Customs valuation and duty demand failed where the notice was exceeded and comparable imports were unreliable.
Differential customs duty under Section 28 of the Customs Act, 1962 could not be sustained because the demand travelled beyond the show-cause notice and the assessment had attained finality without being challenged. Rejection of the declared transaction value also failed because the relied-upon imports were not comparable, as the imported goods were only hardware while the comparables included software, and there was no evidence of relationship or flow back affecting valuation. On that basis, the consequential confiscation, redemption fine and penalty were also held unsustainable, and the impugned order was set aside with consequential benefits.
Issues: (i) Whether the demand of differential customs duty under Section 28 of the Customs Act, 1962 was sustainable when it was not invoked in the show-cause notice and the assessment was not challenged. (ii) Whether rejection of transaction value and the consequential confiscation, redemption fine and penalty could be sustained in the absence of reliable comparable imports and evidence of relationship or flow back.
Issue (i): Whether the demand of differential customs duty under Section 28 of the Customs Act, 1962 was sustainable when it was not invoked in the show-cause notice and the assessment was not challenged.
Analysis: The demand of differential duty was held to be outside the scope of the show-cause notice. The assessment had attained finality and, without first challenging the assessment, the Revenue could not proceed to demand duty under Section 28 of the Customs Act, 1962.
Conclusion: The demand of differential customs duty was not sustainable.
Issue (ii): Whether rejection of transaction value and the consequential confiscation, redemption fine and penalty could be sustained in the absence of reliable comparable imports and evidence of relationship or flow back.
Analysis: The imported goods were found to be only hardware, whereas the relied-upon imports contained software as well, so the comparison was not reliable for rejecting the declared value under Rule 6 of the Customs Valuation Rules, 1988. There was also no material to show that the appellant and the supplier were related or that any flow back influenced the declared value. In these circumstances, the foundation for confiscation and penalty did not survive.
Conclusion: Rejection of transaction value and the consequential confiscation, redemption fine and penalty were not sustainable.
Final Conclusion: The appeal succeeded and the impugned order was set aside, with consequential benefits.
Ratio Decidendi: A duty demand cannot be sustained when it travels beyond the show-cause notice and the underlying assessment has not been challenged; rejection of declared transaction value requires reliable comparables and evidence of relationship or flow back.
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