Custom, Excise & Service Tax Tribunal
Shri C. N. Sanghvi vs Commissioner Of Customs (Adj), Mumbai on 11 December, 2008
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. II Appeal No. C/46 & 47/03 (Arising out Order-in-Original No. 365/2002/CAC/CC/NRN dated 18.10.02 passed by the Commissioner of Customs (Adjn), Mumbai) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. K.K. Agarwal, 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?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
Shri C. N. Sanghvi Plastotex (Bombay) P. Ltd.
Appellants Vs. Commissioner of Customs (Adj), Mumbai Respondent Appearance:
Shri Anil Balani, Advocate for the appellant Shri P.K. Agarwal, SDR for the respondent CORAM:
Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. K.K. Agarwal, Member (Technical) Date of hearing : 21.11.2008 Date of decision : 11.12.2008 O R D E R No:..
Per: Mr. K.K. Agarwal, Member (Technical) These are two appeals, one filed by M/s Plastotex (Bombay) P. Ltd. and the other by its director Shri C.V. Sanghvi.
2. The brief facts of the case are that M/s Plastotex were engaged in import of polystyrene sheets from one M/s. SIBU of whom he claims to be the sole distributor for India. Pursuant to some information that the said company was misdeclaring the value of the polystyrene sheets imported by it a statement of its director Shri Sanghvi was recorded, wherein he had admitted about import of cut to size polystyrene sheets and submitted copies of 8 invoices issued by the supplier SIBU, which were produced by them before the customs authorities during the clearance of polystyrene sheets from December 1998 to December 2000. These 8 invoices were verified by DRI through Indian High Commission at London which revealed that M/s Plastotex had grossly undervalued the polystyrene sheets imported by them from M/s SIBU. Enquiries revealed that Plastotex and SIBU had an understanding, whereby SIBU was required to issue invoice to Plastotex indicating only 25% of the actual value of the goods and the remaining 75% was to be paid by Plastotex separately by telegraphic transfer (TT). The attested copies of the invoice indicating the actual value against each of the 8 invoices were obtained, which indicated that the price against each invoice declared to the Indian customs authorities was 25% of the total value. The Indian High Commission also obtained a report from Austrian customs department which stated that the invoice submitted by Sanghvi to the customs authorities on verification did not match with the documents of SIBU and that SIBU had claimed that the undervalued invoices were issued at the request of the Indian customer and it was the pre-condition by the Indian buyer for doing business with them. A copy of fax message no. 317 was also received through Indian High Commission which was sent by SIBU to Plastotex. This fax message refers to some telephonic conversation regarding due invoices (the invoice numbers were listed in the message) and states that as per their understanding they are splitting every invoice (the official one 25% of the total value) through the bank and the balance is paid separately by TT. It then clarifies the amount received through bank remittance (25%) and the amount due through TT transfer (75%). It further goes to state that Plastotex have earned a commission of Rs. $2399.47 for Delhi consignment and after adjusting the same requires them to send the balance $30,160.76 by TT.
3. After receipt of the above report from the High Commission, office and residential premises of Plastotex and its director were searched which resulted in recovery of a file containing certain fax messages received from time to time. These fax messages related to the amount received and required them to make the balance payment in respect of each invoices and all these facts revealed that payment through banks were to the extent of 25% of the total value only. The receipt of these fax messages was confirmed by Sanghvi in his statement recorded on 14.2.02.
4. It was further gathered that besides the above 8 consignments, Plastotex had imported further 10 consignments in the past and the value declared therein to the customs authorities was also comparable to the one declared in respect of the 8 consignments for which the verification was carried out. It was accordingly concluded that these 10 consignments were also undervalued to the extent of 25% and accordingly show cause notice was issued demanding duty in respect of all the 18 consignments by enhancing the value from 25% to 100% in respect of the 8 consignments based on the invoices supplied by SIBU and on the 10 consignments in the proportion in which undervaluation was done. The show cause notice was adjudicated by the Commissioner who confirmed the demand of differential duty with interest amounting to Rs.19,11,797 and imposed a penalty of equivalent amount under 114A. A penalty of Rs. 5 lakhs was also imposed on Sanghvi. Further, during the search operations a stock of 233 polystyrene sheets and 4350 mtrs of rubber plastics totally valued at Rs.11,34,000 was also found and seized. The Commissioner has confiscated this stock also with an option to redeem the same on payment of redemption fine of Rs. 5 lakhs.
5. The Ld. Advocate for the appellant submits that the entire case has been made out on the basis of a report received from the Indian High Commission indicating that the supplier SIBU was undervaluing the goods by issuing invoices indicating only 25% of the actual value at the instance of Plastotex. He took us through the said report of the Indian High Commission which did say that the enquiries conducted in Austria revealed that Plastotex had grossly undervalued polystyrene sheets imported from SIBU and SIBU have claimed that the goods were undervalued at the request of the Indian customer and the report has reference to a fax dated 30.3.00 from SIBU which says that the official price i.e. 25% of the total value comes through bank account and the remaining 75% through TT. The learned advocate submitted that this very fax also mentions that Austrian customs authorities have reported that the Indian company paid only the undervalued price with one exception and SIBU is still waiting for the Indian company to settle the balance. It was his submission that once the faxe specifically states that but for one case of which no details have been given, the payment has been made to the extent of the invoice submitted by Plastotex to the customs authorities and no further payments have been made, the question of payment of duty on the balance amount does not arise as no such balance amount was ever required to be paid. There was some dispute between the supplier SIBU and Plastotex regarding commission to be paid to Plastotex in respect of goods supplied directly to a person other than Plastotex, without routing it through M/s Plastotex and it was on account of this dispute that SIBU has generated false invoices to show that the goods were undervalued at the appellants behest. Such invoices cannot be accepted as evidence in the absence of any proof of payment over and above the invoice value declared by them.
6. The Ld. Advocate submitted that the value of the goods can be enhanced only on the basis of any contemporaneous imports and though they have submitted the particulars of such imports by some three parties in their reply to the show cause notice, no enquiries to that effect were ever made. Though the DRI has asked the Commissioner to look into similar undervaluation by other parties, no such enquiries were made. The investigating agency should have ascertained the value of other importers to come to a conclusion that they have undervalued the goods which was not done. The goods were examined by the customs before clearance and nothing was found wrong. They have made all the payments through bank which is confirmed by the bank. The price adopted by the DRI is exorbitant as it amounts to Rs.1000 per kg. whereas cost of production is not more than Rs. 100/kg. and therefore they could not have sold the imported material at such high price. They have been importing the material from SIBU from 1997 to 2001 and if the claim of SIBU is accepted that they have not received the payment of 75% they would not have continued to do business with him and therefore, the statement made by SIBU cannot be relied upon. It was submitted that the appellants were cross tallying the yearly ended balance with SIBUs auditor and the auditor of SIBU was sending the statement for balance confirmation to the appellant which was duly confirmed by the appellant as per the books of accounts certified by CAs and SIBU had never taken any objection for the confirmed balance from 1997 to 2001. He produced some such letters regarding confirmation before us. Reference was also invited to some quotations obtained by them from suppliers during 1998-99, wherein the price varied from $4.20 to $5 per kg, some of which were FOB. It was submitted that department has not conducted any enquiries through Trade magazine and others which could have revealed that the imported goods were being sold in the international market at the price declared by them. Further as regards the 10 consignments cleared during the year 1998, there is no evidence whatsoever either in the form of enquiry or in the nature of statement or anything to prove that the goods were undervalued and therefore in the absence of the same, the charge of misdeclaration cannot be alleged against them. The order is therefore required to be set aside on these counts.
7. Lastly, it was submitted that some goods valued at Rs.11,34,000 were seized from them which consisted of polystyrene sheets as well as rubber sheets. However, in respect of rubber sheets valued at Rs.4,35,000/- no charge has been made out in the show cause notice nor there are any findings to that effect in the Commissioners order. In view of this the rubber plastic sheets could not have been confiscated and accordingly, no redemption fine could have been imposed in respect of this part. The Commissioners order needs to be rectified on this account.
8. The Ld. DR submitted that the report from the Indian High Commission and the faxes submitted by SIBU and those recovered from the premises of Plastotex clearly revealed that the goods were undervalued, wherein as per the direction of Plastotex invoice was split and official invoice indicating 25% of the total value of the goods only were issued and the payment for the same were made through banking channels. In respect of the balance 75% payments were to be made through TT transfer but such payments in some cases have been adjusted against the commission due to the appellants and the balance was continuously being demanded from the appellants. The copy of the fax received from SIBU through Indian High Commission has also been found in the office premises of Plastotex and therefore these fax can never be considered as manipulated or self generated. The invoice no. given in these faxes and the amount mentioned therein through banking channels completely tallies with the amount actually paid through banking channels. The quantity both in kg. as well as in number of pieces tallied in respect of each invoice submitted by SIBU and those furnished by Plastotex. He referred to the gist of faxes recovered from the premises of the appellant which are listed at page 63 to 65 of the paper book forming part of the show cause notice. Fax no. 639 sent by SIBU dated 22.4.99 gives details of outstanding position of invoice no. 2058 dated 24.9.98 for US $ 4990.69 and invoice no. 3609 dated 15.2.99 for US $ 4733.93. It is mentioned that all these invoices are for 100% and not split. The invoice no. 2058 dated 24.9.99 submitted to customs was showing value as US $ 1249.11 and invoice no. 3609 dated 15.2.99 was showing the value as US $ 1183.47 which are exactly 25% of the amount shown in the fax no. 639. Fax no. 344 dated 30.3.2000 states that SIBU was to pay a commission of US $ 2399.47 and the total amount due through TT (75%) was $32,560.22 and after adjustment of the commission the total amount payable would come to $30,160.76. The fax makes it very clear that the bank remittance plus TT are 100% of invoice. A copy of this fax was received from the High Commission and were sent on the fax no. of the importer and though the accountant denied of seeing such fax he submitted that it may have remained with Shri Sanghvi, the director. There is a letter dated 21.4.00 from Plastotex to the supplier acknowledging the receipt of the fax and promising to start making payment from May and finish in June 2000 with interest. He apologised for the talk on telephone and reiterated his relations as a brother. Reference was invited to fax no. 769 dated 3.5.99 wherein SIBU had send reminder for payment against invoice nos. 2058/24.9.98, 3048/23.3.99, 3609/15.5.99 which also shows that the value declared to the customs was 25% of the total value shown in these faxes. These faxes also states that in such a game of undervaluation both party should have confidence in each other and play a fair game. All these evidence conclusively prove that the goods were undervalued to the extent of 25%.
9. As regards the plea that the imports from other three persons were not checked, he referred to the finding of the Commissioner in para 28 wherein he says that the imports by other three importers were that of P.P. sheets as against polystyrene sheets imported by them and the price of polypropylene imported by the three importers cannot be compared with the said sheets. The appellants have not submitted evidence of any contemporaneous imports comparable to their declared value. Further SIBU has declared a uniform price for all variety of sheets in kg. whereas sheets are normally sold in size according to quality. Therefore, these invoices appear to be manipulated.
10. We have considered the submissions. We find that in respect of 8 bill of entries for which enquiries have been made from the supplier, there is enough evidence available with the revenue in the form of a report from the Austrian High Commission, suppliers letter, suppliers faxes, all stating that the invoice issued by the supplier SIBU was indicating only 25% of the total value of the goods. The genuine invoice showing 100% of the value has been submitted by SIBU, copy of which has been furnished to the appellants. A copy of some of the faxes furnished by SIBU were also found in the office file of the appellant. The faxes revealed that the supplier has been always pressing upon the appellant to pay the balance 75% amount as per the understanding arrived between them. In fact an amount of $2399.47 has been adjusted against the balance amount, being the commission due to the appellants on account of direct sales made by SIBU to some Delhi party. All these lends full credence to the assertion of the supplier as the appellants have also admitted that being appointed as a sole distributor in India, they were entitled to some commission by the supplier in respect of direct sales made to other parties without routing the same through Plastotex. There is also evidence in one of the faxes that an amount of $5000 has been paid through other than banking channels. The eight invoices submitted by M/s SIBU matched with export declaration submitted at the port of export. Further, the invoice gave the break-up of the material which is in pieces and there are a large number of qualities mentioned in the invoice. The price are indicated up to two decimal points for different varieties and the sum total matches with the total value of the invoice and the invoice submitted with the customs is exact 25% of the total value. The invoice submitted with the customs does not declare the different qualities of polystyrene sheets whereas the appellants have themselves in the reply to the show cause notice referred to different qualities of polystyrene sheets. Further, the price also differs for different sizes of the polystyrene sheets and they are sold by size rather than weight. The price also vary from $2.74 to $4.44 which itself establishes that the price is based on the quality of the polystyrene sheets. This also has been confirmed by the appellant in their reply wherein they have referred to some trade journals quoting prices of different finishes of the polystyrene sheets and vary from Rs. 50/kg to Rs. 1200/kg. Strangely in their reply to the show cause notice they have referred to the product as PP sheets and names some importers who have imported similar consignments of PP Sheets. However, it was admitted that PP sheets was wrongly mentioned in respect of their product as the same was polystyrene sheets. The so-called contemporaneous imports referred to by them without giving the price etc. was of PP sheets and not of polystyrene sheets and therefore, the two could not be compared. Though the appellants have been contending that similar imports have been made by others, he failed to give the price at which such imports, if any, have been made and the quality thereof. The Commissioner in his order has said that he could not find any contemporaneous imports. It is further strange that though the appellants were the sole distributors and were selling the sheets imported by them directly in the market, they did not give the market price at which these sheets after import were sold by them, which could give a clue as to whether the import price declared by them was correct or not. Their only defence is that payments of the balance amount has not been made. This is not sufficient as long as liability for the payment of balance amount has not been disputed by them inasmuch as they have never replied to any of the faxes received from SIBU which only shows that they were admitting the liability. The adjustment of the commission towards the balance amount also points to the same fact that the balance amount was due. They have shown only one letter dated 18.2.2002 wherein they have disputed the liability for the balance payment. This letter has been written only after the investigations were completed by the DRI and the facts were brought to their notice. This clearly is a after-thought. They have not produced any other correspondence in respect of the faxes received by them before the adjudicating authority nor the same was shown or pleaded before us. All these clearly establishes that these consignments were undervalued to the extent of 25% and accordingly, demand thereof including imposition of penalty is upheld. From the show cause notice, we find that in respect of these 8 bills of entry, the total differential demand has been worked out as Rs.13,11,187/- which is accordingly upheld by us.
11. As regards balance 10 consignments we find that the case has been made on the basis of conjectures on the ground that once under valuation was resorted to in respect of the 8 consignments the same must have been resorted to in respect of earlier consignments also. This is not acceptable as the two periods are different. The earlier imports start from period 15.10.1997 to 10.7.98, while the period of import in respect of 8 consignment is 23.12.1998 to 18.12.2000. There is not a single iota of evidence in respect of these consignments as not even the supplier has been asked about the undervaluation in respect of these 10 consignments. The entire enquiry was limited to 8 consignments only. There is no reference to any contemporaneous imports during the relevant period nor any assertion that the international price remained the same during both the periods. Further, the price of the polystyrene sheets varies according to the quality and it is not clear as to which qualities have been imported. Duty cannot be demanded on the basis of the presumptions and conjectures in the absence of any evidence of any nature. In view of this demand relating to these 10 consignments amounting to Rs.6,00,610/- as reflected in the Annexure B of the show cause notice is set aside. Since this was the case of suppression/misdeclaration of fact with an intent to evade duty imposition of penalty under 114A is also upheld. However, since the demand has been reduced from Rs.19,11,797/- to Rs.13,11,187/- penalty under 114A is also reduced to Rs.13,11,187/-. Penalty on C. Sanghvi is however upheld as he was the person concerned with misdeclaration of price etc.
12. As regards confiscation of goods valued at Rs.11,34,000/- we find substance in the appellants contention that the goods seized also comprised of rubber plastic valued at Rs.4,35,000/- against which there is no charge in the show cause notice nor any finding in the order in original. These goods could not therefore have been confiscated and its confiscation is set aside. Confiscation of polystyrene sheets is however upheld. Since the confiscation of rubber sheets valued at Rs.4,35,000/- has been set aside, the redemption fine is reduced to Rs.3.25 lakhs from Rs.5 lakhs.
13. Appeals are partly allowed as stated above.
P.G. Chacko K.K. Agarwal Member (Judicial) Member (Technical) SR 2