Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Customs vs Ramesh Nebhnani And Anil Nebhnani on 7 November, 2000
Equivalent citations: 2001(74)ECC495, 2001(138)ELT232(TRI-MUMBAI)
ORDER
J.N. Srinivasa Murthy, Members (J)
1. This is the department's application, against the order dated 29.12.95 of the Commissioner of Customs, Mumbai DRI/VZU/B/23/95/ S/10-24/95 ADJ on the basis of the review order dated 29.12.96, praying for determining the points arising out of the above order namely (1) whether after taking into consideration the facts of the case the impugned order is legally correct and proper, (2) whether by passing an order under 129B of the Customs Act, the Tribunal should modify the impugned order, (a) holding that DRI has full jurisdiction in such matters even if the goods are under assessment by the customs house, (b) enhancing the declared value as proposed in the show cause notice? (c) confiscation of the goods under Section 11(d) and (m) of the Act and (d) imposition of suitable penalty under Section 112A of the Act, and for such other order deemed fit and proper.
2. The brief facts of the case are that the appellant Ramesh and Anil K. Nebhani are partners of Akash Enterprises, which had imported 5 consignments of fur fabrics of 32336.5 yards, having the declared value of Rs. 15,30,325 CIF, and filed 4 bills of entry for 4 consignments for clearance under DEEC, with declared description of "artificial fur lining" declaring the unit price as 1.5 US $ per yarn. On the basis of the intelligence regarding the under-invoicing the residential premises of the importer were searched by the officer of the DRI, and recovered fax messages exchanged between the foreign supplier and the importer, and incriminating documents revealing that the appellant Anil Nebhnani booked the goods including fur print rainbow and tiger of good quality at USD 5.65 per yard with the supplier M/s. Puerto Rico Investment Ltd., Taiwan, and regarding second quality, an offer of USD 4 per yard as against the price of USD 5 per yard quoted by the supplier under the fax dated 8.2.95, Under the fax dated 9.2.95, the supplier giving the factory price of fur of Hong Kong origin varying from USD 4.65 to 6.80 per yard depending upon pile length and weight per yard etc. The fax dated 13.7.94 from the Taiwanese supplier states the price of fur ranging from USD 3.57 per yard to USD 5.65 per yard depending upon different colour, pile length and weight per unit length. By fax dated 24.1.95, the Taiwanese supplier has stated that fur rate of USD 32,652.2 for 7868 yards under invoice No. 27/95 and USD 17010.2 for 4252.5 under invoice No. 10/95. Fax dated 24.1.95 of the Taiwanese suppliers referring to Nebco file shows the credits available in importer's account and debits made towards shipment against each invoice number. There is a total credit entry of USD 1,18,119.82 towards the shipment under six invoice for which payments have not been made. The debit entries also includes the amount mentioned in the above two invoices (10/94 and 27/95). The fax dated 7.2.95 from the suppliers states that the amount covered by the following five invoices were not paid from the bank. All the five invoices pertains to fur and the amount of USD 12058.50 for invoice No. 488/94, USD 5715 for invoice No. 513/94, USD 12550 for invoice 500/94, USD 5715 for invoice No. 512/94 and USD 11802 for invoice No. 27/95.
3. From the above fax messages and the statements of the partners of the importer firm and the invoice produced for clearance it appears that the value of the fur fabrics was varying from USD 3.7 to USD 6.8 per yard. It depends upon the print, length of pile and weight per yard. Regarding the invoice No. 10/95 and 27/95, the actual unit price was USD 4 per yard and USD 4.15 per yard respectively against the declared price of USD 1.5 per yard. The importer was maintaining a credit USD account with the Taiwanese supplier and differential amount between the declared invoice price and the actual price was being adjusted from that account towards the shipment apart from the remittance of invoice value declared through official banking channels, as per the fax message dated 24.1.95 and 7.12.95. The invoice value declared and the through recovered fax message were as under.
Invoice Declared (in USD) Actual (in USD) Remarks
27/95 11802.00 32652.20 Bases on direct
19/95 6378.75 17010.00 evidence through
fax message
dated 24.1.95
and 7.2.95
488/94 12058.50 41826.00 The values are
500/94 12550.00 43118.30 worked out on
513/94 5715.00 19050.00 the basis of the
price quoted infax
messages for
different grades.
The enquiries conducted with the original licence holder revealed that-they had not used artificial fur fabrics in the manufacture of resultant export product, and there was no nexus between the imported and the exported goods, and the benefit of Notification 204/92 was not available. The show cause notice dated 5.4.95 was issued by the Asst. Director (DRI) to the appellant for enhancing the declared value from Rs. 15,30,325 to Rs. 48,47,862, and for confiscation of the goods under Section 111(d) and (m) of the Customs Act, 1962, and also for imposition of penalty under Section 112 of the Customs Act. As per the said show cause notice both the residential and office premises of Ramesh Nebhnani and Nebco Traders, 59/61, Sunderlal Bahal Path, Fort, Mumbai were searched on 9.2.95 by the DRI officers and recovered various documents in the form or fax messages. The show cause notice relates to consignment of fur fabric imported under the four bill of Entry 2896 dated 8.2.95. 12,130 dated 30.1.95, 2356 dated 7.2.95, 12,691 dated 30.1.95 and also one container bearing No. GSTU 8953032 for which the bill of entry had not yet been file, which was covered by the invoice No. 27/95 dated 22.1.95.
4. The appellants have replied the show cause notice on 22.5.95. The personal hearing was held and the parties were represented by a counsel and written submission is also filed in December 95. After hearing the appellant, and considering the available material on record, the impugned order was passed vacating the seizure of the goods on withdrawing the show cause notices issued to all the noticees as not sustainable on merits and void in law. It is ordered the subject bill of entry pending assessment should be finalised after accepting the licence produced and the assessing officer would be free to take such evidence regarding the value as it deems proper and detention certificate for the delay caused in the clearance of the subject consignment should be issued. The said order was reviewed by the Board objecting to the finding of the Commissioner in the impugned order on various grounds mentioned in paragraphs 1 to 10 of its order dated 19.12.96 by the Member, Central Board in Excise and Customs recommending to approach the Tribunal on the application under Section 129D(1) of the Customs Act. Hence this application.
5. Shri A. Ashokan, Ld. JDR for the appellant, applicant has contended in the course of the argument that the decision in AIR 1954 Patna 262 of Sri Bhabapritananda Oja is not applicable to the instant case on hand to the contention that the DR1 cannot be considered as an authority having jurisdiction for the issue of notice and adjudication. The Notification 19/90 dated 26.4.90 specified that the Asst. Director DRI is also Asst. Commissioner of Customs, have the powers to seize the goods and investigate into the offence committed, and issue show cause notice answerable to appropriate quasi-judicial authorities. There is no possibility in the instant case of the DRI is acting as a quasi-judicial authority as no such power is vested in it. As per the decision of the Calcutta High Court in in UOI v. Sigma Electronics the assessment made by a Dy. Commissioner of Customs being provisional assessment, the DRI is having authority to make further enquiry for assessing the duty thereof. The DRI had the powers to seize and issue show cause notice. The impugned order contrary to it cannot be upheld. Paragraph 47 of the Exim Policy of 92-97 and the Customs Notification 203/92-CX prescribes some nexus between the goods to be imported and the goods, which are to be exported, Paragraph 47 applies to the goods involved in this case provided under the duty exemption scheme the import of raw materials, intermediaries, components, consumables, parts accessories, packing materials and computer software required for direct use in the product to be exported may be allowed to be imported duty free. The Notification referred above provides that the material covered by a Value Based Advance Licence can be imported duty free. The material means the material required for manufacture of export product, as per the explanation to the notification. The decision of the Bombay High Court in S.V.A. Udyog Viniyog v. UOI 1993 (46) ELT 376 held that the nexus between the raw material imported and the export product has to be established. If the exported goods do not contain any kind of fabric which has been imported, the goods imported cannot be construed to be for replenishment as per the precedent order dated 25.9.96 vide Order No. 2910, 2961 in the case of M/s. Garment Craft. The finding of the Commissioner that what is permissible to be imported under transferred advance licence for the goods which are mentioned therein and not the same goods which were used in the case exported is not sustainable.
6. He has further contended regarding the fax message that fax messages dated 24.1.95, 7.2.95 are very much relevant to the subject import. The statement of the appellant Ramesh Nebhnani dated 9.2.95 and the fax message dated 21.1.95 clearly establishes that at least 2 of the 5 consignments covered by invoice No. 10/95 and 27/95 there was direct evidence of under-invoicing and further reveal that compensatory payments were made for the differental amounts between the invoice price and actual price through a credit USD account maintained by the importers with the foreign supplier. Thus there is a corroboration of the statement of the appellant by these two fax messages. Even if the statement is retracted the evidentiary value of the documentary evidence cannot cease to exist. The corroborative evidence render the statement of the parties more correct and authentic. From the six messages and the invoice produced for clearance and the statement of the partners of the importing firm it is clear that the value of fur fabrics were varying from USD 3.57 to USD 6.80 per yard depending upon the print, length of pile and weight per yard. The unit price was USD 4 and 4.15 per yard in the Invoice No. 10 and 27/95, which is against the declared price of 1.5 USD per yard, there was no direct evidence of under-invoicing in respect of the other three consignments under the invoice 488, 500, 513/94. But since the goods covered by these invoices were similar to the good under the above two invoices, the value of these goods should also have been determined on the basis of the price quoted in the fax messages for different grades/colour/pile length/print of the fur fabrics. The finding of the Commissioner in rejecting the proposed enhanced price is not correct. He has further argued that the fax dated 9.2.95 from Peurto Rico seized in this case has given the details of the price of different specification of artificial fur fabrics varying from USD 4.65 to USD 6.68 per yard depending upon quality, print and length of the pile fibre for artificial fur fabrics. In view of this, the Commissioner should not have accepted the uniform price declared of USD 1.5 per yard irrespective of the length of the pile fibre. The contents of the fax message relating to invoice No. in the lower half are connectable to the importer, and the finding of the Commissioner that the fax message dated 24.1.95 had been planted with an intention to implacable the appellant and it has no connection with the present importers simply because they have produced a copy of the fax from overseas supplier with certain variation. The finding of the Commissioner that the statement of Ramesh Nebhnani is forged by addition and the statement is not voluntary in nature. The statement of Anil Nebhnani is not at all considered which has supported the material facts in the statement of the appellant Ramesh Nebhnani. He has not retracted his statement. The statement of Ramesh Nebhnani is in his own handwriting under the signature wherein the additions are made by him, which are grammatical corrections without materially altering the meaning of the sentence. The various fax messages seized materially corroborate on price with the reply to the show cause notice of Anil Nebhnani the appellant. The impugned order is not clear as to who has planted the fax message. Even if they were transmitted from Mahaveer Communications, these are genuine documents from their Taiwanese supplier. There is no proper and conclusive evidence to show that they were planted. The impugned order does not give any reason to hold that it was planted and the statement was forged without identifying who has done them. There is no proper application of mind on the allegations made against the DRI officials in coming to such conclusion. Apart from the seized fax messages, there were two crucial documents recovered in torn condition and re-assemble during panchnama. One of the fax message is dated 7.2.95 originated from the supplier and another a reply in handwriting of Anil Nebhnani dated 8.2.95 under the letterhead of Nebco Traders. The fax message dated 9.2.95 could not have been faxed from Mahavir communication on 8.2.95.
7. Shri V.S. Nankani, Ld. Counsel for the respondent submitted that the imports are between 11.12.94 to 25.1.95 and five consignments are involved showing the invoice no. and date in the show cause notice. Six fax messages referred to therein are quite not relevant to the imports. Three fax are after 7.2.95 and same are at negotiating stage. In the fax dated 8.2.95 no reference is made to Ramesh Nebhnani who is the actual importer. It is not at all connected to the imports on hand. There is no mention of rainbow or tiger in above fax. The fax dated 13.7.94 was found in February 95 in the appellant's premises and it clearly shows that the date 13.7.94 is of identical nature. The show cause notice page 3 does not refer to five consignments. The finding in the impugned order in page 151 is not at all challenged. The goods are in docks and they are not compared with the goods described in the fax. The fax of January 95 in pages 54 to 56 of the paper book shows overwriting in pages 55 and 56 found on 7.2.95 and the original fax was from the supplier. The handwriting in the above two pages are different. There is no mention of net profile in the above fax. The say of Anil Nebhnani and addition in page 76 of the paper book and affidavit in pages 124 and 125 are inconsistent as according to him Ramesh Nebhnani looks after the import. Page 59 refers to 7.2.95 shows that the amount and invoice No. mentioned therein are checked in the bank. To prove the undervaluation the correspondence in page 60 of the paper book is still to be materialised in future. It is not shown that the word Nebco Trading Co. was written by Anil Nebhnani. Nothing is shown about the invoice No. 26/95. Paragraph 56 of the paper book pertaining to the supplier's letter showing the mailing address contain the fax number 91-22-2855848 of Mahavir Communications. Clause (d) in the show cause notice in page 3 bottom, and page 4 top, pertains to that. It pertains to one fax only. It is not related to the goods involved in this case. There is no admission by the appellant Ramesh Nebhnani about the underinvoicing. The statement has been retracted by him Page 9 of the appeal memorandum and page 55 and 54 of the paper book shows that only the two fax messages dated 24.1.95 and 7.2.95 are very much relevant to the subject import. The importation that the fax message dated 24.1.95 read with statement of 9.2.95 of Ramesh Nebhnani clearly shows that at least two of the five consignments covered by the invoice No. 10-27/95 there was a direct evidence of under invoicing and further revealed the appellant of compensatory payment for differential amount between the actual price and the invoice price through the credit of US $ account maintained by the importers in the foreign supplier. The statement of Ramesh Nebhnani is corroborated by this two fax message dated 24.1.95. The contemporaneous imports did not show the higher value in the documents. The manufacturers invoice was produced and on the basis of its rate the impugned order is passed, which is not challenged in the appeal. The import is between 30.1 to 8.2.95. Under Section 110 of the Act, the DRI had no power to seize, only power to search was there. Section 2(34) of Customs Act defined proper officer according to which the DRI must be duly authorised to seize and issue show cause notice and adjudicate. Regarding the enquiry on fur, it is not disclosed. Artificial fur lining is dealt with. The appeal grounds are not based on any enquiry. The appellant has relied on precedent order of the Bench in C-II/185-58/99 dated 3.8.99 in support of their contentions. In reply, it is contended that under Notification 19/91 the Jurisdiction was conferred. The details are shown regarding the fur lining as described in paragraph 3(d) in show cause notice with the invoice No. 26-27/95 of the paper book. In page 77, payment of amounts is admitted and figures tallied in page 55. The statement 9.2.95 shows the seizure.
8. From the above contentions of both sides and also from the impugned order, it is apparent that the validity of the show cause notice issued by the Asst. Director DRI is challenged on the ground that he is not the proper officer. This requires first consideration. From the show cause notice 5.4.95 it is seen that in paragraph 12 the charges are levelled against the respondents that the action of Akash Enterprises, Mumbai, Anil Nebhnani and Ramesh Nebhnani in importing five consignments of artificial fur fabrics of 32,336.5 yards per 47677 sq. m. and declaring the value of Rs. 15,30,325 in the four bills of entry and in the fifth invoice as against the ascertained value of Rs. 48,47,862, when has resulted in the evasion of 33,17,537 and an attempt to evade customs duty to the extent of 29,77,495 is made. In clause (b) of the said paragraph it is alleged that the respondents are not entitled to DEEC benefit for duty free clearance to the goods as the artificial fur fabrics which does not appear to have been used in the export product namely leather garments, leather coats, jackets which were exported and the licence was made transferable in terms of import export policy. The artificial fur lining is a consumer goods under the Import Policy, and attract levy of normal customs duty applicable to each consignment. In paragraph 13 they were called upon to show cause to the Collector of Customs, New Customs House Bombay as to why the goods covered by four bills of entry and one container as detailed in paragraph 3 and annexure to the show cause notice, it had declared value of Rs. 15,30,325 should not be reassessed to the value 48,47,862 and should not be held liable to confiscation under Section 111(d) and (m) of the Customs Act read with Foreign Trade (Development and Regulation) Act, and also for the personal penalties under Section 112 of the Customs Act. So from the above, it is clear that the question of valuation element is also involved in the case after reassessment apart from the question of confiscation and imposition of penalty.
9. In the grounds of appeal regarding this aspect it is urged in page 7 and 8 in paragraph I that the DRI is not vested with the quasi-judicial power and there is no question of conflicting orders between the two concurrent authorities. Under the Notification 19/90 dated 26.4.90 the Asst. Director DRI is also an Asst. Commissioner of Customs having powers to seize the goods, investigate in the offence committed and issue show cause notice answerable to a proper quasi judicial authority. The assessment made by the Dy. Commissioner of Customs being provisional the DRI is having authority to make further enquiry for assessing the duty thereon, as per in UOI v. Sigma Electronics.
10. Under the Notification 19/90(NT) dated 26.4.90 at serial No. 4 of the Table in the said notification for State of Maharashtra, Madhya Pradesh and Goa, the Asst. Collector/Asst. Directors, Directorate of Revenue Intelligence, Mumbai zone has appointed as the Asst. Collector of Customs under Section 4(1) of the Customs Act, 1962. Under the Notification No. 161-Cus (MF) (DR) dated 22.6.1963 under Section 6 of the Customs Act, the Central Government has entrusted to the Dy. Director, Asst. Directors and Asst. Commissioners working in the Directorate of Revenue Intelligence, New Delhi with the function of Asst. Collector of Customs under Section 5(1) of the said Act with the powers to search premises. From the above, it is clear that the specific powers are conferred on the Asst. Director and Dy. Director and Asst. Commissioner in the DRI, New Delhi under the particular provision. The Notification No. 19/90 only appoints the Asst. Director, DRI as the Assistant Collector of Customs under Section 4(1) of the Act for the areas mentioned. Thus, it is seen there is a vast difference between these two notifications regarding the powers conferred on the officers of the DRI. Apart from that, the decision in 1993 (89) ELT 604, the Commissioner of Customs Mumbai v. Pune Roller analysed the meaning of proper officer under Section 2(34) of the Customs Act. According to paragraph 15 to 20 of the said decision, it is held that though the Asst. Director DRI, has been designated the Asst. Collector of Customs, is not a proper officer in terms of Section 2(34) of the Customs Act to be designated as such. He must have been assigned those functions by the Board or the Collector of Customs. There is no evidence available on record to show that such specific function of levy and collection of duty or to raise a demand by issue of show cause notice have been specifically assigned to this officer. The designation as Asst. Collector of Customs under the Notification 19/90 entitles to perform other functions which could be performed by the Asst. Collector. Going by the definition of proper officer as given in the Act, it indicates that only such of the officer even out of the officers of the cadre of Assistant Collectors who are specifically assigned the work of levy and collection of duty can issue the show cause notice in their capacity of the proper officer with no specific assignment of such duty either by the Board or the Commissioner of Customs, DR1 (AD) cannot issue a notice contemplated under the act. This legal position is not specified in the present case, the issue to be determined for imposing the penalty depends upon the under invoicing and the admitted evasion of duty as pointed out in the show cause notice. The question of confiscation under Section 111(d) and (m) is also void. These things depend upon the validity of the import, and the under invoicing which covers evasion of customs duty and the re-assessment of the seized goods on the ascertained value as against the declared value. So under these circumstances, the above case law clearly applies to the instant case on hand. As per the above ruling the present show cause notice issued by the Asst. Director DRI is without authority of law. He is not competent to issue such show cause notice without specific confirmation of powers under the provisions of the Customs Act, namely Sections 28, 111 and 124 of the said Act. The finding in the impugned order in page 11 under Clause (b) that of the Bombay Customs House a proper officer to assess the goods in the quasi judicial manner and clear the bill of entry and they are seized to the matter with the filing of the bill of entry is proper and correct. So to that extent the decision in the impugned order, has to be read with the show cause notice, has to be accepted. Apart from that, in view of the decision in referred above, the show cause notice issued in this case is not legal and valid. On this ground itself without going into the merits of the case, the department's case cannot be upheld. So under these circumstances, the department appeal application aproched challenged in the impugned order cannot be allowed. The points raised is answered. Hence we pass the following order.
ORDER For the reasons discussed above, the appeals cannot be allowed on the ground that the show cause notice issued in the case is not legal and valid and is without authority. These are dismissed.