2025 (5) TMI 1287 - AT - Customs

Undervaluation of goods - Rejection of transaction value declared by the importer for the imported motorcycle inner tubes - discharge of burden of proving undervaluation by adducing cogent reasons and evidence justifying the rejection of the declared transaction value - to be valued as per section 4 of CEA or section 4A. Admission and acceptance by the appellant the charge of undervaluation - HELD THAT - It cannot be ignored that the appellant had filed B/E dated 17.02.2011 for clearance of motorcycle tubes and pursuant to an intelligence the statement of Shri Kulvinder Pal Singh was recorded on 11.03.2011 and 18.03.2011 where he admitted the price to be at Rs. 32 per piece and also paid the duty on enhanced assessable value on the date of the statement itself. Further they also waived the requirement of show cause notice and personal hearing so as to avail early clearance of the consignment. Merely because the appellant has accepted the higher value and also made the payment of differential duty does not absolve the department from discharging their responsibility under the provisions of section 14 read with Valuation Rules. In the present case it is not found that the department has discharged its burden of carrying out the requisite exercise and conducting enquiry with reference to the nature of the imported goods being unbranded along with other factors like quality quantity time and country of origin etc. The goods imported by the appellant were unbranded and it was therefore relevant that the comparable goods should be of the same category unbranded as there is bound to be marked difference in the valuation of branded and unbranded goods which is not forthcoming from the records. No such evidence has been led by the department to ascertain the price for such re-assessment. Considering the fact of the present case the decision of the Ahmedabad Bench of the Tribunal in CMR Nikkei India (P) Ltd. Vs. Commr. of Customs 2022 (8) TMI 114 - CESTAT AHMEDABAD referred where the dispute was regarding the valuation of the goods imported by the appellant and the assessing authority reassessed the imported goods at values higher than what was declared in the Bills of Entry and the importer had accepted the enhanced value by submitting the consent letter. The Tribunal was pleased to observed that in spite of the admission on behalf of the importer the Revenue is required to satisfy the requirements prescribed under Section 14 of the Customs Act read with Customs Valuation Rules before any enhancement of valuation. Reliance has been placed on the contemporaneous imports available in NIDB data which showed the value of the impugned goods and which has been relied on by the authorities below. In the case of M/s Sedna Impex Pvt Ltd. vs. Commissioner of Excise Mundra 2023 (3) TMI 1080 - CESTAT AHMEDABAD the Tribunal observed that the declared value cannot be enhanced merely on the basis of the NIDB data. From series of decisions we find that the Tribunal has taken a consistent view that the declared value cannot be enhanced solely on the basis of NIDB data or in other words NIDB data cannot be made the basis for enhancement of the declared import value. The basic allegation of the department is that the declared value of the impugned goods were found different being on the lower side as the goods were required to be subjected to countervailing duty based on RSP under section 4A of CEA - Section 4A makes it clear that it applied only in those cases where there is an allegation to print RSP on the packages of the goods under the provisions of SWMA or the Rules made thereunder. In terms of section 4A Central Government had issued Notification No. 49/2008-CE(NT) dated 27.02.2008 and Sl. No. 108 therein refers to as parts components and assemblies of automobiles . Since in the present case the inner tubes were imported by the appellant in the packing of 50 pieces per cartons and the said tubes were not in individual package reliance has been placed on Circular No. 625 dated 28.02.2002 which provides that in case of bulk packing there is no requirement of declaring RSP on the packages under the provisions of SWMA or the Rules made thereunder. The findings in the impugned order is that since the appellant has not shown that the inner tubes were sold only in the packing of 50 pieces per cartons the benefit of said circular is not available. The learned counsel for the appellant has referred to a decision of this Tribunal in Titan Industries Limited vs. Commissioner of Customs Chennai 2007 (6) TMI 357 - CESTAT CHENNAI where the appellant as manufacturer of Titan brand watches had imported button cells declaring them as for own use and cleared on payment of duties based on the transaction value. The adjudicating authority concluded that the impugned imports attracted assessment of CVD on RSP as provided under section 3(2) of the Customs Tariff Act 1975 and demanded differential duty. Reliance was placed on Circular No. 625 and it was urged that the impugned goods were imported packed in thermo formed trays each tray holding 100 button cells with 10 such trays shrink wrapped and stacked in a carton and each shipment consisted of Rs.1, 50, 000/- thousand button cells so packed. It was therefore argued that the imports were in bulk packages and did not attract MRP based assessment. In view of the clarification given in the Circular it was held that imported goods do not attract section 4A for the purpose of assessment of CVD. Considering the facts of the present case it is opined that the decisions in the case of Titan Industries is squarely applicable as the tubes were purchased in bulk and not in retail packaging and are therefore not covered for assessment under the provisions of Section 4A. Conclusion - The declared value cannot be rejected merely on the statement of the Proprietor. The department has failed to exercise its power in conformity with the provisions of section 14 read with the Valuation Rules so as to adduce cogent reasons to establish the charge of undervaluation. Further to re-determine the valuation of the imported goods there are no sufficient evidence satisfying the test of equivalence in comparison to the imported goods. In the absence of requisite exercise to collect cogent evidence to arrive at reassessment the goods have to be assessed on the basis of the declared value/transaction value. The impugned order is unsustainable and is hereby set aside. The appeal is accordingly allowed.

Summary

The core legal questions considered by the Tribunal in this appeal include:

1. Whether the transaction value declared by the importer for the imported motorcycle inner tubes could be rejected under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR) and the Customs Act, 1962, specifically under Section 14 and related provisions.

2. Whether the department discharged its burden of proving undervaluation by adducing cogent reasons and evidence justifying the rejection of the declared transaction value.

3. The applicability of Section 4A of the Central Excise Act, 1944 (CEA) regarding valuation of excisable goods with reference to retail sale price (RSP), and whether CVD was payable on RSP or transaction value in this case.

4. The legal effect of the appellant's admission of undervaluation and voluntary payment of differential duty and interest, including waiver of show cause notice and personal hearing.

5. The validity of the confiscation order, redemption fine, and penalties imposed on the appellant.

Issue-wise Detailed Analysis:

1. Rejection of Transaction Value under Customs Valuation Rules and Section 14 of the Customs Act

The relevant legal framework comprises Section 14(1) of the Customs Act, which mandates that the assessable value of imported goods shall be the transaction value, i.e., the price actually paid or payable for the goods, subject to exceptions and conditions specified in the Customs Valuation Rules, 2007. Rule 4(2) of CVR allows rejection of transaction value only upon cogent reasons such as additional consideration or special circumstances.

Precedents cited include the Supreme Court decision in Eicher Tractors Ltd. vs. Commissioner of Customs, which requires sequential application of valuation rules and cogent reasons for rejecting transaction value. The Tribunal emphasized that rejection of declared value must be supported by evidence and proper inquiry considering factors like nature, quality, quantity, time, and country of origin of goods.

The Court found that the adjudicating authority failed to apply the valuation rules sequentially and passed a cursory order without cogent reasons or evidence. The department did not establish that additional consideration was involved or that any exceptions under Rule 4(2) applied. The mere acceptance by the appellant of enhanced value and payment of differential duty could not substitute the department's burden of proof.

Competing arguments included the appellant's contention that the goods were unbranded and imported directly from the manufacturer, thus the declared transaction value should be accepted, and the department's reliance on NIDB data and market inquiry to justify enhancement. The Tribunal rejected reliance solely on NIDB data without corroborative evidence, consistent with prior decisions emphasizing that NIDB data alone is insufficient for valuation enhancement.

Conclusion: The Tribunal held that the department failed to discharge its burden to reject the transaction value with cogent reasons and evidence, rendering the rejection of declared value unsustainable.

2. Applicability of Section 4A of the Central Excise Act and Valuation Based on Retail Sale Price

Section 4A of the CEA provides for valuation of excisable goods with reference to retail sale price where the goods are required to declare RSP on their packages under the Standards of Weight & Measure Act, 1976 (SWMA) or related rules. The Central Government notification specified that parts, components, and assemblies of automobiles are covered under this provision.

The department argued that the imported motorcycle inner tubes attract CVD on RSP as per Section 4A, relying on the fact that the tubes are generally sold individually to end consumers and that the appellant accepted RSP of Rs. 110 per piece.

The appellant countered that the tubes were imported in bulk packing of 50 pieces per carton, not in individual retail packaging, and thus SWMA provisions for declaring RSP do not apply. Circular No. 625/CE dated 28.02.2002 was cited, which clarifies that bulk packaging exempts goods from RSP declaration requirements.

The Tribunal referred to a precedent involving Titan Industries Ltd., where bulk packaging exempted goods from RSP-based assessment under Section 4A. Given the facts that the tubes were imported in bulk cartons and no evidence was provided that they were sold only in retail packaging, the Tribunal concluded that Section 4A was not applicable.

Conclusion: The Tribunal held that CVD was chargeable under Section 4 of the CEA based on transaction value, not on RSP under Section 4A, due to the bulk packaging of the imported goods.

3. Effect of Admission and Voluntary Payment by the Appellant

The appellant's proprietor admitted undervaluation during statements recorded under Section 108 of the Customs Act and voluntarily paid differential duty and interest. The appellant also waived the requirement for issuance of show cause notice and personal hearing to avoid demurrage and other charges.

The department relied heavily on this admission and payment to justify rejection of the declared value and imposition of penalties and confiscation.

The Tribunal examined precedents, including River Side Impex and other Tribunal decisions, which clarified that mere admission or voluntary payment does not relieve the department of its statutory duty to provide cogent reasons and evidence for rejecting declared value. The burden remains on the department to prove undervaluation and comply with procedural safeguards.

Conclusion: The Tribunal rejected the department's reliance on admission and payment alone as sufficient grounds for confirming undervaluation and penalties.

4. Confiscation, Redemption Fine, and Penalties

The adjudicating authority ordered confiscation of the goods pertaining to the live consignment, imposing a redemption fine of Rs. 1 lakh, and imposed fines and penalties on past consignments and the appellant under Section 112(a) of the Customs Act.

The Tribunal found the confiscation and penalty orders unsustainable in light of the failure of the department to discharge its burden on valuation and the absence of cogent evidence of undervaluation or misdeclaration. The Tribunal's decision to set aside the impugned order implicitly includes quashing of confiscation and penalty orders.

Conclusion: The confiscation, redemption fine, and penalties were set aside along with the valuation enhancement.

Significant Holdings and Core Principles Established:

"The rejection of the transaction value and re-determination of the assessable value has to be on the basis of cogent reasons and evidence on record."

"The allegation of undervaluation is not sustainable unless it is proved that additional consideration was involved or any of the exceptions in terms of Rule 4(2) are attracted."

"Merely because the appellant has accepted the higher value and also made the payment of differential duty does not absolve the department from discharging their responsibility under the provisions of section 14 read with Valuation Rules."

"Reliance on NIDB data without going into the details of the goods is not appropriate."

"Section 4A of the CEA applies only where the goods are required to declare retail sale price on their packages under the Standards of Weight & Measure Act or rules made thereunder. Bulk packaging exempts the goods from such requirement."

"The burden of proving incorrect valuation lies on the Department. Before rejecting the transaction value declared in an invoice, the department must provide cogent reasons and evidence, including comparable imports or contemporaneous data."

"The mere acceptance of the re-assessed value and payment thereof will not be sufficient to confirm the allegations of undervaluation; the burden was still on the Department to prove the allegations levelled."

Final determinations:

- The declared transaction value could not be rejected due to lack of cogent reasons and evidence.

- Section 4A of the CEA was not applicable because the goods were imported in bulk packaging exempt from RSP declaration.

- Admission and voluntary payment by the appellant do not substitute the department's burden of proof.

- Confiscation, redemption fine, and penalties imposed were unsustainable and set aside.