2025 (10) TMI 278 - AT - Customs

Appeal allows declared valuation; goods classified under CTH 9006 99 00; s.108 Customs statement inadmissible, Valuation Rules revaluation unlawful

M/s Simpex Industries Versus Principal Commissioner of Customs (Import), New Delhi

CESTAT New Delhi allowed the appeal, setting aside the Principal Commissioner's order. The Tribunal held the goods were correctly classified under CTH ... Classification of the imported goods - LED continuous lighting equipment - Valuation of imported goods - Rejection of declared value of the imported goods - re-determination of the value - revision of statement. Classification of the imported goods - LED continuous lighting equipment - classifiable under Customs Tariff Heading [CTH] 9006 as photography flashlights or under CTH 9405 as lamps and lighting fittings? - HELD THAT:- When the two orders passed by the Commissioner (Appeals) and the Joint Commissioner were in respect of the same products and in matters pertaining to the appellant and the order passed by the Commissioner (Appeals) had been accepted by the department, the Principal Commissioner could not have discarded these orders and re-classified the goods from CTI 9006 99 00 to CTI 9405 40 10. It was not open to the Principal Commissioner to comment that the order dated 07.06.2022 passed by the Commissioner (Appeals) does not discuss any evidence to hold that the goods were covered under CTI 9006 99 00. The Principal Commissioner could not have taken a different view, more particularly in view of the decision of Supreme Court in Birla Corporation Ltd. vs. Commissioner of Central Excise [2005 (7) TMI 104 - SUPREME COURT]. This apart, when 47 Bills of Entry out of the total Bills of Entry involved in appeal were already covered by the order dated 07.06.2022 passed by the Joint Commissioner, a different view regarding classification could not have been taken by the Principal Commissioner for the remaining Bills of Entry. Valuation of the goods - rejection of declared value - re-determination of the value - revision of statement - HELD THAT:- The issue that arises for consideration is whether a statement made under section 108 of the Customs Act can be considered as relevant. This issue was examined by a Division Bench of this Tribunal in M/s. Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [2025 (4) TMI 441 - CESTAT NEW DELHI]. The Tribunal examined the provisions of sections 108 and 138B of the Customs Act as also the provisions of sections 14 and 9D of the Central Excise Act, 1944 and observed that 'In view of the provisions of sub-section (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of sub-section (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made.' The revised statement is said to have been produced by Pankaj Verma during the course of his statement made under section 108 of the Customs Act. For the reasons contained in the decision of the Tribunal in M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [2025 (4) TMI 441 - CESTAT NEW DELHI], the revised statement cannot be relied upon. The Principal Commissioner was not justified in placing reliance upon the Price List dated 04.07.2022 for the purpose of valuation of the goods - The Principal Commissioner has also placed reliance upon the market survey said to have been conducted in a different State on 23.09.2023. This market survey was conducted behind the back of the appellant and, therefore, no reliance can be placed - The certificate provided by the Chartered Accountant which mentions the value of the branded goods as Rs. 6,27,38,434/- could not have been discarded - Thus, the valuation declared by the appellant could not have been rejected under rule 12(1) and re-determined under rule 9(1) of the 2007 Valuation Rules. The appellant had correctly classified the goods under CTI 9006 99 00 and had also correctly declared the value of the goods in the Bill of Entries. The order passed by the Principal Commissioner of Customs, therefore, cannot be sustained and is set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported LED continuous lighting equipment (described as 'Studio light mini', 'Ring studio light', etc.) are classifiable under Customs Tariff Heading (CTH) 9006 (photographic flashlight apparatus) or under CTH 9405 (lamps and lighting fittings) for customs duty purposes. 2. Whether the declared transaction value of the imported goods for the period 10.03.2018 to 31.03.2022 ought to be rejected under Rule 12(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (the 2007 Valuation Rules) and re-determined under Rules 3 and 9 read sequentially with Rules 4-8, having regard to evidence relied upon by the revenue (statements recorded under section 108 of the Customs Act, a supplier price list e-mailed to the importer, a market survey and revised stock statements) and documents produced by the importer (Chartered Accountant certificate, initial stock statement). ISSUE-WISE DETAILED ANALYSIS I. Classification of imported lighting equipment (CTH 9006 v. CTH 9405) Legal framework: Classification governed by the Customs Tariff (HSN) headings and Explanatory Notes (HSN Explanatory Notes to Chapter 90 and Chapter 94). Chapter 90 (CTH 9006) covers 'photographic flashlight apparatus' producing very bright light for a very short duration (flash) distinguished from photographic lighting equipment of Chapter 94. Chapter 94 (CTH 9405) covers lamps and lighting fittings having a permanently fixed light source. Precedent treatment: The principle of following earlier departmental/adjudicatory orders accepted by competent authority and limits on re-opening classification where binding departmental orders exist was applied; the decision relied upon the Supreme Court principle that departmental orders accepted by competent authority ordinarily preclude taking a contrary administrative view (principle invoked from a cited Supreme Court decision). Interpretation and reasoning: The Tribunal examined the product catalogues, submitted documents and prior adjudicatory findings which found that the impugned goods produce bright light for very short durations (e.g., 1/2800-1/3000 secs every 3-5 seconds), lack a permanently fixed light source, and thereby possess the characteristics of photographic flashlights. The Tribunal contrasted Explanatory Note II to Chapter 90 (flash devices producing very bright light for a very short duration) with General Explanatory Note (3) to Chapter 94 (permanently fixed light source). The Tribunal gave effect to earlier findings by the Commissioner (Appeals) and Joint Commissioner that had concluded classification under CTH 9006 after considering product literature and absence of contrary evidence from the department; those earlier orders had been accepted by the department and were therefore binding on the Principal Commissioner absent cogent contrary evidence. Distinguishing/reliance on precedent: The Principal Commissioner had discarded earlier departmental orders on the ground that those orders did not discuss evidence; the Tribunal held that where earlier orders of competent authorities (which had examined catalogues and similar material) were accepted by the department, the Principal Commissioner could not take a different view without demonstrating contrary evidence. The Tribunal expressly invoked the administrative/judicial discipline principle that an accepted departmental adjudication should not be lightly departed from. Ratio vs. Obiter: Ratio-goods that produce bright light for a very short duration and do not have a permanently fixed light source fall within CTH 9006 and are excluded from CTH 9405; where prior adjudicatory orders on identical goods by competent authorities have been accepted by the department, subsequent reclassification by a later authority requires cogent contrary evidence. Obiter-observations on the quality of reasoning in the discarded orders (commentary on whether those orders discussed evidence) are ancillary to the main holdings. Conclusion on classification: The Court concluded the appellant's classification under CTH 9006 was correct; the Principal Commissioner's re-classification to CTH 9405 was unsustainable. The Tribunal set aside the re-classification and held classification under CTH 9006 valid for the consignments in issue (including those covered by earlier accepted orders). II. Valuation - admissibility and weight of evidence relied upon by revenue Legal framework: Customs Valuation Rules, 2007 - Rule 3 (transaction value), Rule 12 (rejection of declared value), and the sequence of Rules 4-9 for redetermination. Evidentiary provisions of the Customs Act: section 108 (power to record statements during inquiry) and statutory safeguards in section 138B (admissibility of statements recorded during inquiry) governing when such statements may be used to prove truth of facts; analogous provisions considered from Central Excise jurisprudence (section 14 and section 9D of the Central Excise Act) were applied by the Tribunal to construe admissibility requirements. Precedent treatment: The Tribunal relied on its earlier decision (M/s Surya Wires Pvt. Ltd. v. Principal Commissioner) which held that statements recorded under section 108 during inquiry are not automatically admissible to prove truth of contents unless (i) the person is examined as a witness before the adjudicating authority and (ii) the adjudicating authority forms an opinion that the statement should be admitted in evidence in the interests of justice - and thereafter the deponent must be available for cross-examination; non-compliance renders such statements inadmissible. This precedent was applied to exclude reliance on a 'revised stock statement' produced during a section 108 statement as a basis for rejecting declared transaction value. Interpretation and reasoning: The Principal Commissioner's valuation rejection rested significantly on (a) a revised stock statement produced during a section 108 statement increasing the value of branded goods, (b) an e-mailed supplier price list (dated after the import period) and (c) a market survey conducted in another State. The Tribunal evaluated each piece of evidence: (i) the revised stock statement generated during a section 108 statement could not be used to prove undervaluation because statutory safeguards of section 138B were not complied with (no examination as witness before adjudicating authority and no opportunity for cross-examination), aligning with the Tribunal's prior holdings; (ii) the e-mailed price list (04.07.2022) purportedly from supplier was shown by a later e-mail from the alleged supplier to be not sent by the supplier's official address and thus unreliable; the IP address inconsistency (Mumbai v. supplier in China) further undermined its probative value; (iii) the market survey conducted without participation/notice to the importer and conducted out of State could not be given decisive evidentiary weight; and (iv) the Chartered Accountant certificate submitted by the importer declaring the lower value could not be discarded without cogent reasons and was insufficiently countered by revenue evidence that failed the admissibility and reliability tests above. Distinguishing/reliance on precedent: The Tribunal applied and followed its prior ruling on admissibility of inquiry statements and emphasized the mandatory nature of sections 138B/9D procedure; where procedural safeguards are not observed, the revenue cannot rely on such statements to reject declared transaction value under Rule 12(1). The Tribunal distinguished the Principal Commissioner's reliance on the section 108 material as procedurally infirm. Ratio vs. Obiter: Ratio-statements recorded under section 108 during inquiry are not admissible to prove their contents for valuation purposes unless the deponent is examined as a witness before the adjudicating authority and the adjudicating authority admits the statement in the interests of justice after affording opportunity of cross-examination; evidence alleged to be forged or unauthenticated (supplier e-mail subsequently disowned by supplier and with conflicting IP data) cannot sustain valuation re-determination; market surveys conducted without notice or participation may not be decisive. Obiter-remarks on the specific sequence of events in the investigation and the reliability of particular documents as applied to this factual matrix. Conclusion on valuation: The Tribunal concluded that the declared transaction value could not be rejected under Rule 12(1) and re-determined under Rule 9(1) on the basis of the impugned evidence. The Chartered Accountant certificate and original stock statement evidence could not be set aside on the record before the Principal Commissioner; consequently, re-determination of value was unwarranted and the valuation findings in favor of the importer were upheld. COMPENDIUM CONCLUSION AND RELIEF Cross-reference: On classification (see Issue I) and valuation (see Issue II), the Tribunal found both that the goods were correctly classified under CTH 9006 and that the declared transaction value was not lawfully rejectable. The Principal Commissioner's order rejecting declared value and re-classifying goods was set aside and the appellant's classification and declared values were sustained.