2025 (10) TMI 128 - AT - Customs

Demands, confiscation and penalties quashed where proforma invoices were inadmissible and proceedings breached s.138B; redemption fines set aside

CESTAT KOLKATA - AT held that demands, confiscation and penalties confirmed against the appellants were unsustainable. Proforma invoices relied upon were ... Valuation of imported goods - rejection of declared value of the imported consignments of ordinary plywood - Demand based on post clearance search and investigation - rejection of assessable value and re-determination of the same - admissibility of proforma invoices as evidence u/s 138B of the Customs act, 1962 - Mis-declaration of description/misclassification - Confiscation of the seized goods - Imposition of various penalties - Penalty on Proprietor of the appellant-company. Admissibility of proforma invoices as evidence u/s 138B of the Customs act, 1962 - HELD THAT:- The Department has not adduced any evidence to substantiate their claim that the said 19 proforma invoices were recovered from the mobile phone of Mr. Vivek Toshniwal. Thus, there are merit in the submission of the appellants that the said proforma invoices, said to be recovered from the mobile phone of Mr. Vivek Toshniwal, are not admissible evidence against the said appellants. Accordingly, the purported proforma invoices issued in the name of another company, by an unconnected supplier, cannot be relied upon as evidence to confirm the demands against the above appellants. The ld. adjudicating authority has denied their request for cross examination of Mr. Vivek Toshniwal, stating that the said request was devoid of any proper reason and delaying tactics. The reasons given by the ld. adjudicating authority for denial of the opportunity of cross examination to the appellants to be unconvincing. It is a settled legal principle that statements given during the course of investigation can be relied upon only if they have been examined during the adjudicating proceedings. Thus, the denial of cross examination vitiates the entire proceedings, which have been built on the basis of such untested statements. A similar issue has been examined by the Tribunal, Chennai in the decision rendered in the case of M/s. Geetham Steels Pvt Ltd Vs. Commissioner of GST & Central Excise Salem [2025 (3) TMI 1098 - CESTAT CHENNAI], wherein it has been observed that 'Section 9D(2) not only legislatively mandates the adjudicating authority to apply the provisions of S.9D(1), depending on the facts and circumstances of the case, to the extent possible, but also when read along with Section 9D(1)(b), leads to the inexorable conclusion that the adjudicating authority necessarily has to conduct an examination in chief of the deponent of the statement so as to determine not only the voluntary nature as well as truthfulness of the facts the statement given under Section 14 before the Gazetted Officer contains, but also to determine whether or not the witness is hostile, and to decide whether or not to place reliance on the statement as per the mandate of Section 9(1)(b) in the circumstances of the case.' It is also a fact that the said statements of Mr. Vivek Toshniwal have not been tested as per the mandate of Section 138B of the Customs Act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944. The Ld. adjudicating authority has not given any finding on this aspect raised by the appellants before relying on the said statements in the present proceedings, for confirmation of the demands by way of the impugned order - the demands confirmed in the impugned order, on the basis of the statements recorded from Mr. Vivek Toshniwal, without following the legal mandate as required under Section 138B of the Customs act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944, are not sustainable. Mis-declaration of description/misclassification - HELD THAT:- The officers of DRI took samples of the plywood imported by appellant during the search made at Phoenix Logistic P. Ltd., CFS, Kolkata on 19.05.2022. However, there was no testing done on samples of the appellant’s goods so as to compare the same with that of Vivek Ply or to question the nature/characteristics of goods. Further, it is observed that there is no difference in description or quantity of goods as per the Panchnama. Thus, it is seen that there is nothing on record to prove that the goods were wrongly described by these appellants, as alleged by the Department. As the Department has failed to produce any test report, bills of entry, etc., so as to contest the description of goods, the allegation of mis-classification made in the impugned order is not sustainable - the allegations of mis-classification and undervaluation of the goods imported by the above said appellants are not sustainable. Confiscation of the seized goods - redemption fine - HELD THAT:- These goods have been imported vide separate Bills of Entry and cleared on payment of appropriate duties of customs. No objections had been raised by the Revenue at the time of importation. As there is no mis-declaration or undervaluation in respect of the goods cleared under the 9 Bills-of-Entry in the case of M/s. Ellena Impex OPC Pvt. Ltd., 29 Bills-of-Entry along with Bill-of-Entry No. 8684073 dated 14.05.2022 (which is a live consignment) in the case of M/s. Sun Ply Pvt. Ltd. and 28 Bills-of-Entry in the case of M/s. Radheysham & Co., we hold that the order of confiscation vide the impugned order for the goods cleared in respect of the above said Bills of Entry is not sustainable. Consequently, the order of confiscation of the goods in the impugned order in respect of the said Bills of Entry set aside. Accordingly, the redemption fines imposed in respect of the said goods also stand set aside. Imposition of various penalties - HELD THAT:- It is found that no objection was raised by the assessing officers on the classification or valuation of the goods declared by the appellants, at the time of clearance, except the one live consignment which was intercepted by DRI. Even in respect of that consignment, the allegation of mis-classification or undervaluation has not been established. Thus, it is found that suppression of facts, with the intent to evade customs duties, has not been established against these appellants in the present case. Thus, it is evident that the ingredients required for imposing the various penalties on the appellants herein do not exists in this case. Consequently, various penalties imposed on all the appellants herein are not sustainable and hence the same are set aside. Penalty on Proprietor of the appellant-company - HELD THAT:- A penalty of Rs.2,74,70,487/- has been imposed on the Proprietorship Firm, namely, M/s. Radheysham Co., under the Section 114A of the Customs Act, 1962 but no separate penalty has been imposed on its Proprietor, namely, Mr. Banshidhar Agarwal, under Section 114A of the Customs Act, 1962. Thus, although it is agreed with submission of the Ld. Counsel for the appellant-firm, M/s. Radheysham Co., that separate penalties cannot be imposed on both the Proprietorship Firm and its Proprietor, in the present case, it is found that separate penalties have not been imposed in the impugned order on the Proprietorship Firm and its Proprietor u/s 114A of the Customs Act, 1962 - the proprietor has to file a separate appeal to contest the penalties imposed on him u/s 112(a), 112(b) and 114AA of the Customs Act, 1962 before this Tribunal. As the appeal, if any, filed by proprietor is not here, the penalties imposed on proprietor as emanating from the impugned order need not be interfered. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the adjudicating authority lawfully rejected the declared transaction value of imported goods under Rule 12 of the Valuation Rules, 2007 read with Section 14 of the Customs Act, having complied with the procedural mandates of Rule 12(1)-(2). 2. Whether the re-determination of assessable value under Rule 9 of the Valuation Rules was in accordance with the statutory requirements (including proviso to Rule 9(1) and clauses of Rule 9(2)) and supported by contemporaneous import data. 3. Whether proforma invoices recovered from an electronic device, as unauthenticated copies, were admissible and could constitute reliable evidence to establish undervaluation or misdescription, in the absence of compliance with Section 138C(2) (and related electronic-evidence requirements). 4. Whether statements or alleged confessions recorded during investigation could be relied upon to establish undervaluation or to implicate other importers, absent examination of deponents before the adjudicating authority in terms of Section 138B (pari materia provisions) / principles governing admissibility of recorded statements. 5. Whether confiscation under Section 111(m) and imposition of redemption fine were sustainable where goods had been cleared on assessment and duties were paid at import, and whether ingredients for confiscation and penalties (Sections 112, 114A, 114AA) were established. 6. Whether deposit made during investigation should be treated as payment under protest and refunded with interest where confirmed differential duty demand is unsustainable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of rejection of declared transaction value under Rule 12 Legal framework: Rule 12(1)-(2) of Valuation Rules requires that where the proper officer has reason to doubt truth/accuracy of declared value he must request further information and, if reasonable doubt persists, must intimate in writing the grounds and afford a reasonable opportunity of hearing before rejecting the declared value. Precedent treatment: Authorities have set aside valuation orders where Rule 12(2) procedural safeguards were not observed. Interpretation and reasoning: The Tribunal examined the record and found no compliance with Rule 12(2) prior to issuance of the show cause notice; no specific written intimations of grounds and no prior opportunity addressing those grounds. The Bills of Entry had been assessed and cleared without contemporaneous objections. The Court emphasized that mere suspicion or intelligence does not substitute the mandated procedure. Ratio vs. Obiter: Ratio - procedural non-compliance with Rule 12(2) vitiates rejection of declared transaction value. Obiter - general remarks on burden of proof on Revenue to bring contemporaneous evidence. Conclusion: Rejection of transaction value was unsustainable; declared transaction value should have been accepted in terms of Rule 3 absent lawful rejection. Issue 2 - Lawfulness of re-determination under Rule 9 Legal framework: Rule 9 provides residual valuation where transaction value is rejected; proviso to Rule 9(1) requires use of prices of identical goods imported into India contemporaneously, and Rule 9(2) prescribes conditions and prohibits reliance on selling price in India of domestically produced goods or arbitrary figures. Precedent treatment: Courts require that re-determination under Rule 9 be supported by contemporaneous import data (NIDB or equivalent) and that arbitrary/fictitious values are impermissible. Interpretation and reasoning: The impugned re-determination adopted a uniform value (USD 935/m3) without disclosing basis, ignored average prices reflected in recovered proforma invoices (USD 781/m3), and failed to show satisfaction of clauses (i)-(iv) of Rule 9(2) or reliance on contemporaneous import data. The Tribunal held that adoption of an arbitrary figure unsupported by evidence violates Rule 9 and Section 14; valuation must be grounded in contemporaneous, identified imports of identical goods and not on calculus divorced from record. Ratio vs. Obiter: Ratio - re-determination under Rule 9 must comply with proviso and clauses of Rule 9(2) and be supported by contemporaneous import data; arbitrary values are illegal. Obiter - commentary on average values and necessity to disclose comparative data. Conclusion: Redetermined assessable value was arbitrary and in gross violation of Rule 9; differential duty based thereon unsustainable. Issue 3 - Admissibility and probative value of proforma invoices recovered from electronic device Legal framework: Admissibility of electronic documents recovered in search is governed by statutory safeguards (Section 138C and related provisions) requiring prescribed formalities for reliance; proforma invoices are commercial quotations and not conclusive proof of transaction value. Precedent treatment: Tribunals and courts have held proforma invoices to be tentative offers/quotations not amounting to transaction invoices; electronic documents recovered must meet statutory authenticity requirements to attract presumptions under section-provisions. Interpretation and reasoning: The recovered proforma invoices were unattested copies from a mobile phone; statutory formalities under Section 138C(2) were not satisfied and the Department did not prove recovery chain. Moreover, proforma invoices related to different consignments and different importers; many covered only later consignments and thus could not justify revaluation of earlier imports. The Tribunal concluded that such documents were inadmissible/unreliable to rebut declared transaction value or to fix a higher assessable value. Ratio vs. Obiter: Ratio - unauthenticated proforma invoices recovered from electronic devices without compliance with statutory requirements are inadmissible and cannot form basis for valuation enhancement. Obiter - reiteration that proforma invoices are offers and may be negotiated. Conclusion: Proforma invoices were inadmissible and, in any event, incapable of supporting the enhanced valuation and duty demand. Issue 4 - Reliance on statements/confessions recorded during investigation to implicate others or to prove undervaluation Legal framework: Statements recorded during investigation have limited evidentiary value; adjudicating authority must examine deponents under statutory provisions (Section 138B / pari materia provisions) and afford cross-examination opportunity; sole uncorroborated confessional statements are insufficient. Precedent treatment: Authorities require that statements recorded in investigation be tested in adjudication; retracted/confessional statements must be scrutinized for voluntariness and corroboration before reliance. Interpretation and reasoning: Statements of an investigative deponent (who was a competitor) implicating other importers were not tested because the adjudicating authority denied cross-examination and did not examine the deponent before itself as required; Section 138B/9D principles were not complied with. The Tribunal held that untested and uncorroborated statements cannot sustain findings of undervaluation or be used to implicate unrelated importers. Ratio vs. Obiter: Ratio - recorded statements must be examined under statutory procedure before being admitted as substantive evidence; failure to do so vitiates reliance thereon. Obiter - note on requirement to examine voluntariness. Conclusion: Reliance on investigative statements without testing was impermissible; findings based thereon unsustainable. Issue 5 - Confiscation and penalties where goods were cleared on assessment Legal framework: Confiscation under Section 111(m) requires statutory predicates (misdeclaration/contravention) to be established; penalties under Sections 112, 114A, 114AA require proof of requisite ingredients and intention; redemption fines under Section 125 follow lawful confiscation. Precedent treatment: Confiscation cannot be sustained where goods were cleared after assessment and no contravention established; penalties require established suppression with intent. Interpretation and reasoning: The Tribunal found no evidence of misdescription or undervaluation for the assessed and cleared Bills of Entry; samples were not tested; no contemporaneous objections at clearance. Consequently, confiscation and redemption fines founded on the re-determined (and flawed) valuation could not stand. Penalties were likewise unsupportable absent proof of suppression or evasion; multiple or duplicative penalties on proprietor and proprietorship required separate appeals and proper pleading. Ratio vs. Obiter: Ratio - confiscation and penalties unsustainable where foundational misdeclaration/undervaluation is not proved and goods were cleared legitimately. Obiter - remarks on propriety of imposing separate penalties on proprietorship and proprietor. Conclusion: Orders of confiscation, redemption fine and penalties were set aside as not sustainable. Issue 6 - Refund of deposit paid during investigation as payment under protest Legal framework: Payments made during investigation/adjudication may be treated as paid under protest and refundable where demand is set aside, consistent with Supreme Court precedent recognizing duty paid during proceedings as under protest. Precedent treatment: Large bench authority confirms deposit in course of investigation is treated as payment under protest and refundable with interest if demand fails. Interpretation and reasoning: Having set aside the differential duty demand as unsustainable, the Tribunal held that the deposit made during investigation qualifies as payment under protest and is repayable with interest at applicable rates. Ratio vs. Obiter: Ratio - deposit during investigation to be refunded with interest where the confirmed demand is set aside. Obiter - none. Conclusion: Deposit to be refunded with interest. Overall Disposition The Court set aside the re-determined valuations, differential duty demands, interest, penalties, confiscations and redemption fines in respect of the appellants; held proforma invoices and untested statements inadmissible/unreliable for enhancement; and directed refund of deposit (with interest) treated as payment under protest. Appeals disposed accordingly.