2024 (7) TMI 121 - AT - Customs

Customs tribunal allows appeal on perfume imports, rejects MRP-based valuation over declared invoice value under Section 14

CESTAT Mumbai ruled in favor of appellants who imported perfumes and deodorants, rejecting department's attempt to determine transaction value based on ... Transaction value - rejection of declared value under Rule 12 - identical goods valuation under Rule 4 - commercial level and quantity adjustments - burden on department to prove under-valuation - Legal Metrology (Packaged Commodities) Rules, 2011 applicability - Drugs and Cosmetics Act, 1940 applicabilityTransaction value - burden on department to prove under-valuation - Prices declared in the 44 B/Es filed by the appellants are to be accepted as the transaction value for customs assessment. - HELD THAT: - The Tribunal held that Section 14 read with Rule 3(1) requires the assessable value to be the price actually paid or payable where the buyer and seller are unrelated and price is the sole consideration. The invoices correspond with the B/Es, payments were routed through banking channels and there was no evidence of any additional payment or mis-description attributable to the appellants. Reliance on Supreme Court decisions establishes that an invoice price must be accepted unless under-valuation is proved by the Department. The adjudicating authority erred in discarding the invoice prices without material showing extraneous payments or mis-declaration and by failing to apply Section 14 and Rule 3(1) properly. [Paras 7]Declared invoice prices in the disputed B/Es represent the transaction value and cannot be rejected absent proof of under-valuation.Rejection of declared value under Rule 12 - identical goods valuation under Rule 4 - commercial level and quantity adjustments - The department could not validly reject the declared values relying on two contemporaneous B/Es and proceed to determine value under Rule 4. - HELD THAT: - Rule 12 provides the procedure to raise reasonable doubt and, if sustained, to proceed sequentially through Rules 4-9. Even assuming doubt, Rule 4 permits use of transaction value of identical goods only where sales are at the same commercial level and in substantially the same quantity, with adjustments demonstrated by evidence. The Tribunal found the contemporaneous imports relied upon by the Department related to retail-level, minuscule quantities, whereas the appellants imported at wholesale commercial level in vastly larger quantities (as set out in the record). Statements relied upon by the Department did not show mala fides or additional payments by the appellants. Therefore, Rule 4 could not be applied to re-determine value in these facts. [Paras 8]Rejection of declared value and determination under Rule 4 using the two B/Es was not permissible given difference in commercial level, quantity and absence of proof of undervaluation.Legal Metrology (Packaged Commodities) Rules, 2011 applicability - Drugs and Cosmetics Act, 1940 applicability - Appellants, as importers/wholesalers of perfumes and deodorants in wholesale packages, fall within the regulatory scope of the Drugs and Cosmetics statute and not the Retail provisions of the Legal Metrology Rules; they were not required to comply with retail MRP affixation applicable to retail packages. - HELD THAT: - The Tribunal examined Rule 2(k) and 2(r) of the Legal Metrology Rules and Rule 24 (declarations on wholesale packages) and concluded that wholesale packages intended for intermediaries are governed differently from retail packages. The proviso to Rule 24 preserves situations where other laws require declarations on wholesale packages. For imported cosmetics, Rule 129H and Part XV of the Drugs and Cosmetics Rules require labelling and registration compliance; the Department did not allege any contravention of the Drugs and Cosmetics statute against the appellants nor did the enforcement authorities initiate proceedings. Hence, the appellants, being wholesale importers, were outside the ambit of the retail MRP requirements relied upon by Revenue. [Paras 9]Appellants are governed by the Drugs and Cosmetics regime for imported cosmetics and not by retail labelling obligations under the Legal Metrology Rules; therefore MRP-based valuation could not be imposed on wholesale imports.Final Conclusion: The Tribunal set aside the adjudication order in entirety: declared invoice prices were accepted as transaction value, re-determination of value and confiscation, demand, interest and penalties were unsustainable, and the appeal was allowed with consequential reliefs. Issues Involved:1. Whether the prices declared in the 45 Bills of Entry (B/Es) should be considered as the 'transaction value' under Section 14 of the Customs Act, 1962.2. Whether the declared value can be rejected and re-determined based on the value of identical goods as per Rule 4 of the Customs Valuation Rules, 2007.3. Whether the appellants were required to comply with the provisions of the Legal Metrology (Packaged Commodities) Rules, 2011 or the Drugs and Cosmetics Act, 1940.Detailed Analysis:Issue 1: Transaction Value DeterminationThe appellants argued that the declared prices in the 45 B/Es should be considered as the 'transaction value' under Section 14 of the Customs Act, 1962. They contended that the goods were imported for wholesale purposes and the prices were based on invoices issued by the overseas supplier, with payments routed through approved banking channels. The Tribunal noted that there was no evidence of mis-declaration or additional payments beyond the invoice value. It was held that the declared value should be accepted as the transaction value as per Section 14 and Rule 3(1) of the Customs Valuation Rules, 2007. The Tribunal emphasized that the transaction value must be based on the price actually paid or payable and that the appellants had discharged their duty liability accordingly.Issue 2: Rejection and Re-determination of Declared ValueThe Revenue relied on two B/Es to reject the declared value in the remaining 45 B/Es, arguing that the prices in these two B/Es were higher and should be used for re-determination. The Tribunal found that the prices in the two B/Es were determined by the overseas supplier for their retail outlets and were not comparable to the wholesale imports by the appellants. The Tribunal held that the volume of imports and the commercial level of transactions were significantly different. Therefore, the declared value in the 45 B/Es could not be rejected based on the prices in the two B/Es. The Tribunal cited several Supreme Court judgments, including Eicher Tractors Ltd. v. Commissioner of Customs, to support the principle that the transaction value should be accepted unless there is evidence of mis-declaration or additional payments.Issue 3: Compliance with Legal Metrology or Drugs and Cosmetics ActThe Tribunal examined whether the appellants were required to comply with the Legal Metrology (Packaged Commodities) Rules, 2011 or the Drugs and Cosmetics Act, 1940. It was found that the appellants imported goods in wholesale packages, which were sold to intermediaries and not directly to consumers. The Tribunal held that the Legal Metrology Rules applied to retail packages intended for sale to ultimate consumers, whereas wholesale packages were governed by different provisions. The Tribunal concluded that the appellants, as importers and wholesalers of perfumes and deodorants, were governed by the Drugs and Cosmetics Act, 1940, and had complied with its provisions. Therefore, they were outside the purview of the Legal Metrology Act, 2009, and the rules framed thereunder.Conclusion:The Tribunal set aside the impugned order, rejecting the re-determination of transaction value, confiscation of goods, differential duty demand, and penalties imposed on the appellants. The appeal was allowed in favor of the appellants, with consequential benefits as per law.