Custom, Excise & Service Tax Tribunal
Ahmedabad vs Hamilton Housewares P Ltd on 3 October, 2018
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
West Zonal Bench AHMEDABAD
COURT NO. I
Appeal No. C/12024/2014 -DB
[Application No. C/Ors/10743/2017]
[Arising out of Order-in-Original No OIO-01-COMMR-DRI-2014 dated 31.01.2014
passed by Commissioner of Central Excise & ST, Ahmedabad]
Commissioner of Customs, Ahmedabad : Appellant
vs.
M/s. Hamilton Housewares Pvt. Limited : Respondent
Appearance:
Shri S.N. Gohil, Superintendent (AR), for the Appellant-Revenue Shri T. Vishwanathan and Shri Manish Jain, Advocates for the Respondent CORAM:
Hon'ble Mr. Ramesh Nair, Member (Judicial) Hon'ble Mr. Raju, Member (Technical) Date of Hearing : 29.06.2018 Date of Decision : 03.10.2018 Final Order No. A/12057 / 2018 Per : Ramesh Nair The brief facts of the case are that the respondent are regularly importing various tableware and household items which includes glass ware made out of opal glass like dinner sets which are supplied directly by the manufacturer M/s. Wenzhou Huishunda Industrial Trade Company Limited, China (for short Wenzhou). The respondent entered into a long term arrangement and agreement to purchase opal glass ware from the supplier. The said goods are manufactured by the supplier exclusively for the respondent as per the design and specifications given by the respondent. 2
Appeal No. C/12024/2014 -DB The goods also bear the brand name of the respondent. The total value of imports made by respondent from 2005 till 15.11.2008 is US $ 43,21,440/- (approximately Rs. 18,58,21,920/-) from the same supplier. The total number of sets (all types) imported is nearly four lakh sets. The value of the imports, quantity-wise and value-wise from 15.11.2008 to 31.03.2013 is as under:-
S/No. Financial Year Quantity of imports in Value of
(Period) sets/Pieces. imports (USD)
1. 2008-09 156171 SETS 12,89,645.64
2. 2009-10 218436 SETS & 33324 Pcs 15,60,862.02
3. 2010-11 300571 SETS 13,30,675.30
4. 2011-12 145405 SETS 8,82,010.80
5. 2012-13 56098 SETS 3,72,416.90
The respondent have duly filed bills of entry for clearances of the goods describing them as "Glassware" and presented the goods for assessment by the Customs. The goods were assessed to duty under heading 70.13 of the Customs Tariff as 'Glassware of a kind used for table, kitchen, toilet, office and indoor and similar purposes.' The classification claimed in the bills of entry for the imported goods was tariff item 70132900 as 'others'. The goods including the cartons used for packing of the goods were physically verified /examined by the Customs at the time of assessment. The examination report prepared by the officers shows that the goods imported by the respondent is 'opal glassware' and the assessment so made were finalized. The DRI investigated the case and the show cause notice dated 23.03.2007 was issued wherein it was alleged that the respondent have mis-classified and mis-declared the goods. According 3 Appeal No. C/12024/2014 -DB to the DRI, the imported goods were classifiable under Tariff Item 7013 32 29 which applies to "glass having a linear coefficient of expansion not exceeding 5x10-⁶ per Kelvin with a temperature range of 0⁰C to 300⁰C".
According to DRI, the goods were not classifiable under 7013 32 29 as originally assessed. Both the tariff items fall within the same heading 70.13 covering 'glassware' and attracting the same rate of duty. According to DRI, the respondent have mis-declared the description of the goods and also classification and consequently, in the show cause notice, the invoice price/ transaction value is liable to be rejected in terms of Rule 6 of Customs Valuation Rules, 1988 which is based on the following:-
(a) A price list dated 09.02.2004 found in the premises of M/s.
Vishal Hira Merchants Limited;
(b) E-mail correspondence exchanged between M/s. Wenzhou Huishunda Industrial Trade Company Limited, China and M/s. K.P. International, New Delhi containing offer/counter offer/ negotiation between these two entities regarding sale/ purchase of goods.
The show cause notice also relied upon two parallel invoices found in the premises of Delhi based importer M/s. Vishal Hira Merchants Limited. Further, the value of the goods imported by respondent were not worked out on the basis of invoices found in the premises of the said importer. On adjudication, the Commissioner of Customs, Ahmedabad vide order dated 17.10.2008, confirmed the proposals made in the show cause notice. Being 4 Appeal No. C/12024/2014 -DB aggrieved by the order dated 17.10.2008, the respondent filed appeal before this Tribunal. This Tribunal vide Final Order No. A/1568- 1569/WZB/HAD/2012 dated 10.09.2012/29.10.2012, set-aside the aforesaid adjudication order had held that imported goods have not been mis- declared and also set-aside the classification ordered by the Commissioner under Tariff Item No. 7013 32 00. Having held so, this Tribunal remanded the matter for de-novo adjudication on the aspect relating to valuation of the imported goods. In the remand proceedings, the ld. Commissioner of Customs, Ahmedabad vide OIO No. 01-COMMR-DRI-2014 dated 31.01.2014, set-aside the demand and dropped the proceedings. The Revenue, being aggrieved by the said order dated 31.01.2014, filed the present appeal.
2. Shri S.N. Gohil. Ld. Superintendent (AR) appearing on behalf of the Revenue reiterates the grounds of appeal. He submits that as per the remand order of the Tribunal, the valuation issue was to be decided by the Adjudicating Authority. As per the imports of contemporary goods from the same supplier M/s. Wenzhou Huishunda Industrial Trade Company Limited, China to M/s. K.P. International were at a significantly higher price. M/s. K.P. International approached to Settlement Commission and had paid differential duty therefore, the price enhanced in the case of K.P. International shall equally apply in the case of the present respondent. Another contemporary import of M/s. Vishal Hira Merchant Limited from the same supplier i.e. M/s. Wenzhou Huishunda Industrial Trade Company 5 Appeal No. C/12024/2014 -DB Limited, there was huge difference in terms of percentage ranges from 32% to 59%, which is abnormal in the common trade parlance. The respondent declared the goods as Glass Ware irrespective of whether they were Opal ware or Glass ware. There were separate price for Opal ware and Glass ware. In the container seized contained the impugned goods were marked as "TREO premium glassware" whereas the inner boxes were marked as "premium imported Opal ware". This shows that under the guise of Glassware, the appellant have imported Opal ware so that the actual price of Opal ware can be suppressed. In view of this position, there is no doubt that the respondent have undervalued the imported Opal ware hence, the impugned order setting aside the demand is not legal and proper. Therefore, he prays for setting aside the impugned order and to allow the Revenue's appeal.
3. Shri T. Vishwanathan, ld. Counsel along with Shri Manish Jain appearing on behalf of the respondent, made the following submissions:-
(i) That, Order-In-Original dated 31.01.2014 is liable to be upheld. One and the only reason given in the show cause notice dated 23.07.2007 and dated 17.10.2008 for rejecting the transaction value was 'mis-
declaration of description of the imported goods' and 'mis- classification of the imported goods'. The said reason is no longer available to reject the value and hence, the value of the imported 6 Appeal No. C/12024/2014 -DB goods was accepted in its face value, in the absence of any circumstances mentioned in Rule 4(2) of the Customs Valuation Rules.
(ii) As can be seen from para 16 of the show cause notice and para 48 of the order dated 16.10.2008 passed by the Commissioner, the sole reason given for rejecting the transaction value was mis- declaration.
(iii) Hon'ble CESTAT, Ahmedabad, vide para 10 of the Final Order dated 29.10.2012 has held that there is no mis-declaration of the description of goods by the respondents. It was also held that no mis- classification of the imported goods. In fact, the CESTAT has upheld the classification under Tariff Item 701339 00 adopted by the respondents and rejecting the classification under Tariff Item 7013 32 00 held by the Commissioner.
(iv) Hence, only ground given for rejecting the transaction value fails.
It was submitted that Rule 3(2) of the Customs Valuation Rules provides for circumstances under which the transaction value between the importer and the supplier should be rejected.
(v) In Eicher Tractors Limited - 2000 (122) ELT 321 (SC), the Hon'ble Supreme Court has held that the transaction value can be discarded only under the circumstances mentioned in Rule 4(2) of Customs Valuation Rules, 1988 and not otherwise. Rule 3(2) of Customs 7 Appeal No. C/12024/2014 -DB Valuation Rules, 2007 corresponds to Rule 4(2) of Customs Valuation Rules, 1988.
(vi) In the instant case, none of the circumstances specified under Rule 3(2) exists and hence the declared value which is the transaction value, needs to be accepted. It is not even the case of the department that the special circumstances mentioned in Rule 3(2) exists in the present case to reject the transaction value.
(vii) The present impugned order is contrary to the law laid down by the Supreme Court in the case of Eicher Tractors Limited vs. CC - 2000 (122) E.L.T. 321 (SC); Tolin Rubbers Pvt. Limited vs. Commissioner -- 2004 (163) ELT 289 (SC) and in Commissioner vs. Bureau Veritas-- 2005 (181) ELT 3 (SC).
(viii) The respondents have not paid any amount to the foreign supplier or others directly or indirectly, over and above the value mentioned in the invoice. In other words, the only amount paid to the supplier is the value mentioned in the invoices. There is no averment in the show cause notice to the contrary, let alone there being any evidence for it
(ix) The imports were from manufacturers directly, without any intermediary involved.
(x) The Respondent had long term arrangement for purchase of goods. The respondent are one of the regular buyer, importing in large volumes. The respondents continue import from the same supplier. 8
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(xi) The value mentioned in the invoice is the value declared by the supplier at the time of export to the customs authorities at China. The same value was declared by the respondents in the bill of entry.
(xii) The department has searched the residential premises of Director of the respondents, Head Office of the respondents and various branches / godown of the respondents. There is not even an averment that the investigating officers found any incriminating documents from any of the premises of the respondents, when they resumed a number of documents, under various panchnamas.
(xiii) In the circumstances, invoice price alone can be the value Section 14. Value cannot be enhanced based on third party documents. Thus the Order-ln-Original dated 31.01.2014 is liable to be upheld.
4. The ld. Counsel further submits that evidences relied upon in the show cause notice do not support the enhancement of the value and in this respect his submissions are that:
(i) The two "parallel" invoices were allegedly found in the premises of M/s. Vishal Hira Merchants Limited, Delhi are not the basis for demanding duty from the respondents.
(ii) The price list resumed by the department from the premises of M/s Vishal Hira Merchant Limited and relied upon by the department is not authentic. It does not show that it belongs to the suppliers. It also does not show that the price was meant of all customers across 9 Appeal No. C/12024/2014 -DB the world or applicable to all customers in India. It may be a price list for M/s Vishal Hira Merchants Limited. Also, no evidence is cited in the show cause notice that the price list has been issued by the supplier, either in the form of statement of exporter or visit or any other evidence.
(iii) The price list is only an invitation to offer to sell the goods at the prices indicated therein. It does not even constitute offer for sale.
There is no evidence cited in the show cause notice or in the order to show that the goods were actually imported into India at the prices mentioned in the said price list.
(iv) The email exchange between the supplier and M/s K.P. International contain only offer / counter offer between the parties. It is only negotiations. M/s K.P. International was only enquiring about the prices. No evidences have been given to show that the goods were imported by M/s K.P. International at the prices mentioned in the email.
(v) In any event, value under Rule 6(3) can be based on transaction value of similar goods imported by other. When transaction value has been rejected for other import and enhanced value adopted for others, that enhanced value cannot be the basis of assessment of goods under Rule 6(3) as transaction value of similar goods. 10
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(vi) The detailed submissions made in the reply dated 14.08.2007 and written submissions dated 13.07.2007 and 25.08.2007 were reiterated in this regard.
5. On applicability of Rule 6, he submits that Rule 6(2) read with Rule 5(3) clearly provides that lowest value of the similar goods imported into India has to be adopted. The department has not produced all the imports of similar goods imported into India. Hence, the mandate of Rule 6 has not been complied with. He submits that the respondents produced evidences in the form of bills of entry under which others imported the similar goods from the same supplier, at a price lower than the price at which the respondents had imported them.
In view of the above submissions, it is his prayer that the value declared by the respondents is correct value of the imported goods and same is liable to be acceptable.
6. The ld. Counsel also submits that the demand is barred by limitation as the show cause notice dated 23.03.2007 was issued by the DRI, demanding differential duty on account of valuation of the imported goods involving extended period of limitation. The period involved is from May 2005 to May 2006. The demand of customs duty is barred by limitation under Section 28 of Customs Act as the Hon'ble CESTAT has held that respondents have not mis-declared the goods.
11
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7. We have carefully considered the submissions made by both the sides. This is second round of litigation. In the first round of litigation, the respondent had filed appeal before this Tribunal against the earlier order-in- original. In the earlier appeal, the issue of mis-classification and undervaluation was involved. The Tribunal in the earlier appeal No. C/485- 486/2008 passed final Order No. A/1568-1569/WAB/AHD/2012 dated 29.10.2012, reported as 2014 (314) ELT 394 (Tri. Ahmd.). By the said order, the matter was remanded to the Adjudicating Authority. The findings of the Tribunal's order dated 29.10.2012 is reproduced below:-
"4. The department has taken a view that Hamilton has mis-declared the description and also the classification of the items in dispute. Before we proceed to consider mis- declaration of description, it would be appropriate to consider the dispute regarding the classification first. The disputed tariff headings are to be found under 7013 as under in Customs Tariff :
7013 Glassware of a kind used for table, kitchen,
toilet, office, indoor decoration or similar
purposes (other than that of heading 7010 or
7018)
7013 10 00 Of glass-ceramics Kg. 12.5%
Drinking glass other than of glass-ceramics
7013 21 00 Of lead crystal Kg. 12.5%
7013 29 00 Other Kg. 12.5%
Glassware of a kind used for table (other than
drinking glasses) or kitchen purpose other than
of glass-ceramics.
7013 31 00 Of lead crystal Kg. 12.5%
7013 32 00 Of glass having a linear coefficient of expansion Kg. 12.5%
not exceeding 5×10-6 per Kelvin within a
temperature range of 0 degree to 300°C
7013 39 00 Other Kg. 12.5%
5. As already mentioned, the classification claimed by the appellant was 7013 39 00 whereas the proposal by the department is 7013 32 00. It was submitted by the appellants that test report relied upon by the department do not show that the product imported by the appellants satisfies the condition related to coefficient of expansion being less than 5 x 10-6 per Kelvin.
6. Samples were drawn from the consignment pending clearance and according to the test report, the samples under reference were 'borosilicate glassware', Opal ware containing boric acid ranging from 9.68% to 12.27%, showing no thermal expansion between 0 degree C. to 300 degree C. and no breakage on heating and cooling 12 Appeal No. C/12024/2014 -DB indicating lower linear expansion. The Chemical Examiner also indicated that the samples received were translucent in nature and according to ASTM standard 162, this type of glass is called Opal Glass. He also stated that the samples have more than 5% boric acid. Therefore, they are of borosilicate glass type (ASTM 162). The samples has been sent for testing of borosilicate content, the thermal resistance, between 0 to 300 degree C. and linear coefficient expansion. The question that arises is whether this report is sufficient to hold that the goods are correctly classified under CTH as claimed by the department. Unfortunately, even though in the test memo query had been raised to determine linear coefficient of thermal expansion, the Chemical Examiner simply stated that the fact that there was no breakage on heating and cooling would indicate low linear coefficient of expansion and he has not quantified the same. On the other hand, the supplier of the goods had certified the coefficient thermal expansion of the imported goods as 5.9 × 10-6 per Kelvin and the appellant got tested the imported goods at Central Glass & Ceramic Research Institute (CGCRI), Kolkata. The Institute certified that the thermal expansion of the imported goods is 6.99 × 10-6 per Kelvin. Thus we have a situation where the supplier's certificate and the certificate obtained by the importer are contradictory to the report of the Chemical Examiner.
7. Hamilton contended that the Chemical Examiner has determined the boron content as per procedure prescribed in the manual maintained by M/s. Alembic Glass Ltd., which is not a standard for determination for boron content. That also contended that the precise method prescribed is IS 5623/1993 and this was not followed in determining the linear thermal expansion of the imported goods. On this ground, the appellants submitted that the test report, dated 12-3-2007 is not reliable and samples may be tested at CGCRI, Kolkatta. They also submitted that Opal glassware of La Opala, indigenous manufacturer were being classified under the heading claimed by them and their products were similar to the products of La Opala. These submissions have been rejected in the impugned order on the ground that the Chemical Examiner during the course of cross examination had clearly stated that the procedure given in IS 5623/1970 was followed and if there is any expansion, there will be a breakage, but the samples under reference do not show any breakage. The Chemical Examiner has also replied during the examination that any glass with fiery transmission or translucence is considered as Opal Glass and as per chemical composition the samples under reference are borosilicon glassware, whereas as per appellant, the same are Opal Glass. The Commissioner also relied upon the statement of the Managing Director, who explained how borosilicate gives strength to the glass. He also rejected the test report of CGCRI on the ground that what samples were forwarded to CGCRI is not known and at what temperature the test was conducted by CGCRI was also not known.
8. From the tariff description and the headings reproduced earlier, it can be seen that the sole criterion required to be fulfilled for items imported to be classified under 7013 32 00, is the linear coefficient of expansion. The test memos had clearly indicated that this aspect is required to be verified. The Chemical Examiner has chosen just to say that since there was no breakage, the thermal expansion is nil. When the heading required specific indication that linear coefficient of expansion is less than 5 x 10-6 per Kelvin, in our opinion, this statement of the Chemical Examiner was not sufficient. In fact, the department should have required the Chemical Examiner to specifically indicate the linear coefficient of thermal expansion. Therefore, when the appellants requested for retest by CGCRI, Kolkatta, it could have been considered. In any case option was available to the department to send it for retest to the Chief Chemist at Delhi which was also not done. On the one hand, we have a blank statement from the Chemical Examiner in the test report that, since there was no breakage on hearing and cooling, it indicates lower linear coefficient of expansion. How can we conclude whether it is below the level prescribed in the heading or not is not indicated by the Chemical Examiner. We could have appreciated if he stated clearly that it is lower than what is prescribed in the tariff heading. Even this is not forthcoming from the reports. On the other hand, the supplier of the appellants and CGCRI has clearly measured the linear coefficient of expansion and have indicated the same. Under these circumstances, we 13 Appeal No. C/12024/2014 -DB have no option but to hold that the department has failed to show and prove that the classification of the goods in question would come under 7013 32 00.
9. The next question that arises is whether there was misdeclaration of description by the appellants. On going through some of the Bills of Entry filed in ICD, Vapi, we find that after opening the packages and inspection, the examining officer had found the goods to be contained in 2 packages and the goods were found to be "Opal Glassware Dinner Sets". The fact that even after finding the goods to be Opal Ware on examination, the same were allowed to be cleared when the Bills of Entry had been filed as Glassware supports the claim of the appellants that there was no mis-declaration since Opal glassware is nothing but Glassware. It has to be seen that the case of the department is that the Appellants had mis-declared Opal Ware as Glassware and thereby under-valued the goods. The Managing Director has also admitted that the goods were Opal Ware. In the discussion and findings, the Commissioner has taken a view that there was a mis-declaration of Opal Ware imported by the appellants as Glassware. As already stated, the examination reports in ICD, Vapi go against the department. Further, we also find that according to ASTM C-162-05 Standard Terminology of Glass and Glass Products, "Opal Glass" means, a glass with fiery translucence; typically nearly opaque white glass. "Borosilicate glass" means silicon glass with B2O3 content above 4 weight percentage characterized by a moderate to low thermal expansion, long in viscosity versus temperature, and low in density. While borosilicate glass can be Opal glass, it cannot be other way round. From the tariff description, the classification would depend upon the coefficient of thermal expansion and not merely the percentage of boron oxide or the trade name Opal Glass.
10. In view of the above discussion, the findings of misdeclaration of description and misclassification cannot be sustained.
11. The next is the rejection of transaction value and determination of value. According to the appellants, once there was no misdeclaration of the goods by appellants, the transaction value cannot be rejected since that is the only ground taken. However, we have to take note of the fact that the whole investigation started based on recovery of 2 invoices with an importer in Delhi which showed price of goods imported by the appellant to be much higher when compared to what was declared by them. The transaction value is rejected on the ground that even though the appellant claimed that imports were made according to an MoU, but in reality the MoU was available for only 10" full plate and 7" quarter plate and in respect of their items, they could not produce the MoU. The Commissioner also found that after 2006, there was no fresh MoU and basis of price and specific shapes of new mould could not be found out. As regards claim of the appellant that the goods were specially designed for them with different art work, the Commissioner had observed that this would actually increase the rate and not decrease the rate. As regards reliance on the e-mail and submissions of the appellants that there was no evidence to show M/s. K.P. International had imported the goods figuring in e-mail, the Commissioner has observed that differential duty of Rs. 90 lakh was paid by M/s. K.P. International and they have already approached the Settlement Commission for settlement of the case. As regards contentions that price redetermination has to be made on the basis of contemporaneous price, the Commissioner has stated that it was admitted by Shri Vishal Konde, General Manager, that there was no escalation in the price of M/s. Wenzhou and therefore reliance on price list of 9-2-2004 and E-mail, dated 15-3-2004 and evidence in the form of parallel invoices is rightly placed for determination of value. As regards submission about contemporaneous value declared by other importers, the value other than in e-mail and the price list, the Commissioner has observed that it is open to the jurisdictional authority to take up investigation and has left it at that. The submissions of the appellant that appellants had imported goods in bulk on the basis of a long time supply contract and there was a MoU, the ld. Commissioner observed that the MoU was only in respect of 2 items and the ground for rejecting the transaction value have been indicated in the show cause notice. Rejection of transaction value has been made by the 14 Appeal No. C/12024/2014 -DB Revenue on the ground that Shri Vishal Konde, General Manager (International) of Hamilton could not explain difference between the price of items imported by them and price in the parallel invoices recovered from a Delhi importer and e-mail received by M/s. K.P. International. Shri Vishal Konde could not give any reason as to why there was such a large variation in the price between the price of Delhi importer, price list of February, 2004 and the e-mail received by K.P. International.
12. However, we find that it is the appellants' claim that no evidence has been shown of any payment by other channels other than what was paid for import directly or indirectly; the search of residential premises of the Managing Director's office etc. did not result in recovery of any incriminating records; the import was directly made by manufacturer; the appellant had long time arrangement and were regular buyers and had imported glassware of more than Rs. 18.5 crores and they had produced evidence to show that the value declared by the supplier at the time of export to the Customs authorities, was the same as was declared in India; as regards price list, appellant has submitted that it is only an offer and subject to negotiations; it was also submitted that M/s. K.P. International have not imported any goods, but there was only negotiations; under these circumstances, Rule 6(2) read with Rule 5(3) of the Customs Valuation Rules is applicable which provides that value of goods similar to goods imported to India should have been adopted. The appellants had produced evidence in the form of Bills of Entry under which others had imported similar goods from same suppliers and such prices were lower than prices adopted in their case and, therefore, differential duty demanded is not sustainable.
13. The claim of such imports by others at lower values has been rejected holding that it was for other jurisdictional authorities to take action. We find that this was an incorrect observation. Absence of any evidence to show and any admission by the company to show that actual transaction value was higher in the absence of any admission of excess payment and its quantum, it was necessary for the Commissioner to follow the Customs Valuation Rules after rejecting transaction value for which we find that there are ground made out even though appellants had resisted this. Having rejected the transaction value, the next step was to proceed to determine the value by following the rules. As submitted by appellants, the proper course for the Commissioner was to apply Rule 6(2) read with Rule 5(3) of Customs Valuation Rules. In this case transaction value of similar goods by other importers was available and for rejecting the same it should have been shown that the department has not accepted those values, by taking appropriate action. Whereas the Commissioner has simply stated that it is for the jurisdictional authorities to take action. In this case while price list of February, 2004 has been relied upon, no adjustment taking the peculiar circumstances into account has been made. The MoU has been rejected on the ground that it covers only 2 items and there is no indication whether MoU in respect of two items was accepted. Further the claim of the appellants that the products were made specifically for them was definitely visible from the fact that the products contained their name which would show that the goods were specifically manufactured for them. It is well-known that such specialised manufacture is done for big customers who purchase in substantial quantity and particularly Hamilton as a big purchaser, the cost of moulds for making special art work were recovered separately. In such a scenario the claim that their prices have to be less than the normal price list has to be considered. There is no detailed discussion at all as to why these aspects should not be taken into account in the order. Moreover, whether any action has been taken against other importers at all is not coming out. Especially in view of the fact that this order covers imports by appellants in all the ports in India, if no action has been taken against other importers, in our view, it would not be proper to the department to reject the transaction value in respect of the appellants looking to the fact that they have been recognized as a bulk purchaser and have imported in substantial quantities. However, there is no indication as to whether price list of supplier is applicable irrespective of the quantities the purchaser buys and if it is comparable to the point it is purchased by the appellants.15
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14. The above discussion would show that the Commissioner has not followed proper procedure for redetermination of value and for rejection also while initial grounds for rejection are acceptable after giving an opportunity to the importer and considering the submissions, there has to be a categorical finding as to why the transaction value is not acceptable. In this case the two grounds for rejection of transaction value is mis- declaration of value and inability of the General Manager to explain the difference between their price and price list, dated 9-2-2004 of the supplier. If the General Manager could not explain it at the time of investigation, it does not mean that they could be permanently shut out from explaining afterwards. Therefore, the submissions made during the hearing and in reply to the show cause notice should have been considered.
15. In view of the above discussion, the impugned order is set aside and the matter is remanded to the Original Adjudicating Authority for fresh adjudication after observing principles of natural justice, taking note of following observation :
(1) The re-valuation has not been done in accordance with the provisions of law."
8. On careful reading of the above order of the Tribunal, it is observed that the Tribunal has concluded, as recorded, the charge of mis-declaration of description and mis-classification is not sustained. The Tribunal in the aforesaid order made various observations as regards the valuation of the goods also and after considering the said observations, the ld. Commissioner in de-novo adjudication, dropped the proceedings initiated against the respondent vide show cause notice dated 23.03.2007 and the ld. Commissioner also clearly held that as per the Tribunal order, the issue of mis-declaration and mis-classification does not exists. Therefore, the limited issue now to be decided by us is whether the appellant have undervalued the goods in question or otherwise.
As regards the valuation of the goods, it is observed that in the show cause notice, the sole reason given for undervaluation was on the basis of mis-declaration of goods. The Tribunal in the earlier order, as referred above, clearly held that there is no case of mis-declaration or mis- classification. Therefore, the very basis, even for valuation of goods, gets 16 Appeal No. C/12024/2014 -DB demolished. Once the charge in the show cause notice was made on the basis of some material, the adjudication order cannot travel beyond the allegation and the material evidence adduced in the show cause notice. It is pertinent to reproduce the relevant Para-16 of the show cause notice which is as under:-
"16. The facts regarding mis-declaration of description of the Opal ware as Glass ware and the claim of classification of the goods under CTH -7013 39 00 instead of CTH7013 32 00 as discussed above raised doubt about the valuation aspect of the subject goods. This is also admitted by Shri Vaghani, MD as well as his Managers that Opal wares are costlier than that of normal glass wares. The aspect of undervaluation of the Opal ware imported by M/s HHPL from M/s Wenzhou also gets support from the fact as as1rnilar case of undervaluation of the imported Opal ware supplied by MIs Wenzhou was detected by the DRI officers of Delhi Zonal unit, Delhi in the case of M/s Vishal Hira Merchants Pvt. Limited, 16/14 W.E.A. 1 Floor Unique Plaza Bldg, Karol Bagh, New Delhi (hereinafter referred to as "M/s VHMPL" for the sake of brevity). In that case, Delhi DRI officers recovered the rafle1 invoice No. HSD-2-04-1541 dated 01.03.05 (depicting the actual value of the imported goods) raised by M/s Wenzhou for the import of Opal wares by the firm M/s VHMPL (RUD-21).The issuance of parallel invoices by MIs Wenzhou establishes the fact that to accommodate/ facilitate their buyers in India, M/s Wenzhou were raisins the manipulated invoices especially for the sake of undervaluation of the imported goods and for presenting the manipulated invoices before the Customs authorities in India, The modus adopted by M/s Wenzhou and the importers in India cast shadow on the bona-fide credentials on both the parts and had resulted in the loss to the Exchequer."
From the above allegation in the show cause notice, it is clear that even for the charge of undervaluation, the reason stated is mis-declaration of the description of Opal ware as Glass ware and the claim of classification of goods is under CTH 7013 39 00 instead of under CTH 7013 32 00. Since, now the charge of misdeclaration of goods and classification does not exist, the case of undervaluation of the Revenue fails on this ground itself. 17
Appeal No. C/12024/2014 -DB
8. As regards the other evidences in support of Revenue's allegation of undervaluation, we find that the Revenue has relied on two parallel invoices found in the premises of M/s. Vishal Hira Merchant Pvt. Limited, Delhi. However, enhanced price of the goods is not based on these parallel invoices, therefore, this evidence of parallel invoices is discarded and the same cannot be used against the respondent. It is also pointed out by the ld. Counsel that the said invoices are not authentic as the same does not show that it belongs to the supplier. It also does not show that the price is meant for all customers across the world or applicable to all customers in India. Therefore, the invoices of M/s. Vishal Hira Merchant cannot be used as evidence against the respondent. As regards the email exchanged between supplier and M/s. K.P. International, it is not the conclusive evidence for the reason that it contains only offer/ counter-offer between the parties and it is exchanged with M/s. K.P. International only for enquiring about the price. There is no evidence that goods have been imported by M/s. K.P. International at the price mentioned in the emails. Therefore, whatsoever price mentioned in the email, cannot be taken as price of contemporary goods. It is was submission of the ld. Counsel that for application of Rule 6(2) read with Rule 5(3) of Customs Valuation Rules, it clearly provides that if at all the value of contemporary imports is to be applied, the lowest value of similar goods imported into India is to be adopted. However, in the present case, the department could not bring on record that there are various imports and lowest price among all the imports 18 Appeal No. C/12024/2014 -DB is adopted. Therefore, the provisions of Rule 6 has not been complied with. The respondent have produced evidence in the form of bills of entry under which others have imported the similar goods from the same supplier at price lower than the price at which the respondent had imported the goods. In these facts, even if the value of contemporary goods has to be adopted, the value of bills of entry produced by the respondent should have been taken. It is undisputed fact that the respondent is a bulk buyer of the goods in question, the goods are specifically branded as per the requirement of the respondent. Therefore, there cannot be contemporary goods similar to the goods imported by the respondent. For this reason also, the value declared by the respondent cannot be rejected. The Revenue has no evidence that there is any extra consideration paid by the respondent to supplier of Glassware, therefore, there is no material at all to suggest that there is undervaluation of the goods imported by the respondent. In these circumstances, the rejection of declared value is improper and illegal. The case of the respondent is covered by the Hon'ble Supreme Court judgment in the case of Eicher Tractors Limited vs. CC - 2000 (122) ELT 321 (SC).
As regards the submissions of ld. Counsel on the issue of limitation with reference to the show cause notice dated 23.03.2007, which was issued for the period covering from May 2005 to May 2006, we find that the extended period was invoked mainly on the allegation that the respondent have mis-declared the description and classification of the goods. As discussed above, the Tribunal in the first round, set-aside the charge of mis- 19
Appeal No. C/12024/2014 -DB declaration of description and classification. Therefore, in this scenario, when no mis-declaration is involved, no suppression of facts exists. Hence, the extended period for demands proposed in the show cause notice also not sustainable and therefore, the demand for the extended period is set- aside also on the ground of limitation.
9. On perusal of the impugned order, we find that the ld. Commissioner has very carefully considered the observations made by the Tribunal in the remand order and also each and every charge made in the show cause notice together with analyzing various judgments in the case of Adani Exports Limited vs. CC, Vishakhapatnam - 2000 (116) ELT 715 (Tri.), CC, Vishakhapatnam vs. Aggarwal Industries Limited - 2011 (272) ELT 641 (SC), Shalimar Industries Limited vs. CC, Madras - 1996 (88) ELT 769 (Tri.) and Sawhney Exports House (P) Limited vs. CC - 1992 (60) ELT 327 (Tribunal, to come to the conclusion that there is no undervaluation of the goods imported by the respondent. From the impugned order, we do not find any infirmity and therefore, the order deserves to be sustained. Accordingly, the impugned order is upheld and Revenue's appeal is dismissed on merits as well as on limitation.
We find that the respondent has also filed a misc. application for release of bank guarantees involved in the present case. Needless to say that with the disposal of the appeal by dismissing the Revenue's appeal, the 20 Appeal No. C/12024/2014 -DB respondent is entitled for consequential relief arising out of this order in accordance with law. Accordingly, the MA (Ors) also stand disposed of.
(Order pronounced in the open court on 03.10.2018)
Raju Ramesh Nair
Member (Technical) Member (Judicial)
KL