Custom, Excise & Service Tax Tribunal
Gaurav Sales Corporation vs Commissioner Of Customs on 4 November, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.C/1037/09 (Arising out of Order-in-Original No.CAO No.CC-(RT)34/2009 ACC dated 31/08/2009 passed by Commissioner of Customs (Export), Mumbai) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Gaurav Sales Corporation Appellant Vs. Commissioner of Customs (ACC & Export), Mumbai Respondent Appearance: Shri.VM Doiphode, Advocate for appellant Shri.MK Sarangi, Jt. Comm. (AR), for respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing : 04/11/2016 Date of Decision : /11/2016 ORDER NO Per: Raju
1. The appellants, M/s.Gaurav Sales Corporation imported watch modules at a declared value of Japanese Yen 35 per piece. The appellant claimed that they had entered into a contract for supply of 50 lakhs pieces of watch module 2035 at JY 35 per piece (CIF Mumbai). The first consignment of such watch modules consisting of 3,06,030 pieces was imported vide invoice dated 08/07/2002 and Bill of Entry No.457430 dated 16/07/2002. The said bill of entry was finally assessed. Subsequently, watch movements/modules in various quantities were imported by the appellant by six different Bills of Entry from 25/07/2002 to 24/08/2002, however the said Bills of Entry were provisionally assessed. The matter was referred to SIIB. Statements of the appellant was recorded wherein he stated that the representative of Citizen Watch Company Ltd. had come to India and offered to supply watch modules at very competitive rates. The said price was accepted by the appellant and consequently the goods were imported by the appellant on the contracted prices against eight difference invoices. Out of 8 Bills of Entry filed by the appellant, 2 were assessed finally and balance 6 were assessed provisionally. During investigation, following discrepancies were notice:
7. Scrutiny of the offer letter dated 12/06/2002 and confirmation letter dated 14/06/2002 with the invoice TA 020813N dated 13/08/2002 and other 5 original invoices, revealed discrepancies:
a) The address shown in the manufacturers catalogue was TANASHI-SHI, Tokyo 188, Japan whereas the letter head of Citizen was showing the area as TANASH-SHI.
b) Telex Number on the manufacturers catalogue was 2822471 CTZTNS whereas on the letterhead the same was shown as 2822417 CTZINS.
c) The signature differed of, Manager of Citizen Watch Co Ltd., Sh.Akishige Uchino, on the invoices.
d) The word Japanese was mentioned incorrectly on the invoices. In one case it was JAPANES and at another place it was written as JAPANESS
e) The photocopy of letter dated 12/06/2002 did not correspond with the original there being changes in the text and format.
f) On the invoices and offer letter, the name of the company CITIZEN WATCH CO.LTD is shown while elsewhere it was shown as CITIZEN WATCH CO., LTD.
Statement of Shri Rajendra B Jain, Proprietor of M/s.Gaurav Sales Corporation was recorded. During the statement, he promised to submit the bank accounts pertaining to the transaction made in relation to the disputed bills of entry. However, the said bank statements were not produced. Thereafter, Revenue obtained duly certified caveat free documents from the Hong Kong Government. They were in the form of four export declaration along with copies of related shipping documents pertaining to export from Hong Kong to India in respect of bills of entry Nos.462860, 462861, 467837 & 467839. Revenue noticed following from the said documents:
a) In the Caveat free documents/evidences procured from Hong Kong pertaining to goods, the shippers name is Citizen Watch Co, Japan on the AWB Nos.KKS-185 945 / 944 /873 / 186-356 issued at Tokyo by K Line Air Service Ltd., Japan, and the specified Invoice Nos. are TA270288K & TA270324K / TA270297K / TA270206K / TA270788K & TA270789K for shipments from Tokyo to Hong Kong.
b) Documents produced by importer along with bills of entry are Invoice Nos.TA020721N / TA020720N / TA020713N / TA020727N said to be issued by Citizen Watch Co Ltd., Japan with shipments from Hong Kong to Mumbai under AWB Nos.160-8326- 2336 / 2325 / 098-7881-9333 / 9355 issued at Hong Kong by K Line Air Services, Ltd with Consignor being K Line Air Service (HK), Kowloon and no mention of Citizen Watch Co, Japan.
Thereafter, statements of Shri Rajendra B Jain, Proprietor of M/s.Gaurav Sales Corporation was recorded wherein he inter-alia deposed the following:
c) He was asked to explain the difference in placement of words in lines and differing signatures on the original offer letter dated 12/06/2002 addressed to him by Citizen Watch Co Ltd and its photocopy. He stated that difference in placement of words seemed to be typographical/clerical computer line alignment adjustment. Regarding signature, he could not explain or comment and that it seemed similar but he did not know the exact position.
e) He was shown offer letter dated 12/06/2002 and confirmation letter dated 14/06/2002 issued by Citizen Watch Co Ltd and asked if they were issued by one person. He stated that it looked like same and signed by Sakuma, but as it was Citizens document, he could not confirm.
f) His attention was drawn to the word Japanese spelt as Japaness and Japanes on the five invoices, to which he stated that Citizen Watch Co Ltd, Japan could explain it better but it seems to be a spelling mistake by their clerical department.
h) He was shown the duly certified caveat free documents and he stated that data mentioned in these documents and that submitted by them (importer) at time of import tallied except for quantity and value; that caveat free documents showed that cargo was carried by K Line Air Services (Hong Kong) Ltd from Japan to Hong Kong; that invoices in these documents were raised with consignee name as Gaurav Sales Corporation indicating values in US Dollars and terms of payment as advance payment by TT remittance.
j) He was asked of the possibility of watch movements weighing less than 1 gm/piece and he stated that in the market he had seen watch movements of less than 1 gm and that it was possible for watch movements to have weights of 1 gm or more or less. However, he changed this by clarifying that he could not surely tell that there is watch movement of less than 1 gm.
k) It was pointed out to him that from the certified documents from Hong Kong the weight/piece of watch movement came out between 0.678 gms 0.694 gms. He stated that he was not sure this was the correct weight.
Thereafter, a letter was written to Mr.Hideaki Nakazaki, Managing Director of M/s.Citizen Watch Co. (India) Ltd., Bangalore, enclosing the copies of the invoice Nos.TA 020727 N dated 26/07/02, TA 020726N dated 26/07/02, TA 020720N dated 20/07/02, TA 020721N dated 20/07/02, TA 020713N dated 13/07/02, TA 020708N dated 08/07/02 and offer letters dated 12/06/2002 and 14/06/2002 for verifying he genuineness of these documents. He in turn forwarded the same to Shri Miwa, Citizen Watch Co. Ltd., Japan in charge of the watch movement segment of the company in Japan, requesting him to verify the genuineness and authenticity of the said documents. Citizen Watch Co. Ltd. by letter dated 08/08/2007 intimated as follows:
1. Citizens letter to Gaurav S. Corp. CIT/GSC/2002-03 dated 12 and 14, June, 2002.
These letter including price offering do not exist and were not written by our staff.
Head office mentioned as Shinjyuku Tokyo for address in these Letter-Head, though our address of head office had moved to Tanashi Tokyo in March 2001 and old letter-head had not been used after that.
2. Invoice No.TA020708N, TA0020713N, TA020720N, TA020721N, TA020726N and TA020727N.
These invoices were not issued by us and the form for our original invoice for year 2002 is different from them.
These refer attached our invoice.
With regard to the matter above, 1 and 2, if Gaurav S. Corp. had intentionally made them for some purpose, these are unpardonable behavior.
3. In our movement business, we are dealing with lots of customers in the world, with various models, various prices and various business method which decided fairly and legally with our customers.
We are not position to disclose them for all customers in consideration of On the basis of above communication, a show-cause notice was issued to the appellant seeking to reject the declared value under Rule 10 of the Customs Valuation Rules, 1988 and apply Rule 6 of the said Rules. The assessable value of the imported goods were re-fixed under Rule 6, the assessments were finalised under Section 18 (2) of the Customs Act and the differential duty was demanded. The goods were ordered to be confiscated under Section 11 M of the Customs Act and offered for redemption fine in lieu of confiscation was also made of imposition of redemption fine of Rs.4.00 crore. Penalty equal to the duty demanded was also imposed under Section 112 of the Customs Act. Aggrieved by the said order, the appellants are before the Tribunal.
2. Learned Counsel for the appellant argued that there was no need to Revenue to look for contemporaneous price of similar goods as contemporaneous price of the identical goods was available with the Revenue in the shape of 2 bills of entry imported against the very same contract from the same country of origin and of identical description. He argued that if the said bills of entry were taken as contemporaneous imports of identical goods no demands survives.
2.1 Learned Counsel argued that they have placed an order of 50 lakhs pieces of watch modules and the contemporaneous imports relied upon by the Revenue is of much smaller quantity. He argued that in case of electronic goods significantly discounts were offered on increase in the quantity of order. He argued that in case of watch modules if there is 20% increase in the quantity, the price come down by 7%. He argued that in the instant case, the contracted quantity was 50 lakhs pieces and 21 lakhs pieces were imported over a period of 1 = months from the same manufacturer. He argued that if the NIDB data for a quantity of 35,000 units show the price is Rs.47.66 and for the quantity of 42,000, the price is Rs.43.82. It clearly implies that for 20% increased in quantity, the price come down by 7%. He therefore, argued that if the same ratio is extrapolated to 50 lakhs pieces, the price would come down to Rs.14/- per piece, which is below Rs.15/- the value declared by the appellant.
2.2 Learned Counsel argued that they have made payments to the Citizen Watch Company, Japan through TT transfers and produced certain photocopies of TT documents. Learned Counsel argued that he will be in a position to give a bank attested copy of the said documents. Vide letter dated 08/11/2016, the learned Counsel submitted a letter from Seema Kamat, Manager, Canara Bank addressed to Foreign Department of the said bank and certified photocopies claimed to the TT documents with the following attestation of Prakash G Paigude, Senior Manager, foreign department, Canara Bank, Mumbai. It contained endorsement stating that docs handled as per RBI guidelines. The said photocopies were in respect of invoice No.TA-020708N dated 08/07/2002, TA-020713N dated 13/07/2002, TA-020813N dated 30/08/2002. Learned Counsel argued that the amounts transferred through aforesaid TTs matched with the value declared in their bills of entry for assessment.
2.3 Learned Counsel further argued that the invoices submitted by K Line Air Services (Hong Kong) Ltd. who had shipped the said consignment to the appellant was 1,212,000 pcs in respect of Invoice No.TA-270206K-1. Learned Counsel argued that the value of US $ 227.040 declared on the said invoice was for 1,212,000 pieces and the value was US $ 227.040. The said goods were declared vide bill of entry No.467837 dated 03/08/2002 and in the said bill of entry a quantity of 303000 @ 35 Japanese Yen and 6060 @ 40 Japanese Yen was declared. The invoice Number was declared in the bill of entry was TA 020713N dated 30/07/2002. Following table summarized the details as it appears in the documents obtained from Hong Kong Government and documents submitted by the appellant:
BE NO. / DATE 462860 / 25.07.02 462861 / 25.07.02 467837 / 03.08.02 467839 / 03.08.02 INVOICE / DATE FROM CITIZEN TA020721N / 20.07.02 TA020720N / 20.07.02 TA020713N / 13.07.02 TA020727 / 26.07.02 INVOICE ISSUED BY K LINE TA270298K-1 / 08.07.02 TA270297K-1 /08.07.02 TA270206K-1 / 04.07.02 TA270789K-1 /22.07.02 MAWB 16083262336 16083262325 9878819333 9878819355 PKG / BE 51 51 52 52 PKG / H KONG 51 51 52 52 PCS / B.E 303000 303000 303000 + 6060 303000 + 1515 QTY / H KONG 1212000 1212000 1224120 1212000 BE / J.YEN 10605000 10605000 10847400 10668125 H KONG / HK $ 1699521 1699521 1788621.2 1774611.2 H KONG / US $ 215730 + 2157.3 215730 + 2157 227040 + 2270.4 222570 + 2225.7
3. Learned AR argued that while it is an admitted fact, there are quantity discounts available in any industry, the same cannot be in a straight line method. He argued that if the arguments of appellant is extended to a quantity of 1 crore pieces instead of 50 lakhs, the price of the modules according to the formula suggested by the appellant would come down to Rs.7/-. Learned AR argued that the invoice received through Hong Kong Government, which has been issued by K Line Air Services (Hong Kong) Ltd. is not for watch movements but watch parts. He argued that a watch movement would consist of many parts and the quantity mentioned in the invoice relates to those parts individually and not to the number of watch module. He argued that if the total weight of the consignments sent by the Air Way Bill issued by K Line Air Services (Hong Kong) Ltd. was 850 Kgs consisting of 52 cartons which contained 1,212,000 pieces. If we divide the said gross weight of 850 Kgs (which includes the packing material) by the total number of pieces, the weight of each part on an average comes to 0.7 grm. He argued that even the appellants have in their statements admitted that there are no such watch movements which weight less than 1 gram. In the statement of Shri Rajendra Jain made before the Revenue, the learned AR argued that the invoice issued by K Line Air Services (Hong Kong) Ltd. is for parts of watch movements and each watch movement consists of 4 parts. Thus, the actual quantity of watch movement imported was < of the number of parts declared in the invoice of K Line Air Services (Hong Kong) Ltd.
3.1 Learned AR further argued that they have declared a unit price of Rs.14/- whereas the invoice obtained from the Hong Kong Government show a price of Rs.9/- per piece. It is obvious that the price declared in the Hong Kong invoice to K Line Air Services is for an item different from the watch movement declared by the appellant. He argued that the website of Citizen Watch Company, Japan clearly indicate that the watch movement consists for the basic part, setting stem, hour wheel and dial washer. In the website of the manufacturer showed that each module consisted of (i) basic classification (ii) setting stem (iii) hour when and (iv) dial washer. Moreover, the examination report of the Appraiser Officer in respect of bill of entry No.462861 also shows that the blister packs of module contained the key role and washer pack separately inside. Learned AR argued that this clearly shows that what was imported was watch modules in the shape of blister packs consisting of 4 parts which together constituted a module.
3.2 Learned AR argued that while the contemporaneous imports of similar goods have been made as reference, the value appearing in the invoice recovered from the Hong Kong Government and issued by K Line Air Services (Hong Kong) Ltd. have been taken for the purpose of assessment. Learned AR argued that the appellants have made payments in advance to K Line Air Services (Hong Kong) Ltd. as is apparent from the endorsement on the invoice issued by K Line Air Services (Hong Kong) Ltd. He argued that since a separate payment has been made to K Line Air Services (Hong Kong) Ltd. and the said TT remittance have not been produced by the appellant. The TT remittance in respect of payments made to Citizen Watch Company cannot be accepted as sole payments made by the appellants. He further argued that there are large number of discrepancies in the documents produced by the appellants at the time of assessment such as the signatures of the person, who has issued the said documents. Signatures of Shri Sakuma does not match in the two documents, namely, the offer letter dated 12/06/2002 and letter of confirmation dated 14/06/2002. He further argued that the signature of Mr.Akishige Uchino on invoice No.TA 020727N does not match with his signature with invoice TA 020713N.
3.3 Learned AR further pointed out that even Citizen Watch Company has stated that the invoices produced by the appellant have not been issued in the format which was prevailing in Citizen Watch Co. at the material time and in the address, which was operational at the material time. In view of the above, he argued that the invoice produced by the appellant cannot be relied upon for the purpose of assessment.
4. We have gone through the rival submissions. We find that the appellant has produced certain invoices at the time of assessment. When the same invoices were sent to the Citizen Watch Company for confirmation, following response has been received.
1. Citizens letter to Gaurav S. Corp. CIT/GSC/2002-03 dated 12 and 14, June, 2002.
These letter including price offering do not exist and were not written by our staff.
Head office mentioned as Shinjyuku Tokyo for address in these Letter-Head, though our address of head office had moved to Tanashi Tokyo in March 2001 and old letter-head had not been used after that.
2. Invoice No.TA020708N, TA0020713N, TA020720N, TA020721N, TA020726N and TA020727N.
These invoices were not issued by us and the form for our original invoice for year 2002 is different from them.
These refer attached our invoice.
With regard to the matter above, 1 and 2, if Gaurav S. Corp. had intentionally made them for some purpose, these are unpardonable behavior.
3. In our movement business, we are dealing with lots of customers in the world, with various models, various prices and various business method which decided fairly and legally with our customers.
We are not position to disclose them for all customers in consideration of A perusal of the response shows that there is a reason to doubt the invoices produced by the appellant. However, it is noticed that there are following discrepancies in the invoice and the documents produced by the appellants have been highlighted by Revenue during adjudication.
7. Scrutiny of the offer letter dated 12/06/2002 and confirmation letter dated 14/06/2002 with the invoice TA 020813N dated 13/08/2002 and other 5 original invoices, revealed discrepancies:
a) The address shown in the manufacturers catalogue was TANASHI-SHI, Tokyo 188, Japan whereas the letter head of Citizen was showing the area as TANASH-SHI.
b) Telex Number on the manufacturers catalogue was 2822471 CTZTNS whereas on the letterhead the same was shown as 2822417 CTZINS.
c) The signature differed of, Manager of Citizen Watch Co Ltd., Sh.Akishige Uchino, on the invoices.
d) The word Japanese was mentioned incorrectly on the invoices. In one case it was JAPANES and at another place it was written as JAPANESS
e) The photocopy of letter dated 12/06/2002 did not correspond with the original there being changes in the text and format.
f) On the invoices and offer letter, the name of the company CITIZEN WATCH CO.LTD is shown while elsewhere it was shown as CITIZEN WATCH CO., LTD.
The following table shows the details invoices produced by the appellant and those obtained from Hong Kong Government through Caveat.
BE NO. / DATE 462860 / 25.07.02 462861 / 25.07.02 467837 / 03.08.02 467839 / 03.08.02 INVOICE / DATE FROM CITIZEN TA020721N / 20.07.02 TA020720N / 20.07.02 TA020713N / 13.07.02 TA020727 / 26.07.02 INVOICE ISSUED BY K LINE TA270298K-1 / 08.07.02 TA270297K-1 /08.07.02 TA270206K-1 / 04.07.02 TA270789K-1 /22.07.02 MAWB 16083262336 16083262325 9878819333 9878819355 PKG / BE 51 51 52 52 PKG / H KONG 51 51 52 52 PCS / B.E 303000 303000 303000 + 6060 303000 + 1515 QTY / H KONG 1212000 1212000 1224120 1212000 BE / J.YEN 10605000 10605000 10847400 10668125 H KONG / HK $ 1699521 1699521 1788621.2 1774611.2 H KONG / US $ 215730 + 2157.3 215730 + 2157 227040 + 2270.4 222570 + 2225.7 It is seen that the invoices of K Line are issued prior to issue of invoices of Citizen Watch Co. produced by the appellant. It is not possible that the invoice of a consignment would be made by intermediary before the original invoice is made by manufacturer. The intermediary can make the invoice only after the same is made by original supplier.
From the above documents, it is apparent that the invoices produced by the appellant at the time of assessment are not genuine documents. Furthermore, the quantities mentioned in the Air Way Bill and the invoices of K Line Air Services (Hong Kong) Ltd. do not match with quantities and description given by the appellants in their declaration before the Revenue.
4.1 Learned Counsel for the appellants argued that the goods imported under the same contract for identical goods have been assessed finally by the Revenue. Learned Counsel argued that the same should be adopted a contemporaneous imports and the same should be adopted for the purpose of assessment of rests of the bill of entry. We find that this is erroneous arguments. Para 4 above, clearly shows that the invoices produced by the appellant and the contract documentation produced by the appellant are themselves suspected documents. Since the basic documents on the basis of which the final assessment in respect of bill of entry No.457430 has been made is itself a suspected documents, the said assessment cannot be treated as contemporaneous imports of identical goods.
4.2 During the investigation, the appellant was asked to produce bank records of the remittance made. However, the appellant failed to produce the same. The appellant has produced a few TT documents however, it cannot be said that all the TT documents have been produced. If the appellant has produced the entire bank statements, Revenue would have been able to gather all the TTs made by the appellant. In view of the fact that the invoices issued by K Line Air Services (Hong Kong) Ltd. clearly shows that they also have received payments in advance. In these circumstances, the copies of TT attested by Bank produced by the appellants do not come to their rescue.
4.3 In view of the above, it is apparent that the invoices produced by the appellants are not genuine and therefore, the same case to be rejected of right. Once the invoices produced by the appellants are rejected, the only alternate is to rely on the documents recovered from the Hong Kong Government. The said documents consists of the following:
a) AWBs issued by M/s. K Line Air Services Ltd. Japan for carriage of the goods from Tokyo to Hong Kong
b) Authorization of EDI Submission of Export/Re-export declaration in Form 2 and the Trade Declaration print out of Hong Kong Customs. This document reflects the record of information lodged, by M/s. K Line Air Services (Hong Kong) Ltd., Hong Kong the consignor of the goods in Hong Kong, with reference to the goods re-exported to the importers in India.
c) AWBs issued by M/s. K Line Air Services (Hong Kong) Ltd. Hong Kong, for carriage of the goods from Hong Kong to Mumbai
d) Invoices issued by M/s. K Line Air Services (Hong Kong) Ltd. in favour of M/s.Gaurav Sales Corporation
e) Invoices issued by M/s. K Line Air Services (Hong Kong) Ltd., Hong Kong, to M/s.Citizen Watch Co. Ltd., Japan, towards charges like airfreight, terminal charges, airline documentation charges, handling charges, cartage charges, re-labeling charges, import/export declaration charges, cargo insurance surcharge, etc. incurred in connection with re-export of goods from Hong Kong to Mumbai.
It is seen that corresponding to each Air Way Bill, the appellants have filed different bill of entry. The Commissioner has taken the value declared in the corresponding invoices of K Line Air Services (Hong Kong) Ltd. as the assessable value while doing this he has given suitable adjustments after examining the contemporaneous imports of similar goods in terms of Rule 6 of the Customs Valuation Rules.
5. In view of the above, we do not find any merit in appeal, the same is rejected.
(Pronounced in Court on..) (MV Ravindran) Member (Judicial) (Raju) Member (Technical) pj 1 17 Appeal No.C/1037/09