ORDER
Shri S.S. Sekhon, Member (T)
1. The appellant imported three consignments of white poppy seeds from Turkey and Show Cause Notices were issued as follows:-
(i) F.No.File CFS/CUS/00594/00-01/662 dtd.17.9.2001
(ii) F.No.File CFS/CUS/00642/00-01/661 dtd.17.9.2001
(iii) F.No.File CFS/CUS/00641/00-01/660 dtd.17.9.2001
In respect of the first consignment covered by the Show Cause Notice at Sl.No. (i) above, besides valuation, the issue of confiscation of goods under Section 111(d) of the Customs Act was also raised. It was alleged that condition 4(c) of DGFT Notfn.27(RE 2000) 1997-2000 was not complied in as much as the contracts were not registered prior to the imports. The other issue in all these three Show Cause Notice, to invoke the consequences of confiscation under Section 111(m) was alleged mis-declaration in respect of value. The values declared were proposed to be enhanced to US$ 1200 PMT (CIF) from those as declared in the Bills of Entry and a penalty under Section 112(a) was proposed besides confiscation under provision to Section 111(d) and (m) as mentioned above.
2.(a) As regards the liability for confiscation under Section 111(d), the Ld. Commissioner found that in terms of alleged condition of DGFT Notification, which prescribes that import contracts of poppy seeds shall compulsorily be registered with Narcotics Commissioner, Gwalior prior to import and while the importers interpret the word ‘import’ as given under Section 2(23) of the Customs Act relying upon the Supreme Court and High Court judgments stipulating that import would constitute and commence only when the goods cross the customs barriers and or the territorial waters and therefore the date of import and in these cases, the contracts were registered with Narcotics Commissioner, Gwalior prior to the goods entry into the territorial waters of India was not acceptable, since the clause used ‘Prior to import’ has to be interpreted in terms of EXIM Policy and relying on the DGFT’s clarification that date of import for registration of import contracts was to be decided with reference to date of shipment, he upheld the violation and liability for confiscation under Section 111(d) of the Customs Act.
b) As regards the issue of violation, he found that in these three cases, the declared value of white poppy seeds was US$ 945 PMT while the department sought to reject the transaction value under Rule 10A because much higher prices were found to be quoted in ‘Spice Market Weekly Bulletin’ and ‘Public Ledger, UK’ and also on the basis of verification of the market prices for similar white poppy seeds. Therefore, the noticees proceeded after rejecting the transaction value under Rule 10A as sought to re-determine the values under Rule 8 read with Rule 7 of Customs Valuation Rules, 1988 at the previously determined value of similar poppy seeds imported through Nhava Sheva, JNPT Custom House at US$ 1200 PMT. While accepting the clarification produced by the importer that ‘Spice Market Weekly’ is published by the Spices Board by obtaining international prices of poppy seeds and considering the e-mail reply produced from ‘Public Ledger, UK’, that they also quote the price of ‘blue poppy seeds’ as was done in Spice Market Weekly, he did not accept the reliance on the price in the two evidences i.e. ‘Spice Market Weekly Bulletin’ and ‘Public Ledger, UK’ relied upon in the Show Cause Notices to reject the transaction value and to re-determine the values thereafter. As regards the study report of Valuation Directorate, based on the spice market prices, he found that the average price for white poppy seeds in the market at Mumbai was found to be Rs. 135/- per kg (retail price) and Rs. 108/- per kg (wholesale price). This report was observed by him to have arrived at the CIF value by applying the deductive value method prescribed by Rule 7 and that value would work out to US$ 1333 PMT (CIF). As regards the contention made that Rule 7(2) of the valuation Rules require the price verification to be conducted in the local market before the expiry of 90days, as contended by the advocates, he found that by applying Rule 8 read with Rule 7 of the Valuation Rules, the 90days stipulation could be dispensed with in view of Clause 3(c) of Interpretative Note to Rule 8. Thereafter relying upon a letter of Chief Commissioner of Customs, Mumbai dtd. 24.1.2001, which refers to a study report furnished by the Commissioner of Customs, Nhava Sheva showing the date to be 12.01.2001, it was held that in terms of Rule 10A of Customs Valuation Rules, 1988 the Department could reject the transaction value, if there is reasonable doubt about the truth or accuracy of the value so declared. Since in the present case the value arrived in the study report by flexible application of deductive value method in terms of Rule 8 read with Rule 7A would provide sufficient ground to reject the transaction value under Rule 10A the show cause notice does not reveal any importation of identical or similar goods at a higher price so as to invoke Valuation Rules 5 to 6 and Rule 7 provides the deductive value method, and with that method the study report has applied and arrived at CIF value of US$ 1339 PMT (CIF) for white poppy seeds, by flexible application of deductive value method of Rule 7 by virtue of Rule 8 of Customs Valuation Rules, the contemporaneous importations of Turkish white poppy seeds at Nhava-Sheva port and CFS, Mulund have been assessed at a value of US$ 1200 PMT (CIF), and observing that in terms of Clause 1 of Interpretative Note to Rule 8 “the value of the imported goods determined under the provisions of Rule 8 should to the greatest extent possible be based on previously determined Customs values”, he held that the value at US$ 1200 PMT (CIF) to be the value for the subject imports and liability for confiscation under Section 111(m) was determined since value declared were not US$ 1200 PMT (CIF).
c) Since the goods were held to be liable for confiscation under Section 111(m) and (d), he also held the importers to be liable for penalty under Section 112(a) and demanded duty at the enhanced value and imposed personal penalty of Rs. 7.5 lakhs and Rs. 8 lakhs respectively, while imposing Redemption fine of Rs. 15 lakhs, Rs. 40 lakhs and Rs. 60 lakhs in each case.
6. After hearing both sides and considering the matter, it is found:-
a) the application of Rule 10A of the Valuation Rules, 1988, which reads as under:-
“10A. 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 value of such imported goods cannot be determined under the provisions of Sub-rule (1) of Rule 4.
(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).”
provides for a procedure which has to be complied with. In this case, procedure as prescribed vide Rule 10A(1) has not been complied with. Therefore, resort to Rule 10A cannot be upheld.
b) The Tribunal in the case of Venus Insulation Products Manufacturing Co. v. CC, Goa [2002 (143) ELT 364(Tri-Del)] have held in Para 4.4 of this decision, as regards the application of Rule 10A and other rules especially the provisions of Rule 4 as follows:-
“4.4 We further find that the adjudicating authority has grossly misunderstood the legal provisions relating to determination of the value of the goods. He has “invoked” Rule 10A, which is not a substantive provision governing determination of value in the sequential scheme laid down under the Valuation Rules. That rule is a procedural provision, which is meant to act as an aid to determining as to whether it is Clause (i) or Clause (ii) of Rule 3 that will be applicable to a given case. The sequential scheme for determination of value, under the Valuation Rules, comprises Rules 3 to 8. Rule 3 reads as under:-
“Determination of the method of valuation – for the purpose of these rules,
(i) the value of imported goods shall be the transaction value;
(ii) if the value cannot be determined by proceeding sequentially through Rules 5 to 8 these rules.”
What has been broadly laid down under Clause (i) of Rule 3 appears in specific terms under Rule 4(1) which reads as follows:-
Transaction value.- (1) 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 of these rules.
Sub-rule (2) of Rule 4 lays down some exceptions to Sub-rule (1). If the facts of a given case will attract any of those exceptions, the case will go out of the purview of Rule 4(1) and, in that case, the transaction value shall be determined by proceeding sequentially through Rules 5 to 8 as prescribed under Clause (ii) of Rule 3. Rule 8 is the residuary provision under this scheme. Rule 9 provides for certain additions to the price actually paid or payable, to arrive at the assessable value. Rule 10 casts an obligation on the importer to declare the details of the value of the goods accurately as also to furnish such document or information as may be required by the proper officer for determination of the assessable value. Rule 10A is extracted below:-
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 value of such imported goods cannot be determined under the provisions of Sub-rule (1) of Rule 4.
(2) At the request of an importer, the proper officer, shall intimate the importer in writing the ground 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).”
The above rule is a rule of procedure, which enables the proper officer to decide as to whether he can accept the declared value of the goods under Rule 4(1) or should proceed sequentially through Rules 5 to 8 for arriving at the value of the goods. If, even after considering the information documents/ evidence furnished by the importer, the proper officer has reasonable doubt about the truth or accuracy of the declared value, it shall be deemed that the value of the goods cannot be determined under Rule 4(1). This deeming provision contained in Rule 10A has necessarily to be pressed into service at the very initial stage under the sequential scheme. It has no role after the scheme has worked itself out.”
Thereafter, the Tribunal held that what was open to the proper officer under Rule 10A was to question the accuracy of the price of the goods mentioned in the documents and without arriving at any good reason for doubting the truth or accuracy of the same, not to reject the transaction value under Rule 4(1). It was not open to the Customs authorities to rely on general quotations and mere production of pricelist to discharge the onus cast on them to prove the existence of circumstances indicated in Section 14(1) of the Customs Act and provisions in Rule 4(2) of the Valuation Rules, resorted to rejection of the transaction value and or the provisions of Rule 10A. Following this decision of the Tribunal, in this case also, when the ‘Spice Market Weekly Bulletin and Public Ledger, UK are not found to be inapplicable, there was no reason for the Commissioner to have resorted to Rule 10A or and rejection of the transaction value in the facts of this case. More so, when the document i.e. the Chief Commissioner’s letter being relied upon by him was not part of the documents relied upon in the Show Cause Notice and or supplied to the importers and also the market value alleged to be conducted, was not conducted within the 90days prescribed under Rule 7. Infact there is no material to exit from the transaction value as depicted by the documents of the importers in the facts of this case. The procedure prescribed for such an exit permissible by Rule 10A has not been followed. Therefore, the orders of the Commissioner coming to a conclusion as regards mis-declaration of value and consequently liability for confiscation under Section 111(m) cannot be upheld.
c) As regards the liability for confiscation under Section 111(d) taking into consideration the definition of the word ‘import’ under Section 2(e) of the FTDR Act, 1992 and the definition of the word ‘import’ as given in Section 2(33) of the Customs Act, 1962 and the Supreme Court decision in the case of Garden Silk Mills [1999 (113) ELT 358(SC)] and the fact that the contracts in this case were registered before the goods reached customs stations, Pimpri, the port of import and before filing of the Bills of Entry, we do not find any violation of the provisions of the DGFT Public Notice para 4(c) to call for a confiscation and thereafter heavy penalties under Section 111(d) of the Customs Act, 1962 as arrived at by the Commissioner.
d) Since the liability for confiscation under Section 111(d) and 111(m) is not being upheld in the facts of this case, there is no case and or cause for invoking the penal clause under Section 112(a). The confiscation and redemption fines and penalties cannot be upheld.
7. In view of our findings, the order is set aside and appeal allowed.
[Operative portion of this order was pronounced in open court on conclusion of hearing]