Tribunal overturns assessment order, stresses procedural fairness, directs reevaluation under Customs Valuation Rules.

SEAGRAM MANUFACTURING LTD. Versus COMMR. OF CUS., NEW DELHI

SEAGRAM MANUFACTURING LTD. Versus COMMR. OF CUS., NEW DELHI - 2003 (154) E.L.T. 610 (Tri. - Del.) Issues Involved:

1. Challenge against the order in original dated 31-5-2002/4-6-2002.
2. Provisional assessment finalization and extra duty demand.
3. Applicability of Rule 6 of Customs Valuation Rules, 1988.
4. Principles of natural justice and procedural fairness.
5. Comparison of transaction values and the method of valuation.
6. Classification of imported goods under the correct tariff heading.
7. Quantity discrepancies in Bills of Entry.
8. Right to demonstrate transaction value under Rule 4(3)(b).

Issue-wise Detailed Analysis:

1. Challenge against the order in original dated 31-5-2002/4-6-2002:

The appellant, a wholly owned subsidiary of Seagram India Ltd., challenged the order passed by the Commissioner of Customs, ICD Tughlakabad, New Delhi, which finalized the provisional assessment of imports and confirmed an extra duty demand of Rs. 41,70,49,724/- against a proposed demand of Rs. 50,05,12,913/-.

2. Provisional assessment finalization and extra duty demand:

The Commissioner adjudicated two show cause notices covering imports from January 1995 to May 2001. The provisional assessment was finalized under Rule 6 of the Customs Valuation Rules, 1988, leading to the confirmation of an extra duty demand. The appellant argued that the order went beyond the show cause notice and violated the principles of natural justice.

3. Applicability of Rule 6 of Customs Valuation Rules, 1988:

The appellant contended that the show cause notice had proposed fixing the transaction value under Rule 8, rejecting Rule 6. However, the Commissioner finalized the assessment under Rule 6, which the appellant claimed was beyond the scope of the show cause notice and violated natural justice principles. The Commissioner concluded that similar brands of liquor imported by others in India during the material period justified using Rule 6.

4. Principles of natural justice and procedural fairness:

The appellant argued that the Commissioner's decision to apply Rule 6 without prior notice violated natural justice. The Tribunal agreed, stating that the appellant should have been given an opportunity to contest the proposal to apply Rule 6. The Tribunal emphasized the necessity of procedural fairness and the opportunity to respond to new grounds of assessment.

5. Comparison of transaction values and the method of valuation:

The Commissioner compared the appellant's brands (100 Pipers, Passport, Something Special) with similar brands from other importers and adopted the lowest CIF value for valuation. The appellant challenged this method, arguing that it did not satisfy the mandatory conditions of Rule 6, such as considering the transaction value of all similar goods imported at or about the same time and making necessary adjustments for differences in commercial levels, quantities, quality, reputation, and trademarks.

6. Classification of imported goods under the correct tariff heading:

The Commissioner classified the imported goods under Tariff Entry 2208.30 (whisky) instead of 2208.10 (compound alcoholic preparations). The appellant contended that the imported concentrate was not consumable in its imported form and required dilution, thus fitting under 2208.10. The Tribunal found merit in the appellant's contention, supported by a Bombay High Court decision, and held that the goods should be classified under Heading 2208.10.

7. Quantity discrepancies in Bills of Entry:

The appellant admitted discrepancies in the declared and received quantities under certain Bills of Entry but argued that the discrepancies were due to bona fide mistakes, not willful misdeclaration. The Tribunal noted that the actual quantities received would be considered for duty liability quantification but did not express an opinion on the intent behind the discrepancies.

8. Right to demonstrate transaction value under Rule 4(3)(b):

The appellant claimed the right to demonstrate that the declared transaction value closely approximated one of the values referred to in Rule 4(3)(b). The Revenue countered that there was no previously accepted test value for comparison, and thus Rule 4(3)(b) could not be applied. The Tribunal agreed with the Revenue, stating that without a previously accepted test value, the appellant could not prove that the relationship had not influenced the price.

Conclusion:

The Tribunal set aside the impugned order and remanded the matter to the Commissioner for fresh consideration, emphasizing the need to afford the appellant an opportunity to respond to the proposal to apply Rule 6. The Commissioner was directed to proceed under Rules 7 to 8 if Rule 6 was found inapplicable after considering the appellant's reply. The appeal was disposed of with instructions for procedural fairness and reevaluation of the classification and valuation issues.