Valuation without indicating how market survey was conducted, is wrong

Tushar Trading Company Vs Principal Commissioner of Customs (CESTAT Delhi)

Assessing officer has enhanced the declared value on the ground that those are not inconsonance with the current market price of similar goods being sold in the Indian market. However, the adjudication order does not indicate as to how and where the market survey has been conducted and also how the transaction value has been rejected without following the Valuation It is a fact that the appellant has accepted the enhanced value and paid the differential duty, but only for the reasons that the consignment was incurring a heavy demurrage and detention charge by the custodian. Therefore, the acceptance of enhancement of the price by the department is not at their own volition but under compulsion so as to avoid heavy demurrage and detention charges. If any transaction value is to be rejected by the assessing officer it has to be done under the provisions of Section 14 of the Customs Act read with Customs Valuation Rule 2007 as stated above. No such exercise has been undertaken by the adjudicating authority and also by learned Commissioner (Appeals), while passing the impugned order. In view of above, we set aside the impugned order and allow appeal with consequential benefit.

FULL TEXT OF THE CESTAT JUDGEMENT

This appeal seeks to assail order dated 13 November, 2018 passed by the learned Commissioner (Appeals) wherein the order passed by lower adjudicating authority has been affirmed while rejecting the appeal filed by the appellant. The appellant M/s Tushar Trading Company, 693/5, Gurgaon, Haryana has imported consignment of mixed items at declared assessable value of Rs. 18,99,147/- for clearance of the said imported consignment. The Bill of Entry was filed along with the export invoice and other related document for clearance of imported consignment at ICD, TKD, New Delhi.

2. On the basis of intelligence, regarding mis-declaration of value of the imported goods covered by the above Bill of Entry, the consignment was put on hold for check on 26.5.2016. During examination, it was found that the following items were found to be contained in the container No. TGHU8311979/40”.

During the examination, it was found that the item declared as Drill machine-I (600 pcs.) was actually concrete Vibrator to two different sizes i.e. 300 Pcs of 1 meter and other 300 Pcs. of 1.5 meter on the ground of this mis-declaration in the description of the goods imported vide the said Bill of Entry the consignment were seized under the provisions of Section 110 of the Customs Act, 1962. The samples were also drawn and the container was resealed with the Customs seal and handed over to the custodian under Panchnama dated 7.6.2016. During the investigation statement of Shri Tushar Dang, partner of the appellant was recorded on 9.6.2018 under Section 108 of the Customs Act, wherein he had accepted the mis­declaration and also paid the differential duty on the higher assessable value as arrived by the department. The declared value of Rs.505588.40 was enhanced to Rs.921686.30 by the department. The appellant had paid the differential duty amounting to Rs.416097.90 and also waived the Show Cause Notice and also personal hearing and requested for the immediate clearance of imported consignment as the same was incurring heavy demurrage.

3. The adjudicating authority adjudicated the case by rejecting the declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re­determined the value as Rs. 34,57,428/- under the Customs Valuation Rule read with Section 14 of the Customs Act. The consignment was also ordered to be confiscated under the provisions of Section 111(l) of the Customs Act, however, the option was given for redemption in terms of Section 125 of the Customs Act on payment of redemption fine of Rs. 42,000/-. A penalty of Rs. 4,16,098/- was also imposed on the appellant under the provisions of Section 112 and 114A of the Customs Act for the Act of mis-declaration while clearing the imported consignment.

3.1 The appellant preferred appeal against the order before the learned Commissioner (Appeals), however, the same was dismissed by the impugned order dated 13 November, 2018.

4. Learned Advocate on behalf of the appellant submitted that the transaction value was rejected without any basis and informing the contemporaneous import price or any market enquiry in respect to the imported consignment. The learned Commissioner (Appeals) has not considered the submissions made by the appellant regarding arbitrary decision of the original adjudicating authority, who has rejected the transaction value under Rule 12 of the Valuation Rules.

5. The Department has not produced any record of contemporaneous import or even the price data from the National Import Data Bank being maintained by the Customs Department.

6. The lower adjudicating authority has failed to follow the provisions Section 14 of Customs Act read with Valuation Rule. In accordance with the Valuation Rules, when the price declared for the imported consignment is proposed to be rejected by the Department. The assessing authority was required to follow the Valuation Rules sequentially, which has not been done in this case. The Rule 12 of CVR, 2007, only gives the assessing officer power to reject the transaction value if the same is not in consonance with the provisions of Section 14 of the Customs Act. This rule does not mandate the acceptance of value other than as per Rule 4 to 9 of CVR, 2007.

7. Learned Advocate has also submitted that their case is fully covered by the decision of Hon^‟ble Supreme Court in the case of Eicher Tractors Ltd. Vs. Commissioner -2012 (122) ELT 321 (SC), wherein it is held that unless the price actually paid for the particular transactions fall within the exception under Rule 4(2) of the Customs Valuation Rule, the customs authorities are bound to accept the transaction value. It is submitted by the learned Advocate that the decision of Eicher Tractors although delivered in respect of old Valuation Rules of 1988, the provisions of Rules of Valuation under Customs Act, 1962 have not changed and remained the same after its substitution with effect from 10.10.2007. The concept of transaction value remains the same even after the enactment of Customs Valuation Rules, 2007. Thus, the ratio laid in Eicher Tractors are applicable in the new Valuation Rules as well.

8. Learned Advocate also placed reliance on this Tribunal ruling in the case of M/s Orient Sales and Others Vs. CCE & ST Coordinate Bench at Allahabad Vide Final Order No. 70190- 70195/2019 dated 29.1.2019 and the decision in the case of Innobiz Electronics Pvt. Ltd. Vs. CC, Tuticorin – 2017 (352) ELT 82 (Tri.- Chennai) Therefore, the learned Advocate submits that the impugned order is not sustainable and required to be set aside in the appeal.

9. Learned DR on behalf of the Revenue reiterated the findings of the impugned order and also submitted a written reply dated 2.5.2019. In the written reply the learned AR submitted that the appellant has accepted the mis-declaration and affirmed that the declared value of the goods are not in conformity with the market price and also accepted loaded value. In fact, the value was enhanced after his acceptance and agreement with the price ascertained by the Department. It is also submitted that in case, the appellant was not in agreement with the price proposed by the Department they could have resorted to provisional assessment, which was in fact not done by the appellant and the duty was deposited without any protest. Learned AR placed reliance on the following decisions, wherein it is held that once price is accepted by the importer there is no need for following any evidence or Valuation Rules:

(i) Jai Shiv Trading Co. Vs. Commissioner of Central Excise, New Delhi – 2018 (359) ELT 208 (Tri.-Del.);

(ii) Commissioner of Customs (Import), ICD, TKD, New Delhi Vs. Sodagar Knit Wear – 2018 (362) ELT 819 (Tri.-Del.);

(iii) Vikas Spinner Vs. Commissioner of Customs, Lucknow – 2001 (128) ELT 143 (Tri.-Del.);

(iv) Varsha Plastics Pvt. Ltd. Vs. UOI – 2009 (235) ELT 193 (SC).

10. We have considered the submissions of the learned Advocate on behalf of the appellant and learned DR on behalf of the Revenue.

11. The issue involved in the present case is regarding valuation of imported consignment imported by the appellant vide Bill of Entry No. 5403120 dated 26.5.2016. From the perusal of the Bill of Entry and related document, we find assessing authority has rejected the transaction value on the ground of mis-decloaration regarding drill machine-I. The assessing officer has also concluded that the assessable value appeared to be low and the value was enhanced item wise which is as under;

12. After perusal of the order in original and appeal, in appeal we find that the assessing officer has enhanced the declared value on the ground that those are not inconsonance with the current market price of similar goods being sold in the Indian market. However, the adjudication order does not indicate as to how and where the market survey has been conducted and also how the transaction value has been rejected without following the Valuation It is a fact that the appellant has accepted the enhanced value and paid the differential duty, but only for the reasons that the consignment was incurring a heavy demurrage and detention charge by the custodian. Therefore, the acceptance of enhancement of the price by the department is not at their own volition but under compulsion so as to avoid heavy demurrage and detention charges. If any transaction value is to be rejected by the assessing officer it has to be done under the provisions of Section 14 of the Customs Act read with Customs Valuation Rule 2007 as stated above. No such exercise has been undertaken by the adjudicating authority and also by learned Commissioner (Appeals), while passing the impugned order.

13. We have also carefully considered the submissions made by the learned Departmental Representative and also considered the case laws cited by him. After perusal of the case laws we find that the facts and circumstances in those cases are different to the extent that in the case at hand, the appellant, although paid the duty but did not accept the price as is evident from the endorsement on the invoice itself. In view of above we find that the case law cited by the learned AR is distinguishable and not applicable in the case at hand.

14. In view of above we do not find any reason to sustain the order passed by the learned Commissioner (Appeals) in the impugned order. We also find that similar issue has been considered by the Tribunal in the case of Innobiz Electronics (supra), wherein it is held as under.

5. On a perusal of the impugned order, as well as order-in-original, we find that the declared value was not found acceptable as transaction value in view of the admission in statements of the partner that the payable invoiced values were different. We therefore, find no reason to interfere with the resort to Rule 12 of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for not accepting the declared price. However, the law is also well-settled that revision of value for assessment must, necessarily, be the outcome of sequential application of the other rules in Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. We notice that no such exercise has been undertaken by the lower authorities, in adjudication as well as in appeal, and the process of enhancement of assessable value lacks the sanctity accorded by law.

6. In arriving at this conclusion, we place reliance on the decision of the Hon^‟ble Supreme Court thus in Eicher Tractors Ltd., Haryana Commissioner of Customs, Mumbai [2000 (122) E.L.T. 321 (S.C.)].

^‘Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be  taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularized in Rule 4(2). Rule 4(1) speaks of the transaction value. Utilization of the definite article indicates that what should be accepted as the value for the purpose of assessment to Customs duty is the price actually paid for the particular transaction, unless of course the price is unacceptable for the reasons set out in Rule 4(2). Payable in the context of the language of Rule 4(1) must, therefore, be read as referring to the particular transaction and payability in respect of the transaction envisages a situation where payment of price may be deferred. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other Rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at the same time as the subject goods. Where there are no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule 7A. When value of the imported goods cannot be determined under any of these provisions, the value is required to be determined under Rule 8 using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 14 of the Customs Act, 1962 and on the basis of data available in India. If the phrase the transaction value used in Rule 4 were not limited to the particular transaction then the other Rules which refer to other transactions and data would become redundant. It is only when the transaction value under Rule 4 is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules.^‟

thus mandating recourse to sequential application of the Rules. As this requirement is lacking in the proceedings before the two lower authorities, the enhancement of value is set aside.”

Similar view has been taken by the coordinate Bench in the case of M/s Orient Sales (supra), the relevant paragraph of the said order is re-produced below:

“ 6. We note that there were number of importers of Polyester Knitted Fabrics wherein the value was declared by them as US $ 1.6 per kg. The same was enhanced by the Customs authorities and the matters came up before the Tribunal. Tribunal in the case of A.R. Fabrics Pvt.Ltd. vide its Final Order No.70096-70097/2018 dated 05.01.2018 had dealt with an identical issue where the declared value of Polyester Knitted Fabrics at US $ 1.6 per kg. was enhanced by the Customs officers to US $ 2.89 per kg.. Tribunal by observing that at the time of clearance of the goods the value was enhanced to 1.73 per kg. by the officers themselves which was accepted by the importers and goods were accordingly cleared, Customs cannot subsequently further enhance the value by doing the piecemeal assessment as it amounts to review of their own earlier order. In any case Tribunal further observed that the issue is no longer res integra and the proceedings in respect of the other importers at Delhi-Faridabad stands concluded in favour of the assesses in respect of the same item. Though learned Advocate has also drawn our attention to various other decisions of the Tribunal, but we would like to take note of one decision in the case of same assessee^‟s case, wherein the Revenue^‟s appeal was rejected. Reference is made to the Tribunal^‟s judgement in the case of Commissioner of Customs, New Delhi v. General Traders and Others wherein by taking note of the earlier decisions, being F.O. No.51690-51694/2016 dated 27.04.2016 as also the decision in the case of Commissioner of Customs, New Delhi v. Artex Textiles Pvt. Ltd. [2014 (303) E.L.T. 572 (Tri.-Del)], the Revenue^‟s appeal was rejected vide Final Order No.54434-54510/2016 dated 14. 10.20 16.

7. We also find that the Revenue has alleged mis-declaration in the quantity of the net weight of the goods. This allegation is not based upon the physical examination of the goods and only refers to the fact that the difference in the gross weight and net weight of the fabrics is on the higher side than the one declared by the same assessee in respect of the imports of the same very goods at ICD Tughlakabad, we are afraid that such type of comparisons cannot be upheld to lead to the findings of any mis-declaration in the quantity of the goods.”

15. In view of above, we set aside the impugned order and allow appeal with consequential benefit.