Custom, Excise & Service Tax Tribunal
M/S A.G. Incorporation vs Cc, Delhi on 15 March, 2012
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Court No.III
C/Appeal Nos. 55-58/2007
(Arising out of order in original No.20/MDS/07 dated 19.10.07 passed by the Commissioner of Customs & Central Excise, New Delhi)
Date of Hearing: 15.3.2012
Date of Pronouncement:
For Approval and signature:
Hon'ble Mrs. Archana Wadhwa, Member Judicial
Hon'ble Mr.Mathew John, Technical Member
_________________________________________________
1. Whether Press Reporters may be allowed to see
The order for publication as per Rule 27 of the
CESTAT(Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of
the CESTAT (Procedure) rules, 1982 for
publication in any authoritative report or not?
3. Whether their lordships wish to see the fair
copy of the order?
4. Whether order is to be circulated to the
Department Authorities?
M/s A.G. Incorporation Appellant
Vs
CC, Delhi Respondent
Appeared for the Appellant: Shri A.K. Jain, Advocate Shri Prabhat Kumar, Advocate Appeared for the Respondent: Shri B.L. Soni, DR Coram: Hon'ble Mrs. Archana Wadhwa, Member(Judicial) Hon'ble Shri Mathew John, Member (Technical) ORDER NO. Per Mathew John:
In this proceeding the main appellants, namely, A.G. Corporation, Coir Cushion Ltd. and Overseas Business Corporation, are three importers who imported thirty two consignments of apparently the same goods declared to be components of Digital Satellite Receiver/ Satellite Receiver/ Receiver DVB Set etc of Chinese origin shipped from Hongkong and also from Chinese Ports. Out of these items the main item was Populated Circuit Boards (PCB). These goods were sold to mainly to M/s Rishav Udyog which was a proprietorship firm of Mr. Kamal Pat Surana, for use in assembling receivers for Direct to Home (DTH) transmission of TV signals.
2. At the time of initial assessment of goods customs suspected undervaluation of the goods. For goods with declared value varying from HK$ 20 to HK $ 30 per piece the customs department loaded the value to values in the Range of HK$ 20.50 to HK$ 42.75 in different consignments. But later the Directorate of Revenue Intelligence did more investigations and they were of the view that the undervaluation was to a much higher extent. The present proceedings involve orders passed to load value based on such investigations and confirming duty along with interest and penalties.
3. Digital Satellite Receiver consists of five main parts namely,
1. Main PCB Board, 2. Power Board 3. Front Panel with PCB 4. Remote Control 5. Wires and cables.
4. The appellants were declaring prices of US$ 6 to 6.5 for the whole kit whereas intelligence received by DRI was to the effect that the cost of Main PCB itself was around US$ 16 per piece ie approximately to HK$117, considering that during the period US$ was approximately 7.73 times costlier than Hongkong Dollar.
5. Revenue conducted investigations and collected evidence to support their case. The facts brought out are broadly the following:
(i) The importers were just conduits for import transactions between firms of connected persons in China and India. For example M/s Quantum Mecca Co Ltd, Hongkong in which Mr. Pankaj Surna was a Director, supplied goods to AG Corporation. AG Corporation imported the goods and sold it to Rishav Udyog which was a proprietorship firm of Mr. Kamal Pat Surana who was brother of the father of Pankaj Surana;
(ii) Import by other importers at higher prices;
(iii) Value of goods declared in the export declarations filed with Honkong Customs;
(iv) Statements recorded from concerned persons accepting undervaluation.
6. From the Customs House Agent who cleared goods imported by M/s AG Corporation and M/s Coir Cushions Ltd., it was ascertained that these two firms were controlled by a person by name Sh. Ajay Kumar Agarwal. In a statement given by Shri. Ajay Kumar Agarwal he stated that they imported Main PCB of HAIER solution having "Cheertek" circuitry. When he was shown an invoice for main PCB of the same brand at US$ 16.75 and US$ 16.25 he explained some differences in features and but accepted to pay differential duty if any. Shri. Rabindra Kumar Agarwal Director of Coir Cushions Ltd agreed that Shri Ajay Kumar Agarwal his younger brother was looking after the affairs of the company and agreed with the statement given by Shri. Ajay.
7. Imports of similar goods by others at higher prices 7.1. It was seen that M/s Modern Cable and Broadcasting Services Ahmedabad were importing Main Board of DSR at the price of US$ 14 to 16 per unit.
7.2. M/s Electronic Enterprises, F-49, Motinagar New Delhi imported main PCB of DSR at the rate of US $ 10.5 per piece 7.3. M/s Catavision Products Ltd imported 11 consignments of main PCB for DSR in the range of Us$ 10.75 to Us $ 18 7.4. A quotation obtained from a Chinese manufacturer M/s N Shin Exports showed that PC Board of Haier solution was offered to S.S. Enterprises at US$ 16.25 7.5. Bharat Electronics Limited Bangalore stated that Cost of PCB for DSR was estimated to be 10 US $ for Haier, 15 US $ for Fijutsu and 18 US $ for ST Micro.
7.6. M/s TVS Electronics Ltd stated that the landed cost of PCB Board was estimated at Rs. 2054. Set Top Boxes were costing about US$ 25 to US $ 30 per unit and the mother Board was around 70% of the cost of the product value.
8. After considering various evidences, Revenue came to the tentative conclusion that the prices at which M/s Catvision Products Ltd and M/s Electronic Enterprises and M/s MCBS Ahmedabad as detailed below:
"22(i) Now therefore, in order to ascertain the correct value in this case, values of similar goods imported by contemporaneous importers has to be examined. While many companies had been found to have effected imports of the smilar goods in the price range of USD 2.7 to USD 5.6 piece, these values could not be accepted since undervalutin had been noticed in these cases aswell. In fact suitable investigations had already been initiated into these imports including the issuing of an Alert Circular No. 6/2006 dted 4.4.06 by the DRI. Hence, these values could not be accepted for the case in question. In fact, the values decalred by the importers, M/s Catvision Products Ltd, M/s electronic Enterprises and M/s MCBS, Ahmedabad are found to be appropriate as summed up in the tables as under:
Sl No. Bill of Entry No. Date Name of the importer Value declared (in US$) Product Description Quantity Improted
1. 823307 27.11.04 A.G. Incorporation 3.2 (equivalent to 25 HK$) Populated PCB for Receiver 3000 pcs
2. 896588 15.3.05 A.G. Incorporation 3.3 (equivalent to 26 HK$) Populated PCB for Receiver 2000 pcs
3. 808285 3.11.04 Cat vision Products Ltd 10.75 (CIF) Main Board for digital Satellite Receiver 505 pcs
4. 822179 14.3.05 Electronic Enterprises
10.(CIF) Main Board for digital Satellite Receiver 5050pcs
5. 602404 5.11.04 MCBS Pvt Ltd 14 (FOB) Populated PCB 5000 pcs
6. 602404 5.11.04 MCBS Pvt Ltd 8.5 (FOB) Tuner 5000pcs
7.
613363 MCBS Pvt Ltd Populated PCB 5050pcs
8. 613363 MCBS Pvt Ltd 5050pcs
ii) It is observed that M/s A.G. Incorporation had in November 2004 declared a value of US$ 3.2 for the import of 3000pieces of the said goods. Whereas M/s Catvision Products Ltd had in November 2004 only declared a value of USD 10.75 (CIF) for 505 pieces of similar goods. Again at Sl No. 4 of the said table, it could be seen that M/s Electronic Enterprises had declared a value of 10.5 US$ (CIF) for import of 5050 pieces of similar goods in the month of March 2005.
iii) In so far as imports by M/s MCBs are concerned, it may be noted that the 'Populated PCB' imported by them as referred to at Sl No. 5 and 7 of the table above does not include the Tuner, which in fact, they had imported separately as highlighted at Sl No. 6 and 8 of the said table. It may also be noted that M/s MCBS had in every bill of entry imported the 'Tuner' and 'Populated PCB' both in exactly the same quantities. Therefore, to arrive at the value of the similar goods imported by M/s MCBS, the values of 'Populated PCB' would have to be added with the value of the Tuner as imported by them. On doing so, the following values emerge:
Sl No. Bill of Entry No. Date Name of the importer Value computed (in US$) Product Description Quantity Improted
1. 802404 5.11.04 MCBS Pvt Ltd 22.5 (FOB) Populated PCB + Tuner 5000 pcs
2. 613363 10.3.05 MCBS Pvt Ltd 15.25 (FOB) Populated PCB + Tuner 5050 pcs It is thus seen from the above that the value of similar goods as imported by M/s MCBs varies between 15.25 USD and 22.5 USD.
iv) In the light of the aforesaid position, it emerges that the lowest Transaction value out of the different ones declared by the importers of similar goods is 10.5 US$ (CIF) as declared by M/s Electronic Enterprises. Accordingly, this value of 10.5 US$ appears to be the correct value for the purposes of valuation of the said goods imported by the notice in terms of the Valuation Rules read with the provisions of the Customs Act, 1962.
8. Evidence based on Export Declaration filed in Hongkong "18. Scrutiny of the Trade Declaration:
i) Caveat Free and Certified Export Trade Declaration in respect of a single shipment received from Consulate General of India, Hong kong was scrutinised with a view to correlate it with the corresponding imports effected by M/s AG Incorporation to ascertain the correct value declared at the time of import. Scrutiny of the value declared in the said export declaration revealed that the value declared therein was for far higher than the value declared in the corresponding bill of entry No. 796262 dated 16.10.04 and invoice No. QM-1003 dated 12.10.04 filed by M/s I.G. Incorporation t the time of import of goods into India. Thus the said export declaration clearly brought out the mis-declaration of value in import of the said goods (main PBC Board for Digital satellite receiver) in India.
ii) The details of the export declaration vis a vis corresponding bill of entry are summarised below:
Trade Declaration No date R 21858187004 L7 FOB value declared for the shipment of the entire consignment of 1000 sets at Hongkong customs as per trade declaration is HK $ 187200+ HK$ 39100= HK$ 226300. CIF value of the entire consignment 1000 sets after addition of 21,125% towards freight and insurance HK$ 274106 (in terms of the first proviso to Rule 9(2) of the valuation rules, 1988 red with section 14 of the customs Act 1962. Total CIF value declared for import of entire consignment of 1000 sets in the corresponding BE/invoice at the time of import as filed before the Indian customs US$ 5290. Total CIF value for the entire consignment of 1000 sets (on the basis of declaration filed before Hongkong customs) in US$ (prevailing rate was Rs. 46.10 for US$ and Rs. 5.90 for HK$) US$ 35081= (274106 x 5.90/46.10) CIF value of the said goods (Main Board for DSR) declared before Indian Customs: US $ 3200. Percentage of the CIF value of the said goods in total CIF value declared as per the invoice presented before Indian Customs) 60% Hence, the CIF value of the said goods in total CIF value on the basis of declaration before Hongkong customs should have been : 60% of US$ 35081 i.e. US$ 21049 for 1000 pieces of the said goods. Therefore, the correct CIF value per piece appeared to be US$ 21.
(iii) The additional differential duty payable for the said goods w.e.t Bill of entry No. 796262 is accordingly calculated to be Rs. 3,34,628/- (Annexure G-1).
9. Statements of different persons connected with the three firms "11 Further investigation revealed that a. Shri Mahendra Kumar Agarwal, Director M/s Coir Cushions Ltd was a permanent resident of Mumbai and according to him, day to day affairs of the company and its import business were looked after by his younger brother Shri Ajay Kumar Agarwal b. Shri Vijay Kumar Agarwal, Director M/s Coir Cushions Ltd and partner M/s A.G. Incorporation was a permanent resident of Bhubaneswar and according to him, the day to day affairs and import business of the said two firms were looked after by his younger brother Shri Ajay Kumar Agarwal.
c. Mrs. Santosh Agarwal, partner M/s A.G. Incorporation was a housewife and according to her, the firm's import business was looked after by her brother in law Shri Ajay Kumar Agarwal.
d. Mrs Kapila Agarwal, partner m/s A.G. Incorporation was a house wife and according to her, the firms import business was looked after by her husband Shri Ajay Kumar Agarwal.
e. Mrs. Aparna agarwal, partner M/s A.G. Incorporation was a housewife and according to her, the firm's importbusiness was looked after by her brother in law Shri Ajay Kumar Agarwal.
f. Shri Nirmal Kumar Agarwal, Director M/s Coir Cushion ltd was in trnsporration business, based atBangalore and according to hi therespective Directors/partners of each of the firsm concerned took decisions about the business activitites in these firms.
12. Shri Ajay Kumar Agarwal, on 18.1.06 in his statement inter alia stated that he was looking after the day to day work of M/s Coir Cushion Ltd M/s A.G. Incorporation and M/s Overseas Business Corp; that they had imported totally 65000 pcs (appx) of populated PCB for receiver in all the three companies put together as under:
From Quantum Meca Co Ltd Hongkong 57000 pieces From New Leaf International Hongkong 6000 pieces From Wichmore Enterprises Hongkong 1000 pieces " Shri Ajay Kumar Agarwal in his statement dated 13.3.06 stated inter alia that for a long time, he was importing materials from Mr Pankaj Surana's firm Quantum Meca Co; that Mr. Pankaj Surana was son of Shri Vimal Pat Surana who was brother of Shri Kamal Pat Surana (prop of Ms Rishav Udyog) and Shri N.S. Surana (Director of Ms SAG Audio Vision P Ltd and partner of Ms Pranam Enterprises to whom goods including digital satellite receivers were being sold by the three companies being controlled by Shri Ajay Agarwal that during Sept/Oct 2004, when there was demand for digital satellite receiver, he asked Shri Panay Surana to supply components of receiver for which Shri Pankaj Surana agreed and suggested to sell the said goods to his uncle who could buy and sell these goods on regular basis; that he had imported these components and sold a good quantity to M/s Rishav Udyog of Shri Kamal Pat Surana; that components of digital satellite receiver imported from Trade Venture Ltd were sold in the local market; the said goods supplied by New Leaf Electronics were sold to M/s Wing Electronics of Shri Vinod Chawla; that said Shri Vinod Chawla was father of Shri Ashish Chawla of New Leaf Electronics; that they were getting the import documents through bank on D/P (Delivery against payment) or D/A (Delivery against acceptance) basis, getting revealed the goods from Customs, making payment to the banks and getting reasonable credit period for payments; that the profit margin for such sales was around 3 to 4% that he agreed with the contents of statements of Shri N.S. Surana and Shri Kamat Pat Surana both dated 7.2.05; the brand of the imported goods were never declared in the invoices; that though the populated PCB for receivers were supplied by three different overseas suppliers, the value of these goods were almost same with minor gat of 1 to 2 HKD; tat selling price was declared by keeping a profit margin of 3 to 45 on cost and that expenditure such as CHA charges duty amount, transportation charges and sales ta were paid by him and alter recovered from customer while raising sales invoices."
10.1. Based on such evidence a Show Cause Notice proposing increase of value of the goods was issued and adjudicated resulting in confirmation of duty detailed as under:
Sno Name of Importer No of Bills of Entry and no of pices No of pieces Price declared Duty confirmed 1 A. G. Incorporation 18 BEs;
6286719 2 Coir Cushions Ltd 8 BES 2187949 3 Overseas Business Corporation 1 BEs 125570 10.2. Further penalties under section 114A equal to the duties confirmed have been imposed on the three importers. Further penalty of Rs.25 lakhs has been imposed on Shri. Ajay Kumar Agrawal, who was the main person behind such imports, under section 112 (a0 of the Customs Act.
11. Issue whether A Show Cause Notice demanding duty can be issued in a case where the value was once loaded by Customs Officers at the time of assessment.
11.1. The Counsel for appellants submits that the values of the consignments were once loaded by the Customs Authorities at the time of import and hence the Revenue authorities cannot load it again through another proceeding. They rely on many decisions of judicial forms to support the above argument. The main decisions relied upon to support this argument are the following:
(i) Mohan Meakin Ltd Vs. CCE-2000 (115) ELT 3 SC;
(ii) CCE Vs. TTK-2006 (198) ELT 481 (SC)-in a case relating to a excise duty where classification list was approved.
(iii) CC Vs. Arvind Exports (P) Ltd -2001 (130) E.L.T. 54 (Tri. - LB);
(iv) Kalinga Gases Vs. CC reported in 2004 (170) ELT 25 (Tri);
(v) CC Vs. Lord Shiva Overseas-2005 (181) ELT 213 (Tri-Mum) 11.2. The above argument if made an absolute rule it can turn out to be one of the best means to evade customs duty with impunity. All what is required is to declare a substantially low price in bill of Entry and somehow get the customs officer to load the value a bit. That single action of an appraising officer will give impunity from any further proceedings regarding mis-declaration of value. It appears that the provisions in Customs Act are not that weak to protect the interest of the state. This argument canvassed is not based on any provisions in statute and appears to be not consistent with section 28 of the Customs Act and appears to be a judge made law. So it is necessary to see whether the judges really made a law like that and there is a need to examine this contention closely. It would be proper to examine the decision according to the hierarchy of the Courts giving such decisions.
11.3 The case of Mohan Meakins Ltd.
In this case, after issuing a notice as contemplated under Section 124 of the Act, to the importer of the goods in question and adjudication proceeding under Section 125 had been conducted and the goods in question were released on payment of redemption fine. The question before the court was whether another proceedings can be initiated for confiscation of the goods in the hands of banafide purchaser alleging under valuation which was not adjudicated during the first proceedings. The Hon Apex Court held that in such an event it matters little whether the adjudication was under which sub-clause of Section 111 because whichever is the sub-clause, there was an obligation on the adjudicating authority to find out the market value of the goods so imported and to collect all duty and other charges payable on the goods in question before releasing the goods on payment of redemption fine. [refer para 6 of the order].
This decision in my view does not declare a law that no matter what if the value is loaded once no demand can be issued to the importer under section 28 of the Customs Act to recover duties short levied. This decision only gives a protection to a bonafide purchaser.
11.4 The case of TTK Ltd This is case where the classification of goods was approved by the Assistant Commissioner of Central Excise in a classification list as per law in force at that time. Revenue was seeking to reclassify the goods and demand duty by invoking extended period of time.
The court opined as under:
"approval of the classification list by the Assistant Collector, Central Excise, on 6-6-1991, it could not be said to have been done without application of mind. A copy of the order of the Assistant Collector Central Excise dated 6-9-1991 has also been produced before us. It is not a mere cursory reasoning but a detailed investigation into the facts and conclusion reached on the basis of those facts. It may be that the Assistant Collector Central Excise was wrong in approving the classification of Ossopan under T-H. 02.01. However it cannot be said that the Assistant Collector Central Excise did not consider the relevant material or that there was any suppression of fact. The Tribunal's opinion on the non-applicability of the extended period of limitation is accordingly upheld."
In our view thus decision does not give the impunity canvassed. This decision only gives protection to a bonafide assesse in a situation where he acted bonafidely on the basis of an approved classification list. The decision does not deal with the situation if the approval were to be obtained by fraud 11.5 The case of Arvind Exports Brief facts of the case are that the respondents made an import of beef tallow and filed a Bill of Entry and sought clearance of the goods, in question, on the strength of additional licence dated 12-3-1981. On the date of issue of the import licence, beef tallow was under OGL and w.e.f. 5-6-1981, the beef tallow was placed in the list of canalised item under Appendix 8 of Import Export Policy. However, the licence was accepted by the Collector of Customs and clearance was allowed. The Central Board of Excise & Customs, in exercise of power, conferred under Section 129D of the Customs Act, called for the relevant record and after perusal, passed an order directing the Collector of Customs to make an application to Customs, Excise & Gold (Control) Appellate Tribunal under Section 129D of the Customs Act, 1962.
"7. In the present case, the importer filed bill of entry in respect of goods imported and bill of entry was assessed as per the provisions of Section 47 of the Customs Act and the clearance was allowed by the Collector of Customs after satisfying the conditions laid down under Section 47 of the Customs Act. In view of the decision of the Hon'ble Madras High Court in the case of Best & Crompton Engineering (supra), the order passed under Section 47 of the Customs Act is not an administrative order, therefore, the Central Board of Excise & Customs, while exercising its powers conferred under Section 129D of the Customs Act, is competent to review such order."
This order is cited basically to argue that the order of assessment on a bill of a Bill of Entry is an order which can be appealed against. Nothing turns out from this case on the issue whether an assessment made on a bill of entry can be re-opened through a Show Cause Notice issued under section 28 of the Customs Act on the basis of mis-declaration or suppression of value unearthed subsequent to assessment of the Bill of Entry.
11.6 The case of Kalinga Gases Ltd.
This appeal is against an order passed by the Commissioner of Customs in adjudication of show cause notice dated 29-3-2001 issued to the party for confiscating certain goods (along with the vehicle used for transportation thereof) which were the subject-matter of final assessment of a Bill of Entry dated 27-9-2000 under Section 47 of the Customs Act. In the impugned order, the Commissioner confiscated 30 gas cylinders containing 284.5 Kgs. of Carbon dioxide under Section 111(m) of the Customs Act and gave option to the appellants to redeem the same by paying a fine of Rs. 20,000/-. He also held that 68 other gas cylinders (provisionally released) were liable to be confiscated and appropriated Rs. 10,000/- from the security amount towards redemption fine. He ordered likewise in respect of the truck which belonged to the appellants. The Commissioner, further, imposed a penalty of Rs. 10,000/- on the party under Section 112 of the Act.
The Tribunal held that without reviewing the order under section 129D of the Customs Act Revenue could not have opened another proceedings to increase the value by issuing SN under section 28 of the Customs Act.
However it is seen that the Allahabad High Court in the case of CC Vs. Sonam International-2012 (275) E.L.T. 326 (All.) considered this decision and overruled the above decision of the Tribunal.
11.7 The case of Lord Shiva Overseas This decision is given on the basis of the decision in the case of Mohan Meakins (Supra) and Aravind Exports. (Supra). In this case one of the observation of the Tribunal as follows:
"When the proper officer had reasons to believe that the declared value in the present case of USD 0.05 per piece was not as per Section 14 and thereafter, making such enquiries, as he deemed fit, loaded it to USD 0.10 per pieces, then further proposal to reload the same cannot be approved since no ground of earlier enquiries were inadequate or otherwise doubted or taken to be incorrect. The proper officer was duty bound to make such enquiries as he deemed fit, including enquiry about the nature of goods, its classification, contemparances values, market values etc. and then resort to an assessment of loading. Piece meal value loading re-adjudication is not envisaged under the Custom Act, 1962 and cannot be upheld more so when valuations as determined on the BE and assessed would be an order appealable adjudication order [see CC, Cochin v. Arvind Exports (P) Ltd. - 2001 (130) E.L.T. 54 (LB)]. No review/appeal against such an order of determination of value by the proper officer was taken by Revenue. The loading for USD 0.05 per pcs to USD 0.10 per pcs is final."
The above decision is taken on the facts of the case and cannot read to infer an absolute law that assessment made under section 47 cannot be opened through notice issued under section 28 of the Customs Act, because there are judgements which lays down decisions to the contrary view canvassed by the appellants. Firstly let us see the decision of the Apex Court in the case of UOI Vs. Jain Shudh Vanaspati-1996 (86) E.L.T. 460 (S.C). Two paragraphs from the decision are reproduced below:
"5. It is patent that a show cause notice under the provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously refunded can be issued only subsequent to the clearance under Section 47 of the concerned goods. Further, Section 28 provides time limits for the issuance of the show cause notice thereunder commencing from the "relevant date"; "relevant date" is defined by sub-section (3) of Section 28 for the purpose of Section 28 to be the date on which the order for clearance of the goods has been made in a case where duty has not been levied; which is to say that the date upon which the permissible period begins to run is the date of the order under Section 47. The High Court was, therefore, in error in coming to the conclusion that no show cause notice under Section 28 could have been issued until and unless the order under Section 47 had been first revised under Section 130.
Section 124 reads thus :-
"S. 124. - Issue of show-cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing penalty on any person shall be made under this Chapter unless the owner of the goods or such person -
(a) is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and
(c) is given a reasonable opportunity of being heard in the matter :
Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral."
6. The case of the appellants in the show cause notices is that the stainless steel containers in which the said oil was imported were banned, that the stainless steel containers were deliberately camouflaged by painting them to resemble mild steel containers, and that this was done with a view to enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if it, in fact, be so) cannot debar the issuance of a show-cause notice for confiscation of goods under Section 124. Fraud, if established, unravels all. An order under Section 47 obtained by the employment of fraudulent methods does not have to be set aside by the exercise of revisional powers under Section 130 before the ill-effects of the fraud can be set right by initiation of the process of confiscation of the fraudulently cleared goods under Section 124."
11.8. The above view has been adopted in CCE Vs. Re-rolling Mills Ltd-1997 (94) E.L.T. 8 (S.C) and a plethora of decisions of the Tribunal like 2008 (228) ELT 78 (Tribunal Bombay/Mumbai) 2009 (239) ELT 208 (Tribunal Delhi) 2010 (254) ELT 179 (Tribunal Madras/Chennai) 2010 (256) ELT 424 (Tribunal Bombay/Mumbai) 2011 (264) ELT 433 (Tribunal Delhi) 2011 (265) ELT 243 (Tribunal Delhi) 2011 (269) ELT 90 (Tribunal Delhi) 2011 (270) ELT 607 (Tribunal Bombay/Mumbai) 11.9. The above being the position we do not consider it proper to throw this case at the threshold and we propose to look at the quality of the evidence.
12. The issue as to what extent the decision in the case of Eicher tractors is relevant in this case
12.1. The next issue to be examined is the import of the decision of the Hon Apex Court in the case of Eicher Tractors Ltd. Vs. CC- 2000 (122) E.L.T. 321 (S.C.) This decision is often quoted to throw out under valuation cases booked by Revenue on the ground no proof of payment other than what was declared has been adduced by Revenue. It is quite relevant to look into the facts of the case as recorded in para 1 of the order are as under:
"M/s. Eicher Tractors Ltd., the appellant before us, manufacturers tractors and tractor engines in India. From 1955 the appellant imported bearings of a specific size for their tractors and tractor engines from M/s. NTN Corporation, Osaka, Japan. This 33 year relationship was snapped in 1988 when the appellant started utilising bearings manufactured for them in India by M/s. HMT Ltd. The Japanese vendor was left with a stock of the bearings which had been manufactured by it for the appellant anticipating the appellant's continued custom. Not finding any customer for the bearings, by letter dated 12th February, 1993 the vendor's agent in India offered to sell the 1989 stock of 3579 bearings to the appellant at a price of Japanese Yen (JY) 826 per piece. The appellant found the offer competitive and agreed to buy the bearings from the vendor at the price offered. An order was placed by the appellant on the vendor on 17th April, 1993. The bearings were shipped from Japan and arrived in India. The appellant filed the Bill of Entry on 3rd December, 1993 together with the invoice dated 6th October, 1993 with the Custom authorities."
12.2. In this case the Court observed as under:
"In the case before us, it is not alleged that the appellant has mis-declared the price actually paid. Nor was there a mis-description of the goods imported as was the case in Padia Sales Corporation. It is also not the respondent's case that the particular import fell within any of the situations enumerated in Rule 4(2). No reason has been given by the Assistant Collector for rejecting the transaction value under Rule 4(1) except the price list of vendor. In doing so, the Assistant Collector not only ignored Rule 4(2) but also acted on the basis of the vendor's price list as if a price list is invariably proof of the transaction value. This was erroneous and could not be a reason by itself to reject the transaction value. A discount is a commercially acceptable measure, which may be resorted to by a vendor for a variety of reasons including stock clearance. A price list is really no more than a general quotation. It does not preclude discounts on the listed price. In fact, a discount is calculated with reference to the price list. Admittedly in this case discount up to 30% was allowable in ordinary circumstances by the Indian agent itself. There was the additional factor that the stock in question was old and it was a one time sale of 5 year old stock. When a discount is permissible commercially, and there is nothing to show that the same would not have been offered to any one else wishing to buy the old stock, there is no reason why the declared value in question was not accepted under Rule 4(1)."
12.3. Nothing from the said case can apply to the facts of this case where there are evidences to prove the undervaluation of the goods except evidence regarding remittance of the extra consideration. It is in the context of this that Revenue is pointing out that the transaction was between closely related persons, with the appellants acting just as conduits, who could easily do such transactions without getting noticed by Government authorities. Existence of certain facts has to inferred based on acts that are proved and there is no reason to insist of producing proof of aspects which could be easily hidden in the circumstances of the case.
13. The issue whether the allegation that appellants were conduits for imports between closely related person relevant for determining under valuation.
13.1. The next issue is whether the transaction value can be rejected for the reason that supplier in China and the person to whom the goods were sold by the importer were related. The appellants canvass that this is just not an acceptable argument. They rely on the decision in Italia Ceramics Ltd Vs. CC-2005 (191) ELT 1024 (Tri) in this regard. The facts as recorded in para 6 of the order is relevant and is reproduced below:
"6. The evidence produced by the appellants to substantiate their claim that the declared value was correct consists of (a) certificate from the manufacturer of tiles certifying that the sale value of 600 mm x 600 mm sized tiles was 30 RMB per piece (Chinese currency) one piece is = 0.36 Sq. Mtr. Thus one Sq. Mtr cost is 36.11 RMB taking the exchange rate as 8.2 RMB equals one US $, the rate of one Sq. Mtr. of tiles of this size will be 4.4 US $. (The appellants declared the price 6.78 US $) For 500 mm x 500 mm sized tiles the manufacturer has certified that price per piece 7 RMB. One piece is 0.25 Sq. Mtr and thus the value of one Sq. Mtr is 28 RMB. Taking the exchange rate as above, the rate of one Sq. Mtr. of tiles of this size is 3.5 US $ (while the appellants declared 5.60 US $), (b) Commercial invoice of M/s. Noble Electronics, Hong Kong from whom the tiles were purchased. (Manufacturers in China cannot export directly but have to route exports through Government approved exporter). Since M/s. Noble Electronics, the seller was based in Hong Kong, goods were sold through Textile Import and Export Company of Guangdong, China, which is an export house registered with the Chinese Government, (c) Quotations issued by various manufactures based in China relating to the same quality of tiles wherein the price quoted for 500 x 500 mm sized tiles was 2.93 US $ per Sq. Mtr and for 600 x 600 mm sized tiles price quoted was 4.26 US $ per Sq. Mtr. The appellants also arranged import at various ports at a lesser rate. Further, during the relevant time, tiles were being imported from China at a price lesser than the price at which the present appellants imported tiles and, therefore, manufacturers/traders of tiles in India had filed a petition with designated authority seeking imposition of anti-dumping duty on tiles imported from China. From the annexure to the petition filed by SPL Ceramics Ltd., H&R Johnson (India) Ltd., and Murudeshwar Ceramics Ltd., it is seen that the tiles of identical quality were being imported at an average C.I.F price of US $ 4.44 per Sq. Mtr. during the same period, which was lower price compared to the price at which the appellants had purchased the tiles. Notification No. 50/2002-Cus., dated 2-5-2002 was issued by the Central Government imposing anti-dumping duty on tiles imported from China. We also note that there is no actual incidence of import of goods at a lesser value, which has been brought on record during investigation. Inquiries conducted by independent persons for value of tiles with manufactures in China shows that the value was lesser than that at which tiles were imported by the appellants. Regarding the order placed with the M/s. Keda Group (Hong Kong) for 600 x 600 mm sized tiles @ US $ 3.73 per piece, the appellants, contention that this price was not correct and amendment in the order was carried out vide purchase order amendment dated 5-8-2001 amending the price to US $ 3.725 is tenable."
13.2. In the above circumstances the following observation was made by Tribunal:
"8.The value declared by the appellant cannot be doubted merely because the partners of the sellers (M/s. Noble Electronics, Hong Kong) were brother and father of one of the Directors of the appellant-company in India, for the reason that they do not fall within the definition of related person as per Rule 4(2) of the Valuation Rules, as there is no exercise of direct or indirect control over each other.".
3.3. These observations cannot be interpreted like a Euclid's theorem. If at all it is to be interpreted so it cannot be after ignoring the words "merely because" used in the above para. That is not the way Euclid's theorems are interpreted.
13.4 It is relevant to note that the Apex Court in Kanwar Natwar Singh Vs. Director of Enforcement- 2010-TIOL-78-SC-FEMA para 32 of the order observed as under:
"32. In our opinion, these decisions do not assist the appellants' case in any manner whatsoever because the documents which the appellants wanted in the present case are the documents upon which no reliance was placed by the Authority for setting the law into motion. Observations of the Courts are not to be read as Euclid's theorems nor as provisions of the statute. The observations must be read in the context in which they appear. A line or a word in a judgment cannot be read in isolation or as if interpreting a statutory provision to impute a different meaning to the observations [see Haryana Financial Corporation Vs. Jagdamba Oil Mills (2002) 3 SCC 496]."
14. The issue whether the reference prices taken by Revenue were that of comparable goods.
The next main argument is that the value of goods will vary considerably based on the chipset used, whether or not there was built in tuner in the PCB, whether it is to be used only for free channels only or for pay channels also etc. It is argued that without taking such factors into account Revenue is trying to load the value.
He also submits that the manufacturer's invoice was produced at the time of initial assessment.
Regarding the evidence collected by the department from Electronic Industries the appellants point out that that import was for 550 pieces only whereas the present importers imported 65000 pcs (appr). Further that points out that the manufacturer and supplier in that case were different. Further the Show cause Notice itself accepts that such goods were imported at values ranging from US $2.1 to US $ 21 clearly showing that the items involved have varying specifications and different values are just normal and there is nothing to suspect the value declared on such basis.
Revenue is already on record to the effect that cases of undervaluation are being booked against other importers who imported the goods at artificially low prices without providing justification for such prices. It is also to be noted that the duty demand is confirmed by taking the lowest of the values namely------ for similar goods in case of importers whose bonafide was not under challenge.
In the matter of value of comparable goods the appellants have given a bunch of case laws. Since the facts of each case vary it can be quite a tedious task to record the facts all the cases submitted and examine its relevance to the facts of this case. But it is proper to discuss at least the decisions of the Apex Court cited in this regard which are the following:
(i) CC Vs. South India Televisions Pvt. Ltd-2007 (214) ELT 3 (SC)
(ii) CC Vs. J. D. Organics-2008 (226) ELT 9 SC;
Case of South India Televisions Pvt. Ltd The goods imported was Ceramic Capacitors. The importer declared a price of HK$ 6 per 1000 pcs. The case of Revenue was based on export declarations filed abroad. Th export declaration were just Xerox copies which were not authenticated by Hongkong Customs. The authenticity of the declaration was doubtful. The imported supported the declared price by relying on various contemporaneous imports made during the above period by other importers. There was also an infirmity that the assistant Commissioner adopted Rule 8 of the valuation rules without going sequentially through from Rule 5 to Rule 7. There was no evidence of contemporaneous imports at higher price at all.
Case of J. D. Organics This was a case of import of "4,5 Dinitro Crysazine. The case of Revenue was that prior to Oct 99 the importer was importing the same goods from the same supplier at the price of US $ 18.7 per Kg. In Oct 99 the importer filed a Bill of entry declaring price of US$ 13.2 per Kg. The appellant in that case was the only importer of the goods. Revenue had no evidence of contemporaneous imports or other evidence to prove remittance of extra money. Apex Court held that the transaction value could not have been rejected.
15. Relevance of retraction of Statements by Shri. Ajay Kumar Agarwal He also submits that the statement dated 18-01-2006 of Shri. Ajay Kumar Agarwal admitting undervaluation was taken under duress and it was retracted on 19-01-2006 before ACMM, Patiala House, New Delhi. So no credence can be given to such statement.
We have gone through what was recorded by the Magistrate.
He points out that many other importers were importing such goods at more or less the same price as the appellants.
On this issue Revenue submits that cases booked against those importers and proceedings initiated. The matter is at various stages of deciding the issue. In some cases the Appeals are already pending before the Tribunal
16. Issue of Correction of Export declarations in Hongkong.
"Appellant on their own collected customs attested export declarations from Hongkong Customs to prove their bonafides and Commissioner's rejection without any verification is totally wrong - The evidences relied on by Commissioner in his order for enhancement of value are not sustainable on facts as well as law. However, to further prove the bonafides of the prices declared, appellant on their own made an attempt through their overseas suppliers to obtain Customs attested export declarations from Hongkong customs for the consignments shipped by the overseas suppliers to the appellant. The appellant was able to obtain certain number of customs attested export declarations from Hongkong customs which were given to Commissioner in the reply. The prices declared in these customs attested export declarations procured in original were the same which were declared to the customs authorities in India. Since the customs attested export declaration were in original and there was no other basis for doubting the transaction value declared by the appellant before the Indian Customs in the various bills of entry, Commissioner should have accepted such customs attested export declaration as the final proof of correctness of the value of the goods declared at the time of importation by the appellant. His observation that they were procured after the investigation by DRI is totally out of place on the following grounds:-
(i) the export declarations were original copies and not attested photocopies;
(ii) the declarations were all version 1 and no second version had been filed in these cases;
(iii) In case he had any doubt, Commissioner could have at least sent these declarations for verification to Hongkong through official channels, since a customs representative is based in Hongkong;
(iv) Commissioner's observations and findings are without any evidence/proof;
(v) Commissioner's rejection of 'export declarations' shows his biased mind;
(vi) There was complete violation of natural justice since he failed to do justice.
25. Original declarations, as per Supreme Court decision is liable to be accepted particularly when no evidence against those declarations - It is already an admitted position in law that originally signed customs declarations from the customs authorities of the exporting country (in this case Hongkong) must be accepted. The photocopies of such documents are of course not admissible. DRI too in the SCN relied upon certain invoices obtained from Hongkong customs. Therefore, in view of the above, Commissioner erred in not accepting those original customs declarations from Hongkong.
Hon'ble Supreme Court in the case of CC Bombay vs East Punjab Traders reported as in 1997 (89) ELT 11 (SC) held that zerox copies of the documents were not admissible in the customs proceedings.
"Evidence - Documents obtained by Indian Customs officer during the visit to Japan for enquiry - photocopies of such documents not bearing any signatures - held: authenticity of photocopies of the documents when itself is suspected, presumption under Section 139(ii) of the Customs Act, 1962 not available specially when the documents have not come from proper custody or obtained by Indian Customs from Japanese Customs -Department's offer from cross-examination of Steamer Agent from whom such export declaration obtained, of no avail for raising the presumption Discrepancy in regard to the copies bearing seal of the customs at Kobe also raised doubt - Reliance not to be placed on such documents"
Further CESTAT in the cad of Truewoods Pvt Ltd Vs CC Visakhapatnam reported in 2005(186) ELT 135 has held that photocopies of the documents obtained from abroad (foreign sources) are not admissible for enhancement of value. The following is the gist:
"Valuation (Customs) - Enhancement of value sought on the basis of photocopies of export declarations obtained from Italian/US customs original copies of which were not brought on record - Such documents being unsigned, no presumption can be raised under Section 139 of Customs Act, 1962 in respect of same - Appellants submitted manufacturer's invoices packing list and other material including evidence relating to contemporaneous exports in support of price declared by them - Commissioner (Appeals) himself observed in impugned order that evidence of contemporaneous imports is equally tilted on both sides, therefore, Revenue cannot disregard transaction value - Revenue brought no concrete material to prove that invoices submitted were not genuine - Value not to be enhanced - Section 14.
Further in the case of Taito Watch Manufacturing Industries Vs CC Jaipur as reported in 2004 (173) ELT 17 it has been held as under:
"Valuation (Customs ) - Enhancement of - Export declaration field by foreign supplier at their port of export - only attested photocopy given to importer - Without bringing its original on record, Revenue cannot rely on it solely to enhance value - matter remanded for re-determination of assessable value - Section 14 of Customs Act, 1962. Valuation (Customs) - Enhancement of - Export declaration of foreign supplier showing price higher than that on bill of entry - This might be done by foreign supplier to obtain higher export incentive - In such a case, transaction value has to be accepted - Section 14 of the Customs act, 1962."
17. Issue of cross-examination of officers.
18. Issue of different Valuation Rule adopted for confirmation of duty.
The Counsel argues that the proposal in the SCN was for increasing the value based on Rule 4(2) (b) of the valuation Rules. But the adjudicator changed the Rule to 4 (2) (g). So they did not have opportunity make their submission why the new Rule quoted was not applicable to the case.
This contention is with reference to para 54 of the impugned order which reads as under:
"54 It has been further contended that the declared import price satisfied the requirement of Rule 7 of the Customs Valuation Rules, 1988 and that the said DTH being sold in the market at a price of Rs. 1100 to Rs. 1150 and if value suggested by DRI was taken, costing will exceed Rs. 1100. I would like to mention here that the said price of the goods i.e. Rs. 1100 is the price at which the notice and other importees who were manipulating the value of the main boards, were selling the goods. Shri Gyan Chand Jain MD M/s Modern Communication in his statement under section 108 of the Customs Act, 1962 has inter alia stated that the challenger series STB price in local market is Ra. 1350 to Rs. 1450 and their manufacturing cost for this product is Rs. 1250 to Rs. 1350/-. He further stated that the sale price with Dish Antenna, LNB and cable was about Rs. 2300 to Rs. 2500. In the present case, the notice is selling the set of SKD components to DTH as evident from the invoices raised by them, at a price of Rs. 370 to Rs. 466 appx (invoice No. 17 dated 19.10.04, 27 dated 15.12.04, 55 dated 14.3.05 and 35 dated 29.12.05). The assembly charges for these components into a DTH are Rs. 100 ( as per statement dated 7.2.2005 of Shri N. S. Surana, Director of M.s SAG Audio Vision Pvt Ltd partner of M/s Pranam Enterprises, Director of M/s Sarita Electronics which makes the costing as Rs. 550. On adding value of the outer box Rs. 60 as per invoice No. 1126 dated 10.1.05 of M/s Vee Kay Enterprises) the final value comes to Rs. 610 and in this manner, the profit margin comes to about 80% which is very high and therefore, not acceptable. As is seen, in the case of Ms Modern Communication the margin of profit is only 10% which has to be accepted, as if the value is considered as proposed in the show cause notice. It is noticed that the noticee is paying Rs. 117.50 as duty on the set of components imported by them as detailed below:
Components Price Cost of components 450 Profit of AG Corp 5 21.43 Net cost to AG Corp 428.57 Post importation expense 5% 20.41 Landed cost 408.16 Duty 40.376% 117.40 Declared value 290.75 If the said duty is added to the proposed value, the true picture will emerge which is as under:
Proposed Value Cost of main board as US$ 10.50 484.05 Cost of other components as per sale bills 181 Total cost of components 665.05 Post importation expenses 20.43 Profit of AG Corp 5% 21.43 Duty actually paid by notice 117.40 Actual landed cost 824.29 Add manufacture expenses 100 Cost of box 60 Cost price 984.29 From the above, it is evident that the actual manufacturing cost in the case of the noticee is about Rs. 984.29 and they are selling the goods at a price of Rs. 1100 to Rs. 1200. The above analysis clearly suggests that the proposed value also satisfied the conditions of Rule 7 of the Valuation Rules, 1988 which is not the case with the declared value. As such the plea that their declared value satisfied the requirement of Rule 7 of the Valuation Rules is not accepted."
From the above paragraph we do not see any change in the basis for making the demand the demand is confirmed as per the proposal in para_________of SCN. The above para only explains how the value suggested is only reasonable even if Rule 4 (2) (g) is taken into account.
On an overall appreciation of facts before us we find the following relevant facts. The impugned imported goods are something needed by many manufacturers in India. The importers are neither manufacturers who consume the goods in their own manufacturing process or traders who import the goods and make available the goods at competitive prices to manufacturers in India at arm's length. The importers in question were acting as mere conduits between suppliers in China and actual buyers who uses it in further manufacture and having close nexus with the supplier in China. In fact there is only one person behind the three importers. This person cannot demonstrate any special skill or circumstances enabling him to get the impugned goods at low prices. The inference of undervaluation in such circumstances is quite reasonable. So when contemporaneous imports of the goods are shown the burden to prove bonafides definitely shifted to the importers. At such a juncture the main defence is that they had not declared the full details at the time of import and hence their goods were different. The specifications declared at the time of importation is sketchy to suit justification undervaluation. There is nothing to show that the goods manufactured using the components imported by them were of any inferior quality. In fact their prices were competitive only to the extent of duty evasion engineered in these imports. Once the burden had shifted to the importer to prove that the declared values were correct the appellants have hardly done anything to discharge such burden except arguments about possible difference in specifications which they chose not to declare at the time of import. They only want to take advantage of the fact that their declarations were vague at the time of import and for that reason their price has to be considered to be lower.
The other edifice of defence sought to be built is something constructed by borrowing different sentences from different decisions of courts written in the context of the facts of each case as explained with reference to major cases cited. Of course many more such decisions can be examined and shown how the decisions cannot build an edifice of defence in this case. For the sake of brevity it is not being attempted.
When the facts are seen in the above light we see no reason to hold the impugned order to be bad. So we reject the appeals.
(Order pronounced on ) (Archana Wadhwa) Member (Judicial) (Mathew John) MPS* Member (Technical) ?? ?? ?? ?? 14 1