2022 (1) TMI 812 - AT - Customs

Tribunal overturns penalties, emphasizes cross-examination in customs valuation disputes.

The Tribunal set aside the Commissioner's order, accepting the declared value of the barge as the transaction value. The appeals were allowed, and the ... Valuation of imported goods - Halani Star - rejected of declared Cost, Insurance and Freight (CIF) value value - redetermination of value under rule 9 of the 2007 Valuation Rules - opportunity of cross examination - confiscation of goods - redemption fine - penalty - HELD THAT:- What has to be seen under section 14(1) of the Customs Act, as amended in 2007, is the transaction value of the goods imported or exported for the purpose of customs duty and transaction value is stated to be the price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 of the Customs Act also makes it clear that the price actually paid or payable for the goods will not be treated as ‘transaction value’ where the buyer and the seller are related to each other - As per the first proviso to the amended section 14 (1), certain charges are to be added to the transaction value of the imported goods. It is, therefore, clear that while there was scope for addition of notional charges in the assessable value under the un-amended section 14 of the Customs Act, but after the actual sale price concept was introduced in the year 2007 on the basis of GATT guidelines and section 14 of the Customs Act was amended in 2007, any inclusion of notional charges seems to have lost its relevance and only actual cost incurred by the buyer is required to be considered. In the present case, the Barge was earlier on charter to M/s. Afcons Gunanusa Joint Venture who had imported it under a Bill of Entry dated October 22, 2010 with the declared value of ₹ 23.41 crores, which value was accepted by the Department. The declared value of the Barge in the Bill of Entry dated August 25, 2011 is US Dolla₹ 6,000,000.00, freight US Dolla₹ 5,000 and insurance US Dolla₹ 29,657.00 totaling US Dolla₹ 6,034,657.000 (CIF) equivalent to ₹ 26,97,49,167/- - contention of the appellant is that it had correctly declared the transaction value as the assessable value for the purposes of customs duty and it is also not the case of the Department that the assessable value declared by the appellant is not the transaction value since the entire case of the Department is based on the valuation report submitted by the Chartered Engineer. The second report submitted by the Chartered Engineer states that during their re-inspection, they had gathered complete vessel particulars regarding capacities and other technical specifications, which were not made available during the initial inspection. The description of the Barge and its equipment is same in both the valuation reports and the Chartered Engineer had also inspected the Barge before the first report was submitted - What also needs to be noted is that the appellant had purchased the Barge at US Dolla₹ 6,000,000.00 (FOB) and earlier the same Barge was imported by M/s. Afcons Gunanusa Joint Venture under a Bill of Entry dated October 22, 2010 for ₹ 23.41 crores, which value was accepted by the Department. The value of the Barge was mentioned as ₹ 26.82 crores in the Bill of Entry dated August 25, 2011 submitted by the appellant. The cross examination is a valuable right available to an assessee and it cannot be denied in an arbitrary manner. In the present case, as noticed above, the Commissioner has rejected the request made by the appellant for cross examination of the Chartered Engineer only for the reason that the appellant had stated that the Barge may be re-inspected by the same Chartered Engineer. If the report was found to be faulty by the appellant, the Department should have recorded the statement of the Chartered Engineer and also permitted the appellant to cross examine him, so as to determine the correct facts. When neither the Chartered Engineer was examined nor the appellant was not permitted to cross examine the Chartered Engineer, the second report submitted by the Chartered Engineer cannot be relied upon - the value declared by the appellant should have been treated as a transaction value and no reliance could have been placed on the second report of the Chartered Engineer for enhancing the value of the Barge. It is also not the case of the Department that any additional consideration was paid by the appellant to the seller of the Barge. The order passed by the Commissioner cannot be sustained and is set aside. The declared value of the Barge cleared through the Bill of Entry dated August 25, 2011, therefore, deserves to be accepted - Appeal allowed. Issues Involved:1. Whether the declared CIF value of the imported barge 'Halani Star' was willfully misdeclared.2. Whether the declared value should be enhanced and duty demanded on the enhanced value.3. Liability of the barge to confiscation due to misdeclaration of value.4. Imposition of penalties on the appellant and the Managing Director.Detailed Analysis:1. Misdeclaration of CIF Value:The primary issue was whether the declared CIF value of the barge 'Halani Star' was willfully misdeclared. The appellant declared the CIF value based on the invoice, MOU, Bill of Sale, Insurance, and Chartered Engineer Certificate, which stated a value of USD 6,034,657.00 (CIF), equivalent to Rs. 26,97,49,167/-. The Department believed the vessel was grossly undervalued and conducted a re-inspection, which resulted in a revised value of USD 7,385,500.00 (FOB). The Commissioner noted that the initial valuation did not include certain equipment values, leading to the conclusion that the declared CIF value was liable for rejection under Rule 12 of the 2007 Valuation Rules.2. Enhancement of Declared Value and Duty Demand:The Commissioner re-determined the value of the barge under Rule 9 of the 2007 Valuation Rules, based on the second report from the Chartered Engineer, which included previously omitted equipment values. The revised CIF value was determined to be USD 7,478,657.00 (Rs. 33,42,95,968/-). The appellant argued that the transaction value declared was correct and that the second report was flawed. The Tribunal found that the vessel particulars were consistent in both reports and that the description of the barge and its equipment was identical. Thus, the declared value should have been treated as the transaction value.3. Liability to Confiscation:The barge was seized under Section 110 of the Customs Act but was provisionally released upon payment of customs duty as per the second report. The Tribunal noted that the appellant had correctly declared the transaction value and that the Department's reliance on the second report was misplaced. The Tribunal emphasized that cross-examination of the Chartered Engineer was a valuable right, which was denied, thus making the second report unreliable.4. Imposition of Penalties:The Commissioner imposed penalties under Sections 114A and 112(a) of the Customs Act. The appellant argued that there was no misdeclaration or intent to evade duty, and the valuation issue arose due to the Chartered Engineer's report. The Tribunal agreed, stating that the Department did not establish that the appellant influenced the valuation or paid additional consideration. Consequently, the penalties were deemed unjustified.Conclusion:The Tribunal set aside the Commissioner's order, accepting the declared value of the barge as the transaction value. The appeals were allowed, and the penalties imposed on the appellant and the Managing Director were overturned. The Tribunal highlighted the importance of cross-examination and the reliability of the initial valuation report, emphasizing the need for procedural fairness in customs valuation disputes.