2017 (4) TMI 1075 - AT - Customs

Tribunal overturns decision on imported goods valuation, penalties deemed unjustified.

M/s. Euro Cubic Creations P Ltd. Versus Commissioner of Customs, Jaipur-I

The Tribunal set aside the Commissioner (Appeals)'s decision to enhance the assessable value and impose penalties for undervaluation of imported goods. ... Valuation - Branded cut and polished cubic zirconia of PRECIOSA Brand - reasonable belief that value declared on the invoice appears much low in comparison to the goods of other branded company like M/s. Swaroski - the goods imported by the appellant stand described in the invoice as ‘MCC cubic zirconia round white’. The same description stand reflected by the appellant in Bill of Entries - Held that: - the finding of the appellate authority that the goods in question are of ‘star’ quality rather than the MCC grade is not based upon the authentic literature or expert opinion etc. and seems to be his own views on the topic - the enhancement of the value by the Commissioner (Appeals) cannot be held to be justifiable, in the absence of any findings to the contrary. Rule 5 requires valuation at par with the value of similar goods actually imported at or about the same time. As such, the said Rule requires the value of the contemporaneous imports to be adopted. Admittedly, the Commissioner (Appeals) has not referred to any contemporaneous imports on record. Appeal allowed - order of original adjudicating authority restored - decided in favor of appellant. Issues Involved:1. Classification and valuation of imported goods.2. Allegation of undervaluation and misdeclaration.3. Confiscation and imposition of penalties.4. Applicability of Customs Valuation Rules, 2007.Issue-wise Detailed Analysis:1. Classification and Valuation of Imported Goods:The respondent filed Bill of Entry No.5755 dated 24.03.12 for importing 13.510 Kgs of branded cut and polished cubic zirconia of PRECIOSA Brand, classified under Chapter Sub-heading No.71049000 with a declared value of Rs. 3,57,494/-. The goods were examined and found to be cut and polished cubic zirconia (European Machine cut). The initial valuation was accepted by the Superintendent, but doubts arose regarding the value being much lower compared to similar branded goods like M/s. Swaroski. The Revenue contacted M/s. Preciosa Company for a price list, which indicated that the imported goods were undervalued.2. Allegation of Undervaluation and Misdeclaration:The goods were seized under Section 110 of the Customs Act, 1962, and samples were sent for testing. The Gem Testing Laboratory confirmed the goods were cubic zirconia, colourless, with round brilliant cut. The valuation by an empanelled valuer determined the market sale value at Rs. 4,92,000/-. The adjudicating authority initially accepted the transaction value and dropped the proceedings, ordering the release of goods on payment of appropriate duty. However, the Commissioner (Appeals) later enhanced the assessable value and confirmed differential duty of Rs. 2,37,599/-, imposing penalties under Section 114(A) of the Customs Act, 1962.3. Confiscation and Imposition of Penalties:The Commissioner (Appeals) held that the adjudicating authority had reasonable cause to doubt the declared value, as the goods appeared to be of superior quality stone. The Commissioner (Appeals) found that the goods were grossly undervalued and liable for confiscation. The respondent was found to have misdeclared the value and tried to evade duty, thus liable for penalties under Section 114(A). The appellate authority enhanced the assessable value to Rs. 49,71,083/- based on the price list obtained from M/s. Preciosa Company.4. Applicability of Customs Valuation Rules, 2007:The Commissioner (Appeals) assessed the goods under Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, using the transaction value of similar goods. The appellate authority did not consider the certificate from M/s. Preciosa International (H.K) Ltd., which stated that MCC grade goods are left over, inferior quality, and priced lower than 'Star' grade goods. The appellate authority also did not discuss the valuation report by the Department’s Empanelled Valuer, which showed no significant difference between the declared value and the assessed value after deductions.Final Judgment:The Tribunal found that the Commissioner (Appeals) had no expert opinion or technical support to conclude that the goods were of 'Star' quality based on the type of cut. The Tribunal noted that different types of cuts do not necessarily indicate the grade of the stone. The Tribunal also highlighted that the appellate authority did not consider the certificate from the exporter or the valuation report by the Department’s Empanelled Valuer. The Tribunal concluded that the enhancement of the value by the Commissioner (Appeals) was not justifiable and that the provisions of Rule 5 were not legally sustainable without reference to contemporaneous imports. The Tribunal set aside the order of the Commissioner (Appeals) and restored the order of the original adjudicating authority, allowing the appeal.Pronounced in the open court on 21.04.2017.