Elegant International Vs Commissioner of Central Excise (Adjudication) (CESTAT Delhi)
Conclusion: Transaction value could not be rejected by invoking rule 10A of Valuation Rules in the absence of evidence showing undervaluation. Further, the finding that the silk fabric imported by the other four importers and the silk fabric imported by assessee were identical, as same “article member” was provided in the Bills of Entry could not be sustained.
Held: Commissioner of Central Excise (Adjudication) passed order rejecting the transaction value of the imported silk fabrics from China through 37 Bills of Entry during the period from September 2003 to January 2005 under rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, and re-determined the transaction value under rule 5 of the 1988 Valuation Rules. Accordingly, the demand of differential customs duty had been confirmed. Commissioner had also imposed redemption fine on the silk fabric confiscated under section 111(M) of the Customs Act, 1962 and had also imposed penalty upon assessee under section 114(A). An intelligence was received that certain other importers of silk fabrics were engaged in under-valuation of this product imported from China and were thereby evading customs duty. Intelligence further suggested that two sets of invoices were raised by the said overseas suppliers for the same consignment; one set of invoices showed the actual value, while the other set showed lesser value. It was the latter invoice which was submitted by other Indian importers to the customs for clearance purposes so as to evade customs duty. An investigation was initiated by the Directorate of Revenue Intelligence , New Delhi on the import of silk-fabrics from China by other importers and the premises of M/s. Purnima Enterprises at Chennai and M/s. Om Fabrics at Bangalore were searched. A show cause notice was thereafter issued by Additional Director General of DRI, New Delhi to assessee proposing to demand differential duty from assessee with interest; confiscation of the impugned goods; and imposition of penalties, based on under-valuation of the impugned goods by relying upon contemporaneous imports and documents retrieved from premises of other importers pertaining to import of silk fabrics from China. It was basis the investigation carried out by DRI against other importers named above that it was alleged that assessee had also declared lesser value which needed to be re-determined. Assessee submitted a detail reply to the show cause notice and denied the allegations. The first issue arose for consideration was whether the Commissioner was justified in rejecting the transaction value of the imported goods under rule 10. It was held that assessee had imported various grades of silk fabrics. The grade of each of them have been provided in the sales contract which assessee entered with the suppliers. The sale contract had been cross-referenced in the invoices issued by the suppliers to assessee. However, none of the documents of other importers relied upon by the department show the grammage, grade of silk fabric and quality of weave. In the absence of such information, the comparison of quality of the silk fabric imported by the other importers and the quality of the silk fabric imported by assessee could not have been drawn. Commissioner was not justified in rejecting the transaction value of silk fabrics in the 37 Bills of Entry during the period from September 2003 to January 2005 under rule 10A of the 1988 Valuation Rules. The issue of re-determination of the transaction value under the provisions of rule 5 of the 1988 Valuation Rules would, therefore, not arise. The imposition of redemption fine or imposition of penalty under section 114(A) of the Customs Act could not, therefore, also be sustained.
