Legal principle

The transaction value of past imports can be enhanced only on the basis of invoices or other documents pertaining to those very imports; loading the values of live consignments onto past bills of entry in the absence of such documents is impermissible conjecture.

Court decision

The Tribunal upheld the impugned order in respect of the five live consignments, confirming the differential customs duty with interest and the penalties on the company and Malhotra under Sections 112, 114A and 114AA, along with confiscation under Section 111(m). It set aside the demand in respect of the 35 past bills of entry, holding the 1.32-times loading to be based on conjectures and surmises, and remanded the matter to the Adjudicating Authority to decide afresh by a speaking order. The company's appeal was partly allowed; Malhotra's appeal against penalty was dismissed.

Facts

M/s S.R. Bristle Products Pvt. Ltd. and its Director T.N. Malhotra imported polyester filament for paint brushes under CTH 54049090, availing a concessional 5% duty under Notification 50/2017 conditioned on the goods being other than nylon. Acting on SIIB intelligence of suppression of actual transaction value, Customs examined the consignments, found 12 excess cartons in one container, and CRCL testing confirmed the goods were polyester. In his Section 108 statement, Malhotra admitted under-invoicing with the overseas supplier through changed invoices showing values 15-20% below actual FOB value, and retrieved email/WeChat printouts evidencing this, later paying differential duty, fine and penalty. The Department extended the allegation to 35 past bills of entry (2015-2017), issued a show cause notice dated 23.12.2020 invoking the extended period, and the Order-in-Original dated 10.09.2021 rejected the declared value, confirmed differential duty with confiscation under Section 111(m), and imposed penalties under Sections 112(a)(ii), 112(b)(ii), 114A and 114AA.

Key provisions

• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Rule 9, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 138C, Customs Act, 1962 — Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence