Court Overturns Order: Improper Use of 'Deductive Value' in Customs Valuation of Imported Cosmetics Highlighted.

The appeal by M/s Lakyou Beauty India was allowed, and the impugned order was set aside by the court. The court found the application of the 'deductive value' method under the Customs Valuation Rules to be improper. The rejection of the declared value of imported cosmetics based on retail selling price without proper scrutiny of the manufacturer's invoice and local sale invoices was deemed incorrect. The court highlighted that the conditions for using the 'deductive value' method were not fully met, and the rejection under rule 12 lacked necessary justification.

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Issues involved:
The rejection of challenge to the order revising the assessable value of cosmetics imported under Customs Valuation Rules and the correctness of rejection under rule 12.

Summary:
1. The appeal arose from the rejection of challenge by M/s Lakyou Beauty India regarding the revising of the assessable value of imported cosmetics under Customs Valuation Rules. The goods were required to carry the 'retail selling price (RSP)' as per Legal Metrology Act, 2009. A multiplier of 0.3515 was applied to the intended selling price to arrive at the revised value.

2. The issue in dispute was the correctness of rejection under rule 12 of Customs Valuation Rules and the adoption of the 'deductive value' method. The appellant argued that the manufacturer's invoice should have sufficed for accepting the declared value, citing relevant case law.

3. The appellant contended that the rejection of declared value based on retail price in the Indian market was erroneous. They argued that without evidence of contemporaneous imports at a higher price, the Customs Valuation Rules should not have been applied. The onus of establishing undervaluation was emphasized.

4. The 'deductive value' method was defended by the Authorized Representative, stating that the 'first check' revealed a gap between the intended selling price and declared price. Reasonable abatement towards discount and profit margins was applied, leaving no room for grievance.

5. The original authority initiated proceedings based on a report showing a gap between declared value and retail price. The rejection of declared value under rule 12 was supported by the investigators' findings. The 'deductive value' was calculated based on local sale invoices of specific goods, which was deemed improper as different goods were treated alike without justification.

6. The ascertainment of abatement from local sale prices without justification was deemed unacceptable. The conditions for the 'deductive value' method were not fully met, and the rejection of declared value without proper scrutiny was considered a breach of legal requirements.

7. The rejection of declared value without proper scrutiny of manufacturer's invoice and failure to acknowledge local sale invoices as evidence of 'transaction value' were highlighted as deviations from legal requirements. The resort to deductive value for assessment was deemed incorrect.

8. Consequently, the impugned order was set aside, and the appeal was allowed based on the improper application of the 'deductive value' method under Customs Valuation Rules.

(Order pronounced in the open court on 05/07/2023)

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