Customs, Excise and Gold Tribunal - Tamil Nadu
Indowind Energy Ltd. vs Cc (Sea Port-Import) on 26 October, 2004
Equivalent citations: 2005(179)ELT421(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. This appeal is directed against order in Original No. 1997/2004, dated 30-3-2004 passed by the Commissioner of Customs, (Sea-port Import) by which the Commissioner has rejected the value of Rs. 11,12,400/- (FOB) and assessable value of Rs. 13,60,868/- declared by the importer for the goods viz. 18 windmill blades imported by the appellants herein vide Hill of Entry No. 522475, dated 21-08-2003, and re-fixed the value of the said goods at Rs. 90,00,011/- (FOB) and the assessable value at Rs. 1,02,10,924/- under Rule 8 of the CVR. Consequently he has demanded differential duty of Rs. 26,55,017/- under Section 28(1) of the Customs Act, 1962 and has ordered adjustment of Rs. 3,02,496/- paid by the importer towards duty liability. The Commissioner has also confiscated the goods under Section 111(m) of the Act, ibid, with option to redeem the same on payment of fine of Rs. 10,22,000/- in lieu of confiscation under Section 125 of the Act, besides imposition of penalty of Rs. 5,11,000/- under Section 112(a) of the Act.
2. The brief facts of the case are that the appellants herein imported 18 Nos. of Windmills - Blades from M/s. Oak Creek Energy Systems Inc. USA vide Bill of Entry No. 522475, dated 21-8-2003 under Invoice No. 197, dated 12-8-2003 and declared the invoice value as USD 24,000 and the value was assessed at Rs. 13,60,868/-. The importer had paid duty on merit @ 25% BCD and 4% SAD. After assessment the subject goods were examined and pass out orders were given by the Customs. Pursuant to the receipt of information by the Officers of the Directorate of Revenue Intelligence (DRI) that the importer-appellants undervalued the goods, they visited the office premises of the appellants on 25-8-2003. Perusal of the documents revealed that that an amount of Rs 10,08,565/- was paid by the importer to the steamer agent towards freight charges and they had not declared the same to the Customs at the time of assessment of the Bill of entry. It was found that the M/s. Oak Creek Systems, USA from whom the goods were purchased, was not the manufacturer of the goods. The said documents were re-examined by the officers of DRI on 26-8-2003, in the presence of officers of Customs, the importer-appellants and the CHA. The consignment in three containers was found to contain 18 blades and 18 Vanes for windmill. The manufacturer of the goods was found to be M/s. Advanced Blade Manufacturing Inc. Pinconning, USA. As the goods appeared to be under-valued, they were detained for verification of value. As a follow up action, statements were recorded from one Shri Damodaran, Vice President (Projects) of the appellants wherein he has inter alia stated about the description of the blades and that the appellants had placed an order for 36 blades and made payments for 18 blades and the same were shipped to the company in three containers and it was the first import by their company. He has also stated that the Managing Director of the Company Shri K.V. Balakrishnan, was in liaison with the supplier regarding the purchase of the wind turbine blades and the inspection of the same was carried out by their group Company M/s. Subuthi Overseas Inc. representative in USA and that the manufacturer of the goods was M/s. American Wind Turbines (AWT), He has also stated that he was not aware of the original cost of the blades and that the price shown in the invoice was cheap compared to the prevailing market price. He has further stated that they being the first time importer, did not know whether freight charges were to be included in the assessable value. Shri R. Balajee, Vice President of the appellants Company, on 26-8-2004 gave a corroborative statement. Statement was also obtained from Shri K.V. Balakrishnan, Managing Director on 10-9-2004 wherein he corroborated the statements given by other two persons about the fact of not giving information to the department about the freight charges paid, because of ignorance. He has also stated that though they tried to get manufacturers' invoice, they could not get it. He has also stated that no insurance for the goods was taken and he did not know whether the shipping company had taken insurance or not. He has also presented a DD for Rs. 3,02,496/- towards differential duty arising out of the non-inclusion of freight charges in the assessable value. It was in these circumstances, show cause notice was issued to the appellants which culminated in the order of adjudication passed by the Commissioner as noted above, which is challenged before us.
3. Shri AK Jayaraj, learned Counsel for the appellants at the outset submitted that the blades were manufactured in the year 1995-96 and there was no takers for the same and the supplier had to sell the same at the price negotiated between them and the price mentioned in the invoice is the actual price paid by the appellants. He has pleaded that the department proceeded to enhance the value based on the Chartered Engineer's certificate. He has further pleaded that that even according to the Department, the goods imported in the present case are not second-hand goods. The goods involved are new. This fact has been noted in para 15(v)(b) of the impugned order. He has also submitted that even the terms of Public Notice No. 80/94 relied upon by the Commissioner, lays down that second hand machinery may be got appraised by Chartered Engineer. When the Public Notice enjoins that the second hand machinery may be appraised by Chartered Engineer, subjecting the goods involved in the present case, which are : not second hand goods even according to the Department, was not required, argued the learned Counsel for the appellants. Therefore, reference to the Chartered Engineer was not mandated by any rule or instructions issued by the Department. He has also submitted that even the Inspection report started with an observation "used goods" but the container wise inspection report mentioned the goods as "new". There was therefore, contradiction in the report of the Chartered Engineer itself. Therefore, no credence can be given to the said certificate which was the sole basis for enhancement of the value. He has also submitted that the Managing Director or any other officers from whom statements have been recorded have not admitted that there was any mis-declaration with regard to the value of the goods. What they have not declared was freight charges which were not included in the assessable value, because of ignorance as this was the first occasion they had imported the goods and as soon as it was pointed out that freight charges have to be included for the purpose of assessment, the differential duty arising out of the inclusion of freight charges were paid before the issue of show cause notice. He has submitted that the Department has not let in any evidence that the commercial invoice is not genuine or that any amount in excess of the transaction value has been remitted by the appellants or that there was any mutuality of interest between the buyer and the seller. He has therefore, submitted that there was no reason to reject the transaction value. In support of his plea, he pressed into service the judgement of the Tribunal in the case of Spice Communications Ltd. v. CC, New Delhi reported in 2004 (170) E.L.T. 249 wherein it was held that in order to reject the transaction value, has to be shown that the transaction value between parties were influenced by any consideration other than commercial. The Bench in the said judgement has also relied upon the judgement of the Hon'ble Apex Court in the case of Eicher Tractors Ltd. v. CC, Mumbai, reported 2000 (122) E.L.T. 321 (S.C.) wherein it was held that unless warranted by the exceptions provided in Rule 4 of the Customs Valuation Rules, transaction value should be accepted as assessable value. He has also invited our attention to the judgement of the Hon'ble Apex Court in the case of Sounds-N-Images v. CC, reported in 2000 (117) E.L.T. 538 (S.C.) wherein it was held that "it is always for the Customs authorities to establish by methods known to law and in a satisfactory manner that the value of imported goods is not what the importer says it is and what that value actually is". He submitted that in this case the burden was cast on the department that the transaction value declared by the appellants was not correct and this burden has not been discharged and hence, the transaction value has to be accepted as the correct value. He has also submitted that in terms of Customs Notification No. 21/2002, dated 1-3-2002 as amended by Notification No. 26/2003, dated 1-3-2003 the appellants were entitled to concessional rate of customs duty at 5% BCD. But the appellants could not get the required certificate from the Ministry of Non-conventional Energy, recommending the grant of exemption in time, and hence had to pay duty at 25% BCD and 4% SAD. He submitted that this factor should have been taken into consideration by the Commissioner, the, therefore, prayed for setting aside the impugned order and allowing the appeal.
4. Shri C. Mani, learned JDK appeared for the Revenue and defended the impugned order. He, in particular invited our attention to paras 15(vi) (a) onwards of the impugned order wherein the Commissioner has very elaborately dealt with the aspect pertaining to rejection of transaction value. He has also submitted that the objection of the appellants to the engagement of Chartered Engineer for certification of the goods has no basis, because the Commissioner in para 15(vi)(b) has categorically held that this is a unique situation wherein the goods to be valued were manufactured almost 8 years ago, but reportedly not put into use and hence not second hand and the importer has not furnished the manufacturer's price. In such a situation, the value has got to be appraised by professional valuers of goods/machinery imported from all over the world, He submitted that it was in these circumstances that Chartered Engineer was engaged for the purpose of valuation. Therefore, there was no bar for engaging Chartered Engineer who has given the certification after making market enquiry as mentioned in the report, dated 24-9-2003. He has also submitted that the importer has suppressed the fact with regard to payment made for freight charges and has thus violated the provisions of Rule 9(2) of the CVR. Winding up his submissions, he submitted that the Commissioner has passed a very reasoned order and prayed for upholding the same.
5. We have carefully considered the rival submissions. We observe that in this case, the impugned goods viz. Parts of Windmill - Blades numbering 18, made of wooden cellular material were imported by the appellants. The goods were manufactured by Advanced Blade Manufacturing Inc. (American Wind Turbines), Pinconing, USA and supplied by M/s Oak Creek Energy Systems Inc. USA. The Commissioner has noted in para 15(vi)(b) of the impugned order that the goods were manufactured in the year 1995 and were not used or second hand. We have also gone through the Chartered Engineers' certificate wherein it is mentioned that while the blades are manufactured in 1995-96, the vans were new. In any event as noted by the Commissioner, since the goods after manufacture were not put to use, it cannot be considered as second hand goods. We further observe that in terms of Public Notice No. 80/94 second hand machinery may be got appraised by Chartered Engineers. In the present case, the reason for engaging a Chartered Engineer for inspection of the goods, as seen from the impugned order, was that the manufacturer's price was not provided by the importers. It is not the case of the department that they have made any efforts to get the manufacturers' price through the diplomatic channels when it was not provided by the appellants. Based on the opinion given by the Chartered Engineers, the Commissioner proceeded to enhance the assessable value of the goods and demanded differential duty on the goods imported. The contention of the importer-appellants is that when Public Notice specifically envisages that second hand machinery may be got appraised by Chartered Engineers, it was outside the purview of the instructions issued by the Board to get the goods inspected by Chartered Engineers and to use that inspection report against them. Therefore, the report cannot form the basis for enhancement of the price. We observe that under-valuation is alleged by the Department against the appellants. When that be so, it was for the Department to disprove the value declared by the appellants. This burden cast on them has not been discharged by the Revenue. Further, the fact that the goods were manufactured in the year 1995-96, though not used, is admitted by the Department. Needless to say that the goods manufactured with wooden cellular material about eight years prior to the importation would get deteriorated and depreciated in value, particularly when the goods had stains and minor scratches, as seen from the inspection report, though the goods were not second hand, being not put to use after manufacture. Further, the Chartered Engineer's certificate does not disclose the nature of enquiry made by them, except saying that market enquiry was made by them and that the life starts from the date of installation. Further, it is not the case of the Department that the transaction value between the parties were influenced by any consideration other than commercial, and when it was not so, in our opinion, there is no reason to reject the transaction value, in terms of the judgement of the Tribunal in the case of Spice Communications Ltd. v. CC, New Delhi reported in 2004 (170) E.L.T. 249 (Tri. - Del.)- In the circumstances, in our considered view, there was no reason to doubt the genuineness of the transaction value declared by the appellants. In the present case as seen from the records, the goods were lying with the supplier unsold ever since 1998 and the supplier had to resort to distress sale to avoid further damage, because of the exposure to sun and the price agreed upon between them was 24,000 US$ (FOB) in terms of the letter of the supplier dated 8-9-2003 which is filed on page 52 of the paper book. This value is reflected in the invoice. The charge of mis-declaration is alleged against the appellants on the ground that that they have not disclosed to the department the freight charges of Rs. 10,08,565/- paid by them. The Managing Director and the two Vice-Presidents of the company on the other hand in their initial statements stated that this was the first time they resorted to import and they were not aware whether the freight is also to be included in the assessable value. On perusal of the invoice, it is seen that the cost of the goods is shown as USD 24,000 (FOB). In order to arrive at the assessable value (c.i.f.), insurance and freight charges are required to be included in the FOB value. It was, therefore, incumbent on the appraising officer to have asked the importers as to the charges paid by them on account of freight and insurance. This was not done and the goods were cleared and it was at the instance of the DRI, that it was found that the freight charges were not included and on being pointed out about non-inclusion of freight charges, the appellants paid the differential duty of Rs. 3,02,496/- arising out of then on-inclusion of freight charges during investigation and before the issue of show cause notice which was on 25-09-2003. So far as insurance is concerned, the Managing Director of the appellants in his statement dated 10-9-2003 has slated that they had not paid any insurance to any company. This position is not disputed by the Revenue. In the circumstances, in our opinion, no mala fide can be attributed against the appellants for the non-inclusion of the freight charges. Consequently, misdeclaration as alleged against the appellants, in our opinion, cannot be sustained more particularly when there was no misdeclaration about the nature of the goods, the country of origin, and the supplier etc In the backdrop of the factual position as brought out above, and in the facts and circumstances, in our view, there was no reason to doubt the genuineness of the transaction value, in terms of the judgment of the Hon'ble Supreme Court in the case of Eicher Tractors Ltd. v. CC, Mumbai reported in 2000 (122) K.L.T. 321 (S.C.), wherein the Hon'ble Supreme Court has held that unless warranted by the exceptions provided in Rule 4 of the CVR, transaction value should be accepted as the assessable value. In the present-case, it is not the case of the Revenue that the exceptions provided are attracted to fix the value under Rule 8 of the CVR as has been done in the present case. Therefore, the Revenue has not brought home the charges against the appellants. We also note that the appellants in the present case had to pay duty @ 25% BCD and 4% SAD as against the concessional rate of duty of 5% BCD, as they could not get exemption certificate from the Ministry of Non-Conventional Energy in time, in terms of Notification No. 21/2002, dt. 1-3-2002 as amended, probably because of ignorance. This is also an extenuating factoring favour of the appellants.
6. In view of our discussion and finding above, we hold that the impugned order is not sustainable and we set aside the same and allow the appeal with consequential relief if any, to the appellants.