No Demand on Undervaluation of Goods Merely of Higher Discount given on Import: CESTAT sets aside Differential Duty [Read Order]

The Bangalore bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) held that the demand for Undervaluation of goods merely of higher discount given on import is invalid and set aside the differential duty demand.

Hazel Mercantile Ltd, the appellant had imported Methyl Phenyl Acetylene. The goods were imported from Singapore. At the time of the filing of the bill of entry, the appellant declared the value as USD 1900 and the goods were released as declared by the Appellant. 

It was alleged that the same goods were cleared through Cochin Port by another importer manufactured by the very same supplier for a value of USD 2400 PMT. Based on the said objection, a demand notice was made on the Appellant for loading the value to 2400 PMT and the Appellant was directed to pay an amount of Rs. 5,56,198/- towards the differential duty with interest. Though the Appellant submitted a detailed reply, the Adjudicating authority vide Order-in-Original confirmed the demand of duty and aggrieved by the said order, the appeal was filed before the Appellate authority who confirmed a short levy of Rs. 5,56,198/- with interest as applicable.

The Appellant submitted that they have imported more than 1000 containers per month across the country and payments are made through irrevocable letters of credit that they have imported 5 FCL ( 85 MT ) and also that a part shipment of a part lot of 981 MT was supplied at Cochin and through other ports.

The Counsel for the Appellant also drew our attention to the copy of the sale contract dated 15.04.2008. The appellant had also imported the very same goods through Ahmedabad and Kolkata ports as per the declared value. The Counsel for the Appellant further submitted that there is no reason or justification to reject the declared value. The Counsel for the Appellant further submitted that the Appellant had imported the goods, as a sales contract entered on 15.04.2008 for a quantity of 350 MT whereas for alleging undervaluation, the Adjudicating authority relied on the import of 176 MT which was imported in August 2000 and same cannot be considered as a contemporaneous import.

There is no material on record to establish that transaction value was arrived at based on negotiation with the foreign supplier to apply the apex Court judgment in Basant Industries v. Addl. Commissioner. Therefore, the Revenue is correct in its submission that the importers were offered a special discount which is not admissible under the law for arriving at the assessable value under Section 14(1) of the Customs Act, 1962 as held by the Tribunal in Coimbatore Pioneer Mills Ltd. v. Commissioner of Customs - 1991.

The appellant is importing similar goods through various ports across India and produced Bills of Entry related to the import of the very same goods through Ahmedabad and Kolkata. Though the adjudicating authority has considered the Bill of Entry submitted before the Adjudicating Authority, there is no finding in the impugned order regarding the import made by the appellant through other ports.

It was observed that if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules.

The value declared at the time of import was accepted by the assessing authority and only when the audit observed the import of similar goods at a higher rate, demand was made. The appellant categorically submits that the goods imported by the appellant cannot be considered as at par with the import made by the importer M/s. Dimesco Footcare( India ) Pvt. Ltd. as alleged. Since times of import, quantity and country of import are different.

A two-member bench comprising Mr. P. A. Augustian, Member ( Judicial ) and Mrs. R. Bhagya Devi, Member ( Technical ) observed that it is not unusual for a foreign supplier to give a higher discount to an importer who is importing a much larger quantity and merely because the supplier has given such a discount it cannot be said that there has been any undervaluation in the invoice. The Tribunal allowed the appeal.

To Read the full text of the Order CLICK HERE

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