2024 (5) TMI 528 - AT - Customs

Customs valuation rules improperly applied to confiscated goods, discriminatory treatment between importers criticized

Manish Vanigota, Sagar Jalinder Ghare, Abdul Wahab Abdul Kader Dokadia, Mubin Mohammad Asif Shaikh, Mohd Ali, Ismail Tambawala and Sachin Kantilal Patel Versus Commissioner of Customs, Nagpur

CESTAT Mumbai held that customs valuation procedures under the Customs Valuation Rules 2007 were improperly applied to confiscated goods. The tribunal ... Seeking re-export of goods - Absolute confiscation of goods subject to prohibition on import - breach of ‘intellectual property rights’ - Penalty u/s 112, 114AA Or 117 of Customs Act - furnished false declarations - enhancement of valuation - Cosmetic goods - Declaration of two lots of miscellaneous articles and one each of computer parts and accessories - Validity of notice - value’ of ‘identical’ and ‘similar’ goods - HELD THAT:- There is no finding that the value of the declared goods in the consignments of M/s Ghare Impex had been subjected to the requirements of rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 or that rule 3(4) therein was operable. It is clear that the declared value of the declared goods in the consignment of M/s Creative Sales and M/s Unique Impex could not have been less than any ‘conceivably’ actual value and, more particularly, as these were found to be ‘second hand’ upon examination. The value of declared goods have not been demonstrated as meriting re-valuation. We are also unable to fathom the discrimination in determination of the duty liability of M/s Ghare Impex, whose goods were almost entirely confiscated and ordered for destruction, while not effecting the same exercise for the other two importers similarly situated. The value of undeclared goods are not relevant to the proceedings except for imposition of penalty owing to absolute confiscation as well as to the only plea of appellants that goods may be allowed to be re-exported. There is no requirement for duty to be levied in either contingency. Nonetheless, the rigour of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is not to be discarded merely because there is no intent to levy duty as the definition of ‘value’ in section 2 does not offer scope for such dilution. Furthermore, the notice, as well as the impugned order, is bereft of any discussion, in relation to the declared and undeclared goods, on the availability of ‘identical’ or ‘similar’ goods that was purportedly used as reference by the ‘approved valuer’ when the adjudicating authority had already recorded the inevitability of by-passing rule 4 and rule 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It is inconceivable that such ‘prohibited goods’ are available in the market for an acceptable evaluation of price that the ‘approved valuer’ appears to have resorted to. It would appear that the reliance placed on the report of ‘valuer’ to the exclusion of the responsibility devolving on the ‘proper officer’ opting for ‘deductive value’ has rendered the valuation exercise to be untenable in its entirety and, in the absence of any factual narration in the notice, not amenable to fresh determination. Hence, the confiscation u/s 111(m) of Customs Act, 1962 for variation from declared value must be held to lack sanction of law as also the value arrived at by the adjudicating authority. Thus, the impugned order is modified to the extent that the goods absolutely confiscated therein are held to be liable for confiscation and, in acceptance of request for such by the importers, are permitted to be re-exported without being entailed by any other detriment u/s 125 of Customs Act, 1962. The goods permitted for re-export are, except for those in alleged breach of ‘intellectual property rights’, held as liable to confiscation supra but, in the absence of any evidence of any role played by any of the appellants in their import, recourse to section 112 of Customs Act, 1962 is not validated by law. The undeclared goods intended to be cleared for home consumption are, to the extent not absolutely confiscated, held as liable to confiscation u/s 111(l) of Customs Act, 1962 but permitted to be redeemed on payment of fine that erases the ‘margin of profit’ and subject to penalty on the importer to the extent provided for in section 112 of Customs Act, 1962; this will entail determination of value for assessment u/s 14 of Customs Act, 1962 which the ‘proper officer’ u/s 17 of Customs Act, 1962 shall discharge. Likewise, the declared goods in imports of M/s Creative Sales and M/s Unique Impex shall be subject to valuation for clearance and consequent fine and penalties for having been imported without appropriate licence. Consequently, the appeal is allowed to the extent as set out above. Issues Involved1. Absolute confiscation of goods subject to prohibition on import without recourse to option for re-export.2. Imposition of penalty u/s 112, 114AA, or 117 of Customs Act, 1962.3. Legality of destruction of confiscated goods.4. Recourse to section 111(f) of Customs Act, 1962.5. Valuation of goods and rejection of declared value.6. Re-export of prohibited and restricted goods.7. Confiscation of goods violating intellectual property rights.8. Imposition of penalties on individuals and entities involved.Summary1. Absolute Confiscation of GoodsThe appellants challenged the absolute confiscation of goods without the option for re-export and the imposition of penalties u/s 112, 114AA, or 117 of the Customs Act, 1962. The goods were not entered for import as prescribed by section 46 of the Customs Act, 1962, and included counterfeit items or items requiring authorization from the Directorate General of Foreign Trade, compliance with BIS standards, or permission under the Drugs and Cosmetics Act, 1940.2. Imposition of PenaltyPenalties were imposed on various individuals and entities, including the proprietors of the importing entities and those involved in facilitating the imports, for acts of omission or commission rendering the goods liable to confiscation u/s 111 of the Customs Act, 1962, and for furnishing false declarations to customs authorities.3. Destruction of Confiscated GoodsThe Tribunal found that the Customs Act, 1962 does not authorize the destruction of goods and that such an act would be a violation of law and misappropriation of public property. The order for destruction was deemed beyond legal competence and was set aside.4. Recourse to Section 111(f)Section 111(f) was invoked for goods not included in the declaration prescribed by section 30 of the Customs Act, 1962. However, the absence of statutory notice and lack of documentary evidence invalidated this recourse.5. Valuation of GoodsThe valuation of goods was contested, with the Tribunal noting that the declared value of goods should be reassessed under section 14 of the Customs Act, 1962. The adjudicating authority's blanket rejection of declared values was found to be unjustified and lacking in legal basis.6. Re-export of Prohibited and Restricted GoodsThe Tribunal allowed the re-export of prohibited and restricted goods, citing previous decisions that upheld the right to re-export such goods. The goods were not to be cleared for home consumption, and no duty liability would arise for re-exported goods.7. Confiscation of Goods Violating Intellectual Property RightsThe confiscation of goods deemed to be in breach of intellectual property rights was challenged due to non-compliance with rule 8 of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. The Tribunal found the confiscation to be in jeopardy and allowed for re-export.8. Imposition of PenaltiesThe Tribunal set aside the penalties imposed on various individuals, noting the lack of evidence of their involvement in the importation of the undeclared goods. The penalties were found to be unjustified and not supported by law.ConclusionThe appeal was allowed to the extent that the goods ordered to be absolutely confiscated were permitted to be re-exported, and the penalties imposed on individuals were set aside. The Tribunal emphasized adherence to the legal process for valuation and confiscation under the Customs Act, 1962.