Custom, Excise & Service Tax Tribunal
Natesans Antiquarts Mumbai Pvt Ltd vs Cochin-Cus on 25 March, 2025
C/22417, 22422/2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 22417 of 2015
(Arising out of Order-in-Original No. COC-CUSTM-000-COM-26-15-16
dated 21.08.2015 passed by the Commissioner of Customs, Cochin.)
M/s. Natesan's Antiquarts
(Mumbai) Pvt. Ltd., Appellant(s)
Opposite Ayurveda College,
M.G. Road,
Trivandrum - 695 001.
VERSUS
The Commissioner of Customs
Customs House,
Willingdon Island, Respondent(s)
Kochi.
With Customs Appeal No. 22422 of 2015 (Arising out of Order-in-Original No. COC-CUSTM-000-COM-26-15-16 dated 21.08.2015 passed by the Commissioner of Customs, Cochin.) Shri. Kalesan Natesan, Managing Director, Natesan's Antiquarts (Mumbai) Pvt. Ltd., Appellant(s) Jahangir Art Gallery (Basement), M.G. Road, Mumbai - 400 001.
VERSUS The Commissioner of Customs Customs House, Respondent(s) Willingdon Island, Kochi.
APPEARANCE:
Mr. Anil D Nair, Advocate for the Appellant Mr. Rajiv Kumar Agrawal And Mr. Saravana Perumal, Authorised Representative for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS R BHAGYA DEVI, MEMBER (TECHNICAL) Page 1 of 23 C/22417, 22422/2015 Final Order No. 20445-20446 /2025 DATE OF HEARING:26.09.2024 DATE OF DECISION:25.03.2025 PER : DR. D.M. MISRA These two appeals are filed against Order-in-Original No.COC-CUSTM-000-COM-26-15-16 dated 21.08.2015 passed by the Commissioner of Customs, Cochin.
2. Briefly stated the facts of the case are that the appellant had filed a Bill of Entry No.4407651 dated 21.01.2014 through customs broker M/s. General Shipping and Forwarding Services for import of 19 pieces of artwork declaring the same as clay, metal and stone objects valued at Rs.5,08,953.68/- classifying the same under CTH 69120040, 25169090 and 74082990 respectively. The value declared in the Bill of Entry was supported by commercial invoice No. NIL dated 23.11.2013 issued by on Capt. Will Frei, Switzerland. On physical examination of the consignment on 21.01.2014, on first check basis, prima facie, it appeared that the imported articles were antiques and classifiable under CTH 97060000. Consequently, a query was raised on 01.02.2014, registered in the EDI system, which directed the appellant/importer to produce necessary evidences in support of export of antiques from the country of export as per rules of Switzerland for export of such items as required under the Policy and documents relating to valuation of the items by an expert. Thereafter investigation was initiated after receiving the response from the appellant that there was clerical mistake in declaring the classification of the goods. After receiving the report from the Archaeological Survey of India that the goods in question were antiques by the letter dated 29.04.2014, the Department approached the Archaeological Survey of India to inform the value of the imported items and consequently on the suggestion of Department of Archaeological, Page 2 of 23 C/22417, 22422/2015 a expert committee was constituted to assess the correct value of the imported antiques and submit their report. The expert committee by their report dated 18.11.2014 opined the value of the imported 19 pieces as Rs.4,75,00,000/- against the declared value. Consequently, a show-cause notice was issued on 20.11.2014 to revise the transaction value to Rs.4,75,00,000/- and corresponding duty demanded was Rs.69,87,250/-; proposal for confiscation and penalty on the appellant and the Managing Director Mr. K. Natesan. On adjudication, the value was revised to Rs.4,75,00,000/- under Rule 9 of the Customs Valuation (Determination of value of imported goods) Rules, 2007 read with Section 14 of the Customs Act, 1962 and directed confiscation of all 19 pieces of antiques imported against Bill of Entry No.4407651 dated 21.01.2014 under Section 111(d) and
(m) of the Customs Act, 1962 and all 19 pieces are directed to be transferred to National Museum, New Delhi; also penalty of Rs. 2.00 crores was imposed on the appellant company under Section 112(a) of the Customs Act, 1962 and penalty of Rs.5.00 crores was imposed on the Managing Director under Section 114AA of the Customs Act, 1962. Hence, the present appeals.
3.1. At the outset, the learned advocate for the appellant has submitted that they have imported 19 pieces of art works showing its classification under CTH 69120040, 25169090 and 74082990 and declaring their value as Rs.5,08,953.68/-. On query from the Deputy Commissioner of Customs, the appellant through their letters dated 11.02.2014 and 12.02.2014 informed that they had imported packet containing 19 pieces of decorative small Indian objects in clay, metal and stone which are antiques and also informed that owing to clerical oversight, the shipper did not include the word 'antiques' in the invoice. They have submitted that it was brought to the notice of the Department within days of arrival of the shipment by letters. Therefore, there was no intention nor any benefit derived out of non- disclosure whether by omission or otherwise. He has submitted Page 3 of 23 C/22417, 22422/2015 that the appellants have imported antiques several times in past in full compliance of all statutory requirement and they are the oldest licensed antique dealers in the state. They have submitted that it is pertinent to note that the importer is bringing heritage back to the country and not exporting them. When the clearance of the shipment was prolonged indefinitely, they had approached the Hon'ble High Court and by order dated 30.09.2014, the Department was directed to complete the investigation and adjudication proceeding within two months from the date of receipt of the order.
3.2. Assailing the impugned order, which relied only the opinion of the Committee of valuation, the learned advocate has submitted that absolutely no evidence has been attached to show as to how the committee arrived at the valuation except the valuation figures in their report. No evidence of past sale, results of comparable objects sold through international auctions etc. have been provided. They have submitted auction sale prices of over 150 comparable objects supporting their transaction value during the recording of the statement of the Managing Director, no questions were asked disputing the valuation arrived at by them. They have submitted that no documentary evidence whatsoever supplied to support the valuation arrived at thus making it as a guesswork which can vary from person to person, depending on the individual taste and preference for art. The learned Commissioner ignored the 150 examples of objects of similar size and medium that were sold in the international market as filed by the appellant. There is no mention of this comparable sales in the entire order passed by the learned Commissioner. Further, assailing the report of the committee, they submitted as follows:-
• This committee has no legal mandate neither under the Customs Act nor the Antiquities Act to undertake such examinations. As per the Antiquities Act there is no provision for the ASI to undertake valuation. This is further Page 4 of 23 C/22417, 22422/2015 confirmed by the letter sent by the Joint Director General ASI to Customs stating that no such provision exists and that the ASI does not do valuation. As per the ASI website the organization does research on archeology and protects monuments and sites. The ASI is not into the activity of buying and selling antiques. The Antiques in their possession are state monuments and excavated finds and not objects that are purchased. Hence the archaeologists are only concerned with history, research, restoration etc of antiques. They are completely oblivious to traded value, demand-supply, historical prices fetched in the antiquities market etc as they are completely oblivious to the commercial aspects of antiquities.
• On examination of the members of the expert committee, it is seen that they are not competent to value the consignment and that their valuations are not trustworthy. Moreover, provisions of neither the Customs Act nor the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 have been followed.
• In the cross-examination Dr. Satyabhama Badreenath who works for the ASI admitted that the ASI perse does not do valuation. She added that she herself has only done valuation once in her entire lifetime and that too only for bronze. She accepted that she has never bought or sold a single antique.
• When asked about her criteria used for valuation she said it was age and period. When she was further interrogated about the department's criteria she admitted that other factors like material and aesthetics are also considered by the department. She later claimed that she also considered these factors. Towards the end of her cross-examination she further contradicted by saying that she uses three factors for valuation. She further admitted that no tests whatsoever were conducted to determine the age.
• She said that she did not even look at any price comparable before deciding to put these figures. She later contradicted her earlier claim by saying that she referred to auction catalogues. She also said that she would furnish these catalogues afterwards.
• She further admitted that she has never come across terra- cotta objects having similar value. When questioned as to why some objects of varying size and condition were given the same value the question was disallowed by the authorities. She also admitted that in her lifetime she has only done valuation once and they were bronze items. But she further admitted that she has never valued a similar Page 5 of 23 C/22417, 22422/2015 type of bronze before. She also admitted that she has no proof or comparable to support the values. • As regards her claim that the goods were illegally exported she stated that as per her knowledge these objects were not submitted before the ASI for obtaining any export permit. However she admitted that this procedure only started after the enactment of the Antiquities Act (1972). She could not answer the question whether the objects could have been exported prior to the Act. Instead she dodged the question by repeating her earlier answer. It may be noted that she accepted that she saw these objects for the first time on 18/11/2014 when she came for inspection. • Dr. Arundhati Banerjee admitted that she has never done valuation for any items that are sold. She has only done it for objects that are meant for exhibiting for display in Museums.
• She claimed that she used aesthetics, material and age for valuation. She admitted that she has never bought or sold antiques. She claimed that she has comparable for valuing terracottas at 5 to 10 lakhs. She said that these comparable are in her book titled Early Indian Terracotta'. She also claimed that she referred to her book to arrive at values. Contrary to her earlier statement where she said three factors were taken in to consideration she later said she used only aesthetics and material as the criteria. • She claimed that according to her ASI did not give permission for export of these objects hence they could be smuggled. She added that this condition of obtaining permission was enforced after the enactment of the Antiquities Act. 1972. She said she did not know whether the goods left before or after the Act. She also said she has no documentary evidence about when these goods left the country and is unaware of any FIR as such with regard to these goods. It may be noted that she also accepted that she had never seen these objects prior to 18/11/2014 when she came for inspection.
• Dr. R. Nagaswamy did not turn up for the cross-examination citing ill health. We were told that he was unable to travel. No date was also given as to when he would appear. Appellant's counsel even offered to travel down to Chennai and conduct the cross-examination. This was conveyed on 7/4/2015 during the cross-examination of the two members as well as vide our letter dated 2/6/2015. This was also turned down citing poor health. It is submitted that Dr. R. Nagaswamy, although a senior citizen, was leading an active life, was very healthy and was travelling extensively in India and abroad. In those few months he had delivered several Page 6 of 23 C/22417, 22422/2015 long public lectures before audiences at various places, the last one having been held as late as 12/6/2015, soon after he evaded the cross-examination. A person who can prepare and deliver a long speech is more than capable of giving one line answers at his residence. It is obvious that he has no supporting evidence to prove his valuation and hence deliberately escaped the cross-examination. Therefore his opinion in this matter stands worthless, null and void. • Also, the Respondent sought to avoid the cross-examination of Dr. Nagaswamy by citing the need to dispose the matter expeditiously on account of the order in WPC 34032/2014 of the Hon'ble High Court. The respondent claims that they have made substantial compliance to the order of the Court. It is submitted that the High Court had issued the above order under the writ jurisdiction. Substantial compliance of a writ is no good compliance. Though the Court ordered for cross-examination of all three members of the committee, the Respondent has tried to willfully evade the cross- examination of third member. Therefore, the respondent has acted in gross contempt of the Hon'ble High Court and violated Article 14 of the Constitution by issuing Annexure P-24 order. Hence, it is submitted that the Independent Expert committee is fraught with arbitrariness and illegality right from its constitution to the stage of cross-examination of its members. Therefore, the valuation adopted by the committee is liable to be rejected and the value given by the appellants is to be adopted.
3.3. Further assailing the finding of the Commissioner as the appellant could not produce any documents which would prove the legal export of the confiscated goods previously exported from India, he has submitted that the said observation of the adjudicating authority based on unsubstantiated remarks / opinion made by the expert committee in the report dated 18.11.2014. He has submitted that the registration and certificate of antiques for the purpose of export was established only in the year 1972 with the promulgation of the Antiquities and Art Treasure Act, 1972; previously there was legal vacuum in the field of registration of antiques. Therefore, antiques which were exported or taken out of India prior to 1972 were not subjected to any registration process. Therefore, such Page 7 of 23 C/22417, 22422/2015 movement of antiques cannot be classified in the Indian antique market has been noted in the Policy Brief No.37 titled as 'Export Bans are Ineffective and Bad for Governance: Evidence from the Indian Antiquities Market of the Asia - Pacific Research and Training Network on Trade which is a body under the aegis of the United Nations Organisation. Their observation reads as follows:-
"Prior to independence, substantial amounts of Indian art-paintings, sculptures, and other pieces-were removed by the British and other colonial powers. In many cases, important pieces entered the collections of major museums, like the Victoria and Albert and British Museums in London. In the American case, it was more common for them to be acquired by private collectors, who then passed them on to public collections."
3.4. It is submitted that the fact that the imported goods belonged to the private collection of Capt. Willi Frei's father; itself proves that they left India prior to the Antiquities Act, 1972. Thus, the demand for the export document of the goods from India by the adjudicating authority is unreasonable. Further, assailing the impugned order rejecting the transaction value, the learned advocate has submitted that the appellant had declared the value of 19 objects of clay, metal and stone at Swiss Francs 7335 (CHF) on the basis of the invoice issued by the exporter. The adjudicating authority rejected the transaction value under Rule 12 of the CVR, 2007 and proceeded to determine its value under Rule 9 of the said Rules.
3.5. He has submitted that the valuation of the imported goods has been arrived at under Rule 9 of the CVR 2007 disregarding the spirit and essence of the entire provisions of that rule. The learned Commissioner has not considered the price at which like goods are ordinarily sold or offered for sale for delivery at the time and place of importation in course of international trade. Further, Clause 2(vii) of Rule 9 states that valuation under Rule 9 should not be done on the basis of arbitrary or fictitious Page 8 of 23 C/22417, 22422/2015 values. Both members of the expert committee, who were cross-examined, had averred that the valuation has been completed on the basis of factors such as aesthetics and approximate period of the antiques. Thus, the valuation arrived at by the committee is based on fictitious and arbitrary values. Further, assailing the direction of the adjudicating authority to hand over the objects to the museum was to avoid a public auction which would disclose the true value of the goods. The learned advocate for the appellant pleaded that an order be passed for auction of the goods publicly within three months at a reserve price not lesser than that arrived at by the said valuation committee.
3.6. Further assailing the confiscation of the goods under Section 111(d) of the Customs Act, 1962, interpreting various provisions of Cultural Property Transfer Act (CPTA, for short) passed by the Federal Assembly of the Swiss Confederation in order to hold that the appellant has violated the import policy conditions, the learned advocate has submitted that CPTA has been enacted in consonance with the UNESCO Convention on the Means of Prohibiting and Preventing illicit import, export and transfer of ownership of Cultural Property, 1970. It is submitted that any item to be specifically designated by each state as being of importance for archaeology, prehistory, history, literature, art or science to be considered as cultural property. Thus, provisions of CPTA are applicable only to Swiss Cultural Property. In the present case, there is nothing to prove that the Switzerland has designated the 19 pieces of imported goods as cultural property. Thus, the said goods do not fall under the category of Cultural Property under the CPTA and other subsequent articles viz. Article 3 and Article 5 are applicable only to Switzerland cultural property since 19 items imported were Indian antiques, the same were not required to be registered under CPTA which has nothing to do with the Switzerland culture and Switzerland heritage; thus, the exporter has not violated Page 9 of 23 C/22417, 22422/2015 any export norms under CPTA. Further, referring to Article 16 of the CPTA, he has submitted that imposes obligation only on persons active in the art trade and auctioning business. Further, the guide on Cultural Property Transfer Act for the art trade and auctioning business, released by the Federal Department of Home Affairs, Switzerland, clearly brings out that it should be applicable to persons and companies active in the art trade and auctioning business trading on a professional basis in cultural property within Switzerland, whereas Capt. Willy Frei, the exporter of 19 pieces of imported goods is not an art dealer as held in the impugned order by the learned Commissioner. Capt. Willy Frei is a private collector of art and antique pieces and a renowned art enthusiast in Switzerland. He is not engaged in the trade of selling or auctioning antiques. No such allegation has been made in the show-cause notice that he is a dealer. Hence, the 19 pieces of goods cannot be considered as prohibited goods as per Section 2(33) of the Customs Act, 1962 and consequently, the judgments cited by the adjudicating authority is inapplicable to the facts of the present case. Further, assailing the confiscation under Section 111(m) of the Customs Act, 1962, he has submitted that the declaration of the goods under CTH9705 in the Bill of Entry was made on the basis of the documents produced by the exporter. He has submitted that it is a general practice under customs procedures to prepare bills of entry on the basis of the documents supplied by the exporter. In support, he has referred to the judgment of the Tribunal in the case of Kirti Sales Corporation Vs. CC, Faridabad [2008 taxmann.com 845 (New Delhi - CSTAT]. Also, he has submitted that the declaration made in a bona fide manner on the basis of import documents is called as wrong declaration and not misdeclaration as held in the case of Northern Plastics Ltd. Vs. CC&CE [1998(101) ELT 549 (SC)]. Thus, the confiscation under Section 111(m) of the Customs Act, 1962 is also unsustainable. Further, he has submitted that in the show-cause notice, there is no proposal for absolute confiscation; therefore, Page 10 of 23 C/22417, 22422/2015 the appellant was denied the right of redemption of the goods on payment of fine. Further, the penalty on the appellants are improper and cannot be sustained.
4.1. Per contra, the learned AR for the Revenue has submitted that the appellant in their Bill of Entry misdeclared both the classification and the also the description of the product by not mentioning that these goods were antiques and also the value of the goods was grossly misdeclared. It is incorrect on the part of the appellant to state that immediately after import of the goods, they have brought to the notice of the respondent about wrong declaration of the description of the goods by not mentioning it as 'antiques'. The said submission is incorrect as after the Bill of Entry was filed on 21.01.2014, the Department has raised a query in the EDI system on 01.02.2024 mentioning that items under import are antiques and the importer was directed to produce documentary evidences in support of the import items of the conditions as per Import Policy for CTH 9706 0000 and also in support of valuation by an expert. Thereafter, the appellant has replied through their letters dated 11.02.2014 and 12.02.2014 mentioning about the clerical mistake.
4.2. Further, the learned AR for the Revenue referring to the findings recorded at paras from 25.7.1 to para 25.7.8 of the impugned order has submitted that the adjudicating authority has recorded reasons in support of the finding that subject antiques are liable for confiscation. Further, the adjudicating authority has elaborately dealt with the issue in respect to The Cultural Property Transfer Act (CPTA) and its export conditions in paras from 25.7.2 to 25.7.7 and further justified confiscation as mentioned in Para 25.7.8 of the order.
4.3. Further referring to the Import Export policy, the learned AR has submitted that the antiques of vintage more than hundred years can be imported free only if they have fulfilled the Page 11 of 23 C/22417, 22422/2015 legal obligation of the country of export as brought out in detail in the impugned order; and to circumvent these Guidelines, the appellant had misdeclared the items in Switzerland as well as in the import Documents filed in India, for example the description of goods given as Clay Ram, Bronze Ganesha, Clay Head etc. The Bills of Entry filed with Indian Customs also show that the antiques were misdeclared as Bronze Buddha, Clay head etc. Thus, the said antiques imported misdeclaring the description, in contravention of the Import and Export Policy attain the character of prohibited goods. In support, reliance is placed on the case of OM PRAKASH BHATIA Vs. COMMISSIONER OF CUSTOMS, DELHI 2003 (155) E.L.T. 423 (S.C.) and FAROKH S. TODYWALLA Versus COMMR. OF CUS. (IMPORT) ACC, MUMBAI- III 2015 (319) E.L.T. 165 (Tri. - Mumbai) wherein it has been held that violation of policy conditions render the goods as prohibited goods and confiscation is justifiable.
4.4. Learned AR for the Revenue has further submitted that the appellant has grossly misdeclared the description as well as transaction value of the imported 19 objects, accordingly the learned adjudicating authority has rightly rejected the transaction value under Rule 12 of the CVR 2007. After proceeding sequentially by analysing Rules 4, 5, 6, 7 and 8 of the CVR 2007, the learned Commissioner adopted Rule 9 of the said Rules for determination of the transaction value nearest to the value as recommended by the expert committee appointed by the Department in consultation with the Archaeological Survey of India. He has submitted that the value arrived at by the expert committee cannot be questioned since no other contrary expert opinion has been brought on record. In support of his contention that rejection of the transaction value is in line with the principle of law, he has relied upon the judgment of the Hon'ble Supreme Court in the case of Century Metals Recycling Pvt. Ltd. Vs. UOI [2019(367) ELT 3 (SC)].
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5. Heard both sides and perused the records.
6. The issues involved in the present appeals revolve around whether:
i. The 19 items which are declared in the Bill of Entry No.4407651 dated 21.01.2014 classifying under CTH 69120040, 25169090 and 74082990 as objects in clay, metal and stone are prohibited goods and are liable to be absolutely confiscated under Section 111(d) and 111(m) of the Customs Act, 1962;
ii. the transaction value declared as Rs.5,08,953.68/- be rejected and the value under Rule 9 of CVR 2007 as Rs.4,75,00,000/- be accepted;
iii. penalty liable to be imposed on both the appellants under Section 112(a) and 114AA of the Customs Act, 1962.
7. Undisputed facts of the case are that the appellant have imported 19 pieces of decorative Indian objects in clay, metal and stone which though 'antiques' but not declared in the imported documents i.e. export invoice, Bill of Entry etc. Also, the classification of the said objects were misdeclared. On being pointed out by the Revenue on 01.02.2014, the appellant through their letter dated 11.02.2014 and 12.02.2014 admitted to the said wrong declaration, but attributed it to clerical mistake. Department later got it further clarified from the Superintending Archaeologist, Archaeological Survey of India, Thrissur on the nature of the said goods. In response, it is informed vide letter dated 29.04.2014 by the Archaeological Survey of India that the seized objects were inspected and ascertained to be antiquities on typological and stylistic grounds which needs to be registered as per Antiquities and Art Treasure Act, 1972. Later the Department again approached Archaeological Survey of India through their letter dated 26.05.2014 to give description and value of the items; accordingly by letter dated 09.06.2014, after analysing the 19 Page 13 of 23 C/22417, 22422/2015 objects, a report was forwarded by the Superintending Archaeologist, Thrissur. Another letter dated 28.08.2014 was addressed by the Department to the Director General, ASI, New Delhi for appointment of a committee for determination of the value of the said 19 objects. Consequently, a committee was constituted comprising of Dr. N. Nagaswamy, Director(Retd.), State Department of Archaeology, Chennai; Dr. Satyabhama Badreenath, Regional Director, Bangalore; Dr. Arundhati Banerji, Director(Retd.), ASI and Dr. Balasumbramanian, Curator, Govt. Museum, Chennai by letter dated 21.102014 of Superintending Archaeologist, Thrissur. Later, the committee comprising of Dr. N. Nagaswamy,; Dr. Satyabhama Badreenath,; Dr. Arundhati Banerji, and Dr. Balasumbramanian examined the 19 imported objects on 18.11.2014 and arrived at the value of each item totalling to Rs.4,75,00,000/- and communicated the same through the letter dated 18.11.2014, which is reproduced as below:-
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8. Consequent to the said valuation report, show-cause notice was issued to the appellant alleging misclassification, undervaluation of the 19 objects imported and violation of Policy condition. In response to the said notice, in their reply, the appellant requested cross-examination of the said members of the expert committee, which pursuant to the direction of the High Court was allowed by the adjudicating authority.
9. On the issue of misdeclaration of the classification and description of the goods by not mentioning antiques, the learned Page 15 of 23 C/22417, 22422/2015 advocate for the appellant has argued that it was a clerical mistake and not intentional. However, rebutting the said plea of the appellant in the impugned order, the learned Commissioner has observed that the appellant is a regular importer of the antiques and well conversant with the nature of the goods imported and its correct classification under Customs Tariff Act.
Further rejecting the claim of the appellant that it is only the appellant who informed the Department after import of the said goods that these are antiques, learned Commissioner has observed that the appraising group on 01.02.2014 after examination recorded on the website that the items under import are antiques, and asked to produce documentary evidences in support of the import in terms of the condition as per Import Policy for the CTH 97060000 and also in support of valuation by an expert. Thus, the claim of the appellant that for the first time through their letter dated 11/12.02.2024, they have informed the Department about non-mention of 'antique' in the description of the goods, in the invoice and also in the Bill of Entry is a clerical mistake, is not correct as the said letters were addressed in response to Department's query raised on 01.02.2014.
10. Further, analysing the circumstances and evidences on record and taking note of the status of the appellant as a dealer in antiques, it is difficult to accept the contention of the appellant that it was a clerical mistake. Therefore, the misdeclaration of the description of the goods in the Bill of Entry their classification instead of CTH 9706 0000, but under CTH 69120040, 25169090 and 74082990 was undoubtedly deliberate and intentional. Hence, the transaction value declared by the appellant is liable for rejection under Rule 12 of the CVR, 2007. Also, the goods are liable for confiscation, since misdeclared even though as per the Policy the goods are freely importable, under Section 111(m) of the Customs Act, 1962.
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11. The learned Commissioner directed absolute confiscation under Section 111(d) of the Customs Act, 1962 considering the same as prohibited goods on the ground that the appellant has violated the condition of the Policy.
12. At the relevant time, antiques more than 100 years old were allowed to be imported freely without a licence subject to fulfilling the policy conditions viz. "the importer must abide by the rules / laws relating to export of such items of the country from where imports are sought to be made". The learned Commissioner in the impugned order analysing the CPTA of Swiss Confederation held that, it violated the provisions prescribed under the said CPTA; hence in turn, the policy conditions also violated and not complied with; accordingly the antiques are prohibited goods and liable for absolute confiscation. The appellant on the other hand referring to the Article 2, 4 and 5 of the CPTA has submitted that there is no violation of the said Act and the exporter being a person who is not required to register under the said CPTA; therefore, no violation has been committed by the appellant in importing the antiques from the said exporter who is not a dealer of antiques. From the records, we do not find any attempt has been made by the Customs Department to ascertain the fact from the Switzerland authorities as to whether such exports violated provisions of the said CPTA; hence interpreting the provisions of the CPTA by the Commissioner and arriving at a conclusion that there has been a violation of export laws of the said country, in our opinion, cannot be construed to be a correct interpretation of the provisions of the said act in the circumstances of the case and its applicability to the 19 objects imported from the said country in question. Therefore, the said 19 items cannot be considered as prohibited goods and liable to absolute confiscation under Section 111(d) of the Customs Act.
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13. On the issue of rejection of transaction value, we do not find any error in the conclusion of the learned Commissioner as the description of the imported goods has been misdeclared and also classification has not been correctly disclosed in the Bill of Entry even though the appellant is a regular importer of antiques. The assessing officer, if has a reason to doubt the truth and accuracy has the jurisdiction to reject the transaction value. This principle is laid down by the Hon'ble Supreme Court in the case of Century Metals Recycling Pvt. Ltd. Vs. UOI [2019(367) ELT 3 (SC)], wherein the Apex court held as under:-
13. Sub-rule (3) to Rule 3 deals with cases when the buyer and seller are related. We would not dilate on the said sub-rule for this is not required for the purpose of the present decision. As per sub-rule (4), where the value cannot be determined under sub-rule (1) to Rule 3, the transaction is to be valued by step wise applying Rules 4 to 9. Rule 4 deals with transaction value based on identical goods. Rule 5 deals with transaction value based on similar goods. Rule 6 deals with the determination of value where the transactional value cannot be determined under Rules 3, 4 and 5. Rules 7 and 8 deal with deductive value and computed value respectively. Rule 9 prescribes the residual method for computing the transaction value. What is important to note is that Rules 4 to 9 are subject to the provisions of Rule 3 thereby giving primacy to Rule 3 which in turn gives primacy to Rule 12 of the 2007 Rules.
14. Rule 12, which as noticed above enjoys primacy and pivotal position, applies where the proper officer has reason to doubt the truth or accuracy of the value declared for the imported goods. It envisages a two-step verification and examination exercise. At the first instance, the proper officer must ask and call upon the importer to furnish further information including documents to justify the declared transactional value.
The proper officer may thereafter accept the transactional value as declared. However, where the proper officer is not satisfied and has reasonable doubt about the truth or accuracy of the value so declared, it is deemed that the transactional value of such imported goods cannot be determined under the provision of sub- rule (1) of Rule 3 of the 2007 Rules. Clause (iii) of Explanation to Rule 12 states that the proper officer can on 'certain reasons' raise doubts about the truth or accuracy of declared value. 'Certain reasons' would include conditions specified in clauses (a) to (f) i.e. higher value of identical similar goods of comparable quantities in a comparable transaction, abnormal discount or abnormal deduction from ordinary competitive prices, sales involving the special prices, misdeclaration on parameters such as description, quality, quantity, country of origin, year of manufacture or production, non-declaration of parameters such as Page 18 of 23 C/22417, 22422/2015 brand and grade etc. and fraudulent or manipulated documents. Grounds mentioned in (a) to (f) however are not exhaustive of 'certain reasons' to raise doubt about the truth or accuracy of the declared value. Clause (ii) to Explanation states that the declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after enquiry in consultation with the importers. Clause (i) to the Explanation states that Rule 12 does not provide a method of determination of value but provides the procedure or mechanism in cases where declared value can be rejected when there is a reasonable doubt that the declared transaction value does not represent the actual transaction value. In such cases the transaction value is to be sequentially determined in accordance with Rules 4 to 9 of the 2007 Rules.
Sub-rule (2) of Rule 12 stipulates that on request of an importer, the proper officer shall intimate to the importer in writing the grounds, i.e. the reason for doubting the truth or accuracy of the value declared in relation to the imported goods. Further, the proper officer shall provide a reasonable opportunity of being heard to the importer before he makes the valuation in the form of final decision under sub-rule (1).
15. The requirements of Rule 12, therefore, can be summarised as under :
(a) The proper officer should have reasonable doubt as to the transactional value on account of truth or accuracy of the value declared in relation to the imported goods.
(b) Proper officer must ask the importer of such goods further information which may include documents or evidence;
(c) On receiving such information or in the absence of response from the importer, the proper officer has to apply his mind and decide whether or not reasonable doubt as to the truth or accuracy of the value so declared persists.
(d) When the proper officer does not have reasonable doubt, the goods are cleared on the declared value.
(e) When the doubt persists, sub-rule (1) to Rule 3 is not applicable and transaction value is determined in terms of Rules 4 to 9 of the 2007 Rules.
(f) The proper officer can raise doubts as to the truth or accuracy of the declared value on 'certain reasons' which could include the grounds specified in clauses (a) to (f) in clause (iii) of the Explanation.
(g) The proper officer, on a request made by the importer, has to furnish and intimate to the importer in Page 19 of 23 C/22417, 22422/2015 writing the grounds for doubting the truth or accuracy of the value declared in relation to the imported goods.
Thus, the proper officer has to record reasons in writing which have to be communicated when requested.
(h) The importer has to be given opportunity of hearing before the proper officer finally decides the transactional value in terms of Rules 4 to 9 of the 2007 Rules.
16. Proper officer can therefore reject the declared transactional value based on 'certain reasons' to doubt the truth or accuracy of the declared value in which event the proper officer is entitled to make assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by the expression "grounds for doubting the truth or accuracy of the value declared" has been explained and elucidated in clause (iii) of Explanation appended to Rule 12 which sets out some of the conditions when the 'reason to doubt' exists. The instances mentioned in clauses (a) to (f) are not exhaustive but are inclusive for there could be other instances when the proper officer could reasonably doubt the accuracy or truth of the value declared.
17. The choice of words deployed in Rule 12 of the 2007 Rules are significant and of much consequence. The Legislature, we must agree, has not used the expression "reason to believe" or "satisfaction" or such other positive terms as a pre-condition on the part of the proper officer. The expression "reason to believe"
which would have required the proper officer to refer to facts and figures to show existence of positive belief on the undervaluation or lower declaration of the transaction value. The expression "reason to doubt" as a sequitur would require a different threshold and examination. It cannot be equated with the requirements of positive reasons to believe, for the word 'doubt' refers to un-certainty and irresolution reflecting suspicion and apprehension. However, this doubt must be reasonable i.e. have a degree of objectivity and basis/foundation for the suspicion must be based on 'certain reasons'.
However after rejection of the transaction value under Rule 12 of the CVR 2007, the question needs to be answered is whether the valuation has been done in accordance with the procedure prescribed under Rule 12 of the CVR, 2007.
14. The appellant in their reply to the show-cause notice has furnished comparable price of similar goods placed under auction in overseas market which are annexed to the appeal paper book from pages 77 to 112. Also, during the course of cross- examination of the two committee members about the basis to Page 20 of 23 C/22417, 22422/2015 arrive at the value, it was responded by Dr. Arundhati Banerji as follows:
"Q: Have you conducted any tests before arriving at this value?
R: We did not conduct any chemical tests. Valuation is done based on aesthetic value, material of the object, mod of decoration, ornamentation and age. Chemical tests are not done because they damage object.
Q: What are the test criteria for valuation? R: Age, aesthetic value and material of the object. ... .... .... ..."
Similarly, Dr. Sathyabhama Badhreenath, Regional Director responded to the question as follows:
"Q: In your report you have valued it only on the basis of age and period.
R: Yes Q: Are these only criteria adopted by ASI for the purpose of valuation?
R: Age, period, material and aesthetics are the basic criteria for the purpose of valuation.
... ... ... ..."
Therefore, the valuation of the antiques arrived only on the basis of assessment of the criteria of aesthetic value, material of the object, age and period to which it belongs. The learned Commissioner in the impugned order did not consider the claim of the appellant about the comparable auction price available of more or less similar goods before discarding the said claim and adopting the opinion of valuation committee, recorded its finding solely on the basis of the same.
15. Rule 9 of the CVR 2007 reads as follows:
9. Residual method.-Page 21 of 23
C/22417, 22422/2015 (1) Subject to the provisions of rule 3, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and on the basis of data available in India; Provided that the value so determined shall not exceed the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation in the course of international trade, when the seller or buyer has no interest in the business of other and price is the sole consideration for the sale or offer for sale.
(2) No value shall be determined under the provisions of" this rule on the basis of -
(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs purposes of the highest of the two alternative values;
(iii) the price of the goods on the domestic market of the country of exportation;
(iv) the cost of production other than computed values which have been determined for identical or similar goods in accordance with the provisions of rule 8;
(v) the price of the goods for the export to a country other than India;
(vi) minimum customs values; or
(vii) arbitrary or fictitious values.
16. The learned Commissioner ought to have considered the availability of comparable international auction price as per Rule 4 & 5 of the said Rules while applying the valuation suggested by the Committee. Since the purpose of the determination of the transaction value rests on ultimate sale on the goods by the appellant, an antique dealer; therefore, international auction prices of similar goods definitely would play a significant role in arriving at the nearest transaction value of the imported goods for the purpose of assessment, when the declared transaction value was rejected under Rule 12 of the CVR 2007. In these circumstances, the determination of assessable value solely on the basis of the expert committee opinion, cannot be sustained and the matter is remanded to the learned Commissioner to reassess the value taking note of the claim of the appellant that comparable price of similar goods in auction produced for Page 22 of 23 C/22417, 22422/2015 consideration by them in ascertaining the correct value of the goods.
17. In the result, the impugned order is set aside and the matter is remanded to the adjudicating authority to redetermine the assessable value, and consequently the redemption fine and penalty on the appellant and the Managing Director.
18. Appeals are disposed of by way of remand.
(Order pronounced in Open Court on 25.03.2025) (D.M. MISRA) MEMBER (JUDICIAL) (R BHAGYA DEVI) MEMBER (TECHNICAL) Raja...
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