2025 (7) TMI 90 - AT - Customs

Redetermination of value of imported goods - Enhancement of value - metal scrap - rejection of value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 read with Section 14 of the Customs Act 1962. HELD THAT - It is found that in the grounds of present appeals the department has relied upon the decision of the Tribunal in the case of Commissioner of Customs Patparganj vs. Hanuman Prasad Sons and Niraj Silk Mills 2020 (12) TMI 1092 - CESTAT NEW DELHI . It is found that the said decision of the Tribunal has recently been overruled by the Hon ble High Court of Delhi vide its order dated 27.11.2024 passed in the case of Niraj Silk Mills and Hanuman Prasad Sons Vs. Commr of Customs (ICD) Patparganj 2024 (11) TMI 1361 - DELHI HIGH COURT wherein the Hon ble High Court of Delhi in a bunch of appeals has considered the identical issue in detail and after considering the various judgments of the Tribunal as well as of the Hon ble Supreme Court has decided the issue in favour of the importer/assessee. Thus there is no infirmity in the impugned order passed by the learned Commissioner (Appeals) - appeal of Revenue dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(i) Whether the declared transaction value of imported goods as declared by the importer/assessee was rightly rejected by the Assessing Officer under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 ("CVR, 2007");

(ii) Whether the re-determined (enhanced) value fixed by the Customs authorities for the imported goods was correctly arrived at in accordance with the provisions of CVR, 2007 and the Customs Act, 1962;

(iii) Whether the acceptance by the importer of the enhanced value and payment of differential duty constitutes a waiver of the right to challenge the reassessment and value enhancement;

(iv) The procedural compliance requirements, including issuance of speaking orders and communication of reasons for rejection of declared value under Rule 12(2) of CVR, 2007;

(v) The evidentiary basis for rejecting declared values and relying on external data such as NIDB (National Import Data Bank) for value enhancement;

(vi) The applicability and interpretation of Section 17 of the Customs Act, 1962 relating to reassessment and the requirement of speaking orders;

(vii) The legal effect of recent judicial precedents, including a recent decision of the Hon'ble High Court of Delhi overruling earlier Tribunal decisions relied upon by the Revenue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of Rejection of Declared Value under Rule 12 of CVR, 2007

Legal Framework and Precedents: Rule 12 of CVR, 2007 permits rejection of the declared transaction value if the proper officer has "reasonable doubt" about the truth or accuracy of the declared value. The Supreme Court in the case of Century Metals held that such doubt must be based on cogent reasons and not mere ipse dixit. The proper officer is also required to communicate the grounds of doubt to the importer under Rule 12(2).

Court's Interpretation and Reasoning: The Commissioner (Appeals) found that the Assessing Officer did not issue any speaking order or communicate reasons for rejection of the declared value, instead assuming acceptance by the importer. The Tribunal noted that acceptance under duress to avoid detention or demurrage charges does not amount to waiver of rights. The Commissioner (Appeals) relied on judicial precedents including Maruti Fabrics, Artex Textile, and Century Metal Recycling, which emphasize that rejection of declared value requires objective grounds and procedural compliance.

Key Evidence and Findings: The importer had declared the goods as metal scrap and self-assessed duty on declared value. The department reassessed value based on NIDB data but failed to issue speaking orders or communicate reasons for rejection. The importer initially accepted the enhanced value but subsequently challenged it by filing appeals.

Application of Law to Facts: Since no cogent reasons or speaking orders were issued, and the acceptance was under compulsion, the rejection of declared value was held improper. The Tribunal found that the declared value met the criteria of transaction value under Section 14 and Rule 3(1) of CVR, 2007, with no allegations of related parties or additional payments.

Treatment of Competing Arguments: The Revenue argued that acceptance of enhanced value waived importer's rights and that reassessment was justified by NIDB data. The Tribunal rejected this, holding that acceptance under coercion does not amount to waiver and that reliance solely on NIDB data without corroborative evidence is insufficient.

Conclusion: The rejection of declared value without proper reasons and communication was not in accordance with law and was set aside.

Issue (ii): Legality of Re-determined (Enhanced) Value

Legal Framework and Precedents: CVR, 2007 requires sequential application of valuation rules and clear specification of the rule under which value is enhanced. The Supreme Court and Tribunal decisions have held that reassessment must be supported by cogent evidence beyond external data like NIDB.

Court's Interpretation and Reasoning: The Commissioner (Appeals) observed that the Assessing Officer failed to specify the rule applied for enhancement and did not follow the prescribed procedure. The Tribunal noted that reliance solely on NIDB data for value enhancement is arbitrary and legally untenable, as reiterated in recent decisions including those of the Chennai Bench of the Tribunal and the Hon'ble Delhi High Court.

Key Evidence and Findings: The reassessment was based on contemporaneous import data from NIDB without additional corroborative evidence or proper procedural steps.

Application of Law to Facts: The enhancement was not legally sustainable as it lacked a proper basis and procedural compliance.

Treatment of Competing Arguments: The Revenue contended that reassessment was justified and accepted by the importer. The Tribunal rejected this, emphasizing statutory safeguards and procedural mandates.

Conclusion: The re-determined value was not correctly arrived at and was set aside.

Issue (iii): Effect of Importer's Acceptance of Enhanced Value

Legal Framework and Precedents: Section 17(5) of the Customs Act relieves the proper officer from issuing speaking orders if the importer confirms acceptance of reassessment in writing. However, judicial precedents including the recent decision of the Hon'ble Delhi High Court clarify that acceptance under duress or to avoid demurrage does not constitute waiver of the right to challenge reassessment.

Court's Interpretation and Reasoning: The Tribunal noted that letters or communications indicating acceptance to expedite clearance cannot be construed as abandonment of statutory rights. The High Court emphasized that the right to question reassessment is protected by statute and cannot be waived implicitly.

Key Evidence and Findings: The importer initially accepted enhanced value to avoid delay but subsequently filed appeals. There was no explicit waiver of rights.

Application of Law to Facts: Acceptance under compulsion does not relieve the department from issuing speaking orders or preclude the importer from challenging reassessment.

Treatment of Competing Arguments: The Revenue argued that acceptance waived rights; the Tribunal rejected this based on statutory protections and judicial precedents.

Conclusion: Acceptance did not amount to waiver of rights; reassessment without speaking order was improper.

Issue (iv): Procedural Compliance - Speaking Orders and Communication of Reasons

Legal Framework and Precedents: Section 17(5) mandates speaking orders for reassessment unless waived by importer's written acceptance. Rule 12(2) requires communication of grounds for doubting declared value. Supreme Court in Century Metals underscored mandatory nature of these requirements.

Court's Interpretation and Reasoning: The Tribunal found that no speaking order was issued by the Assessing Officer, violating statutory mandates. CBEC instructions also require speaking orders within 15 days of reassessment. The absence of such orders deprives the importer of the right to know grounds for reassessment, rendering the reassessment legally questionable.

Key Evidence and Findings: No speaking order or communication of reasons was found on record.

Application of Law to Facts: Non-compliance with procedural requirements invalidated the reassessment.

Treatment of Competing Arguments: Revenue contended that acceptance waived speaking order requirement; Tribunal rejected this.

Conclusion: Procedural non-compliance vitiated reassessment.

Issue (v): Reliance on NIDB Data for Value Enhancement

Legal Framework and Precedents: Judicial decisions have repeatedly held that NIDB data alone is insufficient to reject declared value or enhance customs duty. The importer's invoice and transaction value must be accepted unless discredited by cogent evidence.

Court's Interpretation and Reasoning: The Tribunal and the High Court emphasized that reassessment solely on NIDB data is arbitrary and contrary to principles of fairness and transparency in customs valuation.

Key Evidence and Findings: The department relied exclusively on NIDB data without additional evidence.

Application of Law to Facts: Such reliance was held to be legally impermissible.

Treatment of Competing Arguments: Revenue's reliance on NIDB data was rejected.

Conclusion: NIDB data alone cannot justify value enhancement.

Issue (vi): Interpretation of Section 17 of the Customs Act, 1962 on Reassessment

Legal Framework and Precedents: Section 17(5) requires speaking orders for reassessment unless waived by importer's written acceptance. The Supreme Court and High Courts have clarified that reassessment must be reasoned and communicated.

Court's Interpretation and Reasoning: The High Court's recent judgment clarified that the proper officer's obligation to issue speaking order cannot be circumvented by presumed acceptance. The reassessment process must be transparent and reasoned.

Key Evidence and Findings: No proper speaking order was issued; acceptance was under compulsion.

Application of Law to Facts: The reassessment was procedurally flawed and legally unsustainable.

Treatment of Competing Arguments: Revenue's reliance on earlier Tribunal decisions was negated by the High Court's overruling.

Conclusion: Reassessment without speaking order is invalid.

Issue (vii): Impact of Recent High Court Judgment Overruling Earlier Tribunal Decisions

Legal Framework and Precedents: The Tribunal had earlier relied on a decision of the Principal Bench in Commissioner of Customs, Patparganj vs. Hanuman Prasad & Sons and Niraj Silk Mills. However, the Hon'ble High Court of Delhi in a recent judgment dated 27.11.2024 overruled that decision, clarifying the principles relating to reassessment, acceptance, and procedural safeguards.

Court's Interpretation and Reasoning: The High Court extensively analyzed statutory provisions, rules, and precedents, emphasizing the mandatory nature of reasons and communication under Rule 12, the protection of importer's rights, and the inadmissibility of reliance solely on NIDB data. It repudiated the notion that acceptance under duress amounts to waiver.

Key Evidence and Findings: The High Court's judgment is binding and authoritative on the issues involved.

Application of Law to Facts: The Tribunal applied the ratio of the High Court judgment to uphold the Commissioner (Appeals) order and dismiss Revenue's appeals.

Treatment of Competing Arguments: Earlier Tribunal decisions favoring Revenue were overruled; the High Court's judgment was followed.

Conclusion: The High Court judgment decisively supports the importer's position and procedural safeguards.

3. SIGNIFICANT HOLDINGS

The Tribunal preserved and applied the following crucial legal reasoning verbatim from the impugned and High Court orders:

"As per sub Rule (2) of Rule 12 the proper officer when required must intimate to the importer in writing the grounds for doubting the truth or accuracy of the value declared. The said mandate of sub-Rule (2) of Rule 12 cannot be ignored or waived. Formation of opinion regarding reasonable doubt as to the truth or accuracy of the valuation and communication of the said grounds to the importer is mandatory, subterfuge to by-pass and circumvent the statutory mandate is unacceptable."

"The reasonable doubt being based on empirical and legally justifiable factors illustratively spelt out in Rule 12, the mandate to record reasons in support of the formation of that opinion and the mandatory requirement of communicating that material to the importer upon request."

"Acceptance of enhanced value under compulsion or to avoid detention and demurrage charges cannot be construed as waiver of the right to question reassessment."

"Rejection of declared value and reassessment solely on the basis of NIDB data without corroborative evidence is arbitrary and legally untenable."

"Non-issuance of speaking orders in reassessment proceedings violates Section 17(5) of the Customs Act and deprives the importer of statutory rights."

Core principles established include:

- The statutory mandate under Rule 12(2) of CVR, 2007 for communication of grounds of doubt is mandatory and cannot be bypassed.

- The burden lies on the department to prove that declared transaction value is not the true value with cogent and objective reasons.

- Acceptance of reassessment under duress does not preclude the importer from challenging the reassessment.

- Reliance solely on external data such as NIDB for value enhancement is impermissible without corroborative evidence.

- Speaking orders are mandatory in reassessment unless expressly waived by the importer in writing.

Final determinations on each issue are:

(i) The declared value was wrongly rejected without proper reasons and communication; rejection set aside.

(ii) The re-determined enhanced value was not lawfully arrived at; enhancement set aside.

(iii) Importer's acceptance did not waive rights to challenge reassessment; rights preserved.

(iv) Procedural lapses including absence of speaking orders vitiate reassessment.

(v) Reliance on NIDB data alone is insufficient for reassessment.

(vi) The recent High Court judgment overruled earlier contrary Tribunal decisions and was followed.

(vii) The impugned order of the Commissioner (Appeals) upholding declared value and setting aside enhancement was upheld; Revenue's appeals dismissed.