1992 (12) TMI 132 - AT - Customs

Summary

Issues Involved:
1. Classification of the imported goods as "consumer goods" or "raw materials."
2. Correct tariff classification under Heading 39.21 or 39.26.
3. Validity of the transaction value for customs valuation.
4. Impact of excess weight on assessable value and imposition of penalty.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The Additional Collector classified the imported "PVC Flocked Sheets in Rolls" as "consumer goods" under Sr. No. 145 of Appendix 2, Part B of the Import and Export Policy for AM 1988-91, arguing they could be used as seat covers, sofa covers, etc., without further processing. The appellants contended that these goods were raw materials requiring further processing to manufacture items like purses and car seat covers. The Tribunal agreed with the appellants, referencing case law (Mangla Brothers v. Collector of Customs, Bombay and Basant Export Corporation v. Collector of Customs) and concluded that the goods were raw materials, not consumer goods, thus validly covered by the import licenses produced.

2. Tariff Classification:
The Additional Collector classified the goods under Heading 39.21 as "Other sheets of plastics (PVC)." The appellants argued for classification under Heading 39.26 as "Other articles of plastics." The Tribunal upheld the classification under Heading 39.21, noting that the goods derived their essential character from PVC, which was the predominant constituent (67.6% to 72.3%). The Tribunal dismissed the appellants' reliance on the Supreme Court decision in Geep Flash Light Industries and the Madras High Court decision in Precise Impex (P) Ltd., stating these cases were not relevant to the issue at hand.

3. Validity of Transaction Value:
The Additional Collector rejected the transaction value of US $950 PMT, citing significant discrepancies with contemporaneous imports priced between US $1675 to 1700 PMT. The appellants argued that the transaction value should be accepted under Rule 4 of the Customs Valuation Rules, 1988, as there was no evidence of related parties or non-arm's length transactions. The Tribunal found that the appellants' arrangement for an invoice from a party in the USA for goods shipped from Taiwan, without filing vital shipping documents (packing list and certificate of origin), indicated an attempt to misdeclare the value. The Tribunal held that the declared value did not represent the transaction value under Rule 4, supporting the Additional Collector's decision to determine the value under Rule 8.

4. Impact of Excess Weight on Assessable Value and Penalty:
The appellants admitted the excess weight but argued it was due to variations in material thickness and should not warrant a penalty. The Tribunal held that the assessable value must be based on the actual weight found on weighment. The Tribunal referenced the Bombay High Court decision in Satellite Engineering Ltd. v. Union of India, emphasizing the need for a reasoned finding on whether the weight misdeclaration was innocent. The Tribunal remanded the issue for reconsideration, instructing the Additional Collector to determine the assessable value based on actual weight and decide on the penalty after applying his mind to the circumstances of the misdeclaration.

Order:
The appeal was partially allowed by remand, directing the Additional Collector to:
(i) Reassess the validity of the import licenses considering the finding that the goods are not consumer goods.
(ii) Classify the goods under Heading 39.21.
(iii) Re-determine the value of the goods under the Customs Valuation Rules, 1988.
(iv) Assess the value based on the actual weight.
(v) Decide on the penalty considering the Tribunal's observations on the weight discrepancy and assessable value.

The Tribunal requested the de novo proceedings be completed within two months due to the detention of the goods.