Customs, Excise and Gold Tribunal - Delhi
Auto Control (P) Ltd. vs Collector Of Customs on 12 March, 1999
Equivalent citations: 1999(65)ECC91, 1999ECR37(TRI.-DELHI), 1999(111)ELT96(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The Collector of. customs in the impugned order confiscated component parts of Electronic Typewriters covered by 12 Bills of Entry under Section 111(d) and Section 111(m) of the Customs Act, 1962. Since the goods had already been released, he ordered that a sum of Rs. 2.00 Lakh should be recovered from the Bank Guarantee in lieu of confiscation. The Collector also imposed a penalty of Rs. 50,000/-. The Collector further ordered that the 12 Bills of Entry shall be assessed at the enhanced value. Being aggrieved by this order, the Appellants have filed the captioned Appeal.
2. The facts of the case, briefly stated, are that Customs House collected intelligence indicating that the Appellant was importing complete typewriter in knocked-down condition under the guise of components for Electronic Typewriters and that some of the components were under invoiced. Accordingly, the goods were located and import documents were examined. On scrutiny of 8 Bills of Entry, it was observed that the goods imported were 250 kits each of Electronic Typewriters. In the examination report, it was stated that regarding the items still required to make the Electric Typewriter, 'party's declaration placed opposite may be seen'. Representative of the Importer had given declaration that 23 more items were to be added indigenously to the imported component to make the complete Electronic Typewriter. Importers furnished a further declaration in terms of Rule 10 of Customs (Valuation) Rules, 1988 to the effect that the Suppliers were M/s. Peekay Corporation, Japan. They also declared that similar goods were imported earlier. There was a general declaration that they had not received and did not know any other documents or information showing a different price; value, including the article payment whether as commission or otherwise. It was also confirmed by the Importers that they were not connected with the Suppliers otherwise as ordinary importers or buyers. Hundred percent examination of the goods was resorted to. It was found that the goods covered by the first set of 4 bills of entry, in each set constituted 250 kits of complete electronic typewriters and were in the form of assemblies, sub-assemblies of electronic typewriters. The containers had the markings of 'made in Japan'. Examination report made it clear that 2 sets of bills of entry contained 500 numbers of electronic typewriters. Samples were drawn from each lot in respect of each and every item shown in the invoice, as also of the goods found in the container.
3. From the documents submitted by the Importer, it was seen that their industrial licence was issued by the Ministry of Industries and that they were registered as a manufacturer of Electronic Typewriters, having a licensed capacity to manufacture 5000 numbers of electronic typewriters. Further, the Importers had approached the DGTD for getting a Phased Manufacturing Programme (PMP). For Getting this PMP, the Importer had submitted a list of PMP which showed the components to he imported and also the component to be manufactured or produced indigenously. On the basis of their application and statement submitted, the Ministry of Industry had issued a PMP. On scrutiny of this PMP, it was found that the PMP had stipulated inter alia some conditions, i.e. year-wise production, quantity, value, import content per typewriter and the percentage of import content. The 3 years programme was as under :
_______________________________________________________ Year Production Import content % of Import Nos. per Typewriter content 1st 2000 Nos. Rs. 3,500/- CIF 21.87% 2nd 3000 Nos. Rs. 2,740/-CIF 17.125% 3rd 4000 Nos. Rs. 2,145/-CIF 9.37% _______________________________________________________
4. Premises of the Importer was searched and during the process of search, some documents found to be incriminating were seized. From these documents, it was observed that M/s. Auto Control Private Limited (ACPL) was related to M/s. Nakajima and M/s. Peekay Corporation, Japan in otherwise than a normal buyer and seller; that complete typewriters were being bought by M/s. ACPL from M/s. Nakajima through M/s. P.K. Corporation, Japan in semi-knocked down condition; that the price reflected in the invoices was not true, but appeared to be under-invoiced heavily; that M/s. ACPL had projected to the DGTD as manufacturer of Electronic Typewriters by using imported as well as indigenous components as per PMP.
5. Import of printed material was also noticed. Scrutiny of the invoices showed that printed matter contained instructions manual for typewriters, unpacking instructions, instructions manual for memory function, with markings of 'Nakajima All Co. Limited'. It appeared that the imporer had imported 100% electronic typewriter. Thereafter, Shri Vinayak M. Barve of M/s. Supar-gal Electronics, an independent technician of Electronic Typewriters was contacted and was requested for his opinion about the parts required for assembly of a full typewriter and to assemble these parts. He assembled 2 Typewriters out of the seized representative samples. He stated that these two assembled typewriters bearing Model Nos. 475X and 395M are complete in all respects componentwise and no components were required except for one drive belt in Model No. 475X with part No. 330-60600. Subsequently on 3-5-1991, Shri Barve again assembled 2 Typewriters out of 3 sealed samples and gave a certificate on 3-5-1991 that he had assembled 2 typewriters of Model No. 475X and Model No. 355V.
6. Shri Navin Chandra Joshi, Dy. Manager of M/s. ACPL in his statement confirmed that the agreement was entered into between Gentron Pte. Ltd. of Singapore and ACPL, Delhi; that this agreement appointed M/s. ACPL as sole authorized sales and Spares Representative of M/s. Nakajima All Co. Ltd.; that M/s. ACPL was authorized to assemble Nakajima typewriters from knocked down parts supplied to them by M/s. Nakajima; that M/s. Peekay Corporation, Japan had endorsed the agreement between Gentron Pte. Ltd. and M/s. ACPL; that draft invoices and packing list used to be sent from M/s. ACPL to M/s. Peekay Corporation as per requirements of M/s. ACPL.
7. About value, Shri Jain confirmed that the value of the key board assembly was of Yen 7150 and that of control assembly was Yen 8500 per unit. Shri Jain further confirmed from the documents that the FOB price of Electronic Typewriter Model No. 475X was Yen 41200.
8. Shri Chaman Mahajan, MD of M/s. ACPL in his statement recorded on 18-9-1991 stated that the company was importing component parts and sub-assemblies from Gentron Pte. Singapore who were the distributors of M/s. Nakajima All Co. of Japan; that there was an agreement between their company and M/s. Gentron Pte. Singapore which made their company the sole sales service and spares representative of Nakajima All brand Electronic Typewriters in India; that their company had an industrial licence for manufacture of electronic typewriters based on PMP; that their company started importing components from M/s. Peekay Corporation of Japan from 1986 onwards; that these goods were manufactured by M/s. Nakajima, Japan; that before placing the order, the suppliers send proforma invoices and on that basis, a letter of credit was opened; that no lumpsum fees were paid either to Nakajima All Corporation or to M/s. Peekay Corporation of Japan.
9. During the search of importer's premises on 7-5-1991 and 8-5-1991, original proforma invoice No. 1501, dated 18-1-1990 could be recovered. The seized invoice showed the correct price of the keyboard assembly; power pack assembly, plastic moulded goods of the models A, B & C of electronic Typewriters.
10. According to the PMP, the importers were entitled to bring only 13.40% in the third year of manufacture. However, from the examination report and other evidence, it was clear that the importer had brought 100% of the components required for the manufacture of electronic typewriters.
11. As per the Import Trade Control Policy for the relevant period, import of complete Typewriters was prohibited as the same was treated as consumer goods. SI. No. 176 of the Appendix 2B of the Import Policy AM 91 also stated that all the consumer goods under SKD condition including the sub-assembly thereof were to be treated as restricted goods. The import of the goods was allowed only against a valid and proper import licence. In the instant case, the Department noticed that M/s. ACPL had been importing complete typewriters in dismantled form with the sole intention of reassembling complete typewriters after import and effect the sale of the same in Indian market. It appeared that there was no manufacturing activities undertaken by this firm.
12. On scrutiny of the import licence, it was found that the same was filed only for certain components and as such it could not cover the full assembly of electronic typewriters in any form. The Department alleged that the importers imported goods valued at Rs. 19,83,930/- in contravention of import-trade control regulations.
13. It was also noticed that the importers had misdeclared the value of the goods with a view to evade customs duty. Proforma invoice No. 1501, dated 18-1-1990 showed the correct price of the item like Keyboard Assembly, Powerpack Assembly and Plastic Moulded parts of A, B and C model typewriters. The invoice No. PK 975, dated 14-5-1990 relating to the consignment already imported and cleared indicated the said proforma invoice No. 1501, dated 18-1-1990. The said telex (Fax) as well as proforma invoices indicated the value of the Electronic typewriters in CKD condition 'A' as Y 41200, while the declared price for the same typewriter was Japanese Yen 28550. It, therefore, appeared that the importer had made deliberate under invoicing which worked cut to Rs. 6,76,340 and that the importer had attempted to evade payment of customs duty to the extent of Rs. 13,83,282.
14. A Show Cause Notice was issued to the Appellants asking them to explain as to why the goods should not be confiscated, why duty should not be demanded and why penalty should not he imposed. In reply to the Show Cause Notice and at the time of personal hearing, the Appellants submitted that every single item was covered by the licence produced by them; that certain minor items not exceeding 10% of value have been permitted clearance against supplementary REP licence produced by them; that the PMP and indigenisation has not progressed as per the licence. They also referred to the correspondence with the DGTD which showed that they admitted their lapse in not progressing; that inspite of their slow progress, they were allowed to import components and sub-assemblies for 750 Electronic typewriters; that this was a conscious decision of the DGTD in view of the PMP and, therefore, there was no question of confiscation of the goods as there was no violation of any import-export policy. The Appellants also contended that the Apex Court in the case of Union of India v. Tarachcind Gupta [AIR 1971 S.C. 1558] ruled that Collector's jurisdiction was limited to ascertaining whether or not the goods imported by the Respondents were spare parts and accessories covered by entry 295 in respect of which they undoubtedly held licence and, therefore, he could not have lumped together the two consignments which they imported under one licence, arise separately and were received on different dates and could not have come to the conclusion that the plaintiffs had imported 51 RIXE moped in completely knocked down condition. It was contended by the Appellants that the above decision of the Apex Court fully covers their case and thus there was no violation of the Import policy. They also distinguished the decision of the Apex Court in the case of M/s. Sharp Business Machines Pvt. Ltd. v. C.C.E., [1990 (49) E.L.T. 640]
15. On the Question of valuation, it was contended by the Appellants that they have no special relationship with the foreign supplier; that the Indian Importer had not collaborated or was not an agent of M/s. Nakajima All Co. Ltd. of Japan. On the Question of loading of value of the imported consignment under Rule 7 of the Valuation Rules, the Department had relied on 2 documents out of which one is a Fax message and the other is the proforma invoice. It was contended that the Appellants had not accepted the price quoted in the proforma invoice; that they negotiated the price over phone and another proforma invoice was sent. After careful consideration of the submissions made by the Appellants, the ld. Collector of Customs held as indicated above.
16. Shri J.S. Agarwal, the ld. Counsel appeared for the Appellants and, in addition to reiterating the submissions made before the lower authorities, submitted that in so far as violation of EXIM policy in the relevant period is concerned, the matter was brought to the notice of the DGFT and DGTD; that the licence was issued to them after considering the PMP and other factors. He submitted that the EXIM policy in para 20 on interpretation of policy, stipulates that if any question or doubt arises in respect of the interpretation of any provisions contained in this policy, the said question or doubt shall be referred to the DGFT whose decision thereon shall be final and binding. He submitted that it is further provided in para 20 that "for the removal of doubts, it is hereby declared that if any question arises whether a licence has been issued in accordance with or if a question arises touching upon the scope and content of a licence, such question shall also be referred to the DGFT for a decision. He submitted that the slow progress of the PMP was brought to the notice of the DGTD who after considering all the facts of the case recommended issue of the licence; that further the item imported was covered by the licence and those which were not covered by the licence upto 10%, a REP licence was produced. The ld. Counsel, therefore, submitted that there was valid licence held for the import and therefore there was no violation either of the Import Control Order or EXIM policy for the relevant period.
17. In so far as the valuation is concerned, the ld. Counsel submitted that there is hardly any evidence based on records brought in by the Department to prove that the prices were in any way depressed or that the Indian Importer had special relationship or was a collaborator of the foreign supplier. He submitted that the Department had relied solely on a Fax message and the proforma invoice; that the proforma invoice was not accepted by the Appellants and the lower price was negotiated over phone. He submitted that the Department has not relied on contemporaneous imports for which evidence was placed by the Appellants. He submitted that contemporaneous imports indicated that the price was almost the same as was in the invoices covering the Bill of Entry. He submitted that thus, no case has been made out on either issue and prayed, therefore, that the Appeal may be allowed.
18. Shri K. Shiv Kumar, the ld. JDR reiterated the findings of the ld. Adjudicating Authority.
19. We have heard the submissions of both sides. We find that the Appellants held an industrial licence. They were permitted to undertake a Phased Manufacturing Programme (PMP). In terms of the PMP, they were required to indigenize year after year. The present imports pertain to the third year of PMP. In the third year, the total percentage was 13.40% as imports. We note that the admitted position in the present case was that complete typewriters were imported in knocked-down condition. Thus, the PMP was not at all followed by the Appellants. Hence, there is a violation of the restrictions imposed under the PMP. We have perused the rulings of the Apex Court in the case of M/s. Sharp Business Machines Pvt. Ltd. as well as in the case of Union of India v. Tarachand Gupta (supra). We find that the decision of the Apex Court in the case of M/s. Sharp Business Machines Pvt. Ltd. is apt and more appropriate to the facts of the present case. In that case, a certain percentage was fixed upto which the goods can be imported. In the instant case, a certain percentage was fixed here also. The PMP was not complied with and thus, the ratio of the decision of the Apex Court in Sharp Business Machines Pvt. Ltd. covers the facts of the present case. Looking to the facts and the case law on the subject, we hold that there was violation of the EXIM Policy. We are not prepared to accept the contention of the Appellant that they had taken up the matter with DGTD in so far as the slow progress of the PMP was concerned. If that be so, no explanation has been given by the Importers as to why the percentage fixed for the purpose were not simultaneously changed. Since the percentage has remained fixed, we are of the view that the Appellants contention that they were permitted to change the percentage is not supported by the evidence placed before us. Thus, the confiscation of the goods is sustainable in law.
20. In so far as under-valuation is concerned, we note that there was an agreement between the foreign supplier and the Indian importer establishing special relationship as is evident from the statement of the responsible person of the Appellant Company. We also note that there was a Fax message and a proforma invoice. The proforma invoice number was found quoted in the regular invoice covering the goods. Thus proper significance has to be given to this invoice. The contention of the Appellant that there was negotiation of price is not supported by any evidence on record. We, therefore, hold that the contention of the Appellant is not convincing. We find that in the instant case, there was an understanding between the foreign supplier and the Indian Importer that the foreign supplier was sending proforma invoice on the strength of which letter of credit was opened by the Indian Importer. In the instant case, therefore, proforma invoice for the relevant period assumes importance. It was not in the form of quotation, but it was in the form of over-all amount for which the letter of credit was required to be opened. In view of the special understanding between the Indian Importer and the foreign supplier, this proforma invoice and the Fax message become more relevant as documents for indicating the correct price of the material. In this view of the matter, the Fax message and the proforma invoice relied upon by the Department, cannot just be brushed aside. As regards the contention of the Appellant that he had submitted price list No. 6054, dated 20-11-1990 which had not been rebutted by the Adjudicating Authority, we find that this price list was not submitted immediately and further this may be issued only in respect of supplies to the appellant who was the representative of the foreign supplier. Looking to the fact that there was special relationship between the foreign supplier and the Indian Importer, we are prepared to accept that the Fax message and the proforma invoice are important piece of evidence and have rightly been relied on and accepted by the lower authorities for enhancing the value. Thus, under-valuation of the goods renders the goods liable to confiscation under Section 111(d), read with Section 111(m) of the Customs Act, 1962.
21. In view of the above findings, we hold that the goods have been rightly confiscated. Looking to the value of the goods, we do not find that the penalty amount is excessive. Having regard to the above findings we do not see any reason to interfere with the impugned order. In the circumstances, the impugned order is upheld and the Appeal is rejected.