Legal principle

Once the Valuation Rules, 2007 prescribe sequential application under Rule 3(4), the assessing authority has no option but to exhaust Rules 3 to 5 — including comparison with identical or similar goods imports with appropriate adjustments — before proceeding to residual Rules 7 to 9.

Court decision

The appeals were allowed: both the Principal Commissioner's order dated 30.3.2017 and CESTAT's order dated 6.11.2017 were set aside, and the matter was remitted to the Principal Commissioner of Customs (Preventive), New Delhi, to proceed afresh by applying Rules 3 to 5 first, sequentially, before any resort to Rules 7 to 9; all other pleas, including limitation, were left open to be raised and decided on merits, with parties bearing their own costs.

Facts

M/s. Diyas Mantra Lighting Private Limited and its Directors imported electric decorative lightings under the brand names 'Diyas' and 'mAntra', filing a bill of entry on 21.1.2015 at ICD Tughlakabad, New Delhi, with 21 consignments spanning December 2012 to January 2015 in issue. The department, doubling that the goods were correctly valued, issued a show cause notice under Section 28 of the Customs Act, 1962 on two grounds: non-declaration of brand with undervaluation to evade duty, and undervaluation of branded goods imported from a related party. The Principal Commissioner revalued the consignments under Rules 7 and 9 of the Customs Valuation Rules, 2007, confirmed differential duty of about Rs. 9.53 lakhs for the current consignment and around Rs. 1.23 crores for past consignments, held the goods liable to confiscation subject to redemption fine, and imposed a Rs. 13 lakhs penalty on the Directors; CESTAT dismissed the appeal on 6.11.2017.

Key provisions

• Section 18, Customs Act, 1962 — Provisional assessment of duty
• Rule 7, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Deductive value
• Rule 9, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method