Customs, Excise and Gold Tribunal - Delhi
Nina Chaka Pvt. Ltd. vs Commissioner Of Customs on 20 November, 2003
Equivalent citations: 2004(92)ECC249, 2004(163)ELT464(TRI-DEL)
ORDER K.D. Mankar, Member (T)
1. The appellants are contesting the allegation of undervaluation levelled against them by the customs authorities in respect of import of nylon/polyester cloth with PVC backing imported by them. The import was effected through 10 Bills of Entry (B/Es), from ICD Tughlakabad Delhi. The goods were of Taiwan origin and the bills were raised by M/s. Kabul Gulf Trading LLC Dubai, UAE.
2.1 In respect of Bill of Entry No. 103522, dated 9-4-96 the Customs authorities stumbled upon a Letter of Credit (L/C) established by the said trading company in favour of M/s. China Plastic Company, Taiwan, for US $ 55,570 as against the price of US $ 29,924.10 reflected in the invoice presented by the appellant along with the corresponding Bill of Entry.
2.2 In respect of B/E 110097, dated 22-10-96, as against the declared value of US $ 27,822.05, the authorities noticed that the said goods were insured by the supplier for US $ 56,589.01. Similar evidence of insurance value of US $ 52,982.18 against the declared value of US $ 24,219.25 was noticed.
2.3 It has also been alleged that the appellants furnished some documents claiming these to be the actual invoices and the prices figuring therein were tabulated against the prices declared in the corresponding B/Es. However, in the show cause notice that was issued, the basis of value enhancement proposed therein was totally different.
2.4 The authorities recorded statements of the importer, wherein there was an admission of undervaluation. While the investigations were in progress, the importers made voluntary deposits of Rs. 28,00,000/- towards the eventual duty liability. The matter culminated in the issue of a show cause notice which was adjudicated by the learned Commissioner of Customs. In the order passed by the Commissioner, it was held that, the import price declared was not acceptable. The show cause notice proposed value enhancement based on the price mentioned in the L/C recovered during the investigations as also the price at which the goods were insured by the supplier.
2.5 In respect of 4 varieties of fabrics the higher price proposed in the show cause notice was based on the ground that these were figuring in the said L/C even though partly imported under different B/Es. In respect of the 5th variety the price was derived based on the prices noticed for other varieties after making some adjustments on account of qualitative difference.
2.6 These 5 varieties were imported partly under B/E for which L/C was recovered and partly under subsequent seven Bills of Entry, for which there is no recovery of L/C. The show cause notice proposed to enhance the value for the said 8 B/Es based on the actual value derived from the recovered L/C for the first B/E. In short basis for value enhancement was two-fold :-
(i) Based on the value noted in the recovered L/C (For 8 B/Es). (ii) Based on the amount at which the supplier had insured the goods (For 2 B/Es).
3.1 The appellants made several submissions to refute the allegations and also produced the evidence of contemporary import from the same ICD, showing imports at prices comparable with the price declared by the appellants. But these grounds were not considered and the impugned order came to be passed against the appellants.
3.2 In the instant appeal, those very points are reiterated by the ld. Counsel for the appellants. Ld. DR pleads in support of the order, claiming that the appellants themselves have admitted to have indulged in undervaluation and have deposited part amounts towards duty voluntarily.
4. We have heard both sides.
5. The dispute relates to valuation of imported goods. The department is alleging that the declared value does not conform to the concept of "Transaction Value" as envisaged under Section 14 of the Customs Act, 1962 read with Rule 4 of Customs Valuation Rules, 1988. Obviously, in that situation, the assessable value has to be determined in accordance with the provisions contained in the Customs Valuation Rules, 1988. In that situation Customs Valuation Rules provide that the value determination process has to progress in a sequential manner from Rules 5 to 8. The appellants have made available the contemporary correspondence with the supplier subsequent to opening of Letter of Credit, complaining to the supplier of quoting higher price, compared to availability of the material at cheaper price and ultimately the supplier sending the material with the price reflected in the invoice. In a situation of this nature it was incumbent on the department to discuss the acceptability of this evidence and furnish cogent reasons to discard the evidence furnished by the importers. We do not find any discussion in the impugned order on this aspect. There is no finding in the order to claim that the amount reflected in the L/C was ultimately paid to the supplier in connection with the said supplies or whether a part of it was adjusted against subsequent supplies. The adjudication order proceeds to accept the price mentioned in the L/C as the correct price in respect of goods covered by 8 B/Es. In the face of the contemporary correspondence between the appellants and the suppliers, whereby ongoing negotiation of price between buyer and seller is established and the genuineness of this correspondence has not even been doubted, the adoption of price as shown in the L/C is totally without the authority of law. It is more so for the reason that, the department in the impugned order, has not alleged even a single import at the price reflected in the said L/C, whereas there is a supplier's commitment to adjust the excess payment reflected in the L/C, against future shipments.
6.1 The ground for adoption of price depression ratio to other consignments based on the price noticed in the specific consignment for which L/C has been recovered is far more weaker. The evidence emerging from the said L/C cannot be applied to the imports against other B/Es, when no contemporary imports at the price adopted in the show cause notice has been brought on record by the Department.
6.2 In respect of goods covered by the remaining 2 B/Es, the insurance value is taken as a basis. It is a common knowledge that the insurance value takes into account not only the CIF value but also duties and taxes payable on the goods involving transfer from seller's premises to buyer's premises. The insurance price as such, therefore, cannot form the basis of valuation without making deductions therefrom of taxes and other permissible components. It is not known as to why preference to insurance value has been given for alleging undervaluation in respect of imports against two B/Es, while L/C formula is preferred for 8 B/Es. This shows that the Department is trying to invent different grounds for alleging undervaluation and not sure as to which one to apply. The figures of insurance value could have been ascertained or deduced in respect of 8 B/Es., as has been done for L/C value. Instead for the 8 B/Es only L/C formula has been applied and for 2 B/Es, the insurance formula has been applied.
6.3 Though the Commissioner's order does not spell out as to under which rule the value is determined, and the Ld. DR could not throw any light on this aspect, it appears to have been done under the residual rule viz. Rule 8. Determination of value under Rule 8 cannot be done without exhausting the provisions contained in the earlier rules, especially Rules 5 and 6 dealing with valuation based on the value of identical goods (Rule 5) and similar goods (Rule 6). When the date for import of identical goods and similar goods was available in the ICD (even the appellants furnished such data) as well as other customs formation, taking recourse to valuation, as adopted in the impugned order is totally against the provisions contained in the Customs (Valuation) Rules, 1988. The impugned order, therefore, deserves to be set aside.
7. Accordingly, we set aside the impugned order and allow the appeal. The appellants shall consequentially be entitled to the refund of the entire amount paid by them as deposits.