2010 (2) TMI 264 - AT - Customs

Tribunal rules in favor of Appellant, rejecting enhanced declared value.

The Tribunal found that the Department did not provide sufficient reasons to reject the transaction value of 'Sulphuric Acid' declared by the Appellant. ... Valuation- The Department challenged the value on the ground that the Contract dated 7-12-2007 between the Appellant and the foreign supplier had not been cancelled and that the Contract dated 8-12- 2008 shows supply of 13000 MT whereas Bill of Entry has been filed for 13,129 MT. While the issue relating to finalization of the value, in case of aforesaid Bill of Entry dated 2-1-2009, was pending, the Appellant filed the Bills of Entry Nos. 1035 dated 9-1-2009, 1098 dated 30-1-2009, 1058 dated 15-1-2009 and 1091 dated 29-1-2009 along with the supporting documents, as prescribed under the Customs Act. The lower adjudicating authority enhanced the value in case of B/E. No. 1012 dated 2-1-09 as US $ 107 as per the Contract dated 7-12-07 and in case of remaining B/Es. to US $ 40.50 PMT CFR as per Rule 5 of Valuation Rules, 2007. The Appellant preferred an appeal against the lower Adjudicating Authority’s Order with the Commissioner (Appeals). The ld. Commissioner (Appeals) in the impugned Order modified the value in the case of B/E No. 1012 dated 2-1-2009 to US $ 40.50 PMT from US $ 107 PMT and in case of remaining B/Es. upheld the Lower Adjudicating Authority’s order. Held that- there is no finding of the lower authorities that the in voices issued by overseas suppliers are fake or fabricated and that the transaction value shown therein has not been actually paid by the Appellant. Since the transaction value is determinable under Section 14 of the Customs Act, 1962, read with Rule 3(1) of the Valuation Rules, the question of resorting to assessment under Rule 5 does not arise. The transaction value declared in the instant case has been rejected without the sanction of law. Therefore, the impugned Order is not sustainable, hence set aside. The Appeal is allowed. Issues Involved:1. Enhancement of the declared value of 'Sulphuric Acid' from US $3 to US $40.50 per MT.2. Legality of the rejection of the declared transaction value under Rule 5 of the Valuation Rules, 2007.3. Comparison of the imported quantity with contemporaneous imports by M/s. Paradeep Phosphates Ltd.4. Application of Rule 12 of the Customs Valuation Rules (CVR), 2007.Issue-wise Detailed Analysis:1. Enhancement of the Declared Value:The Appellant, engaged in the manufacture of fertilizer products, imported 'Sulphuric Acid' at a declared value ranging from US $3 to US $4.25 per MT. The Department enhanced this value to US $40.50 per MT, based on contemporaneous imports by M/s. Paradeep Phosphates Ltd. The lower adjudicating authority initially enhanced the value to US $107 per MT as per a previous contract but later reduced it to US $40.50 per MT under Rule 5 of the Valuation Rules, 2007.2. Legality of the Rejection of Declared Transaction Value:The Appellant contended that the reduction in the price of 'Sulphuric Acid' was due to a collapse in international demand and was based on commercial considerations. They argued that the Department did not discharge the onus of proving that the declared price was not genuine. The Appellant cited several case laws, including CCE v. Jai Bharat Steel Inds. and Eicher Tractors Ltd. v. CC, Mumbai, to support their argument that transaction value should be accepted unless proven otherwise.3. Comparison with Contemporaneous Imports:The Department based its enhancement on the price of contemporaneous imports by M/s. Paradeep Phosphates Ltd., which imported 18,870 MT at US $40.50 per MT. The Appellant argued that their import quantity of 55,361 MT was significantly larger and not comparable, as per sub-rule 2 of Rule 12 of the CVR, 2007.4. Application of Rule 12 of CVR, 2007:Rule 12(1) of CVR, 2007 allows the proper officer to reject the declared value if there is reasonable doubt about its truth or accuracy. However, the rule does not provide a method for determining value but a mechanism for rejecting declared value. The Appellant argued that the Department did not follow the procedure outlined in Rule 12, which requires establishing that the transaction value is not genuine before rejecting it. The Tribunal cited Rashesh & Co. v. CC, Mumbai, where it was held that transaction value could only be rejected under exceptional circumstances.Tribunal's Findings:1. Rejection of Transaction Value: The Tribunal found that the Department did not provide sufficient reasons to reject the transaction value. The invoices issued by the overseas suppliers were not proven to be fake or fabricated.2. Application of Rule 5: The Tribunal held that since the transaction value is determinable under Section 14 of the Customs Act, 1962, read with Rule 3(1) of the Valuation Rules, the question of resorting to assessment under Rule 5 does not arise.3. Comparison with Contemporaneous Imports: The Tribunal agreed with the Appellant that the quantity imported by M/s. Paradeep Phosphates Ltd. was not comparable to the Appellant's import quantity.4. Case Laws: The Tribunal relied on several Supreme Court judgments, including Eicher Tractors Ltd. v. CC, Mumbai and CC, Mumbai v. J.D. Orgochem Ltd., to conclude that the transaction value must be accepted unless there is concrete evidence to prove otherwise.Conclusion:The Tribunal set aside the impugned Order, stating that the enhancement of the declared value to US $40.50 per MT was not sustainable under the law. The Appeal was allowed, and the transaction value declared by the Appellant was accepted.(Operative part of the Order was pronounced in the court)