AI Drafter 
TaxTMI 
TaxTMI 
2025 (6) TMI 1679
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....n Rules. Accordingly, the demand of differential customs duty has been confirmed. The Commissioner has also imposed redemption fine on the silk fabric confiscated under section 111(M) of the Customs Act, 1962 the Customs Act and has also imposed penalty upon the appellant under section 114(A) of the Customs Act. 2. It transpires that intelligence was received that certain other importers of silk fabrics were engaged in under-valuation of this product imported from China and were thereby evading customs duty. Intelligence further suggested that two sets of invoices were raised by the said overseas suppliers for the same consignment; one set of invoices showed the actual value, while the other set showed lesser value. It is the latter invoice which was submitted by other Indian importers to the customs for clearance purposes so as to evade customs duty. An investigation was initiated by the Directorate of Revenue Intelligence DRI, New Delhi on the import of silk-fabrics from China by other importers and the premises of M/s. Purnima Enterprises at Chennai and M/s. Om Fabrics at Bangalore were searched. It also transpired that M/s. Zhejiang Cathaya International, China Zhejiang, Chi....
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....bmissions were also filed by the appellant on 19.12.2007. 6. The Commissioner passed the impugned order dated 06.02.2009. The relevant portions of the order rejecting the transaction value under rule 10A of the 1988 Valuation Rules are reproduced below: "146. xxxxxxxxxxx. In the background of above statutory provisions, I find that in the present case, it has been alleged that the value declared by the importers in the Bills of Entry that were the subject matter of the show cause notice was not the true transaction value as defined in Rule 4(1) of the Customs Valuation Rules, 1988. The DRI had challenged in correctness of the value declared in the Bills of Entry as true transaction value on the basis of evidence collected by them during investigations at Chennai and Bangalore. These evidences were in form of certain communications like e-mails, actual transaction invoices and sales contracts recovered by them from the other importers, namely, M/s. Poornima Enterprises, M/s. Om Fabrics and M/s. Vedant Enterprises. Apart from this DRI had relied upon evidence in form of bill of entry filed by other importers, namely, M/s. Regent Exim for clearance of indentical/comparable....
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....he evidence gathered by the investigating agency, the noticees have contended that no incriminating documents of the above nature have been recovered from their premises. On going through the case records and the chronology of events, I find that the premises of M/s. Poornima Enterprises, M/s. Om Fabrics and M/s. Vedant Enterprises which ultimately led to the recovery of duplicate sets of invoices were searched on 19.10.2004. It is a fact that the premises of the noticees company were searched on 8.2.2005 i.e. after a gap of almost four months. Taking note of this time lapse, it is not surprising that no incriminating documents were recovered from the premises of the noticees company. Even otherwise, while substantiating my findings given above regarding the rejection of transaction value declared by the noticees in the impugned Bills of Entry, I had analyzed that the goods imported by M/s. Elegant Industries & M/s. Elegant International were identical to those imported by M/s. Regent Exim, M/s. Poornima Enterprises, M/s. Om Fabrics & M/s. Vedant Enterprises. It is a matter of record that the goods imported by the noticees as well as the four importers named above were of Chinese o....
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....ect. xxxxxxxxxx. Though the noticee in their defence has submitted details of imports made by other importers. I find that all these imports have been made from traders in China. The DRI on the other hand has based its valuation in respect of the above article numbers on the prices declared by the other importers being much higher than the values declared by M/s. Elegant International and M/s. Elegant Industries for comparable quality and variety of silk fabrics. xxxxxxxxx." (emphasis supplied) 8. Shri B. L. Narasimhan, learned counsel for the appellant assisted by Ms. Jyoti Pal, Shri Ashwani Bhatia and Ms. Srishti Bajaj submitted that the Commissioner committed an illegality in rejecting the transaction value of silk fabric imported by the appellant. Learned counsel pointed out that in the present case the department has not invoked the provisions of rule 4 of the 1988 Valuation Rules and reliance has been placed on rule 10A of the 1988 of the Valuation Rules for rejection of the declared value. The transaction value declared by the appellant was, therefore, required to be accepted and could not have been rejected. The submission that was, therefore, advanced was that ....
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....fied in rejecting the transaction value of the imported goods under rule 10A of the Valuation Rules. 13. Section 14 of the Customs Act deals with valuation of goods for purposes of assessment and it is reproduced below: "Section 14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, whereunder a duty of suctoms 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- (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill or bill of export, ....
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....normal discount or reduction from the ordinary competitive price; (c) the sale does not involve special discounts limited to exclusive agents; (d) objective and quantifiable data exist with regard to the adjustments required to be made, under the provisions or rule 9, to the transaction value. (e) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which, - (i) are imposed or required by law or by the public authorities in India; or (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (f) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being value; (g) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller unless an appropriate adjustment can be made in accordance with the provisions of rule 9 of these rules; and (h) the buyer and seller are not related, or where the buyer and seller are related, that ....
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....rect or unacceptable, the revenue has to bring on record cogent material to show that contemporaneous imports were at a higher price and for this rule 10A of the 1988 Valuation Rules would have to be resorted to. The relevant portions of the judgment of the Supreme Court are reproduced below: "11. On a plain reading of Sections 14(1) and 14(1A), it is clear that the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in Section 14(1) of the Act. Section 14(1) is a deeming provision as it talks of deemed value of such goods. The determination of such price has to be in accordance with the relevant rules and subject to the provisions of Section 14(1) of the Act. Conjointly read, both Section 14(1) of the Act and Rule 4 of CVR, 1988 provide that in the absence of any of the special circumstances indicated in Section 14(1) of the Act and particularized in Rule 4(2) of CVR 1988, the price paid or payable by the importer to the vendor, in the ordinary course of international trade and commerce, shall be taken to be the transaction value. In other words, save and except for the circumstances mentioned in proviso to Sub-rule (2) of Rule 4, the....
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....s. The value may be fixed by the Central Government under Section 14(2). Where the value is not so fixed it has to be decided under Section 14(1). The value, according to Section 14(1), 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 and importation in the course of international trade. The word "ordinarily" implies the exclusion of special circumstances. This position is clarified by the last sentence in Section 14(1) which describes an "ordinary" sale as one where the seller or the buyer have no interest in the business of each other and price is the sole consideration for the sale or offer for sale. Therefore, when the above conditions regarding time, place and absence of special circumstances stand fulfilled, the price of imported goods shall be decided under Section 14(1A) read with the Rules framed thereunder. The said Rules are CVR, 1988. It was further held that in cases where the circumstances mentioned in Rules 4(2)(c) to (h) are not applicable, the Department is bound to assess the duty under transaction value. Therefore, unless the price actually paid for a particular transaction fal....
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....hen the premises of three importers had been searched. 23. Learned counsel for the appellant has placed reliance upon a decision of the Tribunal in Regent Exim International, which is a decision on similar facts. Regent Exim was also engaged in the import of silk fabrics from Zhejiang, China. On receipt of intelligence about under invoicing in import of silk fabrics by M/s. Purnima Enterprises at Chennai, M/s. Om Fabrics at Bangalore and M/s. Vedant Enterprises at Bangalore, the DRI searched their premises in the course of which incriminatory documents indicating issue of two sets of invoices by Zhejiang, China for each consignment of silk fabric supplied to the aforesaid three companies were recovered. The documents showed that one set of invoices showed 30 to 35% less value. Since Regent Exim International was also importing silk fabrics from Zhejiang, China, the godown and the premises of the Director were searched and a statement of the Director was recorded. However, incriminating evidence was not recovered received at the time when search was conducted of the premises Regent Exim and its Director but as the declared per unit price was found to be lower than the actual per ....
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....he department to have substantiated the allegation of undervaluation of the silk fabric imported by the appellant from Zhejiang, China by cogent evidence and not by drawing an inference from the imports made by other importers of silk fabrics from Zhejiang, China. 25. The impugned order also relies upon the statement made by Ajit Kumar Gupta, who was looking after the activities of the appellant as a Director, to establish that the goods were undervalued. 26. This statement was made by Ajit Kumar Gupta under section 108 of the Customs Act. In the absence of the procedure contemplated under section 138B of the Customs Act having been followed, this statement could not have been relied upon. In this connection, it may be pertinent to refer to the decision of the Tribunal in M/s. Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur Excise Appeal No. 51148 of 2020 decided on 01.04.2025 wherein it was observed: "21. It would be seen section 14 of the Central Excise Act and section 108 of the Customs Act enable the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The s....
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....e Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examined as witnesses before the adjudicating authority and the adjudicating authority forms an opinion that the statements should be admitted in evidence. It is thereafter that an opportunity has to be provided for cross-examination of such persons. The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed that the statements recorded during inquiry/ investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility that statements of the witnesses have to be recorded before the adjudicating authority, after....
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....ach of them have been provided in the sales contract which the appellant entered with the suppliers. The sale contract has been cross-referenced in the invoices issued by the suppliers to the appellant. However, none of the documents of other importers relied upon by the department show the grammage, grade of silk fabric and quality of weave. In the absence of such information, the comparison of quality of the silk fabric imported by the other importers and the quality of the silk fabric imported by the appellant could not have been drawn. 33. This apart, there are other factors which impact the prices of silk fabrics. It would depend on the quantity imported, the time of importation and existence of multiple suppliers. The appellant has provided a chart that shows significant differences between the imports made by the appellant and the imports by the other four importers. The illustration with respect to article 10103 of silk fabric imported by the appellant and M/s. Om Fabrics Imports provided by the appellant is reproduced below : Article 10103 Basis Appellant Imports M/s. Om Fabrics Imports Differences Time 10.10.2003 to 25.11.2004 18.10.2004 Ther....