2023 (7) TMI 1193 - AT - Customs

Tribunal overturns Appeals Commissioner's car value decision, upholds penalties, and partially accepts appellant's challenge.

M/s. Lakshami & Co. Versus The Commissioner of Customs, (Seaport – Import) Custom House, Chennai

The Tribunal set aside the Commissioner (Appeals) decision to enhance the car's value, stating that in the absence of a Department appeal, the valuation ... Valuation of imported goods - Petrol Car (unused) - used split air conditioner compressors without gas - rejection of declared value - redetermination of the value - Confiscation - redemption fine - penalty - HELD THAT:- The appellant was not put to notice with regard to the issue of enhancing the declared value of the car. Thus, without having an opportunity to defend the enhancement of the value of the car, as decided by the original authority, the Commissioner (Appeals) has revised the value of the car to demand differential duty. It is brought out from the records that the original authority had accepted the value declared for the car, being a second-hand car and not a popular branded car. The declared value of the air conditioner compressors was rejected and re-determined as USD 300 (C&F). Though the Department has not filed any appeal against such order, the Commissioner (Appeals) has, without giving any notice to the appellant, enhanced the value of the car so as to demand differential duty. In the absence of an appeal filed by the Department, the Commissioner (Appeals) ought not to have interfered with the findings with regard to the valuation - the order passed by the Commissioner (Appeals) revising the value of the car requires to be set aside. The Commissioner (Appeals) has reduced the penalty to Rs.25,000/- - the redemption fine of Rs.25,000/- or the reduced penalty of Rs.25,000/-, not disturbed - impugned order is modified to the extent of setting aside the enhancement of the value of the imported car - appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether an appellate authority can enhance the assessed value of imported goods (car) in appeal proceedings when the Department has not filed a cross-appeal against the original authority's acceptance of declared value. 2. Whether enhancement of declared value by the appellate authority without prior notice to the importer/officer contravenes the procedural safeguards under Section 128A of the Customs Act, 1962. 3. Whether the adjudicating authority's re-determination and confiscation/redemption and imposition of penalty for import of second-hand goods in alleged violation of Foreign Trade Policy conditions was sustainable, and whether the reduction of penalty by the Commissioner (Appeals) was proper. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Appellate enhancement of value without Department's cross-appeal Legal framework: The appellate function is exercised in the context of Customs adjudication where an original authority's findings on valuation can be challenged by parties. Principles preventing an appellant from being placed in a worse position on appeal (without a departmental cross-appeal) are relevant. Precedent treatment: The decision relied upon by the appellant (Servo Packaging Ltd. v. CESTAT, Chennai) establishes that an assessee should not be put in a worse position for having filed an appeal unless the Department has filed a cross-appeal. Interpretation and reasoning: The Tribunal notes the original authority accepted the declared value of the imported car and the Department did not appeal that acceptance. The Commissioner (Appeals) nonetheless enhanced the value suo motu and directed quantification of differential duty. The Tribunal reasons that improving the Department's case by enhancement in appeal, absent any departmental challenge, results in the appellant being placed in a worse position contrary to appellate fairness. Ratio vs. Obiter: Ratio - An appellate authority should not enhance valuation to the detriment of the appellant where the Department has not appealed the original finding accepting the declared value. Conclusion: Enhancement of the car's value by the Commissioner (Appeals) in the absence of a departmental appeal is unsustainable and is set aside. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Requirement of notice under Section 128A before enhancing value Legal framework: Section 128A (procedural safeguards) requires that parties be put on notice regarding issues on which adverse findings are to be made so that an opportunity of being heard is given before adverse determinations are recorded. Precedent treatment: The Tribunal relies on the statutory requirement of notice and opportunity to defend when valuation is to be questioned or enhanced on appeal. Interpretation and reasoning: The record showed the appellant was not put on notice by the Commissioner (Appeals) regarding enhancement of the declared value of the car. The Tribunal finds that altering valuation without affording the importer an opportunity to defend contravenes Section 128A principles and procedural fairness. The absence of notice deprived the importer of the chance to present evidence or explanation supporting the declared value. Ratio vs. Obiter: Ratio - An appellate revision of declared value that increases duty cannot be validly made without giving notice and opportunity to the importer under the procedural safeguards embodied in Section 128A. Conclusion: The Commissioner (Appeals)'s enhancement of value without notice was procedurally impermissible and must be set aside. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Confiscation, redemption fine and penalty for import of second-hand goods and appellate reduction of penalty Legal framework: Customs provisions permit confiscation of goods imported in contravention of import conditions and levy of redemption fine under Section 125; penalties may be imposed under Section 112(a) for prohibited or irregular imports. Import of used vehicles is governed by Foreign Trade Policy / Licensing Note conditions which, if breached, can justify confiscation and penalty. Precedent treatment: The Tribunal applies established principles that confiscation and penalties are fact-sensitive and dependent on proof of breach of import conditions and correctness of valuation. Interpretation and reasoning: The original authority concluded the vehicle was imported in violation of import conditions (not registered for use, sold at auction prior to importation) and ordered confiscation with option of redemption on payment of Rs.25,000 and imposed a penalty of Rs.3,00,000 under Section 112(a). The Commissioner (Appeals) found the penalty excessive and reduced it to Rs.25,000 but did not disturb the order of confiscation/redemption fine. The Tribunal, having set aside the appellate enhancement of value (Issue 1 & 2), nonetheless does not disturb the redemption fine of Rs.25,000 nor the reduced penalty of Rs.25,000 as being reasonable in the circumstances. Ratio vs. Obiter: Ratio - Reduction of penalty by the appellate authority was within the appellate discretion and is not interfered with where the Tribunal finds it reasonable; the redemption fine imposed remains intact. Obiter - The Tribunal's treatment assumes correctness of the original factual finding of violation by the original authority, which was not challenged by the Department on appeal. Conclusion: The Tribunal upholds the redemption fine of Rs.25,000 and the reduced penalty of Rs.25,000; the higher penalty originally imposed is set aside by implication through the appellate reduction which the Tribunal affirms. Cross-references and Consolidated Outcome The Tribunal's reasoning on Issues 1 and 2 are interlinked: procedural fairness under Section 128A and the prohibition on worsening the appellant's position in appeal without a departmental cross-appeal converge to invalidate the appellate enhancement of value. Following this, the Tribunal affirms the Commissioner (Appeals)'s reduction of monetary penalty and maintains the redemption fine, while expressly setting aside only the enhancement of the car's value made by the Commissioner (Appeals).