Judgment:
Per Dr. Chittaranjan Satapathy, J.
1. Heard both sides. The appellants have imported six vehicles of different models during the month of March 2007. They have imported another two vehicles out of the models already imported earlier during July 2007. The learned advocate for the appellants states that the first six vehicles were imported for certification purposes and the subsequent two vehicles were imported for testing purposes. According to him, these eight vehicles were supplied free of charge by M/s.Volvo Car Corporation. The impugned show-cause notice dt. 6.9.2007 was issued proposing enhancement of the value declared for all the eight vehicles, and violation of import licensing requirements was also alleged. Under the impugned order, three cars have been allowed being permissible to be imported by companies having foreign equity participation, and import of rest of the five vehicles has been held to be in violation of import licensing requirements. The value declared at the time of import has been rejected and enhanced on the basis of prices available in the web pages of M/s.Parker’s Guide, uk and carpages co. uk, after allowing abatement towards VAT from such price.
2. The adjudicating Commissioner has, inter alia, held as follows :-
(1) The relationship between Volvo and Ford were not disclosed at the time of import.
(2) There was no sale.
(3) There was no import of comparable goods before the import of these vehicles.
(4) Value of regular imports made subsequently was not acceptable as Special Valuation Branch was yet to finalize the same.
(5) The vehicles were misdeclared as prototypes.
(6) Five out of eight vehicles were confiscated under Section 111 (d) of the Customs Act, 1962 for violation of licensing note Para 3 as only three cars are allowed.
(7) All eight cars were confiscated under Section 111 (d) for misdeclaration.
3. We have heard arguments from both sides. The appellants now admit that M/s.Volvo Car Corporation are related to the appellants who are engaged in the manufacture of ‘Ford’ brand motor vehicles. However, this relationship between M/s.Volvo and the appellants was not disclosed to the Customs authorities at the time of import. We find from para-16 of the impugned order that Shri K. Mohanasundaram in his letter dated 22.8.2007 has submitted to the Customs authorities that there had been an inadvertent error in the Bills of Entry stating the purpose of import as ‘prototype’ and the relationship as ‘non-related’ which was not correct. His letter also shows that the nature of transaction was indicated as ‘sale’ and the method of valuation was declared as transaction value method under Rule 4, which he has sought to explain away as clerical error. We are not at all convinced that the appellants had approached the Customs authorities for clearance of the impugned vehicles with clean hands. A large business entity like Ford India (the appellants herein) having related and associated companies all over the world are not expected to misdeclare the relationship existing between their related supplier and themselves, and misdeclare the purpose of import, as also seek assessment on the basis of declared value wrongly indicating the nature of transaction as ‘sale’ whereas now the ld. advocate in his synopsis clearly indicates that these vehicles were supplied free of charge’. Hence, appellants’ attempt of seeking assessment under Rule 4 of the Customs Valuation Rules, which requires that transaction value method to be followed in respect of sale for export to India, has to be viewed in its proper perspective. It is obvious that the officials of the appellant-company have clearly tried to hoodwink the Indian Customs authorities regarding the relationship between the supplier and the appellants, regarding the nature of transaction which was not arm’s length sales but free supply, and also the purpose of import. Only when they have been caught by the Customs authorities and thoroughly exposed regarding their misdeclaration, they have come forward with lame excuses as having made inadvertent errors and clerical mistakes. It is inconceivable that the concerned officials of the appellant-company were not aware that the supplier company and the appellants were related. It is equally inconceivable that when the supplies were made free of cost without any payments being made for the impugned vehicles, the nature of transaction was described as ‘sale’. Such patent misdeclarations require to be condemned and exemplary penalties are required to be imposed so that others do not venture to make such misdeclarations in future or consider the Indian Customs authorities to be naive and gullible.
4. However, coming to the main issue of valuation of the impugned vehicles, we find merit in the submission of the ld. advocate that there was scope for adopting other methods of valuation when the declared value could not be accepted under the transaction value method. This is a case where the transaction is not a sale transaction but a free supply from a related party. Hence, the Customs authorities have rightly come to the conclusion that the first method of valuation i.e. transaction value method cannot be applied under the Customs Valuation Rules, which have been formulated on the basis of the WTO Agreement on Customs valuation. When the first method of valuation based on transaction value cannot be applied, the subsequent methods based on comparative value of identical and similar goods are required to be applied under the Rules. In the present case, there were no imports of identical or similar goods before the impugned imports. But, we gather that subsequently, the appellants themselves have made regular imports of similar vehicles not as free supplies but for commercial purposes. We are also given to understand that valuation of those vehicles imported subsequently are yet to be finalized. In the event of finalization of valuation of the similar vehicles imported subsequently, it would be reasonable to base the valuation of the impugned vehicles on the value arrived at for such subsequent imports in the absence of other contemporaneous imports.
5. If that is not possible, the Customs Valuation Rules also prescribe methods based on deductive value and computed value. Under the deductive value method, the price of subsequent sale of the impugned goods are required to be taken as basis for arriving back at the customs value. Since the impugned goods, in this case, were not imported for subsequent sale, this method, therefore, may not be appropriate. However, there does not appear to be any reason why the computed value method of valuation based on the costing of the vehicles in the country of manufacture cannot be applied. Since the supplier and the appellants are parts of a big multi-national group and would have elaborate accounts maintained for the relevant period, there is no reason why they should not cooperate with the customs authorities to determine the customs value for the impugned vehicles under the computed value method. We, therefore, think it proper to set aside the impugned order and remand the matter for re-determination of the value applying one of the valid methods of customs valuation. We also direct the appellants to fully cooperate with the customs authorities in the fresh determination. All other issues including the issue of redetermining the penalty are kept open. The adjudicating Commissioner shall give an adequate opportunity of hearing to the appellants before passing a fresh order.
6. The appeal is thus allowed by way of remand.