Re-Determining Value Of CDs Imported By HP India Is Invalid Without Rejection Of Transaction Value Under Customs Valuation Rules: CESTAT
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that re-determination value of CDs imported by HP India invalid without rejection of transaction value under Rule 12 Customs Valuation Rules 2007.
The bench stated that unless the proper officer rejects the transaction value under Rule 12, the valuation has to be based on transaction value as per Rule 3 with some additions, if necessary, as per Rule 10.
Rule 12 of Customs Valuation Rules 2007 gives an option to the Customs department for rejecting the transaction value declared by the importer where there is a reasonable doubt as to the truth or accuracy of the declared value.
The Bench of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that “the responsibility of the importer is confined to truthfully declaring the transaction value in the Bill of Entry. If the transaction value is not indicated correctly, the goods will be liable for confiscation under section 111(m) and NOT if the value declared in the Bill of Entry do not match with some value determined later by the proper officer during re-assessment or in any investigation or adjudication proceedings.”
In this case, HP India imported QR CDs from Mentor of Singapore and these CDs contained the Microsoft OS and also other drivers. It declared a value of less than US$ 1 per CD being the cost which it had paid to Mentor towards the cost of the blank CD and the cost of copying the software.
The case of the Revenue is that the value of the CD is not the same as the blank CD plus a little towards the cost of copying the software and it should also include the cost of the software which it contains.
The case of HP India is that it declared whatever transaction price it had paid to Mentor. It did not pay anything extra for the CD or to anyone else including Microsoft USA as a condition of sale by Mentor.
The assessee submitted that the value of the QR CDs cannot be re-determined by adding the royalty amount attributable to the OS pre-installed in the computer system under HP’s licence agreement with Microsoft. In the impugned order, the transaction value was rejected and the value was re-determined under Rule 8 of the Customs (Determination of value of imported goods) Rules, 1988 and Rule 9 of the Customs (Determination of value of imported goods) Rules, 2007.
The revenue submitted that the Commissioner did not impose any penalty on HP India under section 114AA holding that penalty under section 114AA is imposable only on a person for any fault in his personal capacity. There is nothing in the section to suggest that it can only be imposed on individuals. The Commissioner did not cite any authority to hold that penalty can only be imposed on individuals under section 114AA.
The re-determination of the value of the CDs imported by HP India cannot be sustained because the transaction value was not rejected under Rule 12 of the 2007 Rules and Rule 10A of the 1988 Rules, stated the Tribunal.
The bench opined that “in the Bill of Entry, the importer only has only an obligation to declare the value which it knows and has no obligation to anticipate if the proper officer or any adjudicating authority would reject the transaction value and if so, what value such officer would find correct and file the Bills of Entry accordingly. Section 111(m) of the Act does not require the importer to do the impossible. Therefore, confiscation of the goods under section 111(m) of the Act cannot be sustained in this case even if the re-determination of value was correct.”
In view of the above, the Tribunal allowed the appeal and set aside the impugned order.
Case Title: M/s Hewlett Packard Sales Pvt. Limited v. Principal Commissioner of Customs ACC (Import) Commissionerate
Case Number: CUSTOMS APPEAL NO. 50203 OF 2021
Counsel for Appellant/ Assessee: V. Sridharan and BS Ravishankar
Counsel for Respondent/ Department: Mihir Ranjan
