TMI Blog2024 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... orded that since Thorn was a restricted item, there were no contemporaneous imports of identical or similar goods. Valuation Rule 6 is not a method of valuation and it only states that if the value cannot be determined under Valuation Rules 3,4 or 5, it shall be determined under Valuation Rule 7 or Valuation Rule 8 and at the request of the importer, Valuation Rule 8 can be applied without applying Valuation Rule 7 first. Valuation Rule 7 is a deductive method and it provides for determination of value based on the value of such goods sold in India and after making certain deductions. Valuation Rule 8 provides for computed value based on the cost of production of such goods in India. The Additional Commissioner, having recorded that these were not possible in this case, followed Valuation Rule 9 which is the residual method. He determined the value as per the method recommended by the Directorate General of Valuation in such cases based on the aluminum content of the imported scrap and the London Metal Exchange (LME) prices of the metal. We find that the method followed by the Additional Commissioner for determining the value is correct and proper and this decision has been correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of a fine of Rs. 4,00,000/-. Penalties u/s 112(a) (i) and 114AA on the importer and Shri Jain - The importer imported Thorn without the required licence and therefore it is squarely covered by section 112(a). Penalty not exceeding the value of the goods could be imposed under this section. The value of the goods as determined by the impugned order is Rs. 27,48,405/- and therefore, a penalty of Rs. 4,00,000/- is within the limits and is in the factual matrix, in our opinion, just and proper. As far as the penalty on Shri Jain is concerned, we find that he was a partner of the importer and in that capacity, he played the role in importing the goods. We do not find sufficient justification to also impose penalty on Shri Jain u/s 112 (a) (i). We, therefore, set aside the penalty on Shri Jain under this section. The importer only made an erroneous classification which is not a declaration or document but is its self-assessment. The importer also declared the value as per its transaction value which the officer deemed it necessary to re-determine. The importer can only declare the value based on what he knows and there was no mis-declaration. Thus, we find that there is no mis-dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Director General of Foreign Trade or prohibited which means that the goods cannot be imported at all. Often any restrictions on imports under any other law is also indicated as Policy notes in the ITC (HS) classification published by the DGFT. These policy notes are not relevant for this appeal. 4. Section 11 of the Customs Act, 1961 [Customs Act] also empowers the Central Government to prohibit imports either absolutely or conditionally. Regardless of under which law the imports are prohibited or regulated, it is enforced by the Customs under the Customs Act because Customs officers control the entry points for the goods. Section 111 of the Customs Act provides for confiscation of goods for various violations including the violation of any prohibition on imports under the Customs Act or under any other law for the time being in force. For instance, if there is a violation of import restrictions under the FTDR Act, such imported goods become liable to confiscation under section 111 of the Customs Act and consequently, they can be seized under section 110 of the Customs Act. 5. It needs to be pointed out that while FTDR Act has three categories of goods free , restricted and prohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther metals. As per the importer s test report, it was about 94% aluminium and the rest other material. 10. As the aluminium content was different from what was declared, it was proposed to reject the transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 [Valuation Rules] and re-determine it under Rule 9 of the Valuation Rules based on the methodology suggested by the Directorate General of Valuation. The importer agreed to this method of valuation by a letter dated 29.12.2020 and further said that they did not want a show cause notice [SCN] or a speaking order under Section 17(5) with respect to the valuation. 11. After investigation, an SCN was issued by the department proposing to: a) Reject the classification of the imported aluminium scrap Thorn under Customs Tariff Item [CTI] 76020010 and re-classify it under CTI 76020090; b) confiscate the imported goods under sections 111(d), 111(m) and 111(o) of the Customs Act; c) reject the value of Rs. 10,77,132.99 declared by the appellant under Rule 12 and re-determine it under Rule 9 as Rs. 27,48,405/- and charge duties of Rs. 5,83,999/-; d) impose penalty under section 112 (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on the partner also is not correct. k) The appeal may be allowed and the impugned order may be set aside with consequential reliefs to the appellant. Submissions on behalf of the Revenue 15. Learned counsel for the appellant made the following submissions. a) The importer imported Thorn whose import was restricted and attempted to clear it by wrongly classifying it under 76020010 (which pertains to freely importable types of scrap but not Thorn ). b) The appellant also undervalued it and when it was proposed to reject the transaction value and re-determine it under Valuation Rule 9, the appellant had given a consent letter not only accepting the enhanced value but also waiving the SCN and the issue of a speaking order. c) Since the import of scrap was restricted, the adjudicating authority confiscated it and had not allowed its redemption because it might be hazardous to the society at large unless imported through a proper licence. d) Since the goods have been confiscated, the penalty under section 112 (b) automatically follows. e) Since the importer was a regular importer of aluminium scrap it must be aware of the classification of the scrap and it had mis-classified Thorn so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the grounds for rejection of the declared value under Valuation Rule 12 and Section 14 of the Customs Act; b) that they have gone through the details of contemporaneous imports of similar/identical goods and that they agree that their declared value is liable to rejected and the value has to be enhanced under section 17(5);and c) therefore, they are in agreement with the proposed enhancement of the value which they accept and that they did not want any personal hearing or a speaking order and the Bill of Entry may be assessed accordingly. 20. Learned authorised representative submits that it is not open for the importer to now contest the value after having categorically accepted it and further having waived the personal hearing or speaking order. 21. We find this an interesting case. The two elements to be modified in the Bill of Entry were classification and value. There is never any dispute about the classification and the importer s contention was only that it had classified under an incorrect CTI by mistake. The importer also categorically accepted the value. Thus, the assessment could have been completed without even issuing a speaking order (which the importer had waived) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interfere with the valuation. Absolute confiscation of the imported Thorn 25. Absolute confiscation of the goods under Sections 111(d), 111(m) and 111(o) is assailed by the importer and according to it, the confiscated goods should have been allowed to be redeemed on payment of fine. Revenue, on the other hand, asserts that import of Thorn was restricted and even when the importer was given adequate opportunity to produce any licence from the DGFT to import Thorn , it could not. 26. Before us, learned counsel also made a submission that Thorn can be imported by actual users and since the importer was an actual user, it can import it. We find this claim baseless. Restriction in import is under the FTP as indicated in the ITC (HS) classification of aluminium scrap. Nothing in this supports the claim that Thorn can be imported by Actual Users. Learned counsel also could not produce any evidence to support his claim. It therefore, appears to be more of his opinion as to what the law should be and not what the law is. 27. Since the appellant also claimed that the confiscated Thorn should have been allowed to be redeemed on payment of fine under section 125, we now proceed to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prohibited goods . Thorn is a restricted good, i.e., it could be imported with a licence from DGFT. Since the importer had not obtained the licence, the imported Thorn was prohibited good and the option of redemption under section 125 may be given or may not be given as per the law. To examine this prayer that redemption should have been allowed and take a balanced view, it would be necessary to examine why the Thorn was confiscated. This requires us to examine the sections under which Thorn was confiscated under sections 111(d), (m) and (o). These sections read as follows: 111. Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation: ..... (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; ..... (m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per his understanding and the officer can re-assess the duty as per his understanding. 32. Section 111(m) renders such goods liable to confiscation which do not correspond to the entry made in the Bill of Entry in any particular. For instance, if 1000 kg is imported and the declaration in the Bill of Entry is for a lesser quantity or if gold is imported and silver is declared in the Bill of Entry or a chemical of Analytical Grade is imported and what is declared is Industrial Grade , such goods are clearly liable to confiscation under section 111(m). Similarly, if the transaction value is, say, $ 100,000 and the value is declared in the Bill of Entry as $ 70,000/- the goods do not correspond in value to the declaration. However, nothing in Section 111(m) makes goods liable to confiscation for an incorrect classification of goods or claiming an incorrect exemption notification, etc. 33. It is impossible for the importer to anticipate what classification the assessing officer will find correct during re-assessment or if the assessing officer will apply or deny a particular notification or if the assessing officer will accept the declared value or reject it under Valuation Rule 12 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on redemption fine because it might be hazardous to the society at large unless imported through a proper licence. We do not find anything in the SCN or the impugned order to show that the imported Thorn was hazardous. The ISRI describes Thorn as follows: ISRI Code- Thorn Item ALUMINUM BREAKAGE Shall consist of aluminum with miscellaneous contaminants like iron, dirt, plastic and other types of contaminants. Material can either be sold based on aluminum recovery or content as agreed upon by buyer and seller. Must contain a minimum of 33% aluminum unless otherwise agreed upon by buyer and seller. 39. Nothing in the description shows Thorn is hazardous. It is essentially aluminium breakage scrap with contaminants such as iron, dirt, plastic and other contaminants and it should have at least 33% aluminium content. The consignment in dispute, had 98.8% aluminium as per the test report relied upon by the adjudicating authority. Therefore, it has about 1.2% of other material such as iron, dirt, plastic or other contaminants. The test report also does not say that it has any hazardous material. The importer is a manufacturer of ingots of aluminium and has a licence from the State Pollutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the role in importing the goods. We do not find sufficient justification to also impose penalty on Shri Jain under section 112 (a) (i). We, therefore, set aside the penalty on Shri Jain under this section. 45. Section 114AA reads as follows: 114AA. Penalty for use of false and incorrect material . If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular , in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods. This section provides for penalty on a person who: (a) Makes, signs or uses or causes to be made, signed or used a false or incorrect declaration, statement or document; (b) In connection with the transaction of business under this Act; and (c) With knowledge or intent 46. Clearly, neither the importer nor Shri Jain made any false or incorrect declaration. The importer only made an erroneous classification which is not a declaration or document but is its self-assessment. The importer also declared the value as per its transaction value which the officer dee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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