2023 (10) TMI 1522 - AT - Customs

Enhancement of value of imported Christmas light and others electrical items from China - adoption of NIDB data to enhance the value - HELD THAT - The Department has not made any attempt to follow the procedure given under the Valuation (Determination of Value of Importers Goods) Rules 2007 and has simply adopted the NIDB data and selectively enhanced value - the Commissioner (Appeals) has given a detailed finding along with reasons while setting aside the Order-in-Original. There are no reason to interfere with the same. The appeal filed by the Revenue is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal include:

• Whether the Department was justified in enhancing the assessable value of imported goods by adopting selective data from the National Import Database (NIDB) without following the prescribed statutory procedure under Section 14 of the Customs Act and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter "Valuation Rules").
• Whether the transaction value declared by the importer, supported by invoice values, can be rejected without valid reasons or evidence indicating that the declared value does not represent the actual price paid or payable for the goods.
• Whether the Department's selective adoption of higher value data from the NIDB, without furnishing complete data to the importer or following due process, amounts to a legally sustainable basis for enhancement of customs duty.
• Whether the principles established in relevant precedents regarding the primacy of transaction value and the impermissibility of a "pick and choose" approach in valuation were properly applied.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Enhancement of Assessable Value Without Following Section 14 and Valuation Rules

The legal framework governing customs valuation is primarily contained in Section 14 of the Customs Act and the Customs Valuation Rules, 2007. Section 14 mandates that the transaction value shall be the basis for valuation unless it is not acceptable for reasons enumerated therein. The Valuation Rules prescribe a detailed procedure for determining value where transaction value is not acceptable, including verification, seeking additional information, and applying alternative valuation methods in a hierarchical manner.

The Tribunal noted that the Department failed to follow the statutory procedure under Section 14 and the Valuation Rules. Instead, the Department directly adopted the NIDB data to enhance the value without issuing a speaking order or providing valid reasons for rejecting the declared transaction value. The Commissioner of Appeals had rightly observed that no evidence was placed on record to suggest that the declared transaction value was not the price actually paid or payable, or that the buyer and seller were related parties or that the price was not the sole consideration for sale.

The Tribunal emphasized that the Department's approach was contrary to the mandatory procedural safeguards and the legal framework, which requires a reasoned order and adherence to the prescribed valuation methodology before rejecting declared values.

Issue 2: Validity of Rejecting Transaction Value Without Evidence or Proper Procedure

Transaction value, defined as the price actually paid or payable for goods when sold for export to the country of importation, is the primary basis for customs valuation under the law. The Tribunal highlighted that the Department did not produce any evidence to rebut the declared transaction value or to show that it was not the price paid. There was no indication of related party transactions or additional payments beyond the invoice value.

The Tribunal relied on precedents wherein rejection of transaction value without valid reasons or evidence was held to be impermissible. The Commissioner of Appeals' reliance on a previous CESTAT decision was noted, where the assessing officer's rejection of transaction value was struck down due to lack of valid reasons and failure to follow the valuation procedure. The Tribunal concurred with this reasoning, finding the enhancement unsustainable.

Issue 3: Adoption of NIDB Data Selectively and "Pick and Choose" Approach

The Department relied on NIDB data showing higher values for similar goods in other cases to justify enhancement. However, only data for 88 cases were supplied to the importer, despite the Department claiming 1341 cases with higher values. This selective disclosure was held to be arbitrary and unfair.

The Tribunal referred to the Principal Bench CESTAT ruling which condemned the "pick and choose" approach by Revenue authorities in valuation matters, emphasizing that market realities and variations in quality and price must be considered. The Tribunal also cited the Hon'ble Supreme Court's support for these principles.

The Tribunal found that the Department's selective use of data without full disclosure and proper analysis violated principles of natural justice and the legal standards for valuation. This approach was held to be illegal and unsustainable.

Issue 4: Application of Precedents and Legal Principles

The Tribunal extensively relied on judicial precedents which establish that:

• Transaction value is the primary basis for customs valuation.
• Rejection of transaction value must be supported by valid reasons and evidence.
• Valuation must follow the procedure under Section 14 and Valuation Rules.
• Revenue cannot adopt a selective or arbitrary approach in using comparative data.

The Tribunal found that these principles were correctly applied by the Commissioner of Appeals and that the Department's appeal lacked merit.

3. SIGNIFICANT HOLDINGS

The Tribunal upheld the order of the Commissioner of Appeals and dismissed the Department's appeal. The key legal holdings include:

"The assessing officer has rejected the transaction value without any valid reasons and without new procedure as per Section 14 and valuation rules especially, there is nothing on record that the appellant has imported the secondary items but the value was considered for the fresh items. No speaking order was passed for enhancement of value. There is nothing on record to suggest that the buyers and sellers of the goods are related persons. Therefore the enhancement of the value is likely to be struck down and rightly struck down by the Commr. (Appeals)."

"The Revenue has accepted that value and rejected all other values. Clearly, the effort is to assess imported goods at the higher end of the value spectrum. This is contrary to market reality as well as Valuation Rule. While market prices vary depending upon myriad factors, Rule 4 of Custom Valuation Rules specifically provides that transaction value should be the basis for the valuation of the consignment under assessment, unless the transaction value is not representing the full price for the reasons mentioned in the Rule itself. Law does not allow a pick and choose approach Revenue's acceptance of higher prices and rejection of lower prices for assessment is clearly illegal."

"From the above it is found that the assessing officer has rejected transaction values without any valid basis/reasons and without following the due procedure as per section 14 and Valuation Rules, especially when there is nothing on record to suggest that the transaction value declared by the appellant was not the price actually paid for the good when sold for export to India. Also no evidence has been produced by the respondent that any amount, over and above the invoice values was paid by the appellant to the supplier of the goods. There is also nothing on record to suggest that the buyer and seller of the goods were related or price was not for the sole consideration for sale. Therefore, in these circumstances, the enhancement of assessable value is liable to be struck down and set aside and the bills of entry in the impugned appeal are to be assessed at value declared by the appellant."

"Therefore, I have no hesitation to hold that the enhancement of values done in this case is without having any sanction of law and is thus liable to be set aside outrightly."

"In view of above, the enhancement of values in the present case is not sustainable in the eye of law and accordingly assessment of the impugned bills of entry is ordered at the values declared at invoice value. The appeal is accordingly liable to be allowed with consequential relief."

These holdings reaffirm the core principle that transaction value is the primary basis for customs valuation and any enhancement must be based on valid reasons, evidence, and adherence to statutory procedures. Arbitrary or selective use of comparative data without full disclosure and procedural compliance is impermissible. The Tribunal's decision underscores the importance of procedural fairness and legal sanctity in customs valuation assessments.