COMMNR. OF CUSTOMS, NEW DELHI-IVversusMIS.ARYAN ELECTRONICS

                         [2015] 6 S.C.R. 252


A            COMMNR. OF CUSTOMS, NEW DELHI-IV
                                  v.
                    MIS.ARYAN ELECTRONICS
                   (Civil Appeal No. 709 OF 2005)
B
                           APRIL29,2015
               [A.K. SIKRI AND R. F. NARIMAN, JJ.]

            Customs Valuation Rules, 1988: rr.4, 5, 6, 10A -
c   Import of goods - Transaction value @ Rs.36 per piece
    declared by the importer-respondent - Rejected by the
    Commissioner (appeal) and invoking r. 6, he found thatin 10
    instances given by department, prices mentioned therein
    varied from Rs. 73.94 and Rs.134.08 per piece and taking
D   minimum of the said price fixed the transaction value at
    Rs. 73. 94 and confiscated the goods and imposed differential
    duty and redemption fine of Rs.20 lacs and penalty of Rs.5
    lacs - Tribunal held that identical goods were imported @
    Rs. 58 per piece and, therefore, there was no reason to justify
E   the value fixed by Commissioner (appeal)- Held: In the 10
    instances given by the Department, prices thereof ranged
    between Rs. 73 to Rs. 134 per piece - On the other hand, 5
    examples given by respondent, prices thereof were from
    Rs. 58 to Rs. 72. 12- The Departmental representative argued
F   that even as per the respondent, the similar goods were
    imported@ between 58 to Rs. 72. 12 per piece and, therefore,
    the declaration of price in Bill of Entry at Rs. 36 per piece
    was not accurate - The price of Rs. 581- was rightly not
G   accepted by the Commissioner by giving a very valid reason,
    namely, even in respect of that import by the importer
    declaring the value of Rs. 581-, a show cause notice had
    been issued by the Department and case was under scrutiny
    - Thus, the entire basis of the Tribunal's order was misplaced
H   as it was founded on total misconception of law and was also
                                  252
  COMMNR. OF CUSTOMS, NEW DELHI v. M/S ARYAN 253
                ELECTRONICS

 contrary to the facts on record - The order of Tribunal is set A
 aside and order of Commissioner is affirmed insofar as it
 relates to redemption of the value declared by the respondent
 at Rs. 36 per piece and fixing the value at Rs. 73. 94 per piece,
 as well as demand of differential duty on that basis -
 Redemption fine of Rs. 20 lakhs and the penalty of Rs. 5 lakhs B
 which is imposed in the facts of this case is on a higher side
 - Redemption fine is reduced to Rs.6 lakhs which is the
 equivalent to the differential duty and penalty imposed is set
 aside a/together- Custom Act, 1962 - s. 112.
                                                                c
        Disposing of the appeal, the Court

         HELD: 1. In the first instance, the comparable
  instance which was taken into consideration by the
  Commissioner was not that of "identical goods" but            D
  "similar goods". The Commissioner himself mentioned
· that no evidence of identical goods was available.
  Therefore, the Tribunal wrongly proceeded on the basis
  that the Commissioner had loaded the value on the basis
  of import of identical goods. When the Commissioner           E
  rejected the transaction value declared by the
  respondent applying Rule 10Aofthe Customs Valuation
  Rules, 1988, on that basis he held that Rule 4(1) would
  not apply. Thereafter he stated that Rule 5 would not
  apply as there was no evidence of "identical goods". It       F
  is for this reasons he undertook .the exercise, as
  contemplated in Rule 6, by giving the example of "similar
  goods". The instances which were given by the
  Department and even by the respondent himself, no
  objection was raised by the respondent that these             G
  instances were not .of similar goods. Therefore, relying
  upon those instances by the Commissioner cannot be
  faulted. [Paras 9, 10] [259-C-G]

        2. The Tribunal also committed error in rejecting       H
254      SUPREME COURT REPORTS                (2015] 6 S.C.R.


A the basis of Commissioner's order on the ground that
  these instances which were relied upon by the
  Commissioner were of the import in May, 2003 while the
  import in question took place prior to that date. Insofar
  as the import by the respondent is concerned, that was
B on 13.05.2003. Therefore, the instances which were relied
  upon by the Commissioner of May, 2003 are of the same
  period and fulfill the requirement of Section 14 of the
  Customs Act, 1962. Insofar as reasoning predicted on
  import of identical goods at the rate of Rs. 58/- per piece
C is concerned, again a clear fallacy has occurred in
  making such observation. The ten instances which were
  given by the Department, prices thereof ranged between
  the 73 to 134 per piece. On the other hand, five examples
  which were given by the respondent, prices thereof were
0
  from Rs. 58/- to Rs. 72.12. Thus, what the Departmental
  representative had argued was that even as per the
  respondent, the similar goods were imported at the rate
  of ranging between 58 per piece to Rs. 72.12 per piece
E and therefore the declaration of price in Bill of Entry at
  Rs. 36/- per piece was not accurate. This price of Rs.
  58/- has not been accepted by the Commissioner, and
  rightly so, by giving a very valid reason, namely, even in
  respect of that import by the importer declaring the value
F of Rs. 58/-, a show cause notice had been issued by the
  Department the price proposed was Rs. 90/- per piece.
  Thus, the entire basis of the Tribunal's order is misplaced
  as it is founded on total misconception of law and is
  also contrary to the facts on record. For the said reasons
G the order of the Tribunal is set aside and the order of the
  Commissioner is affirmed insofar as it relates to
  redemption of the value declared by the respondent at
  Rs. 36/- per piece and fixing the value at Rs. 73.94 per
  piece, as well as demand of differential duty on that basis.
H Redemption fine of Rs. 20 lakhs and the penalty of
 COMMNR. OF CUSTOMS, NEW DELHI v. M/S ARYAN 255
               ELECTRONICS

Rs. 5 lakhs which is imposed in the facts of this case is A
on a higher side. Insofar as redemption fine is
concerned, the same is reduced to Rs. 6 lakhs which is
the equivalent to the differential duty and penalty
imposed is set aside altogether. [Paras 11 to 15) [259-H;
260-A-H; 261-A-C]                                                B

      CIVILAPPELLATEJURISDICTION: CivilAppeal No.
709 of2005.

       From the Judgment and Order dated 16.08.2004 ofthe        c
Customs, Excise &Service TaxAppellate Tribunal, New Delhi
in Appeal No. C/25/04-NB(A).

      K. Radhakrishnan, T. C. Sharma, Binu Tamta, B. Krishna
Prasad for the Appellant.
                                                                 0
       S. Vasudevan, V. Lakshmikum.aran, M. P. Devanath,
Vivek Sharma, L. Charanaya, Rach it Jain, Shalini, Aman D.,
Disha Jain, ShagunArora, Rajesh Kumar for the Respondent.

       The Judgment of the Court was delivered by                E

       A.K.SIKRI, J. - 1. The respondent herein who is trading
in electronic goods had imported a consignment of 30,000
pieces whic_h was described in the Bill of Lading as "parts of
VCD-LENCE WITH MECHANISM".                                       F

        2. In the Bill of Entry which was filed by the respondent
for clearing of the aforesaid imports, the value of the goods
was declared at US$ 0.72 per piece and total value of US
$ 21,600 was arrived at in the aforesaid import. In support G
of this declaration of value, the respondent had produced
Bill of Lading dated 14.4.2003 and invoice dated 9.4.2003.
Since the goods were not purchased directly from the
manufacturer but from a trader, the invoice produced was
that of the trader who had sold the goods to the respondent.      H
    256       SUPREME COURT REPORTS                  [2015] 6 S.C.R.


    A         3. The goods were assessed to duty and ordered to
      be examined before clearance. On examination the customs
      authorities found that this has been sub-assemblies for VCDs
      - Lens with mechanism. It was also found that in the result,
      the packets of the goods were marked as "Made in China"
    B and were bearing brand name of"Samsung". As this fact was
      not reflected on the invoice and the Department nurtured the
      doubt that the goods are branded and therefore the value
      discloses was not the true value of the goods, the Department
      sought clarification from the respondent vide letter dated
    C 23.5.2003 regarding brand name. In this communication the
      respondent was also asked to justify the declared value.

              4. The respondent replied vide letter dated 28.5.2003
      stating that on.ly the eye of the lens with mechanism was
    D branded and other parts like motor parts etc. were not
      branded and were made in China. It was also stated that
•     only a few boxes were bearing a small sticker of Samsung to
      distinguish thatthe mechanism is having Samsung brand Lens.
      Insofar as query on valuation is concerned, it was explained
    E by the respondent that imported goods are unbranded and
      the transaction has been made through the bank and, therefore,
      the declared value be accepted.

              5. This reply did not satisfy the Department and it chose
    F to hold further enquiry into the matter. Accordingly, vide
      communication dated 31.5.2003 the respondent was
      requested to be present to conduct a 100% examination of
      goods to verify their contention that only few boxes were
      having stickers of Samsung. The respondent was requested
    G to provide information regarding goods packed in branded
      boxes and the goods packed in unbranded boxes. They were
      also asked to submit manufacturer's invoice as they had
      informed that only eye of lens was provided by Samsung and
    H rest of the parts were made in China and other information
 COMMNR. OF CUSTOMS, NEW DELHI v. M/S ARYAN 257
         ELECTRONICS [AK. SIKRI, J.]

was also solicited in this communication._ The Department           A
also conducted a market enquiry in the presence of the
 representative of the respondent at two places i.e. Bhagirath
Place, Delhi and Lajpat Rai Market, Delhi. They also gathered
some information from M/s. Super Cassette Industries Ltd.,
Noida, who were the manufacturer of VCD players and were            B
regularly importing similar goods in connection with the said
manufacturer. Inquiries were also made from the custom
authorities at Inland Container Depot at Tughlakabad, New
Delhi. In the inquiry from Inland Container Depot, the
Department learnt that lens with mechanism - parts of VCD           C
that had been imported at the said Port by some parties were
cleared at a higher value. The ICD Tughlakabad also provided
the information that those goods which were imported showing
the higher value were similar to the samples forwarded by the       D
customs authorities from the consignment of the impugned
goods.

        6. After collecting the aforesaid information the show
 cause notice dated 5.9.2003 was issued to the respondent.
The respondent filed its reply. The material which was              E
collected and mentioned above, was also supplied to and
 put to the respondent. Th_e respondent, in response, also
provided certain instances of import at the same time. After
hearing the respondent, the Commissioner of Customs                 F
passed Order-in-Original dated 22.10.2003. In this order,
he rejected the transaction value as declared by the
respondent under Rule 1OA of the Valuation Rules, 1988
and on that basis observed that Rule 4(1) will have no
application. The Commissioner also accepted that no                 G
evidence of import of "identical goods" was available.
Applicability of Rule 5 was, thus, ruled out. In such a situation
he invoked the provisions of Rule 6 and referred to ten instances
which were collected of similar goods. He also cited five
instances which were given by the respondent during the             H
258       SUPREME COURT REPORTS                 [2015] 6 S.C.R.


A course of personal hearing. Insofar as instances furnished by
  the respondent are concerned, for reasons recorded in the
  order he discarded four out offive instances. The fifth instance
  which was given by the respondent mentioned the import of
  the similar goods at Rs.71.50 per piece. He thus relied upon
B the ten instances which were given by the Department and
  found that the prices mentioned therein varied from Rs. 73.94/
  - and Rs.134.08/-per piece depending upon the quantity and
  the period of import. In terms of Rule 6, the Commissioner
  took the minimum of the aforesaid price and thereafter fixed
C the transaction value at Rs. 73.94 per piece. This resulted in
  confiscation of the goods. However, the Commissioner
  allowed the respondent to clear the goods on payment of
  differential duty i.e. Rs.6, 11,694/- and on payment of
  redemption fine of Rs.20 lakhs. He also imposed penalty of
0
  Rs.5 lakhs on the respondent under Section 112 of the Customs
  Act, 1962.

         7. The respondent, feeling aggrieved by the aforesaid
  order, challenged the same in appeal before the Customs,
E Excise and Service Tax Appellate Tribunal (CESTAT). The
  CESTAT by impugned order dated 16.8.2004 has allowed
  the appeal of the respondent herein. On going through the
  order of the Tribunal, we find that following three reasons
F have persuaded by the Tribunal to allow the appeal of the
  respondent.

      (i) The Commissioner had loaded the value of the goods
      on the basis of the import of "identical goods" which
      cold not be done.
G
      (ii) The import in question was prior to the date in
      comparison with the examples which were given of those
      identical goods which was in the year 1993 and it was
      contrary to the provision of Section 14 of the Customs
H     Act;
 COMMNR. OF CUSTOMS, NEW DELHI v. M/S ARYAN 259
         ELECTRONICS (A.K. SIKRI, J.]

   (iii) The identical goods were imported at the rate of       A
   Rs.58/- per piece and that was no reason enough to justify
   the value fixed by the Commissioner.

        8. After hearing the counsel on either side we find that
on all three counts the Tribunal has committed serious error B
which has resulted in passing the impugned order allowing
the appeal of the respondent.

        9. In the first instance, the comparable instance which
was taken into consideration by the Commissioner was not c
that of "identical goods" but "similar goods". This is so stated
by the Commissioner in his order itself. On the contrary as
pointed out above, the Commissioner himself mentioned that
no evidence of identical goods was available. Therefore, we
do not understand as to how the Tribunal proceeded on the D
basis that the Commissioner had loaded the value on the
basis of import of identical goods.

         10. As mentioned above, when the Commissioner
 rejected the transaction value declared by the respondent E
 applying Rule 1OA of the Customs Valuation Rules, 1988,
on that basis he held that Rule 4(1) would not apply.
Thereafter he proceeded sequentially from Rule 5 onwards.
As far as Rule 5 is concerned, again he stated that this would
not apply as there was no evidence of "identical goods". It is F
for this reason he undertook the exercise, as contemplated
in Rule 6, by giving the example of "similar goods". We would
like to point out at this stage that the instances which were
given by the Department and even by the respondent himself,
no objection was raised by the respondent that these instances G
were not of similar goods. Therefore, relying upon those
instances by the Commissioner cannot be faulted.

      11. The Tribunal also committed error in rejecting the
basis of Commissioner's order on the ground that these          H
260       SUPREME COURT REPORTS                   [2015] 6 S.C.R.


A  instances which were relied upon by the Commissioner were
   of the import in May, 2003 while the import in question took
   place prior to that date. Insofar as the import by the
   respondent is concerned, that was on 13.5.2003. Therefore,
   the instances which were relied upon by the Commissioner of
 B May, 2003 are of the same period and fulfill the requirement of
   Section 14 of the Customs Act, 1962.

           12. Insofar as reasoning predicated on import of
  identical goods at the rate of Rs.58/- per piece is concerned,
C again a clear fallacy has occurred in making such observation.
  We have already pointed out above that ten instances which
  were given by the Department, prices thereof ranged between
  the 73 to 134 per piece. On the other hand, five examples
  which were given by the respondent, prices thereof were from
D Rs.58/- to Rs. 72.12. Thus, what the Departmental
  representative had argued was that even as per the
  respondent, the similar goods were imported at the rate of
  ranging between 58 per piece to Rs. 72.12 per piece and
  therefore the declaration of price in Bill of Entry at Rs.36/- per
E piece was not accurate. We may observe that this price of
  Rs.58/- has not been accepted by the Commissioner, and
  rightly so, by giving a very valid reason, namely, even in respect
  of that import by the importer declaring the value of Rs.58/-, a
F show cause notice had been issued by the Department and
  the case was under scrutiny. In the show cause notice which
  was issued by the Department the price proposed was
  Rs.90/- per piece.

          13. Thus, the entire basis of the Tribunal's order is
G misplaced as it is founded on total misconception of law and
  is also contrary to the facts on record.

         14. For the aforesaid reasons we set aside the.order
  of the Tribunal and affirm the order of the Commissioner
H insofar as it relates to redemption of the value declared by
 COMMNR. OF CUSTOMS, NEW DELHl·v. M/S ARYAN 261
         ELECTRONICS [A.K. SIKRI, J.]

the respondent at Rs.36/- per piece and fixing the value at A
Rs.73.94 per piece, as well as demand of differential duty
on that basis.

       15. However, we are of the opinion that redemption fine
of Rs.20 lakhs and the penalty of Rs. 5 lakhs which is imposed       B
in the facts of this case is on a higher side. Insofar as
redemption fine is concerned, the same is reduced to Rs.6
lakhs which is the equivalent to the differential duty and penalty
imposed is set aside altogether.
                                                                     c
        16. The appeal is disposed of in the aforesaid terms.

Devika Gujral                                Appeal disposed of.



                                                                     D