2025 (9) TMI 6 - AT - Customs

Wilful under-declaration upheld; customs reassessment under Rules 5, 7 and rejection under Rule 12 sustained

M/s. Shahji Associates (Exports), (Through Proprietor Sh. Gurminder Singh) Versus The Commissioner of Customs (Preventive), New Delhi.

M/s. Shahji Associates (Exports), (Through Proprietor Sh. Gurminder Singh) Versus The Commissioner of Customs (Preventive), New Delhi. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the Retail Sale Price (RSP) declared in the Bills of Entry can be rejected where contemporaneous evidence (price tags affixed at importer's premises) shows materially higher RSP for goods which are exigible to Additional Duty of Customs based on RSP. 2. Whether packing, repacking, labelling or relabelling that occurs post-import converts the imported goods into a different (manufactured) product such that RSP subsequently affixed cannot be applied to the import for assessment of Additional Duty of Customs. 3. Whether a materially understated RSP gives reasonable cause to doubt the declared transaction value and justify rejection under Rule 12 of the Valuation Rules and re-determination under Rules 5 and 7 (and Rule 4(b) for RSP determination) of the applicable Valuation/RSP Rules. 4. Whether the extended period of limitation under section 28(4) (invoking wilful mis-statement) is invocable where the importer declared a deliberately low RSP but subsequently affixed higher price tags. 5. Whether penalties under sections 114A (penalty for short levy by reason of collusion or willful mis-statement or suppression of facts) and 114AA (penalty for use of false and incorrect material) are sustainable on the facts. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Rejection of declared RSP in Bills of Entry where price tags show higher RSP Legal framework: Additional Duty of Customs (countervailing duty) for certain imported goods is leviable based on the Retail Sale Price (RSP); RSP may be declared in the Bill of Entry and is relevant to computation of Additional Duty. Precedent treatment: The judgment does not rely on or distinguish any specific precedents; determination rests on statutory scheme and factual findings. Interpretation and reasoning: The Tribunal treats the undisputed price tags found at the importer's premises as contemporaneous and probative evidence of the real RSP. Where goods are exigible to Additional Duty on RSP and are intended for retail sale, an RSP declared in the Bill of Entry that is materially lower (one-tenth) than the RSP on tags gives clear indication of wilful mis-declaration. The Tribunal rejects the contention that post-clearance price-tagging alters the character of the imported goods for RSP purposes. The correct RSP is held to be that evidenced by the tags and the commercial reality of retail distribution, not the artificially low figure declared for customs assessment. Ratio vs. Obiter: Ratio - where imported goods liable to Additional Duty for retail sale are found to have materially higher RSP on contemporaneous tags, the declared lower RSP in the Bill of Entry may be rejected as wilful mis-declaration for assessment purposes. Conclusion: The Tribunal upholds rejection of the RSP declared in the Bills of Entry and accepts the RSP evidenced by the tags for levy of Additional Duty. Issue 2 - Effect of labelling/relabelling/packing as 'manufacture' on applicability of RSP Legal framework: Central Excise concept that certain processes (labelling, repacking) may amount to manufacture for excise purposes; separate statutory regimes for customs valuation and RSP-based Additional Duty. Precedent treatment: No precedent invoked to establish a principle that post-import labelling converts the imported article into a different good for Additional Duty calculation. Interpretation and reasoning: The Tribunal rejects the importer's argument that affixing labels with higher RSP after clearance constitutes manufacture that changes the goods' character so as to prevent application of the RSP found on those labels to the imported goods. The Tribunal reasons that even if relabelling may amount to manufacture under excise law in some contexts, that does not shield a deliberate under-declaration of RSP at import where goods were clearly intended for retail sale. The commercial reality and intent (retail distribution) determine applicability of RSP for Additional Duty; post-clearance labelling cannot be used as a subterfuge to avoid duty. Ratio vs. Obiter: Ratio - labelling/relabelling asserted as 'manufacture' does not preclude using contemporaneous retail price evidence to determine RSP for customs Additional Duty when import was for retail sale and RSP was deliberately mis-declared. Conclusion: The 'manufacture by labelling' contention is rejected; affixing higher RSP tags post-clearance does not prevent customs from treating the price tags as evidence of true RSP for Additional Duty assessment. Issue 3 - Rejection of declared transaction value and re-determination under Valuation Rules Legal framework: Valuation Rules provide for rejection of declared transaction value where reasonable doubt exists (Rule 12) and re-determination using other rules (Rules 5 and 7), including assessment based on contemporaneous imports; separate provision (Rule 4(b) under RSP rules) for determining RSP. Precedent treatment: No authority contradicted or followed; application is statutory and fact-driven. Interpretation and reasoning: The Tribunal finds that the gross understatement of RSP furnished reasonable cause to doubt the declared transaction value. The existence of tags showing RSP an order of magnitude higher than the declared RSP provided sufficient basis to reject the transaction value under Rule 12 and re-determine value under Rules 5 and 7 using contemporaneous import values. The Tribunal finds the statutory mechanism properly engaged where declared values are inconsistent with independent contemporaneous evidence. Ratio vs. Obiter: Ratio - material mis-declaration of RSP supports rejection of declared transaction value under the Valuation Rules and re-determination under Rules 5 and 7. Conclusion: The Tribunal affirms rejection of declared assessable value and its re-determination under the Valuation Rules. Issue 4 - Applicability of extended period of limitation given alleged bona fide belief Legal framework: Section 28(4) permits invocation of extended period where duty short-levy is by reason of collusion, wilful mis-statement or suppression of facts; limitation consequences follow from establishing wilful conduct. Precedent treatment: No precedent cited; analysis is fact-based on wilfulness standard. Interpretation and reasoning: The Tribunal rejects the importer's claim of honest belief that post-clearance relabelling or higher tags would negate liability for Additional Duty. The deliberate declaration of an RSP one-tenth of the commercial price evidenced on tags is held to be a planned, wilful mis-declaration rather than an honest mistake. Accordingly, extended limitation is correctly invoked because the statutory threshold of wilful mis-statement is met. Ratio vs. Obiter: Ratio - deliberate, planned under-declaration of RSP precludes a finding of honest belief and justifies invocation of extended period of limitation under the statute. Conclusion: Extended period of limitation is properly invoked; the objection based on alleged bona fide belief is untenable. Issue 5 - Imposition and sustainability of penalties under sections 114A and 114AA Legal framework: Section 114A prescribes penalty equal to duty/interest where short-levy arises from collusion or willful mis-statement or suppression; section 114AA penalizes knowingly using false or incorrect material and authorizes penalty up to five times value of goods. Precedent treatment: No contrary authority discussed. Interpretation and reasoning: Given the Tribunal's finding of deliberate mis-declaration of RSP (and consequent rejection of transaction value), the statutory predicates for section 114A (willful mis-statement causing short levy) are satisfied; hence penalty under 114A is sustainable. Similarly, the intentional mis-declaration in the Bills of Entry constitutes use of false/incorrect material in the transaction of business for purposes of the Act, fulfilling section 114AA's requirement for imposition of penalty. The Tribunal finds both penalties correctly imposed on facts demonstrating deliberate concealment and mis-statement. Ratio vs. Obiter: Ratio - where RSP is deliberately mis-declared and false/incorrect declarations are used in customs transactions, penalties under sections 114A and 114AA are properly attracted and sustainable. Conclusion: Penalties under sections 114A and 114AA are correctly imposed and sustained on the facts. Cross-references: Issues 1-3 are interlinked - material understatement of RSP (Issue 1) affects validity of transaction value (Issue 3) and feeds into wilfulness and limitation (Issue 4), which in turn supports penalty imposition (Issue 5). The Tribunal's conclusions on each issue rest on the same core factual finding of deliberate mis-declaration of RSP evidenced by price tags recovered at the importer's premises.