2025 (6) TMI 1974 - AT - Customs

Valuation of imported goods - used cranes - Revision of value - re-determination of value solely on the basis of statements recorded during the course of investigation - demand of differential duty with interest and penalty - Confiscation - HELD THAT - With the revision in value of 16 nos. used cranes duty liability was reassessed to Rs.. 161, 61, 899 of which Rs.. 65, 70, 381 had been discharged at the time of import leaving Rs.. 95, 91, 518 as short-paid and to be recovered. In diverting Rs.. 16, 94, 904 towards other unconfirmed dues the adjudicating authority committed a gross error and particularly for not having assigned any reason for such or cause for such appropriation towards dues proposed in a show cause notice that was not adjudicated concurrently. This transgression invalidates the impugned order to that extent. An identical issue on valuation of similar goods had come up before the Tribunal and while setting aside unsupported appropriation the re-assessment was called in question on the plea of importer therein that reliance upon statements for the purpose and that too without testing for relevancy under section 138B of Customs Act 1962 for disturbing the declared value was improper even if the manner of such declaration was questionable. In other words except by strict compliance with the Rules framed under the authority of section 14 of Customs Act 1962 re-assessment would not meet the test of soundness to enable which the matter was remanded. As in the present dispute the value had been similarly determined solely on the basis of statements recorded during the course of investigation it would be appropriate to set aside the impugned order similarly and remand the matter back to the original authority to determine the value afresh in terms of Customs Valuation (Determination of Value of Imported Goods) Rules 1988/2007 as applicable. Appeal allowed by way of remand.

Summary

The core legal issues considered by the Tribunal in this appeal are:

1. Whether the revision of customs duty valuation on the import of used cranes, based solely on statements recorded during investigation, complies with the procedural and substantive requirements under the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988/2007.

2. The validity of appropriation of amounts deposited by the appellant towards duty liability against dues proposed in a pending show cause notice which had not been adjudicated concurrently.

3. The applicability and necessity of cross-examination under section 138B of the Customs Act, 1962, particularly when statements form the sole basis for revision of declared value and consequent duty reassessment.

4. The correctness of penalty imposition and confiscation orders under sections 111(m) and penal provisions of the Customs Act, 1962, in light of the valuation and procedural irregularities.

Issue 1: Validity of revision of customs duty valuation based on statements recorded during investigation

The legal framework governing valuation of imported goods is primarily the Customs Act, 1962, specifically sections 14 and 28, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988/2007. Section 14 mandates that the value of imported goods shall be determined in accordance with the Rules framed thereunder, which emphasize transaction value and provide methods for valuation where transaction value is not acceptable.

Precedent decisions, including the Tribunal's ruling in Karim Jaria and Crown Lifters Pvt Ltd, and the Supreme Court's decision in Parle Beverages Pvt Ltd, emphasize strict adherence to the valuation rules and procedural safeguards. The Tribunal in Karim Jaria underscored that reliance solely on statements, without corroborative evidence or proper testing for relevancy under section 138B (which mandates cross-examination for admissibility of statements), is an inadequate and fragile basis for revising declared value.

In the present case, the Tribunal noted that the impugned order revised the value of 16 used cranes based exclusively on statements recorded during investigation, without corroborative support or cross-examination of declarants. This approach was found to be procedurally defective and substantively unsound, as it failed to meet the test of soundness required for valuation revision. The Tribunal reiterated that the Customs Valuation Rules must be strictly complied with and that statements alone cannot justify re-assessment of duty liability.

The Tribunal thus set aside the impugned order on this ground and remanded the matter for fresh adjudication in accordance with the statutory valuation framework and procedural safeguards.

Issue 2: Appropriation of deposited amounts towards pending, unadjudicated dues

The appellants had deposited Rs. 20,00,000 during the investigation towards possible duty liability. The adjudicating authority appropriated Rs. 16,44,904 of this amount towards recovery of dues proposed in a separate show cause notice relating to three cranes, which was still pending adjudication at the time.

The Tribunal found this appropriation to be a gross error, as the authority did not assign any reason or justification for diverting amounts towards dues that were not crystallized or adjudicated. The principle of natural justice and procedural fairness requires that dues proposed in a show cause notice be adjudicated before amounts can be appropriated against them. The unauthorized appropriation was held to invalidate the impugned order to that extent.

Issue 3: Necessity and scope of cross-examination under section 138B of the Customs Act, 1962

Section 138B provides that statements recorded during investigation can be admitted as evidence only if the person making the statement is made available for cross-examination. The Tribunal in Karim Jaria emphasized that cross-examination is a vital procedural safeguard to test the reliability and relevancy of statements, especially when such statements form the sole basis for valuation revision and duty reassessment.

In the present case, the Commissioner refused to allow cross-examination of key declarants without recording specific reasons, relying on precedents that cross-examination is not an absolute right. The Tribunal rejected this approach, holding that denial of cross-examination without reasons violated the principles of natural justice and rendered the reliance on statements unsustainable. The Tribunal noted that the declarants were crucial links in the alleged undervaluation and evasion scheme, making cross-examination essential.

Issue 4: Penalty and confiscation imposed under Customs Act provisions

The impugned order imposed confiscation under section 111(m) and penalties under penal provisions of the Customs Act, 1962. However, since the valuation revision and consequent duty liability were set aside for procedural and substantive infirmities, the foundations for penalty and confiscation also became questionable.

The Tribunal did not explicitly uphold or overturn the penalties but remanded the matter for fresh adjudication, implicitly requiring that penalty and confiscation be reconsidered in light of the fresh valuation determination and procedural compliance.

Significant holdings and principles established:

"Reliance on statements alone is too fragile a foundation to build a case of undervaluation; such depositions are reliable only with corroborative support. In the absence of corroboration, test of cross-examination is of essence, as mandated by section 138B of Customs Act, 1962, for relevancy."

"The Commissioner cannot rely on the judgements without first recording specific reasons for not allowing the cross-examination. Denying cross-examination without recording any reasons is violative of the principles of natural justice and must be rightfully set aside."

"Appropriation of amounts deposited towards dues proposed in a pending show cause notice which has not been adjudicated concurrently is a gross error and invalidates the impugned order to that extent."

"Strict compliance with the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988/2007 is mandatory for revision of declared value and duty reassessment."

Final determinations include setting aside the impugned order to the extent of valuation revision and appropriation, and remanding the matter for fresh adjudication in accordance with the statutory valuation framework, procedural safeguards including cross-examination, and proper adjudication of all dues before appropriation.