Customs, Excise and Gold Tribunal - Delhi
Kothari And Company vs Collector Of Customs on 3 March, 1988
Equivalent citations: 1989(40)ELT155(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. The appellants imported, under 2 Bills of Entry filed on 9.8.1984 and 18.10.1984, goods described as components for Auto Topless Umbrella Frames and in one case also spare parts. The Customs Department felt that the licence produced by the appellants was not valid for importation of the goods and that the value declared by the appellants was less than correct value. Show cause notices were therefore issued to the appellants on both counts.
2. After due process the Collector adjudicated the case and he found against the appellants on both counts. He confiscated the goods under Section 111(d) of the Customs Act and gave option to redeem the goods on payment of fines of Rs.3 lakhs each in respect of the two Bills of Entry. He also imposed penalties of Rs. 10,000/- each and ordered that the assessable value of the imported goods be increased to US $ to 3.55 and 3.75 per Dozen in respect of the two varieties. Accordingly the value declared in Bill of Entry No. 702 was increased from Rs. 1,23,400.10 p to Rs.2,01,467.26 p. In respect of the 2nd Bill of Entry No. 821 the value was increased from Rs. 1,24,900.95 p to Rs. 2,02,457.15 p. Hence the present appeals which were heard together and are being decided by this common order.
3. In so far as the licence is concerned Shri Jain, the learned Counsel for the appellants submitted that the licence clearly covers the goods which consisted of spare parts. He argued that in several earlier cases similar licences were accepted for similar goods and the Customs Department was not justified in changing the practice suddenly. He further argued that admittedly the Umbrella Frames imported by the appellants were not fitted with cloth covers and therefore it is wrong to call the imported goods complete Umbrellas. They are only component parts which, as defined in the ITC policy for AM 83-84, included assemblies also. He pleaded that as accepted by the Trade and even by the Customs Department, the frames fell within the meaning of component parts. He submitted that the Collector was not justified in holding that in Trade the goods are known as Umbrellas.
4. Arguing that the appellants declared the correct value Shri Jain submitted that there was no charge or finding about the existence of any clandestine remittance to the exporter. Earlier, the learned Advocate submitted, this value was accepted. The importers were not related to the exporter and in several other cases the customs accepted the value. Shri Jain submitted that the importers wrote two letters to the Collector asking for certain invoices and other documents and another letter dated 13.1.84 requesting him to make available to them at least photo copies of Bills of Entries referred to in the supplementary show cause notice as also for supply of invoices. He submitted that only one Bill of Entry was given to the appellants. However, the appellants did not want the matter to be remended on this ground.
5. Shri Doiphode, the learned SDR opposing the arguments submitted that the goods were not covered by the licence as they are Umbrellas for all practical purposes. He argued that Rule 2A of the Rules of interpretation had to be applied to the ITC Schedule also and as the imported goods had all the essential character of Umbrellas they should be considered as such. He further argued that Umbrella cloth is not a component thereof and referred to Chapter Note to Chapter 66. Shri Doiphode further submitted that previous clearances did not confer any right on the importer.
6. In so far as valuation was concerned Shri Doiphode submitted that the Collector of Customs considered the price invoiced by Mercantile Trading Co., wherein the invoice showed that the highest value was $ 5.20 per dozen. He pointed out that the Collector took into consideration the possibility that the goods in question may be of inferior quality and therefore fixed the lowest recorded price of 3.55 $ and 3.75$ as assessable value of the imported goods. The highest value recorded in the invoice relied on for Customs was 5.20 $. Shri Doiphode further submitted that there is neither any correspondence nor any price list, record of negotiation or anything which is to prove that the value declared by the appellants represented the correct prices.
7. Shri Jain in his rejoinder submitted that interpretative rules could not be applied in toto to the ITC Schedule. He reiterated that the Customs Department always considered the Umbrella frames as components and submitted that in the show cause notice there was no allegation that these were not component parts. He emphasised that to prove undervaluation the burden is on the department and reiterated that the same kind of Umbrella as imported by the appellants was not considered by the Collector. He pleaded that the penalty imposed was very heavy as the importers did not commit any mala fide acts.
8. We have considered the arguments of both sides. The questions that arise for decision are whether the licences produced by the appellants are valid for the importation of the goods and whether the values declared by them were correctly enhanced by customs.
9. The import and export policy of 83-84 defined component as "a part or sub-assembly or assemblies of which a manufactured product is made up...". We note that the licence was valid for the import of raw materials, components, consumables, stores and packing materials in accordance with the provisions made in para 30 (1) of para (b) Section 1 of the red book Volume II for AM 78. According to the said para 30 (1) the licence was valid for import of raw materials, components etc. specified for use in the licence holder's factory and as per the relevant policy prevailing at that time the licences were not transferable. In this case the appellants purchased the licence. This purchase was legal according to the changed ITC policy. The appellant's plea is that as they held the licence they are entitled to import goods required in their factory. The learned SDR's argument that the policy for AM 78 contemplated importation of goods to be used in the factory of the licence holder and not in the factory of the transferee. However, the appellants have shown that in more than six earlier instances similar imports covered by similar licences were allowed. In this context we have perused the judgement of the Calcutta High Court reported in Impex International v C.C.Calcutta (1985) ECC (4) 60 Cal; cited by the appellants. In that case considering a similar situation the High Court held that "Item which was not export-linked import can be imported under the licence issued in 1983-84 subject to the condition, if any, applicable under paragraph 30(1) of the said 1977-78 policy". While holding so the High Court observed that the importer in that case could certainly rely on the stand taken by the customs authority in releasing various consignments of the identical item is permitted for import. Keeping in view the past practice of the Customs House we hold that there was no justification for suddenly rejecting the importation of the present consignments under the licences produced. We, therefore, set aside the impugned order so far as licensing is concerned.
10. In view of this we are not going into the appellant's argument that they imported not a complete Umbrella but only a component part thereof. We are not examining the claim of the respondents that interpretative Rule 2A has to be applied even for licence purposes.
11. The next question to be examined pertains to the value. The Ld.SDR submitted that the imported goods were complete except for the cloth and in such a situation the price declared at Rs. 2/- for ladies umbrealla (9"x8") and Rs. 2.20 per piece of gents umbrella (size 21 "x8") do seem to be remarkably low. Market prices in India cannot normally indicate the CIF price of imported goods, but it is this low price which created a doubt in the minds of the customs who issued the show cause notice threatening to increase the value. The appellant's argument that Section 14(1) (b) was not mentioned in the show cause notice is not relevant as all the essential ingredients relating to valuation are present in the show cause notice. The argument that totally like goods were not considered is also not persuasive as the Collector obviously allowed reasonable margin and reduced the assessable value fixed by him when taking into consideration the prices pertaining to another importation on which the customs relied. We note that admittedly there was no correspondence between the appellants and the exporter and there is no price list. The plea is that one of the partners of the appellant's firm went to Taiwan in July '83 saw the samples of the goods manufactured by M/s. Ming Ho and after seeing them the appellants placed the order. To put it very mildly this circumstance does not inspire faith in the value declared which at first sight appears to be remarkably low. In this background we consider what troubled the minds of the customs officers. It is recorded as follows in the preliminary part of the impugned order:-
"During the course of investigation it appeared that M/s. Ming Ho Trading Company, Taiwan supplied identical goods frame size 19"x8 @US $ 5.20 per dozen CIF. In another case invoices of Lipton Trade International, Taiwan covered identical goods at US $ 3.80 per dozen for frame size 19"x8". Price of US $ 4.00 per dozen for frame size 21"x8" CIF is available with the department. These goods were the subject matter of the investigation on the ground of unauthorised importation and undervaluation. The goods covered by invoice of import made by Lipton Trade International indicating the unit value as US $ 3.30 per dozen & US $ 4.30 per dozen did not appear to have been landed at Calcutta though Bills of Entry were presented sometimes in July 1984. At the rate of US $ 5.20 per dozen as noticed in respect of the supply made by M/s. Mercantile Trading Company, the assessable value of one Topless Umbrella worked out to Rs. 5/- approximately. As there appeared to be strong ground to suspect gross under invoicing in the subject case in view of the difference of value declared and noticed, it appeared necessary to determine the assessable value of the goods in question as per the provision of Section 14 of the Customs Act, 1962 read with Customs Valuation Rules, 1963, independently of the invoice value declared by the importers. When the value of 19"x8" variety was noticed at Rs. 5/- per piece, value of 21"x8" variety should be considered more than that. It therefore, appeared a fair to take Rs. 5.50 per piece as the assessable value of 21"x8" variety of Topless umbrella."
12. The Collector obviously kept in view that the quality of the goods imported by the appellants might not be the same as that of the goods which were relied on by the customs. In his findings regarding value he recorded as follows:-
"The goods in question are described as components for Auto Topless Umbrella. The importers and the suppliers have not given any model number or other specification to identify them. It is admitted that there are different varieties of Umbrella, but on perusal of the different invoice available it is seen that when special type of umbrellas are supplied it is specifically indicated and a higher rate charged. From this it is certain whenever the suppliers described the goods without giving detailed specifications they referred to the normal type of umbrellas. In the instant case the goods imported are normal type of umbrellas. From the documents it is clear that the value proposed at US $ 3.55 and US $ 3.75 per dozen by applying Section 14(1) (b) of the Customs Act,1962 read with Clause 3(a) of the Customs Valuation Rules, 1963 are considered to be fair assessable value of the goods. On that basis the assessble value of the goods work out to Rs. 2,01,467.26".
13. The impugned order made ample allowance for any difference in value of the goods imported by the appellants. The evidence relied on by the customs to arrive at the value is reasonable and the findings are, in our opinion, also reasonable. We do not therefore find any reason to interfere with the same. As a consequence we reject the appeal in so far as it relates to value.
14. In the result we find that the licence has to be accepted whereas the value, as fixed by customs, has to prevail. This calls for examination of the fines and penalties in both cases. As the confiscation was only on account of licensing we set aside the same. For the same reason we also set aside the penalties in both cases, Duty is payable at the enhanced value as fixed by the customs.
15. The two appeals are disposed of accordingly.