Customs, Excise and Gold Tribunal - Delhi
Varsha Polyproducts Pvt. Ltd. vs Collector Of Customs on 22 September, 1994
Equivalent citations: 1994ECR535(TRI.-DELHI), 1994(74)ELT151(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. These are four appeals, two are filed by the parties and remaining two are filed by the Department with reference to the respective impugned orders passed by the Collector of Customs, Customs House, Kandla, involving common issues. They are, therefore, clubbed together and are being disposed of by this common order.
2. Facts of the case, in brief, are that both the above-named appellants imported a consignment of 507.5 MTs. of Polystyrene each and declared as Wide Spec under respective invoices from Korea at US $ 510 PMT CTF, out of which 385 MTs. was declared as Polystyrene General Purpose Wide Spec and 122.5 MTs. of High Impact Grade Wide Spec. Since Directorate of Revenue Intelligence received information indicating mis-declaration and under-valuation in respect of imported goods, 80% goods were released provisionally at the request of the parties on execution of a provisional duty bond pending investigation. According to Department on detailed investigation carried out by them it was revealed that the Importers while importing Polystyrene G.P. Grade and H.I. Grade from M/s. Dongbu, Korea knowingly misdeclared the description of the said grades of Polystyrene as Polystyrene G.P. Grade Wide Spec and Polystyrene H.I. Grade Wide Spec respectively in the relevant Bills of Entry filed by them. They also misdeclared value of the said both grades at the rate of US $ 510 PMT GIF as against the actual and correct value of US $ 700 PMT CIF for Polystyrene G.P. Grade and US $ 760 PMT GIF for Polystyrene H.I. Grade. Accordingly, show cause notice was issued to enhance the value by rejecting the declared value and for confiscation of the 20% of the seized goods under Section 111(m) of the Customs Act, 1962 since 80% quantity has already been released provisionally, in addition to imposing penalty under Section 112(a) of the Customs Act, 1962. Show cause notices were duly answered by the Importers stating that the goods imported by them were 'Off Grade' and the value had to be lower and in lieu of the large quantity imported by them, same cannot be compared with the graded material or of lesser quantity imported by others. These two cases were adjudicated by the Collector of Customs, Kandla and as per his respective impugned orders, he held that the charge of mis-declaration with regard to description of the imported goods was not sustainable. As regards value, he held that importers were guilty of misdeclaring the value and ordered enhancement of value as under for purpose of assessment :-
(1) Polystyrene General Purpose - US $ 600 PMT CIF. (Wide Spec) (2) Polystyrene High Impact - US $ 640 PMT CIF. (Wide Spec) However, he dropped the penalty proceedings observing that it cannot be conclusively held that the Importers knowingly misdeclared the value and there is no evidence to hold that they consciously manipulated lower price covering imported goods in question.
3. We have heard Shri L.P. Asthana and Shri Pradeep Jain, learned Counsels for the Importers'/parties and Shri A.K. Singhal, learned JDR for the Revenue.
4. Arguing for the Assessee, Shri Asthana submitted that there has been no mis-declaration of description of goods or of value to reject the transaction value. The Collector in his order has given a clear finding that goods were not of prime quality and neither the importers have knowingly misdeclared the value, nor evidence to hold that they manipulated the lower price of the goods in question. Since the transaction was genuine and at arm's length department was not justified in rejecting the transaction value and transaction value cannot be rejected in the facts and circumstances and in support of his contention he cited the following decisions :-
(1) Gold Plast India (P) Ltd. v. Collector -1991 (53) E.L.T. 147 (T) (2) Atco Industries Ltd. v. Collector -1992 (57) E.L.T. 654 (T) (3) Elite Packaging Industries v. Collector -1992 (60) E.L.T. 311 (T) (4) Sawhney Export House (P) Ltd. v. Collector -1992 (60) E.L.T. 327 (T) (5) Supreme Laces v. Collector -1992 (60) E.L.T. 442 (T) (6) Ruchi Associates v. Collector -1992 (59) E.L.T. 155 (T) (7) Satya Vijay Exports Pvt. Ltd. v. Collector -1991 (51) E.L.T. 457 (T) (8) P.A.C. Systems (P) Ltd. v. Collector -1992 (58) E.L.T. 131 (T) (9) Punjab Niryat Ayat Pvt. Ltd. v. Collector -1992 (58) E.L.T. 340 (T) (10) UOI v. Mahindra & Mahindra Ltd. -1991 (55) E.L.T. 15 (Bom.) (11) Honesty Traders v. Collector -1991 (55) E.L.T. 102 (T) He submitted that the imported goods are not of any specific grades and hence same cannot be compared with that of any graded material. The graded material which has quality, specific characteristics, brand and repute which the ungraded item lacks. While comparing the similar goods it should be substantially the same quantity as the goods being valued with reference to same grade. Similar goods are those which are commercially inter-chargeable and the items in question cannot be construed as inter-changeable since these are sub-standard goods. There is an inconsistency in the order passed by the Collector since he observed that prices of similar imports were not comparable but still compared with that of different graded material and ultimately determined the value under Rule 8 of the Valuation Rules as best judgment assessment without any data or basis. Best judgment assessment should not be an arbitrary assessment and further Collector erred in resorting to Rule 8 overlooking Rule 4. Transaction value cannot be rejected under Rule 4 if there was no under-invoicing and transaction was genuine like in the present case.
5. Shri A.K. Singhal, learned JDR for the Revenue submitted that importers had imported two types of material viz., Polystyrene General purpose grade and Polystyrene high impact Grade. General purpose grade and high impact grade are themselves grades as can be seen from the invoice but parties declared Wide Spec as grade to confuse the Department and Collector also misled by this Wide Spec as 'off grade' and arrived at the conclusion that there has been no misdeclaration in description of the goods. The opinions given by (i) Prof. M.K. Trivedi from LIT. Bombay, (ii) M/s. Hico Products Ltd., Bombay and the Department of Chemical Technology, University of Bombay, Bombay substantiate that there is nothing like Wide Spec material in Polystyrene and there is no grade as such and Shri Shantilal J. Jain common Director of both the Companies M/s. Pushpak Plastics Pvt. Ltd., and M/s. Varsha Polyproducts stated in his statement that Wide Spec was not technical but a commercial term; that polystyrene was sold with main grade such as General GPPS and HIPS grade depending upon quality, but in spite of this fact the finding of the Collector is otherwise on this issue. He said that imported items cannot be considered as low grade and since there has been misdeclaration of description of goods and value thereof, the Department was justified in rejecting the transaction value and determined the value under Section 14IA of the Act with reference to Valuation Rules. He said that they have misdeclared the description of the goods and shown the uniform rate for different grades and in the circumstances the rejection of transaction value was justified relying upon the decisions in the case of Maya Enterprises v. Collector of Customs, Kandla, reported in 1994 (71) E.L.T. 817 (Tribunal) and Plaza Steels & Alloys Ltd., v. Collector of Central Excise, New Delhi reported in 1993 (68) E.L.T. 213 (Tri.). He also referred to the decision in the case of Crescent Corporation, Calcutta v. Collector of Customs, Calcutta - 1992 (41) ECR 444 wherein it was held that where the declared CIF price was far less than the value of the comparable goods, the declared .CIF price cannot be deemed to be the transaction value under Rule 4 of the Customs Valuation Rules, 1988 and it has been further held that determination of the value under Rule 8 of the Customs Valuation Rules was permissible even though in the show cause notice Rule 5 was invoked. He contended that Collector was not right in dropping the penalty in spite of his finding that importers were guilty of misdeclaring the value and there has been variation in declared value and value assessed. Alternatively, he requested that matter may be remanded to the Collector to decide the issues afresh.
6. In reply, Sri Asthana submitted that there is inconsistency in the opinions sought by the Department on the issue whether Wide Spec was a grade or not but there is no such inconsistency in the opinions of technical persons placed on behalf of Importers which clarifies that Wide Spec refers to Wide Specification not of standard grade but sub-standard goods or Off grade. He said that findings of the Collector that there has been no misdeclaration of description of the goods has not been challenged in the appeal filed by the Department and same cannot be agitated. As regards penalty, he said that no concrete evidence was brought on record to enhance the value and penalty cannot be imposed when it was assessed under best judgment assessment.
7. We have considered the submissions. The first point to be considered in this case is whether there has been misdeclaration of the description of the goods. The Importers had declared the goods as Polystyrene General purpose-wide spec and High impact grade wide spec. On going through the submissions with reference to the bill of entry and invoice, it is clear that they have declared the grades as General Purpose grade and high impact grade but added with 'Wide Spec'. It is not even the case of the Department that they have shown only Wide Spec and omitted General purpose grade and high impact grade. Manufacturer's catalogue, the technical literature and technical opinions placed on record substantiate their contention that there were as many as 15 tests which had to be carried out and if the product fulfilled the specifications laid down therein it would be graded as per specifications and if the material which did not come upto the said specifications in all respects was 'off grade' or Wide specification. The importers have submitted a technical opinion from Shri Arvind Athalye, whose bio-data indicate that apart from holding degrees both from India and from U.K. in Polymers, he is a Fellow, Plastics & Rubber Institute (U.K.), Indian Standards Institution, Institute of Standard Engineers and Member of Society of Plastics Engineers INC, USA. For the last 30 years he has worked in senior positions in Dow Chemicals Co., U.S.A., Polychem Ltd., Bombay, Hochest Dyes & Chemicals Ltd., Bombay, Thackersey Group, Blow Plast Ltd., and Ors.. He has very much publications and papers to his credit. In his technical opinion dated 22-1-1993 Shri Athalye says-
"that the term 'Wide Spec' is very commonly used Overseas for the Polymers that do not conform in respect of technical properties to any specific grade of the Polymer as specified by the Polymer supplier. These materials are very commonly designated as 'OFF-GRADE' materials in our country. All the raw materials manufacturers have a wide ranging grades of each polymer to meet specific conversion method and the end-use applications. In the specific case of Polystyrenes, which cover GPPS, HIPS, etc., the properties that are specified for each grade include colour, Density, Melt Index, Heat Distortion Tern., Tensile and Elongation, Izod and/or Dart Impact, Shore Hardness, Electrical Properties etc. For every regular grade of PS, there is a set of values for each property for each grade and when the polymer produced does not conform to some of the important specified values of the range of grades, the polyer is considered as non-standard and is marketed at a much reduced price stamping it as 'OFF-SPEC', 'WIDE-SPEC', etc., and quite often in plain bags and without the brand name so that the supplier is free from any complaints on account of quality. On the commercial production runs, such problems are not unusual because of very many variables involved in the Polymerization Process, where one or more parameters could go wrong resulting into a Wide-Spec material. However, these materials are not useless for any applications. They can be used as such for some non-critical applications or by upgrading them by the use of Polymer additives or blended with virgin. Yet they are marked as Wide-Spec at a lower price so as to be protected from quality complaints and the resultant damages."
In view of the technical literature and opinions the Collector has clearly analysed that while attempting a prime quality graded material each manufacturer does not reach the fine quality on day one but through sustained trial/error method over a certain period that the quality of desired grade is obtained and what is produced until then sold as Wide Spec/Off Grade. Similarly for various marketing needs specifications are changed for graded material, the same exercise of experimentation is required to be gone through before obtaining perfection. What does not conform to 'Spec' cannot be sold as standard/primary graded material, as each manufacturer has his own reputation at stake. It is, therefore, not in dispute that the price charged for primary/graded material is higher than that of sub-standard/off grade/Wide Spec material. Further evidence placed on record that invoices of M/s. Polychem Ltd., Bombay showing clearances of polystyrene which categorically described the product viz., polystyrene sub-standard and off grade establishes that the sub-standard and off graded materials are being sold by the Indian manufacturers of Polystyrene also at a lower price as compared to the graded products. In the facts and circumstances of the case, we concur with the finding given by the Collector that importers have not misdeclared the description of the goods. Next question arises whether sufficient evidence was brought on record to discard the transaction value. Transaction value can be rejected if there has been a misdeclaration of the description of the goods or price declared by the importers were much lower than the contemporaneous price at which identical goods or similar goods were sold in the international trade at the relevant time with reference to the amended Section 14(1) of the Act. In other words invoice value must be accepted when there is no evidence of sales at higher prices, mutuality of interest, extra-commercial consideration and dealings are normal. There is no evidence in this case that transaction was not genuine or of extra-commercial considerations. In the circumstances only point to be considered is whether similar goods were sold at higher prices at the relevant time. There is a clear finding by the Collector that contemporaneous price of identical goods is not available. Even we do not find any evidence to show that similar goods were imported at the relevant time. It is settled that burden lies on the Department to prove under-valuation. Sufficient evidence must be brought on record to show that the declared price of the imported goods was far less than the price of the similar goods imported at the relevant time. Goods should be compared with that of identical goods or of similar goods and quantity should be substantially same. Since such evidence is not forthcoming the transaction value cannot be rejected and it should be accepted as envisaged under Rule 4 of the Valuation Rules. The Adjudicating Authority has not pointed out any of the circumstances set out in Rule 4(2) or 4(3) of the Valuation Rules, 1988 to discard the transaction value. The only reason given is that price of graded polystyrene imported during the period was higher than the price of the imported goods and there is no much quality difference between the Wide Spec polystyrene and regular graded polystyrene. In view of the clear finding that quality of imported goods was inferior to the prime quality of polystyrene or graded material, we are of the view that same cannot be compared since it cannot be said to be contemporaneous evidence. We also take note of the submissions made by the learned Counsel for the appellants that price of prime quality of goods started from US $ 600 and goods of prime quality imported from Russia in the case of Priya Plastics wherein goods were described as of CIS origin and the price quoted was US $ 650 by a Hong Kong supplier for shipment from Singapore and these were not considered by the Adjudicating Authority in determining the value. In the facts and circumstances of the case, we hold that there was no justification either for enhancement of transaction value or to impose penalty. All these four appeals are disposed of accordingly.