The rejection of declared transaction values based on evidence of under-invoicing and unauthorized remittances was upheld, affirming the legal obligation for accurate declarations in customs.

Per Mr. VASA SESHAGIRI RAO

The present appeal has been filed by Shri Tukaram Rao Devraj, Proprietor of M/s. Multitek Engineers, Bangalore (the Importer-Appellant), against Order-in-Appeal Nos. 269 and 270 of 2016 dated 04.07.2016 passed by the Commissioner of Customs (Appeals), Chennai. By the impugned orders, the Commissioner (Appeals) upheld Order- in-Original No. 106/2016 dated 17.02.2016 and also allowed the Department’s appeal for inclusion of interest in quantification of mandatory penalty under Section 114A of the Customs Act, 1962 .

2.1 The Importer-Appellant is engaged in the import and trading of rubber belts and PVC conveyor belts for industrial consumers. During the relevant period, imports were effected through Air Cargo Complex, Chennai, from suppliers located in China, Korea, Singapore and Italy.

2.2 On receipt of specific intelligence, the DRI, Bangalore initiated investigation alleging systematic undervaluation of imports by about 25% of the actual transaction value and remittance of the differential consideration to overseas suppliers through unauthorised channels. Searches conducted at the business and residential premises of the appellant led to seizure of incriminating documents, and statements under Section 108 of the Customs Act, 1962 were recorded from the appellant, foreign exchange dealers and other connected persons.

2.3 The investigation revealed that only about 75% of the actual value was declared in the Bills of Entry, while the balance consideration was remitted outside the banking system through hawala channels.

2.4 Accordingly, a Show Cause Notice was issued proposing rejection of the declared value of ₹40,34,895/-, re-determination of assessable value as ₹46,55,070/- under the Customs Valuation Rules, demand of differential customs duty of ₹1,83,164/- with interest, confiscation under Section 111 (m), and imposition of penalties. The Adjudicating Authority confirmed the proposals, which were upheld by the Commissioner (Appeals), giving rise to the present appeal before the Tribunal.

3. The Ld. Advocate Mr. A.K. Prasad appeared for the Appellant and the Ld. Authorized Representative Ms. Rajini Menon, appeared for the Revenue.

4. Submissions on behalf of the Appellant: -

4.1 The Ld. Counsel appearing for the appellant submitted that the impugned orders are legally unsustainable and contrary to settled principles of customs valuation. It is contended that the entire case of the Department rests solely on statements recorded under Section 108 of the Customs Act, 1962 , which were either retracted or obtained under coercion, and that no contemporaneous import data or cogent documentary evidence has been produced to establish undervaluation.

4.2 It is argued that the declared transaction value could not have been rejected merely on the basis of assumptions and presumptions. The Ld. counsel submits that Rule 12 of the Customs Valuation Rules mandates that rejection of transaction value must be preceded by cogent reasons and by according an opportunity to the importer, which was not complied with in the present case.

4.3 The appellant submitted that reliance on proceedings and documents gathered by the Directorate of Enforcement under FEMA is impermissible in customs proceedings. It is further contended that statements recorded before the Enforcement Directorate were retracted and therefore cannot be used against the appellant without independent corroboration.

4.4 It was further contended that no bill-of-entry- wise evidence linking alleged hawala remittances to specific imports has been brought on record. The valuation exercise, according to the appellant, is arbitrary and mechanically applied at a flat rate of 25% without any legal basis.

4.5 On limitation, the appellant submits that all imports were duly declared,