Customs Value Enhancement Invalid Without Speaking Order: CESTAT Kolkata

Commissioner of Customs (Port) Vs Radha Trading (CESTAT Kolkata)

Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, dismissed the Revenue’s appeal against M/s. Radha Trading and upheld the Commissioner (Appeals)’s decision setting aside the enhancement of the declared transaction value of imported mixed lots of polyester knitted fabrics from China. The importer had paid customs duty on the enhanced value to avoid demurrage and detention charges but subsequently challenged the reassessment.

The CESTAT Kolkata dismissed the Revenue’s appeal against Radha Trading concerning enhanced valuation of imported mixed lots of polyester knitted fabrics from China. The importer had paid duty on the enhanced value to avoid demurrage and detention charges, but challenged the reassessment. The Tribunal held that Section 17(5) of the Customs Act, 1962 requires a speaking order within 15 days where reassessment under Section 17(4) differs from self-assessment and is not accepted in writing. No such speaking order had been issued.

The Tribunal also found that the Proper Officer had supplied neither reasons nor evidence supporting rejection of the transaction value. The Commissioner (Appeals) had correctly applied Section 14 of the Customs Act and the Customs Valuation Rules, 2007, along with relevant judicial precedents. Accordingly, the Tribunal found no infirmity in the Commissioner (Appeals)’s order and dismissed the Revenue’s appeal, sustaining assessment at declared values with consequential relief.

Cases Discussed:

FULL TEXT OF THE CESTAT KOLKATA ORDER

The Revenue is in appeal.

2. The facts of the case are that the respondent filed various bills of entries declaring the goods as imported ‘Mixed lot of Polyester Knitted Fabrics’ from the manufacturers of China and sought clearances of the goods. The Proper Officer re-assessed the same and enhanced the declared value and demanded duty accordingly. The respondent paid the excise duty to avoid demurrage and detention charges and challenged the said order before the Ld. Commissioner(Appeals) on the ground that no order under section 17(5) of the Customs Act, 1962 has been passed by the adjudicating authority for enhancement of the declared value. Further, no reasons has been stated or no evidence has been produced for rejection of the declared value. The Ld.Commissioenr(Appeals) examined the issue in detail and held that the transaction value cannot be rejected without any evidence or reasons. Therefore, he rejected the enhancement of declared value by the respondent. Aggrieved from the said order, the Revenue is before us.

3. The Ld.AR for the department supported the grounds of appeal and submitted that as the Proper Officer has reasons to doubt the truth or accuracy of the value of declared imported goods, the Proper Officer may ask the importer for such goods to furnish further information including documents or other evidences and after receiving such information and in the absence of any response given by the importer, the Proper Officer was having reasonable doubt and accordingly enhanced the declared value. Therefore, the impugned order is to be set aside.

4. None appeared on behalf of the respondent, nor any request for adjournment has been received. On going through the records placed before us, we find that the appeal itself can be disposed of at this stage, therefore, appeal was taken up for disposal.

5. We find that after filing the Bills of Entry declaring the value of the imported goods the Proper Officer sought to assess the goods under section 17(4) of the Customs Act, 1962 and assessed accordingly. In terms of section 17(5) of the Customs Act, 1962, the Proper Officer is duty-bound to pass a speaking order for enhancement of the declared value within 15(fifteen) days of the passing of the order under section 17(4). Admittedly, no such order was passed by the adjudicating authority after passing the order under section 17(4) of the Act. Therefore, on this ground itself the enhanced value is not sustainable. Moreover, the Ld.Commissioner(Appeals) has examined the issue in detail and observed as under:-

“8. In the instant cases, the appellant imported mixed lot of Polyester Knitted Fabric, for which they declared the value in the bills of entry. The values declared by the appellant in the impugned Bills of entry, as mentioned on previous page, were enhanced by the assessing officer. The appellant paid duty in respect of impugned Bills of entry in order to clear the goods early to avoid heavy demurrage.

9. I observe that the appellant did not receive assessment order u/s 17(5) of the Customs Act, 1962 (hereinafter, referred to as “the Act”). I note that Section 17(5) of the Act states that:

“Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter regarding valuation of the goods, classification exemption or concessions of duty availed consequent to any notification issued therefore under the Act and in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said re-assessment in writing, the proper officer shall pass a speaking order on the re- assessment within fifteen days from the date of re-assessment of the bill of entry or the shipping bill as the case may be.

In the instant case, I note that no speaking order has been issued in terms of the said Section 17(5) of the Act, ibid. This by itself is contrary to the provisions of the Act.

However, Section 17(5) of the Customs Act, 1962 stipulates that a speaking order has to be passed within 15 days if the re-assessment is done contrary to appellant’s claim unless the said re-assessment is accepted by the importer in writing. It is on record that the bills of entry were re-assessed. Naturally, the speaking orders were required to be issued within 15 days thereof as per Section 17(5) of the Customs Act, 1962. There is no dispute that no speaking order was passed in this case. In the circumstances, in absence of a valid speaking order as per Section 17(5) of the Customs Act, 1962 for re-assessment made by the department contrary to appellant’s claim, re-assessment is liable to be set aside.

Hon’ble High Court at Calcutta in the matter of M/s. Sigma Power Products Pvt. Ltd. [2017-TIOL-597-HC-KOL-CUS] held as under:

“The order made by the proper officer on the bills of entry in changing the classification and value enhancement is an order of re-assessment attracting the provisions of sub section (5) of section 17 of the Act as urged by the appellant what who appears to be the case from the effidavit filed by the Revenue. Hence, the conclusion has to be that the proper officer was required to pass a speaking order on the re-assessment within 15 days of the re-assessment of the bills of entry.

No speaking order was passed.

In the circumstances, we have no hesitation to set aside the re assessment.

In view of the aforesaid, there is no scope for a contrary finding. The writ petition thus succeeds to that extent.”

Similar order was also passed by Hon’ble Tribunal in the matter of C.C. -vs- M/s Mittal Processors Pvt. Ltd. (2013(293) E.L.T. 384 (Tri- Mumbai)).

Therefore, the impugned re-assessments are liable to be set aside on this ground alone.

10. As per section 14 of the Customs Act 1962, the value of the imported 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, where the buyer and seller of the goods are not related and price is the sole consideration for the sale. Further for rejection of the declared transaction value, the procedure has been laid down in the rule 12 of the CUSTOMS VALUATION (DETERMINATION OF VALUE OF IMPORTED GOODS) RULES, 2007, which stipulate as under: “

12. Rejection of declared value – (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to only 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 sa declared, it shall be deemed that the transaction value of such imported goods connot be determined under the provisions of sub-rule (1) of rule 3.

(2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).

Explanation-(1) For the removal of doubts, it is hereby declared that :-

(i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9.

(ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers.

(iii) The proper officer shall have the powers to raise doubts on the truth of accuracy of the declared value based on certain reasons which may include –

(a) the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed;

(b) the sale involves an abnormal discount or ebnormal reduction from the ordinary competitive price,

(c) the sale involves special discounts limited to exclusive agents,

(d) the misdeclaration of goods in parameters such as description, quality, quantity, country of origin, year of manufacture or production,

(e) the non declaration of parameters such as brand, grade, specifications that have relevance to value; (f) the fraudulent or manipulated documents.”

11. The appellant declared the transaction value and there is nothing on record to suggest that the transaction value declared by the appellant was not the price actually paid for the goods when sold for export to India, There is also nothing on record to suggest that the buyer and seller of the goods were related or price was not the sole consideration for sale.

12. Hon’ble Supreme Court in the case of Eicher Tracters Limited, reported in 2000 (122) E.LT. 321 (S.C.) has held as under:

“10. The respondent’s submission is that the phrase “the transaction value” read in conjunction with the word “payable in Rule 4(1) allows determination of the ordinary international value of the goods to be ascertained on the basis of data other than the price actually paid for the goods. This, according to the respondent, would be in keeping with the overriding effect of Section 14(1). We cannot agree.

11. It is true that the Rules are framed under Section 14(1A) and are subject to the conditions in Section 14(1). Rule 4 is in foct directly relatable to Section 14/1). Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14/1) and particularised in Rule 4(2).

12. Rule 4(1) speaks of the transaction value. Utilisation of the definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price octually paid for the particulor transaction, unless of course the price is unacceptable for the reasons set out in Rule 4/2). “Payable in the context of the language of Rule 4(1) must, therefore, be read as referring to “the particular transaction” and payability in respect of the transaction envisages a situation where payment of price may be deferred.

13. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other Rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at the same time as the subject goods. Where there are no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule 7A. When value of the imported goods cannot be determined under any of these provisions, the value is required to be determined under Rule & “using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 14 of the Customs Act, 1962 and on the basis of data available in India. If the phrase the transaction value used in Rule & were not limited to the particular transaction then the other Rules which refer to other transactions and data would become redundant.

14. It is only when the transaction volue under Rule & is rejected, then under Rule 3(i) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules Conversely if the transaction value con be determined under Rule 4(1) and does not foll under any of the exceptions in Rule 4/2), there is no question of determining the value under the subsequent Rules.

15. The Assistant Collector in this case determined the value of the imported goods under Rule 8. The question is whether he should have determined the transaction value under Rule 4 at the price actually paid by the appellant for the 1989 bearings. Naturally, if Rule 4 applies to the focts of this case, the Assistant Collector’s reasoning under Rule 8 must, by virtue of language of Rule 3(i), be set aside.”

13. Similar views have been taken by Hon’ble Supreme Court in case of Tolin Rubbers(P) Ltd vs CC Cochin-2004 (163) E.L.T. 289 (S.C.), wherein it has been held as under:

3. Learned counsel for the appellant brought to our notice a decision of this Court in Eicher Tractors Ltd. Haryana x. Commissioner of Customs, Mumbai- (2001) 1 SCC 315 in which It has been held that the mode of determination of the value of the goods in question in such matters as has been laid down in Rule 4(1), the transaction volue will have to be determined and under the Rule 4(2), if any exceptional circumstance is found then the transaction value indicated in Rule 4(1) will have to be rejected and further determination have to be made under Rule 8.

4. That procedure has not been followed in this case. None of the authorities advert to this Rule or say for what reasons as provided under Rule 4/2) the transaction value will have to be rejected, in these circumstances, we allow this appeal, set aside the order made by the authorities and hold that the Bill of Entry as made by the appellant shall be accepted. The appeal is allowed accordingly. If any payment has been made the same shall be refunded.”

14. I find that that there were no ground in respect of the present appeals to doubt the transaction value and to assess the duty liability on the enhanced value, as done by the assessing authority.

15. Further the appellant’s consent, even if any, to accept the enhanced value, due to Incurring heavy demurrage etc. did not confer any right on assessing officer to determine value un-statutorily as has been held in the following decisions:

i. Commissioner of Customs, ICD, New Delhi -vs- K.D. Exports [2008 (227) ELT 494 (tri-Del)]. In para 5, Hon ble Tribunal has held as under:

“5. We have carefully considered the submissions and perused the bill of entries and the endorsements relating to examination and enhancement of the value. We find that in the case of bill of entry No. 387940 dated 01-11-2004, the declared value of US$ 32 was enhanced to USS 0.448 per meter. Subsequently in respect of bill of entry No. 389742 enhancement has been made from 0.30 US $ to 0.448 stating that the party has already Imported the same item vide bill of entry No. 387940 dated 01-11-2004. We find this nating is misleading. For the consignment relating to the bill of entry dated 1-11-2004 the value was enhanced only by the Department. It is not a case of the respondent importing at the assessed value of 448 US $. Learned DR produced NIDB data relating to the year 2005 and claimed that imports had taken place at prices substantially higher the prices declared by the respondent. He was not able to specifically indicate any specific contemporaneous import price relating to the relevant period based on which the prices were enhanced. We also find that certain ad hoc and arbitrary enhancements to the extent of 40 cent per meter etc. have been adopted. Such an enhancement has been made apparently without disclosing the proposal for enhancement and seeking acceptance of the some from the respondent, in none of the bill of entries we find any endorsement to the fact that the respondent or the representative have accepted such enhancement in the absence of acceptance, speaking orders specifying the grounds should have been issued.”

ii. M/s. R. C. International (2009(243) ELT729 (Tri- Del)], wherein Hon’ble Tribunal has held as under.

“4 Relevant facts, in brief, are as follows The appellant filed bill of entry for clearance of silk fabric declaring a unit price of US S 1.40 per sq mtr. which was enhanced to US $2.29 per sq. mtr. This enhancement was reportedly done with the concurrence of the representative of the importer. The appellant paid the assessed duty on 24-1-2003 and cleared the goods and thereafter preferred appeal against the order of assessment.

5.1 When the matter was heard on the earlier occasion, the learned DR claimed that the value was enhanced as per the endorsement appended in the hard copy and we specifically directed the Department to produce the assessment documents to see the basis of enhancement and an order was passed to this effect on 22-4-2008 it was made clear in our order dated 22-4-2008 that on failure to produce the relevant document adverse inference might be drawn against them and that the matter would be decided on the basis of available record. Subsequently, when the matter came up for hearing on 2-7- 2008, ot the request of the learned DR, further time was given till 6-4-2008.

5.2 Learned DR submits that in spite of his best efforts, he is not able to get the relevant document based on which the enhancement of value was made. Thus we have not been shown any evidence of contemporaneous import relied upon to enhance the value declared by the importer Further, no specking order has been issued in this case. The appellant has contended that in view of the urgency, they took release of the material paying duty on the enhanced price and that they have not accepted the enhanced value This submission appears acceptable, especially in the absence of production of documents based on which value was enhanced.

6. Therefore, we find merits in the appeal. We set aside the order of the Commissioner of Customs (Appeals) and also the assessment order which enhanced the value. The value declared by the importer should be adopted for payment of duty.

7. The appeal is allowed with consequential relief”

16. It is a settled law that the value cannot be enhanced on the basis of NIDB data as held in following judgments:

i. C. C. vs KD Exports 2008 (227) ELT494 (Tri-Delhi).

ii. C. C. vs D M International 2013 (289) ELT 169 (Tri-Delhi).

iii. C. C. vs Marble Art 2013 (289) ELT 346 (Tri-Delhi).

iv. C. C. vs Century Metal Recycling Pvt. Ltd. 2013 (295) ELT 726 (Tri-Delhi).

v. C. C. vs D M International 2013 (297) ELT 450 (Tri-Delhi).

vi. Topsia Estates Pvt. Ltd. vs C. C. (IMPORT-SEAPORT), Chennai 2015 (330) ELT 799 (Tri-Chennai).

vii. C. C., New Delhi vs Virasat Electronics, 2015 (317) E.LT. 295 (Tri. Del.).

viii. C. C. vs Intiling Explosive 2008 (224) ELT 343 (SC).

ix. C. C. vs South India Television 2007 (214) ELT 3(SC).

17. In the case of COMMISSIONER OF CUSTOMS, NEW DELHI Versus DM INTERNATIONAL reported in 2013 (289) E.L.T. 169 (Tri. – Del.) the following has been held:

“5. We find that there is no dispute that the customs has power to reject the transaction value and enhance the assessable value in terms of Customs Valuation Rules. However, such rejection of transaction value and enhancement of assessable value has to be on the basis of some evidences on record. Contemporaneous imports have to be considered with reference to quality, quantity and country of origin with the imports under co It has been held in a number of decision cannot be made the best for enhancement of value. Commissioner (Appeal) has relied upon various decisions of the Tribunal for holding that any enhancement in assessment valve the transaction value has to be first rejected based on legal permissible ground as indicated in the Valuation Rules He has also referred to Hon’ble Supreme Court decision in the car of Eicher Tractors in CC-2000 (122) ELT, 321 (SC) in support of his finding that transaction vole c be rejected without clear and cogent evidence produced by the department with regard to quality, import of origin and place and time of import.

6. We find that in their memo of copest, Revenue has not advanced any such evidences to support their case, Inasmuch as, no evidence for rejection of transaction value stands produced by the authority, we find no reason to interfere with the impugned order of Commissioner (Appeal), Revenue’s appeal is accordingly rejected”

18. I also observe that the Apex Court has held in Motor Industries Co. Ltd Vs Commissioner of Customs (2009 (244) ELT 4 (SC)) that:

“….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 volue at incomect or unacceptable, the deporoment has to find out whether there are any imports of identical goods or similar goods at higher price at around the same time. Unless the evidence is gathered in this regard the question of importing Section 14/14) does not arise. In the absence of such evidence, invoice price has to be accepted as tramiaction value, Invoice is the evidence of value. Casting suspicion on the invoice produced by the importer is not sufficient to reject it as evidence of valve of imported goods. Under valuation has to be proved If the charge of undervaluation cannot be supported ether by evidence or information about comparable imports, the benefit of doubt must go to the importer.”

19. The assessing authority has failed to take this into account. I further observe that mere assumption cannot be the basis for rejection of declared value.

20. Further, mere acceptance of the enhanced value by the appellant, or any other importer; does not preclude him from filing an appeal against this arbitrary enhancement of value, and claiming refund on the basis of proper assessment.

21. I observe that the Hon’ble Supreme Court of India, in the matter of Dunlop India vs. UOI (1983(13) ELT 1566 (SC)) has held that “there is no estoppels in low against party in taxation matter. a party in order to clear the goods for Customs, has given the classification in accordance with the wishes of the authorities or even under some misapprehension, and if the low allows it a right to ask for refund on proper appraisement and which is actually applied for, the party cannot be stopped from making such application and ask for such refund.”

22. This was also followed in Laxmi Colour Labs vs. CC (1992(62) ELT 613 (Tri.) and in CC vs. International Exports (1992 (62) ELT 608 (Tri). The enhanced value accepted by some importers cannot be made basis to enhance the value for subsequent importers, unless there are contemporaneous import data available and transaction value is rejected as per Valuation Rules.

23. The assessing authority has failed to prove that the declared value did not reflect the true transaction value. I further observe that mere assumption cannot be the basis for rejection of declared value. In this regard I find that Hon’ble Supreme Court in case of Commissioner Of Customs, ICD Versus Polyglass Acrylic Mfg Co Pvt Ltd. reported in 2015 (322) ELT. 794 (S.C.) has held as under

“The respondent-importer had filed the Bills of Entry in respect of the imported goods declaring the value at US $ 305 PMT. The Department was not happy with the aforesaid valuation and thus issued show cause notice stating that the value should be US $ 450 PMT. This demand under the show cause notice was confirmed. Against this order the respondent filed appeal which has been allowed by the Tribunal, inter alia, making the following observations: “We have heard both the sides. We find that the Department has not relied upon any contemporaneous import of similar or identical goods to justify enhancement and what has been relied upon for enhancement is the report of fair value of such goods imported through various major Indian ports.”

2. Learned counsel for the appellant could not ploce any material to rebut the aforesaid observations of the Tribunal. in the absence of any documents or material showing the value of the import as claimed by the Department, at that time, the Department was not justified in demanding the value of the imported goods at US $ 450 PMT.

3. We are thus in agreement with the view taken by the Tribunal and as a consequence thereof this appeal is dismissed.”

24. Therefore any enhancement of declared value without any evidence, document or material is violative of section 14 of customs Act. The appellant declared the transaction value and there is nothing on record to suggest that the transaction value declared by the appellant was not the price actually paid for the goods when sold for export to India, There is also nothing on record to suggest that the buyer and seller of the goods were related or price was not the sole consideration for sale. In view of the above, I find that the rejection of declared value without cogent and justified reasons and its enhancement is not sustainable, and hence liable to be set aside.

25. From the above it is found that the assessing officer has rejected transaction values without any valid basis/reasons and without following the due procedure as per section 14 and Valuation Rules, especially when there is nothing on record to suggest that the transaction value declared by the appellant was not the price actually paid for the goods when sold for export to India, There is also nothing on record to suggest that the buyer and seller of the goods were related or price was not the sole consideration for sale. Therefore in these circumstances, the enhancement of assessable values is liable to be struck down and set aside and the bills of entry in the impugned appeals are to be assessed at values declared by the appellant.

26. In view of the above, I set aside the enhancement of values, assess the impugned bills of entry at declared values and allow the appeals filed by the appellant with consequential relief.”

6. On going through the observations made by the Ld.Commissioner(Appeals), we find that it is true that on reasons has been given by the Proper Officer for rejection of transaction value and no order has been passed under section 17(5) of the Customs Act, 1962.

7. In that circumstances, the value declared by the respondent cannot be rejected. Therefore, we do not find any infirmity in the impugned order and the appeal filed by the Revenue is dismissed.

(Operative part of the order was pronounced in the open Court.)