Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Shri Savaram D. Patel, M/S Saimehar ... on 7 August, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.C/185, 189 to 193, 197, 198, 213, 214/2012
(Application Nos.C/Stay/993, 1000-1004, 1018, 2029, 1107, 1108/2012
Arising out of: OIO No.3/Commr/ICD-Valvada/JNPT/2012, dt.29.03.12
Passed by: Commissioner of Customs, Ahmedabad
For approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial)
Mr. H.K. Thakur, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
Shri Savaram D. Patel, M/s Saimehar Industries, M/s Dev Pheripherals, M/s Trinity Industries, M/s Nishimitsui Electronics, M/s Echovision Electronics, Shri Velaram Chaudhary, Shri Joetaram Chaudhary, Shri Jitendra Manek, Shri K.C. Mankani
Respondent:
CC Ahmedabad Represented by:
For Assessee: Shri V.S. Nankani, Shri C. Subba Reddy, Shri P.M. Dave, Shri Paritosh Gupta, Shri Amit Laddha - Advocates For Revenue: Dr.J. Nagori, Additional Commissioner (A.R.) CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. H.K. THAKUR, HONBLE MEMBER (TECHNICAL) Date of Hearing:07.08.13 Date of Decision:
ORDER No. /WZB/AHD/2013, dt._____________ Per: H.K. Thakur
1. By an order dated 29.3.2012 the Respondent Commissioner confirmed an aggregate customs differential duty of Rs. 4,85,22,215/- under proviso to Section 28(1) from the Appellant K.C.Mankani (KCM, for short) with equal penalty under Section 114A of the Customs Act, 1962 (the Act) in respect of consignments of components/parts of air-conditioners by 8 different entities. Penalties under Section 112 (a) and (b) have been imposed on certain individuals connected with these imports. Redemption fine has been imposed on seized goods on the ground that the same are liable for confiscation under Section 111 (d) and (m) of the Act. Hence these appeals.
2. We have heard S/Shri V.S.Nankani, Subba Reddy, P.M. Dave, Paritosh Gupta, for the Appellants and Dr.J. Nagori, Additional Commissioner (A.R.) DR for the Respondent-Commissioner.
3. The main argument of the Appellants is that there is no evidence to show import of complete air-conditioner or to show that complete air-conditioner was shipped from Thailand to Singapore where it was dismantled or disassembled into parts before shipment to India and hence the Commissioner could not have taken the prices of complete air-conditioner and apportioned the same in the ratio 60:40 for indoor and outdoor units of split air-conditioners. It was also submitted that the findings of the Commissioner are based solely on statements of KCM and other co-noticees, although not only KCM but also co-noticee Savaram Patel had retracted their statements. On behalf of KCM, Shri Nankani pointed out that veracity and authenticity of some documents was challenged, as confirmed by handwriting experts, and there are no findings on the discrepancies noticed in several key documents on the basis of which the duty demand was calculated. It was emphasized that the Commissioner had ignored data of contemporaneous imports of parts and despite search, no action was taken in respect of Kheteshwar Electronics and Satguru Electronics. Lastly it was submitted that KCM is not the importer and hence not liable for payment of duty under Section 28 or penalty under Section 114A.
4. The learned DR, on the other hand, submitted that after retracting his statement, KCM had in his subsequent statements had confirmed his earlier statement and also admitted to undervaluation. He invited our attention to judgments of the Honble Apex Court and this Tribunal that statements are directly reliable and the retraction was found by the Commissioner to be an afterthought. The learned DR further submitted that declared value was found to be wrong not only based on oral statements of KCM but also on the basis of documentary evidence like the insurance certificates and imports of complete air-conditioners by ETA General at the comparable prices to those mentioned in the seized records and hence the Appellants cannot deny the genuineness of the documents which were seized or retrieved from the computers installed in the Appellants office. He submitted that the Commissioner had given reasons why statements of KCM are voluntary and since Mehul Patel and Jitendra Manek of Subh Electromech and Jaidev Enterprises respectively had said in their statements that all orders were placed and price negotiated by KCM, he was the defacto importer, and hence the Commissioner had correctly demanded duty from him.
5. The issues involved in the present case are as under:
A. Whether the transaction value of parts of air-conditioners, both split as well as window, can be rejected and re-determined, proportionately, on the basis of price of complete air-conditioner?
B. Whether the Appellants had imported complete air-conditioners split/disassembled in Singapore before shipment to India?
C. Whether duty can be demanded from KCM as an individual or ought to have been demanded from the different importing entities?
D. Whether KCM managed and controlled Subh Electromech, Vinayak Enterprises and Jaidev Enterprises in addition to the 5 entities to import complete air-conditioners?
E. Whether fines and penalties as imposed are justified under Section 111(d) and (m) and Section 112 of the Act?
6. The main issue relates to re-determination of value on account of alleged under invoicing. Before dealing with this issue, we may conveniently dispose of the issue relating to clubbing first, because the entire investigation has been premised on the fact that what was ordered was a complete air-conditioner which disassembled before import into India, and hence the price of a complete air-conditioner as given in the price quotation sent by email dated 12.8.2005 from Mr K.Hayashi to Mr Ashok of Uptron Electronics faxed to KCM and found during the search from his office should be adopted as the basis of determining the correct value. There is no doubt that in terms of the law laid down by the Apex Court in Collector of Customs vs. Sony International 2008 (231) ELT 385 unless the goods as presented having the essential character of a complete or finished article, the same cannot be assessed or classified as a complete article. As a consequence of ratio of this judgment, it follows that different consignments of parts of an article when imported at different points of time cannot be assessed together as a complete article. In the present case, this ratio is sought to be applied on the basis that duty has been demanded in respect of 108 consignments which have been imported by 8 different entities at different times and ports, of which 27 consignments relate to indoor units and 50 consignments relate to outdoor units and the balance 31 being parts of window air-conditioners. It is also urged that the total quantities of different models of air-conditioners do not match as per the chart attached to the written submissions filed on 3.9.2013. It is stated that 6007 units of indoor units and 6786 units of outdoor units have been imported and therefore, it cannot be alleged that what are imported are complete air-conditioners and that the same is also the case with different parts of window air-conditioners. On this basis, it is submitted that since what is imported does not constitute a complete air-conditioner, the Commissioner was wrong in adopting the price of a complete air-conditioner as the basis for demanding differential duty.
7. Significant to note that the Commissioner has ordered the classification of the goods imported under sub-Heading 8415 90 00 which relates to parts of air-conditioner. The classification has not been disputed. The Commissioner, at the same time, has described the modus operandi as import of air-conditioners from Thailand, disassembled at Singapore and imported then into India in paragraph 46.28 of the impugned order. A more detailed finding is also found in paragraphs 47.1 to 47.7 of the impugned order. Having read these findings carefully, we have given our anxious consideration. The Appellants are right in saying there is no evidence that complete air-conditioners were imported from Thailand to Singapore and were disassembled at Singapore before shipment to India. KCM has also not admitted this in his statements to which we shall refer in greater detail hereafter. None of the documents either seized or recovered from the computers during search also support this modus operandi. The report from the High Commission of India, Singapore vide letter dated 22.8.2007 is also silent on this aspect. The enquiry with ETA General Pvt Ltd which apparently revealed that O General does not sell parts is belied by large number of imports of parts into India by independent third parties before and after the period covered by these appeals, which is April 2004 to May, 2007, a fact which has not been denied by the Revenue. There is no explanation from the Department how thousands of consignments of parts of air-conditioners of O General brand are allowed imports, if the enquiry with ETA General is correct. The Commissioner no doubt refers to 3 cases where consignments of the same quantity of indoor and outdoor units were imported by Subh Electromech and Vinayak Enterprises in paragraphs 47.9 and 47.10 but except for one instance, where the same model was imported at different ports, in other two it is not known whether same model was imported. These consignments were also not presented as such or together for assessment. The Tribunal in Susha Electronics vs Collector (1989 (39) ELT 585) set aside the order clubbing consignments of parts of television imported at Bombay and Kandla to confiscate the same as complete television which required a licence then to import and value them as complete television. Amongst the seized goods, examination as detailed in sub-paragrapghs of main para 9.1 of the show cause notice also shows that these are parts of different quantities of different models not constituting a set of complete air-conditioners. Applying the ratio of Sony International (supra) we therefore hold that there is no evidence of import of complete air-conditioner from Thailand to Singapore and after disassembly, to India as parts.
8. We now turn to the issue of under invoicing. It is a case of the Department that KCM placed orders for O General Brand complete air-conditioners with the suppliers in Singapore, who would then dismantle the same into parts, e.g. indoor and outdoor units in case of split air-conditioners, and into Fan, plastic body, control panels etc in case of window one, and ship the same in different names, as instructed by KCM. Hence, the Commissioner has adopted the price of the complete air-conditioner. For this purpose, reliance is primarily based on the statements of KCM recorded under Section 108 of the Act. These statements are sought to be read with documents, which have either been seized from the premises of KCM or retrieved from the computer data found in the premises of KCM. On the other hand, it is contended that the statements have been recorded under duress and coercion and one of the crucial statements dated 22nd August, 2007 has been retracted. It is contended that the statements of KCM are contrary to documents and also, otherwise not reliable since the statements are not corroborated by independent evidence.
9. In order to appreciate the evidentiary value of the statements, each of these is summarized below:
(a) In his first statement dated 9.7.2007 KCM has deposed on behalf of Nishimitsui Electronics, Saimehar Industries, Trinity Industries, Echovision Electronics and Dev Peripherals and stated that these entities have imported components/parts of air-conditioners from Singapore, Dubai, etc. as inputs since these entities are engaged in the assembly of air-conditioners, and that the main suppliers are M/s. Uptron Electronics Pte. Ltd., (Uptron) M/s. Jackys Electronics (Singapore) Pte. Ltd. (Jackys) and M/s.Ninja Electronics Pte. Ltd. (Ninja) all from Singapore. He has given names and telephone numbers of persons with whom he has been dealing in with three companies supplying the components/parts of air-conditioners. He has also explained the process of assembly and given the brand names of each of the entities engaged in the imports of components/parts under which they sell complete air-conditioners in India. KCM has also explained his relationship with M/s. Jaidev Enterprises, M/s. Shubh Electromech, M/s. Vinayak Enterprises, M/s. BGM Enterprises, M/s. Japonica International as suppliers of parts, but stated that he does not know M/s. Kheteshwar Electronics and M/s.Satguru Electronics, who have factories at Silvassa. KCM has however identified the proprietors of M/s. Kheteshwar Electronics and M/s.Satguru Electronics. KCM has further stated that compressors are filled with gas and that the suppliers have given a certificate that the compressor gas does not contain any ODS substance;
(b) In his statement dated 22nd August 2007, the first seven pages contain formal recording of facts. In Q. 5 on page 7, KCM was shown pages 61, 60, 59, 58, 57, 62 and 72 of File No. 27 seized under Panchnama dated 23.5.2007. He explained that pages 61 and 59 are Debit Notes Nos. ID 00083 and 84 dated 23.4.2007 and 20.4.2007 respectively issued by Uptron. After setting out the contents of these two documents read with pages 60 and 58 of the same seized file, on page 9, KCM has stated as under:
I further state that the amt. minus the invoice amt. i.e. US $ 302580.75 being the differential amt. was remitted separately to M/s. Uptron Pte. Ltd. KCM confirms that this explanation also applies to pages 60, 59. 58 and 57 of File No. 27. KCM has then noted down the contents of the Sale Note No. S 0001034 dated 4.5.2007 and page 70 and as a token of having seen these pages put his signature. On being shown page 3 of File No. 26 seized from his office, KCM narrates the contents of these documents being an internal email of Uptron to Ashok of Uptron forwarding the price quotation email received from Mr. K. Hayashi dated 12.8.2005 addressed to Mr.Pradeep of Uptron with cc marked to Mr. Ashok giving the rates of O General brand air-conditioners for different periods (April, 2004 - August, 2005) in US Dollars per piece. It may be mentioned that these documents, viz. page 3 of File No. 26 is the basis for calculating the differential duty in almost all cases as can be seen from the list of consignments in respect of each importer annexed to the show cause notice for working out the differential duty. KCM further confirms that pages 1 to 24 were printed from the computer installed in his office and seized on 23.5.2007 and amongst them, in relation to page 7, states that this is a print out of the proposed prices for placing orders on Uptron and this letter was signed by him and faxed to Mr. Pradeep Sharma of Uptron. He also confirms that the prices quoted in these documents against the respective models are in US Dollars and are the actual prices of full air-conditioner unit;
(c) In his statement dated 6.9.2007, KCM has stated that the consignments were imported in mutual packing, so as not to reveal the original packing at the time of examination of the goods and intention of clearing the unit by declaring as components is fulfilled and that this packing was done, so that the description of the goods mentioned in the invoice would be correct, whereas the goods contained complete outdoor/indoor split AC except window unit. KCM stated that his letter dated 1.9.2007 (which is the retraction letter) was sent on legal advice and that his statement dated 22.8.2007 was volunteered. He also explains pages 2 and 3 of the files containing pages 1-24 being the print-outs from his office computer to the effect that the same give a statement of the excess and shortage of number of pieces found in each consignment;
(d) In his statement dated 1.11.2007, he has stated that air-conditioners were imported at an undervalued rate with a clear understanding that the amount over and above the undervalued amount will be sent separately to the suppliers abroad. He further stated that the imported consignments were sold under 60% billing and the rest in cash, and the cash so generated was sent to Uptron through Uptrons persons or when Shri Pradeep Tewani, owner of Uptron visited India. KCM was however, unable to give details of the person who used to come and collect the cash from him. He also confirms that the similar modus was followed for other suppliers like Ninja, Jackys and Anisuma. He once again explains pages 1, 2 and 7 of the computer print-out which inter alia contains the payment schedule given date-wise. He once again confirms that page no. 3 of File No. 26 shows the prices of various models of O-General brand air-conditioners imported by him during the period April 2004, August, 2005 and as on 12.8.2005. He also explains other pages of the seized record shown to him;
(e) In his last statement dated 12.11.2007, he accepts the contents of his earlier statements. He gives details of 36 models of window and split air-conditioners. In the same way, when shown page 3 of File No. 26, KCM explains that the first 8 models are window air-conditioners and the remaining 4 models are split air-conditioners. He then states that the bifurcation of the price element quoted for indoor and outdoor units, I state that normally it is 40:60 i.e. 40% is a price element of the indoor unit and 60% is a price element of the outdoor unit. KCM further states that Mr. K. Hayashi is a Managing Director of M/s. Onesall Company Pte. Ltd., which is a marketing arm/unit of M/s. Fujitsu General, having manufacturing units at Thailand and China. He explained that under column the April, 04 the prices/rates mentioned are the corresponding models of air-conditioners units mentioned in the first column and these prices were are effective from April, 2004 to August, 2005 and the prices mentioned under the column our final are the prices negotiated and finalized and the prices mentioned under column our last price are the prices/rates effective for imports of air-conditioner units from August, 2005 onwards. He has further stated that he could not locate the debit note mentioned on pages 2 and 3 of the computer print-out because normally such papers are destroyed after the transactions are over and that he has tried his level best, but till date, Uptron had not supplied the same as these were of the previous periods.
10. Statements cannot be read in isolation. On the other hand document speaks for itself. Besides one needs to examine that the statements are not only voluntary, but also true with reference to the documents in relation to which the statements have been made. The Apex Court in K.I. Pavunny vs. Asst. Collector (1997 (90) ELT 241 ) has also referred to the twin test of proving that statements are voluntary and true.
11. So also in Vinodkumar Solanki vs. UOI (2009 (233) ELT 157), the Honble Supreme Court held that both the statement and the retraction must be taken into account, and retracted statement be corroborated by independent material. The first test is to see that statements are voluntary. We have summarized the statements above and also, reproduced relevant extracts therefrom. While KCM has retracted his statement dated 22nd August, 2007, he has thereafter given three more statements on 6th September, 2007, 1st November, 2007 and 12th November, 2007. We may have considered that KCMs statement dated 22nd August, 2007 was involuntary because of the threat to him on account of his daughters interrogation and her impending marriage in the following month, but in view of his three statements recorded thereafter, which admittedly have not been retracted, we hold the statement dated 22nd August, 2007 to be voluntary, but following the ratio of the judgments of the Honble Supreme Court referred to hereinabove, deal with it to see whether it is independently corroborated.
12. The next task is to evaluate and weigh the statements and the evidentiary value of the documents referred therein. While the oral statements may not be sacrosanct, its probative value must be considered having regard to the overall evidence and material on record. This is more so when there are various inconsistencies between the statements and some of the uncontroverted facts to which we shall advert to now.
13. The first difficulty in accepting the statements as such is that the same proceed on the basis as if KCM had imported complete air-conditioners. Although KCM stated that purchase orders are destroyed after the transaction, in respect of live consignments and seized goods, no such purchase orders were found in the search carried out on 23.5.2007 in various premises. The examination of the containers seized, however, shows that what was found, as recorded in paragraphs 9.1 (a) to (f) of the show cause notice dated 16.11.2007, that each container contained parts of different models of air-conditioners which did not match with each other, so as to constitute a set of a complete air-conditioner of the same model. In the case of split air-conditioners, it is seen that the indoor and outdoor units were of different models and the quantity also did not match. The same is a case with parts of window air-conditioner. The Department, based on statement of representative of ETA General (who are representatives of O General in India) took the view that O General does not sell parts and therefore it is obvious that the importers/KCM purchased complete air-conditioners and split the same into parts before import. However, ETAs claim is unsustainable on the face of it, because the fact remains that parts of air-conditioner, either split or window, were imported prior to the period in question, have been imported during the period in question by others including the Appellant and continue to be imported even thereafter till date, not only of the O General brand, but of others as well. To say therefore that the OEMs like O General do not sell parts at all is belied by innumerable consignments of parts allowed to be imported at all times on regular basis and therefore, such an extreme stand taken by the Department cannot be sustained. Contrary to the statements, there is no evidence to show that what was actually imported is a complete air-conditioner, and not parts thereof. The Commissioner has been unable to show that what has been imported, when presented together, constitutes a complete or a finished article. Model numbers and quantities both differ and this mismatch is seen not only amongst the containers lying under clearance at the start of the investigation, but also out of the various annexures to the show cause notice where duty has been calculated. In none of the seized documents or statements has KCM mentioned about import of complete air-conditioner from Thailand to Singapore, disassembly by Uptron or any other person into parts, and repacking the parts for shipment to India. There is no conclusive proof either in the documents or statements to support this fundamental presumption on which the entire investigation has been premised.
14. We also find strong force in the contention that there is a serious contradiction amongst the seized documents viz. pages 58 to 61 of File No. 27 (debit notes) and page 3 of File No. 26 (price quotation fax), when read with the statements of KCM. According to KCM, the differential amounts as per the invoices and the amounts shown in the two debit notes were paid to Uptron separately. If the quantity covered by the invoices referred to in debit notes is multiplied by the rate in US Dollars indicated in the price quotation fax, the actual price does not tally with the amount shown in the debit notes. The Department has adopted the prices given in the price quotation fax (page 3 File No. 26) for the purposes of calculating the differential duty. If the same rates are adopted for the purposes of the two debit notes to the quantities covered by the invoices, they should tally with the actual price purportedly mentioned under two debit notes, but as demonstrated by the Appellant, it does not do so. The Department has not been able to show how the amounts mentioned in the debit notes is the actual price if the rates shown on page 3 of File No. 26 are correct. KCM has also not been asked to explain this discrepancy in the so-called actual price shown in the debit notes vis-`-vis page 3 of File No. 26. This casts a serious doubt on the statements of KCM who on one hand states that the price quotation fax (page 3 of File No. 26) reflect the actual prices and in the same breath, says that the debit notes were raised for the amount of actual price without reconciling the two. In the same way, pages 2 and 3 of computer print-outs are also not supported by the examination reports of each consignments on the respective bills of entry to show that there were in fact, either actual shortage or actual excess of the quantity covered by the invoices and hence, to that extent also, the statements of KCM remain uncorroborated since the document on which it is based is itself not supported by the statutory record, namely examination reports in possession of the Department, on the basis of which the Department ought to have shown reflecting the same quantity of excesses and shortage.
15. We have also read the explanation of KCM in his statements dated 22.8.2007 and 1.11.2007 on the two documents which are the price quotation at Page 3 of File 26 and Page 7 retrieved from the hard disks on 22.8.2007. The answers by KCM to these documents are again premised on import of complete air-conditioners. As observed hereinabove there is no evidence of import of complete air-conditioner. These statements of KCM do not support the further assumption that complete air-conditioners were shipped from Thailand (country of origin is not in dispute), disassembled at Singapore, repacked and shipped to India. All the statements are unfortunately silent on this aspect which goes to the root of the case. It is the totality of all the facts and circumstances which should inspire confidence in relying solely on the statements. By itself neither Page 3 of File 26 nor Page 7 of the computer print out are incriminating. A perusal of other documents from Pages 1-24 of the computer print out shows that just like price quotes for air-conditioners, KCM received various mails offering prices quotes of various items like HIFI with VCD, Home Theatre, refrigerators, etc. The report dated 25.10.2007 from Directorate of Forensic Science shows that Page 7 is a word document in the folder My Documents. There is no evidence of transmission to Mr Pradeep and no evidence of reply from Mr.Pradeep. It is undated and unsigned document containing rates for the period April 2004 and KCM does not in his statements say when this proposed prices at which we would like to place orders was actually sent. No quantity is mentioned. Though it refers to purchase schedule there is no reference to period of delivery or terms of payment , contrary to which KCM says 60% was remitted through banks and 40% in cash which again tally with the debit notes.
The net result in this case is documents by themselves are not incriminatory and do not corroborate or support the statements of KCM. We find that statements have been discarded when the same are uncorroborated and not truth thereof cannot be established by the record in Commissioner vs. R.M.jewellers (2008 (228) ELT 577), Swati Industries (2009 (248) ELT 191) and Radha Madhav Corporation vs. Commissioner (2012 (284) ELT 369).
16. We may at this stage deal with one of the submissions made by the Appellants in relation to the debit notes. It is argued that the debit notes are not genuine and were not seized from the premises of the Appellant. According to the Appellants, the debit notes are alleged to be found at pages 57 to 61 of File No. 27 and although the Panchnama dated 23.5.2007 mentioned that only the first and the last pages of each seized files were signed by the Panchas, these pages 57 to 61 purportedly bear the initials of the Panchas and the representatives of KCM present at the time of search. The Appellant also relies on report of the handwriting expert Mr. Deepak Jain to contend that the signatures of the Panchas and the KCMs representatives on the Panchnama as well as on the first and last pages of each files tally, but the initials on pages 57 to 61 do not match with the admitted signatures, meaning thereby that these pages have been subsequently inserted/substituted in File No. 27 and were not found from the custody of KCM. Regretably, the Commissioner has not dealt with this submission at all. While something could be said in favour of these arguments, there is no allegation by the Appellants of personal vengeance or bias on the part of the investigating officers. Without giving credence to these arguments, we, therefore, reject the same.
17. We would not have been at pains to critically analyse the statements and the documentary evidence, but have been constrained to do so for the following reasons:
(i) On the same date i.e. 23.5.2007, units of M/s. Kheteshwar Electronics and M/s. Satguru Electronics, who are in the same business, were also searched and the statement of Mr. Raju Ram, proprietor of M/s. Kheteswhar Electronics was also recorded on 16.7.2007, but in their case, the invoice prices of identical/similar goods has been accepted, and no show cause notice has been issued to them;
(ii) There is evidence of sale by Shri Jitendra Manek, proprietor of M/s. Jaidev Enterprises of parts of air-conditioners to M/s. Kheteshwar Electronics of identical/similar goods, but those transactions have also not been questioned.
(iii) The Appellant has produced evidence of large number of contemporaneous imports comparable to the prices declared by it as against which the Department has failed to produce evidence of contemporaneous imports at higher prices of either complete air-conditioners or parts of air-conditioners at the same rates, proportionately or otherwise, as shown in the price quotation fax;
(iv) The debit notes and the price quotation fax relate only to Uptron, whereas there is no document at all to show that the other suppliers like Jackys, Ninja and Anisuma also supplied complete air-conditioners at the same prices mentioned in the price quotation fax or Page 7 of computer print out;
(v) A report from the Singapore High Commission showed that M/s.My Way Electronics is in the business of forwarding, packing and crating services which does not lead to the conclusion that it was engaged or competent in dismantling a complete air-conditioner into parts;
(vi) There is no allegation of relationship between the suppliers and the importers.
18. In support of their case, the Appellant has produced evidence of a large number of contemporaneous imports of parts of air-conditioners imported at prices comparable to those declared by them. The Commissioner, however does not accept this evidence, because according to the Commissioner, except for producing the NIBD data, the Appellant has not produced any further material to show that the goods covered by the contemporaneous imports are like or similar to the goods imported by it. The law, however, puts the burden of proof of undervaluation on the Department as held by the Honble Supreme Court in Mirah Exports vs. Collector (1998 (98) ELT 3). To discharge this burden, it is for the Commissioner to make enquiry at all major ports as held by the Tribunal in Walia Enterprises vs. Collector (1987 (32) ELT 774). Not having made the relevant enquiry with the concerned Custom Houses on NIBD data produced by the Appellant, in our view, the Commissioner could not have summarily discarded the evidence of contemporaneous imports. The Honble Supreme Court in Commissioner of Customs vs. South India Television Pvt. Ltd. 2007 (214) ELT 3 held as under:
Therefore, what has to be seen by the Department is the value or cost of imported goods at the time of importation i.e. at the time when the goods reaches the Customs barriers. Therefore the invoice price is not sacrosanct. However, before rejecting the invoice price, the department has to give cogent for such rejection. This is because the invoice price forms the basis of the transaction value. Therefore, before rejecting the transaction value as incorrect or inacceptable, the Department has to find out whether there are any imports of identical goods or similar goods at a higher price at around the same time. Unless the evidence is gathered in that regard, the question of importing Section 14(1A) does not arise in the absence of such evidence, invoice price has to be accepted as the transaction value. Invoice is the evidence of value. Casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. Undervaluation has to be proved. If the charge of undervaluation cannot be supported either by evidence or information about comparable imports, the benefit of doubts must go to the importer. If the Department wants to allege undervaluation, it must make detailed enquiry, collect material and also adequate evidence. When undervaluation is alleged, Department has to prove it by evidence or information about comparable imports. For proving undervaluation, if the Department relies on declaration made in the exporting country, it has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to adjudication proceedings. They apply strictly to court proceedings. However even in adjudication proceedings, AO has to examine the probative value of documents on which reliance is placed by the Department in support of its allegation of undervaluation. Once the Department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus shifts to the importer to establish that the invoice relied on him is valid. Therefore, the charge of under invoicing has to be supported by evidence of prices of contemporaneous imports of like goods.
19. The Department has not produced evidence of contemporaneous imports at higher prices. The Commissioner has also not made any enquiry at all major ports regarding the prices at which parts of air-conditioners are being imported. When these aspects are considered, it is obvious that the Department has not discharged the burden to prove undervaluation by complying with the tests laid down by the Honble Supreme Court. It finally boils down to statements of KCM versus the evidence of contemporaneous imports. In our view, in the light of the judgement of the Supreme Court in South India Television, the transaction value cannot be discarded in the present case as it is duly corroborated by evidence of contemporaneous. It was open to the Commissioner to make all India enquiry as held by the Tribunal in Walia Enterprises (supra) cited by the Appellants. He choose not to. On the other hand the statements are not corroborated by documents as discussed above. Hence the statements of KCM will yield to the evidence of contemporaneous imports.
20. Assuming that transaction value can be rejected in the present case, the result would still be the same. As per Rule 3 of the Customs Valuation Rules, 1988, applicable at the relevant time, if the transaction value under Rule 4 is rejected, value is required to be determined by proceeding sequentially through Rules 5 to 8. Rule 5 deals with transaction value of identical goods. Rule 6 deals with transaction value of similar goods. Once evidence under Rule 5 and 6 is available, transaction value must be based thereon. Its not thereafter open to the Department to embark upon an enquiry of its own and re-determine the value based on assumptions and presumptions unborne from the documents and records. This why the Honble Supreme Court laid down the tests that when evidence of contemporaneous imports are available such evidence must form the basis of determination of value under Section 14 of the Act. As such, the declared value can also be upheld on the basis of contemporaneous imports of parts of air-conditioners. Infact the Appellants have also produced evidence of such imports of complete air-conditioners at lower prices which cast a doubt on the correctness of ETA Generals price who are admittedly distributors of O General and hence the level of transaction is different.
21. In respect of 4 consignments, the Department has adopted the value based on the insurance certificates on the ground that the insurance value is not 110% of the declared value, but three times thereof. The show cause notice covers the total of 108 consignments. It is not shown that the insurance certificates correspond to the values shown in the price quotation fax. It is not unusual for businessman to over insure the goods, as has happened in the case of M/s. Sadguru Electronics, where despite finding the insurance certificate of a higher amount like in the present case, the declared value lower than the insurance certificate was accepted.
22. As we have held that there is no import of complete air-conditioners, we reject the adoption of value in respect of one model based on import of a complete air-conditioner by ETA General which in any event, is a distributor to the supplier.
23. So far as appellants argument that Commissioner could not have demanded duty and imposed Section 114A penalty upon KCM in his individual and personal capacity, we agree with the legal principle on this aspect, as laid down by the Tribunal in Gujarat Adani Ports Ltd. Vs. Commissioner 2013 (287) ELT 330, Gurmeet Singh vs. Commissioner, 2006 (199) ELT 822 and in Bimal Kumar Mehra vs. Commissioner (2011 (270) ELT 152), and accordingly hold that KCM cannot be fastened with the liability under Section 28 and Section 114A of Customs Act, 1962, as he is not the importer.
24. The Commissioner has also held that goods (outdoor units) are liable for confiscation under Section 111(d) on the ground that import of compressors containing R22 Gas requires a license. It is no doubt true that at the time when the goods landed into India, the importers did not have a license. It is only subsequently that the importers applied for and obtained licenses which were issued post facto, to cover goods which had already been shipped/landed/cleared. We therefore, set aside the confiscation under Section 111(d) subject to verification of the fact that the import licenses cover the total quantity of consignments of outdoor units with compressors containing R22 Gas.
25. The Commissioner has also imposed penalties on Savaram Patel, Vela Ram Choudhary and Joet Kumar Chaudhary. Statements of Savaram Patel and Vela Ram were recorded on 23.5.2007 in which both admitted receiving cash from KCM or his office to be sent to Singapore. On this basis it is alleged that differential amount over and above the invoice price was sent through unauthorized channel to suppliers in Singapore. Both these persons have within 2 days retracted their statements. Savaram also produced medical report to show injury to contend statement was recorded under duress. Savaram also appeared for cross-examination before the adjudicating authority and denied the contents of his statement.
26. We find that though statements of Savaram and Vela Ram were recorded on 23.5.2007, KCM was never confronted with them. KCM does not corroborate the statements of Savaram and Vela Ram. None of the documents also support corroborate the statements of Savaram and Vela Ram. We rely on Sunil Gulati vs Commissioner (2003 (161) ELT 283) We also agree with learned Counsel Shri Gupta that apart from being unreliable the statements do not disclose any offence for penalty under Section 112 since these two persons have no relation to import of goods. There is absolutely no evidence against Joit Kumar Chaudhary. Penalty under Section 112 cannot be imposed for not responding to summons. We therefore set aside the penalties of these three Appellants.
27. We must also deal with the finding of the Commissioner that all the units/entities who imported the parts are controlled by KCM. Heavy reliance is placed on the statements of Mehul Shah and Jitendra Manek and the fact of signed cheque books of their respective entites with KCM. These statements must however be read with the evidence in cross examination of Mehul Shah and Jitendra Manek. However, in view of our finding that there is no warrant or justification in rejecting the transaction or the declared value and the case of import of complete air-conditioners being based on assumptions, this issue would not result in either the imports of parts being prohibited or restricted or the declared value incorrect. As a matter of law, parts and complete air-conditioners are freely permissible for import under the Foreign Trade Policy. We therefore do detain ourselves with this issue.
28. Subject to the verification suggested in Para 24 above, all the present appeals are allowed by setting aside the Order-in-Original and the case is remanded back to the original adjudicating authority with respect to the limited purpose of verification and consequent action for either having or not having valid import authorizations from appropriate licencing authority for compressors containing R-22 gas to cover all the consignments in the present imports.
(Pronounced in Court on ______________________)
(M.V. Ravindran) (H.K. Thakur)
Member (Judicial) Member (Technical)
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