Case Law Details
Hanuman Weaving Factory Vs Commissioner of Customs (CESTAT Chennai)
Introduction: In a recent case before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chennai, the issue revolved around the transaction value of silk yarn and the demand for excise duty. The tribunal ruled that the rejection of the transaction value should be supported by cogent reasons. This article provides a comprehensive analysis of the case, including its background, key arguments, and the tribunal’s decision.
Background of the Case: The appellant, Hanuman Weaving Factory, filed a Bill of Entry for the clearance of goods declared as raw silk yarn in hanks. These goods were invoiced by M/s. Bedeil General Trading LLC, based in Dubai, UAE, at a unit price of USD 15 per kilogram. However, the assessment group did not accept the declared unit price and sought to enhance it. In response to higher court directions, the Bills of Entry were provisionally assessed at the value determined by the department. The goods were released to the appellant against a bank guarantee covering 50% of the differential duty and a personal bond for the rest. Subsequently, the department issued a Show Cause Notice on 29.11.2011, alleging undervaluation of the goods and seeking enhancement of their value based on contemporaneous imports. After due legal procedures, the original authority rejected the transaction value, confirmed the differential duty, ordered confiscation of the goods, and imposed a redemption fine under Section 125 of the Customs Act, 1962. Additionally, a separate penalty under Section 112(a) of the Customs Act, 1962, was imposed. The appellant challenged these orders before the Commissioner (Appeals), who upheld them. Consequently, the appellant appealed to CESTAT Chennai.
Submissions by the Appellant: The appellant’s counsel, Shri M.A. Mudiamman, argued that the price for the imports was negotiated with the foreign supplier in July 2010 for the supply of approximately 6500 kilograms of raw silk yarn. The agreed-upon price was declared in the Bill of Entry. However, the department rejected the declared transaction value of USD 15 per kilogram without providing any legal or factual basis for doing so. The Show Cause Notice did not specify the reasons for doubting the transaction value; it merely mentioned that imports from Uzbekistan cleared through Chenna Port on 25.11.2010 had a higher contract value/declared value. The appellant contended that in this case, the goods were supplied by a Dubai-based supplier, although the country of origin was Uzbekistan. The department mistakenly relied on imports from Uzbekistan via a single Bill of Entry dated 25.11.2010, failing to establish the comparability of various parameters such as quality, quantity, and manufacturer/supplier. The appellant had provided details of multiple Bill of Entry entries for the import of raw silk yarn in hank from Uzbekistan through Chennai Port from 12.4.2010 to 30.11.2010. The declared values for these imports ranged from 13 to 15 USD per kilogram. In the present case, the appellant declared a value of 15 USD per kilogram, which aligned with the values declared during the relevant period. Despite this, the department rejected the transaction value without providing valid reasons. The appellant cited the Tribunal’s decision in the case of Sree Rajendra Textiles to argue that the transaction value could not be enhanced without sufficient grounds for rejecting it. The appellant requested that the appeal be allowed.
CESTAT’s Decision: CESTAT Chennai carefully examined the arguments presented and reviewed the Order in Original. It found that the department had not provided proper reasons for rejecting the transaction value. The Order in Original discussed various provisions related to transaction value without offering reasons for the rejection. Additionally, the value had been enhanced based on a Bill of Entry dated 25.11.2010, which involved direct imports from Uzbekistan. However, the appellant had imported goods from Dubai, UAE, even though the country of origin was Uzbekistan. The department had not demonstrated the comparability of various parameters, such as the quality, quantity, and manufacturer, between the imports. The appellant had furnished data on multiple Bill of Entry entries for imports from Uzbekistan, showing declared values ranging from 13 to 13.75, 14.10 to 15.50 USD per kilogram, which the department had accepted. Given these circumstances, the department’s rejection of the transaction value based solely on a single Bill of Entry dated 25.11.2010, where the declared value was 28 USD, was not justified. The department had failed to establish that the commercial parameters were similar. CESTAT cited its previous decision in the case of Sree Rajendra Textiles, which emphasized that the transaction value could not be rejected without cogent reasons.
Conclusion: In the case of Hanuman Weaving Factory versus the Commissioner of Customs, CESTAT Chennai set aside the demand for excise duty, confiscation, redemption fine, and penalty. The tribunal ruled that the rejection of the transaction value of silk yarn must be supported by cogent reasons. This decision underscores the importance of providing valid grounds when challenging the transaction value and serves as a precedent for future cases with similar issues.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The issue involved in these appeals being the same, they were heard together and disposed by this common order.
2. Brief facts are that the appellants filed Bill of Entry for clearance of goods declared as raw silk yarn in hanks. For both the consignments, invoices were raised by M/s. Bedeil General Trading LLC, Dubai, UAE at a unit price of USD 15 per kilogram. The assessment group did not accept the unit price declared by appellant and sought to enhance the same. Based on the directions of the higher courts, Bills of Entry were assessed provisionally at the value determined by the department and the goods were released to the appellant on the strength of 50% of the differential duty covered by the bank guarantee and the rest by personal bond. Thereupon, department issued Show Cause Notice dated 29.11.2011 alleging that the goods have been undervalued and same has to be enhanced on the basis of contemporaneous imports. After due process of law, the original authority rejected the transaction value and confirmed the differential duty, ordered for confiscation of the goods and imposed redemption fine under sec. 125 of the Customs Act, 1962 was issued. Separate penalty under section 112(a) of the Customs Act, 1962. Against such order, the appellant filed appeals before Commissioner (Appeals) who upheld the same. Hence the appellant is now before the Tribunal.
3. The learned counsel Shri M.A. Mudiamman appeared and argued for the appellant. It is submitted that the imports had taken place in July 2010 and the price was fixed after negotiations with the foreign supplier for supply of about 6500 kilograms of raw silk yarn. The price fixed agreed after negotiations between the appellant and the foreign supplier has been declared in the Bill of Entry. The department has rejected the declared value (transaction value) of 15 USD per kg without any legal or factual basis. It is not stated in the Show Cause Notice as to what is the reason for doubting the transaction value. It is merely stated in the Show Cause Notice that imports made from Uzbekistan and cleared vide Bill of Entry dated 25.11.2010 through Chenna Port showed higher contract value / declared value. The learned counsel pointed out that in the present case, though the country of origin is Uzbekistan, the goods were by supplier at Dubai. The department has erroneously relied upon the imports vide a single Bill of Entry imported on 25.11.2010 of similar goods. However, the department has not been able to satisfy with regard to various parameters in the nature of quality, quantity and the manufacturer / supplier. For these reasons itself, the import of 25.11.2010 cannot be compared with that of the appellant’s imports. The appellant had furnished details of various bills of entry for import of raw silk yarn in hank, from Uzbekistan through Chennai Port from 12.4.2010 to 30.11.2010. The value declared for these imports was between 13 to 15 USD per kilogram. The appellant in present case has declared the value as 15 USD per kilogram which reconciles with the imports during the relevant time. However, without giving any cogent reasons department has rejected the transaction value relying upon the single bill of entry dated 25.11.2010. The decision of the Tribunal in the case of Sree Rajendra Textiles vide Final Order No. 41048 to 41050/2017 dated 20.6.2017 was relied to argue that the value cannot be enhanced unless the department has put forward reasons to reject the transaction value. The learned counsel prayed that the appeal may be allowed.
4. The learned AR Shri Harendra Singh Pal supported the findings in the impugned order.
5. Heard both sides.
6. On perusal of the Order in Original, we do not find any proper reasons given by the department to reject the transaction value. In para 15 of the Order in Original, the original authority has discussed the various provisions relating to transaction value without giving reasons for rejecting the transaction value. Further, it is seen that in para 21 of Order in Original that the value has been enhanced on the basis of a Bill of Entry dated 25.11.2010 which is an import directly from Uzbekistan. In the present case, the appellant has imported the goods from Dubai, UAE, though the country of origin is Uzbekistan. It is also not brought out in evidence as to the comparison of the various parameters with regard to quality, quantity of the goods imported. The appellant has furnished data with regard to various Bills of Entry for imports made from Uzbekistan for the period from 12.4.2010 to 30.11.2010. The value declared in these imports range from 13 to 13.75, 14.10 to 15.50 USD per kilogram. The department has accepted the value declared for these imports. In present case, merely because the value declared for the goods in a single Bill of Entry dated 25.11.2010 is 28 USD, the department has rejected the transaction value. It is not established that the commercial parameters as to quality, quantity, manufacturer are similar. The Tribunal in the case of Sree Rajendra Textiles (supra) had occasion to consider a similar issue and observed that the transaction value cannot be rejected without cogent reasons.
7. After appreciating the facts and following the proposition of law in the above case, we are of the considered opinion that the demand of duty, confiscation, imposition of redemption fine and penalty imposed cannot sustain and requires to be set aside, which we hereby do.
8. In the result, the appeals are allowed with consequential relief, if any.
(Pronounced in open court on 12.09.2023)
