2023 (6) TMI 598 - AT - Customs

Tribunal affirms no penalty in car import case, upholding declared value & customs benefits.

The appellate tribunal upheld the decision of the Commissioner (Appeals) in a case involving fraudulent import of a high-end car. The tribunal ruled that ... Confiscation of Vehicle - redemption fine - penalty - rejection of declared value - value of the vehicle was proposed to be re-determined under Rule 9 of the Customs Valuation Rules, 2007 on the basis of value available on Parker’s website - benefit of Notification No.21/2002-Cus dated 01.03.2002 - HELD THAT:- The adjudicating authority has held that the proposed value in the show cause notice is not acceptable. The said order was not challenged by the Revenue before any authority. Therefore, the said part of the order attains finality as there is no proposal in the show-cause notice to take valuation available from the manufacturer’s website. Therefore, the ld.Commissioner (Appeals) has rightly held that the value adopted by the ld.Adjudicating authority is not acceptable in the absence of any other value of the said goods available at that time. Therefore, the declared value is to be accepted - there are no infirmity in the above observations. Further, it is the fact that the vehicle was manufactured in June 2007 as declared by the manufacturer and the registration was in August 2007, which was manufactured by the respondent vide Invoice of June, 2007 and the Bill of Lading was also available of July 2007. In that circumstances, the vehicle was registered only for the purposes of transportation for the Port. Therefore, it cannot be held that the vehicle was old and used. In that circumstances, the ld.Commissioner (Appeals) has rightly given the benefit of Notification No.21/2002-Cus dated 01.03.2002 Sl.No.344. The goods are not liable for confiscation as the facts are not controverted by any cogent evidence - It is found that at the time of import, the vehicle was physically examined and found new one - the respondent is entitled to the benefit of Notification No.21/2002-Cus dated 01.03.2002 Sl.No.344. The vehicle is not liable for confiscation, redemption fine and penalty are not imposable - there are no infirmity in the impugned order and the same is upheld - The appeal filed by the Revenue is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the adjudicating authority could adopt a valuation (manufacturer's website value) that was not proposed in the show-cause notice under the Customs Valuation Rules read with Section 14 of the Customs Act, 1962. 2. Whether prices of identical/similar goods in other markets/territories (Parker's U.K. value) are admissible for determination of assessable value for import into India under the Customs Valuation Rules. 3. Whether the declared transaction value is admissible where documentary inconsistencies (alleged non-existence of exporter and differing invoice figures) were pointed out during investigation. 4. Whether the imported vehicle was 'used' such that benefit of Notification No.21/2002-Cus (concession/exemption) is forfeited, and consequently whether the vehicle is liable to confiscation, redemption fine and penalties. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of adopting a valuation not proposed in the show-cause notice Legal framework: The Customs Valuation Rules govern methods for determination of assessable value; procedural fairness requires that the basis of valuation proposed in a show-cause notice be communicated to the importer so that the importer may meet the case made. Precedent treatment: No specific precedent cited in the judgment; the Tribunal treated the requirement of proposal in show-cause notice as binding for adoption of an alternate valuation. Interpretation and reasoning: The adjudicating authority rejected both the declared value and the valuation method proposed in the show-cause notice, and then adopted a valuation based on the manufacturer's website value. The Tribunal noted that the adjudicating authority's chosen valuation was not the subject of the show-cause notice and that the Revenue did not challenge the adjudicating authority's rejection of the proposed valuation. The Tribunal held that a valuation not proposed in the notice cannot be adopted subsequently because it was not put to the respondent for rebuttal. Ratio vs. Obiter: Ratio - procedural requirement that a valuation must be proposed in the show-cause notice before it can be adopted as assessable value, and that failure to do so precludes adoption of that valuation. Conclusions: The Tribunal upheld the Commissioner-(Appeals) in holding that the adjudicating authority's valuation (manufacturer's website value) could not be taken as assessable value in the absence of any proposal in the show-cause notice; accordingly, the declared value had to be accepted where no other legally proposed value existed. Issue 2 - Use of prices from other territories/markets (Parker's U.K. value) for valuation Legal framework: Customs Valuation Rules and Section 14 require that valuation conform to specified methods; comparability of prices in other territories is subject to legal tests and relevance to import into India. Precedent treatment: None specifically cited; Tribunal followed the adjudicating authority's reasoning that values of goods sold in other markets cannot be the basis for valuation of identical/similar goods in India without satisfying rules. Interpretation and reasoning: The adjudicating authority proposed use of Parker's U.K. value because the vehicle's country model was U.K.; the Tribunal accepted the Commissioner-(Appeals) finding that such cross-market pricing is not an appropriate basis for valuation of imports into India where the goods were neither manufactured in nor imported from that territory. The Tribunal further noted that country-model designation alone does not render foreign market prices legally relevant for valuation in India. Ratio vs. Obiter: Ratio - prices in other markets/territories are not a valid substitute for proper valuation under the Customs Valuation Rules unless they meet criteria under those rules; mere designation of a country model does not suffice. Conclusions: The proposed reliance on Parker's U.K. value was not acceptable as a legal basis for assessable value in India; the Department's proposed method failed to conform to the statutory valuation framework. Issue 3 - Admissibility of declared transaction value amid documentary inconsistencies Legal framework: Transaction value is the primary method for valuation if it can be accepted as the price actually paid or payable, subject to verification and absence of reasons to reject it under the Valuation Rules and Section 14. Precedent treatment: No external cases cited; Tribunal applied standard evidentiary and procedural principles. Interpretation and reasoning: Although investigation raised questions (e.g., invoices with differing amounts, alleged non-existence of 'Lexus Japan (Export Division)' and alternative invoices indicating different sale amounts), the Commissioner-(Appeals) found that the Department failed to prove payments beyond those declared and that the adjudicating authority's alternate valuation was not put in the show-cause notice. The Tribunal further observed that the Revenue did not challenge the adjudicating authority's rejection of the proposed valuation and furnished no cogent evidence to controvert facts showing manufacture in June 2007 and import in July 2007. Consequently, absence of substantiated evidence to displace the declared transaction value warranted acceptance of the declared value. Ratio vs. Obiter: Ratio - where the Department fails to establish additional payments or cogent evidence to displace declared transaction value, and where alternative valuation bases were not properly proposed, the declared transaction value must be accepted. Conclusions: The declared value was accepted because the Revenue failed to legally displace it; absence of a legally proposed alternate value in the notice and failure to prove additional payments precluded rejection of the transaction value. Issue 4 - Whether the vehicle was 'used' and liable to confiscation and penal consequences; applicability of Notification No.21/2002-Cus and Board Circular No.1/2005-Cus Legal framework: Notification No.21/2002-Cus provides specified benefit(s) for new vehicles; consignments determined to be 'used' may be ineligible. Board Circular No.1/2005-Cus clarifies that temporary registration for movement from showroom/factory to airport does not defeat the benefit of the notification. Precedent treatment: The Tribunal relied on documentary facts and the Board circular; no external authority overruled or distinguished. Interpretation and reasoning: The Tribunal accepted evidence that the vehicle was manufactured in June 2007, imported in July 2007, and first registered in August 2007, with registration attributed to transportation from showroom/factory to port. The Commissioner-(Appeals) applied Board Circular No.1/2005-Cus to hold that such temporary registration for transportation does not render the vehicle 'used'. The Tribunal found that physical examination at import observed the vehicle to be new and that no cogent evidence contradicted these facts. Given these undisputed facts and the circular's guidance, the vehicle could not be treated as used; consequently, confiscation and penalties were not sustainable. Ratio vs. Obiter: Ratio - temporary/initial registration for transportation purposes does not render an otherwise new import 'used' for the purposes of Notification No.21/2002-Cus; hence confiscation and penalties cannot be imposed on that basis absent contrary cogent evidence. Conclusions: The vehicle was entitled to the benefit of Notification No.21/2002-Cus; the goods were not liable for confiscation and attendant redemption fine and penalties were not imposable. Cross-references and final disposition Interplay: Issues 1 and 3 are interrelated - procedural failure to propose an alternate valuation in the show-cause notice (Issue 1) directly affected the ability of the Department to displace the declared transaction value (Issue 3). Issue 2 reinforced why the Department's alternative valuation method was legally infirm. Issue 4 was resolved on uncontested factual findings and application of Board Circular No.1/2005-Cus. Final conclusion (ratio): The declared transaction value was to be accepted in the absence of any legally proposed alternate valuation and cogent evidence to displace it; cross-market prices and post hoc manufacturer-site valuation not placed in the notice could not be adopted. The imported vehicle was new for the purposes of Notification No.21/2002-Cus and not liable to confiscation, redemption fine or penalty.