Customs, Excise and Gold Tribunal - Delhi
Mirah Decor vs Collector Of Customs on 25 June, 1991
Equivalent citations: 1992(57)ELT312(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. This appeal is directed against the order dated 20-12-1988 passed by the Additional Collector of Customs, New Delhi. The facts, in brief, are as follows :
2. The appellants filed their Bill of Entry for warehousing dated 1-8-1987 at the Inland Container Depot (ICD), New Delhi for the clearance of a consignment described as decorative paper for laminates. An import licence dated 9-10-1986, being REP Licence issued under Appendix 17 of the Import Policy 1985-88 against product credit C. 11.1 for decorative paper for laminates was filed for the clearance of the goods. The Bill of Entry was marked to the Superintendent, CFS for examination of the goods on 1-8-1987 with the direction to send sealed samples to the Assessing Officer and was, in its turn, marked to the Inspector by the Superintendent on 10-8-1987 and the goods were examined on 19-8-1987 and samples were drawn by the Inspector in the presence of the Customs House Agents (CHA) and the appellants, who were M/s. Om International, New Delhi and the importer's representative. After examination, the papers and the samples were presented before the Assessing Officer on 21-8-1987. Meanwhile, the CHA submitted a letter dated 21-8-1987 requesting that the yellow into - Bond bill of entry may be allowed to be converted into home consumption white bill of entry which was allowed by the Assistant Collector, ICD on the following day and the white bill of entry dated 22-8-1987 was filed. On 24-8-1987, the Assistant Collector, ICD received information that the goods declared as decorative paper for laminates were not as per declaration. The Assistant Collector, therefore, personally visited the CFS on the same day and found that the goods were different from the samples received earlier from the ICD. Thereafter, 100% examination of the goods was ordered by the Assistant Collector (ICD) on 25-8-1987 which examination was carried out on 27-8-1987 in the presence of the CHA, Proprietor of M/s. Mirah Decor, the Superintendent of Customs, CFS and the Superintendent of Customs, ICD. As a result of the examination, two cartons were found in excess containing 10 sample/catalogue books for wall paper. These two cartons were not mentioned in the Packing List attached to the Bill of Entry. The labels found on the goods indicated that the goods were not decorative paper for laminates but were wall paper. The samples of various designs, labels and from individual rolls of paper were drawn by the Department in the presence of the importer and his agents. Wall paper being a consumer goods item, is covered by S. No. 121 of Appendix 2B of the Import Policy 1985-88. This reads as follows :
"All consumer goods, howsoever described, of industrial, agricultural or animal origin, not appearing individually in Appendices 3, Part A and 5 or specifically listed for import under Open General Licence."
The Licence produced, therefore, the Customs House found, was not valid to cover the importation of wall paper and the Customs House was of the view that the import was unauthorised. Shri Anil Patil, Director of the Customs House Agents, M/s. Om International gave a statement on 2-9-1987 in which he said that on 19-8-1987 when the goods were first examined, he did not carry the Bill of Entry to CFS and that since the importer was himself present, he did not see the goods closely and that he was not present when the samples were sealed. He closely saw the goods on 27-8-1987 and the goods appeared to him to be the wall paper. Shri R.K. Goenka, Proprietor of the appellant firm in his statement on 3-9-1987, said that Shri Anil Patil was present at the time of examination of the goods at a close distance and he helped in the examination. He also said that the goods imported by him were designed to be used as wall paper. In subsequent statement dated 7-9-1987, Shri Patil admitted that the samples received at ICD were different from the goods imported and that he did not give the samples actually received at ICD to any concerned official there. In his further statement dated 7-9-1987, Shri R.K. Goenka, denied having mis-declared the goods and said that he did not know how the samples got changed. On 7-9-1987, when Shri Goenka arrived at ICD for tendering his statement and to submit documents, out of suspicion his car was searched by the officers. As a result of the research, paper pieces resembling the samples actually received at ICD and the one actually imported by him and torn from the rolls of the consignments were recovered. In his statement on 7-9-1987, Shri Goenka admitted that the two pieces were wall paper taken from the rolls in his consignment imported and that the other pieces were that of Decorative Paper for Laminates, which had been placed in the sealed cover containing samples drawn on 19-8-1987 that he deals with wall paper and other items. Proceedings were initiated by the Department against the appellants also on the question of valuation of the consignment based on certain market enquiries and similar import at Cochin Port and a show cause notice was issued to the appellants for mis-declaration of value and description of the goods and for importing the goods without valid licence and the CHA of the appellants were also proceeded against, by the issue of a show cause notice for the purpose dated 16-1-1988. The appellants submitted a reply thereto and subsequently, the Customs House issued an amendment to the show cause notice on 29-8-1988 seeking to amend paras 21 and 22 of the show cause notice issued on 16-1-1988. This was for the purposes of bringing on record a price quotation obtained from the same supplier of the goods, M/s. Europe Wall Coverings of Singapore for the same brand of goods imported showing much higher value than that declared. The paras in the earlier show cause notice for the charge of valuation based on local enquiry and import in other port was amended. After obtaining the reply from the appellants and allowing cross-examination of some of the officers including the Assistant Collector (ICD) and hearing them in the matter, the Additional Collector passed the impugned order and hence in the value of the imported goods from Rs. 1,34,285/- to Rs. 4,58,214/- CIF, Bombay in terms of provisions under Section 14(1) (b) of Customs Act, 1962 read with Rule 3(a) of the Customs Valuation Rules, 1963. He also ordered confiscation of the goods under Heading 48.14 of Customs Tariff Act. The sample books and catalogues valued at Rs. 4,000/-, which were not mentioned in the packing list, were ordered to be assessed at appropriate rate of duty. He confiscated the seized goods imported under Section lll(d) and (m) of Customs Act, 1962 levying a fine of Rs. 4.5 lakhs in lieu of confiscation. A personal penalty of Rs. 2 lakh imposed under Section 112(a) of the Customs Act, 1962 on the appellants and another penalty of Rs. 10,000/-on the Customs House Agents under the same section.
3. Arguing for the appellants, the Ld. Counsel, Shri T.P.S. Kang, contended that the examination of the goods conducted on 19-8-1987 was in favour of the appellants and that the second examination conducted was also not against them. The examination, according to the appellants, was also not a proper examination as per the definition of the term in the Customs Act without measurement and weighment which are its essential characteristics. The 100% examination carried out on 27-8-1987 is not an examination as defined under the Act. The Department has changed its view regarding the nature of the goods after the second examination without disclosing any grounds. The Ld. Counsel submitted that the statement of Sh. R.K. Goenka on 3-9-1987 only indicated that the goods could possibly be used as wall paper. He has also protested to the department that the statement was obtained from him under duress, as seen from the telegram dated 9-9-1987. It was also argued that the importer is not at all concerned with the samples drawn as they were under the Customs Control. One of the Panchas has even given an affidavit regarding the search of the car which was against the Department. Regarding the change of samples, which was under the Customs Control, no enquiry was conducted, no one's statement was recorded and the Department has not discharged the burden cast on it in this regard. When the examination of the goods took place, the appellants' say is that only the departmental officers were present. Even the labels indicating the goods as wall paper were not found on all the goods imported, but only on some of the rolls. It was also submitted that the appellants could not have gained any advantage by changing samples because the goods were in the Customs Control. The goods imported is decorative paper for laminates and is used as top layer in lamination. It is imported as such and the end-product as wall paper, is not important for assessment at the point of import. The appellants had submitted samples of the decorative paper for laminates used as top layer in a laminate before the Additional Collector which that authority ought to have got tested or expert opinion obtained thereof, but this has not been done. The appellants have acted bona fide because they have been saying from the very beginning that the goods could be used as wall paper. In this connection, reliance was placed on 1990 Vol. 28 ECR 4 (Bom.) Ashak Hussain v. Collector of Customs, Bombay to say that a statement obtained from a person during his detention for interrogation, should be considered as a statement obtained while under arrest. This ratio applies to the statement obtained from Shri R.K. Goenka, according to the appellants. The Ld. Counsel also urged that since there was no mala fide intention, the personal penalty on the appellants is totally unwarranted and the import is also valid since the possibility of the goods being used as wall paper is not relevant for the clearance of the goods against the licence produced for decorative paper for laminates at the point of import. On the question of valuation, the Ld. Counsel pointed out that the details of the market enquiry made by the Department were not disclosed. It was also not shown that the goods imported at Cochin were the same quality. As regards the second show cause notice dated 1-9-1988, it was pointed out that two paragraphs 21 & 22 of the original show cause notice dated 16-1-1988 had been deleted. These contain, inter alia, a proposal to confiscate the goods and impose penalty. With the deletion of these paras by the amending show cause notice, the combined effect of the show cause notices will be that the proposal to confiscate and impose penalty had been deleted whereby rendering the adjudicating proceedings and the order passed thereon invalid. It will also mean that their earlier reply to the show cause notice dated 16-1-1988 had been accepted. Further the basis in the show cause notices for enhancing the value through the price quotation which did not have the name of any party to whom it is sent nor did it contain the name of the item of which the quotation was for and it was a quotation subsequent to the import. Reliance was placed on the case law in the case of Honesty Traders v. Collector of Customs, Cochin -1991 (55) ELT 102 (Tri.) It was also urged that the burden was on the Customs House to prove the charge of under-valuation. The appellants, in this case, have also led evidence regarding valuation by producing invoices for goods which has not been considered by the Department. The Ld. Counsel referred to the invoices at pages 104 to 106 of the Paper Book (I) in this regard. A further submission was also made as contained in the Misc. Application that the Additional Collector should have considered the valuation of the goods in terms of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 being the transaction value method and that as the new Valuation Rules have come into force on 16-1-1988, the same being procedural in nature were applicable to all the pending matters or pending proceedings. As the transaction value has not been disputed by the Department, the same should be accepted as assessable value for the goods. Reliance was also placed in this regard in the case of Biju Patnaik v. Wealth-tax Officer -1983 (3) ITD 693. The Department ought to have furnished the price of a comparable import instead of a quotation for which reliance was placed on 1990 (49) ELT 293 (Tri.) Collector of Customs (Bom.) v. Indian Photographic Co. It was further urged that without establishing any mutuality of interests between the supplier and importer the assessable value cannot be increased. Further relying upon the case law reported in 1990 (46) ELT 402 (Tri.) in the case of Tsubo Shilpa Exports v. Collector of Customs, Bangalore, it was submitted that in the absence of any proven mala fides on the part of the appellants, confiscation of the goods was not justified. Argument was also put forth that under Section 122 the powers given to the proper officer is only to confiscate and this section does not empower officers acting under that section to order classification of the imported goods.
4. Sh. S.K. Roy, Ld. S.D.R. appearing for the Department, referred to the reasoning contained in the Additional Collector's adjudication order that essentially the action against the appellants for mis-declaration and unauthorised import was following the receipt of intelligence that goods imported were not as per declaration. The fact that there was an attempt to substitute samples drawn from the consignment, is clear evidence of mala fides on the part of the appellants. There was material evidence in the consignment, itself, to show that the goods were nothing but wall paper. The cartons contain the instructions as to how to hang the wall paper as has been elaborated in the Additional Collector's order at internal page 21 of the order para 37 thereof. Sample books of wall paper which were not at all mentioned in the Packing List were also found alongwith the consignment which is equally significant, according to the Ld. S.D.R. The DGTD, to whom the sample was sent, has opined that the goods imported is basically wall paper and has indicated the difference between the wall paper and decorative paper for laminates. It was submitted by the Ld. S.D.R. that classification of the goods is on the basis of the condition thereof at the point of import and does not matter how it is ultimately used after clearance. The production of a stock sample of laminated goods without top layer cannot be relevant for assessment at the time of import. As regards the charge of mis-declaration of value, the Ld. S.D.R. referred to the provisions of Section 14 of the Customs Act and contended that it was a deemed value concept and does not require in an actual sale transaction. Even an offer for sale in the course of international trade between unrelated persons will suffice for the purpose of determination of assessable value under that section. The Ld. S.D.R., further, urged that the 1988 Valuation Rules cannot be applied to the present import which took place in 1987. The Ld. S.D.R. also argued that the amending show cause notice cannot be said to have deleted the proposal for confiscation and imposition of penalty if the original show cause notice and the amending show cause notice are read as a whole. As regards the other arguments of the appellants about the statements obtained from the appellants, being under duress, cannot be taken under evidence, the Ld. S.D.R. submitted that statements are recorded under Section 108 of the Customs Act and urged that Customs Officers are not police officers. In the circumstances, the personal penalty on the appellants and confiscation of the goods is deleted. The Ld. Counsel in reply, contended that the reliance on mere quotation without any particulars of quality, mode of payment, etc. cannot be valid for enhancing assessable value and cited the case of Tirupathi Plastics v. Collector of Customs reported in 1989 (40) ELT 118 in which the similar plea before the Supreme Court was dismissed. The appellants had also produced the value of similar import which was, in fact, at price lower than that declared by the appellants. Therefore, the declared value should have been accepted. The DGTD report on the material was also in response to a query put to them and therefore, was made suitable to meet the situation.
5. The submissions made by both the parties, have been carefully considered. On the question of validity of the import, from the Import Trade Control angle, the import licence produced is an REP transferable licence for the import of Decorative Paper for Laminates. The goods were subjected to 100% examination and a sample had been forwarded to DGTD who had opined in his letter dated 8-9-1988, on a perusal thereof that it was basically wall paper, a finished product, and that decorative paper was not such as to be used straightaway. Therefore, the essential character of the goods as wall paper - a finished goods - which is of relevance for classification, is thus established by expert opinion based on a sample drawn from the imported consignment. The submission made that the sample of the laminated product with wall paper as top layer furnished by the appellants, has not been duly considered, does not carry much weight because goods have to be classified on the basis of the condition in which they are imported. Further, it was also found that catalogue and literature found with the consignment indicated that goods are wall paper and there were instructions on the labels of the rolls of the goods related to the quality of the product and contained hanging instructions. The wall papers were found in various designs and varieties. Another aspect is the presence of catalogue and sample books in the consignment not found in the packing list which were all about wall papers and their usage, design and varieties. It can reasonably be presumed under the circumstances that these had relevance to the nature of the goods imported. Thus goods imported have been found to be wall paper on sufficient evidence of 100% examination of the goods, alongwith the labels thereon and literature found with the goods, backed up by opinion of DGTD on perusal of the sample. Even the appellants have not denied in the various statements that the goods are not wall paper, but have indicated that it could be so used. Since in the condition in which the goods are imported, they are found to be finished product consumer goods, they are covered by the definition of the term in the policy as meaning "consumption goods which can directly satisfy human needs without further processing; it will include consumer durables also." See para 7 of ITC Policy 1985-88 : As such, the goods fall under Sl. No. 121 Appendix 2B of ITC Policy 1985-88 which covers all forms of consumer goods. Therefore, import licence produced for decorative paper for laminates issued under Appendix 17 against product group C 11.1 has rightly been held to be not valid for the goods imported. The confiscation of the goods is, therefore, maintainable.
6. The controversy regarding the alleged substitution of the sample drawn earlier from the consignment on 19-9-1988 falls for consideration only in the context of whether the goods were deliberately mis-declared, and in this connection, the issue whether the goods were decorative paper for laminate or whether they are wall paper having been determined by a 100% examination of the goods and uncontroverted drawal of samples, the question will survive at best for determining the quantum of penalty. On this aspect the fact that the Customs House had in deciding the issue also consulted the DGTD to whom a sample was sent, as also the fact that Sh. Goenka, Proprietor of the appellants had said that the goods could be used as wall paper, will be mitigating factors. The argument that the first examination of the goods on 19-9-1987 was in their favour that the second examination on 27-8-1987 was unlawful, overlooks the fact that the appellants at the time of first examination had not filed Bill of Entry for clearance for home consumption at all, but had filed Bill of Entry for warehousing the goods. It was only subsequent to that on 21-8-1987 that the Customs House Agent for the appellants had submitted a letter for conversion of warehousing Bill of Entry into one for clearance for home consumption and such a Bill of Entry was filed on 22-8-1987 and it was, thereafter, on receipt of information that the Assistant Collector, ICD had ordered on 25-8-1987 a 100% examination of the goods, which led to the finding that the goods were in fact wall paper different from the declared description of decorative paper for laminates. Therefore, on this fresh material, the authorities had firm basis for discarding the examination report of 19-8-1987, which was also in the context of a Warehousing Bill of Entry.
7. On the question of valuation of the goods, the Department has relied upon a quotation for the same brand of goods imported (Romantic & Candy) from the very same supplier M/s. Europe Wall Coverings of Singapore showing a higher price for the goods than the price declared and the Department has adopted price in the quotation as assessable value under Section 14(l)(b) Cus. Act, 1962 read with Rule 3(a) of Valuation Rules, 1963. That the Customs has rightly done so is reflected in the Tribunal's decision in the case of Automotive Enterprises v. Collector of Customs reported in 1985 (22) ELT 283 wherein the Tribunal held that in terms of Rule 3(a) of the Valuation Rules, an offer by itself is sufficient to be the basis for determining the assessable value. This view, further, finds support in the Supreme Court decision in the case of Sharp Business Machines v. Collector of Customs reported in 1990 (49) ELT (SC) . That was a case where the Department initiated proceedings to enhance the assessable value on the basis of a quotation for the imported goods given alongwith application to the Government of India for the approval of the phased programme of manufacture of the appellants therein. It was argued before the Supreme Court that the quotation indicated prices at Hongkong and not the place of importation, and that no reliance can be placed on such a quotation to discard the invoice value of the goods furnished by the appellants which was claimed to reflect the correct value and that the price quotation relied upon was not sufficient to discharge the onus cast on Department to prove the correct value. The Supreme Court, however, observed that "We have considered the submissions made by Ld. Counsel for the parties, Section 14 of the Act provides for valuation of goods for the purpose of assessment. Section 14(1) which is relevant for our purposes reads as under :
"14. Valuation of goods for purposes of assessment:
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be 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 for the sale or offer for sale :
Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46 or a shipping bill or bill of export, as the case may be, is presented under Section 50."
According to the above provision the value of the goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation, 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 for the sale or offer for sale. In the present case the company itself had produced a copy of the quotations received by them from M/s. Shun Hing Technology Ltd., Hongkong in respect of the copiers and other items imported alongwith their application for approval of their phased manufacturing programme. The compnay itself having produced these quotations, they cannot dispute the correctness of the prices mentioned therein. The company has not only not disputed the correctness of these quotations but has not produced any other material on record to show that the value mentioned in the invoices was the correct market value mentioned in the invoices at the relevant time. The adjudicating authority in these circumstances was perfectly justified in taking the prices mentioned in the quotations as a basis for determining the correct value of the imported goods."
8. In the present case also the price quotation relied upon by the Department is from the same supplier for the same brand of goods. The appellants in the present case have referred to a quotation of Dec, 1986 of M/s. Promax Associates, Taiwan, a purchase confirmation dated 3-1-1987 of M/s. Sun Jade Handicraft, Taiwan, and an invoice of Feb. '83 of M/s. ICI of U.K. as being evidence of valuation of similar imports as furnished by them (referred to by them in their reply to show cause notice). However, a perusal of these invoices shows that none of them contains the brand name of the product for comparison with present import, and the invoice from M/s. ICI is as old as 1983, whereas the present import is in 1987. Therefore, the Department's basis for enhancing the assessable value, namely, the brand-wise quotation of the same supplier M/s. Europea Wall Coverings of Singapore remains unrebutted. The ratio of the Supreme Court decision is, therefore, applicable to the facts of the case and, therefore, the enhancement of the assessable value is well founded. The plea that transaction value of the goods as per Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 should have been applied, is unacceptable in view of the fact that (i) the proviso to Section 14(1) (a) lays down that the price shall be calculated with reference to rate of exchange as in force on the date of filing of Bill of Entry for home consumption which in this case was on 22-8-1987 and (ii) Section 15 of Customs Act, 1962 governs date for determination of rate of duty and valuation which lays down that rate of duty and tariff valuation shall be the one prevailing on the date of presentation of Bill of Entry for home consumption. Therefore, transaction value as contained in the Valuation Rules of 1988 cannot be applied to a Bill of Entry for home consumption presented in 1987. Certain arguments have been put forth regarding the show cause notice issued. On examining these, it is found that it cannot be accepted that the amendment to the show cause notice issued on 29-8-1988 had the effect of deleting the proposal to confiscate and impose penalty. A perusal of the amendment shows that the object of the exercise was to bring on record the price quotation obtained from the same suppliers as the basis of assessable value and the proposal not to accept the declared value for the imported goods and to assess the goods at the enhanced value. It is stated in the amendment, "Para XXI & XXII may be read as amended as follows": and it is also stated at the end, "The show cause notice issued earlier on 16-1-1988 may be treated as amended to the extent above." In view of the wording of the amendment as above and its context, the arguments of the appellants in this regard are unacceptable. Heading 48.14 CTA '75 specifically covers wall paper, and when the goods on examination have been found to be such paper, classification thereof under the specific heading as ordered by the adjudicating authority has to follow and the claim for classification of the goods by the appellants under Heading 48.11 covering "Paper, Paperboard, cellulose wadding and webs of cellulose fibres, coated, impregnated, covered, surface-coloured, surface-decorated or printed, in rolls or sheets, other than goods of Heading No. 48.01,48.09,48.10 or 48.18" is, on the face of it, inappropriate for wall paper and it is also observed that no submissions to substantiate this claim were, also made at this stage. In the result, the order enhancing the assessable value is sustainable and the goods being not covered by the import licence produced have rightly been held to be imported unauthorisedly under Section lll(d) Customs Act, 1962 and the charge under Section 111(m) is also established. On the question of penalty, it has been argued that the show cause notice was not specific. But the narration in the show cause notice perused as a whole clearly brings out the liability of the appellants as importer of the goods for penalty under Section 112 and the appellants, while replying to the notice had not found any difficulty in furnishing their defence in respect of proposal for imposing penalty under Section 112. Therefore, this argument is untenable. However, as regards the quantum of penalty, it is felt that since the fine in lieu of confiscation levied in this case already stands at about 100% of the assessable value, and as already noted supra, there exist some mitigating factors, some relief in the matter of personal penalty appears to be called for, and accordingly the personal penalty is reduced from Rs. 2 lakhs to Rs. 1 lakh (Rupees one lakh only). The impugned order of the Additional Collector is modified only to the extent indicated above. It is, otherwise upheld. The appeal is disposed of in the above terms.