2025 (7) TMI 497 - AT - Customs

Valuation of imported 202.990 MTs and 67.240 MTs of Slack Wax - enhancement of value - non-speaking order - violation of principles of natural justice - HELD THAT - The appellate orders have been issued against reassessed BOE s without the benefit of reasoning available in a speaking order. Neither the appellant nor the First Appellate Authority had deemed it necessary to call for a speaking order from the original authority. It is also noted that vide Finance Act 2001 w.e.f. 11.5.2001 the powers to Commissioner (Appeals) to remand the cases for fresh adjudication to the original adjudication authorities was withdrawn. However the Hon ble Supreme Court in its judgement MIL India Ltd. 2007 (3) TMI 8 - SUPREME COURT had noted that while the powers of remand had been taken away the Commissioner (Appeals) continues to exercise the power of an adjudicating authority in the matter of assessment. Hence we proceed to examine the matter on merits. Although the counsel for the appellant has referred to certain BOE s being relied upon during the appellate proceedings we do not find any reference to contemporaneous BOE s being relied upon / provided either by revenue or the appellant before the Ld. Commissioner (Appeals) in the impugned order. The valuation of the imported goods are to be determined by the transaction value of such goods which is the the price actually paid or payable for the goods when sold for export to India. There is no room for the value declared for goods to be deemed to be the price at which such like goods are ordinarily sold or offered or sale. The concept of deemed price had been given up subsequent to the amendment made to section 14 of CA 1962 w.e.f. 10-10-2007 - There is nothing in the impugned order to show that the documents like NIDB data along with the relevant BOE etc were called for from the original authority and on its receipt were also shared with the appellant giving them an opportunity to rebut it before arriving at a decision. The whole findings and conclusion is thus based on assumptions and presumptions. The judgement in Om Prakash Bhatia 2003 (7) TMI 74 - SUPREME COURT also related to the valuation of export goods. The whole process of re-determining the assessable value has been flawed. No speaking order was passed by the proper officer when he sought to enhance the value of the goods as declared. The Ld. Commissioner Appeals misguided himself by looking for comparisons of the declared vale to a deemed value. No action was taken at least it was not disclosed in the impugned order to collect facts confront the assessee and allow for their explanation before deciding the value. Instead the burden of proving that the value declared was correct was wrongly pinned on the appellant. In the circumstances we find that the impugned order merits to be set aside. No purpose will be served in remanding the matter after 10 years especially when the whole issue is devoid of any factual basis and is deeply violative of law. The impugned order is set aside - appeal allowed.

Summary

The core legal questions considered in this judgment revolve around the valuation of imported goods under Section 14 of the Customs Act, 1962, specifically:

1. Whether the value declared by the appellant for imported Slack Wax can be enhanced by the department without following the prescribed procedure under the Customs Valuation Rules, 2007.

2. The applicability and interpretation of Section 14 of the Customs Act, 1962, in conjunction with the Customs Valuation Rules, 2007, particularly regarding the transaction value and the burden of proof in valuation disputes.

3. The validity of the process followed by the departmental authorities and the First Appellate Authority in reassessing and enhancing the declared value without issuing a speaking order or affording the appellant a proper opportunity to rebut the valuation enhancement.

4. The relevance and admissibility of comparative data such as NIDB (National Import Database) and Alert Circulars issued by the Directorate of Revenue Intelligence (DRI) in determining the correct transaction value.

Issue-wise Detailed Analysis:

Issue 1: Legality of Value Enhancement Without Following Valuation Rules Procedure

The legal framework governing valuation of imported goods is primarily Section 14 of the Customs Act, 1962, which mandates that the transaction value-the price actually paid or payable for the goods when sold for export to India-is the basis for customs valuation. The Customs Valuation Rules, 2007, provide a sequential methodology to determine this value, starting with the transaction value and resorting to alternative methods only if the transaction value cannot be determined.

The appellant contended that the department enhanced the declared value without following the procedural safeguards mandated by the Valuation Rules, such as making inquiries from suppliers or recording statements. The appellant relied on precedent from the Hon'ble High Court of Calcutta, which held that Section 14 must be read alongside Rule 4 of the Valuation Rules, and only if the transaction value is indeterminable can alternative methods be used.

The Court observed that the departmental authorities failed to issue a speaking order or conduct any inquiry to establish the correctness of the declared value. There was no material on record to show that the appellant's invoices were false or manipulated. The department's action was based on suspicion and comparison with unrelated Bills of Entry and NIDB data, without giving the appellant an opportunity to rebut these findings.

The Court emphasized that inferences or presumptions cannot substitute for tangible evidence. The burden to prove that the declared value is incorrect lies with the revenue, not the appellant. The absence of adherence to the prescribed procedural safeguards rendered the reassessment unlawful.

Issue 2: Interpretation of Section 14 of the Customs Act, 1962 and Burden of Proof

Section 14(1) of the Customs Act defines the transaction value as the price actually paid or payable for the goods when sold for export to India, subject to certain conditions. The Court noted that the First Appellate Authority erred by treating the declared value as being "deemed" to be the price at which like goods are ordinarily sold, a concept discarded by amendments to Section 14 effective from 10-10-2007.

The Court held that the transaction value must be accepted unless the revenue produces tangible material to disprove it. The appellate order wrongly placed the burden on the appellant to prove the correctness of the declared value, contrary to settled principles. The Court also found that the cited Supreme Court judgment related to export goods valuation and was inapplicable to the facts of this import valuation case.

Issue 3: Validity of Departmental and Appellate Proceedings

The Court noted that no speaking order was passed by the original adjudicating authority when the value was enhanced. The First Appellate Authority failed to critically examine the evidence or follow due process, instead relying on generalized data and assumptions. The Court underscored that the appellate authority, which exercises adjudicatory powers, must also follow procedural fairness, including confronting the appellant with any adverse material and allowing explanations.

The Court observed that the impugned order was based on assumptions and lacked any factual basis or procedural propriety. It found the entire reassessment process flawed and violative of law.

Issue 4: Use of Comparative Data Such as NIDB and Alert Circulars

The appellant argued that reliance on Alert Circulars issued by DRI and NIDB data to enhance value was impermissible, as confirmed by superior courts. The Court did not find any proper application of these data points in the impugned order, nor was the appellant given an opportunity to rebut such data. The Court implicitly held that such comparative data cannot be the sole basis for rejecting declared transaction value without a proper inquiry and opportunity to respond.

Significant Holdings:

"The valuation of the imported goods are to be determined by the transaction value of such goods which is the price actually paid or payable for the goods when sold for export to India. There is no room for the value declared for goods to be deemed to be the price at which such like goods are ordinarily sold or offered or sale."

"The burden of proof is cast upon revenue to establish the necessity and the veracity of the alternate value being adopted and there should not be a reverse burden on tax payer to prove the negative."

"Section 14 of CA 1962 enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions."

"No action was taken, at least it was not disclosed in the impugned order, to collect facts, confront the assessee, and allow for their explanation before deciding the value."

"The whole findings and conclusion is thus based on assumptions and presumptions."

"The impugned order merits to be set aside. No purpose will be served in remanding the matter after 10 years especially when the whole issue is devoid of any factual basis and is deeply violative of law."

The Court concluded that the departmental enhancement of the declared value was without lawful basis, procedurally flawed, and contrary to the statutory scheme under Section 14 of the Customs Act and the Customs Valuation Rules. The impugned order was set aside, and the appeals allowed, granting consequential relief to the appellant.