TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 933
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....ating one of the enabling provisions within the construct of the law and to which a machinery provision has been tethered as contextual necessity to make it work has been stretched to breaking point, and, that too, by appropriation at subaltern level, beyond the design of intent in legislated enactment or even contemplated for policy formulation. And all by disaggregation and re-aggregation of the several, and mutually exclusive, elements of a valuation scheme, conceived for giving effect to the caveats in the statutory provision enabling valuation of goods, by casting doubts on contractual engagements spanning transnational jurisdictions. This, though not said so in as many words, is, nonetheless, the sum and substance of the outcome in adjudication by Principal Commissioner of Customs (Adjudication), Mumbai that is cause for cavil of the Committee of Chief Commissioners of Customs at whose instance appeals against the said order [order-in-original no. 24/SJ/(24)/PCC(ADJN)/MUMBAI/2023-24 dated 29th November 2023] have been filed with two importers of 'steam coal', M/s Reliance Infrastructure Ltd and M/s Rosa Power Supply Co Ltd, and two individuals, Shri Vaibhav Aggarwal and Shri ....
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....oreover, that the notice sought to be restored on the grounds of appeal preferred here appears to have been unencumbered by appreciation of business in general or comprehension of the energy industry in particular is evident from the insight of hindsight apparently resting only on familiarity with government procurement and, such as it is, upon instructions which do not even pretend to signify that acceptance of 'lowest bid' in tender for works or for supply, beyond excluding exercise of discretion by public servants, also factors in risk elimination in much the same way as a commercial organization would and whether deliberately so or from total ignorance is not immediately apparent. An extremely narrow understanding of energy economics appears to pervade the notice, as well as the review, with focus on 'tariff pass through' without 'aspecting' either regulatory autonomy purposed with elimination of cross-subsidy requiring in-depth scrutiny by the tariff authority or consumer participation in the three stages of 'aggregate revenue requirement', 'provisional trueing up' and 'final trueing up' for tariff implementation. A markup, admitted in the notice to be not more than 20% over p....
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....ariff Act, 1975. The goods, tested for quality and contractual compliance at 'load port' in Indonesia, were shipped on vessels, chartered on behalf of 'intermediaries' for which marine insurance was arranged by the importers, to be discharged at ports in India. There is no record of any test at destination and, therefore, no controversy on impact of parameters on value. Of the 37 consignments of M/s Reliance Infrastructure Ltd, three, till its merger in October 2010 with M/s Reliance Power Co Ltd, were routed through M/s Reliance Natural Resources Ltd, 11 through M/s Larimar Holdings Ltd, Jersey till May 2011, one through M/s Epic Alloy Steel Pvt Ltd, Raigarh and 22 through M/s Century Exports Ltd, Hong Kong while all 38 of M/s Rosa Power Supply Co Ltd were routed through M/s Century Exports Ltd, Hong Kong. The numbers are not relevant and just that were is. 5. The four invoicing entities above were designated in the notice as 'intermediaries' between 'first stage traders' - assigned by the investigation to describe those who sourced the coal from 'second stage traders', or the Indonesian suppliers - and the two importers. Of this channel of supply, the invoices of the contractors....
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....t be invoked in the light of discard of evidence, governed by the decision of the Tribunal on validity of like documentation, offered in the notice as justification for re-opening of appraised value. As spelt in the grounds of appeal disputing three of these, there is challenge, even if not directly but dubiously so, to appellate hierarchy by questioning the propriety of reliance placed by the adjudicating authority on decisions in re Knowledge Infrastructure Systems Private Limited as well as that of the Tribunal in re Adani Power Maharashtra Ltd and in re Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL). It has been summated by the Committee of Chief Commissioners of Customs that the first, having been dismissed as withdrawn with the issue of law left undecided, was no precedent owing to ratio of the decision of the Tribunal not having been approved by the Hon'ble Supreme Court and that, by not endorsing the refuge therein sought by respondents in appeal of jurisdictional Commissioner of Customs, the decision of the in re Adani Power Maharashtra Ltd to approve dropping of proceedings in adjudication on grounds of evidence lacking validation, the law in re Knowled....
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....e Supreme Court in Union of India v. Kamalakshi Finance Corporation Ltd [AIR 1992 SC 711]; we are inclined to say so as an appeal, not preferred under section 129A of Customs Act, 1962 and not stemming from grievance about outcome in impugned order, but, on review for being legal and proper, is deemed under section 129D of Customs Act, 1962 to be so for procedure of filing and stands on a different footing than aggrieved person; by not being a court superior to the Tribunal, they are no less bound by binding decisions of the Tribunal. Turning to the other, the show cause notice had, in addition to re-determining the value, proposed confiscation of the impugned goods under section 111(m) of Customs Act, 1962 while, owing to non-availability thereof, stopped short of proposing that these be vested in the Central Government or offered for redemption under section 125 of Customs Act, 1962. The notice does not particularize the penalty to be imposed under section 112 and section 114AA of Customs Act, 1962 on the importers and individuals leaving that to determination by the adjudicating authority. Stemming from the conclusion that the value was not misdeclared, the adjudicating authorit....
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....ods for home consumption: Provided that such order may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria: xxxxx' in Customs Act, 1962 to confer authority of law and upon which is the stage set for birthing and extinguishment of 'imported goods' and 'export goods' respectively as set out in section 2(26) and section 2 (19) of Customs Act, 1962 beyond which jurisdiction to enforce any or all of Customs Act, 1962 ceases. Thus, only any one of the two contingencies, intended by law for erasure of jurisdiction, may be invoked for resumption thereof and, with one not having been contemplated, only on establishing of the goods, for having been prohibited under Customs Act, 1962 or any other law, as not entitled to have been cleared in the first instance may cause of action lie. Of such, there is neither whiff or whisper. And yet, a jurisdiction was proposed for appropriation, even though not from any of several others envisaged in section 111 of Customs Act, 1962 but that earmarked for misdeclaration by section 111 (m) of Customs Act, 1962 and, that too, of 'value' without erasing clearance for home ....
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.... allegedly at the instance of the importer, for the consignments shipped to India from Indonesia. This was found by the adjudicating authority to be repugnant to the scheme of the said Rules as sequential resort to rule 4 to rule 9 therein was indispensable valid conclusion of venturing upon the governing stipulation in rule 3(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and adoption of another value, pertaining to another sub-transaction of the very same goods, was not consistent with the cause and consequence therein as such eventuality was beyond contemplation. 9. The Committee of Chief Commissioners of Customs devoted substantial verbiage to demonstrated indifference to commercial prudence that should have motivated the impugned transactions and considerable attention to rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 that was projected in the notice as the coup de grace to obtain the finality of confiscation. Repeated references to 'siphoning off' of, presumably, the funds at the disposal of the importers and at cost, presumably, only to themselves, in the grounds of appeal appeared to imply that sufficient....
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....se notice as justification for invoking of section 111(m) of Customs Act, 1962 for confiscation of the goods and which, of course, is cause for pause inasmuch as, while overvaluation may well be within the ambit of procedural stipulations in Customs Act, 1962, the alleged purpose, viz., siphoning off of, moreover, their money, sourced either from returns of risk or at risk to return, is not contemplated for determination under Customs Act, 1962 as being legal and proper. The degree of mischievous consequence that affirmation of this proposition could engender in their own administrative spheres does not appear to have occurred to the Committee of Chief Commissioners: that the lack of acknowledgement of this purported activity by, as well as lack of definition in, the empowering statute which was the very same authority vesting power to review, lends itself to morphing without limit and without direction for criminalizing every business transaction. Consistency in customs clearance of, and certainty of ever meriting national treatment to, 'imported goods' would, then, be contingent upon rule of men and not rule of law. Further, it was alleged in the notice that the respondents herei....
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....ere 'intermediaries' with no worthwhile contribution to the supply chain in direct movement of coal from Indonesia to India. He argued that the routing of documents through related persons was intended for inflating the price of coal and that confiscation was justified in the context of declared value not being in conformity with transaction value and that, with consequences of detriments under Customs Act, 1962 being attached to the mandate of declaration in rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, there was no scope for discarding the proposals in the show cause notice. He took us through the elaborate narration of commercial engagement between the 'first stage suppliers' and the centralized procurement system, the purported supply by the ostensible seller being only on paper and of which one, M/s Reliance Natural Resources Limited, was related to M/s Reliance Infrastructure Ltd though such 'related person sale' was not attributed to the others. Drawing attention to the binding precedent relied upon in the grounds of appeal, he contended that the decision of the Hon'ble Supreme Court in Eicher Tractors Ltd v. Commissioner of Customs, Mu....
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....grounds of appeal were unable to draw upon the authority of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 to legitimize the substitution of declared value, reflecting the contracted price, with a derived price that had no buyer or seller within the referential context of section 14 of Customs Act, 1962. Learned Counsel for the respondents pointed out that appeal was bereft of any factual undermining of the findings in the impugned order to establish that rule 4 and rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, as the case may be, offered valid 'surrogate value' for concluding that goods were overvalued. In the absence thereof, the decisions of the Tribunal excluded any further scope for speculation that Customs Act, 1962 did afford jurisdiction to venture into re-visit of value where duty was not an outcome and of lack of credible evidence, certified through section 138C of Customs Act, 1962, to suggest that the declared value was liable to be re-determined. He further contended that acknowledgement of two different 'values' - one for assessment which remained untouched and the other for computation of value of confis....
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.... legally permissible. 15. The declared value, representing the price in transaction, was proposed to be rejected by recourse to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, in its stead, an alternative transaction value of the imported goods, which was nothing but the ascertained price at an earlier stage in the 'invoice trail', was proposed as legally tenable following which the injunction in rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 was proposed as sufficing for confiscation and other detriments. The substituted value was assigned credibility coefficient from the impugned consignments having been 'exported to India' directly from Indonesia and, therefore, comparatively more in conformity with section 14 of Customs Act, 1962. In so doing, it would appear that rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 was denuded of its true significance without care for its relevance stemming from the totality of section 14 of Customs Act, 1962 affording inclusion of value of services as well as administration of the antidote for transaction between related persons in whi....
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....rable over invoice representing dispatch from Indonesia by seller in Hong Kong. Neither the notice nor the grounds of appeal demonstrate any part of the valuation scheme which accords acceptance of this thesis for 'substitution' of invoice. 17. Any invoice is only a reflection of price agreed between buyer and seller as payable for goods and is not a field in which the State can insert itself under any circumstance; an invoice submitted as evidence of price for assessment to duties of customs may conceivably be rejected by the tax administration but should have the consequence of alternative stipulated in the valuation mechanism, viz., 'surrogate value', because the section 14 of Customs Act, 1962 is intended to fit a transaction between seller outside India and buyer in India for goods intended to be delivered in India at the time of place of importation. Nowhere does '14. Valuation of goods. (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for....
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.... India', its context is a description of the normality at which 'price', as declared, is, invariably and unopposedly, to be accepted as 'transaction value' for assessment; the valuation enablement supra does not refer to the place of export, as far as imported goods are concerned, and the insinuation of such, without any assistance offered by the meaning of 'export' in section 2 of Customs Act, 1962, is without authority of law and, therefore, lacking in legality for being contrived in pursuit of reasons unknown and unimaginable. Clearly, an invoice raised on a buyer, shamed as 'sham' inclusion in the notice, outside India, even if concerning the impugned goods which has not been established by provenanced documentation, is not evidence of price between seller and buyer in India and, hence, not conforming either to section 14 of Customs Act, 1962 or to rule 3(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 18. It is only by evidenced additional consideration, either directly and surreptitiously or by indirect benefit, to seller that may recast the 'price' for enhancement to such extent or upon evidenced flowback, yielding return to the buyer directl....
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....rtation, as the case may be, in the course of international trade, where the buyer and seller have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale; (b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with rules made in this behalf XXXXXXX' as at the time of enactment of Customs Act, 1962, and before some form of resemblance to the extant scheme of valuation was brought about by Customs (Amendment) Act, 1988 to substitute with '14(1) For the purposes of the Indian Tariff Act, 1934, or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the buyer and seller have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale; (1A) Subject to the provisions of sub-section (1), the....
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....unsel or that the employment of M/s Century Exports Ltd, and other intermediaries for a time, justified by reasons was not acceptable as explanation. An observation about commercial prudence, emanating from an investigation agency of the State, is not of adequate credence to be adjudged otherwise. Likewise, the critique of adoption of index value of 'Richards Bay' or of 'Newcastle', merely for not adopting the Indonesian index, is nowhere near oracular as to permit tax intrusion into business expediency. We may conclude that the price negotiation leading to 'letters of award' in favour of the intermediaries have not been evidenced as contrived except through unconnected dots that, like the constellations, have to be imagined as much as sighted. 22. The grounds of appeal, to the extent concerned with justifying non-applicability of the leading judgements of disputes before the Tribunal, are not to be dignified by being even taken into consideration. To do so would be at the cost of judicial discipline and the obligation devolving on the Tribunal, especially on valuation and classification, in the appellate hierarchy of national jurisdiction. The attempt to have the findings therein....