[Order per : P. Babu, Member (T)]. - M/s. Baheti Metals & Ferro Alloys Ltd. were engaged in importation of aluminium scrap. The allegation of the Revenue was that they were manipulating the actual value of the imported consignment in collusion with the supplier firms, High sea sellers and indenters in India and were declaring lower value for purpose of assessment thereby paying lesser amount of customs duty.

2. A show cause notice was issued to the appellant demanding the differential customs duty, along with interest and proposing penalties under Sections 114A and 112A of the Customs Act, 1962. It was also proposed to impose personal penalties on various persons. The aluminium scrap of 332.86 MTs valued at Rs. 2,17,50,755/- was also proposed to be confiscated.

3. On adjudication the original adjudicating authority rejected the values declared by M/s. Baheti Metals & Ferro Alloys Ltd. and held that the value should be re-determined under Section 14 of the Customs Act, 1962. He held that the value should be Rs. 67,88,52,051/-. He also held that the goods valued as above will be liable for confiscation and imposed redemption fine of Rs. 4 lakhs on the goods covered by Bill of Entry No. 68, dated 13-10-2004. Further, he confirmed the demand of customs duty to the tune of Rs. 5,82,19,641/- under Section 114A of the Act. He imposed a penalty of Rs. 1 crore on Shri Shankarlal Shah, Managing Direct of M/s. Baheti Metals & Ferro Alloys Ltd. and also imposed a penalty of Rs. 1 crore on Shri Jamnalal Maliwal, authorized signatory of M/s. Baheti Metals & Ferro Alloys Ltd. Further, personal penalties were imposed as under :

4. Being aggrieved with the above order they filed an appeal before this Bench. In the appeal their basic submissions are as follows :

(a)    At the outset, it may be mentioned that after rejecting the declared value, the Commissioner has re-determined the value of aluminium scraps imported by M/s. Baheti under Section 14(1) of the Customs Act, 1962 read with Rule 8 of the Customs Valuation Rules, 1988. In doing so, he has taken into account the statements of the Managing Director of M/s. Baheti, its authorized signatory, statements of High Seas Sellers, Indenters as also the documentary evidences in the form of e-mails received by the indenters from the overseas supplier that were retrieved from the computer system resumed from the premises of the indenters, one invoice issued by the Overseas Supplier, M/s. F.J. Church & Sons, London received from the High Commission of India, Trade Department, London and also the Valuation Alert Circular No. 14/2005, dated 16-12-2005 issued by the Director General of Valuation.

(b)    Ld. Counsel for M/s. Baheti made voluminous submissions and raised various contentions against the impugned order. He contended that the basis for raising demand is the DGOV Alert Circular No. 14/2005 and the solitary invoice of M/s. F.J. Church & Sons, London which is unsigned, unstamped and unattested. He said that the Commissioner’s reliance on LME is not correct in view of the Hon’ble Apex Court’s judgment in the case of C.C., New Delhi v. Prabhu Dayal Prem Chand - (S.C.). Similarly, his reliance on the unsigned, unstamped and unattested invoice of M/s. F.J. Church & Sons, London is also incorrect in view of the Apex Court’s judgment in the case of C.C. v. East Punjab Traders - (S.C.) and Tribunal’s decision in Truewoods Private Ltd. v. C.C., Visakhapatnam - (T). He also submitted that there is no direct evidence against M/s. Baheti that it has resorted to undervaluation of the goods. The evidences relied upon by the Department are against others and not against M/s. Baheti. This apart, none of the Indenters or High Seas Sellers has given any statement incriminating M/s. Baheti. Therefore, the Commissioner’s reliance on their statements is totally misplaced. Further, the Commissioner has not taken into account the contemporaneous imports as reflected in NIDB data maintained by the Custom Houses. Therefore, the impugned order is inconsistent with the provisions of Section 14(1) of the Customs Act, 1962.

(c)    Without prejudice to the aforesaid submissions, assuming without admitting, that the values that the Alert Circular can be made a basis for valuing Aluminium Scrap it is submitted that the said Circular came into force with effect from 16-12-2005 and will only apply prospectively.

The burden to prove undervaluation lies squarely on the Department. It is for them to bring forth credible and cogent evidence to prove its case of undervaluation as held in the following decisions :

I.        Vijay Leather Stores v. C.C. - (T)

II.       C.C. v. Adhani Exports - (T) which has been upheld by the Hon’ble Supreme Court reported in (S.C.).

In the instant case the value has been enhanced based on assumptions and presumptions without corroborating the same with tangible or concrete evidences.

I.        C.C. v. Blue Star Enterprises - (T) which has been upheld by the Hon’ble Supreme Court reported in (S.C.).

II.       Akshay Exports & Inds. v. C.C. - .

(d)    The value declared by the appellants are in consonance with prices declared by other importers of the same materials The Appellants have placed on record the contemporaneous import records to demonstrate that the value declared by them are true and correct. It is settled law that where the contemporaneous import prices are available it is not open to the department to discard the same and to proceed to value goods under the other provisions of the said Rules. The evidences led by the Appellants clearly demonstrate that the values mentioned in the Bills of Entry reflect the correct value. The DRI had in its possession the names and other details of all buyers/consignment agents yet no investigation at that end has been done to ascertain the correct position.

(e)     The value of goods imported by the Appellants need to be determined in terms of Section 14 of the said Act read with the provisions of the said Rules once transaction value is rejected as held in the case of Varsha Plastics Pvt. Ltd. v. UOI reported in (S.C.). Thus, without the transaction value being rejected in the first place it was not open to the Respondent to have proceeded to re-value the said goods This is more so in light of the various contemporaneous import records made available by the Appellants. Rule 3 of the said Rules provides that the value of the imported goods shall be transaction value. Rule 4(1) defines transaction value to be the price actually paid or payable for the goods when sold for export to India. The transaction value for the imported goods is required to be accepted unless the transaction in question falls under the exceptions carved out under Rule 4(2). In the present Case the transactions do not fall under any of the exceptions enumerated under Rule 4(2) of the said Rules and, therefore, the transaction value is required to be accepted.

(i)       Eicher Tractors Limited v. Commissioner - []

(ii)     Commissioner of C. Ex., Rajkot v. Jai Bharat Steel Industry - []

(iii)    Commissioner of Customs v. Bureau Veritas - [ (S.C.)]

(iv)    Bansal Industries v. Commissioner of Customs, Chennai - []

(f)      Without prejudice to the aforesaid and in any event, it is submitted that, assuming without admitting, for the sake of arguments only that the allegations made are correct, once the transaction value of the goods is discarded the determination of value is required to be done by sequentially following Rules 5 to 8 of the said Rules. Rule 5 of the said Rules mandates that the value of the imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued. In this connection it is submitted that the various grades of scrap of the same country of origin, as imported by the Appellants, is regularly imported into the country by many other importers across India. Each of the said grades of scrap was imported in each of the years for which demand has been raised on the Appellants by various other importers across the country. Thus the re-valuation of the said goods following the mandate of Rule 8 without considering the contemporaneous import records is unlawful and illegal.

5. Against these submissions, the Revenue also made detailed submissions. The contentions are as follows :

(a)     Perusal of the Alert Circular would show that it is the result of indepth study carried out by the DGOV on the assessment practice of Aluminium Scraps of various grades and codes reflected in scrap specifications circular published by the Institute of Scrap Recycling Industries (ISRI) for the period from March to October, 2005 on the basis of NIDB data and other relevant information. This circular states that as per Customs Tariff, there are 34 types of Aluminium Scraps. However, analysis of import data from NIDB revealed that 15 types of scraps account for more than 90% of total volume of imported Aluminium Scraps. The quantity imported, average price and minimum price as per the study of DGOV for all these 15 grades is shown in Annexure-1 to the circular. The prominent grades are tread, twitch, trump, taint/tabor etc. Prices of all the 15 grades have been linked to the price of prime metal as traded on LME in the form of discount from the price of prime metal. It is highlighted that these prices are indicative prices and are on lower side. The circular also states that prices of scrap depend upon the extent of metal recovery from the scrap and type of the scrap. The Alert Circular is, therefore, a valuable guide to the assessing officers for the purpose of assessment of aluminium scraps. Having regard to this, no fault can be found with the impugned order for taking assistance of this circular. This apart, it is well known the world over that the prices of aluminium scraps in the international market depend on the LME prices. This has also been admitted during the investigation by various persons including Shri Jamnalal Maliwal, authorized signatory of M/s. Baheti in their statements recorded under Section 108 of the Customs Act, 1962. The fact that the LME prices are a fair indication of the prevailing market price has been recognized by various courts including the Hon’ble Apex Court. In the case of C.C., Mumbai v. Indian Leads Ltd. - .

(b)     While dealing with the department’s contention that the LME prices which reflects the prevailing market price will be free from bias & show the trend of prices, the Hon’ble Tribunal has held in para 8 of its order that it is difficult not to accept this contention inasmuch as the LME is the market place for the great deal of trade in metal both prime and scrap and its bulletins show the prices at which contracts for sale and purchase of these commodities are being concluded. In the case of C.C., Mumbai v. Mukund Ltd. - , the Hon’ble Tribunal has held that the LME prices can be considered to be a fair indicator of the prevailing market price. In the case of C.C., Mumbai v. Elpro International Ltd. - the Hon’ble Tribunal has held that the LME prices can be taken into consideration in determining the value of imported goods. In the case of C.C., Mumbai v. Metec Asia Pvt. Ltd. - , the Hon’ble Tribunal has held that prices of goods as traded in the LME has an important bearing on the international market price. Again in the case of C.C., Nhava Sheva v. Maini Traders - , the Hon’ble Tribunal has held that the price at which goods are cleared in the LME would, by and large, reflect the trend of price prevailing in the international market. In the case of Varsha Plastics Pvt. Ltd. v. Union of India - , the Hon’ble Apex Court has held that in the absence of any evidence with regard to contemporaneous import, reference to foreign journals that may indicate the correct international price for the purposes of Section 14 may not be irrelevant and reliance on such journals cannot be said to be altogether unreasonable.

(c)     In the case of Prabhu Dayal Prem Chand relied upon by the ld. Counsel for M/s. Baheti, it is seen that no details of contemporaneous imports or any other material showing higher price were referred to in the adjudication order or placed before the Hon’ble Tribunal. This is precisely the reason that the Tribunal did not accept the LME price. However, in the present case, apart from the statements of the indenters stating payment of differential value to the overseas suppliers, the Department has also cited numerous instances in the form of e-mails showing payment of differential value to the foreign suppliers by the importers, though these are not directly pertaining to M/s. Baheti. But these are certainly circumstantial evidences against Baheti. Therefore, the afore-cited judgment is not an authority to say that LME price cannot be relied upon even where there are circumstantial and indirect evidences indicating payment of differential value over & above the invoice value. Therefore, this judgment of the Hon’ble Apex Court is not helpful to M/s. Baheti.

Invoice No. 12558/1, dated 1-2-2004 issued by M/s. F.J. Church & Sons Ltd.

(d)    This invoice has been obtained by the Department from HM Revenue & Customs Authorities, UK through the High Commission of India, Trade Department, London under cover of its letter No. CT/VI/10/2007 FS, dated 6-9-2007 along with a copy of Sales Advice Note (Waste Transfer Note). This invoice shows, inter alia, the container No. TRLU 6146284, the description of the goods as “Loose Pure Aluminium Cuttings”, weight 24.719 MT, Rate 1420.00 US Dollar/MT and total value US Dollar 35100. The invoice is addressed to M/s. Ghanshyam Metal Udyog. The sales advice note (waste transfer note) dated 29-1-2004 shows advance of US Dollar 9887.60 (i.e. difference between US Dollar 35,100.98 and US Dollar 25,213.38) declared by the Indian Importer. The investigation revealed that the aforesaid container containing goods weighing 24.719 MT was imported by M/s. Ghanshyam Metal Udyog, Ahmedabad which, in turn, sold it on high seas sales basis to M/s. Baheti on 8-3-2004 and M/s. Baheti had cleared the same through Nhava Sheva Port by filing Bill of Entry No. 981678, dated 16-3-2004 covered by invoice No. 12558, dated 11-2-2004 for a value of US Dollar 25,213.38 issued by M/s. F.J. Church & Sons Ltd. Both M/s. Ghanshyam Metal Udyog and M/s. Baheti have denied any advance payment to M/s. F.J. Church & Sons Ltd., London. It has been contended that they have imported aluminium scrap and not loose pure aluminium cuttings. Further, invoicc No. 12558/1, dated 1-2-2004 has been addressed to the old address of M/s. Ghanshyam Metal Udyog. However, it has not been denied that invoice No. 12558/1, dated 1-2-2004, invoice No. 12558, dated 11-2-2004 and Bill of Lading No. 14104144401024, dated 11-2-2004 pertain to one and the same Container No. TRLU 6146284 containing 24.719 MT goods. It, therefore, establishes the fact that the invoice No. 12558, dated 11-2-2004 is an undervalued invoice.

(e)     Ld. Counsel for M/s. Baheti contended that the evidence relied upon by the Department is unsigned, unstamped & unattested. Such an evidence is not admissible and cannot be relied upon. In support of his contention, ld. Counsel relied on the judgment of the Hon’ble Apex Court in the case of East Punjab Traders and the Tribunal’s decision in the case of Truewoods Pvt. Ltd. cited supra. In the case of East Punjab Traders, photocopies of the documents recovered by the customs officer were not obtained from the Customs Department in Japan, but from the agencies stated to have exported the material in question. Hence the authenticity of the documents was in doubt. In the case of Truewood Pvt. Ltd. cited supra, the photocopies relied upon by the Department did not bear proper signature or official seal of the foreign customs officers. However, in the present case, the invoice for advance issued by M/s. F.J. Church & Sons, London, though unsigned, was obtained from H.M. Revenue & Customs Authorities, UK through the Diplomatic Channel. Hence the authenticity of this document cannot be doubted. Therefore, the afore-cited judgments do not advance the case of M/s. Baheti.

(f)      In most of the cases of imports, orders were placed by the importers with the overseas suppliers verbally through the indenters who actually acted as their conduit. None of the importers opened any letter of credit. Documents were retired from the banks against cash payment. These are certain significant factors clearly indicating that the transactions between the importers and the overseas suppliers and the transactions between high sea sellers and M/s. Baheti were not straight, thereby paving the way for preponderance of probabilities which have been taken into consideration by the Commissioner in the impugned order.

(g)     Ld. Counsel for M/s. Baheti contended that the Commissioner has not taken into account the contemporaneous imports as reflected in NIDB data maintained by the Customs Houses. Hence the impugned order is not consistent with the provisions of the Section 14(1) of the Customs Act, 1962. No doubt the NIDB data reflects the instances of contemporaneous imports. But then the authenticity of this data cannot be accepted without proper verification and the same cannot be blindly relied upon. Therefore, the Commissioner has rightly not relied upon this data. The Commissioner’s findings in this regard may be seen in para 28 of the impugned order.

Other Contentions of M/s. Baheti :

[(h)]  Ld. Counsel for M/s. Baheti submitted that in about 16 cases, the Department has accepted the declared value and pointed out certain orders passed by the Asstt. Commissioner & Commissioner (Appeals) in that regard. Therefore, the Department cannot now reopen those cases and pass different orders. He pointed out that in the case of M/s. Siyaram Metals, the Tribunal has remanded the matter. He submitted that the facts of the present case are not different from the cases where the Department has accepted the declared value. He cited the Apex Court’s judgment in the case of Bharat Sanchar Nigam Ltd. v. Union of India - (S.C.) and referring to para 8 of the said judgment, he submitted that “where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view”.

[(i)]   It is submitted that in the earlier cases, the facts were plain and simple. In the present case, there are numerous evidences indicating under-valuation of aluminium scraps. In the case of C.C.E., Calcutta v. Alnoori Tobacco Products - (S.C.), the Hon’ble Apex Court has held that circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. Paras 13 & 14 of this judgment may be usefully referred to and relied upon in this regard.

[(j)]   Ld. Counsel also submitted that the orders passed by the Asstt. Commissioner and Commissioner (Appeals) have not been challenged by the Department and hence the same have become final. According to him, the Department’s action amounts to reopening of the closed cases. It is submitted that just because in some cases the Department has not preferred any appeal, that does not necessarily mean that the Department is debarred from filing appeals or agitating in subsequent cases. Reliance is placed in this regard on the judgment of the Apex Court in the case of C.K. Gangadharan v. Commissioner of Income Tax, Cochin - (S.C.) and Commissioner of Income Tax, Central Kanpur v. J.K. Charitable Trust - (S.C.).

6. We have sailed through the various facts and circumstances of the case and had gone through the various case laws in this regard. The department primarily relied upon the report, dated 6-9-2007 of the UK Customs received through the Indian High Commission, London (IHC) which in turn refers to invoice, dated 1-2-2004 and a purported sales advice note, dated 29-1-2004 of M/s. F.J. Church. According to the department the purported invoice dated 1-2-2004 received through the IHC is allegedly the real/actual invoice issued to M/s. Ghanshyam Metal which shows a difference of USD 988.760. The payment of the said differential has been denied by Mr. Babuprasad Shah of M/s. Ghanshyam Metal as well as by Shri Jamnalal Maliwal of M/s. Baheti Metals & Ferro Alloys Ltd. and Shri Shankarlal Shah. We find that these documents are not acceptable due to the following reasons.

(a)     The documents are unsigned and has not got any signature of the suppliers of the goods.

(b)     The addresses shown on the two respective invoices are different.

(c)     The description of goods shown in the alleged invoices describes as loose aluminium cuttings while the goods sold by M/s. Ghanshyam Metal Udyog, received by the appellants are scrap.

(d)    The description in the Bill of Entry No. 981678, dated 16-3-2004 gives a description as aluminium scrap submitted ISRI “Taint and Tabor”.

It is very significant that the Bills of Entry were assessed and the goods were allowed to be cleared thereafter. If the facts are so as above, we find that the Revenue’s case is not sustainable. This finds support from the statement of Mr. Ehsan Haji Amin Gadawala which states that if the values in various invoices were not true and correct and the order of Commissioner would show a higher value, the factual correctness of the declarations as regards the value in the various Bills of Entry filed for clearance of the various consignments of scrap should have been brought along with support of facts and law.

7. The allegation of the Revenue involving the appellants to the extent of purchasing ‘tin sheets’ nor any other consignments also proved to be wrong because as per the records of the case the appellants had not purchased either aluminium skeleton bottle or “Testy” from Primetal. This is apparent from the statement of all purchases made by the appellants from M/s. Ghanshyam Metal Udyog during the relevant period. Further the allegations are based on e-mail dated 5-5-2004, for supply of bottle skelton to M/s. Ghanshyam Metal Udyog by S.A. Metal, recovered from the computers of Primetal, which disclosed the actual price of the goods as being USD 1525 as against the draft contract for USD 800 dollars. However, there is no evidence of actual import of bottle skelton by M/s. Ghanshyam Metal Udyog from S.A. Metal under the said contract at the purported actual price of USD 1525 during the said period. No details of bills of entry are available to support the said price and hence the allegation is based on surmises and not actual imports.

8. In any case there is no evidence of actual imports of bottle skelton under any contract at the purported actual price of the USD 1525 during the period. Further the allegations are based on e-mail dated 5-5-2004, for supply of Bottle Skelton to Ghanshyam Metal by S.A. Metal, recovered from the computers of Primetal, which discloses the actual price of the goods as being USD 1525 as against the draft contract for USD 800 dollars. However, there is no evidence of actual import of Bottle Skelton by M/s. Ghanshyam Metal from S.A. Metal. The details in the Bill of Entry do not support any such allegation. We are to look into the practice of transaction that the aluminium scrap sold by the Appellants to SSM was purchased from M/s. Karnavati Metals Prodcuts Pvt. Ltd. (originally generated as bus scrap at Gujarat State Road Transport Corp (GSRTC) @ Rs. 80 per kg. and therefore, the Appellants’ sale price of Rs. 81.25 per kg. (difference of Rs. 0.69 per kg = 0.85%) is fair and true as per the prevailing market rates. The Appellants purchased total 206.667 MTs of local aluminium scrap from GSRTC and others in the 2005-2006 out of that 5146 kgs. was sold to SSM as aforesaid. The local sale of bus scrap by the Appellants to SSM cannot be compared to the imports made by the Appellants and no allegation of undervaluation can be sustained on that count. The nature of the scrap purchased by the appellants on high seas is totally different from what that procured by the appellants from GSRTC and hence prices of two transactions cannot be compared at all.

9. It is also seen that the high seas seller from whom the appellants purchased the scrap also imported the same for their individual use as well for trading. It is significant that during the period of dispute the high seas sellers had either imported scrap for their own use or sold the same to other individuals or companies at the same price as was for the appellants. In all these cases the goods were allowed to be cleared and no objection was raised by the Revenue. The contentions of M/s. Baheti Metals, therefore, are acceptable as we do not find why these assessments were resorted and the goods were allowed to be cleared.

9.1 We also find considerable force and conviction in the argument of the appellant that for proving undervaluation the onus is on the department with evidence relating to comparable imports. They have relied upon the case of C.C. v. South India Television (P) Ltd. - (S.C.). In the present case the Revenue has not brought out any such evidence in support of their case. It is also a fact that the evidence of contemporaneous imports should be considered for determining the transaction value and cannot be determined on any other basis. The reliance is placed on the order of Truwoods Pvt. Ltd. v. C.C. - by the appellants to support their contention. On this ground, the stand taken by the appellants is sound and legally correct.

10. We also are impressed by the argument that the appellants were raising central excise duty paid invoices and the duty payment on the value was accepted by the Revenue on the final products. We have also gone into the decisions below :

(a)     Prabhu Dayal Prem Chand v. C.C. - (T) upheld by the Hon’ble Supreme Court, reported in (S.C.).

(b)     GKN Sinter Metal Ltd. v. C.C. - (T)

(c)     C.C. v. Meera Impex - (T)

(d)    Shiva Alloys Pvt. Ltd. v. C.C. - (T)

(e)     Palco Metals Ltd. v. C.C. - (T)

(f)      Adani Exports Ltd. - (T)

(g)     C.C. v. Dimple Overseas Ltd. - 2007 (220) E.L.T. (103)

(h)    Shiv Cables and Wire Industries (India) v. C.C. - (T).

11. On the basis of the above judgments we are of opinion that the LME prices do not pertain to metal scrap which are merely indicative of the prime quality metals. Section 14 reads as follows :

SECTION 14. Valuation of goods. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf :

Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, arty amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf :

Provided further that the rules made in this behalf may provide for,-

(i)      the circumstances in which the buyer and the seller shall be deemed to be related;

(ii)     the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;

(iii)    the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section :

Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.

(2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value.

Explanation. - For the purposes of this section -

(a)     “rate of exchange“ means the rate of exchange -

(i)      determined by the Board, or

(ii)     ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;

(b)     “foreign currency“ and “Indian currency“ have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).

12. The valuation to be done so, it has to be done under the following, general and accepted practice.

4. Valuation under Sec. 14 of Customs Act, 1962. - The “Agreement on implementation of Article VII of the G.A.T.T.” was brought into force in India on 14-8-1988”. The preamble of the Agreement clarifies the object and reason of such uniform code of valuation as :

(a)     The need for a fair, uniform and neutral system for the valuation of goods which precludes the use of arbitrary or fictitious customs value.

(b)     That the basis for valuation of the goods for Customs purposes, should to the greatest extent possible, be the transaction value of the goods.

(c)     That the customs value should be based on simple and equitable criteria consistent with commercial practices.

(d)     That the valuation procedures should be of general application without distinction between source of supply and should not be used to combat dumping.

The charge from deemed value to actual value (transaction value) necessitated the corresponding change in valuation rules. Whereby the discretionary power under Rule 8 of the revenue was eliminated and a corresponding obligation was cast on the importer for declaration of value under Rule 10 of GATT Valuation Rules of 1988 (Refer Rule 10 GAT Valuation Rules in Volume II of Customs Act). The GATT was replaced with the World Trade Organization with effect from 1-1-1995. The new WTO valuation is based on Marakesh Conference of 1994.

If the import price of the value is “very low” and for that reason the consignment is required to be assessed at the value of comparable goods.

The price relevant for assessment is the price of the consignment under assessment and the same can be rejected only for reasons specified in the Valuation Rules themselves, in the present case, the order does not reveal any specific reason for the rejection of the assessable value. Except the vague statement that the value is “very low”, there is no basis for discarding the transaction between the importer and his supplier. In fact the circumstances only indicate that the transaction is fully commercial. Appellant is a regular importer of the material for the purpose of domestic manufacture. There is also a difference between the quantities under import. The difference in price is also not vast, so as to lead to the presumption that the transaction is externally influenced. In these facts and circumstances, the impugned Order is not sustainable.

(Ref : Sundek India Ltd. v. Commissioner of Customs, Kandla - at Pp. 901, 902)

5. Section 14(1) creates a legal fixation. - The most important provision for the prupose of valuation of the goods for the purpose of assessment is Sec. 14 of the Customs Act, 1962. And a perusal of the same show that the value to be determined is a deemed value and not necessarily the actual value of the goods. Thus, Sec. 14(1) creates a legal fiction. Section 14(1) states that the value of the imported goods shall be the deemed price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of importation in the course of international trade. The word “ordinarily” in Sec. 14(1) is of great importance. In Section 14(1) the Supreme Court does not see the actual value of the goods, but the value at which such goods or like goods are ordinarily sold or offered for sale for delivery at the time of great importance. The Supreme Court has to see the value of the goods not for each specific transaction, but the ordinary value which it would have in the course or international trade at the time of its import.

(Ref : Ispat Industries Ltd. v. Commissioner of Customs, Mumbai - at P. 568 (S.C.)

According to the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and Sec. 14(1)(A) of the Customs Act, the value of the imported goods shall be the transaction value. It is only if the transaction value cannot be determined, then the value can be determined by proceeding sequentially through Rules 5 to 8. Rule 4 provides that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule (9). Rule 4(2) specifically says that the transaction value of imported goods under sub-rule (1) shall be accepted except in the situation covered by the proviso to Rule 4(2). Rule 5 provides that transaction value of identical goods must be ascertained and that should be taken for the purpose of assessment. Rule 5(3) says that in applying that rule, if more than one transaction has taken place, the lowest of such value shall be used to determine the value of the imported goods. If such determination is not possible under Rules 3, 4 and 5, the transaction value of similar goods should be ascertained under Rule 6, and failing Rule 6, deductive value has to be fixed under Rule 7. Rule 8 provides for residual method. Rule 8(2)(v) provides that no value shall be determined for minimum customs values and sub-rule (vi) prohibits fixation of arbitrary or fictitious values. It, therefore, follows that assessment can only be on the basis of value fixed with reference to the price paid for goods actually imported into the country and not on notional or fictitious basis.

8. Valuation under Sec. 14 refers to assessable value. - Section 12 of the Customs Act, 1962 (52 of 1962), known also as the charging section, declares that duties of Customs shall be levied on all goods imported into India. The goods imported shall have to be valued under Sec. 14, and the duty payable shall have to be determined according to the rates specified under Sec. 15 of the Customs Act read with the Customs Tariff Act. Goods referred to in Sec. 14 are goods on which duty of Customs is chargeable by reference to their value. It would be clear that Sec. 14 by itself does not lay down when or what goods are chargeable to Customs duty. It only deals with valuation of the goods imported which are chargeable to Customs duty. If they are chargeable to Customs duty and are chargeable by reference to their value, then the value has to be determined as laid down in Sec. 14. For such a levy, the concept of value assumes great importance since value may differ from country to country. Some countries have adopted the value based on either the FOB, FAS, C&F OR CIF. prices. Sec. 14 of the Customs Act envisages the C.I.F. concept of valuation which is in consonance with the provisions of G.A.T.T. (General Agreement on Trade and Tariff).

The goods under import are liable for Customs duty as soon as they enter the territorial waters of India which is 20 nautical miles from the coastline. However, this taxable event continues till the goods are cleared at customs barrier for home consumption under Sec. 15 of the Customs Act.

The ad valorem rates of duties are subjected to the value of a product. This value apart from other things is constituted by the elements of cost, insurance and freight. Apart from these elements, there are many other elements which may go into the costing part of the value.

13. There is another significant point in this case. The appellants brought to our notice two orders passed by the Commissioner of Customs (Appeals) pursuant to which the lower authorities have finalized the assessment rejecting LME as the basis and determining the assessable value either on the basis of contemporaneous import or accepting the transaction value. The details are as follows :

Details of 15 Bill of Entry

13.1 Apparently the appeals have been filed by Revenue against the orders of Commissioner (Appeals). It is a matter of judicial discipline that when the appellants succeed before the appellate authority, the adjudicating authority cannot take a different stand.

13.2 In the Order-in-Original No. KDL/AC/DK/528/Gr.IV/2011, dated 31-3-2011 the original adjudicating authority ordered acceptance of declared invoice value as transaction value since there is no such contemporaneous price of identical or similar goods was considered. His observations which are as follows, we feel, may help in deciding the case.

9. I find that the declared invoice value has been rejected as transaction value by enhancing the value on the basis of DOV Alert Circular No. 14/2005, dated 16-12-2005 on the basis of LME price, which reflects the market prices prevailing of prime metal. In case transaction value is rejected the value is required to be determined by proceeding sequentially through the Rule 5 to 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 read with Section 14 of the Customs Act, 1962. But in this case it has not been followed scrupulously. In this context, I rely upon the case of M/s. Adani Exports Ltd. v. Commissioner of Customs, Vishakhapatnam - (Tribunal) wherein it has been ordered that enhancing the value of HDPE (IG) and HDPE (FG) on PLATTS price are not legally sustainable unless there are any convincing evidence of any fraud in the declared value with respect to. Also in the above said case it was observed that mere two informal quotation of local office of foreign manufacturer in India can not be treated as contemporaneous import and unless there are fraudulent declaration of transaction value in the invoices and also the Rule 10A of Customs Valuation Rules, 1988 is not applicable. The above decision was upheld by the Honorable Supreme Court by way of dismissing appeal filed by the Department vide Commissioner v. Adani Exports Ltd. - .

10. I also rely upon the cases of Gujarat Ambuja Cements v. C.C.E. - (CESTAT) and Gujarat Ambuja Cements v. C.C.E. - (CESTAT), where the Hon’ble Tribunal has observed that the transaction value contemplated in Rule 4 is the transaction value of goods under assessment and not the transaction in other goods by other importer or another transaction of same importer.

11. I also refer that the enhancement of value as per LME price on the basis of the DOV Valuation Alert No. 14/2005, dated 16-12-2005 has been set aside by the Hon’ble Supreme Court in the case of Commissioner of Customs, New Delhi v. Prabhu Dayal Prem Chand as reported in (S.C.). In another case the Hon’ble Supreme Court has dismissed the Civil Appeal No. D36231 of 2008 filed by the Commissioner of Customs, Pune against the CESTAT Final Order No. A/389/2008-WZB/C-I/(C.S.T.B), dated 8-7-2008 In the case of Commissioner of Customs, Pune v. GNK Sinter Metals Limited - (S.C.).

14. In view of the above discussions and the legal position, we find that the value declared in the Bill of Entry has been correctly stated and the transaction value of the goods in question in terms of Section 14 of the Act read with Rule 4 of the Rules is correctly declared particularly when other Bills of Entry are assessed at the lower price. We find that there is no mis-declaration of the value and the allegation is unsustainable to that extent. The provisions of Section 11M of the Act therefore cannot be invoked and no penalty under Section 112 can be imposed in this case. No demand of duty as proposed in the show cause notice and confirmed by the learned Commissioner is sustainable and no penalty therefore can be imposed on the assessees or on any persons thereby. The confiscation of goods ordered also is not sustained. In short the order of Commissioner lacks support of sufficient evidence to sustain the order. The Order-in-Original of Commissioner, therefore, is set aside and appeals allowed with consequential relief if any.

15. We dispose of the appeals accordingly.

(Pronounced in Court on 24-11-2011)