TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 1679
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....ntial 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, China had issued the invoices to such Indian imp....
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....ugned 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 goods having same article numbers as imported by M/s. Elegant Industries and M/s. Elegant Internation....
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....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 origin, majority of these goods were imported from the same supplier and as discussed and established above the goods were also ide....
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....de 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 in such circumstances there arose no occasion to re-determine the transaction value. Learned counsel also placed reliance upon a decision of the Tribunal rendered....
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....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, as the case may be, is presented under section 50; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordanc....
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....n 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 transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below." 17. A perusal of sub-rule (1) of rule 4 of the 1988 Valuation Rules, which deals with transaction value, shows that the transaction value of the imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in ....
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....y 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 invoice price is to form the basis for determination of the transaction value. Nevertheless, if on the basis of some contemporaneous evidence, the revenue is able to demonstrate that the invoice does not reflect the correct price, it would be justified in rejecting the invoice price and determine the transaction value in accordance with the procedure laid down in CVR, 1988. It needs li....
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...." 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 falls within the exceptions mentioned in Rules 4(2)(c) to (h), the Department is bound to assess the duty on the transaction value. It was further held that Rule 4 is directly relatable to Section 14(1) of the Act. Section 14(1) read with Rule 4 provides that the price paid by the importer in the ordinary course of commerce shall be taken to be the value in the absence of any special circumstance....
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....i, 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 unit transaction value based on the invoices mentioned in the invoices issued by Zhejiang, China to M/s. Purnima Enterprises and M/s. Vedant Enterprises, proceedings were initiated agent Regent Exim. It is in this context that the Tribunal observed that merely because Zhejiang, China had under invoiced the value of silk fabrics for other importers, it would not mean that it had under invoiced the value in ....
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....tablish 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 statements of the persons so summoned are then recorded under these provisions. It is these statements which are referred to either in section 9D of the Central Excise Act or in section 138B of the Customs Act. A bare perusal of sub-section (1) of these two sections makes it evident that the statement recorded before the concerned Officer during the course of any inquiry or proceeding shall be relevant for the purpose of proving....
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....ination 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 which such statements can be admitted in evidence." (emphasis supplied) 28. Thus, for the reasons stated above, the transaction value of silk fabric imported by the appellant could not have been rejected under rule 10A of the 1988 Valuation Rules. In such a situation, re- determination of the transaction value would not arise. 29. Learned counsel for the appellant also submitted that the department failed to produce contemporaneous imports....
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....nd 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 There is huge time difference as majority of the imports by appellants took place prior to 18.10.2004. Supplier(s) Zhejiang Cathaya International Co. Ltd. Hozhou Hal Ymn Trade Co. Ltd. Zhejiang Cathaya Light Products & Textiles Imp. & Exp. Co. Ltd. Zhejiang sunny Imp & Exp. Co. Ltd. Jiangsu Hongbao Group Imp & Exp Co. Ltd. Zhejiang Cathaya International Co. Ltd. Apart from the common supplier, there are also other Supplier of the appellant. Quantity 10,86,629.9 meters 72,....