TaxTMI 
TaxTMI 
2026 (6) TMI 1431
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....issioner rejected the declared values of the goods (watch parts and watch movements) imported by M/s. Rochi Ram & Sons [The importer] through four ports, re-determined the values, confirmed demand of differential duty amounting to Rs. 5,53,19,097/- under the proviso to section 28(1) of the Customs Act, 1962 [Act] along with interest under section 28AB of the Act, confiscated the imported watches under section 111 of the Act and imposed redemption fine in lieu of confiscation under section 125 of the Act and imposed penalties on the importer under sections 112 and 114A of the Act. He also imposed personal penalties on some persons including the appellants in Customs Appeals No. 233/2011, 234/2011, 235/2011 and 236/2011 as follows: Appeal Appellant Dut/Fine/ Penalty (Rs.) Sections C/231/2011 Rochi Ram & Sons (the importer) Duty Rs 5,53,19,097/ Redemption fine. Rs. 30,80,000/ Rs. 75,000/ Rs. 4,00,000/ Penalty Rs. 5,53,19,097/- Proviso to section 28(1) Confiscated under section 111(d) & (m) and fine imposed under section 125 Sections 112 (a) & (b) and 114A C/233/2011 Nanak Das Moolrajani Penalty 30,00,000/ 112(b) C/234/2011 Neeraj Moolraj....
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....Supreme Court in Shri Balaji Steel Re-Rolling Mills Versus Commissioner of Central Excise & Customs [2014 (36) S.T.R. 1201 (S.C.)] the relevant portion of which is reproduced below: 12. A similar question came up for consideration before this Court in The Commissioner of Income-Tax, Madras v. S. Chenniappa Mudaliar, Madurai - 1969 (1) SCC 591 wherein this Court considered the provisions of Section 33 of the Income-tax Act, 1922 and Rule 24 of the Appellate Tribunal Rules, 1946 which gave power to the Tribunal to dismiss the appeal for want of prosecution. For ready reference, Section 33(4) of the Income Tax Act, 1922 and Rule 24 of the Appellate Tribunal Rules, 1946 are reproduced below :- Section 33(4) of the Income Tax Act, 1922 "33(4). The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner." Rule 24 of the Appellate Tribunal Rules, 1946 "24. Where on the day fixed for hearing or any other day to which the hearing may be adjourned, the appellant does not appear when the app....
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....lant. It was laid down as far back as the year 1953 by S.R. Das, J. (as he then was) in CIT, v. Mtt. Ar. S. Ar. Arunachalam Chettiar that the jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under Section 33(4) and a question of law arising out of such an order. The Special Bench, in the present case, while examining this aspect quite appositely referred to the observations of Venkatarama Aiyar, J. in CIT v. Scindia Steam Navigation Co. Ltd. indicating the necessity of the disposal of the appeal on the merits by the Appellate Tribunal. This is how the learned judge had put the matter in the form of interrogation : "How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether the decision of the Court should be sought." Thus looking at the substantive provisions of the Act there is no escape from the conclusion that under Section 33(4) the Appellate Tribunal has to dispose of the appeal on the merits and cannot short-circuit the same by dismissing it for....
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....made the following submissions: i) The importer herein and five related firms viz., (i) Rochi Ram & Sons, (ii) Rajasthan Watch Manufacturers; (iii) Rochees Time Pvt. Ltd., (iv) Jaipur Time Industries and (v) M/s. HMD Exim Pvt. Ltd. were engaged in manufacture of wrist watches and wall clocks for which purpose, various parts like watch cases, watch movements, watch, dials, hands, leather straps, metal bands and winding knobs, etc. were imported from Hong Kong. Intelligence was gathered by DRI that all the above firms were controlled by Shri Ishwar Das Moolrajani, and were evading customs by mis-declaring the value and description of the goods imported. The officers searched the premises of the importer and its partners and directors on 23 June 2006 and seized relevant records. After conducting a detailed investigation in the matter, DRI issued SCN dated 19.6.2007 to the importer and others. ii) The proposals in the SCN were decided by the Commissioner in the impugned order rejecting the transaction value of the imported goods under Rule 10A of the Customs Valuation (Determination of Prices of Imported Goods) Rul....
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....yal Exports, in turn, issued an invoice to the importer for only USD 0.06 (equal to Rs. 2.69 per piece) which shows undervaluation by 95%. ix) Further, in some imports by other related firms viz., HMD Exim Pvt. Ltd., Rochi Ram & Sons, etc. more than one invoice of the same number were found and the lower values were declared before the Customs. x) Shri Ishwar Das Moolrajani paid the actual price to the Hong Kong suppliers in cash through Shri R K Mansukhani and others during his visits to Hong Kong. Shri Moolrajani had with him, even signed and unsigned copies of invoices in the name of Legend Watch, HK and even letters addressed by this firm to the bank in India for remission of payments. He also had various letterheads of the exporting companies. xi) The appellants cannot disown the invoices issued by the HK suppliers calling them third parties because these were the companies which sold them the goods. xii) With reference to Leather straps the duplicate invoice no. LW/8843/05 dated 30.9.2005, submitted by the appellant, the value declared was USD 420 for 7000 leather straps whereas the original invoice was found to be for HK$ 6749.5 (equal to ....
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....alue for determining the duty. In other words, the transaction value is considered after some adjustments. 13. On the other hand, if the buyer and seller are related or if there are other reasons to doubt the truth and accuracy of the transaction value, Rule 10A provides for rejection of the transaction value by the proper officer instead of making some adjustments to the transaction value as in Rule 9. If the proper officer rejects the transaction value under Rule 10A, the value should be determined sequentially through Rules 5 to 8. 14. The relevant Rules are reproduced below: Rule 5 Transaction value of identical goods. -(1) (a) Subject to the provisions of Rule 3 of these rules, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued. (b) In applying this rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods. (c) Where no sale referred to in clause (b) of sub-rule (1) of this rule, is f....
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....axes payable in India by reason of importation or sale of the goods. (2) If neither the imported goods nor identical nor similar imported goods are sold at or about the same time of importation of the goods being valued, the value of imported goods shall, subject otherwise to the provisions of sub-rule (1) of this rule, be based on the unit price at which the imported goods or identical or similar imported goods are sold in India, at the earliest date after importation but before the expiry of ninety days after such importation. (3) (a) If neither the imported goods nor identical nor similar imported goods are sold in India in the condition as imported, then, the value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons who are not related to the seller in India. (b) In such determination, due allowance shall be made for the value added by processing and the deductions provided for in items (i) to (iii) of sub-rule (1) of this rule. 7A. Computed value. - Subject to the provisions of Rule 3, the value of imported goods shall be based on a computed value, whi....
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.... at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, namely:- (i) materials, components, parts and similar items incorporated in the imported goods; (ii) tools, dies, moulds and similar items used in the production of the imported goods; (iii) materials consumed in the production of the imported goods; (iv) engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods; (c) royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; (d) the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, ....
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.... furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the value of such imported goods cannot be determined under the provisions of sub-rule (1) of Rule 4. (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1). 15. In the impugned order, the transaction values were rejected under Valuation Rule 10A and the values were re-determined. The relevant part of the impugned order is reproduced below: "ORDER 1. I reject under Rule 10A of the Customs Valuation (Determination of prices of the imported goods )Rules, 1988, the assessable value declared in the Bill of Entry and the Import Declaration and I redetermine under Rules 4,5,6,7, 7A &8 of the Customs Valuation (Determination o....
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....and why. Thus, the basis on which the values were redetermined are neither in the operative part of the impugned order nor in the Annexures to the SCN referred to in it. 18. The first part of the question to be answered is whether the Commissioner has correctly rejected the transaction values under Rule 10A. The second part is whether he has correctly re-determined it as per the Rules. The reasons for rejecting the transaction values given in the impugned order and summarized in the submissions of the learned special counsel as follows: (i) The importer and five other importer firms were all related and owned by the same set of people with Shri Ishwar Das Molrajani being the main person. The goods were imported from Legend Manufacturers Ltd. Hong Kong, Compu Xpress, Hong Kong and Royal Exports Hong Kong. The Hong Kong based firms were also owned and managed by the same family. Thus, they are related persons. (ii) The above relationship was never declared before the Customs and it was found during investigation evidenced both by the documents recovered during the investigation as well as the statements. (iii) Some of the invoices- both signed and unsign....
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.... Rule, all the preceding Rules have to be ruled out. Within a Bill of Entry, if there are several goods, one Rule may apply to some goods (say, because there are contemporaneous imports of identical or similar goods) and may not apply to some other goods. Further, the same goods may be valued under one Rule (say, based on value of identical goods) in one Bill of Entry and under some other Rule in another Bill of Entry (say, if there were no contemporaneous imports during the relevant period). Neither the operative part of the order nor the Annexures I,II,III& IV of the SCN which it refers to give any indication as to which Rule was adopted for which good imported under which Bill of Entry and why. 22. However, in the discussion part of the impugned order in paragraphs 188.1 to 188.19, the methods of valuation adopted have been given for different categories of goods but without referring to the Bill of Entry. We proceed to examine these. 23. Leather straps (7,000 pieces) imported under Invoice LW//8843/05 dated 30.9.2005 : In paragraph 188.1, the consignment imported through Foreign Post Office, Jaipur declaring US$ 420@ US $0.06 per piece (equal to HK$ 0.46) as the value was....
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....revious paragraph of the same order shows that there were imports of plastic cases with straps. Therefore, prices of contemporaneous imports must be available. Further, if such cases are imported, they would have been sold in India and therefore, deductive method under Rule 7 should also be feasible. Therefore, re-determination of the value of these goods under Rule 8 deserves to be set aside along with consequential demand of duty. 27. Watch dials of Chinese origin: In paragraph 188.3 of the impugned order, the values of watch dials were re-determined under Valuation Rule 8 as it was found not possible to determine the values under Rule 5 (transaction values of identical goods),Rule 6 (transaction values of similar goods) or Rule 7 (sale price of such goods in India). We find the assertion in the impugned order that no identical or even similar Watch dials were imported or sold in India during the relevant period unbelievable. Watch dials are not some hi-tech or rare or unusual goods. How is it likely that in a country of almost a billion people (even during the relevant time), watch dials were not imported, or sold during the relevant period? Having asserted so, the Commission....
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....owing Rule 8 by simply enhancing the value treating the declared values as having been undervalued to the extent of 60% on the ground that average undervaluation was to that extent. In other words, the values were enhanced two and a half times. This, in our considered view is an arbitrary value whose use is explicitly prohibited under Rule 8(2) (iii). The demand of differential duty on these goods needs to be set aside. 30. Watch cases of Chinese origin: In paragraph 188.5, the prices declared for watch cases imported by the importer from various Hong Kong suppliers were rejected and the prices were re-determined under Rule 8 stating that Rules 5,6,7 &7A could not be applied because there were no imports of identical goods or similar goods nor were such goods sold in India or manufactured in India. We do not see how nobody else in the country imported during the period watch cases which are either identical or even similar and further, nobody even sold watch cases in India (to apply deductive method under Rule 7) and nobody manufactured watch cases and so constructive method under Rule 7A could be applied. Watch cases are a good of such common usage that it is impossible that in....
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....edetermined under Rule 8 by simply treating the declared values as having been undervalued 60% based on the average undervaluation noticed during the investigation. This method of determination is completely arbitrary which is explicitly prohibited under Rule 8(2) (vi). Therefore, this re-determination of value also needs to be set aside. 33. O-rings. In paragraph 188.8, the declared values were rejected and the values were re-determined under Rule 8 after recording that there were no imports of identical goods, imports of similar goods, sale of such goods or domestic manufacture of such goods and hence the value could not be redetermined under Rules 5,6,7 & 7A of the Rules. The value was redetermined under Rule 8 relying on : (a) an invoice dated 16.1.2006 said to have been issued by the actual supplier M/s. Kelvin Far East Ltd., Hong Kong said to have been retrieved from the computer of the importer; and (b) reckoning average under valuation of 60%. It is not clear if the invoice pertained to supply of goods to India and if so, there was no reason to not follow Rule 5 or 6. If the invoice was from M/s Kelvin, Hong Kong to another buyer in Hong Kong or for ....