Whether transaction value can be rejected on account of undervaluation when goods imported from other countries have different zinc contents?

PJ/Case Laws/2012-13/1334

Case:-Dee Kay Exports v/s Commissioner Customs, New Delhi

Citation: -2012(285) E.L.T. 109 (Tri-Del.)

Brief facts: - The Appellant were importing zinc skimming and zinc ash for using it as raw material in factory. They declared the value of such goods to be 380MT, which was accepted at JNPT Port, Mumbai. The DGRI got information that the actual value paid by appellants was much higher than the value declared at the time of import for paying customs duty and appellants were remitting balance consideration through invoice/debit notes. Revenue collected invoices regarding extra remittances and based on such evidence issued two show cause notices and adjudicated.
In appeal no. C/222/2008 imports from USA during the period 13-8-2002 to 6-11-2002 are under dispute as revenue was able to unearth supplementary invoice and date under which it was remitted abroad. Shri Baljinder Singh proprietor of M/s Dee Kay filed appeal on whom penalty was imposed in case of these imports.
In appeal no C/224/2008 7 consignments imported from Thailand, and each from USA, Canada, Saudi Arabia and UAE were in question. In these cases, Revenue was not able to unearth supplementary invoices. In case of bill of entry relating to import from USA , there is admission by Baljinder Singh value declared was 380 US $ per MT instead of 515 US$ .There was mis-declaration of quantity also which was accepted by Baljinder Singh. Appeal No c/225/208 was filed by Baljinder Singh on whom penalty was imposed.

Appellant Contentions: - The appellant pleaded that in case of imports from USA they had paid countervailing duty and it is decided that these products could not have been considered as manufactured and no CVD need to have been paid and they also submitted that there has been error in calculating SAD amount also. The adjudicating authority did not examine this issue at all.
In case of imports from countries other than USA, the appellant pleaded that value of goods imported from USA cannot be applied for value of goods imported from other countries for the reason that the value of these goods depends on the percentage of zinc contents in the material. They also contended that there was no evidence that the zinc contents in the consignments received from different countries were the same. They also raised the issue that they have paid CVD, though such duty was not leviable and consequently there was error in calculating special additional duty.
Appellant also pointed out that Circular No.383/150/2004-JC, dated 19-6-2007 confirmed that no review of question of duty on zinc skimming is contemplated. CVD was paid under mistaken impression of law and they cannot be asked to pay differential duty on said consignments and they also submit that they have already paid excess duty, even if increased price is taken into consideration.
Appellant also contested that since assessment was finalized, the Revenue could not have issued show cause notice later, alleging under valuation.
The ld. counsel contest on behalf of Shri Baljinder Singh that he is partner of the firm which imported the goods and there cannot be separate penalty on partner once penalty is imposed on firm.

Respondent Contentions:- The AR of Revenue defended by submitting that the undervaluation of goods imported from USA was clearly proved as invoices showing additional remittance were unearthed by revenue. The appellant had already paid differential duty of Rs 41632 in the case of appeal NO.C/22/2008 AND Rs. 161352/- in case of appeal no.C/224/208

AR further submits that importer gave false description of value and there was intention to evade payment of customs duty, so such goods are clearly liable for confiscation under section 111(m) of the Customs Act. Therefore the order for confiscation and penalty are maintainable.

As regarding show cause notice, Department was not in agreement that show cause notice cannot be issued once the assessment is finalized. The decision of Apex Court in Nizam Sugar Factory was in entirely different context to the effect that once all facts for one period is known and notice is issued, notice for future period cannot be issued based on same facts invoking suppression of facts. The decision of Apex Court in UOI V. Jain Sudh Vanaspati 1996(86) E.L.T.460 (S.C) is relevant to the facts of case.

Reasoning of Judgment: - It was clear that prices of zinc skimming imported from USA cannot be applied for prices of such goods or zinc ash imported from other countries for the reason that value of goods depends on percentage of zinc contents in this material. The items in question are goods of which quality can vary and therefore it is difficult to agree to any addition in value, based on the fact that the appellants have suppressed value of goods imported from another country. The matter arose from the fact that custom authority adopted practice of assessing such goods at standard value of US$ 380 per MT irrespective of transaction value. There is no reason to adopt different standard for appellant in cases where evidence of remittance of extra consideration is not adduced by Revenue. Therefore for imports other than USA the benefit of doubt should go to appellant.

The plea of appellant of adjusting CVD and SAD against the shortfall in other types of customs duty paid at time of import is not maintainable. Even otherwise the plea that countervailing duty was not payable can result only in refund of duty and such claim has to go through test of unjust enrichment under Section 11B.

Goods imported from USA were liable for confiscation and penalties as there was clear evidence of misdeclaration of value.

Penalties imposed on Baljinder Singh are set aside as there were no specific acts on his part other than the action of firm itself.

Appeal No C/222/2008, the penalty is imposed under Section 112 and in case of appeal No .C/224/2008 penalty is imposed under Section 114 A of Customs Act but no option to pay 25 % of penalty imposed within 30 days of receipt of order. Considering these aspects, penalty in Appeal No. C/222/2008 is reduced to 25% of differential duty amount and in Appeal No. C/224/2008 the penalty shall be equal to differential duty.

Decision:- Appeal partially allowed.

Comment:- The analogy drawn form the case is that valuation based on contemporaneous imports cannot be adopted for when the imported goods in question can be differentiated on the basis of quality or contents depending on the country of origin. In such cases, transaction value can be rejected only if there are cogent and strong evidences of under valuation.

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PJ/Case Laws/2012-13/1334

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