2023 (9) TMI 1388 - AT - Customs

Appeal Dismissed for Non-Attendance & Misdeclaration of Goods

The Tribunal dismissed the Appeal due to the Appellant's non-attendance at hearings, misdeclaration of goods regarding origin and value, and upheld the ... Mis-declaration of imported goods - Import of new footwear - Non-declaration of imported goods as stock-lot - country of origin of goods - valuation of goods - HELD THAT:- The OIO passed by the Adjudicating Authority who has passed the OIO after granting the Personal Hearing on 02/03/2011 which was attended by two Consultants on behalf of the Noticee. Non-declaration of imported goods as stock-lot - HELD THAT:- The notice, at the time of submission of B/E and the concerned Invoice, did not declare the imported goods as stock-lot. But later on, they produced a copy of a correspondence with the seller of the goods where it had been mentioned that the goods they wanted to import were stock losts. Now, from the study of the case and reply of the notice, it is observed that the notice imported the goods taking the opportunity of economic recession in European Countries which were making hectic efforts to sell their products at a reduced price with some conditions - the factor that worked behind the import of shoes at a uniform rate in this case irrespective of size and quality was only to get the benefit of stock clearance at a reduced sale price by the exporter who faced certain problems related to market economy. This is not a case of sale of seconds or old goods. The notice also admitted in their written submission that they imported new footwear and also from the correspondence made by the importer with paolo Sanini Spol, the exporter, there are no mention that the footwear so imported as of second-hand quality. Country of origin of goods - HELD THAT:- The noticee in the B/E declared the country of origin of the product as China. However, during joint examination of the consignment at ICD, it was observed by the departmental officers that there was only a nominal number of footwear that were of Chinese origin. Most of the goods were of Austrian origin - the notices therefore had misdeclared their goods as goods of Chinese origin. Valuation of goods - HELD THAT:- The notice declared the goods as stock lot and submitted in the B/E the discounted value as transaction value. Since the goods have been, as discussed before, not stock lots but new ones and are liable to be sold in India as new ones, therefore, it is observed that the value shown in the B/E was not the real value of the imported goods but a very much reduced value and had no nexus with actual sale price of the goods. Therefore, transaction value in terms of Section 14 of the Customs Act, 1962 read with Rule 3(1) of CVR’07 was not applicable - residual Rule 9 of CVR’07 is applicable in this case. The Adjudicating Authority has gone into considerable details of the consignment imported and has passed a very considered Order justifying all his findings - there are no reason to interfere with the same - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal should proceed to decide the appeal despite the absence of the Appellant at the hearing. 2. Whether the imported footwear constituted 'stock-lot'/second-hand goods or brand-new goods for purposes of customs classification and valuation. 3. Whether the declaration of country of origin as China was correct in light of departmental examination showing majority Austrian (and Italian) origin. 4. Whether the transaction value declared in the Bill of Entry was the real transaction value under Section 14 of the Customs Act and whether the Customs Valuation Rules (CVR 2007) applied - specifically, whether residual Rule 9 ought to be applied. 5. Whether the adjudicating authority complied with principles of natural justice in arriving at demand and confirmation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Tribunal proceeding despite Appellant's non-appearance Legal framework: Appellate tribunals possess inherent power to proceed with hearing/determination where a party fails to appear, subject to fair hearing and record considerations. Precedent treatment: No specific precedent cited in the judgment on procedure; the Tribunal relied on established discretion to proceed in interest of justice. Interpretation and reasoning: The Tribunal noted repeated non-attendance by the Appellant on prior dates, indicating lack of interest in prosecuting the appeal. Nonetheless, in the interest of justice the Tribunal examined the record and heard the Authorized Representative for the revenue. Ratio vs. Obiter: Ratio - The Tribunal may proceed and decide an appeal on merits notwithstanding appellant's absence where record permits fair adjudication and the other party is represented. Conclusion: The Tribunal validly proceeded to dispose of the appeal on the merits despite the Appellant's non-appearance. Issue 2 - Characterisation: stock-lot/second-hand versus brand-new goods Legal framework: Proper characterisation of imported goods (stock-lot/seconds/used v. new) bears on valuation and correct declaration; findings must be based on documentary evidence and physical examination. Precedent treatment: The adjudicator applied fact-based inquiry; no contrary binding precedent overruled. Interpretation and reasoning: The Adjudicating Authority examined correspondence, invoices, and the physical consignment. Although a seller communication later mentioned 'stock lot,' the Authority found the importer's own admissions and examination of goods supported that the footwear were brand-new offered at discounted prices due to market conditions (economic recession) rather than being second-hand or seconds. The Authority reasoned that uniform low pricing across sizes/qualities reflected a clearance sale of new goods, not sale of seconds or used items; importer's written submissions acknowledged import of new footwear and correspondence lacked any assertion that goods were second-hand. Ratio vs. Obiter: Ratio - On facts, the goods were brand-new and not stock-lot seconds; this factual finding justifies valuation and demand adjustments. Conclusion: The Tribunal upheld the Adjudicating Authority's factual conclusion that the goods were new, not second-hand stock-lots, and that the 'stock-lot' label did not reflect the true nature of the merchandise. Issue 3 - Country of origin declared as China but consignment largely Austrian/Italian Legal framework: Correct declaration of country of origin is material for classification, valuation, and regulatory/compliance obligations; misdeclaration may attract consequences where contradicted by evidence. Precedent treatment: The Adjudicating Authority relied on and applied reasoning from a Tribunal decision (Surabhi Supreme Marbles & Granites) which held that goods must be treated as originating from the country where they were manufactured when documentary evidence supports that finding. Interpretation and reasoning: The Authority observed that the Bill of Entry declared China as country of origin, but physical inspection and inventory revealed majority of footwear were of Austrian (and Italian) origin. The importer's explanations were inconsistent - initially relying on seller's statement that goods were made in China, later referring to a certificate from Slovak Chamber of Commerce. The Authority found the importer's position untenable in light of physical evidence and the cited Tribunal precedent, concluding the goods were misdeclared as Chinese origin. Ratio vs. Obiter: Ratio - Where physical examination and documentation indicate a different manufacturing origin, the declared country of origin cannot be accepted; findings of origin must accord with evidence. Conclusion: The Tribunal affirmed the finding that the goods were predominantly of Austrian (and Italian) origin and that the declaration of Chinese origin was not tenable. Issue 4 - Transaction value and applicability of Customs Valuation Rules; applicability of residual Rule 9 Legal framework: Valuation under Section 14 (transaction value) and CVR 2007 (Rules 3-9) requires that declared transaction value represent the real price paid/ payable with nexus to the imported goods; where transaction value cannot be applied or other rules fail, residual Rule 9 may be applied. Precedent treatment: The Authority applied the statutory scheme of CVR'07 and reasoning in paras of its order; no binding precedent contrary to application of residual rule was relied upon. Interpretation and reasoning: The Authority found the value declared in the Bill of Entry reflected a discounted price asserted as stock-lot value; having found the goods to be new and not genuine stock-lots, the declared discounted value lacked nexus with the actual sale price for such new goods. Transaction value under Section 14/Rule 3(1) therefore did not apply. Further, Rules 4-8 could not be applied because comparable values for Austrian-origin goods were not available from known sources and there was no market price at the place of importation (Durgapur) - the goods were not sold in ordinary wholesale markets there. On these facts, the Authority applied residual Rule 9 for valuation. The Tribunal noted the Authority's detailed reasoning and accepted the step-by-step exclusion of Rules 3-8 leading to Rule 9. Ratio vs. Obiter: Ratio - Where declared transaction value is unrepresentative (no nexus with real value) and other comparative/alternative CVR methods cannot be applied due to lack of available data, residual Rule 9 may be invoked to determine customs value. Conclusion: The Tribunal sustained the Adjudicating Authority's conclusion that transaction value was not applicable, Rules 4-8 were inapplicable, and residual Rule 9 of CVR 2007 properly applied to determine value for customs purposes. Issue 5 - Compliance with principles of natural justice Legal framework: Adjudicating authorities must comply with principles of natural justice by granting notice and an opportunity of personal hearing before passing orders affecting rights/liabilities. Precedent treatment: The Tribunal assessed procedural record rather than citing authority; it noted the Adjudicating Authority recorded grant of personal hearing and attendance by representatives/consultants. Interpretation and reasoning: The OIO documented that a personal hearing was held on a specified date and attended by two consultants on behalf of the noticee; the Adjudicating Authority recorded detailed findings and reasons on each contested point. The Tribunal found the adjudicatory process to be reasoned and to have followed natural justice. Ratio vs. Obiter: Ratio - Where the record shows grant of hearing, attendance by representatives, and reasoned findings, principles of natural justice are satisfied. Conclusion: The Tribunal found that the Lower Authorities observed natural justice and rendered a reasoned adjudication; no interference was warranted. Overall Disposition The Tribunal, having reviewed the detailed findings of the Adjudicating Authority on characterisation, origin, valuation and procedural compliance, declined to interfere and dismissed the appeal.