Higher value declared before Chinese Customs adopted as allegation of mis-declaration not disproved

Decor Rubber Industries Vs Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that the values declared by the exporter before the Chinese authorities was much higher than the values declared in the Bills of Entry and appellant has failed to produce any cogent document to disprove the allegation of mis-declaration in the export declaration.

Facts- M/s.Decor Rubber Industries, the appellant, has been importing goods namely unbranded “Reflective Sheets”. Acting on an intelligence, the containers covered under the bill of entry filed by the appellant through its Customs Broker M/s. Sajeev Kumar was preliminarily examined. The imported goods were found to be supplied by M/s. Changzhou Hua R Sheng Reflective Materials Co. Ltd., China. The goods were found to be rolls of branded Reflective Sheets of brand name “Sablite”. Two types of reflective sheets of series TM3200 AB and TM1800 of 1219 and 5 rolls respectively were found. The value of these goods declared in the Bill of Entry was Rs.15,41,721.53. The examining officer doubted these values as they were too low.

During investigation, it was also found that the appellant had imported the same goods through fourteen other bills of entries in the past declaring similar prices. It was felt that the goods imported under these past Bills of Entry were also undervalued and were, therefore, liable to confiscation.

Show cause notice proposed recovery of differential duty under the proviso to section 28(1) of the Act alongwith interest u/s. 28AA and 28AB. The goods imported were detained and provisionally released were proposed to be confiscated u/s. 111 (m) of the Customs Act, 1962. In addition, penalty was proposed to be imposed on them u/s. 112(a), 112(b), 114A and 114AA.

Conclusion- The mode of procuring the documents during investigation and the absence of any other Export Declarations with the appellants is therefore sufficient for us to hold that the appellant has failed to rebut the presumption of correctness attached to these documents in terms of section 139 of the Customs Act. Appellant has not produced any other cogent document to show that price as was declared to the Chinese Customs was different from the price which is mentioned in the export declaration obtained by the department from China through Consulate General of India The Export Declarations as received from China are, therefore, admissible in the evidence.

The values declared by the exporter before the Chinese authorities was much higher than the values declared in the Bills of Entry by the appellant. We, therefore, find that the appellant was liable to penalty under section 114AA and the penalty of Rs. 10,00,000/- was just and fair in the factual matrix of this case.

FULL TEXT OF THE CESTAT DELHI ORDER

Present is an appeal assailing the Order in Original bearing No. 03/20211 dated 9th April, 2021. The facts in brief relevant for the appeal are that M/s. Decor Rubber Industries, the appellant, has been importing goods namely unbranded “Reflective Sheets”. Acting on an intelligence, the containers covered under bill of entry No.874293 dated 09.02.2010filed by the appellant through its Customs Broker M/s. Sajeev Kumar were preliminarily examined on 17.02.2010. The imported goods were found to be supplied by M/s. Changzhou Hua R Sheng Reflective Materials Co. Ltd., China. The goods were finally examined on 23.02.2010 by the officers of the Special Intelligence and Investigation Branch (SIIB) of the Commissionerate in presence of two independent witnesses. The goods were found to be rolls of branded Reflective Sheets of brand name “Sablite”. Two types of reflective sheets of series TM3200 AB and TM1800 of1219 and 5 rolls respectively were found. The value of these goods declared in the Bill of Entry was Rs.15,41,721.53 (USD 32758.58). The examining officer doubted these values as they were too low. The goods were detained and a market survey was done on 18.02.2010 in which quotation from M/s. Surya Plastics, Paharganj, New Delhi was obtained which showed that the price of similar Reflective Sheets was Rs.8,000 per roll (Roll size is 1.2 Mtr x 45.7 Mtrs.) and other reflective sheets were priced Rs.36,000/- to Rs.39,000/- per roll. The value declared in the Bill of Entry was Rs.15,41,721.53 which works out toRs.1247/- per roll. Hence it was felt to be very low.

2. During investigation, it was also found that the appellant had imported the same goods through fourteen other bills of entries in the past declaring similar prices. It was felt that the goods imported under these past Bills of Entry were also undervalued and were, therefore, liable to confiscation. It was felt that the values declared in these fifteen Bills of Entry totaling Rs.1,29,50,222/- was low and it should be Rs.5,44,86,414/-.

3. In order to investigate the matter further, enquiries were conducted overseas and it was found that there was a vast difference between the prices declared in the Bills of Entry before the Indian Customs by the appellant and the values declared by the exporter to the Chinese Customs authorities. With respect to four containers in Bills of Entry dated 22.04.2018, 30.06.2018, 01.08.2018 and 27.10.2018 tabulated below were compared with the values declared for those very consignments of goods before the Chinese Customs authorities and the values declared in the Trade Declarations before the Chinese Customs were four times the values declared before the Indian Customs. In view of this response department formed the opinion that the importer undervalued their goods at the time of import to evade payment of customs duties.

3. On a specific query from the bench as to how the two values were correlated as pertaining to the same consignments, learned authorized representative for the Revenue submitted that these can be correlated by the Bill of Lading number and date, the vessel number and date and the container numbers. He further clarified that the Bill of Lading is the document of title issued by the Master of the Vessel or his representative to the exporter indicating the receipt of the goods. This Bill of Lading is received by the importer through banks and is used to claim the goods. Thus, the Bill of Lading is found both in the Shipping Bill or any other export document presented to the Customs by the exporter and it is also found in the Bill of Entry or any other document presented by the Importer before the Customs in the port of import. Further, the Containers are uniquely numbered and no two containers in the world have the same number. Matching the container numbers in the export and import documents also establishes that what is being referred to is the same container. If the name of the vessel and the date of sailing are also matched with the container number, there can be no manner of doubt that the declarations before the Chinese Customs by the exporter and before the Indian Customs by the importer pertain to the same consignment imported in the same container in the same vessel on the same date.

4. Summons were issued to Shri Varinder Singh Choudhary, Proprietor of the appellant who in his statement dated 15.11.2011 recorded under section 108 of the Customs Act, 1962, said that he has been the Proprietor of M/s. Décor Rubber Industries since its inception in 1986 and the firm is engaged in the activity of import of Automobiles Accessories and Reflecting Sheets for trading thereof. He also admitted that five rolls of the sheet imported were not declared in the Bill of Entry dated 9.2.2010 which was filed. He admitted that all the impugned Bills of Entry were filed by his firm and he had signed on the copies of these Bills of Entry in token of having seen the same. The goods imported under the Bill of Entry dated 9.2.2010 were seized and later provisionally released.

5. Show Cause Notice bearing (SCN) No.29221 dated 30.08.2012 was served upon the appellant alongwith, inter alia, copies of the Trade Declarations filed by their supplier with the China Customs duly authenticated by the Indian Consulate alongwith their English translations. It was alleged that the importer-appellant had fraudulently suppressed the correct transaction value of the imported goods by fabricating import documents with intent to evade payment of appropriate duties of customs, while importing the same during the period 03.02.2008 to 09.02.2010. Hence the said SCN proposed to reject the declared value of Rs.1,44,91,944/- (Rs.15,41,722/- for Bill of Entry dated 09.02.2010+ Rs.1,29,50,222/- of 15 Bills of Entry from 03.02.2008 to 09.02.2010) of „Reflective Sheets‟ imported by appellant during the said period and enhance it to Rs.6,09,72,523/- demand and recover the differential duty under the proviso to section 28(1) of the Act alongwith interest under Sections 28AA and 28AB. The goods imported under Bill of Entry No.87293 dated 09.02.2010 which were detained and provisionally released were proposed to be confiscated under section 111 (m) of the Customs Act, 1962.Goods imported under the other Bills of Entry were not available for seizure as they were already cleared but it was still proposed to hold them liable for confiscation due to the observed mis-declaration of value. In addition, penalty was proposed to be imposed on them under section 112 (a), 112 (b), 114A and 114AA of the Act ibid.

5. The proposals in the SCN were confirmed by the impugned order. The operative part of which is as follows:

“(i) I order to reject the declared value of Rs. 15, 41,722/- in respect of Bill of Entry No. 874293 Dt. 09.02.2010 under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same to Rs.64,86,108/- under Section 14 of the Act ibid read with rule 3 (4). Rule 4 and Rule 9 of the said rules and further order for confiscation under Section 111 (m) of the Customs Act 1962. However, I give an option to the Importer to redeem the imported goods on payment of fine of Rs. 5,00,000/- (Rupees Five Lacs Only in terms of Section 125 of the Customs Act, 1962.

(ii) I reject the declared value of Rs.24,88,990/- of Reflective Sheets’ pertaining to four Bills of Entry No. 687904 dated 22.04.2008, 706622 dated 30.06.2008, 716536 dated 01.08.2008 and 734013 dated 27.10.2008 imported by M/s. Decor Rubber Industries during the period from 03.02.2008 to 09.02.2010 under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same to Rs. 1,04.78,218/- under Section 14 of the Act ibid read with rule 3(4), Rule 4 and Rule 9 of the said rules.

(iii) I refrain from confiscation of the goods imported in past by M/s. Decor Rubber Industries vide Bills of Entry Nos. 765238 dated 03.02.2008, 687904 dated 22.04.2008, 706622 dated 30.06.2008, 716536 dated 01.08.2008, 734013 dated 27.10.2008, 775599 dated 19.03.2009, 783248 dated 17.04.2009, 788781 dated 05.05.2009, 800863 dated 15.06.2009, 815100 dated 30.07.2009, 828110 dated 09.09.2009, 842429 dated 24.10.2009, 855194 dated 08.12.2009 and, 865928 dated 13.01.2010, for the reasons stated above, I, however, order confiscation of goods imported vide four Bills of Entry No. 765238 dated 03.02.2008, 687904 dated 22.04.2008, 706622 dated 30.06.2008, 716536 dated 01.08.2008, 734013 dated 27.10.2008 under Section 111 (m) of the Act.

(iv) I demand the differential Customs duty amounting to Rs.37,40,363/- under Section 28 from M/s. Decor Rubber Industries for the goods confiscated as discussed above alongwith the interest liable thereon under Section 28AA and erstwhile 28AB of the Customs Act, 1962 as amended.

(v) I do not impose penalty under Section 112(a) and 112(b) of the Customs Act, 1962, on M/s. Decor Rubber Industries, A-114/1, Wazirpur Industrial Area, New Delhi-110052, the Noticee No 1.

(vi) I impose a penalty of Rs.37,40,363/- (Rupees Thirty Seven Lakhs Forty Thousand Three Hundred Sixty Three only) under Section 114A of the Customs Act, 1962 on M/s. Decor Rubber Industries, A-114/1, Wazirpur Industrial Area, New Delhi-110052, the Noticee No 1.

(vii) I impose a penalty of Rs.10,00,000/- (Rupees Ten Lacs only) under Section 114AA of the Customs Act, 1962 on M/s. Decor Rubber Industries, A-114/1, Wazirpur Industrial Area, New Delhi-110052, the Noticee No 1.

(viii) I do not impose any penalty on Sh. Varinder Singh Chaudhary Prop. M/s Decor Rubber Industries, A-114/1. Wazirpur Industrial Area, New Delhi-110052, the Noticee No 2 under Sections 112(a), 112(b), 114(A), 114AA and 117 of the Customs Act, 1962 for the reasons discussed above.”

Being aggrieved, the appellant is before this Tribunal.

6. We have heard Mr. Bipin Kumar Sinha, ld. Consultant for the appellant and Mr. Rakesh Kumar, Authorized Representative for the Department.

7. Ld. Counsel for the appellant submitted that there were two sets of Bills of Entry as follows:

(i)One set of four Bills of entry for which some declarations made by Chinese Exporters have been received.

(ii)Another set of 11 Bills of Entry of which valuation in respect of 10 Bills of Entry had already been accepted except the which is the live Bill of Entry No.874293 dated 09.02.2010.

8. In all these Bills of Entry, the description of goods, overseas supplier and country of origin are identical. The rejection of the values declared in the Bills of Entry and the re-assessment was based on the market enquiry during which a single quotation was
obtained from M/s. Surya Plastics and the declarations allegedly made before the Chinese authorities by the exporter.

9. Ld. Counsel submitted that declarations received from the Chinese authorities for the goods cannot be relied as none of these bear any signature or stamp. Rejection of transaction value on the basis of such inadmissible documents is liable to be set aside. Also there is no proper market enquiry. The value has been enhanced and re-assessed based on a single quotation which mentions the retail price of the goods and not the import value. Hence, this report also cannot be the basis for rejecting the transaction value as mentioned in the impugned Bills of Entry. Ld. Counsel has relied upon following decisions to support the above submissions has prayed for setting aside the order under challenge and for the appeal to be allowed.

1. Commissioner of Customs, Calcutta vs. South India Television (P) Ltd. reported in 2007 (214) E.L.T. 3 (S.C.)

2. Eicher Tractors Ltd. vs. Commissioner of Customs, Mumbai reported in 2000 (122) ELT 321.

3. Golden Agro Corporation vs. Commissioner of Customs, Jaipur-I reported in 2017 (354) ELT 655 (Tri.-Del.)

10. Rebutting these submissions, Learned Authorised Representative for the Revenue submitted that the appellant declared the goods as “Reflective Sheets” without specifying any brand, but on examination, they were found to be of “Sablite” brand. The brand name was suppressed with the sole intention to lower the value of the imported goods. The original value declared before the Chinese Customs for the goods was different than the value in the invoices presented before the Indian Customs Authorities for the same goods in the same consignments. This change is sufficient to prove the forgery committed by the appellant to suppress the original value. Ld. Departmental Representative further submitted that the declarations received from China are authentic and they have been obtained through Consulate General of India alongwith English Translations. These documents sufficiently prove that the price declared before Chinese Customs was much higher than the price declared before the Indian Customs. Not only are these documents/declarations admissible but these are a sound basis for rejecting the transaction value under Rule 12 of the Custom Valuation Rules, 2007. Finally, submitting that the forgery nullifies everything, that the order under challenge is prayed to be upheld and appeal is prayed to be dismissed.

11. Ld. Departmental Representative has relied upon the following case laws:-

1. Martwin Electronics vs. Commissioner of Central Excise and Service Tax, Ahmedabad reported in 2016 (331) E.L.T. 85 (Tri.- Ahmd.).

2. Chandra Impex Pvt. Ltd. vs. Commissioner of Customs, New Delhi reported in 2008 (224) E.L.T. 583 (Tri. – Del.)

3. Poonam Plastic Industries vs. Collector of Customs reported in 1989 (39) E.L.T. 634 (Trib.).

12. Having heard the rival contentions, the following three issues are framed:

(i) Whether the Export Declarations received from China are genuine documents to be read into evidence.

(ii)Whether appellant mis-declared the goods imported under the Bills of Entry

(iii) Whether in the Bills of Entry the goods were undervalued and if so, whether the re-determination of the value and demand of differential duty and the confiscation of the goods imported under the Bill of Entry dated 9.2.2010 and the redemption fine and the penalties imposed can be sustained.

Issue No.1

13. It is observed that the export declarations received from China contain data including Exporter name, Consignee name, Departure date, Transport mode, Vessel/Aircraft name, Port of discharge, Airway Bill No., Destination country, Destination country code, Marks and Nos., Container No., Number and kind of packages, description of goods, Country of origin, Country code, Quantity, Unit of quantity, FOB Value, Declarations, Signatory’s name, Signature, designation, date, etc. All these details, except a few particulars that too in few of these documents, tally with the invoices. Thus, prima facie, the documents appear to be genuine. The admissibility of documents is covered under Section 139 of Customs Act, 1962which is reproduced below for better appreciation, reads as follows:-

“Section 139. Presumption as to documents in certain cases. – Where any document –

(i) is produced by any person or has been seized from the custody or control of any person, in either case under this Act or under any other law, or

(ii) has been received from any place outside India in the course of investigation of any offense alleged to have been committed by any person under this Act, and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall

(a) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the Court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person’s handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested;

(b) admit the document in evidence, notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence;

(c) in a case falling under clause (i) also presume, unless the contrary is proved, the truth of the contents of such document.

It is observed that the Export Declarations are obtained from the Customs and Excise Department, Hong Kong under the cover of their letter on letterhead and signature, through Commission for India (High Commission/Embassy) in Hong Kong. It is also stated by Hong Kong Customs that they have no objection for the said 25 Export declarations to be used as evidence in judicial proceedings in India. It is also seen that the Export Declarations are signed by Thomas Chan, Merchandiser and Fradu Wang, Accountant on behalf of the Batshita International Limited. It also contains a declaration that he is the exporter and the particulars given in the declaration are accurate and complete. In view the facts and circumstances of this particular case, we find that these Export Declarations are admissible as evidence, and we hold so.”

14. In the present case the declarations obtained from China Customs are the documents in terms of Section 139(ii). The appellant objected to these declarations being used as evidence but it cannot be denied that supplier of the appellant would have filed export declarations before China Customs. The appellant has failed to produce those declarations to demonstrate that the declarations produced by the Department were false. It is the submission of the learned counsel for the appellant that these declarations do not contain and signature or stamp. We do not find any force in this argument. When processing of documents is computerized, the declarations are filed online and they do not contain any signatures and stamps. In fact, even the Bills of Entry filed by the appellant are also filed online and approved online and the officer does not sign and stamp the Bills of Entry. Likewise, most of the documents such as invoice, packing list, etc. submitted along with the Bills of Entry are also sent and received through electronic means and not under the signature and stamp. At any rate, the documents filed with the Chinese authorities are as per their procedures and practices and if the declarations are to be filed online by the exporter with the Chinese authorities, they will be so filed and they cannot be separately stamped and signed and issued to satisfy the appellant.

15. If the appellant wanted to dispute the authenticity of the declarations, he could have procured and produced the correct declarations as the appellant was in a better position to procure those documents from his supplier/exporter. The appellant failed to produce any such declarations. On the other hand, in order to obtain the declarations made before the Chinese authorities, the investigating officer had requested the Consulate General of India through letter No.62/2010 dated 29.11.2010 and subsequent reminders dated 08.06.2010 and 02/02/2011 to get the possible documents for facilitating the overseas inquiry in the import of Reflective Sheets made by M/s. Décor Rubber Industries (appellant).

16. The Consulate General of India, vide their letter bearing No.02/2011 dated 15.09.2011 provided four trade declarations from China Customs in respect of the case being investigated by ICD, Tughlakabad clearly indicating massive undervaluation over 75% of the value by the appellant while importing the „Reflective Sheets‟ from China. The English translation has been marked on these Chinese Declarations. These, documents were received by DRI Headquarters on 15.09.2011 and by the ICD Tughlakabad on 12.10.2011, based on which a comparative chart was prepared by the department (RUD 5 of the SCN) as below:

COMARATIVE CHART OF DECLARATIONS BEFORE INDIAN CUSTOMS VIZ-A-VIZ CHINA CUSTOMS IN THE IMPORTS OF REFLECTIVPE SHEETS FROM SHANGHAI PORT OF P.R. CHINA

17. This chart was provided to the appellant on 15.11.2011. Copies of declarations received from Chinese Customs were sentto the appellant vide letter dated 23.11.2012. Nothing has been produced by appellant to Show that these documents were incorrect or that the declarations made before the Chinese Authorities were different.

18. The mode of procuring the documents during investigation and the absence of any other Export Declarations with the appellants is therefore sufficient for us to hold that the appellant has failed to rebut the presumption of correctness attached to these documents in terms of section 139 of the Customs Act. Appellant has not produced any other cogent document to show that price as was declared to the Chinese Customs was different from the price which is mentioned in the export declaration obtained by the department from China through Consulate General of India The Export Declarations as received from China are, therefore, admissible in the evidence.

19. In view of above discussion, there appears no doubt about the authenticity of documents as these were obtained by DRI through the Government channel and were obtained from the concerned Department of the exporting country. We draw our support from the decision in the case of Orson Electronics Private Ltd. vs. Collector of Customs, Bombay reported in 1996 (82) ELT 499 (Tri. Delhi).

20. Resultantly the first question of adjudication framed above stands decided in favour of the Department.

Issue No.2

21. The appellant objected the quotation obtained by the Department to be called as the market inquiry report. However, perusal of said quotation reveals that it is about the same product as has been imported by the appellant. The only defense taken by the appellant is that the value quoted in the said quotation is the retail value. But no evidence is placed on record to support this submission. Otherwise also there cannot be a difference of more than 75% in wholesale value and the retail value. The undervaluation in the present case has been noticed to that extent based upon the documents which have already been held admissible in terms of Section 139 of the Customs Act. The quotation from M/s. Surya Plastics is obtained by the competent officers during the course of investigation. Nothing has been produced by the appellant to rebut the presumption of Section 139 of Customs Act even qua the said quotation/market inquiry. We hold that the presumption of correctness was attached to this document, as well.

22. Although only one quotation was obtained during market inquiry, the value mentioned therein is actually in corroboration to the values mentioned in the Chinese Customs declaration. We observe that the adjudicating authority below in para 22.3 of the impugned order has meticulously compared the information of these documents and has cross checked it with the declarations made by the appellant in the five number of Bills of Entry including that of the live consignment which is one of the Bills of Entry among 11 others of past. Hence, we do not find any error when the adjudicating authority has concluded that the comparison makes it clear that for the same Bill of Lading and invoice, the importer declared very less value of transaction in the Bills of Entry as contrast to the value as declared by the exporter in his country for the same invoice. It implies that invoice has been manipulated in between export and import ports and invoice depicting less value was presented to the Indian Customs in order to evade the legitimate duty of customs and the importer succeeded in his intention many times till the documents from overseas came to the notice of the Department. These overseas documents when compared with the details in the import documents it get clearly established that the importer has mis-declared the value of the goods at the time of import by forging the invoice.

23. We also observe that the appellant had admitted the presence of five different rolls of Reflecting Sheets of different series TM 18 100 to have been sent by the exporter as samples, but still had not shown the same in the Bills of entry. This admission corroborates the Department‟s stand that the appellant despite having knowledge of the content of his consignment and the correct/export value of the goods in the said consignment, has failed to declare the same. 24. Hence we don‟t find any reason to differ from the findings in the order under challenge with respect to the said quotation. We hold that the quotation of M/s. Surya Plastics has rightly been relied upon for the purpose of market inquiry. The decisions referred by the appellant are therefore held not applicable to the facts of the present case.

25. We also note that vide letter dated 25.02.2010 the Chinese exporter has certified that appellant is their Customer for years for reflective sheets under “Sablite” brand. This document confirms the alleged mis-declaration as the said brand has not been declared in Bill of Entry. Though the price in said certificate is mentioned to be @ USD 0.48 per Sq. Mtr. but simultaneously the exporter has rescued itself from any responsibility due to any problem with reference to the grade ordered.

26. The defense taken by appellant that Chinese declarations are merely the photocopies is also not acceptable. We rely on the decision in the case of Chandra Impex Pvt. Ltd. vs. CC, New Delhi reported in 2008 (224) ELT 583 (Tri.-Del.).

27. Thus, we hold that appellant mis-declared the goods while importing them. This issue also stands decided in favour of the Revenue.

Issue No. 3:

28. To adjudicate this issue, we need to examine the legal provisions relating to valuation in the Customs Act. Duties of customs are levied on goods imported into and exported from India at the rates specified in the Schedules to the Customs Tariff Act, 1975. On some goods, the levy is based on quantity (specific duty) and other goods, it is based on value (ad valorem). If the duty is to be levied based on value, valuation for the purpose has to be done as per Section 14 which reads as follows:

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 that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and license fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf:

Provided further that the rules made in this behalf may provide for,-

(i) the circumstances in which the buyer and the seller shall be deemed to be related;

(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;

(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section:

Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.

(2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value.

Explanation . – For the purposes of this section –

(a) rate of exchange” means the rate of exchange –

(i) determined by the Board, or

(ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;

(b)”foreign currency” and ”Indian currency” have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999)

29. The non-obstante clause in sub-section 2 of section 14 gives the Board the power to fix tariff values for any class of goods and if fixed, the tariff value will be the value to determine the duty. This sub-section is not relevant to this case. In all other cases, the value to be reckoned for calculating the Customs duty shall be the transaction value subject to five conditions:

a) Buyer and seller are not related.

b) Price is for delivery at the time and place of importation, i.e., all costs up to the point of import are to be included. For instance, if the sale is on Free on Board basis, the costs of transportation to the place of import, transit insurance, etc. will have to be added.

c) Price is the sole consideration for sale.

d) Some amounts indicated in the first proviso to sub-section 1 of section 14 must be included.

e) Valuation will be as per any other conditions as may be specified in the Rules.

30. The first proviso to sub-section 1 of section 14 provides for some additions to the transaction value which are not relevant for the present case. The second proviso to this sub-section provides for Rules to be made in this behalf to provide for:

a) the circumstances in which the buyer and the seller shall be deemed to be related;

b) the manner of determination of value in respect of goods when there is no sale,

c) the manner of determination of value in respect of goods if the buyer and the seller are related,

d) the manner of determination of value in respect of goods where price is not the sole consideration for the sale;

e) the manner of determination of value in respect of goods in any other case; and

f) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section.

31. The Customs Valuation (Determination of Value of imported goods) Rules, 2007² were framed as per the second proviso to sub-section 1 of section 14. It has 13 Rules in all of which Rules 1 and 2 are Preliminary rules. Rule 3 states that subject to Rule 12, the value shall be the transaction value adjusted according to Rule 10. Rule 10 provides for certain costs to be included in the transaction value. Rule 12 provides for the proper officer to reject the transaction value if he has reason to doubt its truth and accuracy. Thus, unless the proper officer rejects the transaction value under Rule 12, the valuation has to be based on transaction value as per Rule 3 with some additions, if necessary, as per Rule 10.

32. If the transaction value is rejected under Rule 12, then it must be determined sequentially under Rules 4 to 9. Rule 4 provides for the valuation to be done on the basis of identical goods. Rule 5 provides for the valuation to be done on the basis of the value of similar goods. Rule 6 states if Rules 4 and 5 cannot determine the value then they must be done as per Rule 7 and thereafter Rule 8 but this sequence can be reversed at the option of the importer. In other words, if the importer so chooses, Rule 8 can be applied directly instead of Rule 7. Rule 7 provides for a deductive method of valuation on the basis of prices of similar or identical goods sold in India and after making some deductions from such prices. Rule 8 provides for a computed value, i.e., based on the cost of raw material, cost of manufacture, reasonable profit, etc. In view of Rule 6, the importer may choose the computed value without examining the feasibility of determining value through deductive methods. Rule 9 is a residual method which provides for determining the value where it cannot be determined under Rules 3 to 8. Rule 10, as already discussed, provides for some costs to be added to the transaction value if the valuation is done as per Rule 3. Rule 11 requires the importer to make a declaration. Rule 12 lays down the provision for rejection of transaction value. Rule 13 provides for interpretative notes for the Rules.

33. To sum up, valuation has to be done sequentially as follows:

a) If a tariff value is fixed by the Board, it is the value (sub-section 2 of Section 14);

b) If no tariff value is fixed by the Board, valuation is as per the transaction value, if necessary, with some additions (as per the first proviso to sub-section 1 of section 14 and as per Rule 10);

c) If the transaction value is rejected as per Rule 12 by the proper officer, valuation has to be done as per the value of identical goods (Rule 4);

d) If transaction value is rejected and there is no value of identical goods, then it must be as per the value of similar goods (Rule 5);

e) If transaction value is rejected and there is no value of identical goods or similar goods, value must be determined through Deductive method (Rule 7)

f) If transaction value is rejected and there is no value of identical goods or similar goods and it is not possible to determine value following deductive method, then value must be determined through computation (Rule 8)

g) If the importer so chooses, computational method may be adopted without examining the deductive method first (Rule 6).

h) If the transaction value is rejected and there is no value of identical goods or similar goods and if it is also not possible to determine the value through deductive method or computational method, then value may be determined through the residual method by the officer following the above principles (Rule 9).

34. The next question which arises is when can the proper officer reject the transaction value. Rule 12 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 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 mis-declaration 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.

35. Thus, if the officer has reason to doubt the truth and accuracy of the transaction value, he can call for information including documents and evidence. If the information and evidence is presented and after examining it or if no information or evidence as called for is presented, if the proper office has reasonable belief then it shall be deemed that the value cannot be determined as per Rule 3 (i.e., based on transaction value with additions, if necessary). The grounds on which the proper officer may raise doubts about the truth and accuracy of the transaction value have been illustrated in explanation 1 (iii) to Rule 12. The list is inclusive and not exhaustive.

36. While examining the issue No.1 we have already held that the export declarations are admissible into evidence. Similarly, while examining issue No.2, we held that the quotation obtained during market enquiry is admissible as evidence. Of the fifteen Bills of Entry, the Commissioner only re-determined the value of the goods in respect of five and did not re-determine the value in respect of the remaining ten Bills of Entry. These five Bills of Entry included the Bill of Entry dated 9.2.2010 and four past Bills of Entry in respect of which the transaction values could be obtained from the Chinese authorities through Consulate General of India from the declarations made by the exporter to Chinese Customs.

37. As far as the Bill of Entry dated 9.2.2010 is concerned, the Commissioner rejected the transaction value, firstly because, while the invoice and the Bill of Entry declared only 1219 rolls of TM 3200, on examination, it was found that there were five additional rolls of TM 1800which were not at all declared in the invoice and in the Bill of Entry. Shri Virendar Singh, owner of the importer firm admitted to having imported but not declaring these five rolls in the bill of Entry.Market enquiry was conducted and it was found that the price of TM 3200 was Rs. 8,000/- per roll , the price of TM 1800 (which was not even declared) was Rs. 36,000/- per roll. Further, overseas enquiry into four past Bills of Entry by the appellant also showed that the actual values of identical goods imported by the appellant declared by the exporter before the Chinese Customs was four times the values declared for the same consignment before the Indian Customs by the appellant. Shri Virendar Singh stated that the goods imported in the Bill of Entry dated 9.2.2010 were identical to the goods in the aforesaid four Bills of Entry in respect of which the declarations before the Chinese Customs could be obtained.

38. For these reasons, she rejected the transaction value under Rule 12 of the Valuation Rules and re-determined it under Rule 4 in respect of the Bill of Entry dated 9.2.2010 taking the value of identical goods imported by the appellant in the past. Thus, as required, having rejected the transaction value under Rule 12, she determined the value on the basis of the contemporaneous imports of identical goods as per Rule 4.

38. As far as the four past Bills of Entry in respect of which the declarations made before the Chinese Customs were obtained are concerned, we find that the Bill of Lading numbers, names of the vessels, container numbers, etc. match which showed that the values declared in the four Bills of Entry were low and the actual values were declared by the exporter in the declarations before the Chinese authorities. Accordingly, the Commissioner has in the impugned order, rejected the declared transaction value in respect of these four Bills of Entry under Rule 12 and re-determined it based on the actual transaction value in respect of the four Bills of Entry. Consequently, she confirmed the demand of differential duty of customs under section 28. We are in full agreement with the decision of the Commissioner.

39. The Commissioner has dropped the demand in respect of ten other Bills of Entry proposed in the SCN in respect of which no direct evidence in the form of declarations made before the Chinese authorities is available and therefore the issue has attained finality to this extent. Thus, the Commissioner’s order was very fair and balanced.

40. In the impugned order, the Commissioner confiscated goods imported under the Bill of Entry dated 9.2.2010 which were seized and provisionally released on execution of a bond under section 111(m) but she refrained from confiscating the goods imported under the past Bills of Entry. Since the undisputed fact is that the goods imported in the Bill of Entry were not fully declared and five additional rolls were imported but not declared and also since we found that the value declared in this Bill of Entry was correctly rejected under Rules 12 and re-determined under Rule 4, we find that there was mis-declaration of the goods both in terms of value and quantity and the confiscation under section 111(m) must be upheld. The redemption fine of Rs. 5,00,000/- imposed under section 125 on the goods valued at Rs.64, 86,108/- is very fair and reasonable and calls for no interference.

41. In the impugned order, the Commissioner did not impose any penalty on the owner of the appellant. She also did not impose any penalty on the appellant under section 112 but imposed penalties under section 114 A and 114AA.

42. The penalty under section 114A is a mandatory penalty and is equal to the duty sought to be evaded. This section reads as follows:

Section 114A. Penalty for short-levy or non-levy of duty in certain cases. –

Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under [sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined:

43. Since we have upheld the confirmation of demand under section 28, we also uphold the consequential mandatory penalty under section 114A.

44. Penalty under Section 114AA can be imposed for use of false and incorrect material. It reads as follows:

Section 114AA. Penalty for use of false and incorrect material.

If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods.

45. The appellant had, undisputedly, mis-declared the quantity of the goods imported in the Bill of Entry dated 9.2.2010. Shri Varinder Singh admitted in his statement that he had not declared five rolls of a different type which were also imported. Further, in respect of four of the past Bills of Entry, the values declared by the exporter before the Chinese authorities was much higher than the values declared in the Bills of Entry by the appellant. We, therefore, find that the appellant was liable to penalty under section 114AA and the penalty of Rs. 10,00,000/- was just and fair in the factual matrix of this case.

46. Resultantly, we are in full agreement with the findings of the adjudicating authority below. Order resultantly, is hereby upheld. Consequent thereto the appeal stands dismissed.

[Order pronounced in the open Court on 03/11/2023]

Notes:

1 Impugned order

2 Rules