DIYAS MANTRA LIGHTING PVT LTD vs PRINCIPAL COMMISSIONER, CUSTOMS-NEW DELHI(PREV)
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO.III
Customs Appeal No.50079 of 2022
(Arising out of Order-in-Original No. DLI/CUS-PREV/GS/Pr. Commr./13/2021
dated 31.03.2021 passed by the Principal Commissioner of Customs
(Preventive), New Delhi)
M/s Diyas Mantra Lighting Pvt. Ltd., …..Appellant
(BJ No.2141, KH No.651/26 FH No.104,
Opposite Palam Vihar Road, Bijwasan,
New Delhi-110061)
VERSUS
Principal Commissioner of Customs
(Preventive), New Delhi ….Respondent
(Near Customs House, Near IGI Airport,
New Delhi-110037)
WITH
Customs Appeal No.50080 of 2022
(Arising out of Order-in-Original No. DLI/CUS-PREV/GS/Pr. Commr./13/2021
dated 31.03.2021 passed by the Principal Commissioner of Customs
(Preventive), New Delhi)
Shri Rahul Mehta, …..Appellant
(M/s Diyas Mantra Lighting Pvt. Ltd.,
B.J. No.2141, KH No.651/2G FH No.104,
Opposite Palam Vihar Road, Bijwasan,
New Delhi-110061)
VERSUS
Principal Commissioner of Customs
(Preventive), New Delhi ….Respondent
(Near Customs House, Near IGI Airport,
New Delhi-110037)
AND
Customs Appeal No.51166 of 2022
(Arising out of Order-in-Original No. DLI/CUS-PREV/GS/Pr. Commr./13/2021
dated 31.03.2021 passed by the Principal Commissioner of Customs
(Preventive), New Delhi)
Shri Anil Kumar Anand, …..Appellant
(M/s Diyas Mantra Lighting Pvt. Ltd.,
B.J. No.2141, KH No.651/2G FH No.104,
Opposite Palam Vihar Road, Bijwasan,
New Delhi-110061)
VERSUS
Principal Commissioner of Customs
(Preventive), New Delhi ….Respondent
(Near Customs House, Near IGI Airport,
New Delhi-110037)
Customs Appeal No.50079 of 2022
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2
PPEARANCE
A :
Shri Prem Ranjan, Advocate for the Appellant
Shri Nikhil Mohan Goyal, Authorized Representative for the Department
CORAM:
HON’BLE MR. SOMESH ARORA, MEMBER (JUDICIAL)
HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NOs.- 51642-51644/2026
DATE OF HEARING : 25.09.2026
DATE OF PRONOUNCEMENT : 29.10.2026
SANJIV SRIVASTAVA:
These appeals are directed against Order-in-Original No.
DLI/CUS-PREV/GS/Pr. Commr./13/2021 dated 31.03.2021
passed by the Principal Commissioner of Customs (Preventive)
New Delhi. By the impugned order following has been held:
ORDER
64. In view of the above findings, I pass the following order:
(i) I reject the declared value amounting to
Rs.19,01,175/- (Rs. Nineteen lakhs one thousand one
hundred and seventy five only) for live shipment i.e.
bill of entry No. 8059523 dated 21.01.2015 and re-
determine it at Rs.52,22,305/-(Rupees fifty two lakh
twenty two thousand three hundred and five only).
(ii) I reject the declared value amounting to Rs.2,
16,95,404/- (Rupees two crores sixteen lakh ninety
five thousand four hundred and four only) for past 13
bills of entry (as detailed in para-59 supra) under the
provisions of Rule 12 of the Customs Valuation
(Determination of Value of Imported Goods) Rules,
2007, and re-determine it at Rs.4,46,72,712/-
(Rupees Four Crores Forty Six Lakhs Seventy Two
Seven Hundred and Twelve only).
(iii) I confirm the demand of differential duty amounting
to Rs.9,53,073/-(Rupees nine lakhs fifty three
thousand seventy three only) for live shipment i.e. bill
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of entry No. 8059523 dated 21.01.2015 and
Rs.74,85,263/- (Rs. Seventy Four Lakhs Eighty Five
Thousand Two Hundred and Sixty Three only-) for
past 13 bills of entry and order it to be recovered from
the importer under Section 28 of the Customs Act,
1962 by invoking extended period under proviso to
Section 28(4) of the Act ibid.
(iv) I drop the demand of differential duty amounting to
Rs.48,40,974/- for seven Bills of Entry (as detailed in
Para-59.3 supra), in respect of imports from Spain
and China.
(v) I confiscate the seized goods (seized on 02.02.2015)
in case of live shipment i.e. bill of entry No. 8059523
dated 21.01.2015 of re-determined value of
Rs.52,22,305/- under Section 111(m) of the Customs
Act, 1962. Since the goods have been released
provisionally and are not available for confiscation, I
impose a fine of Rs. 10,00,000/-(Rupees Ten Lakhs
only) in lieu of confiscation under Section 125 of the
Customs Act, 1962.
(vi) I also confiscate the imported goods seized on
05.02.2015 at godown of the importer value of which
was re-determined at Rs.4,44,16,298/- under Section
111(m) of the Customs Act, 1962. Since the goods
have been. released provisionally and are not
available for confiscation, I impose a fine of
Rs.89,00,000/- (Rupees Eighty Nine Lakhs only) in
lieu of confiscation under Section 125 of the Customs
Act, 1962.
(vii) I confirm the Interest on the above demand which is
to be recovered from the importer under Section 28
AA (as existed during the relevant period) of the
Customs Act 1962.
(viii) I impose penalties of Rs.9,53,073/-(Rupees Nine
Lakhs Fifty Three Thousands and Seventy Three only)
on M/s Diyas Mantra Lighting Pvt. Ltd., New Delhi, in
respect of import made against Bill of Entry No.
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8059523 dated 21.01.2015 and Rs. 74,85,263/- (Rs.
Seventy Four Lakhs Eighty Five Thousand Two
Hundred and Sixty Three only) under Section 114A of
the Customs Act, 1962 (which is provisioned in the
Section as to be equal to the differential duty
determined under Section 28(8) of the Customs Act,
1962) in respect of import made from UK vide 13 Bills
of Entries in past by them.
(ix) I impose a penalty of Rs. 10,00,000/-(Rupees Ten
Lakhs only) each upon Shri: Rahul Mehta, Director
and Sh. Anil Anand, Director of M/s Diyas Mantra
Lighting Pvt. Ltd., New Delhi under Section 112 (b) of
the Customs Act, 1962 for their omission and
commission.
2.1 The impugned order has been made in the de-novo
proceedings as per the order of Hon’ble Supreme Court dated
22.04.2019 in Civil Appeal No.3138-3140/2018 against the
CESTAT final Order No.C/A/57650-57652/2017-CU(DB).
2.2 The facts have been recorded in the order of Hon’ble
Supreme Court as follows:
The appellant is stated to be a regular importer of
electric decorative lightings, and in the process of
such imports, filed a bill of entry on 21.1.2015 at the
ICD, Tughlakabad, New Delhi, for clearance of electric
decorative lightings. These import consignments were
of brand names ‘Diyas’ and ‘mAntra’, and the enquiry
proceeded to ascertain whether the goods had been
correctly valued for the purposes of customs duty. On
completion of the enquiry, proceedings were initiated
for revaluing the current import consignment, as well
as past consignments within the aforesaid window,
apart from the proposal for confiscation of goods and
imposition of penalties under the provisions of the
Customs Act, 1962 (hereinafter referred to as the
‘said Act’). A show cause notice was issued under
Section 28 of the said Act, providing for recovery of
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duties not levied or short-levied or erroneously
refunded, for any reason other than collusion or any
wilful mis-statement or suppression of facts. In
substance, there were really two grounds for the show
cause notice:
(a) that the appellant, knowingly, did not declare
the brand of 2 imported goods, and undervalued
the same with the intent of evading customs
duty;
(b) that the appellant had imported the branded
goods from its related party, and had
undervalued the same to evade customs duty.
2.3 The show cause notice dated 29.01.2016 called upon the
appellant to show cause as to why:
(i) Declared value amounting to Rs.19,01,175/- (Rs. Nineteen
lakhs one thousand one hundred and seventy five only) for
live shipment i.e. bill of entry No. 8059523 dated
21.01.2015 and Rs.2,16,95,404/- (Rupees two crores
sixteen lakh ninety five thousand four hundred and four
only) for past 20 bills of entry (as detailed in Annexure-A to
SCN) should not be rejected under the provisions of Rule 12
of the Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007, and re-determined at
Rs.52,22,305/- (Rupees fifty two lakh twenty two thousand
three hundred and five only) for live shipment i.e. bill of
entry No. 8059523 dated 21.01.2015 and Rs.6,43,95,379/-
(Rupees six crores forty three lakhs ninety five thousand
three hundred and seventy nine only) for past 20 bills of
entry (as detailed in Annexure-B & C to SCN) being the
actual transaction value under Rule 6, 7 & 9 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007;
(ii) The total differential duty amounting to Rs.9,53,073/-
(Rupees nine lakhs fifty three thousand seventy three only)
for live shipment i.e. bill of entry No. 8059523 dated
21.01.2015 and Rs.1,23,26,237/- (Rs. One crore twenty
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three lakhs twenty six thousand two hundred and thirty
seven only-) for past 20 bills of entry (as detailed in
Annexure-B & C to SCN) (inclusive of BCD, CVD and other
customs duty as applicable) should not be demanded and
recovered from them under Section 28 of the Customs Act,
1962 by invoking extended period under proviso to Section
28(4) of the Act ibid.
(iii) the seized goods (seized on 02.02.2015) in case of live
shipment i.e. bill of entry No. 8059523 dated 21.01.2015 of
re-determined value of Rs.52,22,305/- should not be
confiscated under 111(m) of the Customs Act, 1962.
(iv) the imported goods seized on 05.02.2015 at godown of the
importer value of which was re-determined at
Rs.4,44,16,298/- (value re-determined on the basis of
calculation method adopted for re-determining value of
imported goods as discussed in earlier paras) should not be
confiscated under Section 111(m) of the Customs Act, 1962.
(v) Interest on the above demand amount should not be
confirmed and recovered from them under Section 28 AA
(as existed during the relevant period) of the Customs Act
1962.
(vi) Penalty should not be imposed upon M/s. Diyas Mantra
Lighting Pvt. Ltd., New Delhi, under Section 112/114A of the
Customs Act, 1962 for their omission and commission as
discussed in the body of show cause.
(vii) Penalty should not be imposed upon Shri Rahul Mehta,
Director and Sh. Anil Anand, Director under Section 112,
and 114AA of the Customs Act, 1962 for their omission and
commission as discussed in the body of show cause.
2.4 The show cause notice was adjudicated as per Order-in-
Original No. DLI/Custom/Prev./MKV/Pr.Commr/08/2017 dated
31.03.2017 of the Principal Commissioner of Customs
(Preventive), New Delhi, holding as follows:
(i) I reject the declared value amounting to Rs.19,01,175/-
(Rs. Nineteen lakhs one thousand one hundred and seventy
five only) for live shipment i.e. bill of entry No. 8059523
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dated 21.01.2015 and Rs.2,16,95,404/- (Rupees two crores
sixteen lakh ninety five thousand four hundred and four
only) for past 20 bills of entry (as detailed in Annexure-A to
SCN) under the provisions of Rule 12 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007, and re-determined at Rs.52,22,305/-(Rupees
fifty two lakh twenty two thousand three hundred and five
only) for live shipment i.e. bill of entry No. 8059523 dated
21.01.2015 and Rs.6,43,95,379/- (Rupees six crores forty
three lakhs ninety five thousand three hundred and seventy
nine only) for past 20 bills of entry (as detailed in Annexure
–B & C).
(ii) I confirm the demand of total differential duty amounting to
Rs.9,53,073/-(Rupees nine lakhs fifty three thousand
seventy three only) for live shipment i.e. bill of entry No.
8059523 dated 21.01.2015 and Rs.1,23,26,237/- (Rs. One
crore twenty three lakhs twenty six thousand two hundred
and thirty seven only-) for past 20 bills of entry (as detailed
in Annexure-B & C to SCN) and recovered from them under
Section 28 of the Customs Act, 1962 by invoking extended
period under proviso to Section 28(4) of the Act ibid.
(iii) I confiscate the seized goods (seized on 02.02.2015) in case
of live shipment i.e. bill of entry No. 8059523 dated
21.01.2015 of re-determined value of Rs.52,22,305/-under
Section 111(m) of the Customs Act, 1962. Since the goods
had been released provisionally and were not available for
confiscation, I impose a fine of Rs. 10,00,000/-(Rupees Ten
Lakhs only) in lieu of confiscation under Section 125 of the
Customs Act, 1962.
(iv) I also confiscate the imported goods seized on 05.02.2015
at godown of the importer value of which was re-determined
at Rs.4,44,16,298/- under Section 111(m) of the Customs
Act, 1962. Since the goods had been released provisionally
and were not available for confiscation, I impose a fine of
Rs.89,00,000/- (Rupees Eighty Nine Lakhs only) in lieu of
confiscation under Section 125 of the Customs Act, 1962.
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(v) I confirm the Interest on the above demand which is to be
recovered from them under Section 28 AA (as existed during
the relevant period) of the Customs Act 1962.
(vi) I impose penalties of Rs.9,53,073/-(Rupees Nine Lakhs Fifty
Three: Thousands and Seventy Three only) on M/s Diyas
Mantra Lighting Pvt. Ltd., New Delhi, in respect of import
made against Bill of Entry No. 8059523 dated 21.01.2015
and Rs.1,23,26,237/-(Rupees One Crore Twenty Three
Lakhs Twenty Six Thousands Two Hundred and Thirty Seven
only) under Section 114A of the Customs Act, 1962 (which
is provisioned in the Section as to be equal to the differential
duty determined under section 28(8) of the Customs Act,
1962) in respect of import made vide 20 Bills of Entries in
past: by them.
(vii) I impose a penalty of Rs.13,00,000/-(Rupees Thirteen Lakhs
only) each upon Shri Rahul Mehta, Director and Sh. Anil
Anand, Director of M/s Divya Mantra Lighting Pvt. Ltd., New
Delhi under Section) 112(b) of the Customs Act, 1962 for
their omission and commission.
2.5 Aggrieved appellants filed an appeal before the CESTAT,
New Delhi challenging the said order. The CESTAT vide its Final
Order No. C/A/57650-57652/2017-CU(DB) dated 06.11.2017,
held as follows:
10. “We have considered their submission in this regard. It is
clear that the Original Authority adopted the proposal made
in the show cause notice and arrived at the redetermined
value.
11. Regarding the contention of the appellant that there were
similar goods imported though with different brand names,
for consideration of comparable value, they pleaded that the
Original Authority should have examined such value to
arrive at the assessable value for the appellants also. We
are not in agreement with the said proposition. It is
apparent that different brand names carry different values.
It is not practicable to have a comparison of one brand with
another for Customs duty purpose. Such determination will
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be highly subjective. As such, the Original Authority is left
with only option of arriving at the correct assessable value
by backward calculation, which he did. The second major
point contested by the appellant is that post-importation
expenditure and profit margin allowed is not correct. We
note that the Original Authority considered 15% on account
of profit margin, 5% on account of post-importation
charges. He had also considered and allowed deductions on
tax elements attributable to the impugned goods. While we
note that the appellants contested the post-importation
expenditure on the ground that the goods are fragile and
some breakage is to be accounted for, we are not convinced
by the said submission for the reason that the items are
appropriately packed and no evidence is produced to
support a particular quantum of breakage occurring during
transportation. In the absence of such material evidence we
cannot proceed based on simple assertion of the appellant.
On overall analysis of the evidences and discussion of the
Original Authority, we find no serious infirmity in the action
of the Original Authority in both rejecting the declared value
and also refixing the value for Customs Duties as well as
imposing penalties. Accordingly, we find the appeals are
without merit and are accordingly dismissed."
2.6 Aggrieved appellants filed an appeal before Hon'ble
Supreme Court. Hon’ble Apex Court vide Order dated 22.04.2019
in Appeal No.3138-40 of 2018 remanded the matter back to the
original authority for de novo consideration.
2.7 Matter was adjudicated as per the impugned order in the
remand proceedings. Aggrieved appellants have filed this appeal.
3.1 We have heard Shri Prem Ranjan, Advocate for the appellant
and Shri Nikhil Mohan Goyal. Authorized Representative for the
revenue.
3.2 Arguing for the appellants learned counsel submits that:
➢ The transaction value declared by the appellant is not
influenced by the relationship between the parties and
therefore should have been accepted as per Rule 3 (3) (A)
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of the Customs Valuation Rules, 2007. Reliance is placed on
the following decisions:
o Sanjivini Non Ferrous Trading Pvt. Ltd. [2019 (365)
E.L.T. 3 (SC)]
o Impex Steel & Bearing Co. [2014 (302) E.L.T. 464 (T-
Del)]
➢ The finding recorded in the impugned order that the
relationship between the importer and the UK supplier has
influence the prices, is without any basis and only based on
presumptions.
➢ The impugned order is perverse and unsustainable as it fails
to adhere to the directions contained in the Hon’ble Apex
Court order dated 22.04.2019.
➢ Comparison sheet submitted shows that the declared value
has not been influenced by the relationship with the UK
Supplier.
➢ Even if the arguments as per the impugned order are to be
accepted then also the Value of the impugned goods
supplied by the UK Supplier should be determined as per
Rule 3 of the CVR, 2007 on the basis of same/ similar goods
received by them from China. Therefore resort to rule 7 and
Rule 9 of CVR, 2007 is totally erroneous.
➢ Extended period of limitation is no invokable for making this
demand.
➢ Goods are not liable for confiscation as the goods have been
declared as per the import documents, and there is no
reason to allege mis-declaration.
➢ As demand of duty itself is bad in law, demand of interest
should fail.
➢ No penalty could have been imposed on the importer and
the co appellants
3.3 Arguing for the revenue Authorized Representative
submitted that:
➢ Related person status established as a fact, not an
assumption.
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➢ Financial flow back as proof that the relationship had
influenced the price.
➢ A shipping line official in his statement stated that a draft
Bill of Lading was issued for this consignment is relied
upon as indicating as unusually close commercial
relationship between shipper (UK Supplier) and the
buyer, inconsistent with dealings between the unrelated
parties.
➢ In case of East African Traders [2000 (115) ELT 613
(SC)] following was held:
“The learned Attorney General, appearing for the
appellant, has restricted his argument to the
observations of the Tribunal in the order under appeal
relating to the piercing of the veil of the respondent
company to determine whether or not the buyer and the
seller were related persons, this being governed by Rule
2, sub-rule (2) of the Customs Valuation Rules, 1988.
The law that would apply is that laid down in the
judgment of this Court in Calcutta Chromotype Ltd. v.
Collector of Central Excise, Calcutta [1998 (99) E.L.T.
202 (S.C.) = 1998 (3) SCC 681]. It is permissible for the
authorities and the Tribunal to pierce the veil in given
facts and circumstances to ascertain whether the buyer
and the seller are indeed related persons within the
meaning of the said sub-rule.”
➢ Once the revenue shows that the relationship and an
indcium of its effect on price (loan payment), the onus
shifts on the importer under Rule 3(3)(b) to affirmatively
show that the declared value closely approximates the
test value. The appellant failed miserably for the reason
that his own comparison chart showed that UK sourced
goods priced at par with or higher that the same item
sourced from China.
➢ Appellant deliberately did not declared the brand names
“diyas/ mAntra” in the Bill of Entries, invoices, packing
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lists etc., filed with intent to suppress and mis declare
the value.
➢ The fact that the appellant as the sole importer/
distributor of “diyas” and “mAntra” brands s foreclosing
to Rules 4/5 (identical/ similar goods). Since no
independent, comparable transactions existed the resort
was necessarily made to use Rule 7 read with Rule 9.
➢ Deductive value comparison is consistent with the
CESTAT 2017 order.
➢ Reliance is placed on the dealers statement to establish
that these Brands were being newly launched.
➢ Non cooperation by the Mr Anil Kumar Anand allegedly
did not join the investigations and responded to the
summons.
➢ Rahul Mehta failed to provide complete procurement/
purchase invoice details led to inference of concealment
and as an independent ground for personal penal action
under Section 112(b) on the Directors.
➢ Confiscation survives despite the provisional release.
➢ Penalty under Section 114A becomes natural
consequence of confirmation of demand under section 28
(4)
➢ Reliance is placed on the decisions as follows:
o Himanshu Gupta [Order dated 15.01.2026 in CEAC
No 48/2018]
o Xiami Technology India Pvt Ltd. [Final Order No
41324-41330/2025 dated 14.11.2025 Chennai
Cestat]
4.1 We have considered the impugned order along with the
submissions made in the appeals and during the course of
arguments.
4.2 Impugned order records the findings as follows:
“46. From the records I find that the importer has not sought
any adjournment for personal hearing either in their written
submissions or during the course of personal hearing and as
such I conclude that the importer has nothing more to say
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in their defence against the Show Cause Notice in the instant
case. Therefore, I proceed further in the adjudicating
proceedings in the instant case.
47. I find that the impugned Show Cause Notice issued to
M/s. Diyas Mantra Lighting Pvt. Ltd. and its Directors Shri
Rahul Mehta and Sh. Anil Kumar Anand, has genesis out of
the investigations carried out by the officers of the Customs
Preventive Commissionerate, New Delhi. I find that the
present show cause notice essentially involves
determination of the following points, as to why:-
(i) Declared value amounting to Rs.19,01,175/- (Rs.
Nineteen lakhs one thousand one hundred and seventy
five only) for live shipment i.e. bill of entry No. 8059523
dated 21.01.2015 and Rs.2,16,95,404/- (Rupees two
crores sixteen lakh ninety five thousand four hundred
and four only) for past 20 bills of entry (as detailed in
Annexure-A to SCN) should not be rejected under the
provisions of Rule 12 of the Customs Valuation
(Determination of Value of Imported Goods) Rules,
2007, and re-determined at Rs.52,22,305/- (Rupees
fifty two lakh twenty two thousand three hundred and
five only) for live shipment i.e. bill of entry No. 8059523
dated 21.01.2015 and Rs.6,43,95,379/- (Rupees six
crores forty three lakhs ninety five thousand three
hundred and seventy nine only) for past 20 bills of entry
(as detailed in Annexure-B & C to SCN) being the actual
transaction. value under Rule 6, 7 & 9 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007;
(ii) The total differential duty amounting to Rs.9,53,073/-
(Rupees Nine lakhs fifty three thousand seventy three
only) for live shipment i.e. bill of entry No. 8059523
dated 21.01.2015 and Rs.1,23,26,237/- (Rs. One crore
twenty three lakhs twenty six thousand two hundred
and thirty seven only-) for past 20 bills of entry (as
detailed in Annexure-B & C to SCN) (inclusive of BCD,
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CVD and other customs duty as applicable) should not
be demanded. and recovered from them under Section
28 of the Customs Act, 1962 by invoking extended
period under proviso to Section 28(4) of the Act ibid.
(iii) the seized goods (seized on 02.02.2015) in case of live
shipment i.e. bill of entry No. 8059523 dated
21.01.2015 of re-determined value of Rs.52,22,305/-
should not be confiscated under 111(m) of the Customs
Act, 1962.
(iv) the imported goods seized on 05.02.2015 at godown of
the importer value of which was re-determined at
Rs.4,44,16,298/- (value re-determined on the basis of
calculation method adopted for re-determining value of
imported goods as discussed in earlier paras) should
not be confiscated under Section 111(m) of the
Customs Act, 1962.
(v) Interest on the above demand amount should not be
confirmed and recovered from them under Section 28
AA (as existed during the relevant period) of the
Customs Act 1962.
(vi) Penalty should not be imposed upon M/s. Diyas Mantra
Lighting Pvt. Ltd., New Delhi, under Section 112/114A
of the Customs Act, 1962 for their omission and
commission as discussed in the show cause.
(vii) Penalty should not be imposed upon Shri Rahul Mehta,
Director and Sh. Anil Anand, Director under Section
112, and 114AA of the Customs Act, 1962 for their
omission and commission as discussed in the show
cause.
48. It is on record that impugned Show Cause Notice was
already adjudicated vide OIO No.
DLI/Custom/Prev./MKV/Pr.Commr/08/2017 dated
31.03.2017; that being aggrieved with the OIO, importer
preferred appeal before Hon'ble CESTAT, which was decided
by Hon'ble CESTAT vide Final Order No. C/A/57650-
57652/2017-CU(DB) dated 06.11.2017; that further being
aggrieved with the Hon'ble CESTAT's Final Order, importer
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filed Civil Appeal Nos. 3138-3140/2018 before the Apex
Court, whereby Apex Court vide Order dated 22.04.2019
has set aside both the orders of (i) the Principal
Commissioner of Customs (Preventive), Customs, New
Delhi, dated 30.3.2017 & (ii) Final Order of the CESTAT,
dated 6.11.2017; and the matter remitted back to the
Principal Commissioner of Customs (Preventive), Customs,
New Delhi, to proceed afresh with the matter in accordance
with observations in the Order dated 22.04.2019, wherein
it is specified that Rules 3 to 5 which would have to be
applied first, as it is provided for the Rules to apply
"sequentially". The Hon'ble Supreme Court has also allowed
the importer to raise all other pleas, as available in law, and
has directed that the same be dealt with on merits.
49. I find that officers of the Customs Preventive Delhi,
acting on intelligence, booked a case of mis-declaration and
under-valuation of the goods imported vide Bill of Entry No.
8059523 dated 21.01.2015 at ICD Tughlakabad, New Delhi
by M/s. Diyas Mantra Lighting Pvt. Ltd., New Delhi. It was
observed that the importer had not declared brands of
goods imported whereas, two brands of goods namely
"Diyas" and "mAntra" were found with user manual &
installation guide of the goods. These brands were not
declared in the Bill of Entry, Invoice and Packing List. On
suspicion that the said brands were not declared due to the
reason that they intended to clear the goods on lower value
the same was detained under the provisions of Section 110
of the Customs Act, 1962. Also the goods imported vide past
20 bills of entry as detailed under para 17 above, were of
the "Diyas" and "mAntra" brands as the goods were of the
same item codes as mentioned in catalogues of these
brands. It appeared that irrespective of the origin of goods,
the prices of the goods were controlled/ fixed by the brand
owners. Although Sh. Rahul Mehta, in his statements stated
that the goods were manufactured in China but it appeared
that in all such cases price control was maintained by the
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brand owners i.e. in case of 'Diyas' brand the brand owner
was M/s. Inspired Lighting Ltd., U.K. or Mr. Anil Kumar
Anand and in case of "mAntra" brand the brand owner was
M/s. Global Manufacturing & Trading Company S.L. Spain,
who were controlling the prices of these brands. Except one
shipment of mantra brand which was imported directly from
M/s. Global Manufacturing & Trading Company S.L. Spain,
in all other shipments of both the brands supplied from UK
the supplier was M/s. Inspired Lighting Ltd., U.K. Shri Rahul
Mehta, Director in his statement had stated that 'Diyas' was
the brand of M/s. Inspired Lighting Ltd., U.K. and "mAntra"
was the brand of M/s. Global Manufacturing Trading
Company S.L. Spain. Shri Rajan Jain, Director of M/s.
Jainsons Lights Pvt. Ltd., main dealer of the importer, in his
statement dated 22.05.2015, stated that "Diyas" &
"mAntra" were famous brand In Europe and they were
planning to inaugurate goods/brands in India.
50. Now, following the directions of the Hon'ble Apex Court,
I proceed to take case afresh and discuss sequentially, the
Rule 3, 4 & 5 of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007, towards applicability
in the instant matter.
51. Rule 3 of the Customs Valuation (Determination of Value
of Imported Goods) Rules, 2007 reads as under:-
3. Determination of the method of valuation-
(1) Subject to rule 12, the value of imported goods
shall be the transaction value adjusted in
accordance with provisions of rule 10;
……….
(3) (a) Where the buyer and seller are related, the
transaction value shall be accepted.
provided that the examination of the circumstances of the
sale of the imported goods indicate that the relationship
did not influence the price.
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(b) in a sale between related persons, the transaction
value shall be accepted, whenever the importer
demonstrates that the declared value of the goods being
valued closely approximates to one of the following values
ascertained at or about the same time.
(i) the transaction value of identical goods, or of similar
goods, in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar
goods;
(iii) the computed value for identical goods or similar
goods:
Provided that in applying the values used for comparison,
due account shall be taken of demonstrated difference in
commercial levels, quantity levels, adjustments in
accordance with the provisions of rule 10 and cost incurred
by the seller in sales in which he and the buyer are not
related:
(c) substitute values shall not be established under the
provisions of clause (b) of this sub-rule.
(4) if the value cannot be determined under the provisions
of sub-rule (1), the value shall be determined by proceeding
sequentially through rule 4 to 9.
51.1 Rule 3 of the aforementioned Valuation Rules provides
for discarding the invoice price if there is evidence that the
relationship between the supplier and the importer has
influenced the price. I find from the record that the
Memorandum as well as Article of Association and Annual
Return (AR01) of M/s. Inspired Lighting Ltd., U.K. reveal
that Sh. Anil Kumar Anand was the Managing Director and
100% share holder of M/s. Inspired Lighting Ltd., U.K., the
overseas supplier of the goods. Sh. Anil Kumar Anand was
also director and 50% share holder of M/s. Diyas Mantra
Lighting Pvt. Ltd., the importer of goods in India. Shri Rahul
Mehta, director in his statement dated 16.02.2015 has
stated that he and his father Sh. Rakesh Mehta along with
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his cousin Shri Anil Kumar Anand were three directors of the
firm and he and his father were authorized signatory and
looked after sale and purchase and Mr. Anil Kumar Anand
looked after the finance of the company. He further stated
that he and his co-director Mr. Anil Kumar Anand had 50%
each share holding of their company. Thus, I find that in the
instant matter, the buyer and seller are related.
51.2 Following points have emerged on the issue of related
person in the present matter during investigation:
Related
person
Common interest details
Shri Anil
Kumar
Anand
Director and 100% share holder of M/s. Inspired Lighting Ltd.,
U.K.(overseas supplier of the goods)
Director and 50% share holder of M/s. Diyas Mantra Lighting Pvt.
Ltd. (importer of goods in India), look after finance of M/s. Diyas
Mantra Lighting Pvt. Ltd
Cousin of Sh. Rahul Mehta, another director of M/s. Diyas Mantra
Pvt. Ltd.
Given interest free unsecured loan of Rs. 1.37 crores during
2013-14 to M/s. Diyas Mantra Lighting Pvt. Ltd & M/s. Diyas
Mantra Lighting Pvt. Ltd. had transferred/ made payment
Rs.1,00,00,000/- (Rs. 1 crore) on 23.02.2015 to Mr. Anil Kumar
Anand, director of M/s Inspired Lighting Ltd. U.K., the overseas
supplier of the goods
51.3 I observe that the foreign supplier and the Indian
importers are deemed to be 'Related' in terms of Rule 2(2)
of Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007, if one or more of the following
conditions are fulfilled:-
➢ they are officers or directors of one another's
businesses;
➢ they are legally recognised partners in business;
➢ they are employer and employee;
➢ any person directly or indirectly owns, controls or
holds 5 per cent or more of the outstanding voting
stock or shares of both of them;
➢ one of them directly or indirectly controls the other,
➢ both of them are directly or indirectly controlled by a
third person;
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➢ together they directly or indirectly control a third
person; or
➢ they are members of the same family
51.4 In the present matter, Mr. Anil Kumar Anand, is (i)
director and 100% share holder of M/s Inspired Lighting Ltd.
U.K.; (ii) Director and 50% share holder of M/s. Diyas
Mantra Lighting Pvt. Ltd. (importer of goods in India); (iii)
looks after finance of M/s. Diyas Mantra Lighting Pvt. Ltd.;
and (iv) Cousin of Sh. Rahul Mehta, another director of M/s.
Diyas Mantra Lighting Pvt. Ltd. These points confirm that
importer and UK supplier are Related Party in the present
matter.
51.5 I find that Shri Rajeev Dhawan, Asstt. Manager, Import
Documentation with M/s. CMA CGM Agencies India Pvt. Ltd.
New Delhi (shipping company) in his statement dated
20.02.2015, inter-alia, stated that a draft waybill had been
issued as no Bill of Lading was issued at port of loading in
this case as the shipper did not have any problem for the
payment of goods or the payment had been received by
shipper in advance and in such cases generally shipper
select the option of issue of draft way bill instead of Original
Bill of Lading which showed that the supplier and buyer had
some common interest. As such it appears that there was
financial flow back between M/s. Inspired Lighting Ltd.,
U.K., overseas supplier of goods and M/s Diyas Mantra
Lighting Pvt. Ltd., the importer of goods in India.
51.6 Further, it appears that on the back of catalogue of
"Diyas" brand goods of M/s. Inspired Lighting (Edition Eight
India) imported by M/s. Diyas Mantra Lighting Pvt. Ltd., New
Delhi, following details were mentioned;
(i) India Office:
Diyas Mantra Lighting Pvt. Ltd.
Khasra No. 651, Palam Vihar Road Bijwasan New Delhi-
110061 Tel. in
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011-28063100 Mob. 9015584100 www. divasmantra.
sales&divasmantra. in
(ii) Head Office:
Inspired Lighting Ltd, Mutual Mills, Aspinall Street,
Heywood, OLIO 4HP Tell. +441706620077 Fax.
+441706620079
www.mantraUghting. co. uk salesCd) mantraUghting.co.uk
51.6.1 I find that the Catalogue of "Diyas" brand shows that
this brand was the property of M/s. Inspired Lighting Ltd.
Heywood, U.K. and having India office at M/s. Diyas Mantra
Lighting Pvt. Ltd., New Delhi. In my opinion, in any business
terms, if buyer-seller are not related, no buyer would allow
any seller to mention its details on the catalogue of goods
or vice-versa. M/s. Diyas Mantra Lighting Pvt. Ltd., New
Delhi, and M/s. Inspired Lighting Ltd. Heywood, U.K, were
inter related and Mr. Anil Kumar Anand, Director of M/s.
Diyas Mantra Lighting Pvt. Ltd., New Delhi, having its Head
Office in U.K., controlled and managed all the financial
affairs of the importing company.
51.6.2 I find that M/s. Diyas Mantra Lighting Pvt. Ltd. were
the sole distributor/dealer in India of the brands of "Diyas"
of M/s Inspired Lighting Ltd, U.K. and of "mAntra" of Spain
as stated by Sh. Rahul Mehta, director in his statement
dated 16.02.2015. The catalogue of these products also
indicates the common interest of all these firms/company.
Importer in its reply, stated that the names of the UK entity
and the Spanish entity have been mentioned in the
catalogues of the impugned goods only to mark a level of
reputation to such brand as they were non-reputed brand
which were being launched for the first time by the Noticee
in India; the head office addresses in the respective
catalogues was mentioned only to develop an identity in
respect of the brands "diyas" and "mAntra" which were
owned by the UK supplier and the Spanish supplier
respectively. The contention of the importer is not
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acceptable as both the brands are established brands and
M/s. Diyas Mantra Lighting Pvt. Ltd. was the sole
distributor/dealer in India of the brands of "Diyas" of M/s.
Inspired Lighting Ltd, U.K. and of "mAntra" of Spain. This
fact-gets confirmed from the statement dated 22.05.2015
of Shri Rajan Jain, Director of the firm M/s. Jainson Lights
Pvt. Ltd. wherein he stated that "Diyas" & "mAntra" were
famous brand in Europe and M/s. Diyas Mantra Lighting Pvt.
Ltd, India planning to inaugurate goods / brands in India.
51.7 It has been observed that "Diyas" brand goods of M/s.
Inspired Lighting (Edition Eight India) and "Diyas" brand
was the property of M/s. Inspired Lighting Ltd. Heywood,
U.K. and having India office at M/s. Diyas Mantra Lighting
Pvt. Ltd., New Delhi. Thus, it is observed that M/s. Diyas
Mantra Lighting Pvt. Ltd.,. New Delhi, M/s. Inspired Lighting
Ltd. Heywood, U.K were inter-related and Mr. Anil Kumar
Anand, Director of M/s. Diyas Mantra Lighting Pvt. Ltd., New
Delhi, having its Head Office in U.K., controlled and
managed all the financial affairs of the importing company.
51.8 In a similar case of related person in CC vs. East African
Traders reported at 2000 (115) ELT 613 (SC), the Hon'ble
Supreme Court had held that authorities can pierce the
corporate veil to ascertain whether the buyer and seller are
indeed related persons within the meaning of the rule.
Piercing corporate veil means looking behind the facade to
see the persons who are in real control. It appeared that
M/s. Diyas Mantra Lighting Pvt. Ltd. & M/s. Inspired Lighting
Ltd., U.K had common interest in business of each other and
had common decision making with respect to related
entities and their being two business entities in the eyes of
law was just a corporate veil to undervalue the goods for
maximizing profit which stands pierced by establishing
common decision making and comrion business interest
with respect to related entities, Further, the transaction
between supplier and appellants cannot be at arms length.
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52. Having established that the importer and supplier are
related persons, I come to Rule 3(3)(a) according to which
transaction value shall be accepted provided that the
examination of circumstances of the sale of the imported
goods indicate that the relationship did not influence the
price. The financial flow between UK supplier and importer,
as brought out above, clearly indicates the effect of
relationship on business transactions. In any case, the
examination of the circumstances detailed above does not
give confidence that the price was real. Further, I observe
that importer in para B.1 of their written submission
contended that "This is evident from the fact that the value
declared by the Noticee is at par with the value of the goods
imported from the Chinese supplier and the Spanish supplier
which are unrelated persons to the Noticee" which implies
that Chinese & Spanish supplier are unrelated by virtue of
their own submissions, it is quite evident that importer
themselves accepted that UK supplier is a related person.
Here, importer contended that value declared by the
importer was at par with the value of the goods imported
from the Chinese supplier and the Spanish supplier.
Evidently, the foreign supplier has procured the goods from
third party suppliers and sold the same to the Indian
importer but it is not clarified as to how goods of Chinese
origin were routed through UK suppliers M/s. Inspired
Lighting Ltd., while in such an international trade
transaction, the freight cost incurred by the foreign supplier
in procuring the goods from country of origin, or, for that
matter, the margin of profit were not added to local
purchase cost to arrive at selling cost to Indian buyer, the
importer. In fact, if one goes by the prices of some identical
items, as supplied by the importer in Annexure 8 to their
reply to show cause notice, the UK supplier had supplied the
same items at prices comparable with or little higher than
or in few cases even at less than the price of supply from
China, e.g. chandlier (Item code IL 30216/BA) was
purchased by importer from Homemax China (B/E no.
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2398164/ dated 12.06.2013)@ Rs.4275.13 while the same
item was procured from UK related party (B/E no. 2664918
dated 09.07.2013) @ Rs.3823.66. Similarly, Pendant [item
code IL 30410] was purchased from Homemax China
[B/E3661501 dated 28.10.2013) @Rs.1198.11 while the
same item was procured form Inspired Lighting UK [B/E
2664918 dated 09.07.2013)@ Rs.1164.70. The period of
purchases has been taken in these examples to be in closer
vicinity and of course, the rate of exchange (Dollar for
Chinese supply and GB Pound for UK supply) would have its
own impact, but the fact remains that the supply from UK
could not have been cheaper if the same goods were
imported by UK supplier from China and then supplied to
Indian importer than when the Indian importer imported it
directly from China. Thus, I find that in terms of Rule 3(3)(a)
of the Customs Valuation (Determination of value of
Imported Goods) Rules, 2007, the examination of
circumstances indicates that relationship between Indian
importer and UK supplier did influence the price.
52.1 As indicated above and as can be seen from the list
submitted by importer, it has not been demonstrated by the
importer that the declared value of goods imported from
Inspired Lighting. UK closely approximated to the value of
identical goods imported by themselves from Home Max
China around the same time. Thus, importer having failed
to establish their case under Rule 3(3)(b) of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007. I proceed to apply Rule 4 to 9, sequentially.
53. Moreover, Rule 3(1) deals with the determination of the
method of valuation. It provides that subject to Rule 12, the
value of the imported goods shall be the transaction value
adjusted in accordance with provisions of Rule 10. Rule 10
deals with cost and services. It provides that in determining
the transaction value, the amount referred to in (a), (b),
(c), (d) and (e) of sub-rule (1) of Rule 10 shall be added to
the price actually paid or payable for the imported goods.
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The payment referred to in (e) of item sub-rule (1) of Rule
10 provides that in determining the transaction value, all
other payments actually made or to be made as a condition
of sale of the imported goods, by the buyer to the seller, or
by the buyer to a third party to satisfy an obligation of the
seller to the extent that such payments are not.. included in
the price actually paid or payable shall be added.
Thus, Rule 10(1)(e) contemplates two situations i.e. when
other payments actually made or to be made can be added
to the price actually paid for determination of the
transaction value. The first is a situation when all other
payments made by the buyer to the seller, as a condition of
sale of the imported goods to satisfy an obligation of the
seller to the extent that such payments are not included in
the price actually paid, have to be added. The second is a
situation when all other payments made by the buyer to a
third party, as a condition of sale of the imported goods to
satisfy an obligation of the seller to the extent that such
payments have not been included in the price, have to be
added.
53.1 I find that during the course of investigation
proceedings, importer neither co-operated with the
investigation team nor submitted the detailed information
w.r.t. elements as mentioned in Rule 10 for deriving the
transaction value. With the kind of financial relationship
between importer and supplier in UK, as investigated upon,
the exact nature of actual or virtual back flow such as
interest on loan (declared as interest free) etc. was required
to be submitted by importer but it was not submitted. Hence
such additional element could not be calculated.
54. As per Rule 3, the transaction value shall be accepted if
the sale of the imported goods indicate that the relationship
did not influence the price, but it is evident that M/s. Diyas
Mantra Lighting Pvt. Ltd., India and M/s Inspired Lighting
Ltd., U.K., the overseas supplier of branded goods had
common interest in business of each other and had common
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decision making and were related person as per definition
of related person given in Rule 2(2) of the Customs
Valuation (determination of value of imported goods) Rules,
2007.
54.1 Rule 3(4) of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007 states that if the
value cannot be determined under the provisions of sub-rule
(1) of Rule 3, the value shall be determined by proceeding
sequentially through Rule 4 to 9.
55. Now, I proceed to discuss Rule 4 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007, which reads as under:
4. Transaction value of identical goods. -
(1)(a) Subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of identical
goods sold for export to India and imparted at or about the
same time as the goods being vahied:
Provided that such transaction value shall not be the value
of the goods provisionally assessed under section 18 of the
Customs Act, 1962.
(b) In applying this rule, the transaction value of identical
goods in a sale at the same commercial level and in
substantially the same quantity as the goods being valued
shall be used to determine the value of Imported goods.
(c) Where no sale referred to in clause (b) of sub-rule (1),
is found, the transaction value of identical goods sold at a
different commercial level or in different quantities or both,
adjusted to take account of the difference attributable to
commercial level or to the quantity or both, shall be used,
provided that such adjustments shall be made on the basis
of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether
such adjustment leads to an increase or decrease in the
value.
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(2) Where the costs and charges referred to in sub-rule (2)
of rule 10 of these rules are included in the transaction
value of identical goods, an adjustment shall be made,
if there are significant differences in such costs and
charges between the goods being valued and the
identical goods in question arising from differences in
distances and means of transport.
(3) In applying this rule, if more than one transaction value
of identical goods is found, the lowest such value shall
be used to determine the value of imported goods.
55.1 As per Rule 4 of the Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007 transaction value
of identical goods can be used to arrive at value of goods
imported by the importer. Identical goods are defined in
Rule 2(1)(d) as follows:
d) "identical goods" means imported goods -
(i) and reputation as the goods being valued except for
minor differences in appearance that do not affect the
value of the goods; which are same in all respects,
including physical characteristics, quality
(ii) produced in the country in which the goods being
valued were produced; and
(iii) produced by the same person who produced the goods,
or where no such goods are available, goods produced
by a different person,
55.2 Further, I note that Hon'ble Supreme Court in para-8
of its Order dated 22.04.2019, observed that "The aforesaid
Rule envisages that the transaction value of identical goods
imported at the same time as the goods valued, can be
applied. It is, of course, clarified that they should be
substantially of the same quantity, as there can be variation
in pricing, depending on the size of the consignment. In case
identical goods sold are not found in respect of the same
quantity, different quantities of identical goods can be taken
into account, with adjustments made on the basis of
demonstrated evidence which clearly establishes the
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reasonableness and accuracies of adjustment. The
difference in distance, having implication on the transport
cost, is another factor mentioned under the Rules. It is lastly
clarified that the lowest of such value is to be used to
determine the value of the goods.
55.3 The items imported here are of various categories such
as Pendant, chandlier, ceiling light, floor lamp, wall lamp
etc. The design and style of these items differ from those
imported by others. As submitted by importer and other.
dealers during the investigation, brands Diyas and mantra
were being handled only by importer. Thus, imports of these
goods by any other importer are not available for
comparison. While it has been mentioned that goods
imported from UK were also manufactured in china, it is not
submitted if supplier in China was common for both UK and
Indian importers. At the same time, as noted in para 52
above, even if for some limited items, price of goods
supplied by Chinese manufacturer to Indian company was
more than the price of same goods supplied by UK supplier
(though procured from China only by UK supplier),
comparison of prices of such identical goods imported by
importer from both China & UK could not be made. Thus, I
find that in absence of any reliable and complete data for
price of identical goods, Rule 4 of Customs Valuation
(Determination of Value of Imported Goods) Rules 2007
could not be applied in the present case.
56. Now, I proceed to discuss Rule 5 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007, which reads as under:
5. Transaction value of similar goods.-
(1) Subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of similar
goods sold for export to India and imported at or about
the same time as the goods being valued:
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Provided that such transaction value shall not be the
value of the goods provisionally assessed under section
18 of the Customs Act, 1962.
(2) The provisions of clauses (b) and (c) of sub-rule (1),
sub-rule (2) and sub-rule (3), of rule 4 shall, mutatis
mutandis, also apply in respect of similar goods.
56.1 As per Rule 5 of the Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007 Transaction value
of the similar goods can be used to arrive at value of goods
imported by the importer. Similar goods are defined in Rule
2(1)(1), as follows:
" "similar goods" means imported goods -
(i) which although not alike in all respects, have like
characteristics and like component materials which
enable them to perform the same functions and to be
commercially interchangeable with the goods being
valued having regard to the quality, reputation and the
existence of trade mark;
(ii) produced in the country in which the goods being
valued were produced; and
(iii) produced by the same person who produced the goods
being valued, or where no such goods are available,
goods produced by a different person, but shall not
include imported goods where engineering,
development work, art work, design work, plan or
sketch undertaken in India were completed directly or
indirectly by the buyer on these imported goods free of
charge or at a reduced cost for use in connection with
the production and sale for export of these imported
goods;"
56.2 As per Note to Rule 5, while applying Rule 5, the proper
officer of customs shall, wherever possible, use a sale of
similar goods at the same commercial level and in
substantially the same quantities as the goods being valued.
For the purpose of Rule 5, the transaction value of similar
imported goods means the value of imported goods,
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adjusted as provided for in Rule 5(2) which has already been
accepted under Rule 3. Further, all other provisions
contained in note to Rule 4 shall mutatis mutandis also apply
in respect of similar goods. I find that M/s. Diyas Mantra
Lighting Pvt. Ltd., India, was the sole importer/distributor in
India in respect of impugned goods, hence, issue of using
the data of similar goods i.e. decorative electrical lighting
fixtures, is not feasible. As noted earlier, the design, style
and functioning of each item (which has unique item code
assigned by brand owner) is such that comparable similar
goods can't be located to take the value of those similar
goods to arrive at the value of the imported goods. As noted
earlier, even identical goods value is not available.
Therefore, in my view, valuation of the subject imported
goods cannot be determined by applying the provisions of
Rule 5 of Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007.
57. Now, I proceed to discuss Rule 6 of the Customs
Valuation (Determination of Value of Imported Goods)
Rules, 2007, which reads as under:
"6. Determination of value where value cannot be
determined under Rules 3, 4 and 5.-
If the value of imported goods cannot be determined
under the provisions of rules 3, 4 and 5, the value
shall be determined under the provisions of rule 7 or,
when the value cannot be determined under that rule,
under rule 8.
Provided that at the request of the importer, and with
the approval of the proper officer, the order of
application of rules 7 and 8 shall be reversed."
57.1 1 find that value of imported goods cannot be
determined under the provisions of rules 3, 4 and 5 as
discussed above in paras- 54 to 56. The transaction value
method cannot be applied in cases where the buyer and
seller are related and the relationship has influenced the
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price. The scope of relationship is defined in Sub-Rule 2 (2)
of the Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007. In such cases the burden of
proof shifts to the importer, who should satisfy the Customs
that the declared price closely approximates to the test
values. I find that the importer failed to discharge this
responsibility, hence the declared value could be rejected
and valuation done under any of the subsequent methods
applied in sequential order.
58. It is further observed that the value of the imported
goods has beer re-determined/arrived in the show cause
notice from sale price of the importe taken from sale
invoices by reverse calculation as deductive value as per
Rule 7 (1 of the Customs Valuation (Determination of value
of Imported Goods) Rules, 200 read with rule 9 of rules ibid.
Rule 7 (1) reads as under:
7. Deductive value.
(1) Subject to the provisions of rule 3, if the goods being
valued or identical or similar imported goods are sold in
India, in the condition as imported at or about the time at
which the declaration for determination of value is
presented, the value of imported goods shall be based on
the unit price at which the imported goods or identical or
similar imported goods are sold in the greatest aggregate
quantity to persons who are not related to the sellers in
India, subject to the following deductions:-
(i) either the commission usually paid or agreed to be paid
or the additions usually made for profits and general
expenses în connection with sales in India of imported
goods of the same class or kind:
(ii) the usual costs of transport and insurance and
associated costs incurred within India;
(iii) the customs duties and other taxes payable in India by
reason of importation or sale of the goods.
58.1 It appeared that in case of most of the items sale price
had been available from their sale invoices and on being
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noticing that the sale price of the goods was 2 to 8 times
higher than the declared/ import value of the goods,
therefore, in respect of items where sale price was not
available 3 times higher than the declared/ import value had
been taken as sale price on average basis in terms of rule 9
of rules ibid. From the sale price of the importer, factor of
15% has been deducted on account of margin of profit
(MOD) and from the price so arrived, further factor of 5%
has been deducted on account of post importation charges
to arrive at cum duty price. From cum duty price the
elements of customs duty aggregate to 28.85% have been
deducted to arrive at the assessable value of the goods. The
assessable value so arrived was in the range of 25 to 30%
of the MRP/RRP of the goods fixed by the importer. It is also
observed that M/s. Diyas Mantra Lighting Pvt. Ltd. was the
sole importer and distributor of "Diyas" and "mAntra' brand
electric decorative lightings Fixtures imported from M/s.
Inspired Lighting Ltd., U.K and the overseas supplier and
importer were related entities. Also the importer had not
submitted any data with regard to the cost of the material
/labour consumed for manufacturing the said imported
goods as such the value of goods needs determination under
Rule 7 (1) of the Customs Valuation (Determination of value
of imported goods) Rules, 2007. The method adopted for
arriving at the assessable value in respect of goods imported
from UK is found to be as per the provisions of the Customs
Valuation (Determination of value of Imported Goods)
Rules, 2007.
58.2 The claim of the importer about deduction on account
of margin of profit and other expenses to be given more
than what was proposed in the show cause notice was
examined by Hon'ble Tribunal also in final order dated
06.11.2017 and not found sustainable in absence of any
material evidence. The situation remains the same here.
The importer has not provided any evidence/ records to get
any higher deductions. It is already noted that where sale
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price was not available, extrapolation, as in case of other
item was done
58.3. In respect of the importer's deposition that for
element of value addition they refer to UK Recommended
Retail Price (RRP) pricelist to make their Indian RRP Pricelist
to cover the value addition factor and had given 60%-80%
discount on RRP/MRP price, it was noticed that MRP/RRP
price of imported goods as mentioned/ printed on
catalogues of goods resumed from the premises of
C.No.VIII(Cus. Prev.)Adj./Commr/Diyas/02/2016
importer and their dealer M/s. Jainsons Lights Pvt. Ltd., New
Delhi (main dealer of the importer) was found to correspond
to price of goods downloaded from internet which refuted
the claim made by Sh. Rahul Mehta, Director in his
statement dated 07.05.2015 that their dealer were free to
make pricelist of their products on their own as they were
independent businessman and there was no direct relation
of this dealer price catalogue with their firm i.e., M/s Diyas
Mantra Lighting Pvt. Ltd., This argument of Sh. Rahul Mehta
was also found negated by the statement dated 22.05.2015
of Sh. Rakesh Kumar Aggarwal, Partner of M/s Shimer
Lights, wherein he stated that they did not fix any sale price
or MRP on the products of M/s Diyas Mantra Pvt. Ltd. as they
were not authorized to do so. Sample comparative chart
showing price of same items as mentioned in catalogue,
MRP/RRP printed by dealer M/s. Jainsons Lights, price
downloaded from internet, import invoice price, sale invoice
price and re-determined assessable value has been
tabulated under para 31 above.
59. The importer in para B.27 of their written submissions,
stated that "It is submitted that in the instant case, out of
the total consignments imported by the Noticee, only the
imports made from the UK supplier may be construed as
import from a related party of the Noticee". Details of re-
determined assessable value & differential duty in respect
of the 13 Bills of Entry pertaining to imports, imported from
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M/s. Inspired Lighting Ltd., U.K (related entity) are as
under:
Sl.No
.
Bill of
Entry No.
Impor
t from
Sale
value of
the
importer
as per
Sale Bill
Total
duty
payable
as per
SCN
Duty
alread
y paid
as per
Bill of
entry
Diff. Duty
payable
1 9358869
dt.
19.02.201
3
UK 1370683
254174
99748
1544262
4
7
5
2 9496253
dt.
06.03.201
3
UK 6688594 124030
45304
787262
9
7
3 2664918
dt.
09.07.201
3
UK 7115879 131954
44477
874765
4
9
4 4312167
dt.
09.01.201
4
UK 1011371
187545
53670
1338745
7
2
7
5 4350584
dt.
15.01.201
4
UK 59500 11033 4362 6671
6 4977550
dt.
22.03.201
4
UK 265535 49240 21658 27582
7 5459631
dt.
12.05.201
4
UK 107685 19969 3900 16069
8 5605272
dt.
26.05.201
4
UK 25600 4747 1945 2802
9 5646046
dt.
29.05.201
4
UK 6340307 117572
43951
736211
4
3
10 6061312
dt.
05.07.201
4
UK 8647176 160350
46815
1135346
2
6
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11 3598358
dt.
21.10.201
3
UK 403771 74874 35412 39462
12 7163436
dt.
25.10.201
4
UK 7806683 144764
47800
969642
4
2
13 7610152
dt.
06.12.201
4
UK 99128 18382 11939 6443
748526
3
59.1 As such the re-determined assessable value of the live
shipment i.e. the goods imported vide bill of entry
No.8059523 dated 21.01.2015 has beer correctively arrived
at Rs.52,22,305/-in place of declared value of Rs.
19,01,175/- involving differential duty of Rs.9,53,073/- and
applying the same method the re-determined assessable
value of the past imports from U.K. in respect of 13 Bills of
Entry comes to Rs.4,46,72,712/-involving differential duty
of Rs.74,85,263/-, as above.
59.2 Further, importer in para B.4 of their written
submissions, stated that "Without prejudice, it is submitted
that out of the three suppliers, only the UK supplier may be
construed as a related party. The department has given no
justification as to why the transaction value in respect of the
impugned goods imported from the Chinese supplier and the
Spanish supplier is liable to be rejected or how the other two
suppliers can be considered as 'related person' to the
Noticee".
59.3 While the name and brand of Spainish supplier has
been used by importer in branding their products in India
including displaying name & address of Spainish company
on their catalogues, the elements to declare the importer as
related to Spainish company in term of Rule 2(2) of Customs
Valuation (Determination of value of Imported goods) Rules,
2007 have not been established in the Show Cause Notice.
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Thus, I find force in the contention of the importer and find
no evidence on record with regard to related person in
respect of imports from Spain and China, hence, I am
inclined to accept the transaction value declared by the
importer in respect of imports from Spain and China and
drop the demand raised in respect of Bills of Entry pertaining
to imports from Spain and China. Details of 07 Bills of Entry
and differential duty liable to be dropped in respect of
imports from Spain and China, is as under:
Sl.
Bill of Entry No. Import
Sale value as per
SCN
Diff. Duty as per SCN
from
No.
1 9538135 dt. 12.03.2013 Spain 4966744 598244
2 8735949 dt. 11.12.2012 China 13394342 1631814
3 2398164 dt. 12.06.2013. China 10907114 1426130
4 3661501 dt. 28.10.2013 China 9304900 1165029
5 4367980 dt. 17.01.2014 China 29750 1126
6 7182641 dt. 27.10.2014 China 75160 6708
7 7794850 dt. 23.12.2014 China 133572 11923
4840974
60. I find that Shri Rajan Jain, Director of the firm M/s.
Jainson Lights Pvt. Ltd. in his Statement dated 22.05.2015
stated that they met Mr. Rahul Mehta who introduced
himself as representative of M/s Diyas Mantra Lighting Pvt.
Ltd. and told that "Diyas" & "mAntra" were famous brand in
Europe and they were planning to inaugurate goods / brands
in India, hence the contention of the importer that "Diyas"
& "mAntra" were not famous brands is not tenable.
60.1 Further, I find that importer placed reliance on the case
of Commissioner of C. Ex., Bangalore vs. Brindavan
Beverages (P) Ltd., 2007 (6) TMI 4 - SUPREME COURT and
many other judgements, wherein the Hon'ble Court
observed that the show cause notice is the foundation on
which the department has to build up its case and if the
allegations in the Show Cause Notice are not specific and on
the contrary are vague and lack details, it would be
sufficient to hold that the Noticee was not given proper
opportunity to meet the allegations. Here, I observe that Sh.
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Anil Kumar Anand, being the Director of the importing
company, handling the finance, deliberately avoided various
summons issued by the department and not co-operated in
departments efforts of finding facts. At the same time,
details of the allegation and demand were clearly brought
out in the show cause notice, as already upheld by Hon'ble
CESTAT in final order dated 06.11.2017. Therefore, this
contention of importer is not tenable.
61. From the facts on record, it emerges that the importer
had imported branded "Electric Decorative Lighting" from
its related party and had mis-declared the imported goods
and suppressed the brands of the goods namely "Diyas" and
"mAntra". Sh. Anil Kumar Anand, Managing Director and
100% share holder of M/s. Inspired Lighting Ltd., U.K., and
the overseas supplier of the goods was also director and
50% share holder of M/s. Diyas Mantra Lighting Pvt. Ltd.,
the importer of goods in India. The foreign supplier has
procured the goods from third party suppliers and sold the
same to the importer. Further, importer has not been able
to establish that M/s. Inspired Lighting Ltd., U.K. sold
identical or similar goods to other importers in India at the
same price. It is highly unlikely that in such an international
trade transaction, the freight cost incurred by the foreign
supplier in procuring the goods from country of origin, or,
for that matter, the margin of profit will not be added to
arrive at selling cost to Indian buyer, the importer. As noted
earlier, in the present case, on the contrary, supply to India
from UK was cheaper in some case than supply from China.
It is clear that M/s Diyas Mantra Lighting Pvt. Ltd. & M/s.
Inspired Lighting Ltd., U.K, were related person in terms of
Rule 2(2) of the Customs Valuation (Determination of Value
of Imported Goods) Rules, 2007 and they had common
interest in business of each other, had common control and
decision making as well as financial flow back with respect
to related entities. It is also observed that M/s. Diyas Mantra
Lighting Pvt. Ltd. was the sole importer and distributor of
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"Diyas" and "mAntra” brand electric decorative lightings
fixtures imported from M/s. Inspired Lighting Ltd., U.K and
the overseas supplier and importer were related entities.
61.1 The importer knowingly did not declare the brands of
imported goods i.e. "Diyas" which were found printed on the
material and user manual of the goods with intent to
undervalue the goods. As per statement of Sh. Rahul Mehta,
Sh. Anil Kumar Anand had looked after finance of M/s. Diyas
Mantra Lighting Pvt. Ltd.; had given interest free unsecured
loan of Rs. 1.37 crores during 2013-14 to M/s. Diyas Mantra
Lighting Pvt. Ltd. Also M/s. Diyas Mantra Lighting Pvt. Ltd.
was the sole distributor/dealer in India of M/s. inspired
Lighting Ltd, U.K. Thus, they had common interest in
business of each other and had common control and
decision making and also had financial flow back and were
related person in terms of rule 2(2) of the Customs
Valuation (Determination of value of imported. goods)
Rules, 2007. Further, I find that Shri Anil Kumar Anand had
never joined the investigation of this case and had not
supplied the purchase invoices or any other detail of
procurement of the said imported goods. Shri Rahul Mehta
who was authorized by him to give all the information, had
also failed to give all the relevant information to the
department. Thus, it is clear that M/s. Diyas Mantra Lighting
Pvt. Ltd, India and M/s Inspired Lighting Ltd., U.K. had
common interes in business of each other and had common
decision making as well as financial flow back with respect
to related entities and were related person as per definition
of related person given in Rule 2(2) of the Customs
Valuation (Determination of value of imported goods) Rules,
2007. Since the value of goods was mis-declared, therefore,
the declared value merited rejection under Rule 12 of the
Customs: Valuation (Determination of Value of Imported
Goods) Rules, 2007. The value of the same had been
appraised as per Rule 6, 7 and 9 of the Customs Valuation:
(Determination of Value of Imported Goods) Rules, 2007.
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61.2 The seized goods are also found liable for confiscation
under Section 111(m) of the Customs Act, 1962. The
importer has objected to proposal for confiscation of goods
already cleared on the ground that the goods were no longer
available for confiscation. However, I find that the liability
to confiscation is not dependent upon the fact of availability
of goods but on the violations prescribed under Section 11
of the Customs Act. In this regard, I draw strength from the
judgment dated. 11.08.2017 of Hon'ble High Court of
Madras in the case of M/s VISTEON AUTOMOTIVE SYSTEMS
INDIA SYSTEMS VS (i) CESTAT, Chennai and (ii)
Commissioner of Customs Chennai (Import).
In the said judgment Honorable High Court has decided:
"The Fine under Section 125 of Customs Act 1962 is
in lieu of confiscation of the goods. The Payment of
fine followed up by payment of duty and other charges
leviable as per sub section (2) of section 125, fetches
relief for the goods from getting confiscated, by
subjecting the goods to payment of duty and other
charges the Importer and irregular importation is
sought to be regularized where by subjecting the
goods to payment of fine under sub-Section (2) of
Section 125, the goods are saved from getting
confiscated.
Hence, the availability of the goods is not necessary
for imposing the Redemption fine. The opening words
of Section 125 "whenever confiscation of any goods is
authorized by this Act......" brings out the point
clearly. The power to impose redemption fine springs
from the authorization of confiscation of goods
provided for under section 111 of the Act. When once
power of authorization for confiscation of goods gets
traced to the said section 111 of the Act, we are of the
opinion that the physical availability of goods is not so
much relevant. The redemption fine is in fact to avoid
such consequence flowing from section 111 only.
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Hence the payment of redemption fine saves the
goods from getting confiscated. Hence their physical
availability does not have any significant for
imposition of redemption fine under Section 125 of the
Act."
Further in the case of R.K. Agnihotri Vs Unknown,
Honourable CESTAT, Mumbai, relying on the ratio of the said
Judgment dt. 11.08.2017 of the Honorable High Court of
Madras in the case of M/s Visteon Automotive System India
Ltd. Vs (i) CESTAT, Chennai and (ii) Commissioner of
Customs(import) Chennai has decided that:
"Once the goods are held liable for confiscation, the
physical availability of the goods or their presence is
not mandatory for proceedings under section 125 of
the Customs Act 1962."
In any case, in the present matter, goods were seized vide
letter dated 27.03.2015 and later on released provisionally
vide letter dated 18.06.2015 (as per RUD-17 to Show Cause
Notice). Thus, liability to make available the goods is on the
importer in terms of the bond submitted by them and in lieu
of the same, redemption fine is imposable.
62. Next, I will take up the penalty provisions invoked
against the noticees in the SCN. I find that Shri Rahul Mehta,
Director, handling the day to day affairs of the company and
Sh. Anil Kumar Anand, Director of M/s. Diyas Mantra
Lighting Pvt. Ltd. have actively participated in the import of
the subject goods & were knowingly concerned in mis-
statement and suppression of import value of imported
goods with an intent to evade due customs duty. They have
also personally dealt with the clearance of formalities of the
subject goods from the port including mis declaration and
undervaluation. Further, Sh. Anil Kumar Anand, Director,
deliberately avoided various summons issued by the
department and did not co-operate in departments efforts
of finding facts and thus this act of Sh. Mehta and Sh. Anand
made them liable to penal action under Section 112 (b) of
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the Customs Act, 1962. By their acts of omission and
commission these two directors have rendered the goods
liable for confiscation while rendering themselves liable to
penalty under the provisions of Section 112(b) of the
Customs Act, 1962. M/s. Diyas Mantra Lighting Pvt. Ltd. also
is liable to penalty under Section 114A of Customs Act,
1962.
63. Further, the mis-declaration and suppression in import
value of imported goods as well as its brands is found done
willfully by the Importer with sole intention to evade
customs duty and therefore Section 28(4) of the Customs
Act, 1962 read with Section 110 of the Act ibid is found
invokable.”
4.3 Before the matter is further examined its necessary to take
note of the observations made by the Hon’ble Supreme Court
while remanding the matter back to the original authority for de-
novo adjudication. We reproduce the same below:
12. In the context of the aforesaid, it is the submission of
learned counsel for the appellant that the factual matrix of
the present case shows that the twenty one consignments
(including the one directly in question) were not imported
from one source, but three different sources. Out of the
three different sources, the competent authority came to
the conclusion that the import from United Kingdom, from
M/s. Inspired Lighting Limited, is liable to be construed as
import from a related party. Though this is sought to be
disputed by the appellants, but even assuming that to be
correct, it was contended that there were imports available
from two other sources, from China and Spain. These
suppliers are not found to be related parties. Thus, the
pricing from these two sources, with requisite adjustments
for the distance or any other parameter, could always be
taken as the transactional value for all the goods forming
part of the twenty one consignments.
13. A further explanation offered on behalf of the appellants,
in respect of the second aspect, i.e., non-declaration of the
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brand ‘Diyas’ and ‘mAntra’, pertaining to the consignments
in question, was that the brands were not so well-known as
to make a difference to the value. In fact, for the import
from China, the brand ‘Diyas’ had been clearly mentioned.
The consignments had been cleared after physical
verification. In effect, the plea was that the two brands
really do not attract any intrinsic market value.
14. It is a submission that the sequential application of
Rules, thus, required the valuation to be done in accordance
with Rules 3 to 5, before proceeding to the subsequent
Rules, and it is not a case where valuation was not possible
under Rules 3 to 5.
15. As an alternative submission, it was also pleaded that
even where identical or similar goods are not available, data
is available, of the value of the goods in the National Import
Database (‘NIDB’) or the Department of Valuation database
(‘DOV’).
16. In a nutshell, the submission really is that the valuation
was possible on the basis of import from the other two
countries if the brand was to be given some significance,
and in the alternative, if the plea was accepted that the
brand was not of any significance, then the other imports
from the U.K. of the same kind of lights could be taken into
consideration. It was clarified that the endeavour was not to
compare oranges and apples, but to compare apples of a
particular variety with the apples of the same variety, i.e.,
if it was one lamp light, it was to be compared with one lamp
light. In this behalf data was available.
17. We may notice there were certain other pleas advanced,
including the plea of limitation, but that is not of much
significance for redetermination, on account of the
conclusion we are reaching hereinafter.
18. We must first take note of the fact that electrical
decorative lightings, normally, are not highly branded
products, exceptions apart. It does appear that even though
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the imports were under the brand names ‘Diyas’ and
‘mAntra’, they were not trademarks of such nature as would
make them an exclusive product. It also appears that there
has been some mix up in the understanding of a trademark
protection, as the same has been compared with ‘patented
goods’. Thus, data was certainly available, which could have
been utilised to obtain the pricing for imports from the U.K.,
of identical goods or similar goods.
19. The irony is that if the competent authority thought that
these were goods where trademark was of significance, it
could not simultaneously have ignored the imports under
the same trademark, from different countries, where there
were no related parties. Naturally, there would have to be
made adjustments for the distance from which the import
was made, or the size of the consignment, if applicable, as
set out in Rules 3 to 5. There was really no occasion to
straightaway proceed to determine the transactional value
by relying on Rules 7 to 9. We have no doubt this principle
of sequential application would apply, especially in view of
sub-Rule (4) of Rule 3, which provides that there has to be
a sequential implementation of the Rules, i.e., that Rules 3
to 5 would have to be exhausted first, and only in the
eventuality of an inability to apply the Rules would the
assessing authority proceed to impose Rules 7 to 9.
20. Learned counsel for the respondent did endeavour to
persuade us that since there were concurrent findings, this
Court ought not to interfere, given the scope of appeal
before this Court under Section 130E(b) of the said Act, and
referred to the judgment in Collector of Customs, Bombay
v. Swastic Woollens (P) Ltd. & Others [1988 Suppl. SCC
796] , where it was observed as under:
“9. ...... The decision of such a question of fact must
be arrived at without ignoring the material and
relevant facts and bearing in mind the correct legal
principles. Judged by these yardsticks the finding of
the Tribunal in this case is unassailable. We are,
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however, of the view that if a fact finding authority
comes to a conclusion within the above parameters
honestly and bona fide, the fact that another authority
be it the Supreme Court or the High Court may have
a different perspective of that question, in our opinion,
is no ground to interfere with that finding in an appeal
from such a finding. In the new scheme of things, the
Tribunals have been entrusted with the authority and
the jurisdiction to decide the questions involving
determination of the rate of duty of excise or to the
value of goods for purposes of assessment. An appeal
has been provided to this Court to oversee that the
subordinate tribunals act within the law. Merely
because another view might be possible by a
competent court of law is no ground for interference
under Section 130-E of the Act though in relation to
the rate of duty of customs or to the value of goods
for purposes of assessment, the amplitude of appeal
is unlimited. But because the jurisdiction is unlimited,
there is inherent limitation imposed in such appeals.
The Tribunal has not deviated from the path of correct
principle and has considered all the relevant factors.
If the Tribunal has acted bona fide with the natural
justice by a speaking order, in our opinion, even if
superior court feels that another view is possible, that
is no ground for substitution of that view in exercise
of power under clause (b) of Section 130-E of the Act.”
21. We are, however, not persuaded by this argument
because there appears to be a fundamental mistake
committed in the manner of implementation of the statutory
Rules. Once the statutory Rules exist and provide for
sequential implementation, the assessing authority has no
option but to proceed in accordance with those Rules, in that
manner. We did put this squarely to learned senior counsel
for the respondent, who really could not persuade us, or
give a satisfactory answer as to why the concerned authority
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chose to ignore, in the given facts of the case, Rules 3 to 5,
and did not proceed “sequentially”.
22. The result of the aforesaid discussion is that both, the
order of the Principal Commissioner of Customs
(Preventive), Customs, New Delhi, dated 30.3.2017, as well
as the order of the CESTAT, dated 6.11.2017, are liable to
be set aside, and the matter remitted back to the Principal
Commissioner of Customs (Preventive), Customs, New
Delhi, to proceed afresh with the matter in accordance with
our observations aforesaid, and thus, it is Rules 3 to 5 which
would have to be applied first, as it is provided for the Rules
to apply “sequentially”.
23. We make it clear that since we have not gone into other
pleas sought to be raised by the appellant, all pleas can be
raised by the appellant, as are available to the appellant in
law, and the same will be dealt with on merits.”
4.4 From the observations made by the Hon’ble Apex Court it is
evident that the directions were given to proceed sequentially
while applying the Rule 3 to 9 of the Customs Valuation Rules, for
determining the value of the imported goods.
4.5 From para 61 of the impugned order it is evident that brand
used for selling these goods in India is the brand of the supplier
in Spain, who has been held to be non related person with
importer in India. In fact the demand made against the imports of
identical/ similar goods imported from Spain and China have been
dropped. We observe that in Para 18 and 19, Hon’ble Supreme
Court has specifically dealt with the issue of non mention of Brand
Name etc., on the import documents filed by the appellant. Non
mention of the Brand Name on the import documents have been
the ground for invoking the extended period of limitation and also
for holding that Appellant and the UK suppliers were related
person.
4.6 Even if were to conclude that the Appellant (Importer) and
the UK Supplier were the related persons, then also in terms of
the Custom Valuation Rules, it has to be established that the
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relationship has in fact impacted the declared transaction value of
the imported goods. We do not find any attempt made to
determine the impact of the relationship on the price of the
imported goods. On the contrary impugned order has accepted
the prices of the same/ similar goods imported from Spain and
China as the transaction value and have dropped the demand
made against such goods.
4.7 In the case of Impex Steel & Bearing Co. [2014 (302) E.L.T.
464 (T-Del)] following was held:
4. After hearing both the sides, we find that the dispute in
the present appeal relates to the correct value of the PU
belts with buckles of Chinese origin. As per the appellant,
the supplier of the goods is the manufacturer of the same
and the value declared by them in the Bill of Entry is the
same value which is reflected in the invoice raised by the
foreign supplier. The Revenue has not advanced any
evidence to show that the said declared value is not correct
value. In terms of the provision of Rule 3 of the Customs
(Valuation) Rules, 2007, the value of the imported goods
shall be the transaction value and the same is required to
be accepted unless there are strong reasons to reject the
same.
5. We find that the Hon’ble Supreme Court in the case of
Union of India v. Mahindra & Mahindra - 1995 (76) E.L.T.
481 (S.C.) has held as under :
“Ordinarily the Court should proceed on the basis that
the apparent tenor of the agreements reflect the real
state of affairs. It is, no doubt, open to the revenue to
allege and prove that the apparent is not the real and
that the price for the sale of the CKD packs is not the
true price, and the price was determined by reckoning
or taking into consideration the lump sum payment
made under the collaboration agreement in the sum
of 15 million French Francs. The short question is
whether the revenue has succeeded in showing that
the apparent is not the real and that the price shown
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in the invoices does not reflect the true sale price and
so section 14(1)(b) of the Act was properly invoked”.
As such the transaction value should be taken as correct
value unless there is evidence to the contrary. Further, it is
well settled law that unless there is additional consideration
involved or any of the exception of Rule 4(2) are attracted
transaction value cannot be rejected. Reference can be
made to the decision in the case of Commissioner of
Customs (Bombay) v. Bureau Veritas - 2005 (181) E.L.T. 3
(S.C.) and Tolin Rubber (P) Limited v. Commissioner of
Customs, Cochin - 2004 (163) E.L.T. 289 (S.C.).
6. In the present case, we find that the Revenue has not
produced any evidence to show that there was any
additional consideration flowing back from the appellant to
the foreign supplier, in which case the Revenue is bound to
accept the declared transaction value. Apart from that we
note that the attention of the lower authorities was drawn
to the fact of another import made by the appellant at
Tuglagabad wherein the value of the identical goods
declared by them @ US $ 1.50 per dozen were accepted and
there is no appeal of the Revenue against the said
assessment order. If that be so, we really fail to understand
as to why the said imports at Tuglagabad, which is in respect
of the same very goods and from the same supplier, would
not constitute contemporaneous import so as to adopt the
same for the purposes of assessment.
4.8 In case of Sanjivani Non Ferrous Trading Pvt. Ltd. [2019
(365) E.L.T. 3 (SC)], Hon’ble Supreme Court has held as follows:
“6. It was submitted that if the Original
Authority/Assessing Officer had failed to examine the
evidence that was available with the Department and had
not undertaken the exercise regarding price being not the
sole consideration, the Tribunal should have remanded the
case back to the Assessing Officer for examining the
material and undertaking that exercise. To put it otherwise,
the entire thrust of the argument of Mr. Radhakrishna was
that appeals could not have been allowed straightaway by
accepting the transaction value given by the
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respondent/assessee and another opportunity should have
been given to the Assessing Authority in this behalf.
7. This argument may seem to be attractive, but only when
there is a cursory look at the aforesaid observations of the
Tribunal that the Assessing Officer did not examine the
evidence available with the Department which was
necessitated for such a purpose. However, the observations
of the Tribunal have to be understood in their entirety and
in the context in which these are made. The Tribunal has
categorically mentioned that as per the provisions of Section
14 of the Customs Act and the principles laid down in the
case law (which it referred to in the earlier part of the
judgment) interpreting this provision, the assessable value
has to be arrived at on the basis of the price which is actually
paid. It is the basic principle enshrined in the aforesaid
provision, i.e., Section 14, which can be culled out from the
catena of judgments pronounced by this Court.
8. In Eisher Tractors Ltd., Haryana v. Commissioner of
Customs, Mumbai-1, (2001) 1 SCC 315 = 2000 (122) E.L.T.
321 (S.C.), this Court held as under :
“6. Under the Act Customs duty is chargeable on
goods. According to Section 14(1) of the Act, the
assessment of duty is to be made on the value of the
goods. The value may be fixed by the Central
Government under Section 14(2). Where the value is
not so fixed, the value has to be determined under
Section 14(1). The value, according to Section 14(1),
shall be deemed to be the 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”
necessarily implies the exclusion of “extraordinary” or
“special” circumstances. This is clarified by the last
phrase in Section 14 which describes an “ordinary”
sale as one “where the seller and the buyer have no
interest in the business of each other and the price is
the sole consideration for the sale ...”. Subject to
these three conditions laid down in Section 14(1) of
time, place and absence of special circumstances, the
price of imported goods is to be determined under
Section 14(1A) in accordance with the Rules framed
in this behalf.
xxx xxx xxx
9. These exceptions are in expansion and explicatory
of the special circumstances in Section 14(1) quoted
earlier. It follows that unless the price actually paid
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for the particular transaction falls within the
exceptions, the Customs Authorities are bound to
assess the duty on the transaction value.
xxx xxx xxx
12. Rule 4(1) speaks of the transaction value.
Utilisation of the definite article indicates that what
should be accepted as the value for the purpose of
assessment to Customs duty is the price actually paid
for the particular transaction, unless of course the
price is unacceptable for the reasons set out in Rule
4(2). “Payable” in the context of the language of Rule
4(1) must, therefore, be read as referring to “the
particular transaction” and payability in respect of the
transaction envisages a situation where payment of
price may be deferred.
xxx xxx xxx
13. That Rule 4 is limited to the transaction in
question is also supported by the provisions of the
other rules each of which provide for alternate modes
of valuation and allow evidence of value of goods
other than those under assessment to be the basis of
the assessable value. Thus, Rule 5 allows for the
transaction value to be determined on the basis of
identical goods imported into India at the same time;
Rule 6 allows for the transaction value to be
determined on the value of similar goods imported
into India at the same time as the subject goods.
Where there are no contemporaneous imports into
India, the value is to be determined under Rule 7 by
a process of deduction in the manner provided
therein. If this is not possible the value is to be
computed under Rule 7A. When value of the imported
goods cannot be determined under any of these
provisions, the value is required to be determined
under Rule 8 “using reasonable means consistent with
the principles and general provisions of these Rules
and sub-section (1) of Section 14 of the Customs Act,
1962 and on the basis of data available in India”. If
the phrase “the transaction value” used in Rule 4 were
not limited to the particular transaction then the other
rules which refer to other transactions and data would
become redundant.
xxx xxx xxx
22. In the case before us, it is not alleged that the
appellant has misdeclared the price actually paid. Nor
was there a mis description of the goods imported as
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was the case in Padia Sales Corpn. [1993 Supp. (4)
SCC 57] It is also not the respondent’s case that the
particular import fell within any of the situations
enumerated in Rule 4(2). No reason has been given
by the Assistant Collector for rejecting the transaction
value under Rule 4(1) except the price list of vendor.
In doing so, the Assistant Collector not only ignored
Rule 4(2) but also acted on the basis of the vendor’s
price list as if a price list is invariably proof of the
transaction value. This was erroneous and could not
be a reason by itself to reject the transaction value. A
discount is a commercially-acceptable measure which
may be resorted to by a vendor for a variety of
reasons including stock clearance. A price list is really
no more than a general quotation. It does not
preclude discounts on the listed price. In fact, a
discount is calculated with reference to the price list.
Admittedly in this case a discount up to 30% was
allowable in ordinary circumstances by the Indian
agent itself. There was the additional factor that the
stock in question was old and it was a one-time sale
of 5-year-old stock. When a discount is permissible
commercially, and there is nothing to show that the
same would not have been offered to anyone else
wishing to buy the old stock, there is no reason why
the declared value in question was not accepted under
Rule 4(1).”
9. To the same effect, are other judgments, reiterating the
aforesaid principle, such as, Commissioner of Customs,
Calcutta v. South India Television (P) Ltd., (2007) 6 SCC
373 = 2007 (214) E.L.T. 3 (S.C.), Chaudhary Ship Breakers
v. Commissioner of Customs, Ahmedabad, (2010) 10 SCC
576 = 2010 (259) E.L.T. 161 (S.C.) and Commissioner of
Customs, Vishakhapatnam v. Aggarwal Industries Ltd.,
(2012) 1 SCC 186 = 2011 (272) E.L.T. 641 (S.C.).
10. The law, thus, is clear. As per Sections 14(1) and
14(1A), the value of any goods chargeable to ad valorem
duty is deemed to be the price as referred to in that
provision. Section 14(1) is a deeming provision as it talks of
‘deemed value’ of such goods. Therefore, normally, the
Assessing Officer is supposed to act on the basis of price
which is actually paid and treat the same as assessable
value/transaction value of the goods. This, ordinarily, is the
course of action which needs to be followed by the Assessing
Officer. This principle of arriving at transaction value to be
the assessable value applies. That is also the effect of Rule
3(1) and Rule 4(1) of the Customs Valuation Rules, namely,
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the adjudicating authority is bound to accept price actually
paid or payable for goods as the transaction value.
Exceptions are, however, carved out and enumerated in
Rule 4(2). As per that provision, the transaction value
mentioned in the Bills of Entry can be discarded in case it is
found that there are any imports of identical goods or similar
goods at a higher price at around the same time or if the
buyers and sellers are related to each other. In order to
invoke such a provision it is incumbent upon the Assessing
Officer to give reasons as to why the transaction value
declared in the Bills of Entry was being rejected; to establish
that the price is not the sole consideration; and to give the
reasons supported by material on the basis of which the
Assessing Officer arrives at his own assessable value.
11. In South India Television (P) Ltd., the Court explained
as to how the value is derived from the price and under what
circumstances the deemed value mentioned in Section
14(1) can be departed with. Following discussion in the said
judgment needs to be quoted hereunder :
“10. We do not find any merit in this civil appeal for
the following reasons. Value is derived from the price.
Value is the function of the price. This is the
conceptual meaning of value. Under Section 2(41),
“value” is defined to mean value determined in
accordance with Section 14(1) of the Act. Section 14
of the Customs Act, 1962 is the sole repository of law
governing valuation of goods. The Customs Valuation
Rules, 1988 have been framed only in respect of
imported goods. There are no rules governing the
valuation of export goods. That must be done based
on Section 14 itself. In the present case, the
Department has charged the respondent importer
alleging misdeclaration regarding the price. There is
no allegation of misdeclaration in the context of the
description of the goods. In the present case, the
allegation is of underinvoicing. The charge of
underinvoicing has to be supported by evidence of
prices of contemporaneous imports of like goods. It is
for the Department to prove that the apparent is not
the real. Under Section 2(41) of the Customs Act, the
word “value” is defined in relation to any goods to
mean the value determined in accordance with the
provisions of Section 14(1). The value to be declared
in the bill of entry is the value referred to above and
not merely the invoice price.
xxx xxx xxx
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12. However, before rejecting the invoice price the
Department has to give cogent reasons for such
rejection. This is because the invoice price forms the
basis of the transaction value. Therefore, before
rejecting the transaction value as incorrect or
unacceptable, the Department has to find out whether
there are any imports of identical goods or similar
goods at a higher price at around the same time.
Unless the evidence is gathered in that regard, the
question of importing Section 14(1A) does not arise.
In the absence of such evidence, invoice price has to
be accepted as the transaction value. Invoice is the
evidence of value. Casting suspicion on invoice
produced by the importer is not sufficient to reject it
as evidence of value of imported goods.
Undervaluation has to be proved. If the charge of
undervaluation cannot be supported either by
evidence or information about comparable imports,
the benefit of doubt must go to the importer. If the
Department wants to allege undervaluation, it must
make detailed inquiries, collect material and also
adequate evidence. When undervaluation is alleged,
the Department has to prove it by evidence or
information about comparable imports. For proving
undervaluation, if the Department relies on
declaration made in the exporting country, it has to
show how such declaration was procured. We may
clarify that strict rules of evidence do not apply to
adjudication proceedings. They apply strictly to the
Courts’ proceedings. However, even in adjudication
proceedings, the AO has to examine the probative
value of the documents on which reliance is placed by
the Department in support of its allegation of
undervaluation. Once the Department discharges the
burden of proof to the above extent by producing
evidence of contemporaneous imports at higher price,
the onus shifts to the importer to establish that the
invoice relied on by him is valid.
Therefore, the charge of underinvoicing has to be
supported by evidence of prices of contemporaneous
imports of like goods.
13. Section 14(1) speaks of “deemed value”.
Therefore, invoice price can be disputed. However, it
is for the Department to prove that the invoice price
is incorrect. When there is no evidence of
contemporaneous imports at a higher price, the
invoice price is liable to be accepted. The value in the
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export declaration may be relied upon for
ascertainment of the assessable value under the
Customs Valuation Rules and not for determining the
price at which goods are ordinarily sold at the time
and place of importation. This is where the conceptual
difference between value and price comes into
discussion.”
12. The observations of the Tribunal made in the impugned
judgment are to be appreciated in the light of the principles
of law specified in the aforesaid judgment, inasmuch as the
Tribunal has categorically remarked that the normal rule is
that assessable value has to be arrived at on the basis of
the price which is actually paid, as provided by Section 14
of the Customs Act and the case law referred to by it (In
paragraph 5, the Tribunal referred to its own judgments
which follow the aforesaid principle laid down by this Court).
13. It is, therefore, rightly contended by Mr. Dushyant A.
Dave, Learned Senior Counsel appearing for the respondent
that the reason given for setting aside the order that the
normal rule was that the assessable value has to be arrived
at on the basis of the price which was actually paid, and that
was mentioned in the Bills of Entry. The Tribunal has clearly
mentioned that this declared price could be rejected only
with cogent reasons by undertaking the exercise as to on
what basis the Assessing Authority could hold that the paid
price was not the sole consideration of the transaction value.
Since there is no such exercise done by the Assessing
Authority to reject the price declared in the Bills of Entry,
Order-in-Original was, therefore, clearly erroneous.”
4.9 The decision of Hon’ble Delhi High Court, in case of
Himanshu Gupta, relied by the Authorized Representative during
the course of hearing, is on the issue of relevance of cross
examination in the proceedings of demand made under Central
Excise Act, 1944. We do not find any relevance of the said decision
in these proceedings and the said decision is clearly
distinguishable.
4.10 The decision of Chennai Bench in the case of Xiaomi
Technology India Pvt. Ltd. referred by the Authorized
Representative was in respect of addition of the royalty and
license fees paid under exclusive agreements with the license
holders. Tribunal has in the facts of the case concluded that such
royalty and license fees are to be added to the declared
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transaction value for determining the assessable value for the
purpose of payment of the customs duty in terms of Rule 10 (c)
of the Custom Valuation Rules. WE do not have any such case for
consideration and do not find any relevance of the said decision
here. The decision of tribunal is an authority only in respect of the
issues decided.
4.11 All the other issues raised by the authorized representative
in respect of the piercing of corporate viel etc., become irrelevant
as in the instant case we find that prices of the identical/ similar
goods imported by the appellant from non related suppliers in
Spain and China have been accepted by the adjudicating authority
and it has not been shown that the transaction prices of the goods
imported from the related supplier in UK are impacted by the
relationship. The crux of Rule 3 (3) (a) of the Custom Valuation
Rules, 2007 needs to be applied in letter and spirit to the facts of
the present case. In any case the assessable value of the goods
imported from UK could not be higher than the value determined
in respect of identical/ similar goods imported from of Spain and
China.
4.12 In view of the discussions as above we do not find any
merits in the impugned order whereby the demand of duty in
respect of the import made from UK (14 Bill of entries detailed in
para 59 of the impugned order) has been confirmed. Similarly we
do not find any merits in redetermination of the value of the good
imported vide Bill of Entry No 8059523 dated 21.01.2015 (para
59.1) of the impugned order as the said determination is also
based on the similar logic without recording any recording any
separate findings.
4.13 As we are setting aside the basic charge of mis-declaration
and accepting the value as declared by the appellant on the Bill of
Entry No 8059523 dated 21.01.2025, we set aside the order of
confiscation of the said goods.
4.14 We also set aside the confiscation of the goods seized at the
godown of the appellant on 05.02.2015 as we do not find any
merits in the charge of mis-declaration.
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4.15 As we have set aside the demand of duty and the order of
confiscation of goods we also do not find any merits in the order
imposing penalties under Section 114A of the Customs Act, 1962
on the importer and penalties imposed under Section 112 (b) ibid
on the Directors (Appellant 2 and Appellant 3) in the appellant
company (importer).
5.1 Appeals are allowed.
(Order pronounced in open court on - 29.10.2026 )
Sd/-
(MR. SOMESH ARORA)
MEMBER (JUDICIAL)
Sd/-
(MR. SANJIV SRIVASTAVA)
MEMBER (TECHNICAL)
LKS