Cc (Sea-Imp.), Chennai vs M/S. Kwang Sung Brake India Pvt. Ltd

(Arising out of Order-in-Appeal No. C.Cus.704/2013 dated 10.05.2013, passed by the Commissioner of Customs (Appeals), Chennai).

CC (Sea-Imp.), Chennai : Appellant

Vs.

M/s. Kwang Sung Brake India Pvt. Ltd. : Respondent

Appearance

Shri B.Balamurugan, AC (AR) For the applicant Shri Hari Radhakrishnan, Adv., For the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member

FINAL ORDER No. 41365 / 2015

Date of Hearing/Decision: 22.09.2015

Per: R. Periasami,

Revenue preferred this appeal against the order of the Commissioner (Appeals).

2. The brief facts of the case are that the respondents imported goods from their principal supplier M/s. Kwang Sung Precision Co., Korea. It was found by the assessing group that both the importer and the foreign supplier were related in terms of Rule 2 (2) of the Customs Valuation Rules, 2007, accordingly, the issue was referred to the Special Valuation Branch (SVB) and the goods were allowed on resorting provisional assessment. The AC (SVB) vide his order dated 24.05.2012 held that the importer/ respondent and the foreign supplier were related under Rule 2(2) of CVR and held that the invoice price shall be accepted as transaction value and directed the assessing group to finalize all the pending provisional assessment and held that this order is operative for three years up to 23.05.2015. The department reviewed ACs Order and preferred appeal before the Commissioner (Appeals), on the ground that the original adjudicating authority has not compared with contemporaneous import of similar goods before passing the OIO and the original adjudicating authority should have examined the contemporaneous price/value for the subject goods. The Commissioner (Appeals) in the impugned order had rejected the appeal and upheld the OIO. Once again the Revenue reviewed the impugned order and filed the present appeal.

3. The Ld. AR on behalf of the Revenue reiterated the grounds of appeal at page-6 of the paper book and submits that the appellate authority has not examined the valuation with respect to the contemporaneous import of similar goods whereas, he only dealt on the identical goods. Further he submits that the respondents have imported pressing machines which were not manufactured by the principal company but were procured from various manufacturers and supplied to the appellants. He submits that there was no reference of purchase price indicated by the supplier. He also submits that the respondent is remitting the invoice price to the principal company and retaining the profit margin. Therefore, he pleads that the case may be remanded to the adjudicating authority to consider the case in denovo. He also submits that these grounds raised are not new grounds.

4. On the other hand, the Ld. Advocate representing on behalf of the respondent submits that they are the manufacturers of brake moulds for automobiles to M/s. Hyundai Motors. He submits that in respect of the moulds manufactured by the principal supplier and the pressing machines were procured and supplied to the appellant and they were new as well as second-hand ones. He drew attention to the OIO page 21, where the AC (SVB) after examining the agreements and documents and also after satisfying the Chartered Engineers certificate on the deductive value arrived had accepted the transaction value. He drew attention to the grounds of appeal by the department against the OIO which is at page 26 of the paper book and submits that the department preferred appeal only on one ground that the adjudicating authority has not compared with contemporaneous import of similar goods before passing the order. He submits that no other ground was raised before the Commissioner (Appeals). The Commissioner (Appeals) in the impugned order at para 5 & 6 has clearly examined the grounds and held that there is no contemporaneous import and upheld the OIO and rejected the Revenue appeal. He further submits that the department while reviewing the said order and preferring the appeal before this Tribunal, brought two new additional grounds which were not raised before the lower appellate authority. He relies on the following decisions in support of his contention

1. DLF Ltd. Vs. CC, Kandla 2014 (302) ELT 303 (Tri. Ahmd.)

2. CCE, Bombay Vs. Mahindra & Mahindra (Auto) Ltd.

2000 (122) ELT 835(Tri.)

3. Warner Hindustan Ltd. Vs. CCE, Hyderabad 1999 (113) ELT 24 (S.C.) He drew the attention of the Bench to Rule 3(3) (a)(b) of CVR and submits that a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time should be accepted. He further submits that there are no contemporaneous import of identical or similar goods. The adjudicating authority has rightly accepted the deductive value as per the CE certificate. He submits that since the SVB order expired and due for renewal from May, 2015 and there is no similar or identical goods as the goods are customised.

5. After hearing both sides and on perusal of the SVB order passed by the AC (SVB) and the impugned order, we find that the AC(SVB) in his order after examining the agreements and documents and CA certificate accepted the invoice price as transaction value. When the Revenue initially reviewed the said OIO, we find that there is only one ground on which the Revenue filed the appeal before the Commissioner (Appeals) is that the adjudicating authority has not compared the value of contemporaneous import of similar goods before passing his order. On perusal of the impugned order, we find that para 6 & 7 of clearly dealt the issue in detail and concluded that both for the raw material as well as for the pressing machine there is no contemporaneous imports as moulds are tailor made. The respondents contention is that the department has raised two new grounds before this Tribunal, and the grounds (b) and (c) which are reproduced as under:-

(b) In Para 5 of the OIA, it is stated that the pressing machines are purchased from various unrelated manufacturers in their country and the same have been supplied to the respondent. However, there is no reference about the price at which the goods were purchased by the related supplier ad the price at which the goods were supplied to the Indian importer.

(c) Further, in para 6 of the impugned OIA, it is stated that the respondent (importer) remits back the foreign invoice price to the parent company in Korea and the difference between the foreign invoice and the quotation price will be retained by the respondent as profit. It appears that the importer acts as a agent and the difference between foreign invoice price and the Indian price may be their Commission (even though it is stated as their profit in OIA) which needs to be examined with reference to valuation.

Whereas, the only ground on which the department preferred appeal before the Commissioner (Appeals) was on comparison of contemporaneous price whereas the grounds (b) and (c) were either raised before the adjudicating authority or before the lower appellate authority. In the departments appeal before the Commissioner (Appeals) and the lower appellate authority has examined the grounds of appeal and given clear findings on the contemporaneous imports. Therefore, the department has left out with only one option to contest only on said ground. The Revenue cannot raise new grounds before the Tribunal which was not before the adjudicating authority or LAA. The Honble Supreme Court in the case of Warner Hindustan Ltd. Vs. CCE, Hyderabad  1999 (113) ELT 24 (S.C.), wherein the Apex Court had set aside the order of the Tribunal and Tribunal has to consider the additional grounds made by the Revenue. Para 2 & 3 of the said decision is reproduced as under:-

2.?The appellant manufactures what it calls Halls Ice Mint tablets. It classified these tablets as Ayurvedic medicines under Heading 3003.30 of the Central Excise Tariff. It was issued a notice to show cause why these tablets should not be classified under Tariff Heading 3003.19 as patent or proprietary medicines. The Assistant Collector, after hearing the appellant, held that the tablets were patent or proprietary medicines classifiable under Heading 3003.19. In appeal by the appellant, the Collector of Central Excise (Appeals) held that the tablets were Ayurvedic medicines classifiable under Heading 3003.30. The Excise authorities went in appeal to the Tribunal and, for the first time, took the stand that the tablets were correctly classifiable under Heading 17.04 as confectionery. The appellant, of course, stuck to its stand that the tablets were Ayurvedic medicines classifiable under Heading 3003.30. The Tribunal noted that the Assistant Collector had classified the tablets under Heading 3003.19, that is, as patent or proprietary medicines. This was clear indication that the stand of the Excise authorities prior to the stage of the appeal to the Tribunal was that the tablets were patent or proprietary medicines classifiable under Heading 3003.19. The Tribunal also noted that both sides have not adduced any detailed arguments as to why these tablets can be considered as confectionery item or otherwise although a plea is there from the Collector in the grounds of appeal that the goods are assessable under Tariff 17.04". In our opinion, the Tribunal was quite wrong in these circumstances in allowing the appeal of the Excise authorities and classifying the mint tablets as items of confectionery under Heading 17.04. The correct course for the Tribunal to have followed was to have dismissed the appeal of the Excise authorities making it clear that it was open to the Excise authorities to issue a fresh show cause notice to the appellant on the basis that the tablets were classifiable under Heading 17.04 as items of confectionery. This would have given the appellant the opportunity to place on record such material as was available to it to establish the contrary. It is impermissible for the Tribunal to consider a case that is laid for the first time in appeal because the stage for setting out the factual matrix is before the authorities below.

3.?In the result, the appeal is allowed. The judgment and order of the Tribunal under appeal is set aside and the appeal filed by the Excise authorities before the Tribunal is dismissed. It shall be open to the Excise authorities to issue to the appellant a notice to show cause why the tablets should not be classified as items of confectionery under Heading 17.04, provided it is open to the Excise authorities to do so in law. By respectfully following the Apex Court decision above, we are of the considered view that the Revenue coming to the Tribunal against new grounds is not maintainable. We find that it is the Revenue who preferred the appeal before the Commissioner (Appeals) against the adjudication (SVB) order. Nothing prevented the Revenue to raise any number of grounds when the department reviewed the OIO and filed appeal before the Commissioner (Appeals).

6. On merits, we find that this is the case of SVB order and not confirmation of demand of customs duty under Section 28 of the Act. The adjudicating authority had only determined the relationship between the appellant and supplier and whether any remittance made by the respondent to the principal supplier and whether the invoice price is influenced by the relationship. When the goods are customised as clearly recorded in the OIO as well as in the impugned order, the comparison of contemporaneous imports of similar goods or identical goods does not arise. Moreover, we also find that the validity of the said SVB order had expired in the month of May, 2015 and due for renewal by the authority. In view of the above, we do not find any infirmity in the impugned order. Accordingly, we uphold the OIA and reject the appeal filed by the Revenue.

(Order dictated and pronounced in the open Court)

(P.K. CHOUDHARY) (R. PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER

BB

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