Custom, Excise & Service Tax Tribunal
M/S. Pushpanjali Silk Pvt. Ltd vs Cc, Chennai on 18 August, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/251/2008
(Arising out of Order-in-Appeal C.Cus. No. 153/2008 dated 03.07.2008 passed by the Commissioner of Customs (Appeals), Chennai).
For approval and signature
Honble Shri P. G.CHACKO, Member (Judicial)
Honble Shri P.KARTHIKEYAN, Member (Technical)
_______________________________________________
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M/s. Pushpanjali Silk Pvt. Ltd. : Appellant
Vs.
CC, Chennai : Respondent
Appearance Smt. Mythili, Adv., for the appellants Shri N.J. kumaresh, SDR, for the respondent CORAM Shri P.G. CHACKO, Member (Judicial) Shri P. KARTHIKEYAN, Member (Technical) Date of hearing : 18.08.08 Date of decision: 18.08.08 FINAL ORDER No.________/2008 Per P. KARTHIKEYAN The appellants Pushpanjali Silk Private Ltd, Bangalore (Pushpanjali) imported a consignment of Mulberry Raw Silk from China weighing 8888 Kgs and filed Bill of Entry No.727950 dated 29.04.08. They declared a unit price of US$21.3 per Kg CIF. The declared value was rejected and enhanced to US$24.07 CIF under Rule 5 of Customs Valuation Rules 2007 comparing the value of contemporaneous imports. In the impugned order Commissioner (A) sustained the above order of the original authority.
2. The appellant has argued that the declared value was rejected contrary to the relevant legal provisions. The Assistant Commissioner had called upon the importer to substantiate the declared value in a letter purported to be issued under Rule 12 of Customs Valuation Rules 2007(CVR) without furnishing details of contemporaneous imports for similar goods assessed at higher values. In those cases also values declared were in a range including the appellants value. As per Section 14 of the Customs Act,62 effective from 10.10.2007, subject to valuation rules, assessable value of imported goods shall be the transaction value, namely the price paid or payable for the consignment for delivery at the time and place of importation, provided that the importer and the supplier are not related and no extraneous consideration had influenced the price Revenue had no case that the importer had remitted any consideration in excess of what was declared. Rule 12 could not be invoked as a previous import of Pushpanjali in January 08 of identical goods weighing 6221 Kgs had been assessed @US$21.6. The sole ground for enhancing the value has not been imports at higher values but the fact that declared value of some contemporaneous imports had been enhanced in adjudication which were higher than US$21.30. The CVR did not provide for enhancement of value in such circumstances, especially after the amendment to Section 14 of the Act in 2007. The payment for the import had been made through banking channels and the certified invoice had been produced along with all other relevant import documents such as Bill of Lading, Certificate of Origin, Packing list, Insurance Certificate and certificate as regards the description and conditioned weight of the consignment.
3. Every time a consignment was imported, the appellant was required to prove that the price was genuine as there were contemporaneous imports at higher prices by some other person. The provisions governing valuation did not cast such an obligation on the importer. Earlier, in January 08 a consignment of such goods (Weight 6221Kgs) had been imported declaring unit price of US$21.30. After due process the same was enhanced to above US$24.84 which was affirmed by the Commissioner (A). On appeal, the CESTAT had remanded the matter for correct determination of price as per law. In remand proceedings, the original authority decided the price to be US$21.60 which has also been challenged in an appeal by Pushpanjali and was pending before the Commissioner (A). No value for any other contemporaneous import would have been more apt to be invoked for comparison under CVR than the value declared for the above consignment of identical goods from the same supplier. For various reasons and business contingencies, not necessarily that the declared price did not represent the transaction value, importers acquiesced in an enhancement of declared value for assessment and at times not finally accepting the same. Relying on such value as price of contemporaneous imports to determine assessable value may not be proper as the assessed value may change in appeal proceedings.
4. In the subject case, SCN was waived. Rule 12 of CVR 2007 provided for asking the importer to explain why the declared price should not be rejected. After hearing the importer and enquiry, value could be accepted or revised following the CVR sequentially. In the instant case the genuineness of transaction value was doubted solely for the fact that there were contemporaneous imports at higher value. Without further enquiry the doubt became the ground to reject the transaction value and the value was enhanced. This was not envisaged in law. The importer should not be asked to justify how some other importer purchased similar or identical goods at a higher value. The onus was on the department to establish that the declared value was depressed for noncommercial reasons for which the same was not acceptable. Pushpanjali was a regular exporter of finished silk and had established a rapport with its supplier which enabled it get raw silk at competitive prices. As the law provided for accepting transaction value, the authorities should follow the law and accept the declared value for assessment.
5. The appellant had cited the following case law in support of their case against rejection of transaction value and its enhancement:
a) CC, Mumbai Vs. J.D. Orgochem Ltd.
2008 (226) ELT 9 (S.C.)
b) CC, Hyderabad Vs. SPK Electricals 2008 (224) ELT 563 (Tri.-Bang.)
c) Oswal Fats & Oils Vs. CC, Amritsar 2007 (220) ELT 795 (Tri.-Del.)
d) Rashesh & Co. Vs. CC, Mumbai 2008 (227) ELT (573) (Tri-Mum).
6. The ld SDR submits that Rule 12 of the CVR provided for the proper officer to ask the importer for explanation in cases of imports at significantly lower prices compared to the generality of imports of identical/similar goods at or about the time of import under assessment. The contemporaneous price adopted was the lowest of several such imports. Also, contrary to the submission by the ld Counsel, the prices shown in the proposal were not all the enhanced values but declared by the importers. Rule 12 provided a mechanism to ascertain the veracity of the declared value and also for the importer to establish the bona fide of the declaration in cases of extraordinarily low prices compared to the contemporaneous prices for import of identical goods/similar goods. The proper officer was authorized to raise queries and adopt the value of contemporaneous imports of identical/similar goods for assessment. Rule 12 contained a machinery to reject the declared value. The impugned order was passed in accordance with the statutory provisions.
7. We have carefully studied the appeal, the case records and the rival submissions. In this case the value declared by the importer in the B/E has been rejected and a higher value adopted for assessment. The enhanced value has been determined in terms of Rule 5 of CVR 2007.Prices for imports of similar goods had been referred to. We find from the impugned order that the value has been determined with reference to revised values rejecting the corresponding declared value in several Bs/E for contemporaneous imports of similar goods. The commodity involved is an item of regular import through Chennai. We find that Rule 12 provides for the assessing officer to doubt the genuineness of the declared value, interalia, when there are contemporaneous imports of identical/similar goods at significantly higher values and ask the importer to substantiate the declared value. We find that the assessing officer (AO) had no ground to doubt the veracity of the declared value as per this rule in view of similar values declared in several imports. The AO not only initiated enquiries doubting the declared value as not genuine for the reason that there were imports of such goods at higher unit prices but rejected the transaction value for the same reason. The statute does not provide for rejecting the transaction value for such reasons. As per the relevant Section 14 of the Customs Act 62 (the Act), transaction value is the consideration paid or payable for the goods imported for delivery at the time and place of importation where the importer and the supplier are not related and if related, the relationship had not influenced the transaction .Transaction value cannot be rejected for the reason that the same is lower than the range of prices at which such goods are imported contemporaneously. There is no finding that the transaction value was under declared.
7.1. We find that the Commissioner (Appeals) had observed in the impugned order that the contemporaneous imports compared had been assessed at enhanced values.( He submitted that all the six contemporaneous Bs/E were assessed based on the enhanced value and the said enhancement was accepted by the respective importers). It means that the values compared to raise the transaction value of the subject import were not transaction value declared in all these cases. It is likely that these values are still in dispute or accepted for payment of duty under protest. It was too early for the AO to say that the enhancement had become final. The values considered as values of contemporaneous imports are arrived at like the enhanced value in the subject case; ie., the one being disputed by the importer. We find that in such circumstances the range of lower prices could not have been raised in the absence of genuine higher transaction values at which contemporaneous imports took place. The lower prices would appear to represent the value of contemporaneous imports and not the enhanced values. A declared value cannot be validly enhanced with reference to higher values determined in adjudication and under dispute.
7.2. There is no finding or suggestion that the price declared in the instant case is not genuine and that the importer under declared the transaction value. In such a situation the AO is not authorized to choose a higher value for assessment of the imported goods as has been done in the instant case. The portion of Section 14 of the Act relevant to decide the dispute on hand is extracted here under:
Valuation of goods :- (1) For the purposes?of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf :
Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf :
Provided further that the rules made in this behalf may provide for,-
(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;
(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section :
Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.
There is no finding that the declared value is not the transaction value envisaged in this Section.
Rule 12 of CVR reads as follows:
12. Rejection of declared value. (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to 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 transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3.
(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).
Explanation. - (1) For the removal of doubts, it is hereby declared that :-
(i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9.
(ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers.
(iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include -
(a) the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive agents;
(d) the misdeclaration of goods in parameters such as description, quality, quantity, country of origin, year of manufacture or production;
(e) the non declaration of parameters such as brand, grade, specifications that have relevance to value;
(f) the fraudulent or manipulated documents.
These provisions do not empower the AO to reject the transaction value without establishing that the transaction value was not genuine. In the case law Rashesh & Co. Vs. CC, Mumbai 2008 (227) ELT (573) (Tri-Mum) (supra) cited the Tribunal observed as under :
3.We find merit in the submission of the applicants that the transaction price can be rejected only if the exceptional circumstances stipulated in Rule 4(2) of the Valuation Rules are found to be attracted, as held by the Apex Court in Eicher Tractors Ltd. v. CC - 2000 (122) E.L.T. 321 (S.C.). In the present case, the transaction value has been rejected on the ground that the sale was not in the ordinary course of trade under fully competitive conditions and this finding has been arrived at on the ground that other importers were importing the same goods from the same country at around the same point of time at higher prices. This, however, is not legally permissible, as held by the Tribunal in the case of Mark Auto Industries Ltd. v. CC, New Delhi - 2003 (162) E.L.T. 261 and Devika Trading Pvt. Ltd. v. CC, Mumbai - 2004 (167) E.L.T. 75. Since the only basis for rejecting the transaction value is the noticing of contemporaneous imports at higher prices, the transaction value was required to be accepted, and we, therefore, set aside the impugned order of rejection of transaction value and loading of value, and allow the appeal.
8. We find that the concept of transaction value did not undergo any essential change by enactment of the new Section 14 of the Act and CVR on 10.10.2007. Earlier, transaction value within a reasonable range on either side of the contemporaneous price in the international trade was acceptable as assessable value. Then also no price arrived at by negotiations in the course of trade on commercial basis could be rejected as transaction value. This position continues even after 10.10.07. The shift from a deemed normal price in the international trade for valuation of imported goods in the Section 14 to the transaction value has not resulted in any change in practice. Therefore the ratio of the case law in 2008 (227) ELT (573) (Tri-Mum) is still valid and relevant. The circumstances statutorily particularized in the erstwhile valuation Rule 4(2) of CVR 1988 to reject the declared value still exist in the CVR.
8.1 We find that in CC, Mumbai Vs. J.D.Orgochem Ltd., reported in 2008 (226) ELT 9 (S.C.), the Apex Court relied on its decision in Eicher Tractors Ltd. Vs. CC, Mumbai [2000 (122) ELT 321 (S.C.)] which is extracted hereunder.
14. It is only when the transaction value under Rule 4 is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules. It was observed:-
22. In the case before us, it is not alleged that the appellant has mis-declared the price actually paid. Nor was there a mis-description of the goods imported as was the case in Padia Sales Corporation. It is also not the respondent's case that the particular import fell within any of the situations enumerated in Rule 4(2). No reason has been given by the Assistant Collector for rejecting the transaction value under Rule 4(1) except the price list of vendor. The following finding of the Apex Court in CC, Calcutta Vs. South India Television Pvt. Ltd. [2007 (214) ELT 3 (S.C.)] endorsed the same views.
Therefore, the transaction value under Rule 4 must be the price paid or payable on such goods at the time and place of importation in the course of international trade. Section 14 is the deeming provision. It talks of deemed value. The value is deemed to be the price at which such goods are ordinarily sold or offered for sale, for delivery at the time and place of importation in the course of international trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or for offer for sale. Therefore, what has to be seen by the Department is the value or cost of the imported goods at the time of importation, i.e., at the time when the goods reaches the customs barrier. Therefore, the invoice price is not sacrosanct. However, before rejecting the invoice price the Department has to give cogent reasons for such rejection. This is because the invoice price forms the basis of the transaction value. Therefore, before rejecting the transaction value as incorrect or unacceptable, the Department has to find out whether there are any imports of identical goods or similar goods at a higher price at around the same time. Unless the evidence is gathered in that regard, the question of importing Section 14(1A) does not arise. In the absence of such evidence, invoice price has to be accepted as the transaction value. Invoice is the evidence of value. Casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. Under-valuation has to be proved. If the charge of under-valuation cannot be supported either by evidence or information about comparable imports, the benefit of doubt must go to the importer. If the Department wants to allege under-valuation, it must make detailed inquiries, collect material and also adequate evidence. The above judgment affirmed the reading of the Tribunal in Rashesh & Co. Vs. CC, Mumbai (supra). It was also observed that the evidence of contemporaneous imports from the same supplier produced by the importer had to be followed in the absence of contemporaneous evidence to reject the transaction value with the revenue. The onus to prove that the transaction value was not genuine was on the revenue.
8.2. The transaction value declared in the instant case has been rejected without the sanction of law in view of the above provisions. We therefore order that the enhancement of value in the instant case was not legal and set aside the impugned order. The appeal is allowed.
(Operative part of the Order pronounced in Open Court on 18.8.08)
(P.KARTHIKEYAN) (P.G. CHACKO)
MEMBER (T) MEMBER (J)
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