Legal principle

Goods whose value declared in the Bill of Entry does not correspond to the proper assessable value are liable to confiscation under Section 111(m), and where the undervaluation is admitted, penalty under Section 112(a) follows with virtually no discretion available to the importer.

Court decision

The Madras High Court dismissed the appeal with no costs, answering all the substantial questions of law in favour of the revenue and against the assessee, upholding the confiscation under Section 111(m) and the penalty under Section 112(a).

Facts

M/s. Walchand Nagar Industries Ltd. imported a consignment of 'Dryers, Heater and Cooler' under Tariff Entry 84 19 20 20 from M/s Metso Minerals (Australia) Ltd., declaring a value of AUD 4,16,520 C&F in Bill of Entry dated 31.07.2008. Investigation by the SIIB revealed that design charges had been excluded from the declared value, and the Commissioner rejected the transaction value under Rule 12 of the Customs Valuation Rules, 2007, re-determining it at AUD 10,13,720 C&F (assessable value Rs.4,27,09,243) under Section 14(1) read with Rules 3(1) and 10(b)(iv). The goods were confiscated under Section 111(m), with redemption permitted on payment of a Rs.43,00,000 fine under Section 125, and a penalty of Rs.21,50,000 was imposed on the importer under Section 112(a). The appellant accepted the valuation and paid the enhanced duty, but challenged only the confiscation and penalty; CESTAT dismissed its appeal, and the importer brought this appeal under Section 130 to the Madras High Court.

Key provisions

• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Rule 3(1), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of the method of valuation
• Rule 10(b)(iv), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Cost and services
• Section 14(1), Customs Act, 1962 — Valuation of goods
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 130, Customs Act, 1962 —  Appeal to High Court