Customs, Excise and Gold Tribunal - Delhi
Orson Electronics Pvt. Ltd. vs Collector Of Customs on 1 December, 1995
Equivalent citations: 1996(82)ELT499(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. These appeals arise out of a common order dated 5-11-1992 passed by the Collector of Customs, Bombay demanding duty of Rs. 76,54,524/- in respect of 41 consignments of kits of components of colour Television Sets imported by the appellants from Japan in 1985-86 under proviso to Section 28 of Customs Act, 1962. He also imposed penalty of Rs. 20 lakhs on appellant Orson Electronics Pvt. Ltd. and of Rs. 5 lakhs on appellant Manohar Rajaram Chhabaria. The Department had recovered certain incriminating documents from the premises of Orson Electronics Pvt. Ltd. indicating under invoicing, besides statements given by appellant M.R. Chhabria and some officers of Orson Electronics. Investigations were also caused to be done by Japanese police who recovered export declarations relating to the consignments along with connected invoices The department's case is that the imported goods have been undervalued based on 10 invoices issued by M/s. Supra (Japan) Ltd. which were submitted to Japanese Customs along with their export declaration for the imported consignments. These invoices showed higher prices for the goods than in 27 corresponding invoices issued by Supra to the appellants. There are 41 Indian invoices in all, and the ten Japanese invoices correspond to 27 of these Indian invoices, and for the remaining 14 Indian invoices there are no corresponding Japanese invoices. The Collector adopted the higher prices in Japanese invoices for all the consignments in arriving at the assessable value of the goods. He also added a flat 11.15% towards freight and insurance in determining assessable value after considering the actual freight and insurance charges based on 4 Japanese invoices containing FOB as well as C.I.F. prices.
2. Shri L.P. Asthana, learned Counsel for Orson Electronics contended that in respect of 14 consignments since there are no corresponding Japanese invoices, the Collector without showing how goods are comparable had no justification to discard the invoice price in those cases. Even in respect of three consignments out of 41 the Collector has also accepted the invoice value. In respect of the 27 consignments for which there are Japanese invoices, the learned Counsel urged that the export declaration by the supplier before Japanese Customs cannot be a valid basis for fixing the assessable value, especially when in 2 out of 8 Japanese invoices Collector had found no higher value. The legal requirements surrounding such declaration are also not disclosed. It is also a fact that there was inconsistency in Japanese invoices prices. In some instances the Indian invoice prices were found to be higher. The learned Counsel pleaded that there is also no ground in the circumstances of the case for invoking the longer period under Section 28 Customs Act, 1962 to demand duty. The flat addition of 11.15% towards freight insurance by Collector, the learned Counsel argued, is arbitrary as he has taken the average of the highest figures towards freight and insurance contained in the Japanese invoices. The figure according to the appellants would work out to,only about 1.34%.
3. Senior Counsel Shri A.N. Haksar for appellant M.R. Chhabria contended that the penalty on the appellant is unjustified when the Collector had on the same evidence dropped the charges and had refrained from imposing penalty on Shri Shyam Bhatia, Managing Director and Chief Executive of Orson Electronics. The learned Senior Counsel urged that Shri Chhabria had said that on coming to know of the price manipulation in 1985 he had issued orders that it should stop. The Collector seems to have heavily relied on the pre 1985 situation in penalising this appellant and so far as the present imports are concerned, there is no evidence of Shri Chhabria's involvement. The conclusions in the Collector's order in this regard are based on presumptions.
3A. Shri A.K. Singhal, learned Departmental Representative referred to and relied upon the detailed reasoning in Collector's order and urged that the evidence showed that the prices in the Indian invoices were manipulated with the twin objectives of avoiding higher rate of duty on some items as also to get around import licence restrictions. The Japanese invoices do provide the correct basis for valuation as they are for the same goods and are^ at the same rate kit-wise. The flat percentage addition towards freight and insurance is also reasonable. It is much below 21% proposed in the show cause notice and has been arrived at from this own invoices. The longer period under Section 28 of Customs Act is also invokable as there is clear evidence of deliberate distortion of prices with intent to evade duty.
4. The Collector, it is seen, has adopted the export declaration of value by the supplier before Japanese Customs along with the related ten invoices submitted along with the export declaration in arriving at the assessable value of the imported goods under Section 14 of Customs Act, 1962. It has been argued that no reliance can be placed thereon as it has not been disclosed as to what are the Japanese legal requirements regarding the declaration and even out of 10 invoices, 2 Japanese invoices showed prices lower than those found in the invoices submitted to the Indian Customs. As against this, it is found that the export declaration and connected invoices have been obtained by the Indian Directorate of Revenue Intelligence through appropriate governmental channels. The Japanese Government caused investigations to be carried out by the International Investigation Section of the Metropolitan Police. The documents in question, presented to the Japanese Customs at the time of export of the goods in dispute, were seized from the Special Examiner, Yokohama Customs Supervisory Department. These documents had further been forwarded with the investigation of Japanese authorities which has all been narrated in the show cause notice. There is thus no force in the arguments doubting the authenticity of the documents. Further, Shri M.R. Chhabria one of the appellants herein said in his statement dated 8-3-1990 on perusal of these documents, "I state that the discrepancies are obvious and both the invoices appear genuine. I identify and confirm that the signature on invoice No. D-.86-2482/2485, dated 14-4-1986 are of Shri V.B. Rupani, Managing Director of Supra (Japan) Ltd., Japan." Shri Chhabria is admittedly the Chairman of the Importing Company and a 51% share holder along with Rupani of the supplier firm Supra in Japan. The statement of such a person then would lend sufficient credibility to the documents. It is further significant that Shri Chhabria had never at any stage furnished any explanation for the price difference detected. Therefore the reliance placed by Collector on the Japanese invoices for determining the assessable value is well-founded. The appellants have not put forth any convincing defence against the Collector's findings that in the two sets of invoices items carrying higher rate of duty, or which were in the restricted category for purposes of import licencing, were given lower value compared to the value of those items which carried lower rate of duty and which could be easily imported against OGL, and that their value was inflated to accommodate value of items carrying higher rate of duty. The Collector had found that while the overall difference in the invoice price declared for different items to the Indian Customs was only ranging from 3% to 16%, the itemwise difference in valuation was quite substantial. There is also no infirmity in the Collector adopting the price in the 10 Japanese invoices in arriving at the assessable value of kits for which no corresponding Japanese invoices are available, because these goods had been compared with those in the Japanese invoices and the part numbers were found to tally. The goods are from the same manufacturer through a supplier having a common chairman with the importer. There is also no substance in the argument that the Collector erred in adding flat 11.15% for freight and insurance as it has been brought out that the freight and insurance actual percentage in the other invoices were unrealistically low. Further, the Collector had also adopted a reasonable mean percentage based on appellants invoices, much below the notional 21% proposed in the show cause notice. It is also futile to argue, in the face of Japanese investigation reports on method of pricing and the documents seized on search of appellants' premises, that there has been no suppression of facts by the appellants and that hence there is no ground for invoking the longer period under proviso to Section 28 of Customs Act, 1962 for demanding duty. The Collector's order on determination of assessable value, therefore, calls for no interference.
5. In respect of penalty against appellant M.R. Chhabria, it is noted that he is the Chairman of the importing firm The supplier Supra of Japan was started, as per his statement dated 6-2-1990, on 50 : 50 partnership with Shri Rupani and in 1986 his share in Supra increased to 51%. Shyam Bhatia, Managing Director and Chief Executive of appellants has said in his statement dated 12-1-1990 that probably because of his position as Chairman and majority shareholder in Supra Shri Chhabria retained with him decision making, controlling and negotiating power regarding import of components from Japan. In his further statement of 20-2-1990 Shri Bhatia had said that the meetings to discuss business were usually chaired by appellant Chhabria. Further, Shri Kanti C. Khanna, group Finance Director, in his statement dated 19-1-1990 said that generally no decisions were taken without the approval of Chairman (Shri Chhabria). Though the trend of the statements of the persons referred above is to deny any personal role in price manipulation, yet provides nevertheless a reasonable ground to probabilise the pivotal role of appellant Chhabria in the manner in which goods were invoiced so as to avoid higher duty. The preeminent controlling position held by this appellant in Supra, Japan, the supplier, and in Orson Electronics, the importer, is also a very relevant factor in this context, and it hardly sounds plausible that vital policy decisions on pricing, involving such heavy stakes, would have been taken at lower levels, as appellant Chhabria would have us believe, or that directions to stop the price manipulation, emanating from the Chairman controlling both the firms, would have gone unheeded. It is also significant that appellant Chhabria ultimately neither gave his explanation for the irregularity in pricing, nor located the person responsible, as he had promised in his various statements. In such a context, it is no argument to say that since the Collector had not penalised Shri Bhatia, ipso facto he should not have imposed penalty on appellant Chhabria. Therefore, penalty on Shri Chhabria is sustainable and, in the facts and circumstances of the. case as discussed above, appellants Orson Electronics have also been rightly penalised. The appeals are rejected.