2019 (2) TMI 1508 - AT - Customs

Tribunal overturns orders, nullifies penalties under Customs Act due to lack of evidence and valuation rules compliance.

Rajesh Gandhi, Shri Nageshwar Enterprises, Modern Embroideries Versus Commissioner of Customs (Import) Mumbai

Rajesh Gandhi, Shri Nageshwar Enterprises, Modern Embroideries Versus Commissioner of Customs (Import) Mumbai - 2019 (366) E.L.T. 529 (Tri. - Mumbai) Issues Involved:1. Undervaluation of imported goods.2. Legality of invoking proviso to section 28 of Customs Act, 1962.3. Rejection of declared value based on statements.4. Sequential application of Customs Valuation Rules.5. Confiscation and imposition of penalties.Issue-wise Detailed Analysis:1. Undervaluation of Imported Goods:The appellants, M/s Modern Embroideries and M/s Nageshwar Enterprises, were accused of undervaluing imported 'silver polyester metal yarn' and 'polyester metallic yarn' to evade customs duty. The goods were revalued significantly higher than declared, leading to differential duty and penalties. The Directorate of Revenue Intelligence (DRI) alleged that the suppliers were persuaded to provide documents showing lower prices than the market value to support the undervaluation. Evidence included emails, facsimile messages, and internal computer data, suggesting a conspiracy to misdeclare the value.2. Legality of Invoking Proviso to Section 28 of Customs Act, 1962:The appellants argued that without challenging the initial assessment under section 17, issuing a show cause notice for recovery under section 28 was contrary to law. However, the Tribunal cited judicial precedents, including the Supreme Court's decision in Union of India v. Jain Shudh Vanaspati Ltd, affirming that show cause notices under section 28 can be issued post-clearance of goods. The Tribunal found no lack of jurisdiction in the adjudicating authority to issue the notice.3. Rejection of Declared Value Based on Statements:The rejection of declared values was primarily based on the confessional statements of Shri Rajesh Gandhi, a partner in the importing firms. The Tribunal noted that the Supreme Court in Surjeet Singh Chhabra v. Union of India held that confessions, even if retracted, are binding. However, the Tribunal emphasized that the statements should be corroborative rather than the sole basis for proceedings. In this case, the Tribunal found that the statements lacked corroborative support and were insufficient to validate the show cause notice.4. Sequential Application of Customs Valuation Rules:The Tribunal examined whether the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 were applied sequentially. The impugned orders relied on rule 6 (similar goods) and rule 8 (residuary provision) without proper sequential application. The Tribunal noted the lack of evidence to support the declared values and the improper invocation of rule 8 based on discredited statements. The Tribunal emphasized the necessity of strict compliance with the rules, as mandated by the Supreme Court in Eicher Motors Ltd v. Commissioner of Customs, Mumbai.5. Confiscation and Imposition of Penalties:With the rejection of the enhanced value, the Tribunal found no basis for confiscation under section 111 of the Customs Act, 1962. Consequently, the penalties imposed under section 112 on the importer-appellants and the partner were also set aside. The Tribunal highlighted that without a valid re-determination of value, there was no offence justifying confiscation or penalties.Conclusion:The Tribunal set aside the impugned orders, allowing the appeals. The findings emphasized the lack of corroborative evidence for the statements, improper application of valuation rules, and the necessity of adhering to judicial precedents and legislative intent in customs valuation and assessment proceedings.(Pronounced in Court on 25/02/2019)