2024 (9) TMI 254 - AT - Customs

Imported goods ruled new despite department's second-hand claim, confiscation and penalties set aside under Sections 112 114AA

CESTAT Kolkata held that imported goods were not second-hand as claimed by department. The Chartered Engineer's report was inconclusive and contradicted ... Second hand goods and import authorization under Foreign Trade Policy - conclusiveness of expert/Chartered Engineer's report - transaction value and Customs Valuation Rules - confiscation and redemption under Customs Act - imposition of penalty for mis-declaration and incorrect documentsSecond hand goods and import authorization under Foreign Trade Policy - conclusiveness of expert/Chartered Engineer's report - Whether the imported LCD panels are second hand goods requiring prior authorization or unused new goods supplied from old stock. - HELD THAT: - The Tribunal examined the record and found that the Chartered Engineer's report was inconclusive-it failed to note an embossed manufacture date on a large lot of panels and itself recommended further laboratory tests to determine functionality and residual life. The adjudicating authority relied solely on that inconclusive expert report to hold the goods to be old and used. The appellant's supplier's communication stated the goods were new, held as stock in UAE, and capable of replacement if defective. Applying the principle that an expert opinion is only relevant evidence and not conclusive in absence of statutory conclusiveness, the Tribunal held that the available evidence does not establish that the imports were second hand. Unused goods supplied from old stock, though appearing old, cannot be equated with second hand goods for EXIM policy purposes. Therefore confiscation and denial of clearance as restricted imports was not justified on the evidence. [Paras 6]The goods are not second hand requiring authorization; confiscation and redemption fine for violation of EXIM policy set aside.Transaction value and Customs Valuation Rules - conclusiveness of expert/Chartered Engineer's report - Whether the transaction value declared by the importer should be rejected and value re-determined solely on the basis of the Chartered Engineer's certificate. - HELD THAT: - The Tribunal noted that the adjudicating authority re-determined value only on the Chartered Engineer's certificate without corroborative evidence that the transaction value was influenced by other considerations. Market evidence submitted by the appellant showed comparable items selling at materially lower prices; the adjudicating authority dismissed those on a technical ground (pre-IGST), but even with IGST added they remained far below the engineer's assessed per-piece values. Jurisprudence requires acceptance of transaction value unless exceptions in the Valuation Rules apply. Depreciation or obsolescence can reduce value and where goods are from old stock slight variation is permissible. The Tribunal found the engineer's valuation arbitrary and unsupported; consequently the transaction value declared by the appellant was held to be acceptable and the redetermination was set aside. As the re-determined duty is set aside, interest demand did not arise. [Paras 7]Transaction value declared by the appellant accepted; value re-determination and differential customs duty set aside.Confiscation and redemption under Customs Act - imposition of penalty for mis-declaration and incorrect documents - Whether confiscation, redemption fine and penalties under the Customs Act could be sustained against the appellant. - HELD THAT: - The confiscation and penalties were founded on findings of mis-declaration and under-valuation. Having held that the goods were not second hand and that the transaction value should not have been rejected, the foundational allegations of mis-declaration and undervaluation fail. There was no evidence that the importer produced false or incorrect material or declarations attracting penalty under the provision penalising false documentation. The Tribunal therefore concluded that penalties under the cited provisions and the redemption fine could not be sustained and should be set aside. [Paras 8]Confiscation, redemption fine and penalties set aside.Final Conclusion: The appeal is allowed: the goods are held not to be second hand requiring authorization; the transaction value declared by the importer is accepted and the value re-determination is set aside; consequently the confiscation, redemption fine and penalties imposed are quashed and the impugned order is set aside. Issues Involved:1. Whether the imported goods were old and used second-hand goods or new goods appearing old due to prolonged storage.2. Validity of the value enhancement of the imported goods.3. Legality of penalties imposed under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962.Detailed Analysis:1. Whether the imported goods were old and used second-hand goods or new goods appearing old due to prolonged storage:The appellant imported LCD panels, which were declared as 'Electronic Components LCD Panels for LCD TV.' Upon examination, officers believed the goods were old and used, violating the Foreign Trade Policy 2015-2020. The appellant contended that the goods were new but appeared old due to being stored for a long period in the UAE. They supported this claim with a letter from the exporter stating that the goods were new and directly imported from the USA and Canada before being stored in the UAE.The adjudicating authority based its conclusion on a Chartered Engineer's report, which suggested the goods were old and used but was inconclusive and recommended further laboratory tests. The Tribunal found that the Chartered Engineer's report was not conclusive and ignored the appellant's evidence, such as the manufacturing date embossed on the goods. The Tribunal held that the goods could not be considered second-hand merely because they appeared old due to prolonged storage. Consequently, the Tribunal set aside the confiscation and imposition of redemption fine for violating the Foreign Trade Policy.2. Validity of the value enhancement of the imported goods:The adjudicating authority enhanced the value of the goods based on the Chartered Engineer's certificate, which was not supported by corroborative evidence. The appellant argued that the transaction value should be accepted as the assessable value unless exceptions under Rule 4 of the Customs Valuation Rules applied. The Tribunal observed that the adjudicating authority did not consider the comparable market prices provided by the appellant and solely relied on the Chartered Engineer's report. The Tribunal cited various precedents, including the Supreme Court's decisions, emphasizing that transaction value should be accepted unless influenced by non-commercial considerations.The Tribunal concluded that the value enhancement was arbitrary and unsupported by evidence. It accepted the transaction value declared by the appellant and set aside the differential customs duty confirmed by the adjudicating authority.3. Legality of penalties imposed under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962:Penalties were imposed on the appellant for alleged mis-declaration and under-valuation. The Tribunal found that the goods were sent from old stock due to an overseas supplier's mistake, which was beyond the appellant's control. Since the allegations of mis-declaration and under-valuation were not sustained, the Tribunal held that the goods were not liable for confiscation, and the imposition of penalties under Sections 112(a), 112(b), and 114AA did not arise. The Tribunal noted that no evidence was presented to show that the appellant used false or incorrect materials or made false declarations.Conclusion:The Tribunal set aside the impugned order, including the confiscation, value enhancement, imposition of redemption fine, and penalties. The appeal filed by the appellant was allowed, and the transaction value declared by the appellant was accepted as the assessable value.