Customs, Excise and Gold Tribunal - Mumbai
Shri Naresh Lokumal Serai vs Commissioner Of Customs (Export) on 26 July, 2006
Equivalent citations: 2006(203)ELT580(TRI-MUMBAI)
ORDER Krishna Kumar, Member (J)
1. Heard both sides.
2. Briefly stated the facts of the case are that on 19.8.2003 the appellant holding Indian Passport filed baggage declaration Form (BDF) No. 172 at the Unaccompanied Baggage Centre, CFS, CWC, Sheva, Jawaharlal Nehru Custom House along with a detailed packing list showing that his baggage consisted of 237 individual packages contained in 11 containers. He had earlier arrived from Dubai on 17.8.2003 after a stay abroad of more than two years and had filed claim for transfer of residence facility on the goods imported by him. The baggage of the appellant had been booked on 3.7.2003 in 11 containers (40 feet containers) and the same had been shipped from Miami vide Bill of Lading No. SJ-1205570. The BDF filed by the appellant had been filed under "self indicating that he did not avail of the services of any CHA for clearance of his baggage. However, the appellant submitted an authorization for Shri Dinesh Yadav to assist him in the clearance of his baggage. The name of the consignor was shown as Susie Gonzalez Inc. DBA/Friends Cargo International, Miami, USA as agents for the consignee, the appellant and the said cargo arrived at Maersk CFS, D'Node on vessel Maersk Carolina under IGM No. 8474 and Item No. UB-147. The appellant filed his BDF by giving a value declaration of Rs. 4.79 lakhs for various items such as P computer, DVD, Music system. Home Theatre, video cassette/CDs, household linen, pictures/paintings household tools, lamps/shades, decorative items, furniture, binoculars/telescope, mattresses/beddings, mirrors, clothes, books and filed, toiletries and miscellaneous items of household which were all declared as used.
3. Meanwhile, intelligence was also gathered by the officers of the Special Intelligence Unit (SIU) attached to the office of the Chief Commissioner of Customs, Mumbai II that show pieces and decorative items of high value could be cleared at UB Centre. Accordingly, it was ordered that the detailed inventory of the said baggage should be conducted by the officers of the UB Centre in presence of the officers of SIU/CIU. At the request of the UB Centre staff, an appraising officer was also deputed to assess the correct valuation of the individual items in the baggage. The detailed examination of the baggage was conducted by the staff of UB Centre in the presence of the appellant, his authorized representative Shri Dinesh Yadav and an appraising officer and the officers of the SIU/CIU and the same concluded on 3.10.2003 and on 14.10.2003, the goods were finally assessed as per the valuation report of the appraising officer at Rs. 1,98,52,163/-. On the ground that the appellant has mis-declared the value of the goods and as such the goods were confiscated under Section 111(m) of the Customs Act, 1962 with an option of redemption fine of Rs. 15 lakhs. In addition penalty of Rs. 15 lakhs were also imposed on the appellant under Section 112(a) of the said Act.
4. The ld. Counsel appearing on behalf of the appellant interalia submitted that the declaration form was signed by the appellant in blank and the same was filled by Shri Dinesh Yadav of M/s. P.N. Writer & Co. without appellant's instructions. Shri Dinesh Yadav, in his statement dated 27.10.2003, accepted this position and the said fact is also corroborated by the statement given by the appellant on 23.10.2003 and also the declaration form which bears the hand writing of Shri Dinesh Yadav. Since the value declared on the BDF was not as per appellant's knowledge and consent, the said value cannot be regarded as a value declared by the appellant and consequently the charge of mis declaration of value and consequent invocation of Sections 111(m) and 112(a) are untenable. The finding of the Commissioner that in view of Section 147(2) of the Customs Act, any action of agent of the importer is deemed to have been done with the knowledge and consent of the importer overlooks the fact that the presumption under the said section is rebutable as the said section itself states that this should be the position "unless the contrary is proved".
5. The appellant had unequivocally claimed before the Customs in a statement under Section 108 of the Customs Act, 1962 that the value declared in the BDF was not as per his instructions and that the same was filled up by the clearing agent on his own. With a view to ascertain the correctness of this claim, a statement of Shri Dinesh Yadav, whose authorization had been submitted by the appellant along with the BDF, was recorded and Shri Yadav confirmed in his statement that he had filled in the BDF form on the basis of instructions received from some third person who had introduced the appellant to the said Shri Yadav. The statements of the appellant as well as that of Shri Dinesh Yadav have been relied upon in the show cause notice and, therefore, such statements constitute enough evidence to prove that the actions of Shri Yadav were not with the knowledge or consent of the appellant. As such, by virtue of Section 147(2), the appellant should not be held liable for penalty nor should the goods be confiscated based on an unauthorized action of his agent who has owned up his mistake. It was further submitted that the Commissioner ought to have appreciated that the appellant has acted bonafidely by attaching alongwith the BDF a complete packing list, which gave details of all the 237 packages imported by the appellant. The description of the goods appearing in the packing list was 'other than and in addition to' the description of the 14 items given in the BDF. Since the value declared in the BDF of used personal effects which were mentioned therein was only in respect of the 14 declared items of used personal effects, the said value could not be considered as representing the value of the 237 items which were also declared by the appellant by attaching the packing list to the BDF. In other words, in respect of 237 new items, no value was declared by the appellant and, therefore, it was upto the assessing officer to determine the correct value and consequently the charge of mis-declaration of value cannot survive even if one were to record the BDF declaration as having been made by the appellant himself. The only logical inference that one should draw from the BDF and the accompanying packing list is that the BDF contained declaration of value only in respect of 14 used personal effects and did not declare any value for the remaining 237 items imported as per the packing list attached. On 13.10.2003, appellant had made it clear to the Customs that he was willing to pay duty on the items imported as per the value assessed by the Customs. This letter of the appellant should have been read along with the declaration filed by him earlier and the goods should have been assessed for duty and cleared without proposing confiscation and penalties. The value assessed by the Customs in the Bill of Entry is clearly incorrect for the reason that in most instances it adopts a local market prices of similar furniture available in India as the assessable value of the goods without granting any deduction on account of duties, taxes, clearing expenses and profit margins of the wholesalers and retailers incurred in India. Even otherwise there is no evidence to prove that the local market rates determined by the Appraising Officer are that of imported goods. As per the interpretative notes to the Valuation Rules, 1988, there is an absolute prohibition against adoption of the local market prices of the goods as the basis for determining the assessable value of imported goods. The method of valuation adopted by the Assessing Officer, therefore, is contrary to law and cannot be sustained. The valuation report also relies on Internet prices without even seeking to establish that the web sites assessed by the department belonged to the manufacturers of the imported goods. It is settled law that Internet prices cannot be adopted, as the assessable value of imported goods even in a case where the goods are imported from the same manufacturer whose web site is accessed. In a number of cases, the overseas retail sale prices as indicated on the tags / stickers appearing on the furniture have been straight away adopted as the assessable value without appreciating that such tag could not be considered as representing the market prices of such goods in the course of international trade. In the absence of any legally acceptable method available on record, the department was duty bound to determine the assessable value based on the value as declared by the appellant in his statement under Section 108 of the Customs Act. Since the amount of Dirhams 5.25 lakhs (equivalent to Rs. 66 lakhs approximately) which the appellant paid to the supplier represented the transaction value of the imported goods, that alone should have been accepted as the assessable value. Instead the Customs have adopted a completely arbitrary and fictitious value based primarily on the local market prices of the goods as ascertained during a visit to an Exhibition in Mumbai by one officer of the customs who is not even claimed to be an expert on the subject. The reason assigned by the Commissioner for denying the TR benefit is also not tenable as they are different from the one on which the notice proceeded.
6. In support of his contention that the price displayed on internet is not reliable being unsigned and the nature of price not being indicated therein has no evidentiary value for imported goods and the baggage price declared by the appellant is acceptable the ld. Counsel relied on Aggarwal Distributors (P) Ltd. Reported in .
7. The ld. Counsel has referred to Section 77 and 78 of the Customs Act and submitted that there is no requirement in the said provision for the appellant to declare value of the goods of the baggage. Appellant was only required to declare the contents of the baggage. As regards Sections 111(m) the provisions of these sections do not apply because there was no mis-declaration on the part of the appellant as mentioned above. Since the provision of Sections 111(m) is not applicable, the question of invocation of provisions of Section 112 is not attracted. He submitted that 85% of the goods have been valued by the department as per the local market value, which is not permissible. His contention is that the value should have been taken on the basis of (i) declaration of old items (Rs. 4.5 lakhs) and (ii) value of other goods (as per statement 5.25 lakh Dirham). Relying on the decision in the case of Durga Marketing v. CC, Mumbai , the ld. Counsel submitted that enhancing of the value based on the local market price of such goods is not permissible. He also submitted that the appellant has already incurred demurrage of more than Rs. 40 lakhs and the Commissioner has failed to give any findings on the bonafide baggage of the appellant. Finally the ld. Counsel submitted that the impugned order deserves to be set aside as the appellant was not guilty of any mis-declaration and as such no penalty was imposable; goods imported by the appellants are not liable for confiscation; the goods were liable to be assessed at the value of Rs. 66 lakhs being price actually paid for the goods; the benefit of TR facility under the Baggage Rules, 1998 may be held to be available to the goods imported by the appellants and consequential relief by way of refund of excess duty paid and also refund of redemption fine and penalty along with interest and cost.
8. The ld. JDR appearing on behalf of the Revenue interalia submitted that from the declaration form it may be seen that it is written 'self' and the same is also notarized. Therefore, the ground taken by the appellant that he had signed a blank form may not be correct. Drawing attention to Rule 8 of the Bonafide Baggage Rules, 1998 the ld. JDR submitted that the said rule permits clearance of bonafide baggage in case of transfer of residence whereas the goods in question are in commercial quantity. In this regard he drew our attention to para 31 of the impugned order. He also referred to Section 78 of the Customs Act, 1962. He submitted that the said section provides that "the rate of duty and tariff valuation, if any, applicable to baggage shall be the rate and valuation in force on the date on which a declaration is made in respect of such baggage under Section 77." Referring to para 27 of the EXIM Policy he submitted that there is no requirement to comply with the Bill of Entry, shipping bill etc. Referring to sub Section 2 of Section 15 of the Act he submitted that the provisions of Section 15 are not to be applied for the baggage. He also submitted that Section 15, Sub-section (a), (b) and (c) will also not apply to treat as special import. Referring to Section 14, he submitted that the provisions apply for personal purpose only as well as not for profit purpose and trading purpose. He submitted that there are three kinds of goods viz::
(i) which contains price tag
(ii) Internet price
(iii) prices for similar goods He submitted that there is nothing wrong in relying manufactures price list as per the decision in the case of Mytri Enterprises . Referring to the letter dated 13.10.2003 of the appellant, the ld. JDR relying on the decision of Shri Katki Gurakhu Karyalaya submitted that the statement of the appellant in the said letter has evidencery value. Further relying on the report of the appraising Officer he submitted that the Tribunal in the case of B.K. Spinning Mills (P) Ltd. v. CC, Cochin , Commerce International v. CC and Sunil Kumar Gupta v. CC have interalia relied on manufacturers price list and the best judgment assessment. Therefore, his contention is that the appeal needs to be dismissed.
9. After hearing both sides, perusal of the records and case laws relied upon by both sides, we find that the submissions made by the ld. Counsel for the appellant deserve to be accepted. We find that the appellant had, by enclosing a detailed packing list along with the BDF, declared and disclosed to the department the contents of his baggage. This is the primary requirement of Section 77 of the Customs Act which provides that the owner of any baggage shall, for the purpose of clearing it, make a declaration of its contents to the proper officer. There is no statutory obligation cast on the passenger to also declare the value of such baggage in the BDF. The BDF filed by the appellant in the present case gives a list of 14 used personal effects for which a value of Rs. 4.5 lakhs was declared. The 237 items which are listed in the packing list attached 10 the BDF are not the same as the 14 items for which the value of Rs. 4.5 lakhs was declared. It is thus evident that in respect of these 237 items, the BDF did not declare any value at all. It is only in the statement of the appellant recorded under Section 108 that he declared the purchase price of the 237 items as equivalent to Dirham 5.25 lakhs. This statement of the appellant has been relied upon in the show cause notice. We have to examine whether this value should have been accepted for assessment purposes or not.
10. It was also argued by the ld. DR that the provisions of Valuation Rules do not apply for determination of value of baggage. We cannot accept the arguments as the scheme of the Customs Act does not provide for a separate method of valuation for baggage. The provisions of Section 14 clearly provide that wherever duty of customs is chargeable with reference to the value, such value shall be determined as per the said section and the valuation rules framed under the said section. The Valuation Rules provide a complete code for determining the assessable value, if necessary, by resorting to best judgment method which is what the revenue has done in the present case. The ld. DR argued that in most cases of baggage imports, the concept of transaction value is not applied for determining the assessable value. This is probably true in most of the cases of baggage imports, where evidence of transaction value is either not forthcoming or is not relevant on account of the items having been put to use abroad and then brought into India much after their purchase abroad. In these circumstances, report to the best judgment method of valuation under Rule 8 of the Valuation Rules is certainly appropriate. This is what the Commissioner has done in the present case. As such, the argument of the ld. DR that the provisions of Valuation Rules are not applicable do not deserve acceptance.
11. We find that the valuation report which forms the basis of the order does not provide a legally valid basis for determination of value. Firstly, the appraiser who prepared the said report is not even claimed to be an expert in this field. Secondly, as per Rule 8(2) of the Valuation Rules, 1998, under which 'best judgment' assessment has obviously been made, there is an absolute prohibition against adoption of the selling price of locally produced goods as the basis for valuation of imported goods. Yet the valuation report does precisely that by referring to the prices of the similar goods noticed in the INDEX exhibition in Mumbai. Almost 85% of the goods have been assessed on the basis of the prices noticed in the said exhibition in Mumbai without as much stating the origin of the goods whose prices were compared. Even if it is assumed that the items compared were also of foreign origin, no attempt has been made to ascertain and derive assessable value of the subject goods by reducing therefrom various elements of expenses such as cost, taxes, duties and profits made in India, which is a requirement of Rule 7 of the Valuation Rules, 1988. Since the local market price of goods in India has been straight away adopted as the assessable value, we have no hesitation in rejecting this method of valuation. Even in respect of other items, the values have been determined based either on internet prices or on the basis of price tags. As already held in the case of Aggarwal Distributors (P) Ltd. v. Commissioner of Customs , internet prices are not a reliable basis for determining the value as regards the prices appearing on the price tags. Liven if we do not accept this plea, quite certainly the said price tags only refer to retail prices of goods in the country of export and not the price for export to India. In any case, such cases of price tags are very few and even if the same were to be accepted as a basis for valuation, the value ascertained would not work out to more than Dirham 5.25 lakhs. We, therefore, hold that the value as determined by the Commissioner in the order is not correct. In the absence of any other valid basis for determining a different value, the value as declared by the appellant in his statement under Section 108 of the Customs Act deserves acceptance. To this value, a further amount of Rs. 4.5 lakhs is required to be added as the value of used items. The sum total of the two would be the total assessable value of the baggage which, we were informed, comes to Rs. 66 lakhs.
12. It was the contention of the appellant that the BDF filed by him has been signed by the appellant in blank and that therefore appellant could not be held responsible for any wrong declaration appearing on it. We find that the statements of the CHA as well as of the appellant which the notice relies upon do support this contention of the appellant. However, we are unable to hold that the appellant can be absolved of the responsibility for signing a blank declaration. We are, therefore, proceeding on the premise that the appellant is completely was responsible for the declaration made by him and that the circumstance of his having signed a declaration in blank is only a mitigating factor for the purpose of determining the amount of redemption fine and penalty.
13. As regards the question of mis-declaration of value and confiscation of goods under Section 111(m), we find that the appellant had acted bonafide by submitting along with the BDF a complete list of all his baggage by filing a detailed packing list which gives the description of all items imported by him. The absence of declaration of value in the BDF cannot be a ground for imposing a penalty or for confiscating the goods when there is no statutory obligation on a passenger to declare such a value. The obligation under Section 77 of the Customs Act is confined to declaring the contents of the package which the appellant had fulfilled. In any event, the act of non declaration of value cannot tantamount the mis-declaration of value so as to justify confiscation under Section 111(m) of the Customs Act. Even if the appellant was importing goods as cargo and had filed a bill of entry declaring the description of the goods but leaving the value blank, such non declaration of value could not have lead to penal consequences against him. The position with regard to baggage would be in fact on a still liberal footing as the obligation under Section 77 of the Customs Act is only to declare the contents of the baggage and not its value.
14. The benefit of transfer of residence has been denied to the appellant on three counts, the first being that he has not produced any evidence of prove his true intention to return to India; the second being that the goods were not shipped from Dubai where the appellant was residing but from USA; and the third being that the goods were offending goods and therefore not entitled to TR benefit. It has been argued by the appellant that the first ground is beyond the scope of the show cause notice as there was no proposal to deny the TR on this basis. It is further argued that the last ground also is irrelevant as even if the goods are offending goods and are liable to confiscation, the benefit of exemption available on transfer of residence cannot be denied. While we agree with these two submissions, we find that the benefit of TR cannot be granted in respect of goods which were new and not in possession of the appellant during his stay abroad. In the present case, the goods were shipped directly from USA while appellant was residing in Dubai. The exemption available under the TR provisions applies only to such goods which were in possession of the passenger prior to his arrival in India. This condition is not satisfied by the appellant in the present case merely by virtue of the fact that the Bill of Lading stood in the name of the appellant. We, therefore, hold that in respect of the items which were shipped from USA, the benefit of TR is not available. We also find that in the BDF filed the appellant, it was indicated that he was coming from USA and that the baggage had also arrived from USA. This declaration however is not correct as the appellant had arrived from Dubai and not from USA. To this extent there is a misdeclaration and therefore the goods are liable to confiscation under Section 111(m) of the Customs Act, 1962. However, while imposing redemption fine, we take note of the fact that the duty difference on account of TR benefit would be only to the extent of Rs. 1 lakh as the duty rate on baggage and on merits was the same, i.e. 50%. Also there is no restriction on the import of any of these items in EXIM Policy so as to render the goods for confiscation under Section 111(d). The benefit which could accrue to the appellant as a result of the claim for TR was therefore only in respect of initial exemption of Rs. 5 lakhs, for which a concessional rate of 30% was available as against 50% normally payable. In other words, appellant stood to gain 20% of Rs. 5,00,000/- by way of duty benefit. Considering this, and also the fact that the goods were under detention for a long time, for which the appellant had to incur detention and demurrage charges of Rs. 40 lakhs, we consider it appropriate to reduce the redemption fine to Rs. 50,000/- (Rupees fifty thousand only). We also hold that for the act of misdeclaration of the country from which the appellant arrived, he is liable to a penalty which, in the facts and circumstances of the case, is determined at Rs. 25,000/- (Rupees twenty five thousand only).
15. Appeal is accordingly partly allowed with consequential relief to the appellant.
(Pronounced in Court on 26.7.06)