Goods imported in violation of ITC(HS) Import policy and also undervalued are liable to confiscation

Aggarwal Traders Vs Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that imported goods are liable to confiscation under section 111 of the Customs Act as restricted goods are imported in violation of the provisions of ITC(HS) Import Policy and the goods were not correctly valued.

Facts-

The appellant has filed this appeal to assail the order passed by the Commissioner of Customs (Appeals) by which the orderpassed by the Additional Commissioner of Customs rejecting the declared assessable value of the goods and re-determining the same and ordering for confiscation of the goods with an option to redeem the same on payment of redemption fine and also imposing penalty under section 112(a)(i) of the Customs Act, 19623 , has been upheld, and the appeal has been dismissed.

The appellant had filed three Bills of Entry for clearance of the goods described as Defective Tinplate Coil and Defective Tinplate Misprint Sheets under Customs Tariff Heading 7210 12 90.

The Special Investigation Intelligence Branch investigated the three Bills of Entry and noticed that the declared price of the goods was below the Minimum Import Price and, therefore, violated Policy Condition No. 1 of the ITC(HS) Import Policy which prescribed that the specified defective items can be imported free, except those for which the CIF value of imports was below the value specified for the said items.

Additional Commissioner noted that since the importer had undervalued the imported goods and, therefore, misdeclared the value in the entry made in Bills of Entry under section 46(1) of the Customs Act, the goods became liable for confiscation under section 111(m) of the Customs Act. The Additional Commissioner thereafter proceeded to re-determine the assessable value.

Conclusion-

Held that the Additional Commissioner has noted that as the importer had tried to import the restricted goods in violation of the provisions of the ITC(HS) Import Policy and the value had not been correctly declared, the goods were liable to confiscation. There is, therefore, no error in the order.

As the goods were held to be liable to confiscation under section 111 of the Customs Act, penalty under section 112(a) of the Customs Act has been correctly imposed.

FULL TEXT OF THE CESTAT DELHI ORDER

Aggarwal Traders¹ has filed this appeal to assail the order dated 01.09.2021 passed by the Commissioner of Customs (Appeals) ² by which the order dated 25.09.2020 passed by the Additional Commissioner of Customs rejecting the declared assessable value of the goods and re-determining the same and ordering for confiscation of the goods with an option to redeem the same on payment of redemption fine and also imposing penalty under section 112(a)(i) of the Customs Act, 1962³, has been upheld, and the appeal has been dismissed.

2. The appellant had filed three Bills of Entry in August 2020 for clearance of the goods described as ^„Defective Tinplate Coil and Defective Tinplate Misprint Sheets‟ ⁴ under Customs Tariff Heading 5 7210 12 90. The declared unit price of the goods in the three Bills of Entry is as follows:

3. The goods were self-assessed by the appellant under section 17(1) of the Customs Act.

4. The Special Investigation Intelligence Branch⁶ investigated the aforesaid three Bills of Entry and noticed that the declared price of the goods was below the Minimum Import Price and, therefore, violated Policy Condition No. 1 of the ITC(HS) Import Policy which prescribed that the specified defective items can be imported free, except those for which the CIF value of imports was below the value specified for the said items. The relevant portion of the said Import Policy is reproduced below:

(1) Second and defectives of items specified below is permitted for import free except those in respect of which the CIF value of imports is below the value specified against each of these items:

5. The goods covered by the aforesaid three Bills of Entry were examined by SIIB in the presence of the representative of the appellant and directions were issued to the appellant by a letter dated 09.09.2020.

6. In response to the aforesaid communication, the appellant wrote a letter dated 09.09.2020 to the Assistant Commissioner of Customs seeking wavier of the show cause notice and personal hearing. The said letter is reproduced below:

“Date 9-9-2020

To,
The Assistant Commissioner of Customs Group 4
ICD, TKD, New Delhi

Sub: Request to Waive off Show Cause Notice & PH pertaining to BR No. 8375933 dt. 04.08.2020 and 8390321 & 8390733 dt. 06.08.2020

Respected Sir,

This is to bring to your kind notice that our goods were examined by SIIB, import & they were further given direction as per their letter C. No. VIII/ICD/10/TKD/SIIB/IMP/INV/Aggarwal/62/2020 dated 09.09.2020.

So, now, we request you to kindly waive the Show Cause Notice & PH and decide my case with lenient view because this was our first mistake & we were not aware of this policy restriction – And, also, we are ready to pay the duty amount as per the assessment value of the goods (which is as usual on the higher side from the min. value) We are already suffering a lot from heavy demurrage & detention charges. So, please decide on priority and release the goods as soon as possible.

Also, Kindly consider all three BE Mentioned as an individual document and please proceed them separately so that goods delivery order for all three can be taken separately.

Thanking you in anticipation and hoping for a soonest and favourable decisions.

For Aggarwal Traders
Sd.
Authorised Signatory”

7. The Additional Commissioner, after noting that the importer had made a request for waiver of show cause notice and personal hearing observed that since the declared value in the three Bills of Entry was below the minimum import price, the imported goods became ^„restricted‟ goods. The Additional Commissioner also noticed that similar goods were being assessed at USD 540 as per the Contemporaneous Import Data. The Additional Commissioner also noted that since the importer had undervalued the imported goods and, therefore, mis-declared the value in the entry made in Bills of Entry under section 46(1) of the Customs Act, the goods became liable for confiscation under section 111(m) of the Customs Act. The Additional Commissioner thereafter proceeded to re-determine the assessable value. For the defective tinplate coil, the value was determined at Euro 540 per MTS instead of 435 per MTS as declared by the appellant. The assessable value of defective tinplate misprint sheet was determined at Euro 470.5 per MTS instead of Euro 287 per MTS. The operative part of the order passed by the Additional Commissioner is reproduced below:

“ORDER

(i) I reject the declared assessable value of goods, as mentioned in column (4) in Table-D below, in terms of Rule 12(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same, as specified in column (5) of said table accordingly in terms of Rule 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of Customs Act, 1962 and order to pay duty as mention in Column (6) of Table-D as per Section 17(4) read with Section 12 and 14 of Customs Act, 1962 alogwith Section 2 and 3 of Customs Tariff Act, 1975 and Section 5 of IGST Act, 2017.

Table-D

(ii) I order confiscation of goods having re­determined assessable value as mentioned in column (5) of Table-D supra, imported vide Bills of Entry, as specified in column (2) of said table, in terms of Section 111(m) and 111(o) of the Customs Act, 1962. However, I give an option to the importer to redeem these goods on payment of Redemption Fine of Rs. 15,00,000/- (Rupees Fifteen Lakh Only) under Section 125(1) of the Customs Act, 1962.

(iii) I also impose penalty of Rs. 15,00,000/-(Rupees Fifteen Lakh Only) on the M/s. Aggarwal Traders under Section 112(a)(i) of Customs Act, 1962.”

(emphasis supplied)

8. Feeling aggrieved, an appeal was filed by the importer before the Commissioner (Appeals) who, as noticed above, by order dated 01.09.2021 dismissed the appeal. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below:

“5.0 Discussion and findings:-

5.2 Firstly, I note that the Appellant had themselves requested for waiver of SCN and P.H. vide their letter dated 09.09.2020. They had admitted that they were not aware of the Policy Condition and it was their first mistake. Thus, their plea of not giving opportunity is self-contradictory as they had themselves waived it. The Adjudicating Authority had passed the impugned order in accordance with their request only. Accordingly, plea of violation of natural justice is not sustainable.

5.3 Further, I do not find any force in the contention of appellant that a common order was passed for the impugned 3 B/Es. The Adjudicating Authority has given clear bifurcation of declared values and redetermined values in respect of each bill of entry and worked out duty payable for each bill of entry. Thus, I find no infirmity in this regard.

5.4 Also, I note that there is clear cut violation of FTP as the declared unit price of the impugned goods is below the Minimum Import Price (MIP) of USD 465 per tonne – which is in violation renders the impugned goods as “Restricted” and thus the same were correctly confiscated under Section 111(o). The contention of the Appellant that impugned goods were not restricted has no force and is not sustainable.

5.5 Insofar as rejection of declared value and re-determination of value is concerned, I note that the same has been done on the basis of contemporaneous data and details of relied upon B/E have been mentioned in the impugned Order. I find the ratio of cited case law of Sanjivani Non ferrous Trading Pvt. Ltd (supra) is applicable in the instant case. Thus, rejection of declared value under Rule 12 of CVR, 2007 and re-determination of value under rule 5 of CVR, 2007 is noted to be in order. The Appellant has not been able to counter the same and has vaguely mentioned that other importers were importing at lower prices. However, no evidence in this regard has been produced. Thus, rejection of declared value and re-determination thereof is upheld.

5.6 I also find the amount of Redemption Fine and Penalty imposed to be commensurate with the facts of the case. I do not find any reasons to interfere with the impugned Order and the appeal is noted to be devoid of merits.”

(emphasis supplied)

9. Shri Bipin Garg, learned counsel for the appellant assisted by Ms. Kainaat submitted that the Commissioner (Appeals) was not justified in upholding the order passed by the Additional Commissioner and that it was not open to the Additional Commissioner to re-determine the assessable value at such a high rate even if the appellant had submitted the letter dated 09.09.2020. Learned counsel also submitted that in any case neither were the goods liable to confiscation under section 111(m) and 111(o) of the Customs Act nor could penalty be imposed under section 112 (a)(i) of the Customs Act.

10. Shri Rakesh Kumar, learned authorized representative appearing for the Department, however, supported the impugned order and placed reliance upon the Division Bench decision of this Tribunal in Commissioner of Customs Hanuman Prasad & Sons⁷

11. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered.

12. Section 14 of the Customs Act deals with ^„Valuation of Goods‟ and is reproduced below:

“Section 14. Valuation of goods. – (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf:

Provided       *****             *****            *****”

13. It would be seen that section 14 of the Customs Act provides that the transaction value of goods shall be the price actually paid or payable for the goods when sold for export to India where the buyer and the seller of the goods are not related and the price is the sole consideration for the sale, subject to such other conditions as may be specified in the rules made in this behalf. The Customs Valuation (Determination of Value of Imported Goods) Rules, 2007⁸ have been framed in exercise of the powers conferred by section 14 of the Customs Act. Rule 12 deals with rejection of the declared value and is reproduced below :

“Rule 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 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 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.”

14. Rule 12 provides that 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 rule 3(1). Explanation (iii) to rule 12 provides that 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 any of the six reasons contained therein, one of which is that there is a 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.

15. In the present case, the proper officer doubted the value of the goods declared by the appellant since it was below the Minimum Import Price and sent a letter dated 09.09.2020 to the appellant. The appellant, in response to the aforesaid communication, categorically stated that the issuance of show cause notice may be waived and personal hearing may also not be given. The appellant also stated that it was the first mistake and it was not aware of the policy restriction. The appellant also categorically stated that it was ready to pay the duty amount as per the assessment value of the goods, which the appellant believed was usually on the higher side than the minimum value.

16. Section 124 of the Customs Act does provide for issuance of a show cause notice and personal hearing but in view of the specific request made by the appellant, show cause notice was not issued and personal hearing was also not granted. The assessing officer, after rejecting the value declared by the appellant in the Bills of Entry, re­assessed the value of goods. The appellant paid the enhanced value without raising any objection or protest at the time of clearing of the goods. Thereafter, an appeal was filed to assail the order passed by the Additional Commissioner.

17. It is no doubt true that the value of the imported goods shall be the transaction value of such goods when the buyer and the seller of goods are not related and the price is the sole consideration, but this is subject to such conditions as may be specified in the rules to be made in this behalf. The Valuation Rules have been framed. A perusal of rule 12(1) indicates that when the proper officer has reason to doubt the truth or accuracy of the value of the imported goods, he may ask the importer to furnish further information. Rule 12(2) stipulates that it is only if an importer makes a request that the proper officer shall, before taking a final decision, intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared and provide a reasonable opportunity of being heard. To remove all doubts, Explanation 1(iii)(a) provides that the proper officer can have doubts regarding the truth or accuracy of the declared value if the goods of a comparable nature were assessed at a significantly higher value at about the same time.

18. Explanation (1)(i) to rule 12 of the Valuation Rules, however, provides that the rule only provides a mechanism and procedure for rejection of declared value and does not provide a method for determination of value and if the declared value is rejected, the value has to be determined by proceeding sequentially in accordance with rules 4 to 9.

19. Regarding the determination of the value of the imported goods the Assistant Commissioner noted as follows:

“Further, as per sub-rule (1) of Rule 3 of Valuation Rules, the value of the imported goods shall be the transaction value adjusted in accordance with the provisions of Rule 10. Also Sub rule (4) of Rule 3 of Valuation rules provides that if the value of import goods cannot be determined under sub rule(1) i.e. transaction value, then the value shall be determined by proceeding sequentially through Rule 4 to Rule 9 of the said Rules. However, as per NIDB import data, there are no identical goods available for determination of value as per Rule 4 of CVR,2007. Further, Rule 5 the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 stipulates that subject to the provisions of rule 3, the value of imported goods shall be the transaction value of similar goods sold for export to India and imported at or about the same time as the goods being valued; Provided that such transaction value shall not be the value of the goods provisionally assessed under section 18 of the Customs Act, 1962. The actual assessable value of the similar goods is USD 540 per metric tonne. Hence the re-determined value of the imported goods is USD 540 per metric tonne as per Rule 5 of CVR, 2007.”

20. It needs to be remembered that the importer had specifically, in writing, agreed to pay the duty amount as per the assessment to be made which he realised would be higher than the minimum value. Despite this categorical statement contained in the communication submitted by the appellant to the Assistant Commissioner, learned counsel for the appellant submitted that at best only the minimum value contained in the import policy should have been determined and not higher than the minimum value.

21. It is correct that the Assistant Commissioner could not have determined the assessable value in an arbitrary manner even if the importer had submitted in writing that it would pay the duty amount as per the assessment, but it is seen from the order passed by the Assistant Commissioner that contemporaneous datas were examined. During the course of hearing of the appeal, learned counsel for the appellant also placed certain Bills of Entry relating to identical goods submitted by the appellant. It is seen from one such Bill of Entry No. 7462561 dated 16.04.2020, that the appellant accepted the transaction value of misprint sheets as Euro 495, which would come to 600 Dollars, whereas in the present case the value has been fixed at only Euro 470.5 per MTS. It cannot, therefore, be urged that the assessable value was determined by the Assistant Commissioner in an arbitrary manner on a higher side.

22. The issues involved in this appeal were dealt at length by a Division Bench of the Tribunal in Hanuman Prasad and it was held that it was not necessary to issue any notice or grant a personal hearing when the importer had waived this right in writing and as the value re­assessed was accepted by the importer, the differential duty was correctly recovered.

23. In this connection, it would also be useful to refer to a decision of this Tribunal in Advanced Scan Support Technologies Commissioner of Customs, Jodhpur⁹, wherein the Tribunal, after making reference to the decisions of the Tribunal in Vikas Spinners vs. Commissioner of Customs, Lucknow¹⁰ and Guardian Plasticote Ltd. vs. CC (Port), Kolkotta¹¹, held that as the appellant therein had expressly given consent to the value proposed by the Revenue and stated that it did not want any show cause notice or personal hearing, it was not necessary for the Revenue to establish the valuation any further as the consented value became the declared transaction value requiring no further investigation or justification. Paragraph 5 of the decision is reproduced below:

“5. We have considered the contentions of both sides. We find that whatever may be the reasons, the appellant expressly gave its consent to the value proposed by Revenue and expressly stated that it did not want any Show Cause Notice or personal hearing. Even the duty was paid without protest. By consenting to enhancement of value and thereby voluntarily foregoing the need for a Show Cause Notice, the appellant made it unnecessary for Revenue to establish the valuation any further as the consented value in effect becomes the declared transaction value requiring no further investigation or justification. To allow the appellant to contest the consented value now is to put Revenue in an impossible situation as the goods are no longer available for inspection and Revenue rightly did not proceed to further collect and compile all the evidences/basis into a Show Cause Notice as doing so, in spite of the appellant having consented to the enhancement of value and requested for no Show Cause Notice, could/would have invited allegation of harassment and delay in clearance of goods. When Show Cause Notice is expressly foregone and the valuation is consented, the violation of principles of natural justice cannot be alleged. In the present case, while value can be challenged but such a challenge would be of no avail as with the goods not being available and valuation earlier having been consented, the onus will be on the appellant to establish that the valuation as per his consent suffered from fatal infirmity and such onus has not been discharged. Further, valuation of such goods requires their physical inspection and so re­assessment of value in the absence of goods will not be possible. The case of Eicher Tractors v. Union of India (supra) cited by the appellant is not relevant here as in that case there was no evidence that the assessee had consented to enhancement of value.”

(emphasis supplied)

24. In Vikas Spinners, the Tribunal dealing with a similar situation, observed as under :

“7. In our view in the present appeal, the question of loading of the value of the goods cannot at all be legally agitated by the appellants. Admittedly, the price of the imported goods declared by them was US $ 0.40 per Kg. but the same was not accepted and loaded to US $ 0.50 per Kg. This loading in the value was done in consultation with Shri Gautam Sinha, the Representative and Special Attorney of the appellants who even signed an affirmation accepting the loaded value of the goods on the back of the Bill of Entry dated 7-5­1999. After loading of the value, the appellants produced the special import licence and paid the duty on the goods accordingly of Rs. 4,22,008/- on 19-5­1990. Having once accepted the loaded value of the goods and paid duty accordingly thereon without any protest or objection they are legally estopped from taking somersault and to deny the correctness of the same. There is nothing on record to suggest that the loaded value was accepted by them only for the purpose of clearance of the goods and that they reserved their right to challenge the same subsequently. They settled their duty liability once for all and paid the duty amount on the loaded value of the goods. The ratio of the law laid down by the Apex Court in Sounds N. Images, (supra) is not at all attracted to the case of the appellants. The benefit of this ratio could be taken by them only if they had contested the loaded value at the time when it was done, but not now after having voluntarily accepted the correctness of loaded value of the goods as determined in the presence of their Representative/Special Attorney and paid the duty thereon accordingly.”

(emphasis supplied)

25. In Guardian Plasticote Ltd., the Tribunal after placing reliance on the decision of the Tribunal in Vikas Spinners, had also observed as follows :

“4. The learned Advocate also cites the decision of the Tribunal in the case of M/s. Vikas Spinners v. C.C., Lucknow – 2001 (128) E.L.T. 143 (Tri.-Del.) in support of his arguments. We find that the said decision clearly holds that enhanced value once settled and duty having been paid accordingly without protest, importer is estopped from challenging the same subsequently. It also holds that enhanced value uncontested and voluntarily accepted, and accordingly payment of duty made discharges the burden of the department to establish declared value to be incorrect. In view of the fact that the Appellants in this case have not established that they had lodged any protest and on the contrary their letter dated 21-4-1999 clearly points to acceptance of the enhanced value by them, the cited decision advances the cause of the department rather than that of the Appellants contrary to the claim by the learned Counsel.”

(emphasis supplied)

26. In BNK Intrade (P) Ltd. Commissioner of Customs, Chennai¹², the Tribunal observed as follows :

“2………. . It is also to be noted that the importer had also agreed for enhancement of the price based on contemporaneous prices available with the Department. We, therefore, find no merit in the contention raised in the appeal challenging the valuation and seeking the refund of the differential duty paid by the appellants on enhancement.”

27. Learned counsel for the appellant also submitted that before confiscation of the goods in terms of sections 111(m) and 111(o) of the Customs Act, a notice should have been issued to the appellant.

28. Sections 111(m) and 111(o) of the Customs Act are, therefore, reproduced below:

“Section 111. Confiscation of improperly imported goods, etc. – The following goods brought from a place outside India shall be liable to confiscation : –

*****

(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54;

(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;”

29. The Additional Commissioner has noted that as the importer had tried to import the restricted goods in violation of the provisions of the ITC(HS) Import Policy and the value had not been correctly declared, the goods were liable to confiscation. There is, therefore, no error in the order.

30. Penalty has also been imposed upon the appellant under section 112(a) of the Customs Act. This section is reproduced below:

“Section 112. Penalty for improper importation of goods, etc. – Any person, –

(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or”

31. As the goods were held to be liable to confiscation under section 111 of the Customs Act, penalty under section 112(a) of the Customs Act has been correctly imposed.

32. There is, therefore, no error in the order passed by the Commissioner (Appeals). This appeal is, accordingly, dismissed.

(Order Pronounced in Open Court on 14.02.2023)

Notes:

1. the appellant

2. the Commissioner (Appeals)

3. the Customs Act

4. the goods

5. CTH

6. SIIB

7. Customs Appeal No. 51601 of 2019 decided on 20.10.2020 (Tri.-Del.)

8. the Valuation Rules

9. 2015 (326) ELT 185 (Tri.-Del)

10. 2001 (128) ELT 143 (Tri.-Del)

11. 2008 (223) ELT 605 (Tri.-Kol)

12. 2002 (140) ELT 158 (Tri.-Del)