Customs, Excise and Gold Tribunal - Delhi
Metlex India (P) Ltd. vs Cc on 10 May, 1999
Equivalent citations: 2000(88)ECR464(TRI.-DELHI)
ORDER A.C.C. Unni, Member (J)
1. M/s. Metlex India (P) Ltd. have challenged Order-in-Original dated 24.10.1996 passed by Commissioner of Customs, IGI Airport, New Delhi holding that an amount of Rs. 11,37,824.00 being amount of customs duty short levied on 3,600 pieces of "INTERMETALLIC COMPOSITES METALLIZING BOATS" (IMC boats), imported by the appellants is liable to be paid by them. He also directed confiscation of another 300 pieces of IMC boats seized by the DRI Officers with option to get them redeemed on payment of redemption fine of Rs. 25,000/- Customs duty on the said 300 pieces of IMC boats amounting to Rs. 98,504/- was also confirmed. Penalty of Rs. 4 lakhs was imposed on the appellant firm and a penalty of Rs. 2 lakhs was imposed on Shri Jamna Datwani, Chairman of M/s. Metlex (India) Pvt. Ltd. under Section 112(a) of the Customs Act.
2. Appellants are engaged in the manufacture of Hot Stamping Foils and in metallising bare plain films of plastics. For purposes of metallising, evaporation boats known as 'Intermetallic Composites Metallizing boats' (IMC boats) were imported from U.S.A. and bought from M/s. Advance Ceramics Corporation in Cleveland-Ohio, USA. IMC boats are made of ceramics and ceramics are composed of two or three major ceramic powders. On the basis of specific information collected by DRI that the imports of IMC boats by the appellants was heavily under-invoiced, a Show Cause Notice was issued to the appellants to show cause why the differential duty between the duty already paid on 3,600 pieces of IMC boats cleared from foreign Post Office and the actual duty which was payable thereon should not be demanded as also the appropriate duty for 300 further pieces of IMC Boats seized by the Officers on 19.5.1995 and 30.5.1995 should not be demanded apart from confiscation and penalty. The Department alleged that the invoices did not represent the true and real value of the goods; that the actual value thereof had been misdeclared by the appellant importer, that the said IMC boats were in fact sold by the U.S. supplier M/s. Advance Ceramics Corporation, to another U.S. firm viz., M/s. Whistles, New York and M/s. Non-Fiction Unlimited Ltd., New York, both of which were owned by Shri Kishan Datwani, son of Jamna Datwani, Director of M/s. Metlex (India) Pvt. Ltd., the appellant. The FOB price of each IMC boat as per manufacturer's invoice in USA was US $ 14. The price remained the same till 1993 when it was reduced by the original manufacturers by 30% from US $ 14 per piece to US $ 9.65. However, the appellants, M/s. Metlex (India) Pvt. Ltd., accepted an offer from Mr. Kishan Datwani for supply of IMC boats @ US $ 5 per piece from September, 1993. SCN also alleged that the importers had thereafter shifted the import of the said goods from Air Cargo to Foreign Post Office as per the request of the suppliers of IMC boats viz., M/s. Non Fiction Unlimited Limited, USA.
3. During the adjudication proceedings before the Commissioner of Customs, appellants contended that the Department's allegation was on the ground that the entire supplies of IMC boats manufactured by M/s. Advance Ceramics Corporation, USA were routed through M/s. Non Fiction Unlimited Limited and M/s. Whistles, New York both owned by Shri Kishan Datwani, son of Shri Jamna Datwani, Director of M/s. Metlex (India) Pvt. Ltd. Appellants had contended that all the IMC boats were not of the same grade and quality as these boats were composed of two or three types of Ceramic Powders, though they may look alike physically. Whereas Titanium Diboride is an electrically conductive powder that is mixed with Boron Nitride Powder, these are mixed together in appropriate proportions to achieve a specific temperature bulk resistivity. This blended powder mixture is heated to over 1900°C in a mould and pressure is applied. Once the mix is cooled, it becomes extremely hard. This hard piece is cut into plates and machined and finally a cavity is ground into a boat. The physical design of the boat depends upon its application, clamping system, power supply and operating conditions. The boats are used in high vaccum Metallising Plants. Though they may look alike, the boats which are of inferior quality when connected with electricity may not resist the high temperature. Aluminium wire is continuously fed to the boat where it is liquefied and evaporated and such evaporated vapours are deposited on the polyester Films. Since Aluminium melts at 1000°C, but evaporates at 1500°C, in the inferior boats and the Aluminium may not melt properly and evaporation may be defective. Metallic Films manufactured by the appellants are used generally for Zari work, packaging and decorations. Just because the boats look alike physically they cannot be placed on the same footing as far as valuation aspect is concerned. Appellants further submitted that there was nothing on record to show that Shri Kishan Datwani had managed to supply the boats at lower rates in connivance with his father Shri Jamna Datwani, Director of Metlex (India) Pvt. Ltd. Even if Shri Kishan Datwani had purchased the items in USA at higher rate and supplied them to the appellants, at a lower rate, there was no charge or any evidence to show that he had passed on any extra money to the manufacturer (appellants) or to the supplier. The appellant also disputed the Department's stand that the price remained uniformly at US $ 14 or that there was a 30% reduction in price in 1993 bringing down the price to US $ 9.65.
4. The Commissioner, after giving the appellants an opportunity for being heard held that though there was no evidence to show that the importers had passed on any extra money to the supplier Shri Kishan Datwani or that there was any connivance between them, observed that it was a well known fact that payments to make up the difference between the declared price and the actual price was done in a clandestine manner and normally in such transactions/deals, evidence about under hand payments will be hard to find. He observed that it is not possible for the investigators to unravel each and every link in the offence involved where suppression of real value by under-invoicing of imported goods was involved. He noted that the import had been effected by M/s. Non Fiction Unlimited Limited, New York and M/s. Whistles, New York, in both of which Shri Kishan Datwani, son of Shri Jamna Datwani, the Chairman of M/s. Metlex (India) Pvt. Ltd., was interested. It was also observed that the appellants were importing IMC boats through Air Cargo, New Delhi till 1992 and had declared FOB value of each IMC boat at US $ 14. However, some time during 1992, they started importing the same IMC boats by Post Parcel at Foreign Post Office and in the said import, the FOB value of each IMC boat was declared as US $ 5 per unit. Commissioner dismissed the appellants' claim that since the composition and quality of IMC boats varied the price also varied, on the ground that in all the cases where IMC boats were imported through Post Parcel, the price declared uniformly was US $ 5. He also observed that both the firms, viz. M/s. Non Fiction Unlimited Limited and M/s. Whistles, New York were operating from the same premises. Commissioner also found that during the period 1989 to first quarter of 1992, the appellants were importing IMC boats directly from M/s. Advance Ceramics Corporation, USA and all these imports were through Air Cargo, IGI Airport, New Delhi and the invoice price of the manufacturer was uniformly US $ 14. Even in March, 1992, appellants had placed orders for purchase of IMC boats from M/s. Advance Ceramics Corporation, USA. For the subsequent imports through M/s. Whistles and M/s. Non Fiction Unlimited Limited, the price quoted was US $ 5 per piece. It was not in dispute that both the said firms in New York were owned by Shri Kishan Datwani, son of Shri Jamna Datwani, Chairman of the appellant company. During the same period, the appellants had also shifted their import from Air Cargo to Foreign Post Office deliberately to escape detection of the offence of undervaluation. Commissioner therefore, held that there was enough evidence to establish undervaluation and also to establish that the buyer and seller in the instant case were related persons in terms of Sub-rule (2)(viii) of Rule 2 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
5. Ld. Advocate for the appellants Shri J.S. Agrawal submitted that the onus to prove a charge of undervaluation was on the Revenue. He submitted that there was nothing on record to show that the 3,600 IMC boats cleared by the appellants during the period March, 1992 to June, 1993 were undervalued. Since the Department had itself conceded the fact that there was world-wide competitiveness for the said item, the Department ought to have also taken into account the fact that the price of IMC boats varied depending on the grade and quality of the material used in their manufacture. He also submitted that the Department had not shown evidence of any extra money by way of credit notes or otherwise having been passed on by the appellants to the foreign supplier. It was also not correct according to the Ld. Advocate, to conclude that there was a fraudulent intent in changing the imports from Air Cargo to Foreign Post Office. Even as per the provisions of Rule 4(3) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, it was not correct to dismiss the transaction value as forged or not genuine in the absence of evidence to show that any part of sale proceeds had flowed back. It cannot also be held that in each and every case where a related person is involved, the transaction value becomes unacceptable.
6. Ld. SDR, Shri Prabhat Kumar reiterated the findings of the Commissioner in the impugned order which have been referred to in the previous paragraphs. He also submitted that the appellants have not denied the basic factual position that there was a very wide difference between the invoice price raised by the US supplier in supplying IMC boats to the appellants directly and the invoice price raised by M/s. Non Fiction Unlimited Limited and M/s. Whistles, New York while supplying the items to the appellants. As observed by the Commissioner in the impugned order, it was not possible to unravel each and every link in a case involving suppression of correct value by the under-invoicing. As regards the claim of the appellants that the price of various types of IMC boats would vary because of difference in their quality, ld. SDR submitted that the appellants have not been able to show the different prices for the different types of IMC boats. He submitted in conclusion that in view of the clear finding given by the Commissioner on each of the allegations against the appellants, the impugned order does not call for any interference and the same may be upheld and the Appeal dismissed.
7. After careful consideration of the submissions made and on perusal of the record, we find that the Department has been able to substantiate the charge of undervaluation against the appellants to a sustainable degree. Appellants have not disputed the fact that the original declared FOB value of each IMC boat was US $ 14 as per supplies made by M/s. Advance Ceramics Corporation, USA, the manufacturers of the said items till 1992. They have also not disputed that subsequently, i.e., from the latter part of 1992, they have been importing IMC boats manufactured by the same US manufacturer through M/s. Non Fiction Unlimited Limited and M/s. Whistles, New York, both firms owned by the son of the Director of the appellant firm, at a price US $ 5 per unit. We are unable to agree with the contention of the Ld. Advocate that because of variation in the composition and quality of IMC boats, the price would vary and that it was for the Department to establish that there was undervaluation of the said goods. We observe from a copy of the invoice dt. 22.6.1992 (page 76 of Paper Book) raised by M/s. Advance Ceramics Corporation for supply of goods to M/s. Metlex (India) Pvt. Ltd. that they have described the item as: "INTERMETALLIC COMPOSITES METALLIZING BOAT" having specification:
3"/8 × 5"/8 × 31/2"
W cavity : 3"/16 × 7"/16 × 3"
600-800 MOC"
The same specification is shown in the invoice dt. 20.9.1993 raised by M/s. Non Fiction Unlimited Limited for supply of the goods to M/s. Metlex (India) Pvt. Ltd. (page 75). The price per unit has been shown as US $ 9.65. Further, in the invoice dt. 7.6.1994 raised by M/s. Non Fiction Unlimited Limited for supply of 'Chemical Porcelain ware crucibles (IMC boats)', the unit price is shown as US $ 5 (Page 73). In view of these facts which have not been disputed and in the absence of any detailed description of the composition/quality of the IMC boats in the invoice or any further evidence to show that quality, composition etc. of IMC boats imported earlier were different from the ones imported through M/s. Non Fiction Unlimited Limited and M/s. Whistles, the appellants' contention that the Department has not discharged the onus of proving undervaluation has no merit. It is for the appellants to show that the lower price of IMC boats imported later was because of difference in the quality, composition or nature of the goods. We also do not find any legal infirmity in the reliance placed by the Commissioner on Rule 4(1) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 since the appellants have not disputed the fact that the seller and the buyer in the instant case are related. We also find that the confiscation of 300 pieces of IMC boats seized by the DRI under Section 111(3) of the Customs Act, 1962 has been validly made. In the circumstances of the case, we find that the differential duty demand for the pieces already cleared and the duty demand on the confiscated 300 pieces are sustainable. The redemption fine amount also does not appear to be unreasonable having regard to the value of the goods.
8. In the above view of the matter, we do not think that the appellants have made out any case for either setting aside the impugned order or for any modification thereof.
9. Appeal is accordingly rejected as announced in Court on 10.5.1999.