2025 (5) TMI 1463 - AT - Customs

Undervaluation and redetermination of assessable value of the imported goods - Compliance of the provisions of section 14 - differential duty amount along with penalty and redemption fine - intention to avoid customs duty - lack of evidence to show excess amount over and above the invoice price paid to the suppliers - HELD THAT - We find that the adjudicating authority has recorded the finding on the basis that Shri Jhunjhunwala had admitted undervaluation and the fact that he deposited the huge amount at the time of recording his statement on 13.03.2009 itself proves the guilt of the appellant. We completely disagree with these findings as acceptance of revised valuation cannot be treated as a voluntary consent by the importer. From the provisions of section 14 of the Act read with the Valuation Rules it is clear that in the ordinary course the transaction value has to be taken as the assessable value. Repeatedly the Courts have laid much emphasis on the principle that even where there is admission by the importer the department is required to satisfy the compliance of the provisions of section 14 and the Valuation Rules while re-determining the value of the goods. Merely because there is admission by the importer does not absolve the department to act in compliance of the mandatory provisions. Recording the basis for such an enhancement is the sine-quo-non of re-determination. From the perusal of the records of the case we do not find that the department has made any effort to ascertain quality quantity characteristics of the goods of contemporaneous import from which the basis for such reassessment can be made out. In fact there is no evidence at all to show that the department had carried out any exercise for ascertaining the basis for re-determining the value of the imported goods. It is not even forthcoming that the overseas supplier has been paid consideration higher than the amount declared in the invoices. In the present case the revenue has merely re-assessed the value on the basis of the statement of Shri Jhunjhunwala which is not the prescribed requirement for reassessment of the value of the imported goods. The revenue has not discharged its burden and therefore we conclude that the transaction value declared by the importer should form the basis of assessment and consequently the enhanced value reassessed by the revenue is unsustainable. We do not find any merits in the impugned order and hence the same is set aside. The appeal is accordingly allowed.

The core legal questions considered in this judgment revolve around the validity of the charge of undervaluation of imported goods and the consequent re-determination of the assessable value under the Customs Act, 1962 and Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. Specifically, the issues include: whether the statement of the importer's proprietor alone suffices to establish undervaluation; the evidentiary requirements and procedural safeguards for rejecting declared transaction value under section 14 of the Act and relevant Valuation Rules; the applicability and sequential application of Customs Valuation Rules in re-determining value; and the burden of proof on the department to justify enhancement of assessable value beyond the declared invoice price.

The principal issue is whether the charge of undervaluation and consequent re-assessment of the value of imported goods is sustainable solely on the basis of the proprietor's statement admitting possible undervaluation, without corroborative evidence. The statement in question uses tentative language ("might be"), indicating uncertainty rather than a positive admission of actual values. The Court emphasized that such equivocal admissions cannot form the sole basis for rejecting the declared transaction value.

Section 14(1) of the Customs Act mandates that customs duty be assessed on the value of goods, which is deemed to be the price at which the goods are ordinarily sold for delivery at the time and place of importation. The Customs Valuation Rules, 1988, particularly Rules 3 and 4, prescribe that the transaction value-the price actually paid or payable-is the primary basis for valuation unless special circumstances justify rejection. The Court reiterated the principle, supported by binding precedent, that rejection of transaction value must follow a sequential application of the Valuation Rules and be based on cogent reasons and evidence.

The Court found that the adjudicating authority failed to apply the valuation rules sequentially and did not produce any evidence beyond the proprietor's statement to establish that the declared invoice value was incorrect. No evidence was presented to show that any additional consideration was paid beyond the invoice price or that any exceptions under Rule 4(2) applied. The absence of such evidence undermines the department's case, as the burden of proving undervaluation lies squarely on the department.

Judicial precedents were extensively examined. The Tribunal cited multiple decisions where mere suspicion or statements without corroborative evidence were held insufficient to reject declared transaction value. For instance, in a recent decision, it was held that statements alone cannot confirm undervaluation without evidence of excess payment or comparable import data. Another precedent emphasized that export declarations showing higher prices than import invoices cannot be relied upon for enhancement if the exporter's motive for higher export prices is unrelated to the import transaction. The Apex Court's rulings were highlighted to stress that the department must provide cogent reasons and undertake detailed inquiries before rejecting declared values.

The Court also addressed the appellant's payment of differential duty as alleged admission of guilt. It was held that voluntary payment or acceptance of enhanced valuation does not amount to a voluntary consent absolving the department from complying with statutory requirements. The department must still justify the reassessment with proper evidence and reasoning. Reliance was placed on decisions holding that acceptance of enhanced value without statutory compliance does not validate the reassessment.

Further, the Court noted the absence of any recorded reasons or discussion by the authorities as to why the declared value was rejected, which is a mandatory procedural requirement under the law. The department did not demonstrate any effort to ascertain the quality, quantity, characteristics, or contemporaneous import data that could justify reassessment. Nor was there any evidence that the overseas supplier received payments exceeding the declared invoice amounts.

In applying the law to the facts, the Court concluded that the department's reliance solely on the proprietor's tentative statement and the subsequent payment of differential duty was insufficient to reject the transaction value. The statutory framework and judicial precedents require the department to produce cogent, corroborative evidence and follow prescribed procedural safeguards before enhancing the assessable value. The failure to do so rendered the reassessment and imposition of penalty unsustainable.

Competing arguments were carefully weighed. The appellant's contention that the statement alone cannot sustain the charge was accepted, while the department's reliance on the statement and payment was rejected as inadequate. The Court underscored the importance of procedural fairness and evidentiary rigor in valuation disputes, cautioning against cursory or arbitrary re-determinations.

The significant holdings include the following:

"On the basis of the statement of Shri Jhunjhunwala, the goods cannot be said to be undervalued to the extent stated by him and on that basis the department could not have re-determined the value of the goods."

"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 onus to prove the allegation of undervaluation has been cast on the department."

"Merely because there is admission by the importer does not absolve the department to act in compliance of the mandatory provisions. Recording the basis for such an enhancement is the sine-qua-non of re-determination."

"The revenue has merely re-assessed the value on the basis of the statement of Shri Jhunjhunwala, which is not the prescribed requirement for reassessment of the value of the imported goods. The revenue has not discharged its burden and therefore, we conclude that the transaction value declared by the importer should form the basis of assessment and consequently, the enhanced value reassessed by the revenue is unsustainable."

"Voluntary payment hence cannot be called as admission of the appellant towards alleged mis-declaration for value... The burden was still on the Department to prove the allegations levelled. The said burden has not been discharged."

"Before rejecting the transaction value declared in an invoice, the department must provide cogent reasons and evidence... Mere suspicion or allegations of undervaluation are insufficient for rejection."

In conclusion, the Court set aside the impugned order confirming the differential duty, penalty, and redemption fine, holding that the transaction value declared by the importer must be accepted in the absence of cogent evidence and proper application of the Valuation Rules by the department. The appeal was allowed accordingly.

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