Legal principle

Enhancement of the value of imported goods based on a DGOV circular, without rejecting the declared value under Rule 12 and applying the Valuation Rules sequentially from Rule 4 onwards, is unsustainable, and goods that correspond to their declaration in description and value are not liable to confiscation or penalty.

Court decision

The Tribunal allowed the appeal. It held that the enhancement of value was based not on contemporaneous import data but clearly on the DGOV circular, that no exercise of rejecting the declared value under Rule 12 with sequential application of the valuation rules was followed, and that confiscation and penalty under Section 112(a) cannot be sustained where goods correspond to the declaration in description and value; accordingly the impugned order had no merits and the declared value had to be accepted.

Facts

M/s KSEG India International imported goods declared as 'Aluminium Taint/Tabor Scrap as per ISRI with 45% wastage' at USD 700 PMT under two Bills of Entry dated 25.02.2019, filed on first check basis. On 100% examination and testing (spectro gun test and Textile Committee report), the consignment was found to be roughly 55% aluminium (about 99% purity) and 45% non-woven 100% polyester cloth waste, which revenue treated as mis-declaration of 'aluminium sheets' rather than Taint Tabor scrap. The department rejected the declared value under Rule 12 of the Customs Valuation Rules, 2007, valued the aluminium scrap on the LME price discounted per a DGOV letter and the polyester as 'synthetic rags' at contemporaneous import data, and re-determined the value at USD 943.85 CIF (Rs. 56,87,541.92) under Rule 9. The Additional Commissioner ordered confiscation under Sections 111(d) and 111(m) with option to redeem on a fine of Rs. 8,50,000 under Section 125 and imposed a penalty of Rs. 3,00,000 under Section 112(a); the Commissioner (Appeals) upheld this order.

Key provisions

• Section 14, Customs Act, 1962 — Valuation of goods
• Rule 3, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of the method of valuation
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 18, Customs Act, 1962 — Provisional assessment of duty
• Section 2(41), Customs Act, 1962 — Definitions
• Section 1, Customs Act, 1962 — Short title extent and commencement
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 17(5), Customs Act, 1962 — Assessment of duty