Custom, Excise & Service Tax Tribunal
) M/S. A.N. Impex vs Commr. Of Customs (Port), Kolkata on 27 March, 2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH : KOLKATA
Stay Petition Nos.383,386,387/2010
AND
Customs Appeal No.-C-88,107,110,111,151,154,155 & 156/2010
(Arising out of the Order in original No. KOL/CUS/PORT/06/2010 dated-25/2/2010 passed by the Commissioner of Customs (Port), Kolkata)
SRI S.K. GAULE, HONBLE TECHNICAL MEMBER
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
===========================================
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 ?
1) M/s. A.N. Impex
2) M/s. Gee Pee International
3) Sri Prabhat Manna
4) Sri Gautam Adhikary
APPELLANT(S)
VERSUS
Commr. of Customs (Port), Kolkata
RESPONDENT(S)
AND
Commr. of Customs (Port), Kolkata
APPELLANT(S)
VS.
5) Sri N.C. Chowdhury
6) Sri S.C. Saha
6) Sri Shyamal Mondal
7) Sri Munesh Kumar Meena
RESPONDENT(S)
APPEARANCE
1) Dr. Samir Chakraborty, Advocate
2) Sri Hasmukh Kundalia, advocate
3) Sri Abhijit Biswas, Advocate
4) Sri V.N. Drivedi, Advocate
FOR APPELLANT(S)
Sri M.K. Sil, Spl. Counsel for Department
FOR THE REVENUE
CORAM:
SRI S.K. GAULE, HONBLE TECHNICAL MEMBER
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
DATE OF HEARING: 27.3.2012 Date of Pronouncement :
ORDER NO.
Per SRI S.K. GAULE
Heard both sides.
2. These appeals (including the appeals filed by Revenue) are directed against order No. KOL/CUS/PORT/06/2010 dated 26/02/2010. The issue involved in these appeals is common therefore they are taken up together for disposal.
3.1. M/s. A.N. Impex for which M/s. Gee Pee International was Customs House Agent filed a Bill of Entry No. 414051 dated 10/06/08. 873 Bales of old and used garments completely fumigated by M/s. Al Liberty International Rags, Houston, U.S.A. The Customs Authorities assessed the duty on the said goods by enhancing the value to US$ 0.60 per kg. from the declared value of US $ 0.417 Per Kg. The goods were examined by the Examination Committee. The break-up of various articles of the consignment found during examination was as under:
Sl.No Articles Quantity Declared net weight Ascertained net weight Articlewise net weight
1. Sweater 560 bales 46988 Kgs.
54880 Kgs.
35204 kgs.
2. Trousers 130 bales 8172 kgs.
3. Tops 3 bales 189 kgs.
4. Misc.
180 bales 11315 Kgs.
Total 873 bales 54880 Kgs.
3.2 The import of worn clothing' is restricted in terms of Foreign Trade Policy provisions, the subject consignment was pending adjudication by the Additional/Joint Commissioner of Customs, Custom House, Kolkata. In terms of Boards Circular No.36/2000-Cus dtd. 8th May,2000 while importing old and used garments under CTH 63.09, the imposition of fine and penalty for violation of EXIM policy. The wholesale market price (WSMP) was required accordingly of various worn clothing was ascertained by Customs House, Kolkata. The said WSMP for some of the items was (a) Rs.90/- for Jacket and White Shirt, (b) Rs.86/- for Shirts, (c) Rs.43/- for Trousers (d) Rs.42/- for Miscellaneous items and (e) Rs.39/- for Sweaters ( the lowest among all such goods).
3.3 The DRI working on information came to conclusion that M/s. A.N. Impex ought to have declared the various articles of consignments in the import documents. Giving the declaration of subject goods as old and used worn garments, the conceding by the DRI to be vague and complete.
3.4 The subject consignment was re-examined by DRI on 10.02.2009, 11.02.2009 and 12.02.2009 in presence of the concerned Customs House Agent and two independent witnesses under Panchanama proceeding. The said re-examination revealed the following:
(i) All the 873 bales of the consignment borne some code word/phrase on its cover;
(ii) Bales having same code word/phrase were containing the same articles; for example, the bales having code of L.C.P. (New)were found to be containing Ladies Cotton Pant only.
(iii) The break-up of articles found in the consignment was as under:
Code word/phrase as found mentioned on the face of the bales Description of goods found No.of bales found Mens Ski Jacket, Light Zipper Jacket Jacket 31 Children Sweater Sweater 34 L.C.P., L.C.P. (New), Ladies Cotton Pant Ladies Cotton Pant 219* Ladies Rayon Pant, LCP (New), Ladies Poly Pant (new) Aeroplane Brand 78 Mens Nylon Jogging Pant Track Suit 6 Atheletic Jersey Jersey 4 Mens White Shirt, Mens Cordruoy Shirt, Mens Shirt Cotton Shirt (W/C) 69 Mens Cordruoy Shirt Cordruoy Shirt 19 Boys T Shirt, White Printed T Shirt T-Shirt 51 Polar Fleece Polar Fleece 4 Rain Coat Raincoat 1 Original Short Half Pant, > Pant 85 Swede Pant Mens Swede Pant 12 Mens Cotton Pant Mens Cotton Pant 34 Nylon Jogging Jacket Windcheater 22 Rain Coat (Plastic) Liberty Raincoat 47 Cotton Blouse Ladies Blouse 47 Mens Dark Tropical Jacket Coat 38 Children Sweat Lion Brand, Children Clothing Rummage Children Apparel 58 Bed Sheet Lion Bed Sheet 14 Ladies Night Wear Nighty 73 Total 873
(iv) Most of the above items were found to have no sign of appreciable wear.
(v) However, 78 bales of ladies cotton pant were found to be completely soaked and unfit for use.
3.5 The above table revealed that as 86 bales out of the 873 bales of the consignment were found to contain jackets and shirts only. Moreover, Most of the articles of the consignment having 'no sign of appreciable wear', as found during the said re-examination by DRI, did not appear to qualify for the description of 'worn clothing' as per requirement of Note 3 to the Chapter 63 of Customs Tariff along with the corresponding HSN Explanatory Notes discussed above. Thus, the goods of the subject consignment appeared to have been misdeclared reinforcing the doubt, already raised supra, about the genuineness of the corresponding invoice submitted by M/s. A.N. Impex before the Customs Authority. This doubt appeared to be further corroborated by the fact that although the bales of the impugned consignment borne readable code phrase/ words, indicating a particular type of articles, as revealed during the re-examination by DRI, the same was not declared either in the invoice or in the packing list. The articles of the subject consignment, therefore, appeared to be covered, not in CT11 6309 as claimed, but with the corresponding new articles under the respective CTH.
3.6 The Wholesale Market price of the jackets and shirts, as per findings in the Custom House F.No. S60 (Misc.)-208/95A (Gr.III) Pt. as discussed above, being much higher than sweater/miscellaneous items, it appeared that the imposable Fine and Penalty amounts, in terms of Boards Circular No. 36/2000-Cus dated 8th May, 2000, discussed supra, would be several times higher than those imposable in case of the consignment containing only sweater, miscellaneous items, tops and trousers, as reported earlier in the Custom House Examination report.
3.7 Thereby statement of Shri Prabhat Manna, one of the Partners of M/s. Gee Pee International, the Custom House Agent for the subject consignment in his statement dt. 12.09.2008 stated that The majority of the import consignments handled by them is that of old and used worn clothing. The details of the concerned firms are not readily available with him. However, all the said worn clothing consignments were under control of the following persons who interacted and provided the clearance jobs to them (M/s. Gee Pee International). Statement of Mohd. Umar Khan (3/2/09), Proprietor of A.N. Impex and Shri Deepak Das (dated 20/2/11), one of the partners of said M/s. Ma Vabatarini Enterprise were also recorded. In his statement dated 15/09/2008, he reiterated his earlier statement dated 12/09/2008. Summons were issued to record statement of Md. Shakir Mohammed & Md. Umar Khan, proprietor of M/s. A.N. Impex. However, he did not respond to the said summons on 17/2/2009. M/s. Umar Khan, proprietor of M/s. A.N. Impex appeared to the DRI in response to the summons issued to him on export of worn clothing vide Bill of entry No. 414051 dated 10.06.2008 and in his statement recorded on 17/02/2009 and 18/02/2009 that he was related to the firm M/s. A.N. Impex as its Proprietor, Mohammed Shakir Mohammed Umar Khan was his elder son. He further stated that he was fully aware that bale code was written on each bale. On that basis he came to know what items were imported. His customers were aware of the bale code No. They also knew what items were there inside a bale against any particular bale code No. He added that each item had different price depending on its quality.
3.8 With a view to ascertain the price at which the subject imported items of article worn cloth on wholesale basis, the premises of one M/s. Ma Vabatarini Enterprises, a wholesale trading firm of worn clothing was visited by the officers of DRI. The said office-cum-godown was stacked up with about 450 bales of worn clothing. Similarly, the clothing was re-examined by DRI.
3.9 Thereby statement of Shri Deepak Das was recorded under Section 108 on 22/11/2008 in which he gave details of placing orders, taking delivery of goods, making payment etc. and recording Code Nos. etc. In his statement Shri Das also explained about the various entries in the Register maintained at the godown and a list of entries. It was found that about 2.1 lakh kgs. of clothing in 100 kgs./80 kgs. bales and 1.15 lakh kgs. of clothing in 45 kgs./500 kgs. bales had been purchased by the said firm for a total amount of Rs.1.75 crores and 0.62 crore respectively. The said purchases were mainly for the period between April, 2008 to August,2008. The Register maintained at the godown of M/s. Ma Vabatarini had range of purchase price pertaining to 45 Kgs./500 Kgs. bales were also revealed and 100 kgs./80 kgs. bales were revealed. The DRI came to the conclusion that purchase price of M/s. Ma Vabatarini Enterprise is wholesale market price in article of worn clothing in as much as the same were sold in the form of bales basis to them and there was a huge duty on the subject consignment and its declared value of USD 0.45 per kg. (=Rs.17.97 per kg.) which was subsequently enhanced to USD 0.60 per kg. (Rs.25.86 per kg.).
3.10 Accordingly proceedings were initiated for mis-declaration and under valuation and accordingly a show cause notice was issued against M/s. A.N.Impex, Gee Pee International, Prabhat Manna, Gautam Adhikary, Shri N.C. Roy Chowdhury, Shri Shyamal Mondal, Shri S.C. Saha & Shri M. Meena.
3.11 Vide impugned order KOL/CUS/PORT/06/2010 dated 26/02/2010 the adjudicating authority ordered as under:
(i) The Ld. Commissioner rejected the claim on classification of M/s. A.N. Impex under 6309.00 and classified the items in various Sub-Headings as per para 135 (a) of Table VI of impugned order in Original. He rejected the value declared and enhanced from Rs.8,44,501.40 (CIF) and enhanced to Rs.32,06,174.40 and confirmed the demand of duty of Rs.1,86,16,209/- and appropriated duty of Rs.1,80,555/- paid by M/s. A.N. Impex. He ordered confiscation of goods. However, gave an option to redeem the goods on payment of fine of Rs.16.00 Lakhs (Rupees Sixteen Lakhs only).
(ii) He imposed a penalty of Rs.8.00 Lakhs (Rupees Eight Lakhs only) against M/s. A.N. Impex under Section 112 of C.A., 1962, imposed a penalty of Rs.3.00 Lakhs against M/s. Gee Pee International, CHA and penalty of Rs.50,000/- on Shri Prabhat Manna & Gautam Adhilary, both partners of M/s. Gee Pee International under Section 112 (a) and (b) of Customs Act, 1962. He dropped the proceedings/charges initiated in the show cause notice against the members of the Examination Committee namely i.e. Shri N.C. Chowdhury, Assistant Commissioner of Customs (since retired), noticee No. 5,Shri Shyamal Mondal, Appraiser, Customs House, Kolkata, noticee No. 6, Shri S.C. Saha, Appraiser, Customs House, Kolkata, noticee No. 7 and Shri Munesh Kumar Meena, the then Examiner, Custom House, Kolkata, noticee No.8.
(iii) He dropped the proceedings/charges initiated in the show cause notice against the members of the Examination Committee namely i.e. Shri N.C. Chowdhury, Assistant Commissioner of Customs (since retired), noticee No. 5,Shri Shyamal Mondal, Appraiser, Customs House, Kolkata, noticee No. 6, Shri S.C. Saha, Appraiser, Customs House, Kolkata, noticee No. 7 and Shri Munesh Kumar Meena, the then Examiner, Custom House, Kolkata, noticee No.8.
4.1.1 Ld. Advocate appearing for the A.N. Impex led the arguments. The contention is that DRI officer re-examined the goods. The contention is that they imported 873 bales of old and used garments completely fumigated from M/s. Al Liberty International, Houseton and the Examination Committee had found the goods as per the description given in the Bill of Entry. DRI officials found no sign of appreciable wear without the support of any Technical Experts view or Test Report. The contention is that :
They imported 873 Bales of old and used garments completely fumigated from M/s.Al Liberty International Rags, Houston and the Examination Committee had found the goods as per the description given in the Bill of Entry whereas DRI Officials found no appreciable wear on visual examination without the support of any technical experts views or test reports. The Customs Authorities had assessed the duty on the said goods by enhancing the value to USD 0.60 per Kg. from the declared value of USD 0.417 per Kg. and further re-determination of re-determined value is not provided either under the Act or under the rules made there under. The chapter heading 6309 covers worn clothing and other worn articles; that there is no sub heading under this heading; that all worn clothing such as jackets, shirts, trousers, T-shirts etc. fall under the same heading. The attempt of the DRI Authorities to classify the items/good under different Chapter Tariff Heading assuming that the imported goods are not covered in CTH 6309 and instead are to be classified under Chapter Tariff Heading under corresponding new articles is highly contrary to their own stand since nowhere they have stated that imported goods are new articles. The goods were imported in hydraulically compressed pressed bales conforming to the requirements in Chapter Note 3 to Chapter 63 and in the HSN Explanatory Notes. The fumigation certificate also vindicates that the goods are old and used and the parameters adopted by DRI to view the goods as not having any sign of appreciable wear without an expert opinion is incomprehensible particularly when DRI has valued the goods on the basis of alleged market prices of worn clothing.
4.1.2 As regards the valuation is concerned, the contention is that the enhancement of value based on extraneous considerations like the purchase register and the statement of M/s. Ma Vabatarini Enterprises without subjecting them to the testimony of cross-examination has no evidentiary value and cannot be the basis for re-determination of value under rule 9 of CVR 2007 that too, skipping preceding rules of CVR, 2007 particularly when value under Rule 4 and 5 were available to the DRI at the click of a button which has been deliberately suppressed. The Adjudicating Authority has further erred by not considering the value of contemporaneous import of similar goods and the decisions cited by the appellant. Reference was made to the documents wherefrom it would be seen that similar goods have been cleared from other Ports @ USD 0.45, 0.52 per Kg. Similar goods were also cleared with the knowledge of the DRI @ USD 0.60 per Kg. Sales Invoice of different Companies which were submitted during the course of hearing were also not considered. The goods were described in the Bill of Entry according to the Invoice of the Foreign Supplier as "Old and used garments". The Examination Committee did not find anything wrong in such description of goods. The 100% examination was not done at the time of re-examination but on visual examination at the time of re-examination offered a different view than that of view expressed by the Examination Committee without indicating any parameter for considering an article 'having no appreciable wear' and even did not indicate any guidelines and/ or circulars or notifications in respect of such parameter. Admittedly, the imported goods were old and used. The goods cannot be said to be old and used unless the same is appreciably worn. Undisputedly, goods were imported in bales. The AR of the Department ultimately fairly admitted at the time of hearing that the goods were old and used. There is no scope for classifying those goods under respective tariff heading unless the same are new or MRP is put on those goods in different boxes. Thus irrefutably only conclusion would be that the goods imported were old and used garments and were correctly declared as old and used garments meriting classification under tariff item 63090000.) 4.1.3 So far as the value is concerned, the contention is that once the goods are held to be 'old and used' and classifiable under Chapter 63090000,as per the decision in the Commissioner's conference in Tariff and Allied Matters held on 21st & 22nd January,2000 and subsequent Ministry's Circular No.36/2000 dated 08.05.2000, the importer was under no obligation to resort to item wise declaration in respect of old and used garments. The co-noticee Officers in their submissions as contained in the Adjudication Order have amply clarified the position in respect of the concept of appreciable wear, description of goods and value of the said goods. They had also cited innumerable number of contemporaneous import and practice followed by the Customs House - Kolkata and through out India. The Adjudicating Authority did not rebut those contentions. It is a settled principle of law that if the description is given in the Bill of Entry according to the export document of the Foreign Supplier, there can be no mis-declaration of the goods and the goods are not confiscable under Section 111 (m) of the Customs Act, 1962. This legal position has been upheld in the following judgments:
i) Kriti Sales corporation-VsCommissioner- 2008(232) ELT0151(Tri.Del)
ii) All Seas Marine Contracts SAVsCommissioner - 201 1 (272) ELT61 9(Tri.)
iii) Vinayaka allies Pvt. Ltd.VsCommissioner- 2009(246) ELT540(Tri.) The fact which is acknowledged by the DRI officers is that 78 Bales were totally damaged. The contention is that not a single piece of evidence in form of Invoice or Sale document has been recovered from M/s. Ma Vabatarini Enterprises, not did they disclose any such evidence as authentication/correctness of the entries contained in the Purchase Register in the said firm. Shri Deepak Das's statement has been relied upon but the said statement has no evidentiary value since he is not a party to this proceeding and even after allowing cross-examination by the Adjudicating Authority, the Department did not produce him for cross-examination. Therefore, the said Register and the Statement of Shri Deepak Das have no evidentiary value and the same should be discarded from this proceeding. Re-determination of price of the imported goods is not permissible based on the domestic price of the said goods as has been rightly held by the Hon'ble supreme Court of India in Udayani Ship Breakers Ltd. vs. Commissioner of Customs & Central Excise, 2006 (195) ELT 3 (SC). It is settled by innumerable decisions of the Apex Court that undervaluation cannot be alleged or proved without evidence about comparable imports. No such evidence has been, disclosed in the Show Cause Notice. There is also no evidence disclosed that the importer had paid any amount more than that mentioned in the invoice(s) either in kind or in any other manner. Reference may be made to the following decisions:
(i) Commissioner of Customs, Calcutta -Vs- South India Television (P) Ltd. - 2007 (214) ELT 3 (SC);
ii) Commissioner of Customs-Vs- Initiating Explosive Systems (I) Ltd. 2008 (224) ELT 343 (SC);
iii) Commissioner of Customs -Vs- Prodelin India (P) Ltd. 2006 (202) ELT 13 (SC);
iv) Commissioner of Customs -Vs- J. D. Orgochem Ltd. - 2008(226)
9 (SC);
v) Sara Electro Acoustics Pvt. Ltd.-Vs. Commr. of Customs-2009
(240) ELT 448 (T)
4.1.4 The contention is that Section 111 (d) was not invoked in the Show Cause Notice, the Adjudicating Authority invoked Section 111 (d) by traversing beyond the scope of the SCN, which is not permissible in law but nevertheless vindicates that the goods are old and used garments classifiable under tariff item 63090000. In support of their contention, they have placed reliance on a decision in the case of Raghunath International Ltd.-2011 (266) ELT 432 (All).
4.2.1 Common contention of Sri Prabhat Manna, partner of G.P. International (CHA) and Gautam Adhikary is that the findings against them are mere presumption and assumption basis on extraneous and irrelevant materials. The Ld.Commr. himself has admitted that the goods covered under Bill of Entry No. 414051 dt.10.06.2008 for old and used garments. On re-examination by DRI, the same number of bales as declared were found which was earlier found by the Examination Committee. In these circumstances, there can be no allegation against CHA or its partners of mis-declaration or description of quantity. The contention is that there is no allegation in the SCN nor finding that price of said goods being negotiated by appellant or its partners including Ma Vabatarini Enterprise. Even according to SCN, the appellant only carried out delivery of earlier consignments of similar goods and received payment for the same on behalf of the owner of the importers. The contention is that there is no allegation nor finding that the appellants imported the goods earlier and Ma Vabatarini sold as new goods. In the SCN as well as in the order in original it is a fact that Ma Vabatarini is a purchaser and dealer of old and used goods. In the SCN itself the value of the imported goods has been arrived on the basis of alleged highest purchase price of M/s. Ma Vabatarini i.e. the highest purchase price of the old and used goods. The contention is that the conclusion arrived by the Ld. Commr. is that the immigration certificate showed with the goods were old and used. In these circumstances in no manner whatsoever the appellant could be said to have been aware that the goods imported was nothing but old and used garments. The contention is that the CHA was aware of the contention of appellants. Hence the wholesale price on which the same was sold to the Kolkata based traders actually identified all the goods as well as its wholesale market price. No single piece of evidence has been brought out. Similarly no evidence has been brought out regarding the allegedly 30% of bales on the basis of consignments said to be delivered by the appellant to M/s. Ma Vabatarini Enterprise nor any person has been identified for such consignment. The contention is that it is not obligatory on the part of Customs House Agent under any Provision of the Rules and regulations framed therein to keep the Customs Authorities informed about the wholesale prices of the goods produced in the domestic Indian market. The obligation has been cast upon the importer to ensure correct/genuineness of the nature and the value of the goods invoice/documents before handing over for the preparation of the bill of entry and seeking clearance thereof on behalf of the importer and to find out the correctness of the above aspect of whatsoever officer of the Customs Department is concerned in this manner. The contention is that the alleged involvement in clearance of old and used garments cannot be justifiable fact in the present case. The contention is that Penalty under Section 112 has to be arrived at after determining the fact that the said goods in the present case were liable for confiscation for mis-declaration and mis-description thereof and its value. The contention is that the Commissioner has erred in holding that appellants responsibility for all transactions in relation to the said goods since the goods are very old and used and no transaction had taken place. The Department could not bring out any ingredients against the appellant on abetting or omission of such goods and satisfied on imposition of penalty under Section 112 of Customs Act, 1962. In support of their submission they have placed reliance on:
(a) Rex Printing Press, 2005 (184) ELT 73 (Tri. - Bang.) (b) Navpad Enterprises, 2009 (235) ELT 376 (Tri. - Bang.) ; (c) Shankar Trading Co., 1999 (106) ELT 456 (Tri.) (d) Photo Fax System & Ors., 2010 (174) ECR 288 (Tri. - Kol.)
5.1.1 The Department filed appeal against the order of Ld. Commissioner whereby the proceeding against the Departmental officer has been dropped.
5.2.1 The contentions of Sri M.K. Sil, Special Counsel appearing for the Department are as under:
5.2.2 All the 873 Bales of the consignment had some code word/phrase on the outer transparent covers (packing materials) which could be seen on visual inspection without even strip opening the same.
5.2.3 Bales having Code "LCP (New)" were found to contain only Ladies Cotton Pant & not any other item. It is submitted that DRI during re-examination first inspected the bales and found the code word/phrase written on each bale. Thereafter, on burst opening a few bales having same codeword/phrase the items were found same as those marked on the bales. Accordingly, about 10% of the bales were burst opened & rest were strip opened since the items contained therein were the same as that marked on outside the bales.
5.2.4 The question of burst opening all the bales during re-examination by DRI had not been contemplated in view of the fact that by burst opening a few bales and strip opening all the bales it could be satisfactorily established the content of each of the bales as the bales have respective code word/phrase. It may be pointed out that the entire consignment is still in the warehouse under the control of Customs pending clearance.
5.2.5 As regards the appreciable wears, it is submitted that apart from the reasonable belief of the seizing officers which has been held by the adjudicating officer being justified, nothing more could be placed before the Hon'ble Bench. It may kindly be appreciated that the goods falling under Chapter 63.09 are only "Worn clothing and other worn articles ".
5.2.6 Further during examination it was found that each bale was marked with a specific code number and each code number signified a specific item. For example bales having code of L. C. P (new) were found to be containing 'ladies cotton pant only'. Md Umar Khan, father of the proprietor of the importing firm, in his statement dt. 17.02.2009 and 18.02.2009 recorded under Section 108 of the Customs Act, admitted that he was fully aware of the fact that code number was written on each bale and that his customers also know about the bale code number and what such code denotes and which item is inside the bale having the specific code. He also admitted that each item has different price depending on its quality. Thus it is quite obvious that no mark no and code no was mentioned in the invoices and packing list deliberately to suppress the true identity of the imported goods. It further appeared that the price declared in the invoices is not reflecting the true value of the individual items imported.
5.2.7 The officers of the Customs Examination Committee were also found to have not examined the goods properly as is evident from their findings dt. 05.09.08 vis a vis finding of DRI on re-examination dt. 10.02.09,11.02.09 & 12.02.09. Most of the imported goods were shown in their report as sweaters and misc. items to reduce the quantum of imposable fine and penalty as those items has the lowest margin of profit as per WSMP calculated by Custom House itself & which practice was followed by the adjudicating authorities for the purpose of imposition of Redemption Fine and Personal Penalty while allowing release of such consignments in the past. It was claimed that the information available to DRI was not available with them and hence there was error in their report. The contention is that all the bales were distinctly marked with specific code word from which content of the bales are easily recognizable. The contention is that there has been mark on the bales which identifies the type of material/item inside the respective bales which could be ascertained even without strip opening or burst opening, simply visible on the outer packaging of the bales.In support they produced certain photographs. For example LCP (new) denotes bale containing Ladies Cotton Pant. Even if one can go by the code word on the bales only, such type of error could not have happened.
5.2.8 As regards valuation, the contention is that the investigation was carried out with one Ma Vabatarini Enterprise, the wholesale trader for such imported goods. It was found that that Mr. Umar Khan of Ma Vabatarini Enterprise repeatedly violated exim policy hence the penalty imposed. From the Register of Ma Vabatarini Enterprise, the wholesale price of goods were ascertained and the redemption fine and penalty imposed were accordingly determined. The contention is that most of the NIDB data provided by the importer at the time of adjudication belongs to clearance through Kolkata Port only and the import value also varied widely from Rs.10/-Kg. to Rs.137/Kg. which also proved that without knowing the exact composition of each consignment, value cannot be compared with each other. Ld. Adjudicating authority also discussed in detail why he had accepted the valuation Rule 9. The statement given by Shri Deepak Das of Ma Vabatarini Enterprise regarding the record produced by him were challenged due to his non appearance for cross examination. The contention is that Shri Das did not appear in spite of issuance of circular to him for cross examination. The contention is that summon cannot be issued for his appearance before the adjudicating authority as summon is meant for the purpose of inquiry only. The contention is that Md. Umar Kahn, the importer and the CHA, Gee Pee International admitted to have dealt with Sri Dipak Das of Maa Vabatarini. In fact, entry of goods earlier sold by Md. Umar Khan can also be seen in the said register. Thus there appears to be no doubt about the existence of Sri Dipak Das and Ma Vabatarini Enterprise and the transaction between the importer and the said firm. In support, they placed reliance on this Tribunals decision in the case of Joitkumar B Jain - vs - Commissioner of Customs (P), Mumbai [2005(191)ELT 218.
5.2.9 All the officers of DRI who participated in the re-examination of goods and the CHA who were present during re-examination, were present before the adjudicating authority as requested by importer for cross examination. But surprisingly they were not cross examined which goes to show that the importer did not question the findings of the re-examination and the importer has created an issue of non-appearance of Shri Deepak Das. The contention is that CHA was found to be involved not only in the attempted mis-declaration of description and value of the goods, they were also found to be a beneficiary of such mis-declaration in as much as they used to deliver 30% bales of the past imported consignments to Maa Vabatarini Enterprises and collecting the sale proceeds thereof as disclosed by the purchaser.
6.0 The contentions of Respondent Shri N.C. Chowdhury, S.C. Saha, Shyamal Mondal & Sri M. Meena in common are that they were part of Examination Committee constituted by the Department and they have examined the consignment of old and used garments as per the existing practice and they have examined the consignment by strip opening without bursting the bales. The contention is that methodology that no sign of appreciable wear has been put to use for the first time in the instant batch of cases. The contention is that earlier also the officer of DRI were participating in the examination of such consignments and no such sign were found in the examination carried out earlier. The contention is that in case the Department or DRI wanted to revise the old practice, the Examination Committee ought to have been put on this to notice. They placed reliance on Honble High Court of Kolkatas decision in the case of Mercantile Express Co. Ltd. Vs. Assistant Collector of Customs and in the case of Sandip Agarwal Vs. Collector of Customs- 1997 (62) ELT 528. The contention is that they are also protected under Section 155 of Customs Act, 1962, they have placed reliance on Honble Supreme Courts decision in the case of Fernandes-Vs.State-1996 (82) ELT 433 (SC).
7.1 We have carefully considered the submissions and perused the records. We find that the entire case is built on the premise that the impugned goods are other than Old and Used garments claimed to be classifiable under Chapter 6309 of CTA 1975. Undisputedly the consignment was initially examined by the Customs Examination Committee as per existing practice by strip opening without burst opening the bales and on examination found that:
Bond CWC, Maheshtalla B/E No. 414051 dated 10.06.2008 In absence of marks and Nos. goods identified by stack card. Strip opened at the bales without bursting for examination in presence of AC (E/C) & SIB officer. The goods are old and used garment. Subsequently, the DRI carried out re-examination of only 69 bales out of 873 bales (approx. 7.9% of total consignment) after burst opening the bales and came to the conclusion that the goods are other than old and used goods falling under Chapter 6309 of CTA , 1975 and also are undervalued. Accordingly the proceedings were initiated against noticees.
7.2 So far as the classification is concerned, the Ld. Commissioner has found as under:
.Moreover, in the instant case, most of the articles of the consignment were found to be having 'no signs of appreciable wear' and accordingly did not qualify for the description of 'worn clothing' as per requirement of Note 3 to the Chapter 63 of the Customs Tariff Act, 1975 along with the corresponding HSN Explanatory Notes. Therefore, the subject goods did not merit classification under Customs Tariff Heading 63.09 of the CTA,75. These goods were classifiable in their respective individual CTH of each type of garment. On the contention of the notices importer that DRI officials found 'no signs of appreciable wear' on visual examination, which was without support of any -technical expert's view or test report, l find that DRI officers re-examined the goods and had drawn 5(five) panchanamas dated 10.02.2009, 11.02.2009, 12.02.2009, 13.02.2009 and 01.07.2009 in presence of the independent witnesses/panchas and also in presence of the representative of the Custom House Agent. l find that, panchanamas dated 10.02 2009, 11.02.2009 and 12.02.2009 show that goods of roost of the bales busted were having 'no or verylittle signs of appreciable wear'. The findings of re-examination had been reflected in the panchanamas. This fact regarding condition of any garment whether having 'no signs of appreciable wear' could only be ascertained on visual examination and no test was requited for this purpose. Nothing prevented the importer from attending re-examination process of the goods by DRI. It appeared that the importer deliberately was not present during re-examination of the goods not to witness the misdeeds committed by them and assist in investigation undertaken by DRI. In absence of the importer, the investigating authority had adopted correct procedures for re-examination of the goods and had drawn panchanamas to this effect in presence of independent witnesses and representative of the Custom House Agent. ~ During cross examination, the panchanama witnesses also did not state anything contrary to the content of the panchanamas drawn and relied upon with the show cause notice. Hence, l hold that most of the garments, as stated in the show cause notice, were having 'no signs of appreciable wear' and the same were not to be considered as 'old and used garment' classifiable under heading 63.09 of the Customs Tariff Act, 1975 as claimed by the importer and therefore the goods merit classification under respective Customs Tariff Heading of each type of garment under Customs Tariff Act, 1975 as mentioned in Table VI of the show cause notice, which is also reproduced in paragraph 18 supra. Thus Ld. Commissioner held that most of the garments were having no sign of appreciable wear therefore not classifiable under heading 6309 of CTA, 1975. Chapter Note 3 to chapter heading 6309 provides as under:
7.3 The Note 3 to the said Chapter 63 specifies articles which merit classification under the said heading 6309 and the conditions which the said articles must comply with for coverage under the said heading. The said Note 3 is thus reproduced below:
3. Heading 6309 applies only to the following goods:
(a) articles of textile materials:
(i) clothing and clothing accessories and parts thereof ;
(ii) blankets and traveling rugs;
(iii) bed linen, table linen, toilet linen and kitchen linen;
furnishing articles, other than carpets of headings 5701 to 5705 and tapestries of heading 5805.
(b) footwear and headgear of any material other than asbestos.
(I) In order to be classified in this heading, the articles mentioned above must comply with both of the following requirements:
(i) they must show signs of appreciable wear and
(ii) they must be presented in bulk or in bales, sacks or similar packings. 7.4 From the above it follows that as per Chapter Note 3 (b) (1) in order to be classified under Chapter 6309, the article must comply for both the above requirement. The goods were presented in bales is not in dispute. So far as the other requirement-they must show signs of appreciable wear. We find that in Panchnama dated 10/02/2009, it is recorded that most of the item contained in the Bales bursted were bearing no or very little sign of appreciable wear. Further in Panchnama dated 11/02/2009 it is recorded that most of the examined items (bursted bales) were found to have no and/or little sign of appreciable wear. Similarly, in Panchnama dated 12/02/09, it was recorded that most of the examined items (bursted bales) were found to have no/or little sign of appreciable wear. Article having little sign of appreciable wear, would not automatically fall in the category of article having no sign of appreciable wear, assigning any reason or in absence of any evidence. We also find that in the show cause notice in para 53 at page 9 it is recorded that Moreover, most of the article of consignment having no sign of appreciable wear. Similarly, Ld. Commissioner has found that in most of the article of the consignment. Admittedly, most does not denotes all. Thus the findings are based on presumptions and assumptions.
7.5 Further from the Panchanama, SCN and finding of the Ld. Commr., nothing specific is revealed as to how many article have no sign of appreciable wear and how many articles have little sign of appreciable wear. The DRI proceeded on the basis that the particular type of Code No. carries similar goods, since the bales carried consignment of cloth of various kind only, merely on presumption, it cannot be held to carry same type of articles. It is a cardinal principle that while fixing the liabilities the same should be specific and not based on mere estimation or guess work. Undisputedly, the consignment was not subjected to 100% examination and no scientific method of sampling was followed. We are of the opinion that the sample test by DRI could not be appropriate in the present case while challenging the earlier report of the Examination Committee, especially when re-examination of the consignment was resorted to by shunning the report of examination carried out earlier by the Examination Committee.
7.6 So far as valuation is concerned, value was initially enhanced by the Customs Authorities from 0.417 per kg. to USD 0.60 initially. DRI sought to enhance the value of the articles treating them other than old and used article. As regards valuation, Ld. Commissioner has found as under:
On the contention that sale price of goods in Indian market could not be taken as the basis for determining the assessable value of the goods and DRI authorities did not bother to consider any On norm, I find that valuation of the subject goods had been done based on the actual market prices of imported 'worn clothing'. Valuation of the articles having 'no signs of appreciable wear' had been done taking higher range of purchase price as the 'whole sale market price of the goods as found the 'Purchase Register' of M/s. Ma Vabatarini Enterprises, who was dealing in identical/similar imported goods. The valuation was not done on the basis of any transaction of any indigenous goods.
The noticee importer did not give break-up of the articles of the consignment which had a bearing on its valuation in terms of explanation (iii) to Rule 12 of the Customs Valuation (Determination of Value of imported Goods) Rules, 2007. Noticee's contention that the Rule 9 of the Customs Valuation (Determination of Value of imported Goods) Rules, 2007 had no application or rule 4/5 was applicable here, is not convincing at all as the subject goods were not of any uniform standard. Accordingly, said rules 4 and 5 did not have any application and said rule 9 of the Valuation Rules, 2007 supra, (corresponding to Rule 8 of the Customs Valuation Rules, 1988) had been followed in the instant case for valuation of the goods. Interpretative Note to said Rule 9 allowed reasonable flexibility in respect of the identical/similar nature of the goods. Reliance in this regard was placed on the judgment of the Hon'ble CESTAT in the case of B.K. Spinning Mills (P) Ltd.-vs- Collector of Customs, Cochin [2000(117) ELT 604 (Tr.) wherein it was held that the (erstwhile ) Rule 8 of the Customs Valuation Rules was correctly applicable in case of subject goods for which there was no uniform standard. The investigating authority accordingly, was justified in taking the said value for re-determination of the assessable value of the present consignment. This was also as per the provisions of Custorns Valuation (Determination of Value of imported Goods) Rules, 2007. I am inclined to accept the basis of valuation adopted by DRI under rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 7.7 We find that the value already enhanced was sought to be rejected by resorting to Rule 12 of Customs Valuation Rule and valuation have been done in terms of Rule 9 of Customs Valuation Rules, 2007.
Rule 12 of CVR provides that:
Rejection of declared value- (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of Rule 3.
(2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).
Explanation: - (1) For the removal of doubts, it is hereby declared that:
(i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9.
(ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the Importers.
(iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include
(a) the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price, (c) the sale involves special discounts limited to exclusive agents;
(d) the mis-declaration of goods in parameters such as description, quality, quantity, country of origin, year of manufacture or production;
(e) the non-declaration of parameters such as brand, grade, specifications that have relevance to value;
(f) the fraudulent or manipulated documents 7.8 We find that Rule 12 itself does not provide a method for determination of value. From the Explanation (I)(i) to Rule 12, supra, it is clear that this Rule by itself does not provide a method for determination of value; it provides a mechanism and procedure for rejection of declared value in case where there is a reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9. Thus the Rule 12 of the CVR. 2007 does not empower the proper officer to reject the transaction value without establishing that the transaction value was not genuine.
7.9 We find that the Hon'ble Supreme Court in the case of Eicher Tractors Limited, reported in 9000 (122) E.L.T. 321, wherein it has been held that if the transaction value cannot be determined under Rule 4(1) [now Rule 3(1)] and does not fall under any of the exceptions in Rule 4(2) [now rule 3(2)], there is no question of determining the value under the subsequent rules.
7.10 We also find that in CC, Mumbai V.J D. Orgochem Ltd. reported in 2008 (226) ELT 9 (S.C.), the Apex Court relied on its decision in Eicher Tractors Ltd.. v. CC, Mumbai- 2000 (122) ELT 321 (S.C.)] which is extracted hereunder:
''14. It is only when the transaction value under Rule 4 is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules."
It was observed :
"In the case before us, it is not alleged that the appellant has mis-declared the price actually paid nor was there a mis-description of the goods imported as was the case in Portia Sales Corporation. It is also not the respondent's case that the particular import fell within any of the situations enumerated in Rule 4(2). No reason has been given by the Assistant Collector for rejecting the transaction value under Rule 4(1) except the price list of vendor.' The Apex Court in CC, Calcutta v. South India Television Pvt. Ltd. [2007 (214) E.L.T. 3 (S.C.)] endorsed the same views.
"Therefore, the transaction value under Rule 4 must be the price paid or payable on such goods at the time and place of importation in the course of international trade. Section 14 is the deeming provision. It talks of deemed value. The value is deemed to be the price at which such 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 the buyer have no interest in the business of each other and the price is the sole consideration for the sale or for offer for sale. Therefore, what has to be seen by the Department is the value or cost of the imported goods at the time of importation, i.e. at the time when the goods reaches the customs barrier. Therefore, the invoice price is not sacrosanct. However, before rejecting the invoice price, the Department has to give cogent reasons 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 unacceptable, 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(1 A) 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 doubt must go to the importer. If the Department wants to allege undervaluation, it must make detailed inquiries, collect material and also adequate evidence."
7.11 We find that value was sought to be enhanced by treating the impugned goods as other than old and used garments; and by comparing the sale price of earlier imported old and used garments. As already discussed, supra, there is no specific findings as to how many articles are other than old and used articles, therefore, this aspect is required to be determined followed by valuation thereof. In these circumstances the case is remanded to Ld. Commissioner for deciding the issue afresh while keeping in view our above observations. It is made clear that all the issues are kept open. Both sides are at liberty to produce documents in their support. Needless to say a reasonable opportunity of hearing may be granted to the appellant. The appeal is allowed by way of Remand. Considering the perishable nature of goods, we direct the ld. Commissioner to decide the issue expeditiously, preferably within 3 (three) months from the date of receipt of this order.Appeal of notices as well as Department are disposed off as above. S.P. disposed of.
(Pronounced in the Court on 9/08/2012)
Sd/- 9/8/12 Sd/- 9/8/12
(D.M. MISRA) (S.K. GAULE)
JUDICIAL MEMBER TECHNICAL MEMBER
k.b/-
Customs Appeal No.-88/2010
3