TMI Blog2023 (8) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons . Besides the opinion formed must be reasonable. Reference to foreign journals for the price quoted in exchanges etc., to find out the correct international price of concerned goods would be relevant but reliance can be placed on such material only when the adjudicating authority had conducted enquiries and ascertained details with reference to the goods imported which are identical or similar and certain reasons exists and justifies detailed investigation. On perusal of the order of the lower adjudicating authority, it is clear that reliance is placed on the values of imports effected in certain Bills of Entry during the relevant time mainly depending upon general description of the goods and the country of origin. Crucial commercial details of these consignments on which reliance is placed to determine contemporaneous prices as to the type, quality, quantity imported whether under any contract or whether any advance paid or whether the supply from the manufacturer or trader or whether the import is from any stock lot, etc., are not ascertainable - There was no discussion by the original adjudicating authority as to how the values of contemporaneous imports of iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these appeals are that M/s. Sree Rajendra Textiles, Varanasi Bangalore have filed various Bills of Entry for clearance of Thrown Silk Yarn/ Raw Silk classifying under CTH 50040090 and 50020010. Covering these imports, invoices were raised by M/s. Oingdao Yijia E.T.I.I./E Co., Ltd., Qingdao, China, K-Sun International Trade Co, Limited, Hongkong, M/s. Guangdong Silique International Group Gold Silk Co. Ltd., Guangzhou, China and M/s. Avanti Trading Co. Ltd., Jordan, Kowloon, Hong Kong with recorded unit price and declared country of origin as shown in the table below: SL. NO. Bill of Entry No Date Value decl. USD Country of Origin 1 795925/ 03.03.2011 795926/ 03.03.2011 797816/ 04.03.2011 30/Kg China 2 3274284/ 21.04.2011 3325340/ 26.04.2011 21/kg Vietnam 3 732617/ 29.12.2010 771868/ 07.02.2011 768972/ 03.02.2011 21 21.35/kg Vietnam 4 73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stan origin Raw Silk Yarn. As per the data, it was noticed that same item was imported from Uzbekistan and cleared for USD 28.50 (CIF) per kg vide Bill of Entry No. 699388 dated 25.11.2010. Hence the declared value appeared to be liable for rejection under rule 12 of CVR, 2007 and the same had to be re-determined by sequentially going through from rule 4 to 9 of CVR, 2007. 7. Since identical goods were imported for USD 29.5(CIF) per kg from Vietnam, value of USD 29.5(CIF) per kg was to be adopted under Rule 4 of CVR, 2007 for the subject goods for the purpose of assessment of duty. Similarly identical goods were imported for USD 40(CIF) per kg from China, the value of USD 40(CIF) per kg was to be adopted under Rule 4 of CVR, 2007 for the subject goods for the purpose of assessment of duty and similarly identical goods were imported for USD 28.50(CIF) per kg from Uzbekistan, the value of USD 28.5(CIF) per kg was to be adopted under Rule 4 of CVR, 2007 for the subject goods for the purpose of assessment of duty. 8. Based on the contemporaneous prices, the assessments were finalized by issuance of Orders- in- Original where in the values were arrived at as detailed in table belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Eicher Tractors v CC, Mumbai [2000(122) ELT 321(S.C.)], lower adjudicating authority had set aside the orders passed by the lower authority and allowed the appeals with consequential relief. 10. Now, the Revenue has come in appeal challenging the above Order-in-Appeal C.Cus. No. 715 to 719 dated 16.05.2013 of Commissioner of Customs (Appeals) on the following grounds:- (a) The Customs Valuation Rules (Determination of Imported Goods) Rules, 2007 and specifically Rule 12 provide grounds for rejection of transaction value. The valuation Rules and also provisions of Section 14 of Customs Act 1962 do not envisage the value entered into a long term contract as a transaction value. The contract period in this case appears to be more than one year. Silk being price sensitive goods, the prices vary from week to week if not on day to day basis. Therefore the acceptance of contract itself raises the legal question, whether or not such contracts can be accepted under the Customs Valuation Rules read with the provisions of the Section 14 of the Customs Act, 1962 as a transaction value. (b) The sales contract said to be entered into between the seller and the buyer M/s. Sree Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the instant importer cannot claim that the good were supplied as per the contracted price which was not prevalent at any material point of time either at the time of entering the contract or at the time of importing the goods. Therefore it is submitted that the declared value was mis-declared grossly by under invoicing which do not reflect the true commercial value. (d) It is submitted that the contract cannot be regarded as a valid contract legally. Therefore there appears to be no valid contract and the declared value is liable to be rejected as not representing the actual transaction value contemplated in Rule 3 of CVR, 2007 and Rule 12 of CVR, 2007 read with Section 14 of the Customs Act, 1962. Thus the Order-in-Appeal which upholds the declared values as transaction value cannot be accepted. 11.1 The Ld. Advocate Shri M.A. Mudimannan representing the respondent importer viz., M/s. Sree Rajendra Textiles has submitted his contentions which are summarized as below. 11.2 M/s. Sree Rajendra Textiles is a major and bulk importer of various varieties of silk at Chennai port from various countries and the price of silk varies due to market fluctuation being a sensitive co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icee has to be accepted in the absence of any special consideration or any mis-declaration of the imported goods either relating to description or price. 11.6 The proposal to confiscate the impugned goods and to impose penalty is not legally sustainable as there is no mis-description of the goods, as to quantity of the goods or change of country of origin or manipulation of invoices in the Bill of Entry. 11.7 The importer has relied upon the following decisions in support of his contentions. (i) Ispat Industries Vs. Commissioner of Customs [2006 (202) ELT 561 (S.C)]: Valuation rules are sub-servient to Section 14. The rule should be interpreted in such a way as to make it in accordance with the main object contained in Section 14. Section 14 is primary and Valuation Rules is secondary. (ii) Agarwal Industries Vs. Commissioner of Customs [2006 (193) ELT 421 (Tri.)]: The transaction value can discarded only for reasons given in Rule 4 (2) (now Rule 3(2)) and not for any other reason. (iii) West Coast Paper Mills Vs. Commissioner of Customs, Chennai [2001 (130) ELT 259 (Tri.)]: Confiscation under Section 111(m) and consequently penalty under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally in line with Article VII of GATT and Ad Article VII in Annex I to GATT, to which India is a signatory) requires customs valuation to correspond to ordinary competitive price in international trade. Transaction value method is one of the methods of valuation under the Customs Valuation Rules, 1988 (which follows the Agreement to implement the said Article VII of GATT). The transaction value has been defined to be the actual price paid or payable. The declared value may not represent the transaction value in every case. When the declared value is ridiculously low compared to the ordinary competitive price of comparable goods contemporaneously imported, such declared values cannot be adopted as customs value. In such cases, the transaction value method is clearly inapplicable as the declared value does not conform to the requirement of the said Section 14(1). Valuation by adopting value of comparable goods contemporaneously imported is an equally efficacious method of valuation. Such valuation is also perfectly legal as has been held by the Hon ble Supreme court and various Tribunal Benches vide various decisions cited by the learned S.D.R. and listed in paragraph 4 above. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiderations justify levy of duty to the same extent on similar goods. (ii) In the case of M/s. Y2K International [2010-TIOL-588-CESTAT-Mad] wherein the Hon ble Tribunal Chennai held that:- 2. We have heard both sides. The importers submission that transaction value could not be rejected except in certain circumstances set out in Rule 4 of the Customs Valuation Rules, 1988 which have not been shown to exist, is not tenable as we find that the price declared does not reflect the price at which such or like goods are ordinarily sold the price of MotherBoards has literally been dictated by the importer to the foreign supplier and, therefore, does not represent the commercial price of the supplier: Shri Kamal Kumar Jain has also accepted that the prices of MotherBoard vary; contemporaneous imports made within an approximate period; comparable quantities have been cited in respect of certain models of Motherboards and Daughter Boards which would show that similar models were imported at much higher prices during the contemporaneous period; the prices of such items were fluctuating and were not constant during the period of import. The deemed value under Section 14 (1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the said view of the Calcutta High Court. We are of the view that the contract between the supplier and the importer may have a bearing in governing the inter se relationship between the supplier and the importer but insofar as assessment of the value for the purpose of levy of customs duty under Section 14 of the Act is concerned, what is necessary is to determine the value of the goods as on the date of importation or exportation. 13. We have heard both sides and carefully considered the submissions made by both the Ld. Advocate and the Ld. Authorized Representative and also we have gone through the documents and records available in these appeals. 14.1 The main issue that is for determination in these appeals is whether enhancement of value of the impugned goods is in accordance with the provisions of Section 14 of the Customs Act, 1962 read with Customs (Determination of Value of Imported Goods) Rules, 2007 or not. 14.2 The other issues that arise for determination are; (i) Whether the allegation of mis-declaration against the importer is justified or not and whether the orders for confiscation of the imported Thrown Silk Yarn/Raw Silk under Section 111(m) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) when buyers and sellers are deemed to be related; (ii) when there is no sale, or buyers and sellers are related or the price is not the sole consideration for sale, etc. and (iii) where the proper officer has reason to doubt the truth or accuracy of such value. When the conditions specified in the second proviso are satisfied, the transactional value for the purpose of charging of Customs duty is to be made as per rules framed in this behalf. 12. Rules 3 and 12 of the 2007 Rules i.e. Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 were enacted and enforced with effect from 10th October, 2007 replacing and superseding the 1988 Rules. Rule 3(1) of the 2007 Rules states that value of the imported goods shall be the transaction value adjusted in accordance with the provisions of Rule 10 of the 2007 Rules which Rule, as observed above, deals with the costs and services which are to be added to the price actually paid or payable for the imported goods for determining the transaction value. Sub-rule (1) to Rule 3 is however subject to Rule 12 and therefore give primacy to Rule 12 which we shall subsequently elaborate and explain. Subrule (2) to Rule 3 stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the truth or accuracy of the value so declared, it is deemed that the transactional value of such imported goods cannot be determined under the provision of sub-rule (1) of Rule 3 of the 2007 Rules. Clause (iii) of Explanation to Rule 12 states that the proper officer can on certain reasons raise doubts about the truth or accuracy of declared value. Certain reasons would include conditions specified in clauses (a) to (f) i.e. higher value of identical similar goods of comparable quantities in a comparable transaction, abnormal discount or abnormal deduction from ordinary competitive prices, sales involving the special prices, misdeclaration on parameters such as description, quality, quantity, country of origin, year of manufacture or production, non-declaration of parameters such as brand and grade etc. and fraudulent or manipulated documents. Grounds mentioned in (a) to (f) however are not exhaustive of certain reasons to raise doubt about the truth or accuracy of the declared value. Clause (ii) to Explanation states that the declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after enquiry in consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des the transactional value in terms of Rules 4 to 9 of the 2007 Rules. 16. Proper officer can therefore reject the declared transactional value based on certain reasons to doubt the truth or accuracy of the declared value in which event the proper officer is entitled to make assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by the expression grounds for doubting the truth or accuracy of the value declared has been explained and elucidated in clause (iii) of Explanation appended to Rule 12 which sets out some of the conditions when the reason to doubt exists. The instances mentioned in clauses (a) to (f) are not exhaustive but are inclusive for there could be other instances when the proper officer could reasonably doubt the accuracy or truth of the value declared. 17. The choice of words deployed in Rule 12 of the 2007 Rules are significant and of much consequence. The Legislature, we must agree, has not used the expression reason to believe or satisfaction or such other positive terms as a pre-condition on the part of the proper officer. The expression reason to believe which would have required the proper officer to refer to facts and figures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value declared. Therefore, there has to be a preliminary enquiry by the proper officer in which the importer must be given an opportunity for clarification of the doubts of the officer by furnishing of documents and evidence as to the accuracy or truth of the value declared. It is only in case where the doubt of the proper officer persists after conducting examination of information including documents or on 15 Appeal No(s).: C/41617 41619/2013-DB account of non-furnishing of information that the procedure for further investigation and determination of value in terms of Rules 4 to 9 would come into operation and would be applicable. Reasonable doubt will exist if the doubt is reasonable and for certain reasons and not fanciful and absurd. A doubt to justify detailed enquiry under the proviso to Section 14 read with Rule 12 should not be based on initial apprehension, be imaginary or a mere perception not founded on reasonable and certain material. It should be based and predicated on grounds and material in the form of certain reasons and not mere ipse dixit. Subjecting imports to detailed enquiry on mere suspicion because one is distrustful and unsure without reasonable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... around the same price during the relevant period during the adjudication proceedings. (Paragraph 11 supra) 18. We find there was no allegation that the importer has mis-declared the description of goods or whether any excess quantity found or whether there is any other mis-declaration as to any other aspect in relation to imported goods. All the silk was imported in terms of the contracts entered with various suppliers as agreed upon with the contracting parties. There is no allegation that any amount over and above the contracted price was paid by the importer to the supplier. Further, there is no allegation that the importer is related to the suppliers other than being a contracted party or the price paid was influenced by any other consideration. 19. We take note of the importer‟s contention that their earlier silk import was cleared at around same prices as in the impugned consignments and they are the bulk importers of silk through Chennai port, the transaction values declared by them to be accepted in the absence of any evidence that they have indulged in mis-declaration of the value. 20. The lower appellate authority has accepted the contentions of the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any ulterior motive affecting the price. Further, revenue has discredited the contract prices as the respondent has not reportedly imported the entire contracted quantities. From the Show Cause Notice, the Order-in-Original and records, contract numbers and the quantity contracted for import are only mentioned as detailed in paragraph 10 (b) supra. Actual total quantity imported and how much is the shortfall and how it is to affect the transaction prices declared is not forthcoming. 23. On the issue of accepting the declared transaction value under a contract, we find it relevant to refer the decision rendered by the Tribunal, Bangalore in the case of M/s. Agarwal Industries v. Commissioner of Customs, Vizag [2006 (193) E.L.T. 421 (Tri. Bangalore)] in the context of old Valuation Rules, wherein it has been observed as under: - 2. . In all the cases, we find that the transaction value has been arrived at purely on commercial considerations based on contracts. The supplier, in order to honour the contracts, supplied the goods at the contracted price. There is also no allegation that the appellants paid to the 19 Appeal No(s).: C/41617 41619/2013-DB supplier more than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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