2016(03)LCX0075

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri R. Periasami, Member (T) and P.K. Choudhary, Member (J)

TRANSVIEW ENTERPRISES INDIA P. LTD.

Versus

C.C. (SEAPORT-IMPORT), CHENNAM

Final Order Nos. 40432-40433/2016, dated 9-3-2016 in Appeal Nos. C/41801-41802/2014-DB

Cases Quoted -

Commissioner v. Ferodo India Pvt. Ltd. - 2008(02)LCX0007 Eq 2008 (224) ELT 0023 (S.C.) - Relied on [Paras 4.5,9]
Commissioner v. Polyglass Acrylic Mfg. Co. Ltd.- 2014 (301) ELT 0545 (Tribunal) - Referred [Para 4.5]
Eicher Tractors Ltd. v. Commissioner - 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C.) - Relied on [Paras 4.5, 9]
Reckitt and Colman of India Ltd. v. Collector - 1996(10)LCX0060 Eq 1996 (088) ELT 0641 (S.C.) - Referred [Para 4.5]

Departmental Clarification Quoted-

C.B.E. & C. Circular, dated 3-3-2004 [Para 4.2]
C.B.E. & C. Circular, dated 13-2-2012 [Para 4.2]

Advocated By -

S/Shri B.G. Chidananda Urs and S. Venugopal,
Advocates, for the Appellant.
Shri B. Balamurugan, AC (AR),for the Respondent.

[Order per : P.K. Choudhary, Member (J)]. -

The present two appeals are arising out of OIO dated 25-4-2014 passed by Commissioner of Customs (Seaport-Import), Chennai.


2. The brief facts of the case are that appellant filed Bill of Entry No. 8746111, dated 12-12-2012 for clearance of 10,000 pieces of items viz. "Amezcua Chi Pendant (Artificial Jewellery)" from M/s. QNET Ltd., Hong Kong declaring the value of Rs. 4,47,45,092/- and claimed classification under CTH 7117 90 90. The Bill of Entry was assessed and the same facilitated through EDI, Risk Management System-RMS. The appellant paid the duty of Rs. 97,46,340/-. On intelligence that appellant misdeclared the goods, classification, as well as undervaluation, the Bill of Entry was taken up for reassessment before clearance. Detailed investigations were conducted by SUB of Customs. The goods were examined, mahazars were drawn. On examination, the goods were found to be only 'glass pendant' having markings 'Made in Germany', thereby showing the country of origin as Germany, whereas the goods imported and declared by the appellant were that of Malaysian origin. On further examination and as per the product literature found inside the package described the item as "an advanced, mineral based pendant made from high temperature nano-engineered glass". The name "Amezcua" relates to a brand. Subsequently, the goods were seized on 11-1-2013. After seizure, provisional release of goods was ordered on execution of bond of Rs. 15,42,86,221/- and cash deposit of Rs. 3.16 crores + Bank Guarantee for 50% of the differential duty i.e. Rs. 1.58 crores towards fine and penalty. However, appellants have not availed provisional release of the goods. After completing the investigation, show cause notice dated 14-11-2015 was issued. Para-14 of the SCN is reproduced as under :-

"(14)(a) In view of the above, the importer, M/s. Transview Enterprise India Ltd., New Delhi, with their branch office at Bangalore, is hereby called upon to show cause within 15 days of receipt of this notice, to the Commissioner of Customs (Seaport-Import), at Custom House, Chennai-1, as to why :

(i) The goods imported vide the Bill of entry no. 8746111, dated 12-12-
2012 namely "Amezcua chi Pendant 1" declared in the bill of entry as "Amezcua chi Pendant (Artificial Jewellery)" under the CTH 7117 90 90 should not be considered as Amezcua Chi Pendant classifiable un-der CTH 7018 90 90 as an article made of glass as corroborated by the catalogue of the imported goods which is used by the importer to promote the goods.

(i) The country of origin declared as Malaysia should not be rejected and should not be considered as Germany.

(ii) M/s. Transview Enterprise India Pvt. Ltd., the importer, M/s. QNET Ltd., HK, supplier and M/s. Vihaan Direct Selling India Pvt. Ltd., the sub-franchisee, should not be treated to be related as provided under rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and why it should not be treated that such existence of relationship was suppressed by the importer while filing the Bill of entry 8746111, dated 12-12-2012 for clearance of the imported goods.


(iii) It should not be treated that such relationship had affected the declared value stated to be of the transaction value under Rule 3 of the above Valuation Rules imported goods in the bill of entry and by which the declared value of Rs. 4,47,45,093/- for the goods imported vide the BiU of Entry no. 8746111, dated 12-12-2012, should not be rejected under Rule 3(1) read with Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

(iv) The value of the imported goods namely Amezcua chi Pendant 1 should not be re-determined at Rs. 15,42,86,221/- under Rule 9(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 as discussed above for the purposes of assessment of the goods to duty under Section 17 read with section 14 of the Customs Act, 1962 and why the differential duty of Rs. 31,28,253/- already paid by the importer on account of classification vide TR6 Challan No. MCM 0102834, dated 24-1-2013, be appropriated towards the total duty liability in respect of the Bill of entry no. 8746111, dated 12-12-2012.


(v) The goods namely Amezcua chi Pendant 1 imported vide Bill of entry no. 8746111, dated 12-12-2012 with a re-determined value of Rs. 15,42,86,221/- should not be confiscated under section lll(m) of the Customs Act, 1962, for the above reasons of misdeclaration of declaration, misdeclaration of country of origin, misdeclaration of classification, misdeclaration of existence of relationship and misdeclaration of true transaction value for the purposes of assessment of the imported goods under section 14 read with section 17 of the Customs Act, 1962.

(vi) Penalty should not be imposed on M/s. Transview Enterprise India Pvt. Ltd., M/s. Vihaan Direct Selling India Pvt. Ltd., Bangalore, under section 112(a) read with section 114AA of the Customs Act, 1962, for rendering the goods liable for confiscation.


(vii) Penalty should not be imposed on Mr. Suresh Thimiri, the CEO, Director of the importing company under Section 112(a) and Section 114 A A of the Customs Act, 1962 for use rendering the good imported vide the said Bill of Entry no. 8746111, dated 12-12-2012.

(viii) Penalty should not be imposed on Mr. Srinivas Rao Vanka, the Director of M/s. Vihaan Direct Selling India Pat Ltd., Bangalore, the sub Franchisee of the importing company, under Section 112(a) and Sec-tion 114AA of the Customs Act, 1962 for rendering the goods it imported vide the said Bill of Entry no. 8746111, dated 12-12-2012.


(a) The noticees are also directed to state whether they desire to be heard in person. Incase no reply is received in response to this Show Cause Notice or the noticee does not appear for personal hearing on the date and time mentioned above, it will be inferred as if they have nothing to state and the case will be decided ex-parte based on available facts and evidences on record."

2. The Commissioner in his impugned order dated 25-4-2014 rejected the classification and re-classified the goods under CTH 7018 90 90 and also held that the goods were of country of Germany origin. He held that appellants are related to M/s. QNET Ltd., Hong Kong under Customs Valuation (Determination of Value of Imported Goods), Rules, 2007. He rejected the declared value and re-determined at Rs. 15,42,86,221 /- under Rule 9 of CVR, 2007 read with Section 14 of Customs Act, 1962 and ordered for reassessment of the goods and ordered for adjustment of the duty already paid and confiscated the goods under Section lll(m) of the Customs Act. However, he gave an option to redeem the goods on payment of fine of Rs. 60 lakhs. He imposed penalty of Rs. 30 lakhs on viz. Shri Suresh Thimiri, CEO and Director under Section 112(a) and imposed penalty of Rs. 30 lakhs on Shri Suresh Thimiri, Director under Section 114AA of the Customs Act, and also appropriated the amount of Rs. 31,28,253/- voluntarily paid by appellant towards customs duty. Hence the present appeals.

3. The learned Advocate Shri B.G. Chidananda Urs appeared for the main appellant M/s. Transview Enterprises India Pvt. Ltd. and Shri S. Venu-gopal, Advocate appeared for the second appellant (Director) and submitted a written synopsis on 30-10-2015 and reiterated the same. The counsel submits that they have imported the goods "Amezcua Chi Pendant (Artificial Jewellery)" from M/s. QNET, Hong Kong and shipped from Malaysia and he explained the description of the product and also showed the sample of the pendant and also filed the product literature. He submits that the goods are originally supplied by a company in Germany.


4.1 On the classification issue, he submits that Artificial Jewellery is rightly classifiable under Chapter 71 and the product is ready to wear artificial jewellery. He drew our attention to Chapter Note 9 and Chapter Note 11 of Chapter 71 annexed at Page 62 in the additional typed set. He explained the product with literature that "Amezcua Chi Pendant" is an advanced, mineral-based pendant made from high-temperature nano-engineered glass that has a positive energy field. The product is fitted in a stainless steel bezel with a string/thread to wear. He submits that it should be worn as per the guidelines given in the literature. He further submits that the product is not sold in retail sale but it is only marketed through internet by way of multi-level marketing. He therefore submitted that the goods are rightly classifiable under heading "Imitation Jewellery" under Heading 7117 90 90. He further submits that the goods cannot be classified under Chapter 70. He drew our attention to Chapter Note 1(b) of Chapter 70 where this Chapter 70 does not cover Articles of Chapter 71 viz. "Imitation jewellery" and submits that Chapter Heading 7018 covers only "Glass beads, imitation pearls, imitation precious or semi-precious stones and similar glass smallwares, and articles thereof other than imitation jewellery, glass eyes other than prosthetic articles; statuettes and other ornaments of lamp-worked glass, other than imitation jewellery. By virtue of exclusion of Chapter 70, the Heading 7018 itself clearly excludes "Imitation jewellery" and therefore he submits that the goods are rightly classifiable under Chapter Heading 7117 90 90 and there is no misdeclaration of goods.

4.2 Regarding the second issue of related persons, he submits that they have submitted all the copies of agreements entered into between M/s. QNET Hong Kong and submits that appellant is a subsidiary of M/s. Transview, Singapore which holds 99% of shares in the appellant company before the adjudicating authority. He further submits that they replied to SCN all the documents which revealed transaction value and requested for special valuation whereas same has not been considered, instead the goods were seized and the counsel submits that once the adjudicating authority holds that both appellant and the supplier are related persons, he has not followed Board's circular dated 3-3-2004 and the Board's instructions contained in circular dated 13-2-2012 for examining the relationship and also submits that nowhere in the agreement, it is stated as a condition of the sale, transaction value is the declared price and also submits that there is no comparable imports. Instead of determining whether the parties are related and the values have influenced the price, the adjudicating authority has not given any finding for rejecting the transaction value. The payments made to overseas supplier was related to royalty on import of these pendants, maintenance of software and other administrative expenses and also payments were made for not only this item imported but also other 20 items. He submits that as per the agreement they imported more than 20 items. Therefore, whatever payments made to the supplier does not exclusively relate to the present import and it is not a condition of sale.

4.3 Regarding undervaluation, he submits that the adjudicating authority has rejected the declared value and enhanced the value under Rule 9 of CVR, on the basis of Product Launch Proposal Form (PLPF) of the imported watches. He drew our attention to Para 32.6. He submits that during investigation itself the department insisted for copy of PLPF for pendants and they informed that PLPF for "Amezcua Chi Pendant" was not available with them as this product was launched in the year 2007 in markets outside India and it was launched in India onlv in 2012 and hence no PLPF was created for the same as PLPF is creat-ed during the launch of a new product. PLPF only indicates how the price is to be adopted after importation in India, till it reaches the customer and he relied Page 365 wherein copy of PLPF for "Quaranos watch" is available and explained that the product watch is sold on the retail price and the commission has been worked out taking into account of the landed cost. He further submits that even by taking note of this PLPF for watches, the department have not questioned the landed cost which is not under dispute. Since PLPF is not available for the impugned goods, they have prepared a worksheet of PLPF which is annexed at Page 373 of the paper book and the same was submitted to the adjudicating authority during investigation. Taking into account the purchase price, the selling price has been arrived and the same has not been considered by the adjudicating authority. He further submits that since the product is a pendant having special properties it has been sold through various multi-level chains through independent representatives. Therefore, transaction is at arm's length; sales commission is involved, therefore, retail selling price has been worked for Rs. 8,522/-. He further submits that for determining the assessable value of imported goods, retail sale price was not correctly applied and submits that based on the PLPF of Qura-nos watches, the value has been enhanced from declared price of USD 79.61 to USD 274.61 per piece. In this regard, he referred to annexure to SCN at Page 214. He submits that as per the worksheet annexed at Page 214, the value has been arrived at based on the PLPF/costing sheet/pricing pattern available for the items "Quranos watch" and "La Retrograde Watch" and without giving any justification, the value has been enhanced from US $ 79.61 to US $ 274.61 per piece. He submits that valuation by comparing the prices of watches is not acceptable which is not in conformity with Valuation Rules.

4.4 The adjudicating authority has not discussed while rejecting the transaction value as to how value has been arrived at and not given any findings for the rejection of declared price and invoked Rule 9 of CVR without any comparable price. He submits that department failed to provide comparison of actual value by any method as per CVR while rejecting the value and failed to show how addition has been made.


4.5 Regarding allegation of misdeclaration of country of origin, he submits that invoice declared the country of origin as Malaysia as the goods were originated from Malaysia. He further submits that department has alleged that the goods were made in Germany. He submits that pendant is made in Germany thereafter on the product testing is done in Malaysia and the same is imported from Malaysia. Therefore, there is no misdeclaration of country of origin. The goods were shipped from Malaysia. Accordingly, the value has been worked out and no unintended benefit was availed by the appellant by misdeclaring the country of origin. Since SCN and adjudication order price has been enhanced based on the watches, enhancement of value is not sustainable. He relied on the following citations :-

(1) Eicher Tractors Ltd. v. CC Mumbai - 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C).

(2) CC v. Ferodo India Pvt. Ltd. - 2008(02)LCX0007 Eq 2008 (224) ELT 0023 (S.C).


(3) CC New Delhi v. Polyglass Acrylic Mfg. Co. Ltd. - 2014 (301) ELT 0545 (Tri.-Del.).

He submits that Tribunal cannot go beyond the scope of SCN. In this regard, he relied on Reckitt & Colman of India Ltd. v. CCE - 1996(10)LCX0060 Eq 1996 (088) ELT 0641 (S.C). Ld. Advocate also submitted that they have imported through other ports and there is no relationship issue raised by the department nor has any dispute arisen. Appellants have paid only for the pendants and no other excess payments were made.


5. On the other hand, ld. AR appearing for Revenue, reiterated the findings of OIO. Regarding classification, he referred to Para 33 onwards of the OIO and on valuation, he referred to Para 34.3 and also the worksheet annexed to the SCN. He submits that appellant imported the same product cleared to Air Cargo Customs as Pharmaceutical product classifiable under 3822 00 90. He submits that as per the copies of agreement, the supplier and the importer is related. Therefore, the invoice price is not the normal transaction value. He further submits that Bill of Entry was filed along with declaration. They have not only misdeclared to the department, the country of origin, but also not declared that they are related. He also submits that option for provisional release was not availed by the appellant. He refers to Paras 6 & 7 of OIO on this aspect. Appellant never submitted PLPF for the Chi pendant. Therefore, the adjudicating authority has rightly arrived at the value and enhanced the price based on PLPF for watches.

6. We have carefully considered the submissions of both sides and perused the records, literature and other relevant documents. The issue before us for consideration is whether the goods "Amezcua Chi Pendant" imported from M/s. QNET Ltd., Hong Kong is classifiable under Chapter Heading 7117 90 90 as "Imitation Jewellery" as claimed by the appellant or classifiable under Chapter Heading 7018 90 90 as "Articles of Glass" as assessed by Revenue and whether rejection of transaction value and enhancing the same is correct or otherwise and whether confiscation of goods, demand and fine and penalty is sustainable or otherwise.


7. As set out in the facts in the pre-page, the Bill of Entry was system-assessed and the appellant paid the duty of Rs. 97,46,340/- whereas the Revenue has taken up the investigation subsequent to the payment of duty but before out of charge and the goods were seized subsequently the adjudicating authority-allowed provisional release of goods on execution of bond for Rs. 15 Crores and cash deposit of Rs. 3.16 crores and a Bank Guarantee for 50% of the differential duty. Since the appellant has not availed the provisional release of the goods, the Customs (SUB) completed the investigation and issued show cause notice and the same was adjudicated. The entire dispute relates to live Bill of Entry No. 8746111, dated 12-12-2012 and the goods are still lying in Customs custody.
8. We now propose to discuss the classification issue of the imported goods. Appellants contended that the imported goods are rightly classifiable under Chapter 71 as 'artificial jewellery'. It is pertinent to see Chapter Note 9 and Chapter Note 11 where articles of jewellery and imitation jewellery are defined and the same are reproduced as under :-

9. For the purposes of heading 7113, the expression "articles of jewellery' means :


(a) any small objects of personal adornment (for example, rings bracelets, necklaces, brooches, ear-rings, watch-chains, fobs, pendants, tie-pins, cuff-links, dress-studs, religious or other medals and insignia); and

(b) articles of personal use of a kind normally carried in the pocket, in the handbag or on the person (for example, cigar or cigarette cases, snuff boxes, cachou or pill boxes, powder boxes, chain purses or prayer beads).


These articles may be combined or set for example, with natural or cultured pearls, precious or semi-precious stones synthetic or reconstructed precious or semi-precious stones, tortoise shell, mother-of-pearl, ivory, natural or reconstituted amber, jet or coral.
10. For the purposes of heading 7117, the expression "imitation jewellery" means articles of jewellery within the meaning of paragraph (a) of Note 9 above (but not including buttons or other articles of heading 9606, or dress-combs, hair-slides or the like, or hairpins, of heading 9615), not incorporating natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed) nor (except as plating or a minor constituents) precious metal or metal clad with precious metal.

As seen from the above definition, as per Note 11, the definition of 'Imitation jewellery' means Articles of Jewellery as defined in Note 9(a), but it does not include 'buttons, or other articles of Heading 9606, or dress-combs, hair slides, hair pins, etc. As already discussed in the brief facts, the imported goods is a circular glass piece fitted with stainless steel bezel. From the literature and the original catalogue produced, we find, it is an advanced mineral-based round glass made from high temperature "Nano-Engineered Glass" and it has positive energy field. By wearing this, it makes it a person balanced and harmonized and it neutralizes the negative effects of Electrosmog which is the result of Electromagnetic fields created by cell phones, microwave ovens, etc. From the above, it is evident that the item cannot be an artificial jewellery. An imitation jewellery/artificial jewellery as per Note means it should be ornamental and it is to be normally worn as a personal adornment for enhancing beauty. Whereas it is evident that it is not made for regular use as jewellery. Merely the glass is fitted with a metal frame cannot qualify as an imitation jewellery to be classifiable under Chapter 71. Further, we find that the primary function of the imported goods is not as artificial jewellery but sold to only through multi-level marketing on one-to-one basis. From the above facts, it is established that the 'Chi Pendant' is not an artificial jewellery worn by any person of any age. Therefore, the imported goods cannot be classified under Chapter 71 as "Imitation Jewellery/Articles of Jewellery". Therefore, there is no justification for appellants to claim the classification under Chapter Heading 7117 90 90. Having held that the goods are not Articles of Chapter 71, the goods are to be classified under respective Chapter 70 as 'Articles of Glass'.The Chapter Note 70 excludes Articles of Chapter 71 (imitation jewellery). Since we have already explained in the preceding paragraph regarding classification, that the goods are not imitation jewellery, therefore, it is not hit by Chapter 1(b) of Chapter 70. Therefore, we find that the goods are covered under appropriate Heading 7018 as other articles of glass other than prosthetic articles. Accordingly, we hold that the goods are rightly classifiable under 7018 90 90 of CTH and chargeable to appropriate duty and the adjudicating authority classifying the goods viz. "Amezcua Chi Pendant" under Chapter Heading 7018 90 90 is upheld.


9. We now propose to discuss the valuation issue. The adjudicating authority rejected the transaction value declared and redetermined the value under Rule 9 of CVR. On perusal of the records, we find that the appellant and suppliers are related which is evident from the various agreements with M/s. QNetLtd. HK discussed at Para 31 of the OIO which are reproduced as under :-

(i) Master Franchisee agreement dated 12-4-2012

(i) Product Supply and Distribution Agreement dated 2-4-2012

(ii) Customer Support Service Agreement dated 12-4-2012 (iv) Sponsorship Rights Agreement dated 8-10-2012


(iii) Trade Mark Sub-Licence Agreement dated 12-4-2014 with Quest I yon Pte. Ltd., Singapore.

In view of the franchisee agreement, the appellants have to pay royalty which is fixed as the percentage of the sales turnover of the franchisee i.e. appellant. We find that the adjudicating authority having held that the parties are related persons but not proposed for loading of any royalty on the value of the imported goods. We also find that there is no comparable price of identical or similar goods and also no contemporaneous price available on these goods. Therefore, the adjudicating authority proceeded to determine the value under Rule 9 of CVR under residual method. While determining the value under Rule 9, we find that the adjudicating authority has taken the cost sheet of sale of "Quranos Watch" and "La Retrograde Watch" which arc imported and cleared by the ap-pellants and sold in the retail market. By taking the value of watches as per PLPF cost sheet the adjudicating authority rejected the declared value of US $ 79.61/per piece and enhanced to US $ 274.61/per piece. Whereas we find that the item imported in the present consignment is "Amezcua Chi Pendant" made of glass and the retail sale price of the watches cannot be compared in the imported goods. Further, the PLPF cost sheet of Quranos watches only relates to post-importation and retail sales through their multi-level marketing. Even in the said cost sheet of the two imported Quranos and La Retrograde watches, we find that the landed cost is not altered. Further, the retail sale price of watches which is only post-importation transaction and not relevant for determining the value of imported goods. In the present case the imported goods is specialized articles of glass and cannot be compared with high value imported watches. Further, we find that the Product Launch Proposal Form (PLPF) of watches of the supplier is only intended for how the pricing should be done in the subsequent retail sale through multi-level marketing pattern. In the absence of PLPF for "Amezcua Chi Pendant", the PLPF of Quranos watches and Retrograde watches cannot be adopted for determining the value under Rule 9. In this regard, we rely on the decision of Hon'ble Supreme Court in Eicher Tractors v. CC (supra) and in the case of CC v. Ferodo India Pvt. Ltd. (supra) wherein the Hon'ble Apex Court in the above cases clearly held that royalty and technical know-how cannot be included as it is not a condi tion of sale of goods. The relevant paragraphs of the Apex Court's decision in Ferodo case are reproduced as under :-


24. One of the questions which arises for determination in this civil appeal is whether reliance could be placed by the Department only on the Consideration Clause in the TAA for arriving at the conclusion that payment for royalty was includible in the price of the important components.

25. Rule 4(3)(b) of the CVR, 1988 provides for an opportunity for the importer to demonstrate that the transaction value closely approximates to a "test" value. A number of factors, therefore, have to be taken into consideration in determining whether one value "closely approximates" to another value. These factors include the nature of the imported goods, the nature of the industry itself, the difference in values etc. As stated above, Rule 4(3) (a) and Rule 4(3)(b) of the CVR, 1988 provides for different means of establishing the acceptability of a transaction value. In the case of Matsushita Television (supra) the pricing arrangement was not produced before the Department. In our view, the Consideration Clause in such circumstances is of relevance. As stated above, pricing arrangement and TAA are both to be seen by the Department. As stated above, in a given case, if the Consideration Clause indicates that the importer/buyer had adjusted the price of the imported goods in guise of enhanced royalty or if the Department finds that the buyer had misled the Department by such pricing adjustments then the adjudicating authority would be justified in adding the royalty/licence fees payment to the price of the imported goods. Therefore, it cannot be said that the Consideration Clause in TAA is not relevant. Ultimately, the test of close approximation of values require all circumstances to be taken into account. It is keeping in mind the Consideration Clause along with other surrounding circumstances that the Tribunal in the case of Matsushita Television (supra) had taken the view that royalty payment had to be added to the price of the imported goods.

The ratio of the above case is squarely applicable to the instant case as even though there was an agreement of payment of royalty towards franchise agreements of various products imported from the supplier for sale through multilevel marketing. In the present case, it is not the case of inclusion of royalty and know-how but the enhancement of value under Rule 9 of CVR and the L.A has loaded the price by adopting the PLPF cost sheets of Quranos watches and La Retrograde watches. We hold that the L.A order rejecting declared value and enhancing the value by taking the price of "Quranos" and Retrograde Watches is without any basis and not supported by the principles of valuation under CVR and not sustainable. Accordingly, we hold that the declared value is accepted as transaction value for the purpose of assessment. The L.A's order of enhancement of the value under Rule 9 of CVR and consequent demand of differential duty on the enhanced value is liable to be set aside.


11. In view of the foregoing discussions, we hold that -

(i) the product "Amezcua Chi Pendant" imported by appellant is classifiable under Chapter Heading 7028 90 90 of the CTH and not under Chapter Heading 7117 90 90 of the CTH.

(ii) Consequently, the differential duty of Rs. 31,28,253/- demanded on account of change of classification and rate of duty is upheld.


(iii) the rejection of transaction value in respect of Bill of Entry No. 8746111, dated 12-12-2012 and re-determination of value under Rule 9 of CVR read with Section 14 of the Customs Act by the adjudicating authority is set aside and accept the declared value of Rs. 4,47,45,092/- as the transaction value.

(iv) the order of confiscation of 10,000 pieces of imported goods is upheld to the extent of misclassification of goods. Accordingly, we reduce the redemption fine from Rs. 60,00,000/- to Rs. 5,00,000/-(Rupees five lakhs only).


(v) We reduce the penalty imposed on the appellant-company under Section 112(a) from Rs. 30 lakhs to Rs. 7,00,000/- (Rupees Seven lakhs only).

(vi) We reduce the penalty imposed on Shri Suresh Thimiri, CEO-Director from Rs. 30 lakhs to Rs. 3,00,000/- (Rupees three lakhs only).


(vii) we set aside the penalty imposed under Section 114AA on both the appellants.

The appeals are partly allowed in the above terms.
(Order pronounced in open Court on 9-3-2016)

Equivalent 2016 (338) ELT 0123 (Tri. - Chennai)