In a recent case, the Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the value of ‘cut and polished diamonds’ determined by the Trade Advisory Panel as it was inconsistent with Customs Valuation Rules, 2007.
The appellant, M/s SK Universal Pvt Ltd, is an importer of ‘cut and polished diamonds’ and the impugned proceedings arose from procurement of 1461.23 carats in 26 lots, valued at US $ 522,591 (₹2,62,60,198) as per invoice issued by M/s Belstar Jewellery (LLC), Dubai, for which assessable value of ₹ 2,65,22,800 had been declared in bill of entry no. 100434/23.12.2008 filed by them.
The ‘trade advisory panel’, to whom the appraisal of value had been referred, indicated it to be US $ 337,056.63 for 24 lots and advised that the remaining two lots be sent to another set of experts in view of size being different. A second panel examined all the lots and concluded that overinvoicing to the extent of 39% at US $ 376,514.55 (₹ 189,19,856.14) and that the two specific lots had value of US$ 66,870 indicating overvaluation of 153% with reference to declared value of US$169, 436.
Commissioner of Customs, Chhatrapati Shivaji International Airport, Mumbai, re-determined the value at ₹2,11,06,256 under rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and confiscated the impugned goods under section 111(d) and 111(m) of Customs Act, 1962 while allowing redemption under section 125 of Customs Act, 1962 on payment of fine of ₹ 7,50,000. Further imposed penalty of ₹ 2,50,000 under section 112 of Customs Act, 1962 as also imposition of penalty of ₹ 1,00,000 each on Shri Sunil Kothari and Shri Lalit Kothari
The appellant contended that it was not open to the adjudicating authority to resort to selective extraction from the reports of the ‘trade advisory panel’ to suit its convenience and that, on reference of the entire import to the second set of experts, even though the first had recommended only two lots to be so scrutinized, the first report should have been rejected in toto.
It was submitted that the adoption of values for confiscation was not consistent with essential prescriptions in rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It was also contended that no evidence of any complicity or relationship with buyer, sufficing to reject the declared value, had been brought on record.
The issue involved is alleged overvaluation of ‘cut and polished diamonds’ for the adjudicating authority has relied upon two ‘trade advisory panel’ reports to discard the declaration and to conclude that the goods had been overvalued warranting resort to confiscation under section 111 of Customs Act, 1962 and consequent penalties under section 112 of Customs Act, 1962.
The difference between the declared value and the ascertained value, even with such flaws as alleged by Learned Counsel, is just about 20%. It was observed that the first panel had tendered its estimation of 24 lots and suggested limited reference to another panel of experts; request for cross-examination was rejected on the ground that the difference between the estimation of the first and the second panels was a mere 8.3%.
“There is no finding that the declared value is inconsistent with the essence of section 14 of Customs Act, 1962 nor of any ground, within the prescription of rule 3(4) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 enabling recourse to subsequent alternatives. Nor is there any narration in the impugned order that can lead us to conclude that the process set for invoking rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 had been taken to its logical conclusion.” the Tribunal viewed.
It was observed that the value adopted in the impugned order has not been shown to lack the impediments enumerated in rule 9(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 which is essential as the reasons that prompted the ‘trade advisory panel’ to arrive at the disputed values is not on record.
While setting aside the impugned order, the two member bench comprising Mr C J Mathew, Member (Technical) and Ajay Sharma, Member (Judicial) held that “the re- determination of value is not in accordance with the law. As the penal consequences arise from confiscation based on illusory foundation, the detriment to the individual appellants lack authority of law.”
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