The issue under consideration is whether the DGOV guidelines are over and above Customs Valuation Rules?
In the present case, the appellant imported Aluminium Scrap under various Bill of Entries and the price declared in the Bill of Entry is as per the invoice of the foreign supplier. The department did not accept the declared value and reassessed the Bill of Entry by enhancing the declared value. Against the reassessment of Bill of Entry appellant filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) rejected appeals on the ground that the appellant has given a consent letter accepting the enhanced value of the Assessing Authority, therefore, the appellant is not an aggrieved party. Hence, appeals are not maintainable. Being aggrieved by the Orders-In-Appeal the appellant filed the appeal in the tribunal.
CESTAT states that, the Assessing Authority reassessed the Bill of Entries by enhancing the value not on the basis of any material evidence which show that the appellant have misdeclared the value even no Contemporaneous Import Data was relied upon. The sole reason for enhancement of the value is on the basis of DGOV Guideline. Therefore, the Adjudicating Authority has not followed the principle laid down under the Custom Valuation Rules and without application of mind straightway enhanced the value only on the basis of DGOV guildeline. CESTAT make it clear that DGOV guideline is not above the statute, the adjudicating authority has not followed the Customs Valuation Rules whereby, he was supposed to first reject the declared value and subsequently he was supposed to apply rules sequentially and only thereafter, the value can be enhanced that too on the basis of evidence.
Further, they states that even though the assessee gave consent letter but if the assessing authority has not followed the principle of valuation as laid down under the act and Custom Valuation Rules, the assessment will not sustain. Accordingly, the impugned orders are set aside and Appeal filed by assessee is allowed.
FULL TEXT OF THE CESTAT JUDGEMENT
The brief facts of the case are that the appellant have imported Aluminium Scrap under various Bill of Entries and the price was declared in the Bill of Entry is as per the invoice of the foreign supplier. The department did not accept the declared value and reassessed the Bill of Entry by enhancing the declared value. Against the reassessment of Bill of Entry appellant filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) rejected appeals on the ground that the appellant have given a consent letter dated 25.4.2019 accepting the enhanced value of the Assessing Authority, therefore, the appellant is not a aggrieved party. Hence, appeals are not maintainable. Being aggrieved by the Orders-In-Appeal the appellant filed the present appeals.
2. Shri H K Hirani, Learned Consultant appearing on behalf of the appellant submits that the only ground for rejecting the appeal is that the appellant had given a consent letter dated 25.4.2019, therefore, the appellant cannot be in category of aggrieved person hence could file the appeal as per Section 128 (1) of Customs Act, 1962. He further submits that the letter was given to avoid delay in clearance of the goods as the appellant had no option except to agree with the department in order to speedy clearance of the goods. However, since the assessment order of Bill of Entry is challengeable by way of appeal and the appellant have right to appeal under the statute, It cannot be said that the appellant is not aggrieved person. As regard enhancement of the value, the value was enhanced not on the basis of any contemporaneous imported data but only on the basis of Directorate General of Valuation Mumbai’s guideline issued under F.No.. VAL/Tech/10/2018(Al Scrap) dated 15.11.2018. According to which the price was to be arrived at by taking LME price of Aluminium Prime Metal and minus discount at the rate specified in the said guideline. He submits that this tribunal in the appellant’s own case has rejected such methodology of valuation and allowed the appeal of the appellant vide order No. A/11871-11874/2019 dated 01.10.2019, therefore, the issue is not under any dispute after the aforesaid order passed by this tribunal.
3. Shri G Jha, Learned Superintendent (Authorized Representative) appearing on behalf of the revenue reiterates the finding of the impugned order.
4. We have heard both the sides and perused the records. We find that the Assessing Authority reassessed the Bill of Entries by enhancing the value not on the basis of any material evidence which show that the appellant have misdeclared the value even no Contemporaneous Import Data was relied upon. The sole reason for enhancement of the value is on the basis of DGOV Guideline vide letter dated 15.11.2018. Therefore, the Adjudicating Authority has not followed the principle laid down under the Custom Valuation Rules and without application of mind straightway enhanced the value only on the basis of DGOV guildeline. We make it clear that DGOV guideline is not above the statute, the adjudicating authority has not followed the Customs Valuation Rules whereby, he was supposed to first reject the declared value and subsequently he was supposed to apply rules sequentially and only thereafter, the value can be enhanced that too on the basis of evidence.
4.1 In the present case, no such exercise was carried out, Obviously for the reason that the enhancement of value on the basis of the DGOV guideline. In Absolutely identical case of the appellant themselves this tribunal has allowed the appeal vide Final Order No. A/11871-11874/2019 dated 01.10.2019. In the said case also the value was enhanced on the basis of same DGOV guideline and the tribunal has categorically rejected such methodology of the valuation and allowed the appeals filed by the appellant by passing detailed order. The said order is reproduced below:- ―
“4. Heard both the sides and proposed the case records. The demand of duty in Annexure – II to show cause notice in case of 32 consignments imported by M/s SMRI from M/s US Zinc, USA through indentor Shri Tarun Jhingon of M/s Trendene Pvt Ltd is on the ground that the goods were mis-declared as Zinc Ash whereas the same was Zinc Skimming. The show cause notice has relied upon the documents received from the Consulate General of India, USA, three e-mails retrieved from the laptop of Shri Tarun Jhingon and the correspondence between the officials of US Zinc concerning the valuation of goods. Also the test report of goods found at factory whose samples were tested by the Chemical Examiner, Central Excise & Customs Laboratory, Vadodara has been relied upon wherein the examiner reported that the goods are other than zinc ash. Against these emails and documents and the report of chemical examiner, we find that the goods on their importation were sent to laboratory for testing to the Chemical Examiner at the Nhava Sheva Port. From the test report annexed to the Appeal, we find that the Chemical Examiner reported that the goods are zinc ash. Such test reports has not been disputed. Contrary to the same we find that the revenue has relied upon the test report of samples drawn from the Appellant‘s factory. The Chemical Examiner in his report has reported that the goods are other than Zinc Ash. However it is nowhere appearing that the goods are skimmings. The Appellant had requested cross examination of chemical examiner which was also not allowed. In our view when the goods on importation were found to be zinc ash and permitted to be cleared after testing and also that the chemical examination report of goods seized from factory is inconclusive, the goods would merit classification as Zinc Ash only. Even though there is communication from the Indian Consulate or the emails between the indentor and supplier, but in the light of the fact that the goods were found to be Zinc Ash during imports, we are inclined to hold that the charges of mis-declaration are not sustainable and hence no duty demand can be made. There is no evidence found at the end of the Appellant and the documents relied upon to support the allegation were of third party. Hence in such circumstances , we are of the view that the charges of misdeclaration and undervaluation does not sustain.
4.1 Further coming to the demands made in above Annexure – II, Annexure A-III on Zinc Ash and in Annexure A-IV on Zinc Dross, we find that the demand has been made in respect of Zinc Ash by determining the value on the basis of 35% of the LME prices and in case of Zinc Dross 75% of the LME. The Appellant has contended that since the assessment were provisional, hence the demand under section 28 cannot be made. We find that though the Ld. Adjudicating authority in Para 291 of the impugned order has accepted the ratio that in case of provisional assessment demand under section 28 cannot be made, but proceeded to confirm demand on the ground that Appellants have not specifically mentioned as to which Bills of Entry are provisional and there is no evidence in the form of execution of Bond. We find the aforesaid findings to be erroneous and contrary to facts. The Appellant had clearly stated in their reply to the SCN that all the goods covered by Annexure- II, III and IV are provisionally assessed and also produced copy of Bills of Entry which clearly show the mention of Test Bond. The printouts taken from EDI system also shows that the assessment were provisional. In such case when the imported goods were provisionally assessed by execution of test bond and is fact apparent, in that case, there is no ground to demand duty.
5. In case of imported Aluminium scrap as detailed in Annexure – ‘C’, ‘D’, ‘E’ and ‘F’ of the show cause notice, the demands have been made under Rule 8 of the Customs Valuation Rules, 1988 by applying price bands to LME prices as per Alert Circular No. 14/2005 dt. 16.12.2005 issued by the Director General of Valuation. The show cause notice has relied upon the statements of the Partners of M/s SMRI and indentors to allege undervaluation. The show cause notice has proposed demand by rejecting declared value. Even though the show cause notice states that wherever the contemporaneous values were found the same has been applied by re-determining the value under Rule 6 and in rest of the cases Rule 8 has been applied, but we find that all demands have been made by applying LME prices and nowhere such contemporaneous values has been cited in show cause notice. The demands have thus been made by adopting the LME prices of Virgin metal and applying discounts inspite of the fact that the Apepllant had produced details of contemporaneous imports. The adjudicating authority if was to redetermine the value, he should have sequentially applied Rule 5 and 6 of the Customs Valuation Rules i.e Transaction value of similar goods or determination under rule 6 by determining under provisions of Rule 7. The Appellant in their reply to show cause notice had provided list of contemporaneous import of identical goods at the same price and we have perused the same. This has been overlooked by the adjudicating authority. We are of the view that if the declared value is to be rejected in that case the CVR, 2008 has to be applied sequentially i.e Rule 5 and 6 is to be applied.
If the value of the contemporaneous goods are available, the same shall be basis for re-determining the prices. Whereas in the case of instant demands the prices of contemporaneous imports were same as that of Appellant and hence the LME Prices reduced by discount band could not have been basis for re-determining the prices and rejecting the declared value. The Appellant has pointed out that identical goods were imported in case of Pushpak Metal Corporation 2014 (312) ELT 381 which were imported during the same period and comparable with Appellant‘s import price. The said prices were upheld by the Tribunal and it was held that value cannot be determined on the basis of LME prices. Also that the said decision was accepted by the CBEC. The Appellant has annexed comparison sheet showing the prices in their case and in case of Baheti Metal which was reported as Puspak metal case supra. We find that when the prices in case of Pushpak metal case supra has been accepted by the revenue and the same are contemporary prices to the Appellant‘s import, in that case the value redetermined vide the impugned order by taking LME Prices as basis is not sustainable. Hence we do not find any reason to uphold the demand confirmed against Appellant as above.
6. In case of demands made under Annexure- ‗C‘ on Aluminium Scrap, it is observed that several imports were made through Nhava Sheva Port and the assessments were provisional. The Order No. 2958/09 AM (I) was passed for finalization of assessment and the prices were enhanced by applying LME. The Appellant approached Commissioner (Appeal) who vide Order-in-Appeal dt. 09.09.2010 set aside the enhancement. The revenue‘s appeal against said order-in-appeal also stands dismissed as reported in Bharathi Rubber Lining & Allied Services P. Ltd. 2013 (287) ELT 124. In such case there is no ground to redetermine the value as the redetermination on basis of LME price already stands decided by the Tribunal. Similarly in respect of imports made through Kandla and Mudra Port included in Annexure – ‘E’ to SCN the assessments were provisional but were finalized vide Orders-in – Original dt. 21.02.2011 and 03.07.2012 accepting the transaction value. It was also held that value cannot be re-determined under Rule 8 on the basis of LME minus discount band. Such orders stands accepted by the revenue. In such case we do not find any reason to reject the declared value. We also find that the issue of determining the value by adopting the price of virgin metal and applying discount bands has been rejected in catena of judgments. In case of Bharathi Rubber Lining & Allied Services P. Ltd. 2013 (287) ELT 124, the tribunal held as under :
5.4 The lower appellate authority has rejected the reliance place on the DGOV Circular on the ground that in terms of the Hon‘ble Apex Court judgment in the case of Varsha Plastics (cited supra), the assessment under the provisions of Customs Valuation Rules cannot be given a go-by and the Valuation Rules will prevail over the departmental instructions on the subject matter. The Hon‘ble Apex Court in the said case held as follows :
“The valuation of the imported goods where the transaction value in the opinion of Assessing Authority is liable to be rejected because of invoice manipulation or under-invoicing or un-realistic price or misdeclaration in respect of valuation of goods or description or where transaction value of the goods declared is ridiculously low, which of course the Assessing Authority has to justify, he must proceed to determine valuation of goods by following Customs Valuation Rules. The availability of evidence of contemporaneous import of the same goods obviously provides the best guide for determination of value of the import of goods but in the absence of evidence of contemporaneous import, reference to foreign journal for finding out correct international price of imported goods may not be irrelevant.”
5.5 In the instant case, the proposition in the show cause notice is that the value of the contemporaneous imports indicated a higher price. If that be so, that should have been the starting point for determination of value of the imported goods and not some other basis. Further even when we take the values of the contemporaneous imports, the lowest of such value has to be adopted as provided for in Rule 6 and not the highest. In the instant case no such thing has been done by the assessing officer
5.6 In view of the above, we do not find any infirmity in the observation of the Commissioner (Appeals) that the DGOV Circular cannot override the provisions of Valuation Rules. The Hon‘ble Apex Court in the case of Commissioner of Customs, Calcutta v. South India Television – 2007 (214) E.L.T. 3 (S.C.) had held that casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value. The invoice price is not sacrosanct but before rejecting the invoice price, the department has to give cogent reasons for such rejection. The assessing authority has to examine each and every case on merits for deciding its validity and he cannot form a view to reject all transaction values on the basis of some general criteria based on DGOV Circular and on that basis load the value of imports uniformly across board. This Tribunal in the case of FSP (India) Pvt. Ltd. (cited supra) held that uniform loading based on general criteria is not permissible.
In case of CCU, NEW DELHI Vs. PRABHU DAYAL PREM CHAND 2010 (253) ELT 353 (SC), the Apex Court held as under :
“2. The respondent assesee filed two Bills of Entry dated 16th September, 1988 and 17th December, 1998 for clearance of Brass Scrap and Copper Scrap as per ISRI grade ‘Honey’ and Birth/Cliff” respectively. The Bills of Entry were assessed at the declared invoice value, viz., CIF US $ 1100 and US $ 1300 PMT respectively. After inspection, the goods were cleared on payment of customs duty assessed.
3. Subsequently, on the basis of the information received from the London Metal Exchange, (for short, ―the LME‖) to the effect that the price of the said metals in the LME as on the date of import was more than the price declared by the respondent, an additional duty amounting to Rs. 90,248/- and 1,94,035/- respectively was demanded from the assessee on the said two Bills of Entry. The additional demand having been confirmed by the Deputy Commissioner of Customs, the assessee preferred appeal to the Commissioner (Appeals) but without any success.
4. Aggrieved, the assessee carried the matter in further appeal to the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, (for short ―the Tribunal‖) as it then existed. By the impugned order, the Tribunal has allowed the appeal and quashed the additional amount of duty demanded from the respondent. While accepting the plea of the assessee that they were not confronted with any contemporaneous material relied upon by the revenue for enhancing the price declared by them in the bills of entry, the Tribunal has observed thus :
“In the present case as mentioned above, even though there is a reference to contemporaneous import in the order passed by the Deputy commissioner no material regarding such import has been placed before us or made available by the appellant at any point of time. Therefore, assessment in this case has to be taken as having been made purely on the basis of LME Bulletin without any corroborative evidence of imports at or near that price which is not permissible under law. We, therefore, set aside the impugned order and allowed the appeal.”
5. Not being satisfied with the said order, the revenue is before us in this appeal.
6. We have heard Mr. Biswajit Bhattacharya, learned Additional Solicitor General on behalf of the revenue. The assessee remains unrepresented.
7. Learned counsel submits that since the LME bulletin is a true indicator of current international prices of metals, the adjudicating authority was justified in adopting the price of the said two metals as notified by the LME, and therefore, the Tribunal was not justified in quashing the additional customs duty determined to be payable on the imports in question.
8. We are unable to persuade ourselves to agree with the learned counsel. It is manifest from the afore-extracted order of the Tribunal that no details of any contemporaneous imports or any other material indicating the price notified by the LME had either been referred to by the adjudicating Officer in the adjudication order or such material was placed before the Tribunal at the time of hearing of the appeal. Learned counsel for the Revenue has not been able to controvert the said observations by the Tribunal. In that view of the matter no fault can be found with the order passed by the Tribunal setting aside the additional demand created against the assessee.”
In case of GKN SINTER METALS LIMITED Vs. CCE, Pune 2008 (232) E.L.T. 692 (Tri. – Mumbai), the tribunal held as under :
“2. We have heard both sides. We find that the prices in the LME bulletin for prime metal are only indicative and cannot be the sole basis for enhancing the value of copper scrap, particularly when the goods imported are copper scrap and not copper. Further there is no basis for holding that refining charges for refining scrap and conversion of the same to copper bar/rod will be US$ 150 per MT. As per Rule 4(2)(b) of the Valuation Rules transaction value of the imported goods shall be accepted provided that (a)- – – – (b) the sale does not involve any abnormal discount or reduction from the ordinary competitive price. It is clause (b) which is highlighted by the Commissioner (Appeals). However, there is no material on record to establish that the suppliers offered any abnormal discount or reduction from the ordinary competitive price for copper scraps which were imported by the appellants. Further, it is brought to our notice that the price declared is only marginally lower than the price as loaded.
3. In the light of the Tribunal‘s decision in the case of Drunkey Exports (P) Ltd. v. Commissioner of Customs (Port), Kolkata-I- 2004 (165) E.L.T. 417 (Tri.- Kolkata) and Commissioner of Customs, Kandla v. Meera Impex – 2004 (167) E.L.T. 446 (Tri.-Mumbai) holding that LME prices are indicative and cannot be the basis for enhancing the value in the absence of corroborative evidence of contemporaneous imports at higher price, we hold that enhancement of the value is not justified in the present case and accordingly set aside the impugned order and allow the appeal.
The above Tribunal judgment stands upheld by the Apex Court as reported in Commissioner Vs. GKN Sinter Metals Limited – 2010 (254) E.L.T. A43 (S.C.)]”
Same analogy has been taken by the Tribunal in case of Bothra Metal & Alloys 2013 (9) TMI 546. It is therefore absolutely clear that the redetermination of value based upon LME prices less discount band as per DGOV Alert Circular supra is not sustainable.
7. From the above judgments it is absolutely clear that applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 – Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap under Alert Circular No. 14/2005 issued under F. No. VAL/TECH/37/2005 dt. 16.12.2005 has stated that there is no linear correlation between the prices of Aluminium Metal and prices of Aluminium Scrap quoted in Metal Bulletin. The main excerpts of the above communication of the Commissioner Nhava Sheva clearly mentions as under :
B. ……………………. the enquiries with the trade reveal that in case the difference between the prime metal and scrap is indeed so small, it does not make economic sense to go in for purchase of scrap. Inquiries from the trade have revealed that the Aluminium Scrap is used for melting purpose and re-melted Aluminium Ingots produced out of it has a sale price of 8 to 10% lower than the virgin metal. This also includes manufacturing cost and the recovery of the metal from scrap is never 100%.
4. It may also be mentioned that there is no linear correlation between the prices of Aluminium Metal and the prices of Aluminium Scrap quoted in the Metal Bulletin.
5. It can be seen that the prices of Aluminium Scrap has not changed in spite of surge in the prices of Aluminium Metal as mentioned in the Metal Bulletin.
From the above communication it is absolutely clear that even the revenue authorities did not consider the valuation of Aluminium scrap to be made as per Alert Circular or based upon LME Prices.
Even the CBEC Board while accepting the decision of the PushpakAluminium casevide letter F. No. 387/w/9/2013- JC dt. 25th June 2013 F No. 387/W/9/2013-JC dated 25 June, 2013 has clarified as under:-
“Recourse to LME prices can‘t be taken to substantiate the charge of undervaluation when contemporaneous import of almost same prices was available during the material time. It is a settled law that transaction value can‘t be rejected unless there is contemporaneous evidence to reject the invoice value as being held by the Apex Court in case laws like Commissioner of Customs, New Delhi vs. M/s. Prabhu Dayal Prem Chand reported in 2010 (253) ELT 353 (S.C.), Commissioner of Customs, Kolkata vs. M/s. South India Television (P) Ltd. reported in 2007 (214) ELT 3 (S.C.), Commissioner of Customs, Mumbai vs. H.D. Orgochem Ltd. reported in 2008 (226) ELT 9 (S.C.).
The case laws relied upon by the Department will not help our causebecause these decisions were applicable in respect of prime metals only and not w.r.t. scrap except in the case of Varsha Plastics. In Varsha Plastic also, the Hon‘ble Supreme Court held that the availability of evidence of contemporaneous import of the same goods obviously periods the best guide for determination of value of the import of goods. But in the absence of evidence of contemporaneous import, reference to foreign journals for finding out the correct international prices for the purpose of Section 14 of the Customs Act is not irrelevant. Since contemporaneous import prices were available in the present case as being noted but not accepted by the Commissioner in the Order—in-Original, departmental case for undervaluation become weak and appeal in Supreme Court is not merited”
We find from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI), wherein they have stated as under :
“We have been asked to explain how aluminum scrap prices are determined. Please be advised that ISRI, as a trade association, does not become involved in scrap pricing. However, our understanding of the market is that scrap prices are determined through negotiations between buyers and sellers, based upon then current market information derived from a variety of sources, including trade press such as the American Metal Market and the Metal Bulletin, as well as future markets. These information sources are utilized as a general market trend basis for negotiation. It should be noted that scrap metal is not traded directly on the futures exchanges – rather it is alloy ingots derived from scrap material that are traded on some of the exchanges such as the London Metal Exchange (LME).”
8. In view of above communication of ISRI it is absolutely clear that the scrap price would depend on many factors and the LME based price cannot be applied blindly to imports of scrap for the purpose of valuation.
9. Most pertinently we find that the whole case is also based upon allegation that the differential amount was paid by the Appellant through Hawala Channels or transfer. However we find that in the show cause notice not a single person was identified or investigations were made as whom the differential value amount was handed over. Except naming Chaganlal no person has been named. There is no evidence as to how the Appellant came into possession of cash alleged to be differential amount towards scrap import neither there is any evidence of any cash being handed over to any person representing suppliers. In absence of same the allegation of undervaluation cannot be supported.
10. The Adjudicating authority in order to justify the LME based valuation has relied upon the statement of Shri Sushil Agarwal, Partner of M/s SMRI and indentors. The Appellant has objected to reliance on such statements that the statement dt. 29.05.2006 and 23.04.2007 of Shri Sushil Agarwal are contradictory as different pricing method was stated by him which are not applicable in the facts of the case. That the cross examination of Shri Sushil Agarwal was also not allowed. Further that even though the cross examination of indentors were allowed but they did not appear for the cross examination. The Appellant has pleaded that in such circumstances, the statement of Shri Sushil Agarwal and indentors cannot be relied upon. We find that the adjudicating authority ought to have allowed cross examination of Shri Sushil Agarwal as the same was necessarily required in view of his statements dated 29.5.2006 and 23.04.2007 which were contradictory in respect of value of imported goods. In his statement dated 29.5.2006 on being shown an alleged abstract of LME prices of Aluminium Scrap, which showed price of Aluminium scrap as 80% of the LME price he had stated that the prevailing LME prices formed the basis of negotiation and that normally, the prices of Aluminium scrap were negotiated at 80% of the LME. However in his statement dated 23.04.2007, he has stated that the import price of Aluminium Scrap was negotiated by applying different discount bands ranging from 5% to 35% to the LME price of various grades, viz. Trump, Tense, Taldon, Trob etc., which corresponded to the discount band provided in Alert Circular No. 14/2005 dated 16.12.2005 of the Director General of Valuation. In such a case, we are inclined to accept the submission of the Appellant that initially the investigating officers were attempting to apply 80% of the LME, but later on realizing that even the Director General of Valuation was not recommending valuation of 80% of the LME, the statement of Shri Sushil Agarwal was recorded to match the discount band, as per DGOV Circular. In such view of the facts, we do not find any reason to rely upon the statement of Shri Agarwal to support the allegation of under-valuation on the part of the Appellant. The Appellant has pleaded that it is incomprehensible that Shri Sushil Agarwal, who was in business of imports of Aluminium Scraps and Zinc Scrap since last many years would state that the prices of Scrap would be equal to the prices of metal content. It is a known fact that re-cycling of scrap would not result into recovery of entire metal content as there would be a process loss, cost to be incurred for conversion of scrap to metal. Such metal produced from Scrap cannot command same price as that of virgin metal. We find that the Appellant had sought cross examination of Shri Sushil Agarwal under Rule 138B of the Customs Act. The allegation of undervaluation are based upon the letters of Indian Consulates and statements of indentors namely Shri Anil Parolia of Nihon Ispat, Shri Tarun Jhingon, Shri Ehsan Amin Gadawala and Shri Mihir Bhat as well as letters from Indian Consulate at U.S.A in reference to import of 32 consignments of Zinc Ash, Indian Consulate at UK in respect of 11 Consignment imported from Sunberg and Indian Consulate at Singapore in respect of 2 consignments imported from PWT Australia. The Appellant had sought cross examination of Indentors. The Appellant has also sought cross-examination of the officials and panchas, who were present during drawal of Panchnama on 26.04.2006 for examination of seized laptop of Shri Tarun Jhingon on the ground that it was not possible to complete the proceedings in 2 hours, as stated in the show cause notice. The cross examination of the officials, who had recorded the statement of Shri Sushil Agarwal on 9.4.2007 was also sought since it was recorded in his statement that he had submitted in tabular form running into 120 pages the particulars of all imports made in 5 years by the Appellant, which are involved in the impugned appeal. The Appellant in their reply had contended that the cross examination of officials was sought as all the import related documents of the Appellant were lying seized with the investigating officers and there was no occasion for Shri Sushil Agarwal to compile such information in absence of any import documents. However except indentors no cross examination of any of the above persons was allowed. The cross examination of Shri Sushil Agarwal was denied by the adjudicating authority on the ground that no new facts are likely to come out at such examination and cross-examination. This reasoning of the adjudicating authority is highly erroneous since it cannot be assumed that the cross examination of a person would not bring any material not already available. Our views are based upon the judgment of the Hon‘ble apex court in case of Andaman Timber Industries – 2015 (324) ELT 641 (SC) , wherein the apex court held as under :
“6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.
9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”
11. Similarly, in case of Vasudev Garg – 2013 (294) ELT 353 (Dl), it was held that it was mandatory to give cross examination. It was held that the statement against the assessee cannot be used without giving them opportunity of cross examining the witness as it is valuable right of accused/ noticee in quasi judicial proceedings which can have adverse consequence for them. The Adjudicating authority had allowed cross examination of indentors and even they were also issued notice, none of the indentor was made available for cross examination. In such circumstances when these persons could not be produced for cross examination, their statements could not have been relied upon. Especially in case of Mihir Bhatt, Ehsan Amin Gadawala where the only evidence was their own statements stating undervaluation. In case of other persons also in the light of above facts, the adjudicating authority should have allowed the cross examination. In absence of the opportunity to cross examine the above persons, we are of the view that no reliance can be placed upon their statements. Our views are supported by the judgment of Hon‘ble High Court of Gujarat in case of CC Vs. Motabhai Iron & Steel Industries 2015 (316) ELT 374 (GUJ) wherein the Hon‘ble High Court has held that “no reliance can be placed on the statement of such witness who has not subjected himself to cross-examination by the affected party”. Similarly we are of the view that no reliance can be placed on the alleged recovery of email from indentor Shri Tarun Jhingon as no opportunity of cross examination of panch witness and officers was given to Appellant. We further find that during the visit to the factory of M/s SMRI, the officers had questioned the employee of M/s SMRI namely Shri Rajesh Kumar Trivedi, C. Haridas and Nikhil Jain on the basis of documents called ―Abstract of LME Price of Aluminium Scrap and Zinc Scrap‘ to which said employees had stated that the Appellant‘s declared price was less. This document was handed over to the Appellant on 20.02.2018 and it contained lowest & Highest Zinc prices of a day and the next 10 pages tiled MP Prices & Archive containing low price of the day alongwith 80% of said price. However we find that nowhere the said papers contain prices of Aluminium or Zinc Scrap. Also no prices of Aluminium Scrap is issued by the LME as it is not concerned with scrap pricing. Hence the allegation that the Appellant‘s declared price was less than the mentioned in said document does not hold any substance. We also find that the Appellant had sought cross examination of the officers for the source and authenticity of such document and 80% formula derived by officers. They had also sought cross examination of panch witness who had witnessed such proceedings. However the same was not allowed. In absence of authenticity of such document and refusal of cross examination we find that the charges of undervaluation are not sustainable.
12. Coming to the issue raised by the Appellants that no additional duty of Customs is payable in respect of Zinc Ash, skimmings and scrap as these are not manufactured product, we observe that adjudicating authority has denied relief to Appellant on ground that they have not produced evidence to show that goods are not manufactured products. We find from the definition of various scrap imported as per ISRI and the photographs annexed to appeal papers that it clearly shows that the scrap was not arising as a result of process of manufacture. The ratio of law on such scarp being non excisable is absolutely settled by the judgments and Circulars viz. Hindalco Industries Ltd. 2015 (315) ELT 10 (Bom), Circular No. 904/24/2009 – CX dated 28.10.2009, Circular No. 1027/15/2016-CX dated 25.04.2016, Slugs India Ltd Vs. CCE – 202 (278) ELT 611, CC vs Tata Iron & Steel Co. Ltd – 2004 (165) ELT 386 (SC), Bhushan Steel Ltd vs CCE – 2012 (284) ELT 713, Shri Ram Agro Chemicals (P) Ltd vs UOI – 2009 (234) ELT 218 (P & H), CC vs L. Madanlal (Aluminium ) Ltd – 2010 (258) ELT 107, Karnataka Chemical IndusCorpn. Ltd vs CC – 2005 (183) ELT 207.The adjudicating authority also held that since the issue of non-payment of Additional duty was not raised at the time of assessment, hence cannot be raised in reply to show cause notice under section 28. The contention of adjudicating authority is not sustainable as when notice under section 28 is issued to an assessee, he can contest the whole assessment to say that duty is not payable for a reason not taken up at the time of original assessment. He is entitled for all reliefs/ exemption associated with the assessment. The issues is well settled by the Tribunal‘s order in case of Decora Ceramics P. Ltd. 1998 (100) ELT 297, Lili Foam Indus. P. Ltd. 1990 (46) ELT 462, Bakeman Home Products P. Ltd. 1997 (95) ELT 278.
13. Further, we also find that in respect of 550 Bills of entries covered under Annexure – C, value was already enhanced at the time of assessment and hence further proposal to re-enhance the value when the earlier assessment order has attained finality since no appeal/review was filed against such order, is not sustainable. There cannot be any reassessment of the said values, which had become final for want of appeal against the same. Our views are supported by judgments in case CC vs Lord Shiva Overseas – 2005 (181) ELT 213, Malhotra Impex vs CC – 2006 (203) ELT 561 and CC vs Paras Electronics – 2009 (246) ELT 231.
14. In respect of export declaration in respect of one consignment shipped from New Zealand and 11 consignments shipped from Spain, we are in agreement with the submission of the Appellant that such declarations have no relevance as the same were not authenticated by the News Zealand Customs and Spanish Customs. Even otherwise also most of these declarations are in respect of goods viz. Iron and Steel i.e other than those imported by the Appellants and the Appellant are not consignees. Even in some declarations, the goods are Iron & Steel scrap which were not imported by Appellant. Even the values has not been re-determined on the basis of such declarations and hence the same are not relevant in the instant case.
15. In respect of demands made in Annexure – RM- I and II, we find that the demands was raised on same ground as in case of demand made in other annexures. We have elaborately discussed the grounds for non sustainability of demand and the same ratio would apply in respect of seized goods also. Also since the charges of undervaluation of declared price is not sustainable, hence the confiscation of goods is also not sustainable.
16. In view of our above observations and findings, we are of the view that the demands confirmed against M/s SMRI, confiscation of goods and penalties imposed upon M/s SMRI is not sustainable. For the same reason the penalty imposed upon co-appellants namely Shri Sushil Kumar Agarwal, Shri Surendra P. Kachhara and Shri Sanjeev Kumar Agarwal is also not sustainable. We thus set aside the impugned order and allow all the appeals before us with consequential reliefs to the Appellants.
4.2 In view of the above order it can be seen that the issue of method of enhancement of the valuation is as per the DGOV Circular which has been rejected by this tribunal. The present case is not different from the case on which the above order was passed. The only difference is the period. These imports were made subsequent to the imports made in earlier order dated 01.10.2019 therefore, the ratio of the above decision of this tribunal is squarely applicable in the present case. The enhancement of the value is absolutely incorrect, arbitrary and without application of mind.
5. As regard the issue on which the Learned Commissioner (Appeals) rejected the appeal that once the appellant have accepted the enhancement of the value at the time of reassessment of the Bill of Entry they are not falling under the category of aggrieved person in terms of Section 128 (1) of Customs Act, 1962. We find that on this direct issue the Hon’ble Supreme Court in the case of CENTURY METAL RECYCLING PVT. LTD. vs UNION OF INDIA- 2019 (367) E.L.T. 3 (S.C.). Considering the fact that the appellant had given the consent letter before the assessing authority, the enhancement of the value was rejected.
6 As per the above Apex Court judgment even though the assessee gave consent letter but if the assessing authority has not followed the principle of valuation as laid down under the act and Custom Valuation Rules, the assessment will not sustain, therefore, merely because the appellant had given a consent letter, the assessing authority cannot be absolved from not doing the process of reassessment as required under law therefore, the valuation particularly in the present case only based on DGOV Circular dated 15.11.2018 which has already been dealt with and rejected by this tribunal in the above Order dated 01.10.2019, the enhancement of the value is not legal and proper hence, is rejected. 7. Accordingly, the impugned orders are set aside. Appeals are allowed with consequential reliefs, if any.