Customs, Excise and Gold Tribunal - Delhi
Shiv Shakti Enterprises vs Collector Of Customs on 31 August, 1990
Equivalent citations: 1991(52)ELT439(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. The appellants imported 2 consignments of 232 cartons containing 60,000 gross sets declared as "Metal fittings rivets (rivets for leather goods)" and filed 2 bills of entry No. 5770 and 5771, both dated 27-12-1988 for their clearance. Declared CIF value was Rs. 1,59,1987/- in each consignment, total coming to Rs. 3,18,396/-. The Department alleged that the appellants had actually imported snap fasteners consisting of 4 pieces, i.e. top, socket, stud and post, of 3 different sizes VT2, VT3 and VT5, of "swallow-RK" brand and had split up the importation into two consignments as detailed below:-
Size No. Carton No. & Bill of Entry No. and Date Quantity VT 5 1 to 25 of B/E No. 5771 dt. 27-12-1988 5000 gross sets 26 to 35 of B/E No. 5770 dt. 27-12-1988 VT 3 36 to 85 of B/E No. 5771 dt. 27-12-1988 10000 gross sets 86 to 119 of B/E No. 5770 dt. 27-12-1988 VT 2 120 to 194 of B/E No. 5771 dt. 27-12-1988 15000 gross sets 195 to 232 of B/E No. 5770 dt. 27-12-1988
It was alleged that the snap fasteners were imported in two consignments by misdeclaring the goods as rivets with a view to evading customs duty and clearing the goods against REP licence for rivets. The appellants had REP licence for rivets, but did not have licence for snap fasteners. Under Notification No. 224/85 dated 9-7-1985 as amended by Notification No. 290/87 decorative rivets were exempted from duty in excess of 40% plus 5% ad valorem with Nil additional duty of customs, whereas the duty on snap fasteners was 100% + 45% ad valorem plus 15% additional duty of customs. It was also alleged that the prices of Japanese brand "Kane-M" snap fasteners imported during the relevant time at Kandla Port were found to be as follows:-
Type Made of Price per gross VT2 Iron, Nickelled Top Vinyl coated Yen 147.50 VT3 Iron, NKL Yen 150 VT5 Iron, NKL Yen 170
The declared price of the imported goods was 45 Yen for 2 pieces, i.e. 90 Yen for 4 pieces. It was alleged that on the above basis the correct value of the two imported consignments was Rs. 2,69,015.00 each. Show Cause Notice was issued to the appellants alleging misdeclaration of description and value, contravention of Section 11 of the Customs Act read with Section 3(2) of the Imports & Exports (Control) Act, 1947 read with Clauses 3(1) & (2) of Import (Control) Order, 1955 and that the goods were liable to confiscation under Section lll(d) & (m) of the Customs Act and the appellants were liable to penalty under Section 112(a) of the Customs Act. After considering the appellants' reply to Show Cause Notice and after hearing them personally, the Collector of Customs & Central Excise, Rajkot held the allegations as proved. He confiscated the two consignments, with redemption fine of Rs. 1,20,000/- and imposed penalty of Rs. 1 lakh on the the appellants. Hence, this appeal before this Tribunal.
2. Shri Balani for the appellants made the following contentions during the hearing before us:
(i) The imported goods were rivets as declared in the bills of entry.
(ii) There was no misdeclaration of description and value of the goods, as alleged.
(iii) Comparison of the price with the price list of "Kane-M" brand snap fasteners of Japanese make, which expired in July, 1988, whereas the present import was in December, 1988, was not correct.
(iv) No market inquiry was made by the Custom House to find out whether in the trade parlance these goods were known as "rivets" or "snap fasteners".
(v) The method of valuation adopted by the Department was not correct,
(vi) Redemption fine and penalty were very heavy.
Shri Balani relied on A.I.R. 1971 S.C. 1558 (Union of India v. Tarachand Gupta & Bros.), 1989 (39) E.L.T. 585 (Susha Electronics Industries v. Collector of Customs & Central Excise), 1987 (30) E.L.T. 345 (Calcutta) in the case of Collector of Customs, Calcutta v. Mitsuny Electronic Works, and 1988 (34) E.L.T. 65 (Tribunal) in the case of Janta Traders, Bombay v. Collector of Customs, Bombay.
3. The learned Departmental Representative challenged the contention of Shri Balani regarding the method of valuation. He re-iterated what was stated in the impugned order.
4. The points to be decided in this appeal are:-
(i) Whether the appellants misdeclared the description and value of the goods;
(ii) Whether the goods were liable to confiscation; and
(iii) Whether imposition of penalty was justified.
The goods were described by the appellants as "Metal fittings rivets (rivets for leather goods)". They sought clearance of the goods against REP licence value for metal fittings/rivets and also claimed concessional rate of duty under notification. The goods were imported from the same foreign supplier by the same vessel. For clearance of the goods, two Bills of Entry were filed at Kandla Custom House on 12-1-1989. Paragraphs 1.1 and 1.2 of the impugned order show that the goods were examined by the officers at Kandla Custom House on 12-1-1989 and on examination the same were found to be "Snap fasteners" and not "Rivets". It is also stated therein that each snap fastener is made of 4 pieces, i.e. top, socket, stud and post. The imported snap fasteners were found to be of 3 different sizes of "Swallow-RK" brand. In paragraph 1.2 of the impugned order, it has been stated that the two Bills of Entry taken together 35 cartons containing 5000 gross sets of size No. VT-5 snap fasteners were imported. In cartons No. 36 to 119,10,000 gross sets of size No. VT-3 snap fasteners have been imported in the two Bills of Entry. 15,000 gross sets of VT-2 size snap fasteners were imported in cartons No. 120 to 232 in the two Bills of Entry. These facts have not been disputed by the learned advocate during the hearing before us, nor has he produced any literature, catalogue etc. to prove that these are not snap fasteners, but are rivets. The learned advocate has argued before us that in the trade parlance these are known as rivets and that the Collector did not ascertain the trade opinion before holding that the imported goods were snap fasteners. In paragraph 6.2 of the impugned order, the Collector has stated that during the personal hearing before him the importers' advocate showed two pieces of rivets of "Kane-M" brand and pleaded that the impugned goods were rivets in two pieces, but he himself admitted before the Collector that the impugned goods were not similar to the two pieces rivets of "Kane-M" brand shown by him. It is also stated in the said paragraph that on a specific query during personal hearing before Collector, it was admitted by the advocate of the importer that they did not have any literature of the manufacturer of the impugned goods to disprove the allegation that the impugned goods were snap fasteners and to support their claim that it should be classified as decorative rivets. In paragraph 6.0 of the impugned order the Collector has stated that vide their letter dated 22-2-1989, the importers agreed to pay duty at standard rate as on "snap fasteners". In paragraph 6.1 of the impugned order the Collector has rejected the appellants' plea that they agreed to pay duty as on snap fasteners on the advice of the Appraiser.
5. The learned advocate has argued that clubbing of the goods imported by the appellants under two Bills of Entry as done by the Collector was not proper. He has relied on the judgment of Supreme Court reported in A.I.R. 1971 S.C. 1558 (Union of India v. Tarachand Gupta & Bros.), Calcutta High Court judgment reported in 1987 (30) E.L.T. 345 (Collector of Customs, Calcutta v. Mitsuny Electronic Works) and the Tribunal's decisions reported in 1989 (39) E.L.T. 585 (Susha Electronics Industries v. Collector of Customs & Central Excise) and 1988 (34) E.L.T. 65 (Junta Traders, Bombay v. Collector of Customs, Bombay). These judgments are not applicable to the facts of the present case. In the case of Tarachand Gupta & Bros., the respondents therein imported parts and accessories of Mopeds, except tyres, tubes and saddles against the specific licence for import of parts and accessories of motor cycle and scooter issued under Entry 295 of Section II of Part IV of Schedule I of the Import Trade Control Policy for the period July-December, 1956. The Customs Authorities held that the goods were not imported as spare parts, but as complete vehicle in a knocked down condition and hence not covered by the import licence produced. Without tyres and tubes, motor cycles and scooters are not complete articles. Therefore, it could not be said in that case that the respondents imported Moped in C.K.D. condition. In paragraph-12 of the judgment, the Hon'ble Supreme Court observed that "Apart from that the goods in question did not admittedly contain tyres, tubes and saddles, so that it was impossible to say that they constituted motor cycles and scooters in C.K.D. condition". Supreme Court, therefore, held that the import was covered by the import licence produced by the respondents therein. In the present case the facts are not similar. The Collector has stated in the impugned order that the goods imported under the two Bills of Entry constituted complete snap fasteners. Therefore, the aforesaid judgment of Supreme Court is not applicable to the present case. In the case of Mitsuny Electronic Works (supra) there were enough of materials to show that the consignments were imported by three independent and separate export houses and they sold the goods on high seas under separate sale agreements. It was a sheer coincidence that all the consignments arrived at a time. In the said case, components of complete T.V. sets were imported by three separate export houses. The papers for customs clearance were filed by the export houses. The papers for customs clearance were filed by the export houses, separately. All import documents, namely, invoice, packing list, certificate of origin, bill of lading, marine insurance policy etc. were in the names of the export houses duly signed by the foreign shippers and the shipping agency. The said documents were negotiated and retired by the export houses through the respective bankers. High Sea Sale Agreements were made by export houses with the writ petitioners (importers who bought goods on high sea). According to the said agreements, customs duties were to be paid by the writ petitioner and he had to bear the costs and expenses of the clearance of the goods. The customs authorities also allowed clearance of identical goods against identical licences in respect of other export houses. In those facts and circumstances of that case, the Division Bench of Calcutta High Court held that the goods imported in those consignments could not be clubbed together to hold that complete colour T.V. sets were imported. The facts are completely different in the present case. As already stated, the goods were supplied by the same foreign supplier and the same were shipped by the same vessel. The invoices No. 4201 and 4201/A covering the two consignments are of the same date, i.e. 25-11-1988. The Bills of Lading are also of the same date. The goods are of the same brand of snap fasteners. The goods have been imported by the same importer and two Bills of Entry have been filed for the clearance on the same date. The goods covered by both Bills of Entry are clearly snap fasteners. The facts of the present case are not at all comparable with the facts of the case of Mitsuny Electronic Works. In the case of Susha Electronic Industries v. Collector of Customs & Central Excise, reported in 1989 (39) E.L.T. 585, certain components of T.V. were imported in one consignment at Kandla Port. Some other components were imported in two consignments at Air Cargo Complex, Ahmedabad. Customs Authorities clubbed together the goods of all the three consignments and held that those constituted complete television sets, and hence were not permissible to be imported under O.G.L. or against the licence produced. In the present case, as already indicated by us, the goods were imported at the same port, by the same vessel and by the same importer. The facts are, therefore, different from those of Susha Electronic Industries. Similarly, the facts in the case of Junta Traders, Bombay, are also distinguishable from the facts of the present case.
6. The action of Collector in clubbing the goods covered by two Bills of Entry is supported by the judgment of Supreme Court in the case of Girdharilal Banshidhar v. Union of India, reported in 1964 (7) S.C.R. Page-62 (not cited by either of the parties before us). In the said case, the appellants were granted a licence to import iron and steel belts, nuts, set screws, machine screws and machine studs, excluding bolts, nuts and screws adopted for use on cycles. They imported nuts and bolts which were components of "Jackson type single bolts, oval plate belt fastener", which were described in the bill of entry as "Stone bolts and nuts". The importation of "Jack type single bolt oval plate belt fasteners" was prohibited. Single bolt belt fasteners were composed of three components, viz. (i) a bolt, (ii) a nut and (iii) washers. The washers to fit into the bolts and nuts imported by the appellants were found to have been separately imported by a firm called Nawanagar Industries Ltd., which was owned or controlled by close relations of the appellants. The Collector held that the bolts and nuts imported by the appellants were in reality the components of the prohibited article and imposed penalty on them. The matter ultimately came before the Hon'ble Supreme Court, who held that (i) importing components of a prohibited article was importing the prohibited article, and (ii) the evidence that washers imported by the relations of the appellants was considered by the Collector as evidence to confirm his conclusion that the nuts and bolts imported by them were in reality the components of the prohibited article. In the said case, the Hon'ble Supreme Court observed, inter-alia, as follows:-
"It appears to us that it does not stand to reason that a component part which has no use other than as a component of an article whose importation is prohibited is not included in a ban or restriction as regards the importation of that article. Expressed in other terms, we cannot accede to the position that it is the intention of the rule that the importers are permitted to do indirectly what they are forbidden to do directly, and that it permits the importation separately of components which have no use other than as components of an article whose importation is prohibited, and that an importer is thereby enabled to assemble them here as a complete article though if they were assembled beyond the customs frontiers the importation of the assembled article into India is prohibited."
The present case is also covered by this Tribunal's decision reported in 1989 (23) ECR 518 (Cegat NRB) in the case of M/s. Monica Enterprises & 4 Others v. Collector of Customs, Madras. This decision has not been cited by either of the parties before us.
7. In the light of the above discussions, we hold that the Collector was right in clubbing the goods imported by the appellants in the two bills of entry and in coming to the conclusion that the imported goods were snap fasteners and not rivets. In the circumstances, we hold that there has been clear misdeclaration of the description of the goods in the bills of entry.
8. For valuation of the impugned goods, the Collector has compared the declared value namely, Japanese Yen 90 per gross set (45 Yen for 2 pieces) with the price of "Kane-M" brand snap fasteners of M/s. Morito Co. Ltd. Japan as per price list dated 17-12-1987. This price list was valid upto July, 1988. The price of VT-2, VT-3 and VT-5 sizes of "Kane-M" brand snap fasteners have been given in paragraph 1.4 of the impugned order as follows:-
TYPE MADE OF PRICE PER
GROSS SET
VT 2 Iron, Nickelled Top Vinyl Coated Yen 147.50
VT 3 Iron, NKL Yen 150.
VT 5 Iron, NKL Yen 170.
Under Rule 8(1) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, the Collector has adopted the above prices for valuation of the appellants' imported snap fasteners and has held that the imported goods have been under-valued. The extent of under-valuation has also been indicated in the impugned order. The learned advocate for the appellants has disputed this valuation. He has argued that the Collector should have accepted the transaction value under Rule 3 of the aforesaid Valuation Rules. Secondly, since the price list dated 17-12-1987 of M/s. Morito Co. Ltd., Japan expired in July, 1988, that price list could not be the basis for valuation of the goods imported by the appellants in December, 1988. But value declared by the appellants in the import documents is of rivets and not of snap fasteners. Therefore, the declared price cannot be said to be transaction value and the question of its acceptance does not arise under Rule 3 of the Valuation Rules. In paragraph 1.6 of the impugned order the import of goods of Japanese origin at the rate of 130 Yen by M/s. Berlia Chemicals & Traders P. Ltd., Bombay, vide bills of Entry No. 2538 & 2537 both dated 27-5-1988, has been referred to. It is stated in that paragraph that Kandla Custom House found the weight of one gross set of snap fasteners of M/s. Berlia Chemicals & Traders P. Ltd. to be 165 grams whereas the weight of one gross set of the present appellants appeared to be 210 grams. It is stated in that paragraph that the goods imported by the appellants are of bigger sizes then those of M/s. Berlia Chemicals & Traders P. Ltd. The learned advocate has disputed the reliance on this price on the ground that the said import was earlier than the import made by the appellants and hence the same is not contemporary. While objecting to the valuation adopted by the Collector, the learned advocate has not brought to our notice any materials to show that the import price of snap fasteners of comparable sizes and quality as those imported by them was less than that adopted by the Collector. In the impugned order the Collector has observed that the value could not be determined in this case under Rule 5 to 7 of the Valuation Rules and hence he has adopted the residual method prescribed in Rule 8(1) of the said Rules. Rule 8(1) of the Valuation Rules provides as follows:-
"(1) Subject to the provisions of Rule 3 of [this rule], where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined under reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) and on the rbasis of data available in India".
In the absence of any contemporary importation of similar goods, the Collector has adopted a reasonable means to determine the assessable value of the impugned goods. The learned advocate's objection to the valuation adopted by the Collector under Rule 8 (1) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 is, therefore, rejected. Having regard to the above, we hold that there has been misdeclaration of value of "Snap fasteners" imported by the appellants.
8A. Paragraph-8.0 of the impugned order shows that the appellants produced an import licence which was valid for import of metal fittings other than zip/snap fasteners. It is also stated in that paragraph that snap fasteners could be imported only to the extent of 10% of the licence value. As the licence so produced was Rs. 3,65,400/-, they could import snap fasteners to the extent of Rs. 36,540/- only. The licence, therefore, did not cover the goods imported in the two bills of entry. In the circumstances, the Collector has rightly held that the import was in contravention of the provisions of Section 11 of the Customs Act, 1962 read with Section 3(2) of the Imports and Exports (Control) Act, 1947 read with clauses 3(1) & (2) of the Import (Control) Order, 1955 and the goods were liable to confiscation under Section 111 (d) and (m) of the Customs Act, 1962. However, the Collector has allowed the option under Section 125 of the Customs Act, 1962 to the appellants to pay fine of Rs. 1,20,000/- in lieu of confiscation of the goods imported under the two bills of entry. The Collector has held that the correct assessable value of the goods is Rs. 5,38,030.64. Considering the value of the goods, the redemption fine of Rs. 1,20,000/- imposed by the Collector is not considered to be excessive.
9. Decorative rivets imported into India for use in the leather industry was partially exempted from customs duty under Notification No. 224/85-C.E., dated 9-7-1985, as amended. Since we have held that the imported goods are not rivets, but snap fasteners, the benefit of this exemption notification is not available to the appellants.
10. The Collector has imposed penalty of Rs. 1,00,000/- on the appellants. The description and value of goods were misdeclared with a view to evading I.T.C. restriction and to evade payment of a large amount of duty. In the facts and circumstances of the case we do not consider this penalty to be excessive commensurate with the gravity of the offence.
11. In the circumstances, we uphold the impugned order and dismiss the appeal.