T.K. Jayaraman, Member (T)

1. These appeals have been filed against Orders-in-Original Nos. 7 & 8/03 dated 31.7.03 passed by the Commissioner of Customs, Visakhapatnam. Both the orders relate to valuation of imported PU leather cloth and also their entitlement for the benefit of Notification No. 20/99 Cus dated 28.2.99. The appellants imported PU leather cloth through Visak port. The unit price declared was 0.90 US$. 0.90US$ was the concessional rate of duty claimed under Sl No. 110 List 3A of Notification No. 20/99 Cus dated 28.2.99 which exempted insoles and mid-soles or sheets if they are imported for use in leather industry and such exemption is restricted to actual users of goods. According to Revenue, there was mis-declaration of value and description of the goods. In Calcutta Customs House, M/s Bharath Leather Company imported PU leather cloth of Taiwanese origin on 6.5.99 and value accepted for purpose of assessment was US$ 2.00 per meter CIF. It was also felt that the impugned item is not exclusively to be used for insole and mid-sole in leather industry. Further, the appellants were found to be traders and not actual users. Therefore, the revenue proceeded against the appellants by issue of show cause notice. The adjudicating authority determined the value of the impugned goods at US$ 2.00 per meter and demanded differential duty. Further penalties were also imposed. The appellants appealed to CEGAT Bangalore bench and matter was remanded to the Commissioner for denovo decision after giving an opportunity to the appellants for personal hearing. Consequently, the Commissioner took up the matter for denovo adjudication and passed the impugned order. In the denovo order, the Commissioner has fixed the value at US$2.00 per meter. He has also given a finding that the importers are not entitled for the benefit of the Notification No 20/99. The goods were held liable for confiscation but they were not available for confiscation as they had already been released. Penalty of Rs. 2 lakhs on M/s D.S. Impex and Rs 5 lakhs on M/s Vijay Leather Stores were imposed under Section 112(a) of the Customs Act 1962. The appellants strongly challenged the findings of the adjudicating authority.

2. Shri Ramesh Ananthan learned advocate appeared for the appellants and urged the following points.

i) The appellants produced evidence of contemporaneous import where similar goods have been permitted to be cleared at almost the same price as was declared in the present case.

ii) The appellant had sold the goods only to a manufacturer of the leather industry who are the actual users and had correctly availed the benefit of Notification No. 20/99 Cus dated 28.2.99. They had also placed on record, the bills of entry of other importers. The Commissioner ignored the submissions of the appellants and passed the impugned order.

iii) The Commissioner relied on price in respect of the clearance effected by M/s Bharath Leather Industry which was US$2 per meter and on the basis of the said documents, issued a show cause notice for refixing the value at US$ 2 per meter.

iv) Even though in the recital to the show cause notice there is an allegation that concessional rate of duty under notification No. 20/99 Cus dated 28.2.99 is only restricted to actual users of the goods, the said allegation has not been taken to show cause as to why the benefit under the aforesaid notification should not be granted.

v) Except for the allegation made in the show cause notice, the show cause notice is not based on any material evidence nor the material evidence upon which the show cause notice came to be issued has been supplied to the appellants.

vi) There is no investigation, or statements drawn in regard to the allegation that the goods were found to be of multiple use like cushion cover, car decorator etc., and not found to be specifically usable for leather industry as such. It is very clear that show cause notice has been issued only on mere assumption and presumption and not on any concrete evidence.

vii) Along with reply to the show cause notice, the appellant filed a list of Bills of entry on their own which were cleared through Nhava Sheva Customs who have allowed the clearance of the said goods granting benefit of exemption under Notification No. 20/99 and also accepting the transaction value which ranged from US$ 0.90 to US$ 1.00 per meter. Further evidence was produced to show that in respect of similar goods, imported by M/s Baba Leather Impex Ltd., and Others, the value declared and accepted was around US $ 1.00 to US$ 1.10 per meter. It was also contended that all the importers mentioned were traders just like the appellants and not actual users.

viii) The Commissioner failed to note that under Sl No. 110 List 3A of the Notification No. 20/99 no condition of actual user has been made. Therefore, the Commissioner has gone beyond the scope of the exemption Notification.

ix) In the show cause notice, there has been no mention of any situation mentioned in Rule 4(2) of Customs Valuation Rules for rejecting the transaction value. The department has not produced nay document to show as to why the transaction value should be rejected. On this ground the appellants relie on the decision of the Tribunal in the case of Rock Wood Products v. CC 2006 (074) RLT 027 wherein the Tribunal has followed the ratio of the Apex court in the case of Eicher Tractor Ltd., v. CC Mumbai . Further the ruling of the Tribunal in the case of Keveeyam Company v. CC Cochin 2006 (194) ELT 447 (Tri-Bang) is also relied upon.

x) The appellants produced documents to show that during the relevant period transaction value of impugned goods, were identical to the value of like goods imported and cleared. But the Commissioner dismissed it on the ground that there was a cartel operation and the value is tainted. In view of the fact that the assessments made in respect of like goods having obtained finality and the department have not filed any appeal, the Commissioner ought to have accepted the transaction value which is lowest in respect of like goods. Reliance is placed on the decision of the Apex court in the case of Flock (India) Pvt. Ltd. 2000 (40) RLT 131 SC and Priya Blue Industries Ltd., v. CC Preventive wherein it has been held that an order of assessment on a bill of entry is an appealable order against which appeal is required to be filed if the party is aggrieved by the same. Further reliance is placed on the Apex court decision in the case of IOC Ltd. v. CCE Baroda 2006 (202) ELT. 37 SC wherein it was held that the department is not entitled to raise same point in other cases when no appeal has been preferred.

The learned SDR Shri K.S. Sambi Reddy urged the following points.

i) The Commissioners decision on valuation is based on the value of similar goods imported by M/s Bharath Leather Industries.

ii) The goods in question were supplied in different colours such as black, cream, red, grey etc., and have multiple users as upholstery material, car seat covers etc.,

iii) The said goods may also find use as insole for footware. Definitely the goods in question were not designed and manufactured for exclusive use as footware. The goods are not having any special characteristic to identify them as meant for exclusive use in the manufacture of footware. The suppliers have in the invoices mentioned that the sheets are for insole. This has been done at the behest of the importers in order to wrongly avail the benefit of exemption notification 20/99. The following case law was relied by the JDR wherein it is held that when identical goods of the same specification produced in the same country of origin for an import and the value is found to be higher in nature, the transaction value is not acceptable Pan Asia Enterprises v. CC Bombay 1995 (791) ELT 322 (T).

We have gone through the records of the case carefully. There are two issues to be decided in this case. The first relates to the valuation of the impugned goods, and the other to the entitlement of the goods to the benefit of exemption Notification No 20/98. The transaction value is US$ 0.90 per meter. If the transaction value is to be rejected in one of the grounds mentioned in Rule 4(2) of the Customs Valuation Rules has to be pin pointed. Only on the basis of any one of the circumstances, enumerated in the said Rule 4(2), to transaction value can be rejected. The burden is on the revenue to show that the appellants had grossly under-valued the impugned goods and has siphoned differential value through illegal channels. They should invoke the valuation rules in seriatim, after rejecting the transaction value. All this has not been done. The appellants had produced the evidence for import of similar goods, for the same value. The adjudicating authority has stated that there is a cartel operating in this matter and therefore the value is tainted. The statement of the Commissioner has not at all been supported by any investigation. Moreover, the Commissioner has stated that the impugned goods are capable of multiple uses and therefore, the benefit of the said exemption Notification is not available to the appellants. While stating that the impugned goods have multiple uses, the Commissioner has not relied on any expert opinion or test report. The Commissioners views cannot be taken very seriously, because without proper evidence gathered through investigation, such opinions, will not survive scrutiny of judicial fora. The appellants have stated that the impugned items have been sold to actual users only and in the Nhava Sheva port, the benefit of exemption notification was given to them. All these averments have not been properly examined by the Commissioner. Moreover the show cause notice itself has not proposed denial of the exemption Notification, In these circumstances, the order of the Commissioner denying the benefit of notification which was already allowed goes beyond the scope of show cause notice. The assessees bills of entry have not been reviewed by the Commissioner. Thus, the assessments have become final. In these circumstances the impugned order suffers from all the above mentioned vices. It was also pointed out that when the revenue relied on the value of similar goods, imported, the copy of the BE or relied on documents was not supplied to the importer. Therefore, we do not find any merit in the impugned order with regard to the valuation and also the denial of the benefit of the exemption notification. Therefore no differential duty can be demanded and no penalties can be imposed. Hence we allow the appeal with consequential relief.

(Operative portion of the order already pronounced in open court on conclusion of the hearing)