M/S. Global Industries v. The Commissioner Of Customs Cochin .

[Order per : M.V. Ravindran, Member (J)]. - The dispute in this appeal relates to value of imported goods described as “betel nuts, Lali Grade ‘C, Ungarbled”, covered by two Bills of Entry No. 2253827 dated 14-10-2010 and No. 3944 dated 19-10-2010, imported at Cochin port. The importer declared the value of US $ 275 per MT. The learned adjudicating authority enhanced the value to Rs. 34/- per kg. The learned Commissioner of Customs (Appeals) vide the impugned order upheld the enhancement of the value. The appeal is filed against the order of the Commissioner of Customs (Appeals).

2. It is contended by the appellants that they have entered into two contracts dated 15th March, 2010, and 1st August, 2010 respectively; under the contract dated 15th March, 2010, they imported 1,914 MT covered by 12 Bills of Entry; under contract dated 1st August, 2010, they imported 1,687.8 MT covered by 12 Bills of Entry, all the bills of entry, except two bills of entry dated 14-10-2010 and 19-10-2010, are provisionally assessed in terms of the order of the Hon’ble Kerala High Court and in respect of one bill of entry, no assessment is made; imports have taken place from April, 2010 to October, 2010; DGFT had issued Notification dated 4th June, 2008, permitting free import of betel nuts of the value above Rs. 35/- per Kg., they challenged the notification of the DGFT before the Hon’ble Kerala High Court and vide the judgment dated 2-11-2010, the Hon’ble Kerala High Court set aside the said notification of DGFT; they had filed writ petition before the Hon’ble Kerala High Court in respect of two consignments, which are subject matter of this appeal seeking provisional release. The learned adjudicating authority finally assessed two bills of entry, after giving the appellants query memo; their CHA approached the learned adjudicating authority on 19-11-2010, with a letter dated 19-11-2010, seeking provisional release of the goods in terms of order dated 12-11-2010 of the Hon’ble Kerala High Court and in the alternative to finally assessed the bills of entry. Their CHA was heard on the 19-11-2011 itself and Bills of Entry were assessed finally on 23-11-2010 by enhancing the value and speaking order was passed on 6-12-2010. The learned adjudicating authority rejected the invoice price by invoking Rule 12(1) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007). The learned adjudicating authority further invoked Rule 5 of the CVR, 2007 and relied upon imports at Nhava Sheva and Chennai as contemporaneous import. The appellants filed the appeal before the Commissioner of Customs (Appeals), Cochin. The appellants filed writ petition seeking provisional release of the goods since the Commissioner of Customs (Appeals), Cochin was not available; in view of departmental communication dated 17-12-2010, the Hon’ble High Court directed the Commissioner of Customs (Appeals), Trichy, to decide the appeal within 2 weeks. Accordingly, the Commissioner of Customs (Appeals) passed the impugned order upholding the order of the learned adjudicating authority. Hence, the instant appeal was filed.

3. After filing, the above appeal was mentioned before the Bench on 17th January, 2011, requesting for an out of turn hearing in view of the fact that consignments are incurring heavy demurrages. The Bench acceded to the request and directed the appeal to be taken up for hearing on 24th January, 2011, after hearing the learned DR vide Misc. Order dated.18-1-2011. The appeal was adjourned to 25th January, 2011, at the request of the department. Goods were lying with the Customs pending clearance and there was no impediment and rather it was just and expedient to hear the appeal.

4. We heard both sides at length on 25th January, 2011. Mr. Prakash Shah, advocate appeared on behalf of the appellants and Shri P. R. V. Ramanan, the learned Special Counsel appeared on behalf of the department.

5. The appellants contended that rejection of invoice price by the learned adjudicating authority by invoking Explanation (1)(iii) to Rule 12 of CVR, solely on account of imports of betel nuts at other ports at a higher value is clearly not tenable in law. Rule 12 does not empower the assessing officer to reject the transaction value without establishing that the transaction value was not genuine and that Rule 12 does not provide a method for determination of the value of the imported goods. Rule 12 only provides mechanism and procedure for rejection of the declared value in case of reasonable doubt that it does not represent the transaction value.

6. He further submitted that if, the transaction value can be determined under Rule 3(1) CVR, 2007 and the transaction does not fall under any of the exception in Rule 3(2), there is no question of determining the value under the sequential rules. He submitted that there are no allegations of mis-description of the goods. The lower authorities did not find that invoices and the transaction covered thereby were fake, fabricated or fictitious. The lower authorities did not doubt the genuineness of transaction or that the transaction value shown in invoice has not been actually paid by the importer. No allegation of any other consideration for sale of goods is found by the lower authorities. The supplier is not related to the appellants. The price is paid through proper banking channels against the documents.

7. It was further contended that so called contemporaneous imports are not comparable as they do not satisfy the requirement of Rule 5 of CVR. The description of the goods of other imports relied by the revenue itself indicate that they are not of the same physical characteristic, quality and reputations. In applying Rule 5, the proper officer has to use a sale of similar goods at same commercial level and substantially, the same quantities of goods being valued. The other imports relied upon by the department are not of the same quality, quantity and commercial level. The appellants have imported about 3,800 MTs so far from the same supplier. The Commissioner of Customs (Appeals) was in error in holding that contracts could not be construed, as an evidence of bulk contract. The goods are agricultural produce and the value of the same is dependent upon quality of such produce which differs from season to season depending upon number of factors. He further submitted that judgment of the Hon’ble Apex Court relied upon by the lower authorities are clearly distinguishable on facts. The appellants are entitled to detention certificate under the Cargo Handling Rules as the department did not release the goods provisionally and Bills of Entry were assessed after 20 days and speaking order was passed almost after one month.

8. In support of their contention the appellants relied upon following decisions :

(i)      Indian Farmers Fertilizers Co-op. Ltd. v. CCE, C & ST, Bhuvaneswar-I - .

(ii)    Keveeyam Company v. CC -

(iii)   Nitee Trading Company -

(iv)   Arkay Overseas v. CC - (T)

(v)     Diamond Traders v. CC -

(vi)   CCE v. South India Television Pvt. Ltd. - (S.C.)

(vii)  CC v. J. D. Orgochem Ltd. -

(viii) Punjab Processors Pvt. Ltd. v. CC - (S.C.)

(ix)   Eicher Tractors Ltd. v. CC, Mumbai - (S.C.)

(x)     Padia Sales Corporation v. CC - (S.C.)

(xi)   Lan Eseda Industries Ltd. v. CC, Mumbai - (S.C.)

(xii)  Dujodwala Products Ltd. v. CC (Import), Mumbai - (Tri.-Mumbai)

(xiii) Dee Pearls (I) Pvt. Ltd. v. CC, ICD, TKD, New Delhi - (Tri.-Del.)

(xiv) Finolex Industries Ltd. v. CCE, Pune - (Tri.-Del.)

(xv)  Exide Industries Ltd. v. CC (I), Mumbai - (Tri.- Mumbai)

(xvi) Radhey Shyam Ratanlal v. CC (Adjud.), Mumbai - (S.C.)

(xvii)CC, Trichy v. Kiran Pondy Chem. Ltd. - (Tri.- Chennai).

9. Shri P.R.V. Ramanan, the learned Special Counsel, while supporting the orders of the authorities below, submitted that the appellants do not deserve the out of turn hearing. They can always pay and clear the goods and can seek the refund, if they succeed in the appeal. He further vehemently contended that enhancement of the value is correct and proper in law. He submitted that department has shown the evidence that import at the other ports are at a higher value. The appellants have not been able to dispute the evidence produced by the department of comparable imports at a higher value. The other imports relied upon by the department clearly shows that quantity does not seem to be a criteria for the price as even consignment of less than 20 MT is sold at the same price as the consignment of 105 MT. He further argued that reasons set out in the Explanation (1) (iii) to Rule 12 is only inclusive and not exhaustive as the expression used is “reasons which may include”. The Commissioner of Customs (Appeals) was right in holding that contract produced by the appellants cannot be construed as an evidence of bulk contract as the appellants did not produce the same before the adjudicating authority and the invoices do not correlate them. Payment made through the banking channels is not sufficient to hold that transaction value is genuine. He submitted that Rule 5 is rightly invoked in the present case. He further submitted that decision relied upon by the lower authorities clearly support the case of the department and the decision of the Apex Court is Eicher Tractors Ltd. (supra) is clearly distinguishable in the facts of the present case. He submitted that orders of the authorities below deserve to be sustained and the appeal deserves to be dismissed.

10. We have considered the submissions of both sides carefully. We have examined the records carefully. We find that in the present case, the only dispute that is required to be decided by us is the valuation of the imported goods.

11. We are not impressed by the submissions of the learned Special Counsel for the department that out of turn hearing of the appeal should not have been granted. We cannot accept this submission at this stage. This submission was made only after we had heard the appellants fully. Further, the department was heard on the application filed for grant of out of turn hearing. The out of turn hearing was granted only after hearing the learned DR. Further, we find that the importers are pursuing clearance of the goods vigorously. This can be seen from the records that they had approached the Hon’ble Kerala High Court for provisional clearances. Further, they again approached the Hon’ble High Court and the Hon’ble High Court was pleased to expedite the hearing of the appeal by the first appellate authority. We find that the first appellate authority was directed to hear the appeal at any rate within two weeks. Further, goods are admittedly lying un-cleared. We are unable to accept the contention of the department that the importer should first pay the duty as per Order-in-Original and wait for hearing of the appeal in its normal course and seek refund, if they ultimately succeed in the appeal.

12. We are of the view that admittedly no findings are recorded by the lower authorities that the present imports are covered by any of the exception under the proviso to Rule 3(2) of CVR, 2007. The lower authorities have not found that there are restrictions as to the disposition or use of the goods by the importer; the sale or price is not subject to any condition or consideration for which a value cannot be determined in respect of the goods being valued; no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller; and that buyer is related to the seller. The other imports relied upon by the department are not of the same quality, quantity and commercial level.

13. In our view, judgment of the Hon’ble Apex Court in the case Eicher Tractors Limited (supra) squarely applies in the present case and the transaction value was required to accepted for the purpose of assessment. The Hon’ble Apex Court was pleased to hold that :

“8. Reading Rule 3(i) and Rule 4(1) together, it is clear that a mandate has been cast on the authorities to accept the price actually paid or payable for the goods in respect of the goods under assessment as the transaction value. But the mandate is not invariable and is subject to certain exceptions specified in Rule 4(2) namely :

(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which -

(i)      are imposed or required by law or by the public authorities in India; or

(ii)     limit the geographical area in which the goods may be resold; or

(iii)    do not substantially affect the value of the goods;

(b) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued;

(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and

(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3).”

9. These exceptions are in expansion and explicatory of the special circumstances in Section 14(1) quoted earlier. It follows that unless the price actually paid for the particular transaction falls within the exceptions, the Customs authorities are bound to assess the duty on the transaction value.”

14. We do not find any justification in support of the contention that ratio of the above case is not applicable in the present case. We therefore hold that department is bound to assess the duty on the transaction value in the present case.

15. We find that decision of the Apex Court relied upon by the lower authorities are clearly not applicable in the present case. One of the decision relied upon by the lower authorities is in the case of Punjab Processors Pvt. Ltd. -. In its subsequent decision in the case of J. D. Orgochem Limited, (S.C.) the Apex Court was pleased to hold that :

(S.C.). We find that this judgment is clearly distinguishable on facts. The Apex Court, held that :

“6. We have considered the aforesaid submissions in the light of the records. On going through the records, we find that the Commissioner of Customs has held that the supplier in the present case was not the manufacturer itself and that the importer and the supplier were related. The Commissioner has further recorded a finding to the effect that prices declared by the appellant were not true transactional value and that they were importing the goods at a lower price to evade the customs duty. The aforesaid findings were challenged before the Tribunal. The Tribunal has considered the respective cases and finally upheld the aforesaid findings mainly relying upon the prices of similar goods.

7. It cannot be disputed that in the present case invoice of the manufacturers was not produced. The findings of the Commissioner as also of the Tribunal are that the prices declared is not the transactional value, which is established from the fact that price of similar goods imported by the appellant was even higher. In our considered opinion, the deemed value of the goods as shown by the Department would definitely prevail over the transactional value shown by the appellant in the present case. The crucial fact is the fact that similar goods imported by the appellant itself for identical specifications were higher than those declared by the appellant. In this connection, we may appropriately refer to the ratio of the decision of this Court in Radhey Shyam Ratanlal & Anr. v. Commissioner of Customs, Mumbai, reported in [(2009) 13 SCC 157]. In the said decision, it was held by this Court that the provisions of sub-section (1) of Section 14 would prevail over the transactional value when Rule 4 is not reflecting the prices on which such or like goods are sold or offered for sale. That being the position and in the present case, the deemed value as is found by the Commissioner of Customs and upheld by the Tribunal being higher than the transaction value, the deemed value would get priority.”

18. It is clear from above that in that case the importer and supplier were related, and secondly, the importer itself had imported similar goods at a higher value. There are no such findings by the lower authorities in the present case. The appellants have imported the goods regularly during 2010 at US $ 275 per MT, and have placed on record the details of such regular imports. Nearly entire quantities under the two contracts placed on record have been imported by the appellants as per details submitted by them. The quantity and description of these imports from the same supplier under various Bills of Entry are not doubted by the Revenue, which lends credence to the contracts relied by the appellants.

19. For the similar reasons, the decision of the Apex Court in the case of Radhey Shyam Ratanlal & Anr v. Commissioner of Customs, Mumbai (supra) is not applicable in the facts of the present case. The other decisions relied upon by the lower authorities also has no application to the facts of the present case.

20. It is undisputed fact that imported goods are agricultural produce. The appellants have produced the chart of comparable imports relied upon by the department. The chart is as follows :

21. We find from the above chart that description of the comparable imports relied upon by the department is not the same. No material is produced on record to show that the imported goods under assessment and goods imported at other ports are of the same quality, quantity and commercial level. The imported goods are agricultural produce and have different varieties. The goods imported by the Appellants are described as “Betel Nuts Split Lali-Grade C - Ungarbled”, whereas other imports are of “Betel Nut Lali” and “Betel Nut Split”. No material is on record to show that they of the comparable quality. We find that there is no material whatsoever to show that the comparable imports are at same commercial level. Admittedly, the quantity imported by the appellants is much higher than the comparable imports. There is a dispute as to the quantity, description, and supplier regarding the contracts produced by the appellants. We find from the record that Bills of Entry were filed on 14-10-2010 and 19-10-2010. The Hon’ble High Court on 12th November, 2010, granted permission to the appellants to approach the assessing officer for provisional clearance. The appellant’s CHA appears to have met the assessing officer with the letter dated 19-11-2010, seeking permission for provisional release or make the final assessment and on the same day, the CHA was heard and the assessment claims to have been finalized on 23-11-2010 and speaking order was passed on 6-12-2010. In this factual scenario, we find that non-production of contract before the adjudicating authority cannot be a ground to hold that contract cannot be construed as evidence of bulk purchase. However, the department did not dispute the correctness of details of Bills of Entry filed by the appellants during April, 2010 to October, 2010, for a total quantity of 3600 MTs and these imports are from a single supplier. We, therefore, hold that the appellants have imported the goods in bulk and the other imports are not comparable both on account of quality and quantity. Rule 5 requires the proper officer to use a sale of similar goods at same commercial level and substantially, the same quantities of goods being valued. We are unable to accept the contention of the department that quantity in the present case is no consequence based on the value and quantity of the imports at the other ports. We do not find any basis for this submission. In the absence of any material to show that in the trade parlance, quantity has no bearing on the price, we cannot accept the submission based stray instances. We further find that no findings are recorded by the authorities below based on evidence that quantity has no relevance for determining the value. We, therefore, hold that in the facts of the present case, the department has failed to produce any material to show that goods imported by the appellants are comparable to other imports and invocation of Rule 5 in the present case is not sustainable.

E.L.T. 447 (Tri. - Bang.), while adjudicating the dispute on the valuation of betel nuts held that :

“6. We have gone through the records of the case. The Revenue has enhanced the value of the Betel Nuts merely on the basis of data in respect of imports through other ports. When we see the quantity imported at other Ports, they are really very low compared to the quantity imported by the appellants. Of course this factor has been taken into account by the first Appellate Authority. He has recorded a finding that the appellant M/s. Keveeyam Company had entered into a contract for 1200 MT of import of Betel Nuts. He has also noted the facts of several imports from the same supplier by the appellants. Under these circumstances, there is no need for the Revenue to doubt that a contract existed between the appellants and the foreign supplier. The appellants have also stated that they visited the foreign country to negotiate the price. The appellants have produced bank documents to show the dispatch of the transacted amount. Revenue has not established that the appellants paid more than the transaction value through some other channel. Revenue does not have any strong reasons to assail the invoices produced by the appellants. Moreover, there is no evidence that the import effected through the other Ports pertain to goods of the same quality imported by the appellants through Cochin Port. In the absence of quality, quantity and commercial level, no comparison can be made. It is also a fact that Revenue has not produced copies of invoices relied on. This amounts to denial of Principles of Natural Justice. While rejecting the transaction value, Revenue has not followed the ratio of the Eicher Tractors case cited supra. The appellants have given rational explanation for the difference in price between the goods imported by them and those imported at other places. In view of the above points, all the case-laws relied on by the appellant are very relevant. In the case of M/s. Mohd. Fariz & Company, without considering the facts, the case has been decided. For reasons stated above, we hold that there are no proper grounds to reject the transaction value. Hence, we allow the appeals of M/s. Keveeyam Company and M/s. Mohammed Fariz & Company. The appeals of Revenue are dismissed.”

held that :

“8. We also notice that there is nothing in the impugned order of the Commissioner of Customs to show that the physical characteristics, quality and reputation at the time of the importation of the goods is identical to the invoices relied upon by the Revenue. The appellants have contended that the betel nuts is an agricultural produce and the value of the same is dependent upon the quality of such produce which differs from season to season, depending upon a number of factors. In the absence of any other evidence reflecting upon the under valuation of the imports, we are of the view that the department actions for enhancement of the value is not justified. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, to the appellants.”

“5.3 We find that the Department has enhanced the value to US $ 40.50 on the basis of price of contemporaneous import by M/s. Paradeep Phosphate Ltd. In this regard, the contention of the Appellant is that the quantity imported by M/s. Paradeep Phosphate Ltd. was 18,870 MT, whereas the quantity imported by them was 55,361 MT, which is 3¹/₂ times more, which is not comparable and is contrary to the provisions of sub-rule (2)(iii)(a) of Rule 12 of the CVR, 2007.

Rule 12 of CVR provides that :

Rejection of declared value. - (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub- rule (1) of Rule 3.

(2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).

Explanation : - (1) For the removal of doubts, it is hereby declared that : -

(i)      This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9.

(ii)     The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers.

(iii)    The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include -

(a)     the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed;

(b)     the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price;

(c)     the sale involves special discounts limited to exclusive agents;

(d)     the misdeclaration of goods in parameters such as description, quality, quantity, country of origin, year of manufacture or production;

(e)     the non-declaration of parameters such as brand, grade, specifications that have relevance to value;

(f)      the fraudulent or manipulated documents.

From the Explanation (1)(i), supra, it is clear that this Rule by itself does not provide a method for determination of value; it provides a mechanism and procedure for rejection of declared value in case where there is a reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9. Thus, the Rule 12 of the CVR, 2007 does not empower the proper officer to reject the transaction value without establishing that the transaction value was not genuine. In case of law Rashesh & Co. v. CC, Mumbai - (Tri. - Mum) (supra) cited the Tribunal observed as under :

“We find merit in the submission of the applicants that the transaction price can be rejected only if the exceptional circumstances stipulated in Rule 4(2) of the Valuation Rules are found to be attracted, as held by the Apex Court in Eicher Tractors Ltd. v. CC - (S.C.). In the present case, the transaction value has been rejected on the ground that the sale was not in the ordinary course of trade under fully competitive conditions and this finding has been arrived at on the ground that other importers were importing the same goods from the same country at around the same point of time at higher prices. This, however, is not legally permissible, as held by the Tribunal in the case of Mark Auto Industries Ltd. v. CC, New Delhi - and Devika Trading Pvt. Ltd. v. CC, Mumbai - . Since the only basis for rejecting the transaction value is the noticing of contemporaneous imports at higher prices, the transaction value was required to be accepted, and we, therefore, set aside the impugned order of rejection of transaction value and loading of value, and allow the appeal.”

Hon’ble Apex Court and the Tribunal and cannot be sustained.

value declared by the appellants requires to be accepted and we order accordingly.

27. Having regard to the aforesaid facts and once we have held that the Customs Authorities are bound to accept the transaction value, we direct them to allow clearance within 3 days as held by the Tribunal in the case of Rational Art & Press Limited - . It was informed that the appeal against this decision of the Tribunal was dismissed by the Hon’ble Bombay High Court.

28. The appellants rely on Regulation 6(1)(l) of Handling of Cargo in the Customs Areas Regulation, 2009, according to which a Customs Cargo Service Provider shall not charge any rent, demurrage on goods detained by proper officer of Customs, for seeking direction to customs authorities to issue detention certificate to the appellants to enable them claim waiver of demurrage and detention charges for the period commencing after three days from the date of filing of Bills of Entry. There is no dispute on the fact that due to valuation dispute, the cargo remained detained and the appellants could not take delivery of the same. Therefore, we see no prejudice to the Customs Authorities in issuing such detention certificate certifying the period for which the goods remained detained.

29. It was submitted by revenue that they have filed cross objections. On perusal of the same, we find that the points are in support of the impugned order. Further, we find that the impugned order has no findings, by which revenue could have been aggrieved and hence, there cannot be any cross objections. The said cross objections filed are disposed off.

30. We accordingly set aside the impugned order and allow the appeal with consequential relief.

(Pronounced in open Court on 1-2-2011)