2023 (8) TMI 1055 - AT - Customs

Tribunal rules in favor of importer in case of alleged undervaluation of imported goods

M/s Sahajahan Majumdar Versus Commissioner of Customs (Prev.) Shillong

The tribunal held that the demand based on alleged undervaluation of cement imported from Bangladesh was not sustainable due to valid reasons for price ... Undervaluation of imported goods - cement imported from Bangladesh - it was alleged by Revenue that the declared MRP of the cement imported by the Appellant was much less as compared to the MRP declared on the cement imported from the same manufacturer through other ports - original assessment of the Bills of entry not challenged - HELD THAT:- It is observed that different lots of the impugned goods were imported by different importers through different land ports though the goods were manufactured by the same manufacturer in Bangladesh. The Appellant stated that the MRP printed on the goods imported through other ports can be different as the Place of importation itself was different and hence difference in MRP is quite natural - It is observed that MRP on the same item is decided in consideration of a number of factors besides landing cost and duty element. In the instant case the goods were imported through different ports. That itself is a valid reason for the difference in price. There is no evidence to suggest that the goods so imported through different ports under different MRP were being sold at same price. Hence, the price difference cannot be attributed to suppression of the value by the Appellant. Accordingly, the demand is not sustainable. The self-assessment of the Bills of Entry by the importer was not challenged by the department. The Hon’ble Supreme Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [2019 (9) TMI 802 - SUPREME COURT], has held that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act. It is observed that the ratio of the above said decision is squarely applicable in this case - The impugned order passed demanding differential duty without challenging the original assessment of the Bills of entry is not sustainable. Hence, the demand is not sustainable on this count also. ISSUES PRESENTED AND CONSIDERED 1. Whether disparities in MRP printed on identical goods manufactured by the same foreign manufacturer but imported through different land ports can, without more, support a finding of undervaluation for levy of Additional Duty of Customs (CVD) on MRP basis. 2. Whether a departmental demand for differential CVD can be sustained where the importer's self-assessed Bills of Entry were not challenged or modified by the department prior to issuance of the demand. ISSUE-WISE DETAILED ANALYSIS - Issue 1: MRP disparities and undervaluation Legal framework: Levy of Additional Duty of Customs (CVD) on MRP basis requires correct declaration of MRP; undervaluation or suppression of value may be alleged where declared MRP is lower than true MRP leading to lower CVD liability. Precedent Treatment: The Tribunal considered the factual matrix and applied established principles that MRP determination may reflect multiple commercial factors and that differences across consignments are not ipso facto evidence of suppression. Interpretation and reasoning: The Court examined that (a) identical goods from the same manufacturer arrived in different lots via different land ports; (b) MRP fixation takes into account factors beyond landing cost and duty (e.g., place of importation, local distribution, market considerations); (c) there was no evidence that goods bearing different MRPs were actually sold at a uniform price or that more than one MRP printed on each bag existed; and (d) therefore price differences attributable to different ports and independent lot decisions cannot be equated with intentional undervaluation by the importer. The Court found the departmental approach impermissibly to treat different printed MRPs on separate consignments as a single datum demonstrating suppression. Ratio vs. Obiter: Ratio - where differing MRPs on separate consignments imported through different ports are explained by legitimate commercial or logistical differences and no evidence shows actual sale at a higher price, such disparities do not establish undervaluation for CVD purposes. Obiter - general observations on factors influencing MRP fixation beyond the facts of the case. Conclusion: The demand based on alleged undervaluation founded solely on comparison with MRPs of consignments imported through other ports was unsustainable; price difference could not be attributed to suppression by the importer. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Finality of self-assessed Bills of Entry and competence to demand differential duty Legal framework: Statutory regime recognizes self-assessment of Bills of Entry by importers; post-assessment modifications or demands for differential duty ordinarily require that the original assessment be challenged or modified under the appropriate statutory provisions before a demand can be sustained. Precedent Treatment (followed): The Tribunal applied the principle (as articulated by the Supreme Court) that a departmental demand for differential duty cannot be raised without first challenging/modifying the original assessment or self-assessment through the prescribed proceedings; in absence of such challenge, the self-assessed order remains extant and cannot be set aside by issuing a demand notice under the guise of a later proceeding. Interpretation and reasoning: The Court noted (a) the Bills of Entry in question were self-assessed and were not subject to departmental modification or reassessment prior to issuance of the Show Cause Notices; (b) the relevant precedent prevents the department from sidestepping the statutory mechanisms for modifying assessment and directly demanding differential duty; and (c) consequently the impugned demand is procedurally and legally infirm. Ratio vs. Obiter: Ratio - where self-assessed Bills of Entry have not been challenged or modified by the department by recourse to the appropriate statutory provisions, a subsequent demand for differential duty is unsustainable. Obiter - explanatory remarks regarding the interplay of assessment, refund claims and statutory amendment context. Conclusion: The demand for differential CVD without prior challenge or modification of the self-assessed Bills of Entry was not sustainable; this independently warranted setting aside the impugned orders. INTERRELATION OF ISSUES Both issues were independently dispositive: (i) absence of evidentiary foundation linking MRP differences to suppression negated the substantive undervaluation claim; and (ii) procedural finality of unchallenged self-assessments barred the department's demand. The Court applied both grounds conjunctively to set aside the demand. FINAL DISPOSITION The Court set aside the impugned orders and allowed the appeals, concluding that the departmental demand was unsustainable on both the merits (no proof of undervaluation given differing ports and legitimate reasons for MRP variance) and on procedural law (self-assessed Bills of Entry not challenged or modified before demand).