2025 (3) TMI 1323 - AT - Customs

CESTAT allows appeal against re-determination of value for warehoused goods intended for re-export under sections 17-18

CESTAT Mumbai allowed the appeal challenging re-determination of value for imported goods intended for re-export. The tribunal held that assessment under ... Valuation of imported goods intended for re-export - re-determination of value assessed to duty at rate corresponding to tariff item 8479 8999 of First Schedule to Customs Tariff Act, 1975 - HELD THAT:- The first appellate authority failed to take cognizance that the original authority should have read section 46 of Customs Act, 1962 as only the first of two ‘stepping stones’ by which the goods could legally be cleared for home consumption in terms of section 47 of Customs Act, 1962 and that assessment, either under section 17 of Customs Act, 1962 or under section 18 of Customs Act, 1962, must necessarily precede clearance for home consumption for the ‘proper officer’ to permit extinguishment of customs jurisdiction as envisaged in section 47 of Customs Act, 1962 Mere filing of bill of entry, under section 46 of Customs Act, 1962 and of essence to build in contingencies of ‘relevant date’ for rate of duty and tariff valuation, does not trigger empowerment of levy and assessment to duty in section 17 of Customs Act, 1962 which is the only stage for recourse to section 12 and section 14 of Customs Act, 1962 by ‘proper officer’ therein. These – the ‘charging’ and ‘valuation’ provisions – are stipulative and, like the definitional provision, to be referred to when embarking upon the machinery provisions in Customs Act, 1962. Otherwise, in terms of section 46 of Customs Act, 1962 and chapter IX of Customs Act, 1962, the ‘imported goods’ are to be deposited, in a public warehouse or private warehouse, as the case may be, until clearance is to be effected either for home consumption under section 68 or for export under section 69 of Customs Act, 1962. A comparison of section 47 of Customs Act, 1962 and section 68 of Customs Act, 1962 makes it abundantly clear that these are mutually exclusive and that, once goods are warehoused, section 47 of Customs Act, 1962 ceases to be of relevance. The ‘trigger happy’ adjudication was, thus, upheld in appellate proceedings without application of mind. The original authority and the first appellate authority are in need of refreshing their approach to assessment procedure; the fault may, probably, not be limited to this lack of appreciation but also in oversight – supervisory and statutory. Empowerment to review, as prescribed in chapter XV of Customs Act, 1962, appears to have been observed in its breach. The malaise is, thus, systemic. The hazard, in consequence, may be oblivion. A copy of this order may be placed before the Chairman, Central Board of Indirect Taxes & Customs (CBIC) for appropriate remediation if ‘ease of doing business’ is to have a chance. Conclusion - The re-determination of value for the goods in question is unjustified, as the goods were intended for re-export and not for home consumption. The Customs Valuation Rules, 2007, and Section 14 of the Customs Act, 1962, are inapplicable in this context. The impugned order set aside - appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:1. Whether the re-determination of value for the imported goods intended for re-export was justified under the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.2. Whether the Customs authorities were correct in applying the provisions of Section 14 of the Customs Act, 1962, and the related valuation rules to goods that were not intended for home consumption.3. Whether the procedural requirements under the Customs Act, 1962, particularly regarding the filing of a bill of entry and the assessment of duty, were properly adhered to by the Customs authorities.ISSUE-WISE DETAILED ANALYSIS1. Re-determination of Value for Imported Goods Intended for Re-exportThe relevant legal framework includes the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and Section 14 of the Customs Act, 1962. The Court noted that the original authority relied on these provisions to re-determine the value of the goods, asserting that the declared value was not the true transaction value. The Court found that the original authority's reliance on Rule 12 of the valuation rules was misplaced because the goods were not intended for import into India for home consumption, but for re-export.The Court emphasized that the absence of duty payable on goods intended for re-export negates the allegation of undervaluation to defraud the exchequer. The Court also highlighted that the Customs Valuation Rules, 2007, are not applicable when the goods are not being imported for home consumption.2. Application of Section 14 of the Customs Act, 1962The Court examined the applicability of Section 14, which deals with the valuation of imported and export goods. The Court noted that the original authority's application of Section 14 was inappropriate as it pertains to goods intended for home consumption. The Court criticized the lower authorities for misconstruing the scope of Section 14 and failing to recognize that the valuation provisions were not triggered merely by the filing of a bill of entry for warehousing.The Court pointed out that the original authority's decision to re-determine the value based on a Chartered Engineer's certificate was flawed, as it did not consider the context of the goods being warehoused for re-export.3. Procedural Requirements under the Customs Act, 1962The Court analyzed the procedural aspects of the Customs Act, particularly the requirements under Sections 46 and 47. The Court clarified that the filing of a bill of entry under Section 46 is a prerequisite for imported goods, but it does not automatically lead to the assessment of duty unless the goods are intended for home consumption.The Court criticized the lower authorities for failing to appreciate the distinction between goods intended for home consumption and those warehoused for re-export. The Court emphasized that the assessment of duty under Section 17 should only occur when goods are cleared for home consumption, which was not the case here.The Court noted that the original and appellate authorities failed to recognize that the warehousing of goods defers the assessment and duty payment until the goods are cleared for home consumption or export.SIGNIFICANT HOLDINGSThe Court held that the re-determination of value for the goods in question was unjustified, as the goods were intended for re-export and not for home consumption. The Court emphasized that the Customs Valuation Rules, 2007, and Section 14 of the Customs Act, 1962, were inapplicable in this context.The Court reiterated the principle that procedural compliance with the Customs Act is essential and that the lower authorities' failure to adhere to these procedures resulted in an erroneous application of the law.Core Principles EstablishedThe judgment reinforced the principle that the valuation provisions of the Customs Act and related rules apply only to goods intended for home consumption. The Court highlighted the importance of understanding the procedural framework of the Customs Act and the specific circumstances under which valuation and duty assessment are triggered.Final Determinations on Each IssueThe Court concluded that the original and appellate authorities erred in their application of the law and procedures under the Customs Act, 1962. The impugned order was set aside, and the appeal was allowed, emphasizing the need for proper adherence to the statutory framework and the intent of the law.