Customs, Excise and Gold Tribunal - Delhi
Radiant Synthetic Industries, Shri ... vs Cc on 14 June, 2006
ORDER T.V. Sairam, Member (T)
1. These are the three appeals filed by; (i) M/s Radiant Synthetic Industries; (ii) Shri R.K. Goyal, Proprietor of M/s Radiant Synthetic Industries; and (iii) M/s Shri Ram Fibres all challenging the order of the Commissioner of Customs (Adjudication), Mumbai, dated 24.06.2004. It has been held in the impugned order that M/s Shri Ram Fibres in collusion with M/s Radiant Synthetic Industries attempted to import acrylic fibre by mis-declaring its description and value. The impugned order also held that the goods were liable to confiscation and the importers were liable to penal action. Accordingly, the goods were confiscated and redemption fine of Rs. 5 lacs was imposed, CIF value was enhanced to US $ 1.75 per kg., penalty under Section 112 was imposed on all the three appellants and a bank guarantee was ordered to be appropriated to recover the duty and penalty leviable on M/s Shri Ram Fibres.
2. Briefly stated, three Bills of Entry were filed by M/s Shri Ram Fibres, declaring the goods as synthetic wastes, which on testing by the Chief Chemist, CRCL turned out to be "Synthetic Filament Tow (Acrylic)"/"Synthetic Staple Fibre not carded, combed or otherwise processed for spinning". The test reports clearly indicated that the samples were free from undrawn, fused filaments and other extraneous matter and the filaments were of uniform diameter and composed of acrylic. In addition to this, a copy of packing list filed for customs clearance along with copies of labels fixed on the bales were also recovered by the Department. The seized labels contained details like, dimension of the bales, gross weight and net weight in Kgs and lbs of the bale, specification of the material ("Acrylic"), type code, total denierage, total kilotex, denier DPF, denier decitex of the materials, date of production of the material, package no. (which incidentally conformed with the one mentioned in the packing lists filed for Customs clearance) merge no. etc. The bales clearly indicated that they belonged to Monsanto Co., St. Louis, Missouri, USA.
3. The investigating authorities made inquiries on these labels by contacting the Bombay Office of M/s Monsanto Co. of USA. M/s Monsanto Co.'s, Bombay Office, vide their letter dated 2.2.1996 clarified that the material covered in the packing list was acrylic fibres manufactured by them. They also clarified that the type Codes mentioned in the labels 'S' denoted Semidull Acrylic Fibre and 'B', Bright Acrylic Fibre.
4. A show cause notice dated 18.3.1996 issued in this context to the appellants in addition, took into account two more Bills of Entry (4535 and 4984) in which the goods were declared as acrylic fibre, but alleged to have been under-valued. The show cause notice also referred to the activities of Shri Rakesh Goyal @ R.K. Goyal, Proprietor of M/s Radiant Synthetic Industries, who was de-barred from importing any goods, receiving import licence/ CCPs and allotment of imported goods through STC/MMTC for 2 licencing years (i.e upto July, 1997) and who had procured the acrylic fibre under seizure from M/s Bollag International Corpn., USA, showing in their invoices as synthetic waste' valued at US $ 0.27 per kg. and the acrylic fibre already cleared as valued at US $ 1.00 per kg. and showed the consignments as sold on high seas to M/s Shri Ram Fibres, Ludhiana, charging a commission of 2% + Bank Charges. The show cause notice deals with two issues: one relates to the consignment imported as synthetic waste by the appellants under three Bills of Entry and the other in respect of two Bills of Entry in which the goods were described as Acrylic Fibre. In the former, the Department disputed the classification as Synthetic Fibre while in the later, the valuation adopted by the appellants has been questioned.
5. The order of the Commissioner issued on 24.06.2004 relies squarely upon the test report of the Chief Chemist, Central Revenue Control Laboratory, who tested the samples to ascertain whether the imported goods could be classified as synthetic stable fibre or as waste of such fibres. The results of the test conducted by the Chief Chemist have been accepted by the Commissioner and based on these, the imported goods have been classified not as "Synthetic Waste" falling under Chapter Heading 55.05 as claimed by the appellants, but as Acrylic Fibre falling under Heading 5503.30.
6. As regards the two Bills of Entry declared as staple fibres and whose valuation was in dispute, the learned Commissioner held that the assessable value of the said consignment should be arrived at by taking CIF value @ US $ 1.75 per kg. and adding bank charges @ 2.25% and high sea sales commission @ 2%. While arriving at this value, the Commissioner took into account the value of contemporary imports made by other importers from the same foreign supplier i.e M/s Bollag International Corpn., USA, but through other ports.
7. The impugned order also hinges on the packing lists recovered by the Department from each and every bale all describing the goods as 'acrylic fibre'. The copies of the same were, however, forwarded by the investigating officers to the Bombay Office of M/s Monsanto Co. of USA to verify whether the material covered by the packing list and the labels were actually manufactured by the said supplier in the USA and sold by them and if so what actually were this material and what did the code mentioned in the labels revealed. The clarification received from the Bombay Office of the said supplier was also taken into consideration before classifying the goods as 'acrylic fibre' and not as 'synthetic waste'. On the other hand, the appellants stuck to a report by a textile expert, Shri Mahendrakumar Purshottamdas Narsana who had stated in an affidavit that the report of CRCL was "incomplete and insufficient" to declare the goods as of prime nature. During the proceedings, the Commissioner, allowed cross-examination by the appellants of the Chief Chemist and Chemist and also the Investigating Officer. The affidavit of the textile expert stating that the report of CRCL was incomplete and insufficient was not accepted by the adjudicating authority in the light of the ratio of the Hon'ble Supreme Court's judgment in Reliance Cellulose Products Ltd. v. CCE, Hyderabad . In this judgment, the Court held that the test report of Chemical Examiner and Chief Chemist of the Government of India has to be relied upon "unless demonstrated to be erroneous, and cannot be lightly brushed aside on the basis of opinion of some private persons obtained by the assessee". There was also a feeble remonstrance on the part of the appellants that the remnant sample was not made available to them after test. The learned Commissioner observed that as the importer could not produce any evidence to contradict the test report from CRCL, their request for re-testing was turned down and the said decision was duly intimated to them. It was also observed that in the subject case, there were no contradictory test reports from CRCL, New Delhi, and Mumbai, unlike in the case relating to M/s Monika India (Appeal No. C/137, 146, 207 to 209/01-B, C/173/03-B) dated 12.02.2004 which was relied upon by the appellants in support of their contention. A letter from M/s Monsanto dated 3.4.1996 signed by one J.E. Lowe addressed to one J.W. Wiloher of Bollag International Corporation and not to the appellants - was another piece of evidence in the appellants' armoury. This was in respect of the three invoices (Nos. 2427, 2446 and 2396). The letter had stated that the products covered under these invoices were "not of a quality Monsanto Product and that there were problems such as variable denier, low breaking strength and mixed luster, which resulted in these products being sold as off quality reject material." This piece of evidence in favour of the appellants was cold-shouldered by the Commissioner on the ground that the said letter did not refer to those invoices which were actually raised by M/s Monsanto to M/s Bollag International. As regards the other two Bills of Entry where the party had declared the goods as staple fibre but valued at US $ 1.00 per kg, the transaction between M/s Bollag International and M/s Radiant Synthetic Industries was not considered at arms length by him.
8. The learned Counsel for the appellants asserts that the Chief Chemist's report is incomplete, inadequate and not reliable. The major annoyance according to him, was that the report was silent about the specific denier and that all the parameters, laid down in the tariff heading concerning the fiber were never discussed in detail.
9. The learned Counsel also contended that the Department did not consider the veracity of the piece of evidence (letter dt.3.4.96) produced by them from M/s Monsanto who had supplied their goods to Bollag International. This letter has clearly indicated that the quality of the product supplied by them was not a 'quality Monsanto product' and that what was dispatched was "off quality reject material".
10. The learned Counsel, however, turned his back on the packing lists recovered from each bale. He stated that they were labels simply found attached to the bales. He also argued that the description given in them, namely, 'acrylic' does not in any way invalidate their claim that the material imported by them was 'waste'.
11. He further deplored the reliance placed by the Department on a letter sent to the DRI on 2nd February, 1996 by the so-called Bombay office of M/s Monsanto Chemicals of India Ltd. as they were not their suppliers.
12. Lastly, he also objected to the enhancement of value (in respect of two Bills of Entry) relying upon the value of contemporaneous imports made by Bollag International for other parties. In this regard, he heavily relied upon the ratio of the decision of the Hon'ble Supreme Court in the case Eicher Tractors Ltd v. CC, Mumbai 2002 (122) ELT 321 (SC), inviting our attention more particularly to paragraph 11, which is reproduced below:
11. It is true that the Rules are framed under Section 14(1A) and are subject to the conditions in Section 14(1) Rule 4 is in fact directly relatable to Section 14(1). Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularized in Rule 4(2).
13. It was argued that subject to three conditions laid down in Section 14(1) of the Act, price of imported goods is to be determined under Section 14(1A) in accordance with the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. According to the Ld. Counsel, "special circumstances" have been statutorily particularized in Rule 4(2) and in the absence of these exceptions, it is mandatory for customs to accept the price actually paid or payable for the goods in the particular transaction. It was vehemently argued that none of the statutorily particularized circumstances have been made out by the Department in the show-cause notice.
14. The learned authorized representative of the Department (SDR) contended that the test report of CRCL cannot be called incomplete or inadequate.
15. On the point raised by the appellants that the test report was silent about the various parameters and hence they can be treated as incomplete reports, the learned SDR vehemently argued that the report contained all relevant details needed to confirm that the goods imported were not wastes.
16. He also referred to the construction of Chapter Heading 55.05 pertaining to wastes to drive home the point that by no stretch of imagination, the test report can be interpreted to convey that the goods tested could fall under this:
55.05- WASTE (INCLUDING NOILS, YARN WASTE AND GARNETTED STOCK) OF MAN-MADE FIBRES.
5505.10 - Of synthetic fibres 5505.20 - Of artificial fibres This heading covers waste of man-made fibres (filaments and staple fibres - see the General Explanatory Note to Chapter 54) and includes:
(1) Fibre wastes (soft waste), such as relatively long fibres obtained as waste during the formation and processing of filaments; short fibres obtained as waste from the carding, combing and other processes preparatory to the spinning of staple fibres (e.g., noils, small broken pieces of laps, slivers or rovings).
(2)Yarn wastes (hard waste), i.e, broken, knotted or tangled yarns collected as waste during the spinning, doubling, reeling, weaving, knitting, etc., operations.
(3) Garnetted stock, i.e, fibres obtained by tearing rags or yarns into their component fibres. Such wastes are classified in this heading whether or not they have been bleached or dyed, provided that they have not been carded, combed or otherwise processed for spinning.
The heading does not include :
(a) Wadding (heading 30.05 or 56.01).
(b) Waste fibres, carded, combed or otherwise processed for spinning (heading 55.06 or 55.07).
(c) Textile flock and dust and mill neps (heading 56.01).
(d) New or used rags (Chapter 63).
17. The Learned SDR further argued that the appellants were given full opportunity to cross-examine not only the Chief Chemist, but also the Chemist, who stated in no uncertain terms that the samples cannot be described as synthetic waste falling under 55.05, and that as they were certainly synthetic staple fibre covered under 55.03.
18. As regards the manufacturer's (M/s Monsanto's) letter dated 3rd April, 1996 heavily banked on by the appellants, the learned SDR stated that first of all it was not addressed to the appellants. Secondly, it never contained any details of invoices raised by them.
19. As regards valuation, the learned SDR articulated that the Department did have a "reasonable doubt" and hence checked the contemporaneous imports which brought to light gross under valuation in their Bill of Entry. He referred to the background facts as contained in paragraph 3 of the show cause notice dated 18.03.1996 which had necessitated the Department to lift the veil of "transaction value". It was argued that the special circumstances - as prevailing in this case, have made a clear distinction and hence the ratio of the decision of the Hon'ble Supreme Court in the case of M/s Eicher Tractors Ltd. (supra), may not be applicable here.
REASONS
20. The whole matter before us has boiled down to two issues: (a) whether the subject consignment imported in respect of three Bills of Entry and declared as 'synthetic waste' were actually waste or staple fibre: (b) and whether the impugned order was wrong in enhancing the value declared by the appellants to US $ 1.75 per kg based on contemporaneous prices of other importers.
21. The appellants have questioned the correctness of classification arrived at by the Commissioner by challenging mainly the test report of the Chief Chemist, CRCL.
22. The main contention is that, the test report as furnished by CRCL was incomplete, inadequate and hence not reliable. On going through the reference made by the DRI vide their letter dated 29.11.1995, we find that the sample was to be tested to ascertain, whether the same was fibre or waste, and if it was waste, whether it was tow waste, fiber waste, soft waste or hard waste. Considering the specific nature of query, the Chief Chemist reported that the sample of B.Es No. 4977 and 4730 may be considered as synthetic filament tow (acrylic) or synthetic staple fiber, not carded, combed or otherwise processed for spinning and the sample of B.E. No. 5099 as synthetic filament tow (acrylic). The reference made to the Chief Chemist and the report expected from him reminds us of the fitness certificate issued by a physician. When called upon to declare, whether a person is fit or otherwise, all that the medical officer is supposed to say is that the person is medically fit or otherwise, and is not expected to write a monograph on Pathogenesis. Absence of a dissective discourse or dissertation cannot be a ground to discredit the certificate issued by a qualified expert. We have however, found the chemical report complete in all respects. For instance, the details such as their form ("crimped, twistless rope like strand of multifilaments"), nature ("free from undrawn, fused filaments and other extraneous matter"), and dimensions ("uniform diameter"), and composition ("acrylic") all indicated that they were of prime quality material. Even in some of the samples, the length found a mention. In one sample, the length was shown as 89.4 cm. and in the other the same was shown as 77.5 cms. During the cross-examination, the Chief Chemist even went to the extent to clarify that the tests were conducted for general appearance, for presence of any defect or deformity, and to ascertain whether the sample was drawn or undrawn, its decitex, its chemical composition - whether acrylic or not. The arguments were buttressed by referring to the statement of the Chemist, Shri D.V. Singh, made on 21.10.2003. The chemist had contended that for testing the samples, the physical form of the goods was more important, although they had also gone to determine the denier in decitex and reported it in their log book. The Chemist had also stressed that physical appearance of the sample was more relevant to determine whether the sample could be called a waste. He had confirmed that the even length of the samples/tow was duly recorded in their report. It is therefore, our considered opinion that the Chief Chemist was neither asked to nor was obliged to submit a detailed dissertation on the subject of yarn or waste. Despite this, we find that the report is adequately made in the sense that it has incorporated its findings on the form, nature and dimensions of the samples tested -which all go to prove that the samples were fibres and not waste as declared by the appellants at the time of import. While arriving at this conclusion, we have also found beacons lit by the Hon'ble Supreme Court in the case of Reliance Cellulose Products v. CCE, Hyderabad, (supra) supporting this contention. Paragraph 12 of the said judgment reads as under:
12. ...We were referred to a number of test reports obtained by the appellant from various persons and on the basis of these opinion, the reports of the Departmental Chemical Examiner and also the Chief Chemist were assailed. We are of the view that the Assistant Collector cannot be said to have erred in relying upon the reports given by the Chemical Examiner and the Chief Chemist. It may be that in a given case, the report of the Chief Chemist may be demonstrated to be culpably wrong. In such a case, the Court may direct re-examination of the whole issue. But that is not the case here. It has not been shown that the Chemical Examiner or the Chief Chemist were in error in their analysis in any way. The views expressed by the Chief Examiner and Chief Chemist of the Government cannot be lightly brushed aside on the basis of opinion of some private persons obtained by the appellant.
23. We do not find any force in the appellants' arguments that the 'labels' found attached to the bales have no relevance to the case. On the other hand, we find that these labels are actually the packing slips and, have brought to light a wealth of information supporting the Department's findings that they were not wastes. The very fact that each label represented a bale and tallied with its contents, as affirmed in the report of the Chief Chemist has rendered credibility to the theory that the appellants have made an unsuccessful attempt to cozen the revenue. The labels have revealed all the particulars of the goods as contained in each and every bale imported. Nowhere in these labels, the word 'waste' had occurred, not even once. On the contrary, they all described the goods as 'acrylic'. Though the appellants have made fragile attempts to drive home the point that the word 'acrylic' can also include "waste", we fail to marshal any merit in such arguments for the reason that the authenticity of these documents has been proved in no uncertain terms by the Chief Chemist as well as the Bombay office of M/s Monsanto. The argument strikes a discordant note. The descriptions on these labels cross-checked with the suppliers' local office at Mumbai, stand fully endorsed that the material imported was not waste and that there was a clear terminological inexactitude on the declarations made by the appellants at the time of import. This fact stands confirmed by the Chief Chemist in his test report, which has a niggling effect on all the appellants in these three appeals.
24. We find that the letter dated 3rd April, 1996 obtained by the appellants from Monsanto curiously was never addressed to the appellants. It does not even refer to the invoices issued by the Monsanto themselves but strangely seeks to certify the goods received by a third party on the basis of invoices No. 2424, 2425 and 2396 raised by Bollag International. The Ld. Commissioner has, therefore, correctly shut the doors on this piece of evidence. In a queer Monsanto v. Monsanto situation, in which one of their two letters supports the appellants, whereas the other one the respondent, we are inclined to fully endorse the decision made by the learned Commissioner to go by the Bombay Office letter dated 2.2.1996 addressed to DRI whose source appears to be more authentic and reliable. The letter produced by the appellants is not addressed to them, nor the contents tally with the appellants' invoices. Going by such an isolated piece of evidence, totally ignoring the whopping volumes against the appellants, in our opinion, would amount to catching the tail for throwing a bull !
25. The second issue is, whether the impugned order of the Commissioner is wrong in enhancing the value of US $ 1.00 per kg. as declared by the appellants in their Bills of Entry to US $ 1.75 per kg.
26. Under the provisions of Rule 3(i) of Customs Valuation Rules (Determination of Price of Imported Goods) Rules, 1988, "the value of impugned goods shall be the transaction value."
27. When the valuation issue came into the crucible in the case of M/s Eicher Tractors, (supra), the Hon'ble Supreme Court made the following observations:
7. The Rules which have been framed are the Customs, Valuation (Determination of Price of Imported Goods) Rules, 1988. The rules came into force on 16th August 1988. Under Rule 3(i) "the value of imported goods shall be the transaction value". "Transaction value' has been defined in Rule 2(f) as meaning the value determined in accordance with Rule 4. Rule 4(1) in turn states: The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules."
8. Reading Rule 3(i) and Rule 4(1) together, it is clear that a mandate has been cast on the authorities to accept the price actually paid or payable for the goods in respect of goods under assessment as the transaction value. But the mandate is not invariable and is subject to certain exceptions specified in Rule 4(2) namely:
(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which -
(i) are imposed or required by law or by the public authorities in India
(ii) or limit the geographical area in which the goods may be resold or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued (C) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of Sub-rule (3).
9. These exceptions are in expansion and explicatory of the special circumstances in Section 14(1) quoted earlier. It follows that unless the price actually paid for the particular transaction falls within the exceptions, the Customs authorities are bound to assess the duty on the transaction value.
28. Further, the Hon'ble Supreme Court held that it is only when the transaction value under Rule 4 is rejected, their under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the rules. Conversely, if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent rules."
29. In the present case, admittedly, there is no such allegation made in the show cause notice which may be brought under any of the exceptions in Rule 4(2). In such circumstances, there is no room for determining the value under the subsequent Rules as was done in the impugned order. It is rather over our head to subscribe to the enhancement of value on the value declared by the appellants, as such an exercise, in our opinion, would not be in consonance with the ratio of the decision of the Apex Court. We, therefore, hold that the value as originally declared by the applicants in respect of the two Bills of Entry viz., 4535 dated 9.10.1995 and 4984 dated 31.10.1995 under which acrylic fibre was cleared shall prevail. In our opinion, the same value will also be applicable in respect of goods covered under the three other Bills of Entry viz. 4977 dated 31.10.1995, 4370 dated 17.10.1995 and 5059 dated 03.11.1995 which have been found mis-declared as waste for valuation purposes.
30. As regards the penal liability being faced by the appellants under Section 112 of Customs Act, 1962, we find clear evidence that they have violated the said provisions. However, we find that Shri R.K. Goyal, Proprietor of M/s Radiant Synthetic Industries and his sole-proprietory concern, M/s Radiant Synthetic Industries have both been penalized for the same offence, which in our opinion would be impermissible, both being the same entity. We are, therefore, inclined to set aside the penalty imposed on the sole proprietory concern while confirming it on the sole-proprietor, Shri R.K. Goyal. As regards the quantum of penalty, which is imposed on the remaining two appellants, the same is in our opinion, adequate and sustainable especially considering the nature of offence committed by them.
31. In view of the above, the impugned order is modified in the following manner:
(i) The goods attempted to be imported by the appellants as wastes under the three Bills of Entry viz. 4977 dated 31.10.1995, 4730 dated 17.10.1995 and 5059 dated 03.11.1995 have been rightly classified as acrylic fibre falling under Heading 5503.30 of Customs Tariff. Accordingly, the order of confiscation passed by the Commissioner is upheld.
(ii) In respect of the two Bills of Entry No. 4535 dated 01.10.1995 and 4984 dated 31.10.1995, the CIF value arrived at by the Commissioner @ US $ 1.75/kg is hereby rejected, restoring US $ 1.00/kg being the value originally declared in their invoices.
(iii) The assessable value of the goods mentioned in the three Bills of Entry as at (i) above will also be the same as declared by the appellants in respect of acrylic fibre imported vide the two Bills of Entry No. 4535 dated 01.10.1995 and 4984 dated 31.10.1995 i.e US $ 1.00/kg.
(iv) The penalty imposed on the appellant, M/s Shri Ram Fibres, is hereby upheld. The penalty imposed on the appellant, Shri R.K. Goyal, Proprietor of M/s Radiant Synthetic Industries, is also upheld. However, the penalty imposed on his proprietory concern, M/s Radiant Synthetic Industries, is hereby set aside.
All the three appeals are disposed of accordingly.
(Dictated & pronounced in the open court)