Customs, Excise and Gold Tribunal - Delhi
Mirah Decor (P) Ltd. vs Collector Of Customs on 6 July, 1989
Equivalent citations: 1989(25)ECR96(TRI.-DELHI), 1989(44)ELT289(TRI-DEL)
ORDER Harish Grander, Member (J)
1. M/s. Mirah Decor (P) Ltd., Bombay has filed an appeal being aggrieved from the order passed by the Collector of Customs, Cochin. Briefly the facts of the case are that the appellant had imported 162 rolls of PVC sheets vide Bill of Entry No. 451 dated 26th December, 1986. The description given in the Bill of Entry and the connected invoice dated 6th November, 1986 was "11460 sq.m. PVC sheets of size 0.72 mm. thickness and 2 metre length" and the value was US $ 0.60 per sq.m. cif Cochin. The appellant had claimed its clearance against the following import licences :-
(1) P/L/3112192/C/XX/98/B/85 dated 3-3-1986 (2) P/K/3120820/C/XX/100/B/85 dated 8-7-1986 (3) P/K/3H0984/C/XX/98/B/85 dated 4-2-1986 and (4) P/K/3070179/C/XX/98/B/85 dated 10-6-1985
2. The above licences were valid for import of goods mentioned in column 4 items as allowed against Export Product Group C-11-3/C-11-4 of Appendix 17 of the Import Policy AM 1985-88. The proforma invoice dated 6th June, 1986 and the invoice dated 6th November, 1986 indicated that the goods were shipped from ANTWERP by M/s. Equest Shippers Ltd., British Channel Islands. However, the certificate of origin dated 7th October, 1986 issued by the European Community which shows the description of the import item as "PARQUET EN MAT. The said certificate indicates that the goods imported are the one commercially known as floor coverings (PARQUET AN MAT).
3. The cargo was examined by the department and representative sample drawn from the consignment and tested in the Custom House laboratory. The test report; confirmed that these are sheets, made of polyvinyl chloride having black colour on one side and different colours with designs and check patterns on the other.
4. As per information gathered by the Customs authorities it was found that the imported PVC sheets were finished products viz. "floor coverings" (in ready for use/ready for sale condition), a consumer product falling under Serial Number 121 of Appendix 2.B of the Import Policy AM 85-88 and not mere PVC sheets as claimed by the appellant under the REP licences produced.
5. The office premises of the Custom House Agents of the appellant and M/s. Basant Export Corporation, a sister concern of the appellant were searched. Scrutiny of the seized documents revealed :-
(a) Vide letter dated 28-5-1986, the importers had sent a sample of the item to M/s. D.B. Khona, Cochin and enquired of the possibilities of importing the item under reference though Cochin since their imports at Bombay were not allowed clearance under REP licences being consumer products.
(b) M/s. Basant Export Corporation, Bombay, a sister concern of the appellant had imported a consignment of PVC sheets (seconds quality) from Holland under Bill of Entry 332 dated 17th Nov., 1986 for a price of DFL 2.00 per sq.m. CIF Cochin. It therefore, appeared that the price at US $ 0.60 per sq.m. for prime quality PVC sheet was less than 50% of the invoice value at the rate of DFL 2.00 per sq.m. quoted for second quality PVC sheet.
(c) All the connected documents pertaining to Bill of Entry 451 dated 26th December, 1986 presented to the Customs authorities indicated that M/s. Equest Shippers Ltd., Jersey vide proforma invoice dated 6th June, 1986 had supplied the goods to the appellant under terms of payment as within 175 days from the date of Bill of Lading. But from the seized documents it appeared that M/s. Eurofloor S.A. Luxembourg, vide order dated 2nd July, 1986 had supplied the goods to the appellant through irrecoverable letter of credit opened by M/s. Equest Shippers through M/s. Meghraj Sons.
(d) The appellant vide telex dated 19th August, 1986 had informed M/s. Eurofloor, Luxembourg that "for customs reasons the first lot has to be of 11500 sq metre only" for which M/s. Eurofloor, Luxembourg vide telex dated 26th August, 1986 had replied that they will be loosing a lot of money for this adjustment in quantity. The unit price of the item has not been enhanced accordingly and therefore it is noticed that the suppliers appear to lose US $ 3624 (approx.) in this single transaction.
5. The above transactions indicated that the subject transaction was not in the normal course and that the declared value was not covered by Section 14(1)(a) of the Customs Act, 1962.
6. Enquiries conducted by the revenue authorities also revealed that the prevailing comparable price for the subject item was in the range of Rs. 113 to Rs. 240 per sq. metre. The item being floor coverings made of PVC had to be correctly classified under Heading 3918.10 of the Customs Tariff and 3918.00 of the Central Excise Tariff as against 3921.12 and 3920.11 respectively as claimed by the appellant. It appeared that the imported goods being finished products viz., floor coverings which was a consumer item, covered by Serial Number 121 of Appendix 2B of Import Policy AM 85-88, clearance sought under the REP licences was in violation of the provisions of general conditions of para 5 of Appendix 17 of the Import Policy AM 85-88.
7. The Customs authorities were of the view that the appellant had knowingly and wilfully mis-declared the description and value in the Bill of Entry with a view to fradulently claim clearance under the REP licences and to evade payment of Customs duty in violation of the provisions of Section 46 of the Customs Act, 1962 which constituted an offence rendering the subject goods liable for confiscation under Section 111(m) of the Customs Act, 1962 and 11460 sq.m. PVC floor coverings imported in contravention of Import Trade Control Order 17/55 dated 7th December, 1955 issued under Section 3 of the Import & Export (Control) Act, 1947 were liable for confiscation under Section 111(d) of the Customs Act, 1962 read with Section 3(2) of the Import & Export (Control) Act, 1947.
8. A show cause notice was, therefore, issued to the appellant on 5th February, 1987 calling upon them to explain as to why the impugned goods should not be confiscated under the provisions of Section 111(d) and 111(m) of the Customs Act, 1962 and penalty should not be imposed as per provisions of Section 112 of the Customs Act, 1962. The appellant was also asked to show cause as to why the value of the imported goods should not be fixed at US $ 1.157 per sq.m. for the purpose of assessment of duty (i.e. 25% more than the value quoted and accepted for second quality PVC sheets as mentioned in the show cause notice) and why the goods should not be correctly classified under Heading 3918.10 of the Customs Tariff and 3918.00 of the Central Excise Tariff.
9. In reply to the show cause notice and at the time of personal hearing before the Collector the appellant submitted that there was no under-valuation and the importation was covered by the REP licence.
10. The learned Adjudicating authority did not accept the contention of the appellant. He was of the view that the object of issuing REP licence is spelt out in para 188 of the Policy 1985-88. The object is to provide to the Registered Exporters, by way of import replenishment, the materials (all or some) required in the manufacture of the products exported.
11. The appellant had obtained REP licence from four different parties with due endorsement and the obvious intention of the appellant was to sell these goods as floor coverings. Appendix 2B of Policy 1985-88 contains the list of banned items. Sl. No. 121 of the said Appendix includes all consumer goods howsoever described and hence, it was very evident that consumer goods are not to be imported unless specifically listed elsewhere. Appendix 17 of the Policy 1985-88 relating to the REP licence makes a specific mention about inclusion of items appearing in Appendix 2B (para 5 refers). The Adjudicating authority was of the view that consumer goods which were listed under Appendix 2B of the policy was not available even under REP licence. A close scrutiny of the list of items mentioned under Appendix 17 would indicate that Items C-11-4 mentioned PVC sheets as an item eligible for importation against exportation of PVC fabricated goods. This clearly implied that the PVC sheets imported was only to facilitate manufacture of PVC fabricated goods and there was no question of importing any PVC sheets which are already in the finished form and the certificate issued by the European Community clearly indicated that the goods are floor coverings which by itself form finished goods and hence the question of treating it as a raw material as envisaged in Appendix 17 does not arise.
12. The learned Collector of Customs has, therefore, held that the goods were floor-coverings and hence did not qualify for importation as raw material as envisaged under Appendix 17 of the Policy 1985-88.
13. On the valuation aspect the learned Adjudicating authority had observed that the original contract was for the supply of 17500 sq.m. in one container at a price of US $ 0.60 per sq.m. Subsequently the total quantity had been reduced to 11500 sq.m. only in a container and the supplier had suffered a loss of about US $ 3,624 due to shipment of a lesser quantity in the said consignment. It was also noticed that from the same European Community PVC sheets were imported in November, 1986 by a sister concern of the appellant and the value declared was DFL 2.00. This value relates to second quality PVC sheets. This being the case, it was not understood as to how good quality PVC sheet which can be directly put to use as floor covering can be imported for less than 50% of the value. The appellant had compared the price on the basis of weight. The learned Adjudicating authority was of the opinion that this cannot be accepted as the appellant themselves had declared in the earlier consignment as seconds. In the matter before us the goods were found to be of prime quality and in ready-to-use condition. The origin of the goods was from the same area in both the cases viz., European Community. One from Holland and the next from Luxembourg. The period of importation was almost the same and there was a margin of one month. The learned Collector of Customs had observed that considering the prevailing price of floor-coverings, the lowest being about Rs. 130 per sq.m., the price fixed at US $ 1.157 was not unreasonable or too high.
14. The learned Adjudicating authority had held that the goods are classifiable under Heading 3918.10 of the Customs Tariff and Under Chapter 3918.00 of the Central Excise Tariff. The learned Adjudicating authority had taken the view that the imported goods do not qualify for importation as raw material as the goods were floor coverings. He had ordered confiscation of the imported goods under Sections 111(d) and 111(m) of the Customs Act, 1962. Further the goods were ordered to be released on payment of redemption fine of Rs. 1.5 lakhs and the assessable value of the goods was ordered to be at US $ 1.157 per sq.m. CIF Cochin. He had also imposed a penalty of Rs. 1 lakh on the appellant under Section 112 of the Customs Act, 1962. Being aggrieved from the aforesaid order the appellant has come in appeal before the Tribunal.
15. Shri V. Lakshmikumaran, learned Advocate has appeared on behalf of the appellant. He has reiterated the contentions made in the appeal memo and has argued that the Revenue's contention that the goods imported by the appellant is floor covering is not correct and the goods should be held as PVC sheets and the assessment of same should be done on the basis of the value as declared by the appellant. Shri Lakshmikumaran, the learned Advocate has referred to a judgement in the case of Mirah Dekor, New Delhi v. Collector of Customs, New Delhi reported in 1988 (35) E.L.T. 357 (Tribunal). Shri Lakshmikumaran has further argued that Appendix 17 of the Import-Export Policy 1985-88 was not discussed earlier and in the appellant's case the value declared was 0.60 US $ and the same was raised to US $ 1.157 by the Collector of Customs. Shri Lakshmikumaran stated that there is no dispute as to classification. Shri Lakshmikumaran has argued that para 225 of AM 85-88 relates to REP licence and earlier the REP licence were freely transferrable. He has argued that the rate of duty applicable is 236%. He has referred to a judgment in the case of Decor India and Ors. v. Collector of Customs, New Delhi reported in 1987 (31) E.L.T. 400 (Tribunal). He has also drawn the attention of the Bench to Public Notice No. 127-ITC(PN) 85-88 dated 27th October, 1986. He has also referred to the reply to the show cause notice. He has argued that the Bill of Lading is dated 18th October, 1986. He has referred to para 18 of the Collector's order which deals with the ITC aspect. Shri Lakshmikumaran has argued that the learned Collector has observed that Sl.No. 121 of the Appendix 2B of the Policy 1985-88 contains the list of banned items and it includes all consumer goods howsoever described and hence it is evident that consumer goods are not to be imported unless specifically listed elsewhere. He has further argued that the learned Collector has mentioned that consumer goods which were listed under Appendix 2B of the policy was not available for importation even under REP licence. Shri Lakshmikumarn has argued that the observations of the Collector are not correct. Shri Lakshmikumaran has argued that the importation is in order.
16. On the valuation aspect Shri Lakshmikumaran has argued that no adjustment of weight has been given to the appellant. There is no under-valuation. The value declared by the appellant is correct. He has referred to para number 24 of the Collector's order He has argued that there is no reason for imposition of redemption fine and penalty. He has prayed for the acceptance of the appeal.
17. Shri B.K. Gupta, the learned SDR who has appeared on behalf of the Respondent has referred to para number 5 of the ITC Policy 1985-88 (Appendix 17) and has relied on the order-in-original. Shri B.K. Gupta the learned SDR has argued that the goods are floor coverings which is a consumer item and the same cannot be imported in terms of Appendix 2B (SL No. 121 of the ITC Policy 1985-88). He has argued that PVC sheet is not floor covering. Floor covering is manufactured out of PVC sheets. He has argued that the import licence is not valid and the appellant's plea that in the past such importations were allowed is of no consequence. On the valuation aspect Shri Gupta has argued that the goods imported are prime goods and there is gross under-valuation and the value adopted by the Revenue authorities is correct. In support of his argument he has referred to the following judgment :-
1. 1984 (18) E.L.T. 203 (Del.) - Oswal Woollen Mills Ltd., Ludhiana v. Asst. Collector of Customs, Bombay and Ors.
2. AIR 1961 Supreme Court 1346 - Kailash Chandra v. U.O. Shri Gupta has pleaded for the dismissal of the appeal.
18. In reply Shri V. Lakshmikumaran, the learned Advocate has pleaded for the acceptance of the appeal. He has referred to the following case law :-
1. 1987 (29) E.L.T. 975 (Tribunal) - Collector of Customs, Bombay v. Hargovindas & Co.
2. 1987 (29) E.L.T. 753 (Del.) - Jain Export Pvt. Ltd, New Delhi and Anr. v. UOI and Ors.
3. AIR 1976 S.C. 2520 - Sone Valley Portland Cement Co. Ltd. v. The General Mining Syndicate Pvt. Ltd.
Shri Lakshmikumaran has again pleaded for the acceptance of the appeal.
19. We have heard both the sides and have gone through the facts and circumstances of the case. The appellant has imported PVC sheets. The description in the Bill of Entry and the connected invoice is "11460 sq.m. PVC sheets of size 0.72 mm thickness and 2 metre length" and the value declared was US $ 0.60 per sq.m. CIF Cochin. The appellant had sought clearance of the same against the following four import licences :-
(1) P/L/3112192/C/XX/98/B/85 dated 3-3-1986 (2) P/K/3120820/C/XX/100/B/85 dated 8-7-1986 (3) P/K/3110984/C/XX/98/B/85 dated 4-2-1986 and (4) P/K/3070179/C/XX/98/B/85 dated 10-6-1985
and the import licences were valid for the import of goods mentioned in column 4 items as allowed against Export Product Group C-11-3/C-11-4 of Appendix 17 of the Import Policy AM 1985-88. Para No. 5 of Appendix 17 relates to Import Policy for Registered Exporters. The learned Collector in his order-in-original (internal page number 2) has mentioned that the country of origin was declared as Luxembourg and in the Certificate of origin dated 7th October, 1986 issued by the European Community which shows that the description of the import item as "PARQUET EN MAT'. The said certificate indicates that the goods imported are the one commercially known as floor coverings. 'PVC' stands for Polyvinyl Chloride. It is a synthetic thermoplastic polymer. "The Condensed Chemical Dictionary" Tenth Edition, Revised by Gessner G. Hawley (page 840-841 describes PVC as under :-
"Polyvinyl chloride (PVC) (-H2 CCHCI-) x. A synthetic thermoplastic polymer.
Properties : While powder or colorless granules. Resistant to weathering and moisture; dimensionally stable; good dielectric properties; resistant to most acids, fats, petroleum hydrocarbons and fungus. Readily compunded into flexible and rigid forms by use of plasticizers, stabilizers, fillers, and other modifiers. Easily coloured and processed by blow moulding, extrusion, calendering, fluid bed coating, etc. Available as film, sheet, fibre and foam.
Derivation : Polymerization of vinyl chloride (q.v.) by free radicals with peroxide initiator. May be co-polymerized with up to 15% of other vinyls.
Hazard: Decomposes at 148°C, evolving toxic fumes of hydrogen chloride. See also vinyl chloride, and note.
Uses : Piping and conduits of all kinds; siding; gutters; window and door frames; officially approved for use in interior piping, plumbing, and other construction uses; raincoats, toys, gaskets, garden hose, electrical insulation, shoes, magnetic tape, film and sheeting, containers for toiletries, cosmetics, house-hold chemicals; fibres for athletic supports; sealant liners for ponds and reservoirs; adhesive and bounding agent; plasticols and organosols; tennis court playing surfaces;flooring ; coating for paper and textiles; wire and cable protection; base for synthetic turf; phonograph records."
20. A simple reading of "The Condensed Chemical Dictionary - 'Properties' and 'Uses' of Polyvinyl chloride will show that Polyvinyl chloride is available as film, sheet, fibre and foam and its use is for the present facts and circumstances of the case is for flooring.
21. In the show cause notice issued under Section 124 of the Customs Act, 1962 there is a mention that the packages were opened. The relevant para is reproduced below :-
"The packages were opened, inspected and a sample of the item tested. The test report confirmed that the sheets were made of Polyvinyl Chloride Compound. One side of the sheet is of black colour and the other side is of different colours having designs and check patterns."
22. The appellant in reply, in the context of the test report, on page 3 of the reply to the show cause notice has written as under :-
"...Even the technical opinion obtained by your Custom House itself confirmed that the goods are sheets made of Polyvinyl Chloride compound which is known as PVC. It is submitted that the intention of Appendix 17 is to allow import of raw-materials and such consumables which are specifically mentioned on the licence and as per column 4 of the said Appendix. It is submitted that nowhere in the Appendix or in the prior paragraphs of Chapter 17 or in the entire Policy, it is mentioned that the PVC sheets should be of a particular kind. It is the intention of the framers of the Policy to allow imports of those goods which are made out of PVC compound and can be called PVC sheets. Your own test report confirms that they are PVC sheets. It is submitted that PVC being the genus the goods manufactured therefrom become its species. It, therefore, cannot be denied that the goods are PVC sheets and if they are worked upon, it does not take away the said sheets from the fold of PVC sheets since the parent genus is still PVC...."
23. A simple perusal of the observation of the Revenue as to the test report and reply shows that the test report is not disputed. In view of the aforesaid discussion, we are of the view that the goods imported are consumables and are in violation of the ITC Policy and hence the importation is unauthorised and accordingly we uphold the findings of the Adjudicating authority in this regard.
24. Now coming to the valuation aspect, we would like to observe that the Adjudicating authority in para 23 of its order (internal page 7) has observed that PVC sheets were imported in November, 1986 by a sister concern of M/s. Mirah Decor Pvt. Ltd. and the value declared was DFL 2.00. This value relates to second quality PVC. This being the case it was not understood as to how good quality PVC sheets which could be directly put to use as floor coverings could be imported for less than 50% of the value. The goods imported by the appellant are of prime quality. The appellant had declared the value at the rate of US $ 0.60 and hence there cannot be any comparison based on weight but only be based on the quality which will ultimately determine the price. We have already said that the goods are of prime quality. The value of the goods has to be in terms of the provisions of Section 14(l)(a) and this Section provides that the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration or the sale or offer for sale. The importation by the sister concern of M/s. Mirah Decor Pvt. Ltd. was almost at the same time. The origin of the goods is of the same area viz., the European Community - One from Holland and the next from Luxembourg, and as such we are of the view that the price adopted by the Adjudicating authority at US $ 1.157 is quite reasonable. The argument of the learned Advocate for calculation on weight basis is not acceptable and the other comparative bills of entry filed by him do not help him. Accordingly we confirm the findings of the lower authority for assessing the goods at US $ 1.157 per sq.m. CIF Cochin. However, keeping in -new the totality of the facts and circumstances of the case and to meet the ends of justice we reduce the redemption fine to Rs. 1,00,000/- (Rupees one lakh only) from Rs. 1.5 lakhs and penalty from Rs. 1,00,000/- to Rs. 75,000/- (Rupees seventy-five thousand only). Except for this modification, otherwise the appeal is rejected. The Revenue authorities are directed to give consequential effect to this order.
I.J. Rao, Member (T)
25. I am unable to agree with the order passed by my learned Brother.
26. Two questions arise in this appeal. The first pertains to the validity of the licence leading to the question as to whether the imported goods are PVC sheets or not. The second question relates to value leading to the question whether the value declared and invoiced can be accepted or not.
27. In respect of licence it was the plea of the appellants that till March, 1986 the same goods were being considered by Customs as PVC sheets to be assessed at higher rate. Now with the change in Tariff the Customs are calling them Floor Coverings so that more C.V. Duty can be charged. Even ignoring this submission we cannot ignore the judgment of the Tribunal in Decor India v. Collector of Customs, New Delhi reported in 1987 (31) E.L.T. 400 (Tribunal), where the Tribunal inter alia held that Vinyl Wall Coverings should be treated as PVC sheets. The Chemical Examiner's report also calls them PVC sheets. The term 'PVC' is a generic term and the floor coverings are one of the goods which generically are PVC sheets though they are, at the same time floor coverings also. I cannot also ignore the submission made by the Advocate that in October, 1986 Appendix 17 was amended banning importation of floor coverings of above 0.8 mm thickness. In the instant case the thickness of the floor coverings is, admittedly, 0.72 mm. The subsequent amendment is another indication that at the time of importation of these goods there was no bar against the same. It was in this context that the learned Advocate cited the Hon'ble Supreme Court's judgment in Sone Valley Portland Cement Co. Ltd. v. The General Mining Syndicate Pvt. Ltd. reported in AIR 1976 (S.C.) 2520 in which Supreme Court observed that some times light may be thrown upon the meaning of an Act taking into consideration parliamentary exposition as relevant by the later Act which amends the earlier one to clearer any doubt or ambiguity. I have also taken note of paragraph 17 of the Larger Bench judgment in Collector of Customs, Bombay v. Hargovind Das and Co. reported in 1987 (29) E.L.T. 975 (Tribunal) cited by the Advocate. I, therefore, hold that the goods are to be treated as PVC sheets and that even as floor coverings entry C-11-4 as amended as well as before amendment covers the goods.
28. In so far as valuation is concerned the learned Advocate for the appellants made a number of submissions among which was one that the invoices of other PVC sheets imported cannot be taken into account for comparison and fixing the value of the imported goods as they were thicker and different. He filed a calculation sheet showing the weight per sq.mtr. of PVC sheets, in each case comparing the price on a per kg. basis. The argument of the learned Advocate was that the imported goods being floor coverings they are costlier than PVC sheets but the cost has to be calculated with reference to the weight per sq.mtr. and then loaded by reasonable percentage in view of the better finish of the floor coverings. I see this argument as reasonable because the PVC sheets appear to have been thicker though poorly finished as compared to the present importation. The reasonable approach would be to take weight per sq.mtr. and work out the value accordingly. I have considered the calculation sheets at pages 61 of the paper book. On the basis of the calculation it is noticed that on weight basis the floor coverings imported by the appellants are about 25% costlier than PVC sheets which are only raw material. The Collector's order does not disclose any acceptable reason for dis-regarding the invoice value. Even if the value of the PVC sheets is taken as the basis for comparison the margin of 25% in arriving the higher value of floor coverings is reasonable. It is settled law that only when the invoice value cannot be accepted for valid reasons, resort can be made to comparison of like goods or similar goods. Here apart from the absence of any valid reasons for rejecting the invoice value, the comparison (for valuation) was made with goods which cannot be considered to be like or similar goods. Therefore, the ratio of the judgment in Oswal Woollen Mills Ltd. v. Asstt. Collector of Customs, Bombay reported in 1984 (18) E.L.T. 203 (Del.), cited by the learned SDR cannot be applied to the facts of this case. The same observation goes for the second citation on the same point made by the learned SDR in Kailash Chandra v. Union of India reported in AIR 1961 (S.C.) 1346.
As a result I allow the appeal.
K. Prakash Anand, Member (T) For reasons so ably brought out at length by Brother Shri Harish Chander, I agree with his findings and order.
In terms of the views of majority, the appeal is rejected except to the extent of modification ordered in the judgment recorded by Member (Judicial) Shri Harish Chander.