2024 (3) TMI 1053 - AT - Customs

Insurance value alone cannot justify rejection of declared value for imported goods without proof of actual payment

CESTAT Kolkata allowed the appeal regarding undervaluation of imported Patchouli Oil. The Department rejected declared assessable value citing higher ... Undervaluation of imported goods - Patchouli Oil - insured value of the goods was higher than the invoice value declared for clearance of the goods - ascertainment of value of contemporaneous imports of Patchouli Oil of Singapore origin - assessable value declared by the appellant in the said two Bills of Entry were rejected on the ground that the insured value of the product was higher than the value declared in the invoice - period from 2005-06 - HELD THAT:- It is observed that the value declared by the appellant for insurance purpose has no relevance for the purpose of assessment of customs duty. There is no evidence on record produced by the investigating officers to the effect that the appellant had actually paid the insured value for the purpose of importation of the impugned goods. Thus, there was no basis for rejection of the declared value by the Department. The quality of Patchouli Oil depends on different chemical factors including alcohol contents. The imports imported by the appellant has been assessed and customs duty has been demanded at the time of importation of the goods. The assessments have not been challenged and they became final. Subsequent to its clearance, factors such as higher value adopted for insurance cannot be a reason for rejection of the assessable value declared - After rejecting the declared assessable value, the Department has adopted the price of contemporaneous import of similar goods to enhance the value declared, without adducing any evidence to the effect that the goods are comparable. There is no evidence available on record to indicate that the Patchouli Oil imported by the appellant and the contemporaneous imports whose price has been adopted by the Department are similar in all respects. The demand of differential duty along with interest confirmed in the impugned order is not sustainable and accordingly, we set aside the same. Since, the demand of duty is not sustainable, the question of imposing penalty on the appellant importer does not arise. Imposition of personal penalty on Shri Subhas K Naik - HELD THAT:- There is no finding in the impugned order regarding the role played by the appellant in the alleged under valuation. It has been alleged that Shri Subhash Khandubhai Naik has visited the supplier and fixed the price over telephone and accordingly, the lower price was fixed due to his personal influence. In view of the discussions, the allegation of under valuation is not substantiated. Accordingly, penalty imposed against the Director of the appellant-importer cannot be sustained and the same is accordingly set aside. The rejection of assessable value under the above two Bills-of-Entry is legally not sustainable. Accordingly, the differential duty along with interest and penalty confirmed in the impugned order set aside - the penalty imposed on the Director of the appellant-company set aside. Appeal allowed. Issues Involved:1. Whether the assessable value declared by the appellant for Patchouli Oil imports was correctly rejected.2. Whether the differential duty demand based on contemporaneous imports was justified.3. Whether the imposition of penalties on the appellant and its Director was warranted.Summary:Issue 1: Rejection of Assessable ValueThe officers of the Directorate of Revenue Intelligence (DRI), Kolkata, based on intelligence, conducted searches and found documents indicating undervaluation of Patchouli Oil imports by the appellant. The insured value of the goods was higher than the invoice value declared for clearance of the goods. The appellant argued that their Patchouli Oil had less alcohol content compared to others, making the prices non-comparable. They also contended that the customs authorities did not test the goods at the time of importation and accepted the declared value. The Tribunal observed that the value declared for insurance purposes has no relevance for customs duty assessment and that there was no evidence that the appellant paid the insured value for importation. The Tribunal concluded that the rejection of the declared value by the Department was legally unsustainable.Issue 2: Differential Duty DemandA Show Cause Notice was issued demanding differential Customs Duty based on the price of contemporaneous imports. The appellant argued that the enhancement of value from USD 3.25/- per kg to USD 33.50/- per kg was unsupported by evidence. The Tribunal noted that the value of Patchouli Oil depends on parameters like alcohol content, specific gravity, and refractive index. The investigation did not provide evidence that the contemporaneous imports had the same parameters as the appellant's goods. The Tribunal held that the rejection of the declared price and the subsequent demand for differential duty were not sustainable.Issue 3: Imposition of PenaltiesThe appellant contended that there was no deliberate violation of the law warranting penalties. The Tribunal observed that there was no finding regarding the role played by the appellant's Director in the alleged undervaluation. The allegation that the Director influenced the price was not substantiated. The Tribunal held that the penalty imposed on the Director could not be sustained.Conclusion:The Tribunal set aside the differential duty demand along with interest and penalties, stating that the rejection of the assessable value was legally unsustainable. The appeals filed by the appellants were allowed.