Custom, Excise & Service Tax Tribunal
Bothra Metals & Alloys Ltd vs Commissioner Of Customs (Import) on 22 January, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI Appln.No.C/S/1348, 1369 to 1371/12 & C/S/1626/12 APPEAL No.C/521, 525 to 527/12 & C/661/12 (Arising out of Order-in-Original CAO No.12/2012/CAC/CC/BKS dated 14/03/2012 passed by Commissioner of Customs (Adjudication), Mumbai) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Anil Choudhary, Member (Judicial) 1. Whether Press Reporters may be allowed to see :No 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 :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Bothra Metals & Alloys Ltd., The Associated Aluminium Industries Ltd., Appellants Vs. Commissioner of Customs (Import), Respondent Nhava Sheva/Kandla Appearance:
Shri.S.P.Mathew, Advocate with Shri Ajay Singh, Advocate for appellant Shri.P.S.Sodhi, Comm. (AR), for respondent CORAM:
Honble Mr. P.R.Chandrasekharan, Member (Technical) Honble Mr.Anil Choudhary, Member (Judicial) Date of Hearing : 22/01/2013 Date of Decision : 22/01/2013 ORDER NO Per: P.R.Chandrasekharan
1. The appeals and stay applications are directed against Order-in-original No. CAO No.12/2012/CAC/CC/BKS dated 14/03/2012 passed by Commissioner of Customs (Adjudication), Mumbai.
2. The facts relevant to the case are as follows:
2.1 The Directorate of Revenue Intelligence (DRI in short) had intelligence that M/s.Associated Aluminium Industries Pvt. Ltd., Silvassa, were indulging in illegal import of aluminium scrap by misdeclaring the value of the scrap, so as to evade Customs duty. They conducted a search of factory office premises of the appellant on 13/03/2006 and recovered incriminating documents relating to import of aluminium scrap during 2004-2005 and 2005-2006 under a Panchnama dated 13/10/2006. Apart from the documents, a pen drive used by the Director of appellant firm, Shri Raghav Daga was also recovered. The said pen drive was sent to the Director of Forensic Science (Computer Forensic), Gandhi Nagar for retrieval of the data contained therein. The Director of Forensic Science vide letter dated 03/07/2007 and 19/07/2007 forwarded the data retrieved from the said pen drive. Based on the data retrieved, Shri. Raghav Daga was questioned and his statement was recorded, among others, under Section 108 of the Customs Act. Shri Raghav Daga confirmed the data retrieved from his pen drive and also confessed to under invoicing of aluminium scrap imported by the firm to the extent of US $ 250 to 300 per MT. The data retrieved from the pen drive related to consignment imported under thirty two Bills of Entry.
2.2 In addition to the above, it was noticed that the appellant firm had imported aluminium scrap under 275 Bills of Entry. In order to quantify the correct value of import, the investigating authority adopted two methods. In respect of the thirty two Bills of Entry, they have taken the values as available in the information retrieved from the pen drive seized during the search operations on 13/10/2006 and also the information given by Shri Raghav Daga. In respect of 275 Bills of Entry, the value of the scrap was arrived at by taking into account the prime metal price reported in the LME Bulletin and by giving certain discounts from the prime metal price to arrive at the values of the different types of aluminium scrap. This method has been adopted on the basis of a premise that the scrap price and the prime metal price move in tandem and there is a certain fixed mark down from the prime metal price to the scrap price for different types of scrap based on the metal content of the scrap.
2.3 On conclusion of the investigation, a show cause notice dated 31/01/2008 was issued to the appellant proposing to revise the price declared by them for import of the scrap through JNCH, Nava Sheva and Customs House, Kandla. The imports at Nhava Sheva is in respect of the thirty two consignments of aluminium scrap, wherein the value has been proposed to be re-determined at Rs.13,98,94,381/- as against Rs.10,68,43,077/- as declared in the documents. Similarly, in respect of another 268 consignments, the value has been proposed to be re-determined at Rs.91,32,56,703/- as against the declared value of Rs.77,23,65,226/-. Consequently, a differential duty demand of Rs.5,34,87,667/- has been proposed invoking the proviso to Section 28 (1) of the Customs Act, 1962 along with interest thereon under Section 28AB. The notice also proposes to impose penalties on the appellant firm under Section 112 (a) of the Customs Act. In respect of seven consignments imported through Customs House, Kandla, it has been proposed to revise the value at Rs.87,68,124/- from the declared value of Rs.70,42,737/- and differential Customs duty amounting to Rs.5,95,413/- is proposed to be confirmed under the provisions of Section 28 ibid along with interest thereon under Section 28AB, and the notice also proposes to impose penalties on the appellant firm and also on the Managing Director, Shri.Raghav Daga.
2.4 The case was adjudicated vide the impugned order and the duty demands were confirmed and penalties were imposed as proposed in the notice. It is against this order, the appellants are before us.
3. The Ld. Counsel for the appellant made the following submission:
3.1 As per the Panchnama dated 13/10/2006, Flash Drive (Pen drive) No. D33193 belonging to Shri Raghav Daga was seized. However in the test report of the Director of Forensic Science, Gujarat the make & model is indicated as Jet Flash, TS1GJF2A/120, S/N: M18ZMY10, with a capacity of 1 GB. Thus, there is a difference between the pen drive seized as per the Panchnama and the pen drive said to have been examined by the Director of Forensic Science. Secondly, when the pen drive was examined initially, only seven files could be retrieved from the pen drive and these seven files did not contain any incriminating evidence against the appellant. However, after a few days on the request of the DRI, the pen drive was re-examined and additional files were retrieved from the said pen drive. This examination/re-examination has been done at the back of the appellant and they were not aware of these details. They had sought for cross-examination of the Investigating Officer of the DRI and also the Officers of the Directorate of Forensic Science, which was denied to them. They wanted a cross-examination of Officers of the Directorate of Forensic Science for the reason that there is an un-certainty about the pen drive which have examined and also a re-examination has been done and during the period between examination and re-examination, who was in the custody of the pen drive and how the additional files could be retrieved when the original examination did not show any such files existed in the pen drive. Inasmuch as the opportunity for cross-examination has been denied, there is a violation of principles of natural justice and therefore, on that ground alone the impugned order is liable to be set aside.
3.2 The second contention of the Ld. Counsel is that in respect of thirty two consignments, the enhancement of the value has been done on the basis of the information said to have been retrived from the pen drive and the statement of Shri Raghav Daga, the Director of the appellant firm. However, in respect of the another 275 consignments, the basis for determination of value is totally different. The value has been arrived at based on the LME prices for the prime metal and giving certain discounts therefrom for various varieties of scrap imported on the basis that there is a co-relation between the prime metal price reported in the LME bulletin and the scrap price and these two move in tandem.
3.3 As per the Customs Valuation Rules, the prices of the goods have to be determined under Rules 5 to 8 by proceeding sequentially, i.e., by taking into account the value on the basis of identical goods imported under Rule 5 or on the basis of similar goods imported under Rule 6 or on the basis of deductive methods and only as a last resort, valuation can be done under Rule 8 and even as per the said Rule, the procedure adopted should be consistent with Section 14 of the Customs Act and the Customs Valuation Rules. In the present case, a strange and arbitrary method has been adopted on the ground that prices of similar or identical goods are not available. The appellant had sought and obtained under RTI, prices of similar/identical goods imported through both the Nhava Sheva Custom House and Kandla Custom House during the impugned period and had submitted the details of such imports to the adjudicating authority and the data obtained shows that the prices declared by the appellant are for higher than those declared in respect of similar or identical goods accepted by the Customs authorities. Therefore, it is incorrect to say that the prices of similar or identical goods for the contemporaneous period were not available.
3.4 The Ld. Counsel also submits that they had written to the LME to ascertain whether there is any study conducted by them so as to establish a nexus between the prime metal price and scrap price and the LME has replied back to them stating that no such study has been conducted by the LME on this basis.
3.5 The Ld. Counsel submits that the determination of value undertaken in the impugned order is not in accordance with the law and consequently, the demand of differential duty along with interest thereon is not sustainable in law. As a result, imposition of penalty on the appellant is also not sustainable.
4. The Ld. Commissioner (AR) appearing for the Revenue reiterates the findings given in the adjudication order.
5. We have carefully considered the rival submissions.
5.1 We are of the view that in view of the violation of principles of natural justice, the appeal itself can be taken up for disposal at this stage. Accordingly, after waiving the requirement of pre-deposit of dues adjudged, we take up the appeal for consideration and disposal.
5.2 We notice that the department has denied the cross examination of the investigating officer and also the officer, who examined the pen drive at the Directorate of Forensic Science. When the appellants have raised serious doubts about the procedure adopted with respect to the examination of the pen drive, it was incumbent upon the adjudicating authority to clear and clarify the matter, by allowing cross examination of the concerned witnesses. Thus there is a clear violation of the principles of natural justice.
5.3 It is also seen from the records that vide letter No.D/E/2007/CF/13 dated 03/07/2007 the said Directorate has communicated that in case the evidence is necessary seems to be issued in the name of S.V. Sanghvi, Scientific Officer, Directorate of Forensic Science subject to payment of TA/DA by the department as per his entitlement. In these circumstances, denial of cross examination of the officer, who examined the pen drive has caused prejudice to the appellants and therefore, on this ground alone the impugned order is not sustainable.
5.4 Secondly, we notice that in respect of 275 consignments of aluminium scrap the appellant had produced before the adjudicating authority details of imports made by other importers both through Nhava Sheva port and Kandla Port during the period involved in the present case and the appellant has claimed that the value declared by them in respective of their imports is much higher than the values declared by the other importers and accepted by the department. There is no finding with respect to this claim of the appellant by the adjudicating authority. As per the Customs Valuation Rules, if the revenue wants to reject the transaction price and re-determine the same, they have to proceed sequentially through the Rules 4 to 8 of the Customs Valuation Rules, i.e. by asking into account the value of identical goods, value of similar goods, deductive method and so on. Even the valuation done under the residuary Rule has to be consistent with the other provisions specified in the Rules.
5.5 In the present case, we find that the department has adopted a hovel method of valuation, which is not recognized by law. The value of scrap cannot be arrived at by giving discounts from the prime metal price as reported in LME. The Business Manager (Non-ferrous metal) of London Metal Exchange in his letter dated 17th October 2008 has categorically sated as follows:
The LME has not completed (as an exchange) any formal public study on the linkage of aluminium or zinc metal LME quote with that of other respective scarp pricing as reported earlier if such linkage exists. It is done on a case to case basis between the buyer/seller based on mutual understanding.
5.6 From the above, it is clear that there no formal public study conducted by LME indicating any co-relation between the prime metal price and the scrap price. If that be so, the department cannot adopt any procedure which LME itself does not recognize. Therefore, the valuation done in the impugned order is not in accordance with the law and consequently the demand of differential duty and imposition of penalties cannot be sustained in law.
6. In view of the above position, we are of the considered view that the matter has to go back to the adjudicating authority for consideration afresh. The appellant has to be given opportunity to cross examine the investigating officer and also the officers of the Directorate of Forensic Science, who conducted the examination of the pen drive regarding the veracity of the reports and we direct accordingly. Similarly in respect of valuation done in the impugned order, the information of contemporaneous imports submitted by the appellant has to be examined and a finding given as to why the valuation should not be done based on such information. Needless to say, the appellant should be given a reasonable opportunity of being heard to make submissions and documentary evidence they relied upon by the appellant should be taken on record and clear findings should be given with regard to the acceptability or otherwise of the missions and documentary evidences.
7. Thus, we allow the appeals by way of remand. The stay applications are also disposed of.
(Pronounced in Court) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 11