Case Law Details
Commissioner of Customs (Port) Vs Sawetri Trading Company (CESTAT Kolkata)
In the realm of customs regulations, legal battles often unfold over the valuation of imported goods. A recent case between the Commissioner of Customs (Port) and Sawetri Trading Company, heard by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Kolkata, sheds light on the complexities surrounding the determination of customs duty on imported ‘Poppy Seeds.’ This article delves into the details of the case, the arguments presented, and the tribunal’s decision.
Case Background: During the period from 17.08.2006 to 13.12.2006, Sawetri Trading Company imported ‘Poppy Seeds.’ The Directorate of Revenue Intelligence (DRI) conducted an investigation and issued a show cause notice to demand differential customs duty. The notice alleged that the supplier of ‘Poppy Seeds’ from Turkey was the same, yet the declared price by Sawetri Trading Company was considerably lower than that of other importers. The tribunal proceedings initiated against the company were dropped by the Commissioner (Appeals) based on a precedent set by the Tribunal. The revenue, dissatisfied with this decision, filed an appeal.
Tribunal’s Ruling: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Kolkata heard the appeal and referred to a similar case involving Ajay Exports. In the Ajay Exports case, the Tribunal observed that certain crucial aspects needed consideration:
- Reliability of Foreign Documents: The revenue relied on copies of export invoices and declarations submitted by suppliers/exporters to Turkish authorities. However, the Tribunal noted that these documents were not tested and signed by Turkish Customs authorities, rendering them inadmissible as evidence.
- Use of Insurance Documents and External Sources: The Tribunal reiterated that the value declared for insurance purposes by the exporter could not be the basis for redetermination of the transaction value. Additionally, external sources like Comtrade and UK public ledger were deemed inappropriate for enhancing the transaction value.
- Contemporaneous Imports: The Tribunal questioned the department’s rejection of contemporaneous imports’ values, emphasizing that if accepted in other cases, they should be applicable uniformly.
- Confessional Statements: In cases involving confessional statements, the Tribunal stressed the need to consider circumstances like the statement being taken during detention, subsequent retractions, and the lack of evidentiary value.
Legal Precedents: The Tribunal referred to its earlier decision in the Ajay Exports case and highlighted the settled law that international prices from public ledgers cannot be used to enhance the value. It also emphasized the need for consistency in applying values of contemporaneous imports and the inadmissibility of unauthenticated foreign documents.
Conclusion: The CESTAT Kolkata, aligning with its previous rulings, upheld the order of the Commissioner (Appeals) in favor of Sawetri Trading Company. The tribunal emphasized the inadmissibility of certain foreign documents, cautioned against relying on insurance values for redetermination, and stressed the importance of consistency in treating contemporaneous imports.
This case reinforces the significance of adhering to established legal principles in customs valuation disputes. It sets a precedent for cases involving similar issues and underscores the necessity of a meticulous examination of evidence and adherence to statutory provisions in customs matters.
FULL TEXT OF THE CESTAT KOLKATA ORDER
Revenue has filed this appeal.
2. The facts of the case are that during the period 17.08.2006 to 13.12.2006, the respondents imported ‘Poppy Seeds’. An investigation was conducted by DRI and thereafter a show cause notice was issued to the respondents to demand differential duty of customs alleging that the supplier of ‘Poppy Seeds’ is the same from Turkey whereas the declared price shown by the respondent is very less than the ‘Poppy Seeds’ imported by the other importers. Therefore, the proceedings were initiated against the appellants, but the Ld. Commissioner(Appeals) relying on the Tribunal’s decision dropped the proceedings against the respondents. Aggrieved from the said order, the revenue is before us.
3. Heard the Ld.AR for the department and perused the records.
4. We find that on the said allegation and on the basis of investigation conducted by the DRI, several show cause notices were issued all over India and in the case of Ajay Exports v. CC(Import), Mumbai [2016-TIOL-264-CESTAT-MUM], this issue came up for consideration and this Tribunal after considering all the facts placed before it, observed as under:-
“10. On perusal of the records and hearing both sides, we find the issues which arise for determination in these appeal are
(a) Whether insurance documents can be relied upon for the loading the transaction value of the consignment/goods
(b) Whether the copies of documents export declarations submitted by the foreign supplier/exporter can be relied upon for enhancing transaction value
(c) Whether com trade, UK public ledger and like sources of the information can similarly be used to enhance transaction value declared by the importer.
(d) Whether penalties need to be imposed on he appellants.
10.1 On consideration of the rival contentions and perusal of records, the following position emerges:
(a) The revenue relied upon copies of export invoices and declarations submitted by the suppliers/the exportes before the Turkish authorities. This is evident from reading of paragraphs 9.1.1.1 of the 2 nd corrigendum issued and the revenue has relied upon 18 (sic 16) bills of entry to charge undervaluation. A perusal of the letter dated 30/10/2009 addressed by first secretary, Moscow to the additional director general of DRI, seems to suggest that information regarding 252 consignments in the form of comparative chart were given out of which 48 cases the declared value (at Turkish Port) match with the invoice value/transaction value and in 204 cases there was significant difference. The letter further states that an exercise of segregation and co-relating such documents would be needed. It is also seen that the comparative statement set to have been filed awarded is blacked out and most of the entries have been redacted and cannot be read. The revenue has not been able to explain this satisfactorily. It is settled law that in order to be admissible as evidence, the copies of foreign documents are required to be tested and signed by the Turkish Customs authorities which they were not. Further, it is settled law that the documents must bear the signature of the officers making the enquiries and be certified as true copies. It is to be noted that the originals have not been made available even to the Tribunal and unauthenticated and unsigned documents were relied upon, which could not be used, even if they may have been forwarded by ‘authorities’ to the investigating agency through official channels. This law is settled by the Apex court in the case of East Punjab Traders (supra).
(b) As regards the insurance documents as well as entries from Comtrade and UK public ledger and other journals it is now well settled law that such information cannot be used to doubt or reject the transaction value. As regards the value on the insurance documents, Apex Court in the case of Orient Enterprises (supra), while affirming the judgement of the Tribunal; Christelle Violene (supra); Nina Chaka Pvt.Ld (supra) held that the value declared for insurance purposes by the exporter cannot be the basis for redetermination of the transaction value as the exporter may have declared higher value for insurance purposes which may not be the correct value. As regards the issue or reliance on com trade and public ledger for redetermination of value of the imported goods, this lies also well settled in the favour of the assessee in the case of Prabhu Dayal Premchand (supra); Jindal Strips Ltd. (supra) (etc as listed at paragraph No.3 at page 10) wherein the law has been clearly settled in favour of the appellant and we find strong force in the submissions made by the learned Counsel for appellant that on the issue in hand, the adjudicating authority has incorrectly relied upon the values of poppy seed’s by considering the same from Comtrade and UK public ledger. In our view the finding on this point are incorrect and not in consonance with the settled law.
(c) We also note that the adjudicating authority has refused to look at other contemporaneous imports, which are not the subject matter of the present show cause notice on the ground that there was gross undervaluation being done by the trade. We find that if the value of contemporaneous imports were accepted and the transaction value in those case are not doubted by the revenue in the assessment orders, it is not understandable why the said values could not have been used for the purposes of comparing the same with the value of the consignments in question in these appeals. It is also said along that the Department has to first reject the transaction value and then follow the rules as laid down form rule 5 to 9 of the valuation rules in order to arrive at the value for discharge of Customs duty. From the entire records we find that this does not seem to have been done. In addition, we find that the documents which have come from the foreign source i.e. Indian embassy, Moscow cannot bring home the charge of undervaluation in the case of Bhatia Group as none of these documents which are relied upon and received from foreign source pertain to these groups; even as far as Ratan Lal Group is concerned these documents cannot be relied upon for the reasons set out hereinabove.
10.2 As regards the appeals of Laxmi Trading Co. and Arun Kumar, we find that the entire findings of the adjudicating authority to fasten the differential duty liability is based on the so called confessional statement dated 7th /8th December 2006 of Shri Arun Kapoor is the only basis to hold against them as there being undervaluation of the goods imported. It was argued on behalf of the appellant M/s. Laxmi Trading Co. that the said statement was taken during the period of Shri Arun Kapoor’s detention; we find that it is so and in any event the statement was retracted by Shri Arun Kapoor by his letter of 9th December 2006, the very next day. It is also on record that Shri Arun Kapoor had informed the Additional Director, D.R.I., by a leter that the statement which was recorded was during the period of his detention hence being one of the reason for retraction. This vital factual matrix which will have a bearing on the case has been ignored by the adjudicating authority; which to our mind has led to a conclusion that there was under-valuation. It is to be noted that long after retraction by Shri Arun Kapoor on 9th December, 2006, the authorities have recorded his his another statement on 8th February 2008. On perusal of statement dated 8th February, 2008, we find that Shri Arun Kapoor has categorically denied the charge of under-valuation; which would mean that the statement dated 7th/8th December 2008, holds no evidentiary value and may not help the Revenue’s case any further as there is paucity of other evidence as held by us here-in-above in other appellants cases.
10.3 In view of the foregoing, in the peculiar facts and circumstances of this case, it is to be held that the impugned orders are unsustainable and liable to be set aside and we do so.
10.4 As we have disposed of the appeals on the factual findings, we are not recording any findings on other submissions made at by both sides. As we have disposed of the appeals on merits holding that the impugned orders are not sustainable, question of penalty on appellants does not arise.”
5. As the said issue was examined by this Tribunal in the case of Ajay Exports and further in the case of Chirag International v. Commissioner of Customs [2019-TIOL-1279-CESTT-MUM], wherein again this Tribunal observed as under :-
“4. Heard both the sides and perused the records. We find that from the SCN it can be seen that the reason for issuance of the SCN is basically an alert from the DG Valuation. In our view, merely by an alert of DG valuation, SCN cannot be issued in mass to all the importers without investigating the fact of their declared value. Though in the subsequent inquiry, the department has found that as per the public ledger international price published therein is 3200 PMT FOB Turkey however as per the judgment of this Tribunal in the case of Ajay Exports (supra), the Tribunal has categorically held in the identical case that merely on the basis of international price published in the public ledge cannot be used for enhancement of the value. As regard the application of price of USD 2700 PMT on the basis of Bill of Entry of contemporaneous import, we find tha the bill of entry of Laxmi Trading Co. was relied upon wherein the 2700 PMT was enhanced price by the customer under the identical dispute. It is a settled law that for the purpose of contemporaneous price, the price which is under dispute and enhanced out of such dispute cannot be taken as price of contemporaneous goods. Only a price which declared by the assessee and accepted by the department, the bill of entry thereof can only be taken as price of contemporaneous goods. Moreover, the enhancement of the price in the case of Laxmi Trading Co., the case was before the Tribunal and the enhancement was set aside by the Tribunal in the case of Ajay Exports and others including the Laxmi Trading Co. (supra) therefore on both the count i.e. either the international price published in the public ledge or contemporaneous price of Laxmi Trading Co., the enhancement is incorrect and illegal. As regard the judgements relied upon by the Ld.AR, we find that the absolutely identical facts and law point in respect of the same case form the same country of origin has been decided by this Tribunal in the case of Ajay Exports and others, therefore, the facts of those cases relied upon by the AR is different from the case in hand, therefore, the judgments are not applicable. As per our above discussion, the enhancement of the price and consequential demand, interest etc. are not sustainable. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief.
Therefore, the issue is no more res integra.
6. In view of this, we do not find any infirmity in the impugned order and the same upheld and the appeal filed by the revenue is dismissed.
(Dictated and pronounced in the open Court.)
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