2000 (5) TMI 733 - AT - Customs

Summary

Issues:
1. Increase in assessable value by the department for the second consignment under a contract.
2. Application of Customs Valuation Rules and rejection of transaction value.
3. Burden of proof on the department to establish undervaluation.

Issue 1: Increase in assessable value
The appellant entered into a contract for the import of Special High Grade Zinc with a foreign supplier. The first shipment was received, and duties were paid based on the agreed price. However, due to difficulties, the remaining goods were delayed. The department increased the assessable value for the second consignment from US $1440 to US $1700 per metric ton. The Asstt. Commissioner and Commissioner (Appeals) upheld this decision, alleging that linking the second consignment to the contract was an afterthought. The appellant challenged this increase in assessable value.

Issue 2: Application of Customs Valuation Rules
The appellant argued that the transaction value should be accepted as the contract was genuine and the foreign supplier was unrelated. The international market price and the price quoted in the London Metal Exchange bulletin were both US $1440 per metric ton. The appellant contended that since the first consignment was assessed at the agreed price, the authorities had no basis to reject the same price for the second consignment under the same contract. Reference was made to various legal decisions, emphasizing that the invoice price should not be discarded without clear evidence of undervaluation.

Issue 3: Burden of proof on the department
The burden of proving undervaluation rested with the department, which needed to provide necessary evidence. Since the Revenue accepted the price for the first consignment, rejecting the price for the second consignment, part of the same contract, was unjustified. The appellant's counsel argued that the Revenue failed to substantiate the charge of undervaluation. After considering the arguments and precedents cited, the appeal was allowed, providing consequential relief to the appellant.

This judgment addressed the issues of an increased assessable value by the department for the second consignment under a contract, the application of Customs Valuation Rules, and the burden of proof on the department to establish undervaluation. The tribunal ruled in favor of the appellant, emphasizing the importance of accepting the transaction value in genuine contracts and highlighting the need for clear evidence to reject invoice prices. The decision underscored the department's obligation to prove undervaluation and the inconsistency in rejecting prices under the same contract without sufficient justification.