2026 (1) TMI 584 - AT - Customs

Imported fabric thickness dispute-use identical goods' transaction value of US$1.80/m; confiscation and director penalty upheld

Dominant issue - Valuation under Rule 4: The proper officer doubted declared transaction value because invoices described fabric as 0.62 mm while actual ... Transaction value - re-determining the value under Valuation Rule 4 - contemporaneous imports of identical goods - mis-declaration - redemption fine u/s 125 - Penalty of equal amount u/s 114A - Clearance of goods described as Plain PU Coated Fabric (0.62 mm thickness) - HELD THAT:- Undisputedly, the fabric was declared to be of 0.62 mm thickness and was found to be of 0.74 mm to 0.81 mm thickness. Therefore, there was a clear mis-declaration of the goods. The actual thickness was between 19% to 30% more than the declared thickness. The fact that the invoices were for fabric of 0.62 mm thickness, whereas the actual fabric which was imported was of 0.74 mm to 0.81 mm thickness i.e., 19% to 30% more thick gave the proper officer reason to doubt the declared value. He did ask the Director of the appellant to explain who accepted that the goods were mis-declared. Under these circumstances we find that the proper officer also had a reasonable doubt about the truth and accuracy of the declared value for the reason that the declared value was for fabric of 0.62 mm thickness, whereas the actual fabric which was imported was much thicker. As may be seen as per Rule 4, the transaction value of identical goods shall be the assessable value and not the value re-determined by the officer for the contemporaneous Bills of Entry. Learned counsel was correct in his submission that in the contemporaneous imports, the transaction values were $ 1.8 per metre and 1.85 per metre in two Bills of Entry. The lower of the two was U.S. $ 1.8 per metre which should have been applied by the Joint Commissioner in assessment instead of U.S. $ 2.04 per metre which was the enhanced value. To this extent, the re-determination of value is not correct. The assessable value and the differential customs duty and the equivalent amount of penalty under section 114A on the appellant need to be re-determined accordingly. Clearly, in this case, the appellant had mis-declared the nature of the goods and the goods which were imported were different from what was declared in the Bill of Entry. They are squarely covered by section 111 (m). The confiscation therefore needs to be upheld. After confiscation, the goods were allowed to be redeemed on payment of a fine, which is very modest being only about 1% of the declared value of the goods. We do not find any reason to interfere with either the confiscation or quantum of redemption fine. Penalty imposed on Director of the appellant under section 112 (a) of the Act which is also appears to be fair. Thus, we partly allow the appeal and modify the impugned order to the extent of re-determining the assessable value reckoning U.S. $ 1.8 per metre as the contemporaneous value under Rule 4 instead of U.S $ 2.04 per metre. The duty payable shall be re-determined accordingly. The penalty imposed on the appellant under section 114A also needs to be re-determined accordingly. Appeal is partly allowed and the impugned order is modified to the extent indicated above. Issues: (i) Whether the declared transaction value could be rejected and the value re-determined under Rule 12 and Rule 4 of the Customs Valuation Rules due to mis-declaration and whether the correct contemporaneous value was applied; (ii) Whether confiscation of the goods under section 111(m) and the redemption fine under section 125 were justified; (iii) Whether the penalty on the director under section 112(a) and penalty on the appellant under section 114A were maintainable.Issue (i): Whether the declared value could be rejected and the value re-determined under Rule 12 and Rule 4, and whether the correct contemporaneous transaction value was applied.Analysis: The imported fabric was declared as 0.62 mm but found to be 0.74–0.81 mm, giving proper officer reasonable doubt under Rule 12. Once transaction value was rejected, valuation proceeds sequentially under Rules 4–9. Rule 4 requires using the transaction value of identical goods imported at or about the same time and, if multiple such values exist, the lowest shall be used; it also specifies that the transaction value used should be the transaction value and not a value provisionally assessed by an officer.Conclusion: The rejection under Rule 12 was justified. However, the Joint Commissioner erred in applying an enhanced assessed value of U.S. $2.04 per metre instead of the lowest contemporaneous transaction value of U.S. $1.80 per metre. The assessable value, duty and penalty under section 114A must be re-determined using U.S. $1.80 per metre in accordance with Rule 4 (in favour of the assessee on this point).Issue (ii): Whether confiscation under section 111(m) and the redemption fine under section 125 were justified.Analysis: The goods did not correspond with the particulars declared in the Bill of Entry because of the material mis-declaration of thickness; such mis-declaration falls within the scope of section 111(m). The redemption fine imposed was modest relative to the declared value.Conclusion: Confiscation under section 111(m) and the redemption on payment of Rs. 25,000 are upheld (against the assessee on this point).Issue (iii): Whether penalties under section 114A on the appellant and section 112(a) on the director were maintainable.Analysis: Given the admitted mis-declaration and waiver of the show cause notice by the director, imposition of penalties under section 114A and personal penalty under section 112(a) fall within the statutory scheme; no appeal was instituted by the director against his personal penalty.Conclusion: The penalty on the director under section 112(a) is sustained; the penalty under section 114A on the appellant is to be re-determined proportionately after re-computation of assessable value (partly against the assessee).Final Conclusion: The appeal is partly allowed by modifying the valuation to apply the lowest contemporaneous transaction value of U.S. $1.80 per metre under Rule 4 and directing re-computation of duty and the equivalent penalty under section 114A; confiscation, redemption fine and personal penalty under section 112(a) are upheld.Ratio Decidendi: Where the proper officer has reasonable doubt about the truth or accuracy of declared value due to material mis-declaration, the declared value may be rejected under Rule 12 and valuation must proceed sequentially under Rules 4–9; under Rule 4, the transaction value of identical contemporaneous imports is to be used and, if multiple values exist, the lowest such transaction value must determine the assessable value.