Case: ANIL KUMAR ANAND Vs. COMMISSIONER OF CUSTOMS (PREVENTIVE)

2. The appellant is stated to be a regular importer of electric decorative lightings, and in the process of such imports, filed a bill of entry on 21.1.2015 at the ICD, Tughlakabad, New Delhi, for clearance of electric decorative lightings. These import consignments were of brand names Diyas and mAntra, and the enquiry proceeded to ascertain whether the goods had been correctly valued for the purposes of customs duty. On completion of the enquiry, proceedings were initiated for revaluing the current import consignment, as well as past consignments within the aforesaid window, apart from the proposal for confiscation of goods and imposition of penalties under the provisions of the Customs Act, 1962 (hereinafter referred to as the said Act). A show cause notice was issued under Section 28 of the said Act, providing for recovery of duties not levied or short-levied or erroneously refunded, for any reason other than collusion or any wilful mis-statement or suppression of facts. In substance, there were really two grounds for the show cause(a) that the appellant, knowingly, did not declare the brand of imported goods, and undervalued the same with the intent of evading customs duty;(b) that the appellant had imported the branded goods from its related party, and had undervalued the same to evade customs duty3. The aforesaid proceedings, as noticed, resulted in an adverse order against the appellant by the authorities, resulting in the imposition of differential duty of about Rs.9.53 lakhs for the consignment in question, and around Rs.1.23 crores for the past consignments. The goods were held liable for confiscation, and were ordered to be released on payment of redemption fine, with the levy of Rs.13 lakhs penalty imposed on the Directors of the appellant (appellants in CA No.3138/2018 & CA No.3139/2018). A perusal of the order shows that the valuation of the goods had been made under Rule 7 and Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred to as the said Rules). It is this very method of valuation which is sought to be assailed by the appellants on a reasoning that the scheme of the Rules has not been correctly understood and implemented by the competent authority. In order to appreciate the contention of the appellants in the context of the Rules, we proceed to discuss the scheme of the Rules.

Court's reasoning:
17. We may notice there were certain other pleas advanced, including the plea of limitation, but that is not of much significance for re- determination, on account of the conclusion we are reaching hereinafter18. We must first take note of the fact that electrical decorative lightings, normally, are not highly branded products, exceptions apart. It does appear that even though the imports were under the brand names Diyas and mAntra, they were not trademarks of such nature as would make them an exclusive product. It also appears that there has been some mix up in the understanding of a trademark protection, as the same has been compared with patented goods. Thus, data was certainly available, which could have been utilised to obtain the pricing for imports from the U.K., of identical goods or similar goods19. The irony is that if the competent authority thought that these were goods where trademark was of significance, it could not simultaneously have ignored the imports under the same trademark, from different countries, where there were no related parties. Naturally, there would have to be made adjustments for the distance from which the import was made, or the size of the consignment, if applicable, as set out in Rules 3 to 5. There was really no occasion to straightaway proceed to determine the transactional value by relying on Rules 7 to 9. We have no doubt this principle of sequential application would apply, especially in view of sub-Rule (4) of Rule 3, which provides that there has to be a sequential implementation of the Rules, i.e., that Rules 3 to 5 would have to be exhausted first, and only in the eventuality of an inability to apply the Rules would the assessing authority proceed to impose Rules 7 to 921. We are, however, not persuaded by this argument because there appears to be a fundamental mistake committed in the manner ofimplementation of the statutory Rules. Once the statutory Rules exist and provide for sequential implementation, the assessing authority has no option but to proceed in accordance with those Rules, in that manner. We did put this squarely to learned senior counsel for the respondent, who really could not persuade us, or give a satisfactory answer as to why the concerned authority chose to ignore, in the given facts of the case, Rules 3 to 5, and did not proceed sequentially.