2025 (3) TMI 787 - AT - Customs

CESTAT sets aside customs duty demand after finding CRCL test reports unreliable evidence for rejecting transaction value

M/s Neelachal Ispat Nigam Limited Versus Commissioner of Customs (Preventive), Bhubaneswar

CESTAT Kolkata allowed the appeal, setting aside customs duty demand and penalties. The tribunal held that CRCL test reports from 2002-2003 were ... Tenability of Customs House Laboratory Report relied upon by the departmental authorities - rejection of transaction value without adequate justification - levy of penalties - HELD THAT:- In this case, the samples were taken by CRCL on 03.10.2002 for Bill of Entry No.226 and 29.11.2002 in case for Bill of Entry No.313 and the test report has been delivered on 20.11.2002 and 22.07.2003 respectively. The said report has lost their evidential value as the test reports are cryptic and its results have been delivered after a long delay. In that circumstances, the test reports are not reliable test reports. In the case of M/s Moorgate Industries (I) Private Limited Vs. Commissioner of Customs (Port), Kolkata [2023 (12) TMI 963 - CESTAT KOLKATA], this Tribunal has observed 'Since the report of the Customs Lab is cryptic and incomplete without showing the BIS Standard and protocol and method of testing, it is noticed that the appellant sought to cross examine the Customs Officer who had drawn the sample and the Chemical Examiner who had tested the sample.' Admittedly, in this case, the samples were drawn in terms of International Standards. Moreover, the test report is cryptic and it is submitted with a delay. The test report is required to be submitted immediately. The test reports produced by CRCL, which has been relied upon by the adjudicating authority to demand Customs Duty on the appellant, are not reliable evidence. Accordingly, it is held that it is not a piece of evidence to demand the Customs Duty from the appellant. Accordingly, the duty paid by the appellant on transaction value is the correct duty paid by them. The penalties are also dropped. Conclusion - i) The test reports produced by CRCL, which has been relied upon by the adjudicating authority to demand Customs Duty on the appellant, are not reliable evidence. ii) The transaction value is valid, and the penalties are unjustified. The impugned orders are set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the Customs House Laboratory's test reports, which determined the moisture content of the imported consignments, are reliable and valid evidence for assessing customs duty.Whether the transaction value declared by the appellant can be rejected without adequate justification.Whether the penalties imposed on the appellant are justified.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity and Reliability of Customs House Laboratory Test ReportsRelevant Legal Framework and Precedents: The judgment references the requirement for adherence to the Bureau of Indian Standards (BIS) and International Standards for sample testing, as established in previous cases such as Tata Chemicals Limited vs. Commissioner of Customs and M/s Moorgate Industries (I) Private Limited vs. Commissioner of Customs.Court's Interpretation and Reasoning: The Tribunal found that the test reports by the Customs House Laboratory were cryptic, delayed, and did not adhere to the stipulated standards, thus losing their evidential value.Key Evidence and Findings: The Tribunal noted the significant delay in the delivery of the test reports and the lack of adherence to BIS Standards, which rendered the reports unreliable.Application of Law to Facts: The Tribunal applied the legal principle that test reports must adhere to specific standards and be timely to be considered valid evidence. Since the reports failed these criteria, they were deemed unreliable.Treatment of Competing Arguments: The appellant argued that the reports were not conducted per BIS Standards, while the Revenue reiterated the validity of the orders. The Tribunal sided with the appellant, emphasizing the need for compliance with established standards.Conclusions: The Tribunal concluded that the test reports were not reliable evidence and could not be used to demand customs duty.Issue 2: Rejection of Transaction ValueRelevant Legal Framework and Precedents: The Tribunal considered the principles of transaction value under customs law, which should not be rejected without adequate justification.Court's Interpretation and Reasoning: The Tribunal found no adequate justification for rejecting the transaction value declared by the appellant.Key Evidence and Findings: The appellant's transaction value was based on commercial invoices that accounted for moisture content deductions, which were not disputed effectively by the Revenue.Application of Law to Facts: The Tribunal applied the principle that transaction value should be accepted unless there is a valid reason to reject it, which was not present in this case.Treatment of Competing Arguments: The appellant contended that the transaction value was valid, while the Revenue failed to provide adequate justification for its rejection. The Tribunal favored the appellant's position.Conclusions: The Tribunal held that the transaction value declared by the appellant was correct and should be accepted.Issue 3: Imposition of PenaltiesRelevant Legal Framework and Precedents: The imposition of penalties under customs law requires a valid basis, often linked to non-compliance or misrepresentation.Court's Interpretation and Reasoning: The Tribunal found no basis for the penalties since the test reports were unreliable and the transaction value was valid.Key Evidence and Findings: The lack of reliable evidence and valid justification for rejecting the transaction value undermined the basis for penalties.Application of Law to Facts: The Tribunal applied the principle that penalties require a valid legal basis, which was absent in this case.Treatment of Competing Arguments: The appellant argued against the penalties, while the Revenue supported them. The Tribunal found in favor of the appellant.Conclusions: The Tribunal set aside the penalties imposed on the appellant.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal noted, 'The test reports produced by CRCL, which has been relied upon by the adjudicating authority to demand Customs Duty on the appellant, are not reliable evidence.'Core Principles Established: The judgment reinforces the requirement for adherence to BIS and International Standards for testing and the necessity for timely and reliable evidence in customs assessments.Final Determinations on Each Issue: The Tribunal concluded that the test reports were unreliable, the transaction value was valid, and the penalties were unjustified. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.