 8.3 are available for the similar goods hence reliance has been made under Rule 5 of Valuation Rules i.e. the value of similar goods. The minimum price at which the similar good have been assessed finally is USD 460 PMT (Ignoring the similar goods which were provisionally assessed), particularly B/E No. 904752 Dt. 27/09/2009 which was assessed provisionally at US $ 385/MT CIF & which is subject matter of dispute of another order, the impugned goods are required to be assessed at a unit price of USD 460 per MT CIF taking Lowest Value of similar goods. Finally assessed as per Rules giving rise to the following Duty difference.
| S. No | Bill of Entry No. & Date | Quantity | Declare d Unit Price USD | Declared Value | Re- determin ed Unit Price USD | Re- determined Assessable Value (Difference) | Difference of Duty |
|---|---|---|---|---|---|---|---|
| 1. | 906019/07.08.09 | 610.500 | 392.70 | 11802753.00 | 460.00 | 13823682/- (2020929/- ) | 9,82,563/- |
| 2. | 906022/07.08.09 | 784.550 | 392.70 | 15167648.00 | 460.00 | 17764733/- (2597085/- ) | 12,62,686/- |
| 3. | 906024/07.08.09 | 1555.330 | 392.70 | 30069084.00 | 460.00 | 35217669/- (5148585/- ) | 25,03,209/- |
| Total Duty | 47,48,458/- |
6. Feeling aggrieved, the Appellant filed an appeal before the Commissioner (Appeals) who, as noted above, dismissed the appeal by an order dated 29.11.2012.
7. The Commissioner (Appeals) held tha t as the importer had violated conditions of the Valuation Rules, the declared value was rightly rejected under rule 12 of the Valuation Rules by the Assistant Commissioner. The Commissioner (Appeals) also observed that the Assistant Commissioner had correctly determined the valuation of the goods under rule 5 of the Valuation Rules. The relevant observations are as follows:-
“6. xxxxxxxx. The adjudicating authority, has assessed the impugned goods under Rule 5 i.e value of similar goods. The data in NIDB indicated the value of similar goods at US$460 PMT and this was supported by the trend of international value indicated by the LME bulletin as the value of coil at US$490 to 550 for August 2009 (month of import) and US$510 to 550 for July 2009 (month of purchase). The LME b ulletin indicates the value of plates at US$ 420 to 440 PMT. The value of coils would be more than the plate‟s value. The adjudicating authority has taken the fair values of similar goods i.e. US$460 PMT. The adjudicating authority has assessed the goods i n tune with the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and the same, therefore, held to be proper, legal and correct.
7. The judgments relied upon by the appellant in support of their contention that the comparison of invoices received by the appellant with the invoice of imports of same goods by another importer is not conclusive for determination of the question of valuation. Further, they differ by facts. Thus, the ratio of the following case laws, Basant Industries VS Addl. Commissioner of Customs 1996 (81) ELT 195(SC); Boichem Synergy Ltd. VS CC, Mumbai 2003 (162) ELT 379 (TRI-MUM) and Kainya & Associates Pvt. Ltd. Vs CC (import), Mumbai 2006(204)ELT 72 (TRI -Mum) are not applicable in this case.”
8. Shri T. Viswanathan, learned Counsel appearing for the Appellant made the following submissions:-
i. In the absence of any evidence to the contrary, the transaction value, as contemplated under the provisions of rule 3 of the Valuation Rules, has to be accepted. In support of this contention reliance has been placed on the judgment of the Supreme Court in CCE & ST, Noida v/s Sanjivani Non-Ferrous Trading Pvt. Ltd. 11, wherein it was held that the transaction value can be rejected only for cogent reasons arrived at by undertaking an exercise to determine on what basis it can be held that the price was not the sole consideration of the transaction value and if no such exercise is undertaken, the transaction value cannot be rejected;
ii. The Appellant had made payment against letter of credit and documents evidencing the payment for the consignment to the supplier was on record and, therefore, rule 12 of the Valuation Rules could not have been invoked;
iii. The re-determination of the transaction value has been done in contravention of the provisions of the Valuation Rules;
iv. Reliance on rule 5 of the Valuation Rules is misplaced as the goods which were imported by the Appellant are not similar to the goods of which the value was relied upon by the Department and the value of HR Coils was incorrectly rejected based on the value of HR Plates;
v. Even otherwise, the commercial adjustments as contemplated under rule 5 of the Valuation Rules have not been considered. The re -determination of the value has been undertaken on the price pertaining to 1002 metric tons of HR Plates, while the Appellant had imported 3000 metric tons of HR Coils; and
vi. London Metal Exchange Price Bulletin could not have formed the sole bases for rejection of the transaction value.
9. Shri Manoj Kumar, the learned authorized representative appearing for the Department, however, supported the impugned order and submitted that it does not call for any interference in this appeal.
10. The submissions advanced by the learned Counsel for the Appellant and the learned authorized representative appearing for the Department have been considered.
11. Section 14 of the Customs Act deals with valuation of goods. It was amended in 2007. Section 14, as it stood prior to its amendment, is reproduced below:
“Section – 14 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 whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where –
(a) where the seller and buyer have no interest in the business of each other; or
(b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale
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.
(1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf.
(2) Notwithstanding anything contained in sub-section (1) or subsection (1A), 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.
*******”
12. Section 14 of the Customs Act, as amended on 10 October 2007, is as follows:
“Section 14.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:”
13. The Supreme Court in Wipro Ltd. vs. Assistant Collector of Customs 12 examined the provisions of section 14 of the Customs Act as it stood prior to 2007 and also as it stood after the amendment in 2007. It noticed that under the unamended provision, the principle was to find out the valuation of goods “by reference to the value” and it introduced a determining / fictional provision by stipulating that the value of all the goods would be the price at which such or like goods are “ordinarily sold”. However, under the amended provisions, the valuation is based on the „transaction‟ price namely, the price “actually paid or payable for the goods”. This change in the principle brought about in section 14(1) of the Act was noticed by the Supreme Court in paragraphs 22 and 23 of the judgment and they are reproduced below:
“22. The underlying principle contained in amended sub-section (1) of Section 14 is to consider transaction value of the goods imported or exported for the purpose of customs duty. Transaction value is stated to be a price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. Therefore, it is the price which is actually paid or payable for delivery at the time and place of importation, which is to be treated as transaction value. However, this sub -section (1) further makes it clear that the price actually paid or payable for the goods will not be treated as transaction value where the buyer and the seller are related with each other. In such cases, there can be a presumption that the actual price which is paid or payable for such goods is not the true reflection of the value of the goods. This Section also provides th at normal price would be the sole consideration for the sale. However, this may be subject to such other conditions which can be specified in the form of Rules made in this behalf.
23. As per the first proviso of the amended Section 14(1), in the transaction value of the imported goods, certain charges are to be added which are in the form of 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 which can be prescribed in the rules. Sub-section (2) of Section 14, which remains the same, is an overriding provision which empowers the Board to fix tariff values for any class of imported goods or export goods under certain circumstances. We are not concerned with this aspect in the instant case.”
(emphasis supplied)
14. Thus, what has to be seen under section 14(1) of the Customs Act, as amended in 2007, is the transaction value of the goods imported or exported for the purpose of customs duty and transaction value is stated to be the price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 of the Customs Act also makes it clear that the price actually paid or payable for the goods will not be treated as ”transaction value” where the buyer and the seller are related to each other. As per the first pro viso to the amended section 14 (1), certain charges are to be added to the transaction value of the imported goods. It is, therefore, clear that while there was scope for addition of notional charges in the assessable value under the un-amended section 14 of the Customs Act, but after the actual sale price concept was introduced in the year 2007 on the basis of GATT guidelines and section 14 of the Customs Act was amended in 2007, any inclusion of notional charges seems to have lost its relevance and only actual cost incurred by the buyer is required to be considered.
15. It would also be appropriate to refer to the definition clause contained in rule 2 of the Valuation Rules. „Similar goods‟ have been defined in rule 2(1)(f) in the following manner:
2. Definitions. – (1) In these rules, unless the context otherwise requires, –
(f) “similar goods” means imported goods –
(i) which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark;
(ii) produced in the country in which the goods being valued were produced; and
(iii) produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person, but shall not include imported goods where engineering, development work, art work, design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods;
16. Rule 2(g) deals with „transaction value‟ which is defined as follows:-
(g) “transaction value” means the value referred to in sub- section (1) of section 14 of the Customs Act, 1962;”
17. Rule 3 of the Valuations Rules, which deals with determination of the method of valuation is reproduced below:-
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 th at 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.”
18. Rule 4 deals with transaction value of identical goods while Rule 5 deals with transaction value of similar goods. Rule 5 is reproduced below:-
“5. Transaction value of similar goods. –
(1) Subject to the provisions of rule 3, the value of imported goods shall be the transaction value of similar 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.
(2) The provisions of clauses (b) and (c) of sub-rule (1), sub-rule (2) and sub-rule (3), of rule 4 shall, mutatis mutandis, also apply in respect of similar goods.”
19. The relevant portion of rule 10 which deals with cost and services is reproduced below.
“10. Cost and services. –
(1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, –
(a) xxxxxxxxx
(b) xxxxxxxxx
(c) xxxxxxxxx
(d) xxxxxxxxx
(e) xxxxxxxxx
(2) xxxxxxxxxxxx
(3) Additions to the price actually paid or payable shall be made under this rule on the basis of objective and quantifiable data.
(4) No addition shall be made to the price actually paid or payable in determining the value of the imported goods except as provided for in this rule.”
20. Rule 11 deals with declaration by the importer and rule 12 deals with rejection of declared value. Rule s 11 and 12 are reproduced below:-
“11. Declaration by the importer. – (1) The importer or his agent shall furnish –
(a) a declaration disclosing full and accurate details relating to the value of imported goods; and
(b) any other statement, information or document including an invoice of the manufacturer or producer of the imported goods where the goods are imported from or through a person other than the manufacturer or producer, as considered necessary by the proper officer for determination of the value of imported goods under these rules.
(2) Nothing contained in these rules shall be construed as restricting or calling into question the right of the proper officer of customs to satisfy himself as to the truth or accuracy of any statement, information, document or declaration presented for valuation purposes.
(3) The provisions of the Customs Act, 1962 (52 of 1962) relating to confiscation, penalty and prosecution shall apply to cases where wrong declaration, information, statement or documents are furnished under these rules.
12. Rejection of declared value. –
(1) When the proper officer has reason to doubt the truth or accuracy of the value declar ed in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3.
Xxxxxxxxxxxx”
21. It would be clear from a perusal of the Sales Order Number 1101041643 dated 10.04.2009 that the product was mentioned as HR Coil with country of origin as Ukraine and shipment was to be by 31 May, 2009. The payment terms were „payable against confirmed L/C at 180 days after B/L date‟. The USD price PMT was mentioned as 392.70. The Assistant Commissioner had examined the contemporaneous imports of Alloy Steel during the relevant period. A perusal of the data contained in the order indicates that most of the imports were for substantially lesser quantity of HR Steel Plates and in one case where it was for prime HR Steel C oils Alloy and the quantity was 4964.9 MTs the unit price was USD 385.00.
22. As noticed above, Rule 3 deals with determination of the method of valuation. Sub-rule (1) provides that subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with the provisions of rule 10. Sub -rule (2) of rule 3 provides that the value of the imported goods under sub -rule (1) shall be accepted provided certain conditions are satisfied. However sub-rule (4) of rule 3 provides that if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through rules 4 to 9. Rule 10 deals with cost and services and provides that in determining the transaction value, there shall be an addition to the price actually paid or payable for the imported goods and what has to be added has also been provided. Sub-rule (3) provides that additions to the price actually paid or payable shall be made on the basis of objective and quantifiable data. Sub rule (4) provides that no addition shall be made to the price actually paid or payable in determining the value of imported goods, except as provided for in Rule 10.
23. The value of Alloy Steel HR Coil as declared by the Appellant is in terms of the Sales Order entered into and mutually agreed upon by the Appellant and the supplier. It is not the case of the Department that any additional payment was made by the Appellant pursuant to which under invoicing was resorted to by the Appellant. In fact, the Bank Remittance Certificate evidences payment to the supplier for the imports in terms of the Sale Order dated 10.04.2009. The only ground on the basis of which the transaction value has been rejected is that the imports were made at a higher price by other importers than at the price at which the Appellant imported HR Coils in question. A perusal of the imports relied upon in the impugned order show that the quantity of imports were substantially different from the quantity of the import made by the Appellant. Rule 5 of the Valuation Rules requires, amongst others, that the transaction value of identical goods should be at the same commercial level and in substantially the same quantity as the goods being valued to determine the value of the imported goods. In the present case neither the goods were identical nor of substantially the same quantity.
24. In this connection, it would be pertinent to refer to the decision of the Supreme Court in Sanjivani Non-Ferrous Trading Pvt. Ltd. The Supreme Court, in relation to imports taking place between 27.08.2013 to 29.12.2014, examined the circumstances in which the transaction value can be determined and observed as follows:-
“xxxxxxxxx
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.
xxxxxxxxxx
13) It is, therefore, rightly contended by Mr. Dushyant A. Dave, learned senior counsel appearing for the respondent that the reason given for setting aside the order that the normal rule was that the assessable value has to be arrived at on the basis of the price which was actually paid, and that was mentioned in the Bills of Entry. The Tribunal has clearly mentioned that this declared price could be rejected only with cogent reasons by undertaking the exercise as to on what basis the Assessing Authority could hold that the paid price was not the sole consideration of the transaction value. Since there is no such exercise done by the Assessing Authority to reject the price declared in the Bills of Entry, Order-in-Original was, therefore, clearly erroneous.”
(emphasis supplied)
25. The contention of the learned Counsel for the Appellant is that is that HR Steel Plates cannot be compared with HR Steel Coils Alloy and also the price is less when large quantity of imports are made as against the price where a small quantity is imported. Learned Counsel also pointed out that the LME Bulletin indicates the value of HR Plates and not HR Coils.
26. In Commissioner Customs (EP), Mumbai v/s Yatin Steels India Pvt. Ltd. 13, the Tribunal held that HR Coil and HR Steel Plants cannot be said to be similar or identical goods and, therefore, the values of HR Steel Plates could not have been relied upon by the Department for enhancement of declared value. The relevant portion of the decision is reproduced below:-
“8. HR Coil and HR Steel Plates cannot be said to be similar or identical goods. If the revenue is rejecting the value declared by the respondent, then they are bound to prove beyond reasonable doubt that the goods compared with are similar goods or identical goods. In our view HR Coils and HR Plates cannot be termed as one and the same for the purpose of contemporaneous value. Both the goods are different in nature and therefore the values relied upon by the Department for enhancement of declared value is not legally sustainable. It is not the case of revenue that it is either a Hawala transaction or remittance of additional consideration by the respondent to the exporter, over and above the declared transaction value. The value declared by the respondent was to be remitted through the banking channel.
11. From the case records we find that the revenue has failed to establish its claim on the basis of contemporaneous import. The major factor which prompted the learned Commissioner to set aside the order-in-assessment passed by the Adjudication Authority was that in arriving at figure of US $ 460 PMT the Adjudicating Authority relied upon the value of import of HR Steel Plates and since HR Coils & HR Steel Plates are not similar, therefore there was no reason to doubt the truth or accuracy of the value declared by the respondent. According to us the Adjudicating Authority has erred in rejecting the declared price/transaction value of the goods imported by the respondent by taking recourse to Rule 12 of Customs Valuation Rules, 2007. Section 14 of Customs Act, 1962 as well as Custom Valuation Rules, 2007 do not sanction such a method, as adopted by the Adjudicating Authority, for redetermination of assessable value. The declared price/transaction value is required to be accepted unless there are valid reasons for rejection of such value as provided in Customs Valuation Rules. In the present case no valid reasons have been recorded by the Adjudicating Authority for rejecting the declared price/transaction value of HR Coils except the contemporaneous import price of HR Steel Plates, which is not valid. Therefore, we find no fault with the impugned order and the Appeal f iled by Revenue is accordingly dismissed.”
(emphasis supplied)
27. Thus, what was actually required to be ascertained was the value of similar goods which were commercially interchangeable with the goods being valued. The Appellant had declared USD at Rs. 392.70 PMT and as seen from contemporaneous data relied upon by the Department for a sale of 4964.9 MTs on 27.09.2009 of Prime HR Steel Alloy, the unit price was USD 385.00. Such being the position, the value declared by the Appellant in the three Bills of Entries could not have been rejected under rule 12 of the Valuation Rules.
28. It is only when the value of the imported goods is not taken to be the transaction value that the value has to be determined sequentially in the manner provided for in rules 4 to 9.
29. For all the reasons stated above, the impugned order dated 29.11.2012 passed by the Commissioner (Appeals) cannot be sustained. It is, accordingly, set aside and the appeal is allowed with consequential benefits.
(Order pronounced on 01.02.2022)
Notes:
1 the Commissioner (Appeals)
2 the Appellant
3 the Assistant Commissioner
4 CTI
5 the Valuation Rules
6 the Customs Act
7 HR
8 CTH
9 Supplier
10 LME
11 2019 (365) ELT 3 (SC)
12 2015 (319) E.L.T. 177 (S.C.)
13 2019-TIOL-1137 CESTAT-MUMBAI
