Custom, Excise & Service Tax Tribunal
Alberto Bestonso vs Cc (I), Jnch, Nhava Sheva, Mumbai on 25 June, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. I
APPEAL NO. C/595/12 Mum
Arising out of Order-in-Original No. 85 (G.Vb)/2011-12-CC(I) dated 03.04.2012 passed by the Commissioner of Customs (Import), JNCH, Nhava Sheva, Mumbai.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri P.K. Jain, 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 :
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?
Alberto Bestonso
:
Appellant
Versus
CC (I), JNCH, Nhava Sheva, Mumbai
Respondent
Appearance Shri P.A. Augustian, Advocate for appellant Shri M.S. Reddy, Dy Commissioner (A.R.) For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.K. Jain, Member (Technical) Date of Hearing :25.06.2014 Date of Decision :..
ORDER NO.
Per: P.K. Jain Brief facts of the case are that based upon an intelligence, officers of DRI searched the residence of the appellant and after making various enquiries, a show-cause notice was issued to the appellant. The appellant has imported a car namely Lamborghini Murcielago Roadster LP640 (vin no. ZHWBE47S08LA03188). The said car was imported from M/s. Hyperformance Cars Ltd., Bedfordshire, U.K. The said firm belongs to one Shri Lorenzo Bestonso, brother of present appellant. The appellant produced an invoice No.1021 dated 20.07.2008 and filed bill of entry No.667510 dated 03.11.2008 declared CIF value as GDP 1,75,000 (equivalent to Rs.1,39,56,250/-). The case of the Revenue is that the value declared in the said invoice is not correct and the value has been under-declared. Further, the Revenue has made a case that the said vehicle was registered abroad before import and is therefore an old and used car and therefore, they are not be eligible for the benefit of Notification No.21/2002 (Sl.344).
2. The case was adjudicated vide order dated 12.04.2010 wherein the Commissioner rejected the declared value and further the benefit of notification 21/2002 was denied as the vehicle was registered prior to its importation thereby not fulfilling the condition stipulated therein. Further, the vehicle was confiscated under Section 111(m) of Customs Act, 1962 read with Rule 2(c), Rule 11, Rule 12, Rule 14(1) and Rule 14(2) of the Foreign Trade (Regulations) Rule, 1993 for under valuation. The appellant was given an option to redeem the same on payment of fine of Rs.5.50 lakhs and was also imposed a penalty of Rs.2.20 lakhs under Section 112 of Customs Act. The appellant did not want to clear the said vehicle on enhanced value but wanted to re-export. After prolong litigation and direction by the CESTAT, the case was re- adjudicated and the learned Commissioner vide the impugned order dated 09.04.2012, rejected the declared value and redetermined the same. The benefit of Notification No. 21/2002 was also denied. The vehicle was confiscated under Section 111(m) of the Customs Act for mis-declaration of the value and also permitted to export the same on payment of redemption fine of Rs.5.50 lakhs. A penalty of Rs.2.20 lakhs was also imposed under Section 112 of the Customs Act. Aggrieved by the said order the appellant is before us.
3. Heard both sides.
4. The appellants main contention is that they are interested in re-exporting the vehicle but in view of detention and demurrage charges, are not able to re-export the car. The learned Advocate for the appellant disputed the valuation done by the department and hence confiscation under Section 111(m) of the Customs Act as also the denial of benefit of Notification No.21/2002 (Sl. No. 344). The main contention of the learned Advocate was that similar goods may have been imported by the dealer of the manufacturer in India and the value at which such dealer are importing the car would be available with the department and the department should take that value for the assessment purpose. The second contention of the learned Advocate is that in the alternative Custom should follow the Boards instructions relating to the valuation of the car. The learned Advocate also argued that there is no evidence about the authenticity of the invoice produced by the department. The department has not disclosed the source of the said invoice and the department is not having the original invoice. Hence the department cannot use the said invoice for determination of the value.
4.1 As far as the benefit of Notification No.21/2002 is concerned, the learned Advocate argued that at the time of investigation in the presence of DRI officials, the odometer of the vehicle has shown zero reading that itself proves that the vehicle is new. So far as the registration of the vehicle is concerned, the learned Advocate stated that they have purchased the vehicle in U.K. and as per the law in U.K. the vehicle had to be registered in the name of buyer, in this case Shri Lorenzo Bestonso. However, the facts remains that the vehicle was not used and registration was required as per Rules of the U.K. Government for taking out for expert. The learned Advocate argued that since the vehicle is a new one therefore, they are entitled for the benefit of Notification No. 21/2002.
4.2 The learned Advocate also quoted this Tribunals judgement in the case of Chemsilk Commerce (P) Ltd. vs. CC (Port), Kolkata 2009 (233) ELT 113 (Tri. Kolkata) and argued that in view of the said judgement, the vehicle is not required to be confiscated. The learned Advocate also quoted the judgement of the Honble Bombay High Court in the case of CC (Import) vs. Noshire Moody 2014 (300) ELT 205 (Bom.).
4.3 The learned Advocate for the appellant has quoted this Tribunals judgement in the case of Chemsilk Commerce (P) Ltd. (supra) to advance the argument that due to valuation, the car should not be confiscated. We have gone through the said judgement. We find in the said case the value declared by assessee was not accepted and higher value has been adopted on the basis of thorough enquiry and study of comparable goods imported by others and no incriminating evidence was found nor any duplicate invoices or suppression of invoices involved. Under the said circumstances, this Tribunal has taken the view that confiscation of goods under Section 111 is not appropriate. In the present case, the appellants brother has purchased the car just few weeks before dispatching to India. Therefore, it was necessary of the appellant to produce the original invoice and to declare the value accordingly. In the present case there is clear-cut suppression of the original invoice and hence the mis-declaration in the value. We find that the situation is squarely covered under Section 111 of the Customs Act and the confiscation is in order.
4.4 The other case law quoted by the learned Advocate for the appellant is that of Honble High Court in the case of CC (Import) vs. Noshire Moody (supra). We have gone through the said judgement of the Honble Bombay High Court. In the said case the Honble High Court has held that whether a vehicle is or is not new is a pure finding into that Settlement Commission found that car was a new car which was transshipped from the manufacturer in Italy to the Ferrari dealer in U.K. who sold the car to a dealer in the U.K. Respondent purchased the car from the dealer in U.K. Registration in U.K. was only to comply with the requirement of Licensing Authorities in U.K. who require registration even for the purpose of exportation Finding that vehicle was a new motor vehicle is not perverse or contrary to the evidence. In the present case, as discussed earlier, we have already come to the conclusion that the vehicle imported is a new vehicle.
5. The learned A.R. reiterated the findings in the impugned order as also the earlier order. He further stated that the appellants contention that the value should be determined on the basis of value of similar goods being imported by the dealer in India is incorrect, for the simple reason that the dealers are required to maintain show room, provide after-sale service, spend on sales promotion, advertisement etc. In addition they also buy vehicle for higher quantity. Import by the appellant and dealers are not comparable. The learned A.R. stated that in any case the appellant has not produced any dealer invoice to examine and comment on the same. The learned A.R.s contention relating to determining the value as per the CBECs Circular No.1/2005-Cus dated 11.1.2005 was that, when the real transaction value based upon actual invoice is available there is no reason to go for any other assessment procedure. This would be against Section 14 of the Customs Act, 1962. Other assessment guidelines are relevant when vehicles have been purchased abroad long back by importer or transactions are between two individuals. In such circumstances, the CBECs guidelines are used and the value so arrived is compared with the invoice or the declared value in case the invoice or declared value is less than as per the guidelines, cars are assessed as per these guidelines. In the present case, the original price at which the brother of the appellant and supplier has purchased the car is already available. The copy of the said invoice was given to DRI officials by their source (the informer). Further, the invoice and details therein has been confirmed by the manufacturer of the vehicle. Original of such invoice will be available with the supplier i.e. brother of the appellant. In any case, the appellant and the supplier are related persons and there was no reason for the appellant not to produce the original invoice. Even when the goods were seized, the appellant could have produced the original invoice and other payment particulars to put the matter to rest.
5.1 As far as benefit of Notification No. 21/02 is concerned, the learned A.R. drew our attention to the fact in para 10.2(b) in the order dated 12.04.2010 discussed in detail that the vehicle was registered in U.K. for use in that country and not for purpose of exporting. Therefore, the appellant cannot get the benefit of Notification 21/2002. As far as the Tribunals judgement in the case of Chemsilk Commerce (P) Ltd. (supra) is concerned, the learned A.R. stated that in that case the Tribunal observed that there was no evidence that the appellant had paid higher amount to the supplier of the goods and the department increased the value based upon the contemporary imports and in these circumstances confiscation and penalty was set aside. In the present case, the actual invoice and the transaction value are available and the appellant has intentionally mis-declared the value to evade the Customs duty and therefore the decision of the Tribunal in the case of Chemsilk Commerce (P) Ltd. (supra) is not applicable. As far as the other decision in the case of Noshire Moody (supra) is concerned, the Honble Bombay High Court said that the Settlement Commission found certain facts and the Honble High Court did not find anything perverse or contrary in that. Situation is very different in the present case..
6. We have considered the rival submissions. We note that the appellant imported a car from M/s. Hyperformance Cars Ltd. U.K. It is not in dispute that the said Company is owned by the brother of the appellant. Invoice of manufacturer is in the name of M/s. Hyperformance Cars Ltd., and delivery to Mr. L Bestonso. It is also observed from the show-cause notice that brother of the appellant viz. L. Bestonso also has a bank account in India. It was also found from the bank account of Shri Lorenzo Bestonso, a huge amount was transferred to the account of the appellant and the said account in turn has been remitted to U.K. in relation to the payment of the present vehicle. (para 11 of the show-cause notice). From the financial transaction, it is very clear that the appellant along with his brother has imported the vehicle (perhaps with a view to sell the same in domestic market). Section 14 of the Customs Act relating to valuation of the goods is as under:-
SECTION 14. Valuation of goods. (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf :
Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules Made in this behalf:
Provided further that the rules made in this behalf may provide for,-
(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;
(iii) the manner of acceptance or rejection of value eclared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section :
Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.
(2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it ay, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value.
Explanation. For the purposes of this section
(a) rate of exchange means the rate of exchange
(i) determined by the Board, or
(ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
(b) foreign currency and Indian currency have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
6.1 As mentioned above since the appellant and the supplier of the goods are brothers one has to see whether they are to be considered as related persons. We note that the Rule 2 of the Customs Valuation Rules defines the terms related persons as under:-
Rule 2. Definitions.
(1) .
(2) For the purpose of these rules, persons shall be deemed to be "related" only if -
(i) they are officers or directors of one another's businesses;
(ii) they are legally recognised partners in business;
(iii) they are employer and employee;
(iv) any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family.
Explanation I. - The term "person" also includes legal persons.
Explanation II. - Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other shall be deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-rule. 6.2 We find that the Clause (viii) covers the members of the family as related persons. Thus the supplier and the appellant are related persons. In the present case, both are one and same in view of financial flow. Further, Rule 3(3) of the said Valuation Rules deals with how to determine the value in case of related persons. The said Rule is as under:-
3. Determination of the method of valuation.- (1) Subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10;
(b) In 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.
(i) the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods:
Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related;
(c) substitute values shall not be established under the provisions of clause (b) of this sub-rule. 6.3 In the present case, the department has obtained invoice from some source (informer). The said invoice in turn was sent to the manufacturer of the car who has confirmed the genuineness of the same. The details of the invoice have been given to the appellant. In fact, original of the said invoice or equivalent invoice should be available with the appellant or his brother. The appellant has not produced any evidence to counter the same. The very fact that the vehicle was purchased on 31st May 2008 from the manufacturer and was thereafter shipped in July 2008 from U.K. The said invoice would be available with the appellants brother i.e supplier and it should have been possible for the appellant to produce the same during investigation or in reply to the show-cause notice. The appellant could have obtained copy of the invoice from manufacturer. In fact this Tribunal did ask the appellant if he has got the invoice or can obtain the same from his brother supplier and matter adjourned. The learned Advocate on the next date of hearing stated that the matter is 5 to 6 years old and they do not have copy of the invoice. In view of the above facts and circumstances, we hold the correct transaction value between the manufacturer and dealer/ the supplier is represented by the invoice produced by Revenue. The supplier is related to the appellant, importer and in fact are one and same in view of financial transactions indicated in the show-cause notice. We are of the view that the assessable value taken by the Revenue is correct and we accordingly uphold the same. Since the value declared by the appellant was less then the value so assessed, facts and circumstances indicate that appellant has intentionally under-declared or mis-declared the value and provisions of Section 111(m) of the Customs Act are attracted. The car would be liable for confiscation under the Section 111(m) of the Customs Act, 1962. We therefore uphold the said decision in the impugned order.
6.4 As far as the benefit of Notification 21/2002 is concerned, the relevant entry be read as under:-
344. 8703 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars, new, which have not been registered anywhere prior to importation,-
(1) If imported as completely knocked down (CKD) unit (2) If imported in any other form 6.5 In the present case we find that during examination the reading of odometer was found at zero which indicates that the car is new one. The departments contention for denying the benefit is based upon the registration. The vehicle was registered with DVLA office in Edinburgh at U.K. The findings of the learned Commissioner in the order dated 12.04.2010 in this respect are as under:-
(b) The registration No. appearing on the Invoice No. 1000145 dt. 31.05.08, gathered by the DRI was found as SN08HCK. Co-relating this code with details appearing on the web, the vehicle was purportedly registered in between 1 March, 08 and 31 August, 08. Further, Guidance Notes from Driver and Vehicle Licensing Agency, U.K. at sub-para 14.1.1 of para 14 provides that vehicle intended for export should be taken or sent to one of the five DVLA office, which deals with registration of such vehicles. These are Birmingham, Chelmsford, Luton, Northampton, Wimbledon. The impugned vehicle was registered with DVLA office at Edinburgh. This establishes the fact that the vehicle was registered in U.K for use in that country and not for the sole purpose of exporting the same out of the country, as claimed. 6.6 During the arguments, the learned Advocate for the appellant explained that they were not in a position to purchase the vehicle from one of the five DVLA office and therefore, they got the same registered from DVLA office at Edinburgh. Since in the said office, vehicle can be registered for use in that country therefore the same was registered in the name of Shri Lorenzo Bestonso. However, the purpose of the said registration was not to use the vehicle but only to get registered the vehicle and transfer to the port of export. It is obvious from the odometer reading that the vehicle was not used.
6.7 We have considered the submissions and we find force in the arguments of the appellant that the vehicle is new as is evident from the odometer reading. The fact that the vehicle was registered prior to importation is only for the purpose of completing the formalities in that country. We also note that CBEC Circular 1/2005-Cus dated 11.1.2005 clarifies that when the registration in the country of export is done with a view to export the same that should not be come in way of extending the benefit of Notification No. 21/2002. In the present case also the registration has been done only with a view to transfer the vehicle to the port of export. We accordingly hold that the appellant will be eligible for the benefit of Notification No. 21/2002.
7. Thus valuation and confiscation is upheld. Redemption fine and penalty are not excessive. As for benefit of notification 21/2002 is concerned, the same would be avoidable. The appeal is disposed of in these terms.
(Order Pronounced in open Court on ..) (Ashok Jindal) Member (Judicial) (P.K. Jain) Member (Technical) nsk ??
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