Customs, Excise and Gold Tribunal - Delhi
Kumar Associates vs Collector Of Customs on 20 November, 1992
Equivalent citations: 1993ECR205(TRI.-DELHI), 1993(65)ELT500(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order passed by the Additional Collector of Customs, Calcutta. Briefly stated the facts of the case are that the appellants filed a Bill of Entry for the clearance of a consignment of 200 pieces of cooling coils, 2100 pieces of driers and 500 pieces of FICD. On the basis of the invoice issued by the supplier M/s. Contax Marketing Singapore showing the unit price of cooling coils, driers and FICD as S $ 10.00, $1.10, and S $ 2.00 per piece respectively the aggregate CIF and the assessable value were declared in the Bill of Entry as S$ 5310.00 and Rs. 49202.74 respectively. The certificate of origin filed along with the Bill of Entry showed that the goods were of Japanese origin. On examination of the goods, the cooling coils were found to be fitted with expansion valves and the driers were of two different types namely, "Filter Drier Receiver Model No. 460 (Made in Canada)" and "Receiver Drier Model LP-8-318 (Made in Japan)". The Department took the stand that apart from misdeclaring the origin of the driers, the importers had also misdeclared the description of the cooling coils fitted with expansion valves which being sub-assemblies of car air conditioners had to be deemed as "consumer goods" falling under Serial No. 146 of Appendix 2B of the Import Policy for the period 1990-93 and the Import Licence covering "cooling coils" under Sr. No. 538 (6) of Appendix 3, Part A of the Import Policy 1990-93 against which they had been imported was not valid. Further, having regard to the unit price of S $ 50.00 CIF in respect of cooling coils (without expansion valves) of Japanese origin shown in invoice No. CX-004/88 dated 16.9.1988 issued by M/s. Products International Pvt. Ltd. Singapore and the price of US $ 13.00 per piece FOB in respect of cooling coils with thermostat shown in invoice No. 61/18654/BEK dated 29-11-1989 issued by M/s. Thai Heat Exchange Co. Ltd., the Department felt that the value of the imported cooling coils with expansion valves had been misdeclared. Further, having regard to the prevailing market price in the country of driers and FICD, the Department worked out the deduced CIF value of these items at Rs. 33.50 and Rs. 84.00 per piece respectively as against the unit price of Rs. 10.09 and Rs. 18.34 respectively declared by the importers.
2. On these grounds, the appellants were served with a notice requiring them to show cause as to why:
(i) the goods which had been misdeclared in respect of description, value and country of origin should not be confiscated under Section 111(m) of the Customs Act, 1962;
(ii) the cooling coils fitted with expansion valves having the ascertained value of Rs. 1,00,914/- should not be confiscated under Section 111(d) of the Customs Act, 1962; (3) the declared price of the goods should not be rejected and the goods assessed at the ascertained value under Section 14 (1) of the Customs Act, 1962; (4) the differential duty Rs. 6,72,468.00 not be recovered; and (5) penalty should not be imposed under Section 112 of the Customs Act, 1962. Thereafter, in the impugned order the Additional Collector held that the imported driers and cooling coils were liable to confiscation under section 111 (d) and (m) of the Customs Act, 1962 on the ground that the country of origin in respect of the driers had been misdeclared and the cooling coils fitted with expansion valves being "consumer goods" falling under Serial No. 146 of Appendix 2B of the Import Policy were not covered by the Import Licence covering 'cooling coils' which were specified against Serial No. 538 (6) of Appendix 3 Part A of the Import Policy for the period 1988-93. On the grounds that the value of the imported cooling coils could not have been less than the price of such goods shown in the invoices relied upon by the Department, the adjudicating authority also held that the value of the imported goods had been misdeclared. He, therefore, ordered the enhancement of the value of the cooling coils, driers and FICD to Rs. 504.57, Rs. 33.50 and Rs. 84.00 per piece respectively and the confiscation of the goods under Section 111 (d) and (m) of the Act. He, however, gave the importers the option to redeem the goods on payment of a fine of Rs. 2,00,000/-. He also imposed a penalty of Rs. 25000/- on the importers under Section 112.
3. On behalf of the appellants, the learned Advocate Shri B.B. Gujral appeared before us. He stated that expansion valve is an integral part of cooling coil. He contended that for this reason there was no indication in the examination report on the reverse of the Bill of Entry that there was any misdeclaration of the description of these goods. He argued that cooling coils were specifically covered as Assemblies/Sub-assemblies under serial No. 483 (6) of Appendix 6, Part-A of the Import Policy for the period 1988-91 and accordingly there was no force at all in the finding of the adjudicating authority that they were "consumer goods" covered by serial No. 146 of Appendix 2 of Part-B which was a general entry. He added that cooling coil assemblies could not be deemed as 'consumer goods' since according to the definition against serial No. 13 at page 3 of the Import Policy 1988-91 "consumer goods" were consumption goods which could directly satisfy human needs without further processing. He stated that cooling coil assemblies could not directly satisfy human needs. In support of his contentions he placed reliance on the Tribunal's decision in the case of Ganeshrajah Organisation v. CC, Madras - reported in 1991 (56) E.L.T. 830 (Tribunal) . As regards the allegation that the country of origin in respect of a part of the driers had been misdeclared, Shri Gujral stated that the declaration was made on the basis of the certificate of origin issued by the competent authority, namely, the Singapore Indian Chamber of Commerce. He contended that the declaration was, therefore, bona fide and it did not involve any loss of revenue. As regards the finding that the goods were undervalued, Shri Gujral contended that the order enhancing the assessable value of the imported items was arbitrary and violative of the provisions of the Customs Valuation Rules, 1988. He stated that the Additional Collector had resorted to Rule 7 for the determination of the assessable value of driers and FICD on the basis of the ascertained local market of these items. He argued that jumping to Rule 7 was illegal since it was absolutely necessary to determine the value by proceeding sequentially through Rules 5 to 8. He added that even if it is assumed that the adjudicating authority could take recourse to Rule 7, he was bound to follow the mandatory provisions of Rule 7(2), which provided that the value of imported goods when determined under sub-rule (i) on the basis of the sale price in India of identical goods sold after importation in India, shall be based on such price at the earliest date after importation of the goods but before the expiry of 90 days after such importation. In regard to the allegation of undervaluation of cooling coils, Shri Gujral contended, that in relying upon the invoice dated 16-9-1988 of M/s. Products International (P) Ltd. Singapore and Invoice dated 21-11-1989 of M/s. Thai Heat Exchange Co. Ltd. and not giving any reasons for rejecting the bona fide transaction value, the Additional Collector had ignored the mandatory provisions of Rules 3 and 4 of the Customs Valuation Rules of 1988. He stated that the two invoices produced by the Department were not in respect of contemporaneous imports and they did not give any indication of the country of origin, make, variety, size or quality of the cooling coils covered by them. He added that the Department had also not produced relevant Bill of Entry to establish that the goods covered by invoices relied upon were actually imported. He argued that under these circumstances and also for the reason that the adjudicating authority had not given any reason for rejecting the documentary evidence referred by the appellants in respect of contemporaneous imorts of identical goods by other importers, the allegation regarding undervaluation of the cooling coils was arbitrary and without any basis. He argued that in absence of any allegation of extra commercial consideration and any evidence of contemporaneous import of identical or similar goods at higher values, the Department was bound to accept the transaction values as per the invoice produced by the appellant. In support of his submissions, Shri Gujral cited the following case laws :
1. Shiv Shakti Enterprises v. Collector of Customs - reported in 1991 (52) E.L.T. 439 (T).
2. Garg Fasteners v. Collector of Central Excise - reported in 1990 (47) E.L.T. 118 (T).
3. Sawhney Export House (P) Ltd. v. Collector of Customs - reported in 1992 (60) E.L.T. 327 (T).
4. Elite Packaging Industry v. Collector of Central Excise - reported in 1992 (60) E.L.T. 311.
5. Opal Exports (P) Ltd. v. Collector of Customs reported in 1992 (60) E.L.T. 232 (Cal).
6 Ganshyam Chejra v. Collector of Customs - reported in 1989 (44) E.L.T. 202.
7 Honesty Traders v. Collector of Customs, Cochin - reported in 1991 (55) E.L.T. 102 (Tribunal).
8 Walia Enterprises v. Collector of Central Excise, Chandigarh - reported in 1987 (32) E.L.T. 774 (T).
9. Jalaram Trading Co. v. Collector of Customs, Bombay - reported in 1991 (55) E.L.T. 614 (Tribunal).
10. Tara Art Printers v. Collector of Customs, Bombay - reported in 1985 (20) E.L.T. 358 (T).
3A. On behalf of the Revenue, the learned JDR Shri M.N. Dhar stated that the item claimed by appellants as cooling coil was in fact a sub-assembly of air-conditioners since it was fitted with expansion valves. He contended that under these circumstances it had been correctly held that it was a consumer item falling under Serial No. 146 of Appendix - 2B of the Import Policy for the period 1988-91. He added that the imported sub-assemblies consisting of cooling coils attached with expansion valves were not covered by the licence held by the appellants which covered assemblies/sub-assemblies of cooling coils and tube bundles falling under Serial No. 483 (6) of Appendix - 3, Part - A of the Import Policy for the period 1988-91. He further contended that apart from the fact that there was misstatement in respect of the description of cooling coils with expansion valves and the country of origin in respect of heat exchangers, the value of the goods was also grossly misdeclared. He stated that the appellants contention that the invoice dated 29.11.1989 issued by M/s. Thai Heat Exchange and the invoice of M/s. Products International (P) Ltd., Singapore issued on 16.9.1988 could be relied upon has no force since between the dates when these invoices were issued and the date of import of the disputed goods, there could not have been any reduction in the price of such goods on account of the continuing inflationary trend being noticed in the prices of almost all commodities. He referred to the order passed by the Additional Collector and contended that evidently the imported driers and FICD had also been grossly underinvoiced since on the basis of the prevailing market price, the CIF price of the driers and FICD worked out to Rs. 33.50 and Rs. 84.00 per piece respectively as against the declared CIF price of these items as Rs. 10.09 and Rs. 18.34 per piece respectively. He stated that certain invoices filed by the appellants in support of their claim that similar goods were being regularly cleared by the Customs Authorities at comparable prices have to be disregarded since specifications and part numbers of the goods covered by those invoices were different. In support of his contentions he cited the following case law :
1. Shiv Shakti Enterprises v. Collector of Customs - reported in 1991 (52) E.L.T. 439 (T).
2. Garg Fasteners v. Collector of Central Excise - reported in 1990 (47) E.L.T. 118 (T).
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the following are the main points that arise for consideration in this case :
1. Whether the imported coils fitted with expansion valves could be deemed as covered by the Import Licence held by the appellants covering goods falling under Serial No. 538(6) of Appendix 3 Part A of the Import Policy for the. period 1988-91 or they have to be deemed as consumer goods' in terms of Serial No. 146, Part B of Appendix 2 of the Import Policy (1988-91).
2. Whether on the basis of the evidence on record the findings in the impugned order in regard to the misdeclaration of origin, description and value of the goods could be sustained.
5. In regard to the first point, we find that the term 'consumer goods' has been defined at serial No. 13 on page 3 in the Import Policy for the period 1988-91 as follows :
"Consumer goods for the purpose of Import Policy will mean consumption goods which can directly satisfy human needs without further processing, it would include consumer durable also."
In this regard we also find that in the case of Susha Electronics Industries v. Collector of Customs and Central Excise - reported in 1989 (39) E.L.T. 585, the Tribunal has held that as per the definition given in the policy 'Consumer goods' would mean consumer goods which can directly satisfy the needs without further processing. The relevant extract from the said order is reproduced below :
"As per the definition given in the policy, for the purpose of Import Policy, consumer goods will mean consumer goods which can directly satisfy human needs without further processing, it would include consumer durable also. Components imported by the appellants at Kandla would not directly satisfy human needs. Further processing would be required to make complete T.V. sets. Therefore, it cannot be even said that the components imported are consumer goods."
The cooling coils fitted with expansion valves imported by the appellants are sub-assemblies, which by themselves constitute only a part of the air-conditioners used in automobiles and cannot be used directly without undergoing further processing and assembly along with other components, for satisfying human needs. Under these circumstances we hold that the Additional Collector's finding that the imported sub-assemblies comprising of cooling coils fitted with expansion valves are 'Consumer Goods' covered by Serial No. 146 of Appendix 2, Part B of the Import Policy for the period 1990-93 is not sustainable.
6. The appellants' case is that the imported sub-assemblies have to be deemed as "cooling coils" since expansion valve constitute integral parts of cooling coils which are invariably supplied fitted with such valves. On these grounds, they have contended that the imported cooling coils fitted with expansion valves were covered by the licence for goods falling under Sr. No. 438(6) of Appendix 3 of the Import Policy for the period 1988-91. In this regard, we find from the Invoice dated 29-11-1989 of M/s. Thai Heat Exchange Co. Ltd. and also the Invoice dated 16-9-1988 issued by M/s. Products International Private Ltd. at pages 1 and 2 of the Paper Book, that cooling coils and expansion valves have been invoiced separately. It is, therefore, evident that cooling coils and expansion valves are separate components and expansion valve does not constitute an integral part of cooling coil as claimed by the appellants. The licence - against which appellants have imported the cooling coil sub-assemblies covers items falling under Serial No. 483 of Appendix 3, Part A of the Import Policy 1988-91. It is seen that sub-item (6) of serial No. 483 of Appendix 3, Part A reads as :-
"483. Assemblies/Sub-assemblies the following :-
(1) ...
(2) ...
(6) Cooling coils and tube bundles...
On a plain reading of the serial No. 483 (6) of Appendix-3 of Part-A it follows that it covers only cooling coils and not sub-assemblies comprising of cooling coils with attached expansion valves. For these reasons we hold that these sub-assemblies were not covered by the Import Licence held by the appellants. We, therefore, uphold that confiscation of the imported sub-assemblies consisting of cooling coils with attached expansion valves under Section 111(d) of the Customs Act, 1962.
7. Taking up the second point, we find that the appellants on the basis of the Invoice issued by the supplier M/s. Contax Marketing Singapore, had declared the unit price of the imported goods, namely, cooling coils, driers and FICD as Singapore $ 10.00, S $ 1.10 and S $ 2.00 per piece CIF respectively. However, having regard to the fact that in the Invoice dated 16.9.1988 issued by M/s. Products International Pvt. Ltd., Singapore cooling coils of Japanese origin were charged at the rate of S $ 50.00 per piece and even cooling coils with thermostat of Thai origin had been charged at the rate of US $ 13.00 per piece FOB in the invoice issued by M/s. Thai Heat Exchange Co. Ltd., the adjudicating authority after adding 225% on account of freight and insurance to the FOB price of goods of Thai origin determined the CIF price of the imported cooling coils with attached expansion valves as US $ 15.87. He, therefore, held that the appellants had misdeclared the value as well as the description of the imported sub-assemblies consisting of cooling coils and expansion valves rendering them liable to confiscation under Section 111(m) of the Customs Act, 1962. It is thus, seen that the finding of the Additional Collector that the value of the cooling coils with expansion valves imported by the appellants in April, 1990 against Bill of Entry No. 1150 dated 18-4-1990 had been misdeclared was based only on two invoices. One of these was issued on 16-9-1988 by a Singapore firm and the other on 29-11-1989 by a firm in Thailand. Evidently, the imports covered by the two invoices relied upon by the Department were not effected at or about the same time when the disputed goods were imported. In this regard, we find that in the case of Satya Vijay Exports Pvt. Ltd. v. Collector of Customs, reported in 1991 (51) E.L.T. 457 (Tribunal), the Tribunal had held that for the purposes of valuation of imported goods it would not be permissible to treat the prices of imports from two different countries as comparable even when the goods imported from those countries may be comparable and the invoice price with which comparison is to be made has to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation. The relevant extract from the said decision is reproduced below:
"Section 14(1) of the Customs Act provides that for the purpose of the Customs Tariff Act, 1975, or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation in the course of international trade, where the seller and buyer has no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. In the present instance, there is no allegation that the seller and buyer are related persons or that they are interested in the business of each other or that the price is not the sole consideration for the sale or offer for sale. The price with which the comparison is to be made is that at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation. In the present case, the two prices with which the invoice price is sought to be compared do not fit in with this provision. The Department has also not produced any evidence concerning other imports effected at Calcutta around the same time as the present import. Even if the price at which the Bombay imports were affected are to be taken for purpose of comparison we have seen how the comparison has not been properly done and how no due allowance has been made for the different circumstances attendant on the imports at Bombay vis-a-vis the present import".
8. We find that in the case of Collector of Customs Bombay v. Nippon Bearings (P) Ltd., reported in 1991 (55) E.L.T. 68 (Tribunal), the Tribunal had once again observed that the burden of proving the charge of undervaluation lies squarely on the Department and in the absence of evidence of contemporaneous import of like kind of goods at higher prices the invoice price should be the basis for the assessable value under Section 14. The relevant extract from the said decision is reproduced below :
"The value under Section 14 is deemed value. It is deemed to be the price at which such or like goods are ordinarily sold....It is settled that invoice price need not necessarily be deemed value, (Calcutta Motor Dealers Association v. CC -1989 (42) E.L.T. Page (693) 'provided another international price available to all parties is normally....exists.' In other words the appellants should be able to prove that the invoice price does not represent the price at which the goods are ordinarily sold, and it does not represent the price in the course of international trade, and that it does not represent the price, as seller and buyer have interest in the business of each other and the price is not the sole consideration for the sale or offer for sale. It is also equally settled that the burden of proving the charge of undervaluation lies squarely on the deptt. The charge of under-invoicing has to be supported by an evidence of right kind of goods [Maheshwari Trading Corpn. v. CC, New Delhi - 1987 (29) E.L.T. 739 (Tribunal); Walia Enterprises Amritsar v. Collector of Customs 1987 (32) E.L.T. 774 CC v. Automotive International 1989 (44) E.L.T. 325; Orient Enterprises v. CC, Cochin 1986 (23) E.L.T. 507. It is also equally settled that in the absence of evidence of contemporaneous import of like kind of goods at higher prices the invoice price should be the basis for the assessable value under Section 14."
9. Since the Department has not produced evidence in regard to the imports of comparable goods at or about the same time as the present import, on the ratio of decisions quoted above we hold that the Revenue has failed to establish the charge of tinder-valuation and accordingly we hold that the Additional Collector's order holding the sub-assemblies consisting of cooling coils with attached expansion valves as liable to confiscation under Section 111(m) of the Customs is not sustainable. However, in view of our findings in this order we confirm the order confiscating the goods under Section 111(m) on account of the imported sub-assemblies having been misdeclared as cooling coils.
10. We find that in regard to the valuation of driers and FICD, the adjudicating authority had resorted to Rule 7 and determined the value on the basis of the market price at which similar goods were being sold in the country after importation. In this regard it would be relevant to refer Rule 3 of the Customs Valuation (Determination of the Price of Imported Goods) Rules, 1988 which is reproduced below :-
"Rule 3. Determination of the method of valuation -
For the purpose of these rules -
(i) the value of imported goods shall be the transaction value,
(ii) if the value cannot be determined under the provisions of Clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules."
It is evident that in straightaway resorting to Rule 7 for the determination of the value of the imported Driers and FICD instead of proceeding sequentially through Rules 5 to 8, the Department failed to observe the mandatory requirement as laid down in Rule 3. Under these circumstances, we hold that the Additional Collector's finding that the value of the imported driers and FICD was misdeclared by the appellants is also not sustainable.
11. It is seen that the imported Driers were also held as liable to confiscation on the ground that their origin had been misdeclared since according to the certificate of origin filed by the appellants, these goods should have been of Japanese origin, whereas on actual examination a part of the goods were found to be of Canadian origin. We find that the appellants had declared the origin of these goods on the basis of the certificate of origin received from the concerned Chamber of Commerce in Singapore and there is no finding that Driers of Japanese origin differ significantly in terms of quality or value from similar goods of Canadian origin, we are therefore, inclined to agree with the appellants that the violation if any, in this regard was purely technical.
12. In view of the above discussion, we set aside the Additional Collector's order enhancing the assessable value of the goods and confiscating them under Section 111(m) of the Customs Act, 1962, on the grounds of misdeclaration of value. However, we uphold the impugned order insofar as it relates to the confiscation of sub-assemblies consisting of cooling coils with attached expansion valves under Section 111(m) and Section 111(d) of the Customs Act, 1962 on account of misdeclaration of the description and the Import Licence held by the appellants not being valid for these goods.
13. Having regard to these facts and circumstances we reduce the redemption fine from Rs. 2,00,000/- to Rs. 50,000/- (Rupees Fifty Thousand only) and set aside the personal penalty imposed on the importer. The appeal is, therefore, partly allowed.