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2016 (3) TMI 509 - CESTAT CHENNAI

2016 (3) TMI 509 - CESTAT CHENNAI - 2016 (337) E.L.T. 232 (Tri. - Chennai) - Rejection of declared price - Determination of value under Rule (8) of Customs Valuation Rules, 2007 - Imported apples from U.S.A. and undervalued to evade duty - Held that:- in view of the decision of the Hon'ble Apex Court in the case of Commissioner of Customs, Calcutta Versus South India Television (P) Ltd. [2007 (7) TMI 9 - SUPREME COURT OF INDIA] the value of imported goods shall be the value at the time of import .....

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n 28 (1) of Customs Act, 1962 - Declared transaction value rejected - Held that:- in the absence of any authentic evidence from suppliers end i.e. either in the form of letter or a statement from them explaining the reason for maintenance of two sets of invoices in their system and also confirming receipt of flow back of excess amount, the department's reliance on unsigned computer generated invoices cannot be relied on, as sole evidence of undervaluation. Mere authentication of a document by U. .....

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tion 114A ibid. Since the main demand is set aside against the main appellants, the personal penalties is also not leviable under section 112(a) ibid. - Decided in favour of appellant with consequential relief - Appeal Nos. C/211-214/2006 - Final Order No.40428-40431/2016 - Dated:- 9-3-2016 - SHRI R. PERIASAMI, TECHNICAL MEMBER AND SHRI P.K. CHOUDHARY, JUDICIAL MEMBER For the Petitioner : Shri K.S. Venkatagiri, Advocate For the Respondent : Ms. Indira Sisupal, AC (AR) ORDER PER R. PERIASAMI All .....

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d the goods to evade duty, DRI searched the premises of the appellant on 28.3.2003 and also recorded statements from Shri M.A. Rahim, partner of the appellant-firm and Shri Ameerul Hussian s/o M.A. Rahim, another partner. After detailed investigations conducted and also carried overseas verification to ascertain the correct value declared by the overseas supplier from the Consulate General of India, U.S.A. On completion of the investigation, and also recording further statement from appellant Am .....

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for confiscation of goods under Section 111 (m) and imposition of penalty on M/s. National Fruits Agency, first appellant under Section 114A and penalty on its partner Shri Ameerul Hussian under Section 112 (a) of the Act. The period of dispute in this case is Feb 2001 to April 2003. The adjudicating authority in the impugned OIO No.4944/2006 dt. 28.2.2006 rejected the transaction and refixed the assessable value as ₹ 12,49,85,609/- and confirmed the demand and appropriated the amounts as .....

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ning in the same premises of M/s. National Fruit Agency Ltd. and also imported the apples from three suppliers namely M/s. Fresh Connections, M/s. Cohen Produce Marketing and M/s. PAC Marketing Inc. The DRI carried out investigation and issued SCN dt. 20.11.2004 proposing to reject the transaction value and also proposed to re-determine value as ₹ 1,85,76,950/- on the identical goods as against the declared value of ₹ 1,16,71,056/- and also proposed to demand differential duty of  .....

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confirmed the proposals made in the notice. Hence the above two appeals. 4. The matter was heard on 22.12.2015, 6.1.2016 and 7.1.2016. 5. Ld. Advocate submitted separate written synopsis in respect of Appeal Nos.C/211 & 213 /2006. For the purpose of arguments, we take the subject matter of M/s. National Fruit Agency Ltd. as the issues are identical. 6. He submits that appellants had a written contract for supply of red delicious fresh apples from various suppliers. The period of import is Fe .....

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recorded statement from the partner Shri Ameerul Hussian and on that date, the department never produced any documents or any second set of invoices. The statement was retracted immediately on the very next date, that department carried out verification and enquiries from the overseas suppliers end and obtained copies of two sets of invoices. One set of invoice is for the customs and the second set of invoice is a computer generated invoice which is not signed by the authorized persons. He submi .....

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He referred to Annexure - 8 where they have submitted evidences of contemporaneous imports both from Mumbai, Chennai and Calcutta. He referred para 19.3 of the reply to SCN at page 118 that on identical goods the declared price was accepted and the goods were cleared and the adjudicating authority has not considered these evidences. 8. He drew our attention to Invoice No.21522 dt. 17.5.2001 annexed at page 828 Vol-III, alleged to be a second set of invoice and the parallel invoices recovered fr .....

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refore submits that parallel invoice submitted by the Indian Consulate at U.S.A is not a parallel invoice issued by the supplier to the appellant. They have only one invoice through the Bank and the remittances were made as per the said invoice price. 9. He submits that the adjudicating authority has not determined the value sequentially as per Valuation Rules and Rule 8 (2) (iii) of CVR has been applied in this case. To invoke Rule 8 the value should be determined as per data available in India .....

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ation as the actual assessable value of the goods. The department is relying on the unsigned invoices and there is no evidence of excess payment or flow back to the supplier. The summary of table attached to the letter of Consul (Trade) was not signed and the said table contains profit margin and it is not explained whether it is on the basis of the sale price to the Appellant or not. No evidence from the supplier was found of having undervalued and there is no shipping bill declaration filed wi .....

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eceipt of excess amount than the declared price. He relied on Hon'ble Madras High Court order in the case of Thangaiah Vs State of Tamil Nadu - 2010 (251) ELT 187 (Mad.) on an identical issue of import of apples though it related to COFEPOSA case where the High Court has laid down the guideline as to how value should be taken in the case of import where the High Court has relied on the Supreme Court's order. He relied on case law of Swati Industries Vs CC Amristar - 2009 (248) ELT 191 (T .....

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ng or ruling out Rules 5 to 7 in sequential manner. Counsel also submits that in respect of appellant M/s.Eden Fruits all the submissions as above are applicable to that case. 11. The Ld. A.R filed detailed written submissions countering each of the grounds of appeal parawise. She reiterated the SCN and also findings of OIO and submits that though the appellants have imported apples from different suppliers they have adopted uniform price of US$ 10 to US$ 10.5. She drew our attention to statemen .....

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d admissible evidence under the Customs Act. In support of admissibility of retracted statement, she relied on the Hon'ble Supreme Court judgements in the following cases :- (i) CC Madras and Others Vs D. Bhoormull-1993 (13) ELT 1546 (SC) (ii) K.I. Pavunny Vs ACCE Cochin-1997 (90) ELT 241 (SC) 11.1 She further submits that the overseas supplier maintained second set of invoices for the same bill of entry number with the price as US$ 14.50. The adjudicating authority has correctly accepted th .....

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lared price.Relied the e-mail evidence of the importer at page 739 read with pages 747, 748 where the appellants have informed the supplier that the price should be quoted at US$ 10.25 and no advance should be mentioned. 12. In rejoinder, learned advocate countered the arguments of A.R and submits that appellants were not made aware of any developments that took place after recording of statement, nor given any document to them. It was only during recording the second statement on 11.10.2014, th .....

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N that the supplier had received higher amount and there was flow back of money to the appellant. He submits that the Supreme Court order relied by A.R. in the case of D. Bhoormull (supra) and K.I. Pavunny (supra) are not applicable to the facts of the present case as that case relates to smuggling of gold which was seized where the impugned order therein held that the statement is a valid document. Whereas in the present case, there was no document and it was only a statement and on the very sa .....

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seda Industries Ltd. relied by A.R. are also not applicable and distinguishable, wherein both the cases, the contemporaneous prices were available. 13. He submits that in their own case the contemporary price is the same and other contemporaneous prices were available but the same was not considered. He also drew our attention to documents at page 738 showing declared price at USA and shippers export declaration at Pages 740 to 741 of Vol-3 of paper book. He submits that nowhere the supplier has .....

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ms. He also drew attention to letter dt.28.9.2004 (page 794 Vol-3) where the supplier has taken legal objection (page 786). He drew our attention to rule 2(iv) where the revenue was concerned with second set of invoices in spite of list price declared by the supplier at U.S.A at much lower value. He submits that in this case, where the identical goods and contemporaneous price is available, the Department should have taken under Rule 5 and 6 of CVR. He pleads that both on merits as well as on fa .....

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adjudicating authority in his impugned orders rejected the declared price of US$ 10 to US$ 12 per carton and enhanced the value under Rule (8) as per the parallel set of invoices recovered by the officers of the Consulate General of India (CGI), U.S.A. and forwarded to the D.R.I. The appellants contested the rejection of transaction value and the veracity and authentication of the said documents is not proved. Revenue relied retracted confessional statement and also contended the violation of na .....

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take the appeal of the 1st appellant viz. M/s. National Fruits Agency (C/211/2006). 16. On perusal of the impugned order, SCN and investigation proceedings, copies of relied upon documents, we find that the period involved in the impugned case relates to February 2001 to April 2003. The appellants imported 64 consignments of apples from various suppliers from U.S.A. which is annexed to the show cause notice. All the Bills of Entry were assessed as per the declared price and the goods were cleare .....

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the persons have retracted their statements vide their telegrams dt.29.3.2003, the very next day. The second statement was recorded only on 11.10 2004 after lapse of one year from the date of retraction of first statement i.e. after receipt of verification report from CGI,USA and it is clearly stated in the order that on receipt of fresh evidences from overseas verification, the appellants were called and statements recorded. This confirms that the entire edifice of allegation of underinvoicing/ .....

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01 (at Pages828 , 829) issued by the supplier M/s. Raymond Mickey Cohen & Son Inc. Biglerville, PA. USA, wherein in the first invoice, the price is indicated as US$ 10.50 per carton and in the second invoice, the price is shown as US$ 14.25 per carton. Both the documents do not bear any signature of the supplier or his authorized person. We find that the said invoices bear the endorsement which is stamped indicating compared with original and certified to be a true copy thereof signed by a .....

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uthorized person of the supplier with his company seal and with name of the foreign Bank, with account number etc. The foreign exchange remittances were made to the overseas buyers through the said U.T.I.Bank and all the remittances were certified by the said bank vide certificate dt.21.2.2005, 28.2.2005 annexed at page 140 & 141 vide Annexure 17. The said foreign exchange remittance certificate clearly shows that exporter s name as M/s.Raymond Mickey Cohen & Son Inc. Bigleville, PA. U .....

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he supplier. The attestation stamp of US Agency only shows that Compared with Original and Certified to be a True Copy Thereof. If the said copy of parallel invoice is taken as a true copy of original, it can be presumed that the original copy is not signed or authenticated by the said supplier or his authorized person. Further there is no evidence to show that the said parallel invoices were issued to the importer, and there is no other corroborative evidence either in the form of statement o .....

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erisource International in support of undervaluation, we find that the e-mail copy was recovered by the CGI USA from supplier's computer and on perusal of the said document it is seen that the message only says the invoice to be prepared for USD 10.25/cartoon and it further says that Advance receipts need not be mentioned. The above message does not reveal or indicate any request of undervaluation. 19. Further, we find from the verification report of CGI USA that they could obtain the " .....

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artment's reliance on unsigned computer generated invoices cannot be relied on, as sole evidence of undervaluation. Mere authentication of a document by U.S. Agent or officers of OCGI, USA does not automatically become a valid evidence to reject the declared price in the customs invoice and to redetermine value under Rule 8. 20. As regards the Lower Authority relying on the statement dt. 28.3.2003 of Ameerul Hussain as a proof of undervaluation and flow back, it is seen that the said stateme .....

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e case of Swati Industries Vs CC (supra) allowed the appeal and held that the retracted statement is not valid. The ratio of Tribunal's decision is applicable to this case as the appellant retracted the statement on the very next day with medical reports and there is no corroborative evidence of any flow back nor any evidence recovered from importer appellant's premises. In the absence of any corroborative evidence in respect of retracted statement, the retracted statement cannot be cons .....

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e legal aspects of determination of value under Section 14 read with CVR, the L.A. in his findings at para 57 discussed the issue wherein it is stated that once the transaction value is rejected, the value should be determined by using Rule 5 to 8 in sequential manner. On the other hand, the L.A failed to give any findings on the evidences of contemporary invoices of import of apples submitted by them before L.A. Instead the L.A stated that there are no contemporary import of similar or identica .....

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annexed at page 187, 188 is reproduced as under :- Annexure 8 Details of contemporaneous imports of apples during April 2001 to March 2003 S. No. Bill of Entry Port of Import Name of the Importer Country from where imported Quantity imported (cartons) CIF/Carton of 20 Kgs. USD(Rs.) 1. 24.4.2001 Mumbai Manav Enterprises USA 250 10.14 478.51 2. 24.4.2001 Mumbai Fara Agro Products Co. USA 750 10.14 478.51 3. 24.4.2001 Mumbai C. Kishinchand USA 650 10.03 473.18 4. 30.4.2001 Mumbai C. Kishinchand USA .....

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inoal USA 8228 11.11 539.95 13. 28.2.2002 Chennai Prabath Kumar & Bros USA 2030 12.26 595.66 14. 28.2.2002 Chennai Capricon Food Products India USA 4116 10.10 490.86 15. 28.2.2002 Chennai Suri Fruit Agency USA 4114 10.21 496.38 16. 321262/17.3.2003 Tuticorin Naushie Exports, Nagerkoil USA 2058 10.36 496.24 17. 321533/27.3.2003 -do-do-do- 3017 10.50 502.95 18. March 2003 -do-do-do- 2058 12.13 581.02 19. 325339/8.7.2003 -do-do-do- 4158 10.36 485.88 20. 321051/ 11.3.2003 -do-do-do- 3087 10.36 4 .....

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arch 2003 NGK Trading Co. -do- 1043 10.72 513.69 30. May 2003 Calcutta Md.Jahangir & Co. -do- 3129 9.12 436.63 As evident from above list, there are more than 30 contemporary imports of apples from USA by different importers from major Custom Houses. The declared price of US$ 10.14 to US$ 12.63/carton has been accepted by the department and allowed clearance whereas the L.A has not considered these evidences and also failed to give any findings as to why the value of similar or identical goo .....

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e appeal. The relevant paragraphs of above decision are reproduced as under :- "2. The facts giving rise to this civil appeal are as follows. The respondent had imported six consignments of ceramic capacitors and one consignment of diodes from Hong Kong during the above period. The goods were shipped from Hong Kong by M/s. Compo Export of Hong Kong and M/s. Pearl Industrial Company of Hong Kong. The price of ceramic capacitors was declared by the respondent in its Bill of Entry @ HK $ 6.00 .....

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ce actually paid appeared to be different than the declared price and that the importer had under-invoiced the value of the goods to evade huge amount of the Government s revenue. At this stage, it may be pointed out that in the show cause notice the Assistant Commissioner had specifically invoked Rule 8 of the Customs Valuation Rules, 1988, which was subsequently given up by the Department. Be that as it may, the importer was asked to show cause as to why the value of the consignments in questi .....

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Excise duty; that the said report was accompanied by xerox copies of the export declarations; that the xerox copies did not bear the seal or signature of the customs officials in Hong Kong; that the authenticity of the declaration was doubtful; that the declarations were not the correct reproduction of the original and that there were endorsements to the effect that the documents shall not be used against any third party or in any legal proceedings. In other words, the importer contended that t .....

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orter supported the declared price mentioned in the Bill of Entry by relying upon various contemporaneous imports made during the above period by other importers whereas the price declared for identical goods was the same as the price declared by the importer in the present case in its Bill of Entry. It was further submitted by the importer that it was not open for the Assistant Commissioner to adjudicate the value under Rule 8 without going sequentially from Rule 5 to Rule 6 and Rule 6 to Rule .....

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the function of the price. This is the conceptual meaning of value. Under Section 2(41), value is defined to mean value determined in accordance with Section 14(1) of the Act. Section 14 of the Customs Act, 1962 is the sole repository of law governing valuation of goods. The Customs Valuation Rules, 1988 have been framed only in respect of imported goods. There are no rules governing the valuation of export goods. That must be done based on Section 14 itself. In the present case, the Department .....

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y goods to mean the value determined in accordance with the provisions of Section 14(1). The value to be declared in the Bill of Entry is the value referred to above and not merely the invoice price. On a plain reading of Section 14(1) and Section 14(1A), it envisages that the value of any goods chargeable to ad valorem duty has to be deemed price as referred to in Section 14(1). Therefore, determination of such price has to be in accordance with the relevant rules and subject to the provisions .....

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ernational trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or for offer for sale. Therefore, what has to be seen by the Department is the value or cost of the imported goods at the time of importation, i.e., at the time when the goods reaches the customs barrier. Therefore, the invoice price is not sacrosanct. However, before rejecting the invoice price the Department has to give cogent reasons for such reje .....

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Invoice is the evidence of value. Casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. Under-valuation has to be proved. If the charge of under-valuation cannot be supported either by evidence or information about comparable imports, the benefit of doubt must go to the importer. If the Department wants to allege under-valuation, it must make detailed inquiries, collect material and also adequate evidence. When under-valuatio .....

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ce is placed by the Department in support of its allegation of under-valuation. Once the Department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus shifts to the importer to establish that the invoice relied on by him is valid. Therefore, the charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like goods. Section 14(1) speaks of deemed value . Therefore, invoice price can b .....

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and price comes into discussion. 7. Applying the above tests to the facts of the present case, we find that there is no evidence from the side of the Department showing contemporaneous imports at higher price. On the contrary, the respondent importer has relied upon contemporaneous imports from the same supplier, namely, M/s. Pearl Industrial Company, Hong Kong, which indicates comparable prices of like goods during the same period of importation. This evidence has not been rebutted by the Depar .....

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mporter has alleged that the original declarations were with the Department. That certain portions of the originals were not shown to the importer despite the importer calling upon the adjudicating authority to do so. Further, by way of Interlocutory Application No. 4 in the present civil appeal, an application was moved by the importer calling upon the Department to produce the original declaration in the Court. No reply has been filed to the said I.A. till date. In the circumstances, we are of .....

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the Fax message it is further stated by the foreign supplier that he was required to show the export value on the higher side in order to claim the incentives given by his Government. This explanation of the foreign supplier, in the present case, had been accepted by the Commissioner. In his order, the Commissioner has not ruled out over-invoicing of the export value by the foreign supplier in order to obtain incentives from his Government. For the aforestated reasons, we find no infirmity in t .....

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ssment under the Customs Act is the price actually paid by the importer for the particular transaction, unless it is unacceptable for the reasons set out in Rule 4(2). In the said judgment, it has been further held that, the word payable in Rule 4(1) also refers to the transaction value and payability in respect of the transaction envisaged a situation where payment of price stood deferred. Therefore, this decision of the Supreme Court directs the Revenue to decide the validity of the particular .....

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the Department to invoke Rule 8 without sequentially complying with Rules 5, 6 and 7 even in cases where the transaction value is to be rejected under Rule 4. In the present case, the show cause notice indicates that the Department had invoked Rule 8 without complying with the earlier rules." The apex Court rejected the value determined under Rule 8 based on price of Country of Exportation. The Hon'ble Supreme Court laid down the law and held that the value of imported goods shall be th .....

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als. As already discussed in the preceding paragraphs in the present case, the L.A relied on the verification report and copies of parallel invoices/Export declaration obtained by the CGI, USA and failed to consider the import price of similar or identical goods available i.e. US$ 10.14 to US$ 12.63/carton which is more or less the same what the appellants declared in the present case. In view of the above decision of the Hon'ble Apex Court, we hold that when the price of similar or identica .....

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tion order. The Hon'ble High Court while setting aside, had discussed the legal aspect of valuation of imported goods under Section 14 and CVR and held that the Revenue is duty bound to follow the Valuation Rules sequentially. The relevant paragraphs of the Hon'ble High Court order are reproduced as under:- "12. Thus, a thorough procedure has been contemplated under Rule 3 as to how the value of the goods has to be determined in the event the Proper Officer has reason to doubt the t .....

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ue shall be determined under the provisions of Rule 7 or, when the value cannot be determined under that rule, under Rule 8 . It has been provided under Rule 6 that at the request of the importer, and with the approval of the Proper Officer, the order of application of Rules 7 and 8 shall be reversed. Rule 7 deals with Deductive value ; Rule 8 deals with computed value ; Rule 9 deals with residual method ; Rule 10 deals with cost and services . 13. Under Rule 11, the importer or his agent shall .....

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ject the declared value and at the request of an importer, the Proper Officer, shall intimate the importer in wring the grounds for doubting the truth or accuracy of the value declared in relation to goods imported. 14. Thus, a thorough procedure to determine the value of the goods has been contemplated by law under these Rules. The Act and the Rules also mandates the Proper Officer to pass a speaking order, giving the reasons as to how he is not satisfied with the valuation offered by the impor .....

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the date of the communication to him of such decision or order. 15. When such safeguards and procedures have been contemplated under the Customs Act and the Rules framed therein, we are unable to find anything from the bulky material submitted before us by the respondents, that they have followed the procedure contemplated under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for assessing the value of the imported goods, so as to say that the detenu has undervalued .....

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der Section 128 of the Customs Act. The burden, to prove that the detenu has committed the offence of undervaluation and the Department has found out the same after scrupulously following the legal procedure mandated under the Act and the Rules, lies on the respondents and once the respondents discharge their burden of proof by producing evidence, then, the onus shifts to the importer to establish that the value offered by him is valid. But, in the case on hand, the respondents have utterly fail .....

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Act, 1962, we are unable to approve the action of the respondents in slapping the impugned order of detention on the detenu. 16. At this juncture, we feel it apt to quote a judgment of the Honble Apex Court in Commissioner of Customs, Calcutta v. South India Television (P) Ltd. [2007 (214) E.L.T. 3 (S.C.) = (2007) 6 SCC 373]. In this matter before the Honble Apex Court also, the issue was undervaluation of six consignments of ceramic capacitors and one consignment of diodes while importing the .....

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