Custom, Excise & Service Tax Tribunal
M/S. R.R. Enterprises vs Cc, Hyderabad (Vice Versa) on 20 April, 2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 06/04/2011
Date of decision:..
Appeal No.C/156, 167/06; C/233/07
(Arising out of Order-in-original No.04/2006-Adjn.-Cus dt. 18/1/2006 passed by CC&CE, Hyderabad)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. R.R. Enterprises
..Appellant(s)
Vs.
CC, Hyderabad (vice versa)
..Respondent(s)
Appearance Mr. B.V. Kumar, Advocate for the appellant.
Mr. Harish Kumar, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran All these appeals are directed against Order-in-original No.04/2006-Adjn.-Cus dt. 18/1/2006. The details are;
a. Appeal Nos.C/156, 167/06 are filed by M/s. R.R. Enterprises (RRE).
b. Appeal No.C/233/07 is filed by the Revenue.
Since the above said appeals are arising out of the same Order-in-Original, they are being disposed by a common order.
2. The relevant facts that arise for consideration are that on 29/11/2000, search operation was conducted at the premises of RRE. As per RG 23A part-I register there was a stock balance of 19,290 kg. of raw material i.e Copper Clad Laminates (CCL for short) as on 27/11/2000 which was recorded in RG23A part-I as imported under Bill of Entry No.473 dt. 17/7/2000. The balance stock of CCL was seized under a panchanama on 29/11/2000 on a reasonable belief that prime quality material had been imported by RRE in the guise of C grade / rejects. Subsequently, upon weighing them, it was found to be 11821 kgs. in weight i.e. there was a shortage of 7469 kgs. of CCL. In order to determine the quality of CCL lying in the factory premises, M/s. Bakelite Hylam, Sanathanagar, Hyderabad who are pioneers in the manufacture of CCL were requested to ascertain the quality of the material, who in its test report dt. 17/5/2001 testified that on visual appearance of the sheets they can be regarded as sub-standard quality but on the basis of tested properties the samples conform to international standards (NEMA, MIL). Therefore, it appeared that the material imported and seized was of prime / standard quality. Various statements of many persons were recorded. On scrutiny of the documents which were recovered during the course of their investigation, the lower authorities found that the invoice connected to Bill of Entry No.473 indicated three varieties of CCL. The conclusion reached by the investigating officers was that the appellant firm herein had mis-declared the goods. The investigating officers have also recorded the statements of various purchasers of the items manufactured and cleared from the appellant firm. Show-cause notice was issued for the purpose of confirmation of the demand of the duty on goods short found and also for confiscation of the said goods and also for demand of differential duty on the balance amount of CCL which were imported by Bill of Entry No.473 and for the confiscation of the said goods. The appellant company contested the show-cause notice on merits and put forth various defences before the adjudicating authority. The adjudicating authority, after considering the submissions made, came to the conclusion that the charge of mis-declaration of the imported goods as rejects was not proved and coming to such conclusion dropped the proceedings for demand of the differential duty on the charge of mis-declaration. The adjudicating authority, however, confirmed the demand of duty on the quantity of CCL found short during the visit of the premises of the appellant-company and imposed a penalty of Rs.50,000/- on the partner of the company under provisions of Section 112(a) of the Customs Act, 1962 (the Act) but did not confiscate the goods found short as they were not physically available. Aggrieved by such an order, the assessee and the Managing Partner are before us in appeal. Revenue is also aggrieved by the said order as the adjudicating authority has dropped the proceedings for the demand of the differential duty on account of mis-declaration of the goods.
3. Assailing the order, the ld. Counsel for the assessee would submit that the adjudicating authority has erred in not considering the fact that the quantity found short were in fact brought in to the factory but were not able to locate when the officers visited the factory. It is his submission that there is no evidence to show that the shortage of 7469 kgs. was real shortage and has not gone into the factual matrix as to whether this shortage has arisen due to clandestine clearance of the goods. It is his submission that the adjudicating authority has confirmed the demand without recording any finding that the goods were not used. It is his submission that the adjudicating authority has erred in confirming the demand as they could have been given an opportunity to produce the records of accountal of the goods and demonstrated that the goods which were found were not actual short.
4.1. Ld. SDR on the other hand would submit that the provisions of Notifications are very clear and the assessee is required to maintain the records for the purpose of inspection and checking of the same. He would submit that having not been able to satisfy the authorities as regards the reason for shortage, the adjudicating authority was correct in confirming the demands.
4.2. As regards the Departments appeal, he would submit that the adjudicating authority has totally erred in dropping the demands. It is his submission that the Departments stand has not been properly appreciated by the adjudicating authority. He would submit that the adjudicating authority has erred in dropping proceedings by mis-interpreting the report given by M/s. Bakelite Hylam Ltd. at his own in a specific manner rather than seeking a re-report from the said M/s. Bakelite Hylam Ltd. It is his submission that in such a scenario, the adjudicating authority should have taken into consideration various corroborative evidences which were in form of the statements given by the buyers of RRE. It is his submission that the consignment under reference is covered by an Invoice dt. 7/6/2000 issued by a company in Taiwan, the consignment was particularly declared as CCL C grade and rejects while the invoice indicate particular shown as A grade. It is his submission that it is pertinent to note that unit price of the A grade and C grade was the same, which would indicate that nobody will supply A grade goods at the price of C grade and vis-`-vis. It is his submission that on these evidences, Commissioner ought to have been ascertained and discussed in his order the pricing pattern offered by RRE to the customers on the consignment in dispute. It is his submission that only after undertaking this exercise, the adjudicating authority should have drawn some inference as to whether the impugned goods are of sub-standard quality or otherwise. It is his submission that in view of this, the adjudicating authoritys order of dropping the proceedings of mis-declaration of goods seems to be inappropriate speaking order and is fraught with defects of presumption. In view of this, he seeks remand of the matter.
5. Ld. Counsel on the other hand would submit that the adjudicating authoritys order is quite clear. It is his submission that the test results of CCL samples sent by the customs authorities to M/s. Bakelite Hylam Ltd. needs to be gone into. He would draw our attention to the test report of samples. It is his submission that M/s. Bakelite Hylam Ltd. had clearly indicated in the said report that on the basis of visual appearance of the sheets, they can be regarded as sub-standard quality while testing the properties, it was remarked that they are conforming the standards of NEMA, MIL. He would submit that Revenue has not able to prove authoritatively that the goods imported were mis-declared as C grade.
6. We have considered the submissions made by both sides at length and perused the records.
7. As regards the issue No.1, i.e. duty liability for shortage of the quantity of 7469 kgs. of CCL imported by availing the benefit of Notification No.25/99(Cus) read with Customs (Import of Goods on Concessional rate of duty for manufacture of Excisable goods) Rules, 1996, the appellant is not able to prove their case. As per the said Customs Rules, it is mandated that the appellant should and maintain the stock registers of the goods imported at concessional rate of duty for the use in his factory. In the absence of any such evidence that the said short found quantity was in fact used by the appellant in his factory premises for the purpose of manufacture, we are of the considered view that the findings recorded by the adjudicating authority for confirming the demand are correct and needs to be upheld. We do so. This appeal to this extent is rejected.
8. As regards the penalty of Rs.50,000/- imposed on the Managing Partner of RRE u/s 112(a) of the Act, we find that he was the person who was looking after the day-to-day affairs of the company, he should have been more diligent to check and counter-check the stock position in his factory premises. Due to his non-effective supervision, there was a shortage of 7469 kgs. of CCL which were imported under concessional rate of duty. We are of the considered view that the Managing Partner needs to be penalized for his activity and hence, we uphold the penalty imposed by the adjudicating authority under Section 112(a) of the Act. But in the facts and circumstances of the case, we find a penalty of Rs.50,000/- is not proportionate to the demand of the duty which has been confirmed, in view of the above, upholding the imposition of penalty on Shri Ravi Ganeriwal, we reduce the same to Rs.25,000/-. Subject to this modification, the appeal is disposed of.
9. As regards the Departments appeal, we find that the adjudicating authority while dropping the demands issued on the allegation of mis-declaration, has recorded the following:-
13. I have examined each of the above material evidences to study its sustainability vis-`-vis the provisions of Law and my conclusions are discussed below:-
13.1. Prima facie, the statements of the various buyers, obviously pertains to the consignments purchased by them earlier and in no way can be related to the consignment, imported vide Bill of Entry No.473, now under dispute. No imputation can be made against the importer for the disputed consignment based on such statements. The same logic applies to the reliance made, on the past mis-declarations made by the Importer before Mumbai customs during 1998. The pas mis-conduct, if any of the importer cannot be a ground for the allegations in the present consignment. Any charges in the present notice can be sustained only based on the evidence gathered during the course of the present case.
13.2. I have gone through the analysis report of Bakelite Hylam Ltd. The report is ambiguous in the sense, on one hand it certifies that the goods conform to the NEMA standards on the basis of tested properties and on the other hand it goes on to certify that by visual appearance the goods are to be regarded as sub-standard quality. If the goods are of sub-standard quality they obviously cannot be used for the application they are meant for. The only way to reconcile this apparent contradiction is to understand that the goods may have been prime quality but for the defects noticed. It is possible that these parts of the CCL sheets would be retrieved by the importer and used. But if the sheet is to be judged overall, it would still be not prime quality, as contended by the notice. In any event the certificate is not conclusive to say the CCL sheets are of prime quality.
13.3. As regards to invocation of Rule 6 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 for redetermination of value of the impugned goods, I find, as discussed above, there are no sufficient grounds to reject the transaction value under Rule 4 ibid. Therefore, proceeding to Rule 6 ibid does not arise.
10. We find that in an identical issue in respect of the very same respondent, vide Final order No.1246-1247/2010 dt. 24/9/2010, this Bench while considering the appeal of the respondent had an occasion to go through the situation wherein the adjudicating authority had extrapolated the value of the live Bill of Entry to the past consignments which were imported by the appellant. The order recorded by this Bench on this issue is reproduced herein below:-
12. As regards past imports covered by Bills of Entry dt. 12/5/2000 and 7/10/1999, we have found no case for the Revenue. It appears that the yardstick applied in relation to the live consignment has been mechanically extended to the past imports. We do not think that the view taken in respect of the live consignment can be extrapolated mindlessly to cover the past imports. We have not found any evidence in support of the findings of misdeclaration of description and value, entered by the Commissioner in relation to the past imports. The only document on the basis of which these findings were entered in relation to the goods covered by Bill of Entry dt. 12/5/2000 is an invoice, copy of which is available at page 93 of paper book Volume-II. The Revenue has considered this document to be an invoice issued by Isola Asia Pacific (Singapore) Inc, to R.R. Enterprises. There is no mention of the name of the consignee / buyer in this document, nor does this document bear any date, nor is it duly signed. The Revenue has heavily relied on this document (so-called invoice) which indicates the name of the goods as Glass Epoxy Copper Clad Laminates and the value of the goods as USD 71,125. Ld. SDR has only reiterated the observations of the Commissioner in relation to this document. But we have found substance in the submissions of the Counsel. This document, with all the said infirmities, can hardly be accepted as a manufacturers or traders invoice. The Revenue has no case that it is international practice to issue a commercial invoice without naming the buyer / consignee. The whole case of the Revenue in respect of the goods covered by Bill of Entry dt. 12/5/2000 is based on this document. On the basis of this document, they alleged that, in the said Bill of Entry, the importer misdeclared the description and value of the goods.
13. ..
14. In the result, in so far as the past imports are concerned, the appeal of the importer has to be allowed. Accordingly, we set aside the decision of the lower authority in so far as its findings and conclusions in relation to the past imports are concerned.
11. We find that the decision of this Bench in the case of Crystal Dot Scan Pvt. Ltd. Vs. CC&CE, Hyderabad-II [2011(263) ELT 401 (Tri. Bang.)] would also squarely apply to the facts of this case. In that case, it is held that the value if declared is sought to be rejected and Revenue should establish details of contemporaneous imports of such or similar goods that the price declared is not correct transaction value and value has been determined under CVR. In this case, the Revenue is seeking to reject the transaction value without any valid reasons and in the absence of any details as regards the contemporaneous imports or comparable imports at higher price, we find that the ld. Adjudicating authority has correctly come to the conclusion that the evidence as regards the contemporaneous imports put forth by the officers (of the prime quality) while the Bills of Entry filed for the clearances of consignment under dispute were declared as rejects and wastes. We also find that there is no evidence that the said declaration of description was incorrect or mis-declared as there is no chemical examiners report of the drawn sample, if any. The test report of M/s. Bakelite Hylam Ltd. (sample was drawn and sent by Revenue authorities) indicates that the consignment on visual inspection is of sub-standard quality, though it specifies that the goods are conforming to NEMA and MIL standards. In our view, if an expert opinion indicates that the sample of imported goods on visual inspection is of sub-standard and there being no contrary evidence from any other expert or chemical examiner, we concur with the findings in the impugned order. In the absence of any evidence to indicate that the goods which were imported and cleared during the material period were not rejects but were of prime quality, we constrained to hold that the impugned order of the ld. Commissioner is correct and does not require any interference. In view of the foregoing, we do not find any merits in the appeal filed by the Revenue. The appeal filed by the Revenue is rejected.
12. All the three appeals are disposed off as indicated hereinabove.
(Pronounced in court on ..) (P. KARTHIKEYAN) MEMBER (TECHNICAL) (M.V. RAVINDRAN) MEMBER (JUDICIAL) Nr 10