Case Law Details
Mittal Appliances Limited Vs Commissioner of Customs (CESTAT Delhi)
In a recent decision by the Customs Excise and Service Tax Appellate Tribunal (CESTAT Delhi), Mittal Appliances Limited’s appeal was dismissed concerning the valuation of imported “Copper Scrap Birch/Cliff.” The case revolved around the rejection of the declared transaction value by the Deputy Commissioner of Customs, upheld in subsequent appeals.
Mittal Appliances Ltd. had imported Copper Scrap Birch/Cliff from the United Arab Emirates, declaring a value of Rs. 414.54 per kg in their Bill of Entry. However, the customs authorities, upon reviewing contemporaneous import values, found discrepancies and requested further justification from Mittal Appliances Ltd. regarding their declared value. The company failed to provide sufficient evidence to substantiate their valuation.
Under the Customs Act of 1962, Section 17(1) allows importers to self-assess duties, but Section 17(4) empowers customs officials to reassess duties if the declared value is deemed inaccurate. The Deputy Commissioner, in his Order-in-Original, cited Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, to reject Mittal Appliances’ declared value. This rule permits reassessment based on the value of similar goods when transaction values are questionable.
Despite Mittal Appliances’ appeal asserting the validity of their declared transaction value and disputing any fraudulent intent or relationship issues between buyer and seller, the CESTAT upheld the customs authorities’ decision. The tribunal ruled that the Deputy Commissioner acted within the legal framework by rejecting the transaction value under Rule 12 and determining the assessable value based on similar imported goods’ values.
The appellant argued that scrap materials like Copper Scrap Birch/Cliff do not have comparable goods for valuation purposes, but the tribunal disagreed, noting international standards and classification systems such as ISRI (Institute of Scrap Recycling Industries) which categorize scrap materials. This classification system supports the customs authorities’ use of similar goods’ values for assessment.
In conclusion, the CESTAT Delhi upheld the Deputy Commissioner’s decision to reassess duties based on the values of similar imported goods, rejecting Mittal Appliances Ltd.’s declared transaction value. This case underscores the application of customs valuation rules to ensure accurate duty assessments, despite importer assertions of transactional accuracy.
This ruling sets a precedent regarding the application of valuation rules under Indian customs law, emphasizing the role of evidence and compliance with valuation standards in import declarations.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s Mittal Appliances Ltd. Pithampur1filed this appeal to assail to order-in-appeal2 dated 17.06.2021 passed by the Commissioner (Appeals) whereby he upheld the order dated 05.02.2021 passed by the Deputy Commissioner and rejected the appellant’s appeal.
2. The appellant had filed Bill of Entry No.2460284 dated 22.01.2021 to clear “Copper Scrap Birch/Cliff” imported by it from United Arab Emirates. The appellant self-assessed duty as per the value declared by it. As per Section 17(1) of their Customs Act 1962,3 the importer has to self- assess the duty and as per Section 17 (4) of the Act the proper officer can re-assess the duty on the imported goods where the self-assessment is not found to be correct. The proper officer raised a query in the Indian Customs Electronic data of Interchange System4 requesting the appellant to provide material or evidence to justify the value declared by it in the Bill of Entry.
3. The importer did not provide any evidence to substantiate the declared value of the goods. Finding that the declared value was lower than the contemporaneous value of the Copper Scrap Birch/Cliff imported during the period, the proper officer re-assessed the Bill of Entry on the basis of contemporaneous values of imports.
4. The appellant sought a speaking order in terms of Section 17(5) of the Act. Therefore, the Deputy Commissioner issued the Order-in-Original dated 05.02.2021. In his order, the Deputy Commissioner listed 15 Bills of Entry filed for import of “Copper scrap and birch/cliff” and the unit assessable value in each case. He also recorded that the appellant was requested to submit material evidence to justify the value of the goods imported by the appellant to substantiate the value declared by it and no evidence was submitted.
5. In view of the above, the Deputy Commissioner held that the declared value was liable to be rejected under Rule 12 of the Customs Valuation(Determination of Value of Imported Goods) Rules, 20075.As per Valuation Rule(3), if the value of the imported goods cannot be determined under Rule 3(1)i.e., as per the transaction value, the value is to be determined proceeding sequentially through Valuation Rules 4 to 9.Valuation Rule 4 provides for determination of value based on the value of identical goods. Valuation Rule 5 provides for determination of value on the basis of value similar goods. The Deputy Commissioner found that there were no identical goods and therefore, Valuation Rule 4 could not be applied in the case and determined the value under Valuation Rule 5.In the impugned order, the Commissioner (Appeals) recorded that the price declared by the appellant was Rs. 414.54per/kg which was significantly lower than the value of similar goods which was between Rs. 465 to Rs. 507 per kg in the 15 Bills of Entry listed in the Order-in-Original. Therefore, he found no reason to interfere with the Order-in-Original and rejected the appeal filed by the appellant.
6. In this appeal, the impugned order is assailed on the following grounds:-
1) The appellant had correctly declared the transaction value based on which the assessment value should have been finalized.
2) The Bill of Entry was filed declaring the value to Rs. 414.54 per kg. as per the transaction value.
3) There is no evidence that the invoice was fake or fabricated or that there was any relationship between importer and exporter.
4) The percentage of copper in the bills of entry whose values were relied on in the Order-in-Original is not indicated.
5) There is no scrap is similar to any other scrap and therefore, no any comparison between two bills of entry.
7. No one has appeared on the behalf of the appellant and no one had appeared on any of the previous dates when the matter was listed. Learned Authorized Representative for the Revenue vehemently supported the impugned order and asserted that it calls for no interference. He submitted that the Bill of Entry had been filed through faceless assessment through the ICES system. Having found that the value of scrap declared in the Bill of Entry was much lower than contemporaneous values for similar scrap, the proper officer sought justification or evidence from the appellant for the lower prices but none was provided. Therefore, the proper officer re-assessed the Bill of Entry rejecting the transaction value under Valuation Rule 12. Having found that there were no identical goods, he re-assessed the Bill of Entry based on the value of similar goods. Thereafter, on the appellant’s request he also passed the speaking order which has been upheld in the impugned order by the Commissioner (Appeals).
8. We have considered the submissions and have gone to records of the case.
9. The appellant’s contention is that the transaction value in the invoice should have been accepted and assessment should have been finalized accordingly. We find that transaction value is not the only basis for assessment of the duty. The Valuation Rules as well as Section 14 of the Act provide for rejection of transaction value. When rejecting the transactionvalue, the customs officer does not modify the transaction value but only rejects it as the assessable value for determination of the duty.
10. There are various grounds on which the transaction valuecan be rejected under Valuation Rule 12.This rule reads as follows:-
“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 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.
(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 rule 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 or 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 abnormal 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. As per Valuation Rule 3, assessment must be done as per the transaction value subject to Valuation Rule 12. In other words, if the transaction value is rejected under Valuation Rule 12, then assessment cannot be done as per transaction value. If it is not rejected under Valuation Rule 12, then assessment must be done as per the transaction value. If the transaction value is rejected under Valuation Rule 12,valuation must be done as per Valuation Rules 4 to 9 sequentially.
12. Rule 4 provides for valuation as per the value of identical goods. If value cannot be determined as per Rule 4 because there are no contemporaneous imports of identical goods then the valuation must be done as per contemporaneous goods of similar case under rule 5.
13. In this case, the Deputy Commissioner recorded that there were no imports of identical goods during the relevant period. There is no evidence contrary to this finding. The Deputy Commissioner, therefore, determined the value based on the value of similar goods. Here also listed 15 Bills of Entry under which similar goods for imported goods during the relevant period. Therefore, this clearly meets the requirement of Valuation Rule 5.
14. The appellant’s contention is that there cannot be similar goods in scrap. This contention cannot be accepted. Infact, scrap is classified as per ISRI standards and different types of copper scrap have been given different names. In this case the imported copper scrap is birch/cliff. Copper scrap is globally traded and it was also imported by the appellant as per ISRI classification. Therefore, copper scrap birch/ cliff as is known in the market is similar to other imported birch/cliff. The Deputy Commissioner has correctly considered only the value of birch/cliff imported during the relevant period. He was therefore, correct in holding that such imports were imports of similar goods and in re-determining the value assessing the duty accordingly.
15. We also find that and contention of the appellant is that there were no evidence that the buyer and seller were related. It is also the contention that there was no evidence that the transaction value was fake or fabricated. We find that as per the Valuation Rules, it is not necessary to establish the invoice was fake or fabricate din order to reject the transaction value. It is also not necessary to establish that the buyer and seller were related. It is sufficient if the proper officer has reasonable doubt for the transaction value to be rejected under Valuation Rule 12.
16. In view of the above, the Deputy Commissioner was correct in rejecting the transaction value and re-assessing the duty as per the values of similar goods and the Commissioner (Appeals) was correct in upholding order of the Deputy Commissioner.
17. The impugned order is upheld and the appeal is dismissed.
(Pronounced in the open Court on 02.2025)
Notes:
1 the appellant
2 impugned order
3 the Act
4 ICES
5 Valuation Rules
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