Customs, Excise and Gold Tribunal - Delhi
Cannon Steels Pvt. Ltd. vs Cc on 4 February, 2004
Equivalent citations: 2004(93)ECC315, 2004(168)ELT398(TRI-DEL)
ORDER P.G. Chacko, Member (J)
The appellants are merchant-exporters. They filed 3 Shipping Bills in Customs House, Cochin for export of synthetic garments under the Duty Exemption Pass Book (DEPB) Scheme. Relevant particulars were declared in the Shipping Bills (S/Bs) as under:-
S/B No. & date Descreption of goods Quantity Unit price Declared Total FOB value declared PMV declared 1000 8.12.98 Woollen blended leggings 6125 pcs.
Rs.677 Rs. 41,17,001 Rs. 375 2088 21.1:99 Woollen blended Pullovers 3000 pcs.
Rs. 1252 Rs. 37,27,993 Rs. 1200 2106 21.1.99 Woollen blended jersey 2750 pcs.
Rs.1252 Rs. 34,61,538 Rs. 1250 The appellants claimed DEPB credit @ 16%. The goods were allowed provisional clearance for export subject to result of chemical test on the samples drawn from the consignments. The export goods had been purchased from parties at Ludhiana (Punjab). The test report of the Custom House Laboratory, Cochin showed that the goods exported under S/B No. 2106 contained 55% synthetic fibre and 45% animal hair (wool) (as against the party's declaration of composition: synthetic fibre 69.4 - 70.5 %). In respect of the goods in S/B No. 1000, the chemical composition as per the test report was: acrylic fibre 89.5% and cellulosic fibre 10.5% (as against the party's declaration of compostition: wool 12%: acrylic fibre 9.7%: polyster fibre 57.7% and other fibres 20.6%). In respect of the goods in S/B No. 2088, however, the test result somewhat tallied with the parry's declaration inasmuch as the synthetic fibre content was found to be above 65%. It appeared to the department that the appellants had misdeclared the composition of goods in S/B Nos. 1000 and 2106. Market enquiries were also conducted by the department to ascertain the PMV (Present Market Value) of the goods at Ludhiana and their results showed that the appellants had declared higher PMVs and FOB values in the Shipping Bills. It appeared to the department that the appellants had indulged in misdeclaration of composition and value of the goods deliberately with intent to claim higher DEPB credits in connection with the exports. On this basis, a show-cause notice [SCN] was issued to the appellants proposing lower FOB values for the goods (Rs. 150 per piece in respect of goods in S/B No. 1000, Rs. 450 per piece in respect of goods in S/B No. 2088 and Rs. 500 per piece in respect of goods in S/B No. 2106). The SCN proposed to deny DEPB credit in respect of the goods in S/B No. 1000, alleging that those goods were not made of woollen blended yarn. In respect of the goods in S/B No. 2106, the SCN proposed to reduce the DEPB credit from 16% to 13% on the basis of the chemical test result indicating synthetic fibre content of only 55%. The notice also proposed to confiscate the entire goods under Section 113(i) of the Customs Act as also to impose penalty on the party under Section 114(i) of the Act on the ground of misdeclaration. The allegations in the show-cause notice were denied and the proposals contained therein were contested. The appellants relied on CBEC's Circular No. 69/97 dated 8.12.97 and contended that FOB value could be higher than PMV depending upon the terms of the contract between the exporter and the foreign buyer. They also relied on the Board's Circular No. 79/98 dated 22.10.98 to contend that the show-cause notice was time-barred vis-a-vis the 3 S/Bs. They also contested the market enquiry results by submitting that the same reflected the wholesale price of the goods for the off-season period of March 2000 and that the real price of the goods during 1998 and 1999 was much higher. The appellants produced a certificate from Bajwa Nagar Hosiery Association, Ludhiana to substantiate this point. They also contested the test report of the Custom House Laboratory and wanted samples to be retested by 'SASMIRA' an independent textile laboratory at Mumbai. The Commissioner of Customs who adjudicated the dispute passed the following order:
1. The department is fully justified in redetermining the FOB in respect of all the three cases as discussed above while finalizing the provisional assessment of the three Shipping Bills for grant of eligible DEPB credit. The assessment is to be finalized immediately and eligible credit allowed to the exporter as per the prescribed procedures.
2. The exporter is entitled to DEPB credit under Group 89, Sl. No. 62 in respect of goods declared as children's legging vide S/Bill No. 1000 dt. 8.12.1998.
3. The exporter is entitled to DEPB credit under Group 89 Sl. No. 68 (b) @ 13% where the synthetic content is only 55% in respect of Shipping Bill No. 2106 dated 21.1.1999.
4. The goods covered vide S/Bill No. 2088/21.10.1999 and S/B No. 2106/21.1.99, wherein the exporter has deliberately declared a wrong composition to claim higher ineligible DEPB credit is liable for confiscation under Section 113 of the Customs Act for misdeclaration of the goods. As the goods are no longer available for confiscation, it is felt that justice would be made if the exporter is penalized by way of penalty.
5. I impose a penalty of Rs. 25,000 (Rupees twenty-five thousand only) on M/s. Cannon Steels Pvt. Ltd., Ludhiana under Section 114of the Customs Act."
2. Heard both sides. Ld. Counsel for the appellants submitted that there was no reliable evidence in this case to show that the FOB value declared by them was incorrect. The department's own Circular dated 8.12.97 had acknowledged the fact the declared PMV could be higher by upto 50% of the export price. As the value declared by the appellants did not exceed 150% of export price, there could not be a valid charge, against them, of misdeclaration of value. Invoices issued by the Ludiana parties (manufactures) from whom the export goods had been purchased by the appellants were produced before the adjudicating authority but the same were not accepted, which was against the law laid down by the Supreme Court. The certificates of Bajwa Nagar Hosiery Association, which were produced by the appellants and would have gone a long way to disprove the department's allegation of misdeclaration, were also not accepted by the Commissioner. The appellants' request for cross-examination of the persons with whom the market enquiries were conducted by the department was also turned down. In the absence of cross-examination of such persons, their evidence ought not to have been relied upon by the adjudicating authority. The Commissioner erroneously applied the Board's Circular No. 23/99-Cus. Dated 11.5.99 which had been issued after the time limit of 90 days fixed in the earlier circular for issue of show-cause notice expired. In this connection, Ld. counsel relied on the Tribunal's decision in Merchant Exports (India) Ltd. v. CC, Cochin, 2001 (74) ECC 339 (T) : 2001 (128) ELT 428 (Tri.- Del). Ld. counsel also raised a grievance that the appellants' request for retest of samples in an outside laboratory was not allowed by the Commissioner. The PMV deed Shipping Bills was as per the Ludhiana manufacturers' invoices and, therefore, there was no basis for the allegation of misdeclaration of value. Finally, Ld. counsel relied on Final Order No. 282/02/A dated 4.6.2002 passed by the Tribunal in the present appellants' own case (Appeal No. C/142/01/A).
3. The DR submitted that the finding of overvaluation of goods was based on the results of market enquiry conducted in accordance with law. The market enquiry reports were also taken under Panchnama which was signed by the appellants and, therefore, the reports could not be challenged by them. Ld. DR. also forcefully relied on the Supreme Court's decision in Om Prakash Bhatia v. CC, Delhi, 2003 (88) ECC 457 (SC) : 2003 (155) ELT 423 (SC) and submitted that, when margin of profit was apparently unreasonable, it was for the exporter to establish that the export value declared in the Shipping Bill was correct. The appellants did not discharge this burden of proof. Hence, the allegation of misdeclaration of value stood unrebutted. The chemical test report of the Custom House Laboratory was legally authentic and the same was binding on the party, who did not ask for any retest in the Central Revenues Control Laboratory of the department. On the other hand, they wanted to have the samples retested in an outside laboratory, for which they did not state any valid reason. The DR also vehemently argued that the penalty imposed by the Commissioner on the basis of the finding of misdeclaration was not assailable in the facts of this case. In this connection, he, again, relied on the Supreme Court's decision in Om Prakash Bhatia (supra).
4. We have examined the records and the submissions. The Commissioner appears to have attributed motive to the Ludhiana-based appellants on account of their having chosen Cochin Port for export of the goods. This can hardly be justified as the appellants were within their right to export the goods in that manner. As per the chemical test report issued by the Customs House Laboratory, the goods in S/B No. 1000 was composed of 89.5% acrylic fibre and 10.5% cellulosic fibre and, accordingly, the Commissioner has allowed DEPB credit @ 15% applicable to acrylic knitwears under Sr. No. 62 of Group 89 of the Hand Book of Procedures, Volume-II (1997-2002). This decision was on the basis of a finding that the goods did not contain any woollen fibre. The chemical test report, in relation to the goods in S/B No. 2106, stated that the goods was composed of 55% of synthetic fibre and 45% of wool. As the synthetic fibre content was more than 50% but less than 65%, the Commissioner allowed DEPB credit in respect of the goods only to the extent of 13% applicable to Sr. No. 68 (b) under Group 89 in the Hand Book of Procedures. In respect of goods covered under S/B No. 2088, there was no proposal in the SCN to deny or reduce DEPB credit. We have examined the Commissioner's reasoning in respect of DEPB credits for the goods under the other two S/Bs. We have not been able to find any fault with the manner in which the Commissioner classified the goods for the purpose of determining rate of DEPB credit admissible to the exporter. The rate of DEPB credit was dependent on the percentage of synthetic fibre contained in the blended yarn used in the fabrics. Such percentages were provided by the chemical test report submitted by the Customs House Laboratory. The appellants never wanted the samples to be retested in the Central Revenues Chemicals Laboratory, New Delhi, though there was a provision for such retest. On the other hand, they wanted samples of the goods to be tested in an outside laboratory, and that too without raising any valid objection against the chemical test conducted in the Custom House Laboratory. Even in the present appeal, we have not found any valid challenge to the test report of the departmental laboratory. Therefore, we sustain the Commissioner's decision to rely on the Customs House Laboratory report for the DEPB rate fixation. Accordingly, we uphold the rates of DEPB credit determined by the Commissioner in respect of the consignments.
5. Under the DEPB scheme, undisputedly, rate of credit was a percentage of export price (FOB value) of the goods. The credit could not exceed 50% of the PMV of the goods. In the instant case, the Commissioner fixed lower FOB values and PMVs than those declared by the appellants in respect of all the consignments. The declared FOB values and PMVs as well as the FOB values and PMVs determined by the Commissioner are as under:
Shipping Bill No. &date Unit FOB value declared Unit PMV declared FOB value determined PMV determined 1000 8.12.98 Rs. 677 Rs. 375 Rs. 236 Rs. 225 2088 21.1.99 Rs. 1252 Rs. 1200 Rs. 709 Rs. 675 2106 21.1.99 Rs. 1252 Rs. 1250 Rs. 788 Rs.750 DEPB credits have been allowed respectively at the rates of 15%, 16% and 13% of the FOB values determined on the above basis in respect of the goods under the above Shipping Bills.
6. The main controversy in this case relates to the determination of FOB values and PMVs of the goods for the purpose of DEPB credit benefit. The PMVs were determined on the basis of market enquiries held at Ludhiana. It has been argued that rejection of the PMVs declared on the basis of the purchase invoices pertaining to the goods is contrary to the instructions contained in the Board's Circular dated 8.12.97. It has been further submitted that the Ludhiana parties with whom enquiries were made by the department had never sold or purchased or exported goods of the kind in question and, therefore, their evidence was not reliable. It has again, been submitted that the opinion of Bajwa Nagar Hosiery Association, relied on by the department, was no longer relevant in view of the letter dated 27.9.2001 subsequently submitted by the Association to the Deputy Commissioner of Customs, which was in support of the appellants' case. Above all, it has been submitted that the appellants had produced their purchase invoices before the adjudicating authority but those invoices were discarded without assigning any reason. It was in this context that the counsel for the appellants relied on Final Order dated 4.6.2002 passed by this Tribunal in the appellants' own case.
7. We have perused the above Final Order. In that case also, the Commissioner of Customs had rejected the purchase invoice for the export goods, produced by the exporter, and market enquiry results were relied on for estimating PMV. The market enquiries were made with two persons. One of them could not even distinguish between woollen paijamas and leggings and the other had no experience of dealing in goods of the kind considered in that case. The Tribunal held that the determination of PMV after rejection of the purchase invoice relating to the export goods was contrary to the directions contained in Circular No. 69/97 dated 8.12.97. It was observed that sale invoice was one of the documents specified in the circular, which could be considered in the determination of market value of export goods. We find that the facts of the instant case are not materially different from the cited case of the appellants. In the present case also, the purchase invoices pertaining to the export goods, produced by the exporter, were rejected by the Commissioner, who exclusively relied on the market enquiry results. The market enquiries were made with M /s. Chawla Knitwears (Ludiana) and M/s. Bajwa Nagar Hosiery Association (Ludiana). Insofar as M/s. Chawla Knitwears are concerned, there is no evidence on record to indicate that they had ever dealt in goods of the kind involved in the instant case. On the other hand, a certificate dated 5.1.2002 of the Authority Signatory of M/s. Chawla knitwears says that they had not dealt in such goods during 1998-99. As regards M/s. Bajwa Nagar Hosiery Association, they issued clarifications to the Customs authorities subsequent to the market enquiries. One of these clarifications dated 5.1.2002 is that acrylic fibre is a substitute for wool in Hosiery industry. Another clarification says that, as per trade parlance, it is not essential that hosiery goods known as woollen blended hosiery should contain wool at all. These subsequent certificate/clarifications did vitiate the reliability of the earlier market enquiry results. In the circumstances, the market enquiry results are not reliable evidence in this case. One has to revert to the evidence adduced by the exporter, that is, the purchase invoices of the manufacturers, from whom the export goods were purchased by the appellants. We, therefore, are inclined to follow the view taken in Final Order No. 282/2002/A dated 4.6.2002 in Appeal No. C/142/2001/A.
8. Ld. DR has relied on the Supreme Court's decision in Om Prakash Bhatia (supra). We have perused this judgment of the apex Court and we find that the case involved over-invoicing of readymade garments without disclosure of true sale consideration for higher drawback benefits. In the present case, the purchase invoices were produced and the declared PMVs were based on these invoices. The ratio of Om Prakash Bhatia is, therefore, not applicable to the instant case.
9. The next point to be considered relates to confiscation and penalty. The Commissioner has found that the appellants deliberately declared wrong composition in respect of the goods for claiming higher DEPB benefits than they were entitled to. On this basis, he has held the goods to be liable to confiscation under Section 113 of the Customs Act. We have already accepted the composition of goods reported by the Custom House Laboratory. That report shows that the appellants misdeclared the composition of the goods in S/B Nos. 1000 and 2106. Apparently, there is no misdeclaration of composition in respect of the goods covered under S/B No. 2088. As the percentage of synthetic fibre content in the blended yarn used on the fabric is crucial to claim of DEPB benefit, the declared composition of the goods should certainly compare with the composition reported by the competent chemical authority viz. Chemical Examiner. In this view of the matter, there is an element of misdeclaration in this case and consequently the goods covered under the above two Shipping Bills are liable to confiscation under Section 113. The penalty under Section 114 depends on the confiscability of the goods under Section 113. Consequently, a penalty is liable to be imposed on the exporter under Section 114. We are of the view that the penalty of Rs. 25,000 imposed on the appellants by the Commissioner is reasonable.
10. In the result, it is ordered as under:
(a) The appellants are entitled to DEPB credits on the basis of the FOB values and PMVs declared by them, subject to the limits prescribed in the Board's Circular No. 69/97 dated 8.12.97. They are entitled to such credit @ 15%, 16% and 13% as determined by the Commissioner in respect of the goods covered under S/B Nos. 1000, 2088 and 2106 respectively.
(b) The penalty of Rs. 25,000 imposed on the appellants under Section 114 of the Customs Act is upheld.
(c) The impugned order stands modified to the above extent and the appeal is disposed of accordingly.