Legal principle

A valuation report or other document cannot be relied upon in adjudication unless its author is examined and the noticee is permitted to cross-examine him, since denial of cross-examination is a violation of natural justice and renders the document unreliable.

Court decision

The Tribunal set aside the Commissioner's order dated 24.02.2014, held that the second Chartered Engineer report could not be relied upon since the Chartered Engineer was neither examined by the Department nor permitted to be cross-examined by the appellant, accepted the declared value of the barge as its transaction value, and allowed both appeals in favour of the appellant company and its Managing Director.

Facts

M/s Bhambhani Shipping Ltd imported a second-hand non-propelled accommodation barge 'Halani Star' from Halani International Ltd., Dubai, declaring a CIF value of USD 6,034,657 (Rs.26,97,49,167/-) in a Bill of Entry dated 25.08.2011 under section 46 of the Customs Act, 1962. SIIB officers suspected under-invoicing after examination, recorded the Managing Director's statement under section 108, and had the same Chartered Engineer re-inspect the barge, producing a revised certificate raising the FOB value from USD 6,000,000 to USD 7,385,000 to include equipment, spares and accessories of USD 1,385,000. The barge was seized under section 110 on charges of mis-declaration of value and freight, then provisionally released under section 110A on payment of duty and furnishing a bond and bank guarantee. A show cause notice dated 28.12.2012 under section 124 read with section 28 led to an Order-in-Original dated 24.02.2014 rejecting the declared value under Rule 12 of the 2007 Valuation Rules, redetermining it under Rule 9, confiscating the barge under section 111(m) with a redemption fine of Rs.3.5 crores under section 125, confirming duty of Rs.5.11 crores, imposing penalty of Rs.5.15 crores under section 114A on the company, and penalty of Rs.1.75 crores under section 112(a) on the Managing Director.

Key provisions

• Section 14(1), Customs Act, 1962 — Valuation of goods
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc
• Section 110, Customs Act, 1962 — Seizure of goods, documents and things
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Rule 9, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 125(2), Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 46, Customs Act, 1962 — Entry of goods on importation
• Rule 4, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Transaction value of identical goods