IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 11TH FEBRUARY 2008 / 22ND MAGHA 1929 Cus.Appeal.No. 12 of 2005() --------------------------- A.NO..C/258/2002 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE .................... APPELLANTR/ESPONDENT. -------------------------------------- THE COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, COCHIN 9. BY ADV. SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR RESPONDENTS: APPELLANT. ----------------------- P.V.UKKRU INTERNATIONAL TRADE, XL/6049, T.D.ROAD, COCHIN 35. BY ADV. SRI.C.K.KARUNAKARAN FOR R1 SRI.C.E.UNNIKRISHNAN THIS CUSTOMS APPEAL HAVING BEEN FINALLY HEARD ON 11/02/2008 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- Cus. Appeal No. 12 OF 2005 -------------------------------------------- Dated this the 11th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. This appeal is filed by the Commissioner of Customs under Section 130 of the Customs Act against the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zone Bench, Bangalore, allowing the appeal filed by the respondent. The respondent imported 79 MT of mild steel flat bars by declaring it as MS scrap. The Customs authorities doubted the identity of the product and therefore goods were examined in detail. It was noticed that the respondent actually imported mild steel flat bars of uniform thickness of 3 mm and with varying width and length of 3 metres and 4 metres. The items were bundled in uniform sizes. Since on examination of the goods, the Customs Authorities found that the goods were not scrap as claimed by the respondent, the value declared at $ 196 per M.T. was rejected and duty was demanded by estimating the value at $ 230 per 2 MT. The value was adopted based on London Exchange metal price. Since goods were mis-declared the customs authorities ordered confiscation and released it on redemption fine of Rs. 10,000/-. Penalty of Rs. 25,000/- was imposed on the respondent. Since the first appeal filed against the same was dismissed by the Commissioner of Customs (Appeals), the respondent filed second appeal before the Tribunal. Even though the tribunal held that there was mis-declaration of goods imported and the same was liable for confiscation under Section 111(m) of the Act, they still cancelled the demand of duty on the higher value and cancelled the penalty and fine for the reason that there is violation Rule 4(2) of the Customs Valuation Rules, 1988. It is against this order that the department has filed this appeal before us. We have heard Asst. Solicitor General appearing for the appellant and counsel appearing for the respondent. 2. While the case of the department is that in view of the finding by the Tribunal that goods were liable for confiscation under Section 111(m) of the Customs Act, they were bound to accept the valuation by the department, respondent's case is that scrap and mild steel bar attract 3 same rate of duty and therefore there is no scope for making valuation after rejecting the transaction valued by the respondent. We are unable to uphold the finding of the Tribunal that department is not entitled to reject the transaction valued in this case and estimate the value of goods because according to us when there is mis-declaration of the product, the transaction value declared automatically goes, more so when the goods declared as MS scrap is found to be otherwise by the department. In fact from the details of description of the goods available and from explanation offered by the importer himself, it is clear that goods, though were not marketable as mild steel bars in Dubai, have market in this country and therefore the description of the goods as MS scrap is incorrect. Flat bars of uniform size and thickness do not come within the description of waste and scrap under the Customs Tariff Act. Moreover all the three authorities including the Tribunal found that the item imported is not scrap but were MS flat bars. Once there is mis-declaration by the importer about the product imported, the department gets right to question the correctness of valuation of goods by the assessee. In this case, the item imported as 4 scrap was found to be otherwise and is a marketable product of steel. This finding alone is sufficient to reject the value and estimate the value and demand duty thereof. Adoption of transaction value under Rule 4 of the Customs Valuation Rules applies only when the transaction declared is found to be genuine and correct. The transaction in this case is purchase and import of MS flat bars whereas in the documents presented for clearance of goods, the respondent termed it as scrap metal. We are therefore of the view that the Tribunal went wrong in interfering with the order of the Commissioner on the ground that the department has not indicated in the order Rule 4(2), the provision under which the transaction value was not accepted. We therefore reverse the order of the Tribunal and allow the appeal on the question of valuation of the product and demand of duty thereon. However, having regard to the fair admission of facts made by the respondent in the reply to the show cause notice, and since the rate of duty is the same and difference in value adopted is less than 40% of the declared value, we uphold the order of the Tribunal cancelling personal penalty of Rs. 25,000/-. Since confiscation under Section 111(m) of 5 the Customs Act is upheld by the Tribunal, the redemption fine is rather mandatory in nature. However, having regard to the facts found above, we reduce the redemption fine to Rs. 3,000/-. The appeal is allowed to the above extent. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk 6