Custom, Excise & Service Tax Tribunal
M/S. Spicer India Ltd vs Commissioner Of Customs on 2 January, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: C/695/2004-DB [Arising out of Order-in-Original No. 70/2004 dated 23/04/2004 passed by the Commissioner of Customs, Bangalore.] M/s. Spicer India Ltd. Appellant(s) Versus Commissioner of Customs BANGALORE. Respondent(s)
Appearance:
Ms. Neetu James, Advocate For the Appellant Mr. N. Jagadish, AR For the Respondent Date of Hearing: 21/10/2016 Date of Decision: 02/01/2017 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER HONBLE SHRI V. PADMANABHAN, TECHNICAL MEMBER Final Order No. 20004_/ 2017 Per : S.S GARG The present appeal is directed against the impugned order passed by the Commissioner of Customs dated 23.4.2004 vide which the Commissioner of Customs has assessed the value of the imported goods under Rule 8 of Customs Valuation Rules, 1998 read with subsection (1) of Section 14 of Customs Act, 1962 and also held that importation is liable to confiscation under Section 111(m) of the Customs Act, 1962 but has given the option to the importer to redeem the same on payment of redemption fine of Rs.5 lakh and also imposed a penalty of Rs.5,000/- on the appellant under Section 112(a) of the Customs Act, 1962.
2. Briefly the facts of the case are that the appellant is a 100% EOU and they have Assets Purchase Agreement dated 20.12.2002 and Supply Agreement dated 20.12.2002 as per which they imported certain tools from M/s. Dana Corporation and they have entered into a technical collaboration agreement with M/s. Dana Corporation. They filed Bill of Entry No.592329 dated 29.3.2004 through their CHA M/s. Passage Cargo Pvt. Ltd. for clearance of the following items.
Invoice No. & Date Description of the item Value UL 83615 dt.22.3.04 Allen Drill Head Broach Fixture Cutter Tool USD 10,000 UL 83606 dt.18.3.04 End Yoke Assembly USD 557.40 UL 83601 dt.17.3.04 Slinger USD 18.75 The total assessable value of Rs.5,97,643.46.
2.1 On the basis of the invoices filed by the appellant, Bill of Entry was assessed on 29.3.2004. The Bill of Entry was allowed clearance under green channel facility. However, before the clearance of the goods at the importer shed, the Superintendent asked the CHA to produce the original invoice, which was not produced. The Assistant Commissioner denied the green channel facility and ordered for open examination. On opening the packages, one invoice No.83615 dated 22.3.2004 and one document marked as Annexure AA were found. These goods were found against Invoice No. UL 83615 dated 22.3.2004. On perusal of the same, it was noticed that the value of the goods was mentioned as US $ 1,94,600 as against US $ 10,000 mentioned in the invoice No. UL 83615 produced at the time of assessment. Further, it was also found that the goods are used second hand. On questioning about the value difference, the importer produced copy of invoice No.83615 dated 22.3.2004 wherein the value of goods was mentioned as US $ 1,94,600 and Chartered Engineer certificate certifying the value of goods as US $ 1,94,600. Further, the importer has stated that the goods are on Free of Charge (FOC) basis and they have put a notional value of US $ 10,000 which was subsequently authenticated by the supplier. As value of the goods was found to be more than the declared value, the Asst. Commissioner (Shed) sent the Bill of Entry to the Asst. Commissioner (Group 7U) for reassessment. The representative of the appellant also requested for re-assessment / amendment. On examination of the entire import document, following discrepancies were found.
(a) The Invoice No. UL 83615 / 22.3.04 produced by the importer at the time of assessment appears to be not correct inasmuch as the value has been mis-declared as US $ 10,000/- as against US $ 1,96,400/-.
(b) On perusal of both the invoices bearing No. UL 83615, the one produced at the time of assessment and the other produced by the importer before AC (Import Shed) it appears that both are photocopies and the figure US $ 1,96,400/- has been blocked at the time of photocopying and the figure US $ 10,000/- has been written in hand deliberately to get the BE assessed at lower value.
(c) A Certificate dated 8.4.04 from the supplier was produced certifying the value of US $ 10,000/- in respect of Invoice No.UL 83615 as the correct value. The production of such certificate is only an afterthought, perhaps only to get the goods assessed at less value.
(d) Second hand nature of the goods has not been declared by the importer even though they were aware and were in possession of Chartered Engineers Certificate issued by Chartered Engineer of USA.
(e) It is seen from the Invoice No. UL 83615 dt. 22.3.04 that there are 5 items and the value is US $ 1,94,600/-. But as per Annexure AA found in the package the value is mentioned as US $ 1,94,600/- for 8 items. However, as per Annexure AA, the value for 6 items found in the consignment works out to US $ 1,77,800/-.
(f) The reply given by the importer that they put a notional value of US $ 10,000/- does not appear to be acceptable as there is huge difference between value declared and actual invoice value. Further, the reply of the importer that the value of US $ 10,000/- has been authenticated by the supplier as US $ 10,000/- is also not acceptable inasmuch as the invoice No. UL 83615 was dated 22.3.04 and the certificate was issued on 8.4.04 which is much later than the date of the invoice.
After seeing these discrepancies, the Joint Commissioner ordered for re-inspection of the goods and value appraiser by a local Chartered Engineer in the presence of CHA/importer. Thereafter Shri Garuda Prasad, Chartered Engineer in the presence of the customs officer, importer and CHA assessed the value of the goods and it was assessed at Rs.40,48,301/-. After the goods were appraised by the Chartered Engineer, it was found that the importer has undervalued the goods and has mis-declared the value of the goods imported vide Bill of Entry 592329 dated 29.3.2004 and also failed to declared secondhand entry of the goods and suppressed the facts from the Department which makes the goods liable for confiscation and importer is also liable for penalty under Section 112 (a) of Customs Act, 1962. On these facts, the importer vide his letter dated 17.4.2004 requested for waiver of show-cause notice and requested for adjudication of the case.
2.2 Learned counsel for the appellants submitted that the appellant being EOU is entitled to import secondhand capital goods duty-free and the Department has not alleged that the appellant is not entitled to import secondhand capital goods duty-free. Since there is no duty implication the benefit has been availed under Notification No.52/2003-Cus. There cannot be mis-declaration as undervaluing the goods does not benefit the appellant and consequently imposition of penalty, confiscation of goods and imposition of redemption fine is not sustainable. Further learned counsel submitted that the Chartered Engineers certificate has not given any justification for the value adopted in the certificate and therefore, the reliance placed upon the certificate is not correct. In support of his submission, he relied upon the following decisions:
i. CC vs. Royal Recylcing Indusries: 2011 (263) E.L.T. 526 (Guj.) ii. Siyaram Metals Pvt. Ltd. vs. CC, Kandla: 2008 (229) E.L.T. 88 (Tri.-Ahmd.) affirmed in 2011 (264) E.L.T. A93 (Guj.) iii. CC, Kandla vs. Texool Wastesavers: 2009 (236) E.L.T. 324 (Tri.-Ahmd.) iv. Artistic Stone (P) Ltd. vs. CC, Kandla: 2007 (208) E.L.T. 390 (Tri.-Del.)
3. On the other hand, the learned AR defended the impugned order and submitted that the learned Commissioner has analyzed all the facts and the circumstances of the case and has rightly come to the conclusion that the appellant have mis-declared the value of secondhand capital goods imported by them.
4. After considering the submissions of both the parties and perusal of the impugned order, we find that the learned Commissioner has passed a very reasoned order on the basis of evidence which has come before him. In this regard, it is pertinent to make a reference to para 22-26, which is reproduced herein below:
22. I have considered the submissions made by the party. The value of US$10000 declared by the party at the time of assessment, as per their own admission, is only a notional value and it does not reflect the correct value of the goods. The goods are not supplied free of charge as admitted by them during the personal hearing because, they have a Technical Collaboration with the foreign supplier who is a related person for supply for plant and machinery and for which they have to make the payment on a credit basis. The goods under importation are part and parcel of that plant and machinery for which they would be making the payment subsequently. Therefore the declaration given in the Invoice that they have been supplied free of charge is totally wrong and amounts to a misdeclaration on the part of the importer. The party was well aware that the foreign 7 Chartered Engineer had evaluated these goods for a value of US$1,94,600 and the invoice given by the Foreign supplier also indicated the same value in respect of 8 items of import. However, in the copy of the invoice given to the Customs department, they have shown a value of US$10000 and as admitted by the party, this has been done by the foreign supplier as per the instructions of the importer. Thus they have no correlation to the actual value of the goods supplied. This fact was very well known to the importer as they had the foreign supplier's original invoice as also the foreign Chartered Engineer's Certificate with them. Merely because, they are a 100% EOU and are entitled for importation of capital goods duty free does not mean that they can declare any value in respect of the goods under importation and get away with it.
23. As per the provisions of Section 14(1) of the Customs Act, 1962, the value for goods chargeable on duty of Customs is the price at which such or like goods which 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 or one of-them has no interest in the business of other and the price is the sole consideration for sale or offer for sale. As per Section 2(2) of the said Customs Act, assessment includes any order of assessment in which the duty assessed is nil. Further, as per Section 2(41) of the said Customs Act, "value" in relation to any goods, means the value thereof determined in accordance with the provisions of subsection(1) of Section 14. The Hon'ble Supreme Court in the case of Om Prakash Bhatia vs Commissioner of customs, Delhi [2003(155) ELT 423 (SC)] has held that the value for determining the value of the goods provided under Section 14 of the Customs Act, 1962, is required to be followed even if no duty is payable. Therefore, even in a case where the duty chargeable is nil, assessment of the goods have to be made and this assessment has to be as per the provisions of Section 14(1) of the Customs Act read with Customs Valuation rules, 1988. In the instant case, the value of US$10000 declared by the importer cannot be accepted for the following reasons:-
(a) The buyer and the seller are related to each other as per Rule 2(2)(iv) of the Customs Valuation Rules in as much as the foreign supplier holds 74.9% of the equity shares of the importing firm.
(b) The value has been declared as free of charge and a notional value of US$10000 has been indicated in the invoice on the insistence of the importer and it does not reflect the correct value. As admitted by the party, during the course of personal hearing, they have a technical collaboration agreement for the supply of plant and machinery with the foreign supplier and they are required to make payment for these goods on a credit basis at a subsequent point of time. Merely because the payment is not made immediately, it does not mean that the goods are supplied free of charge. The goods under importation are part and parcel of the plant and machinery supplied or to be supplied by the foreign supplier.
Thus the attendant circumstances reveal that the price declared in the invoice has been influenced by the relationship between the importer and the foreign supplier and therefore under Rule 4(3)(a), the transaction value cannot be accepted.
24. The importer has not produced/submitted any evidence to demonstrate that the declared value of the goods being valued closely approximate to either the transaction value of identical goods or of similar goods in sales to unrelated buyers in India or deductive value of similar goods or identical goods or the computed value for identical goods or similar goods. In the absence of any such evidence, adduced by the importer, the transaction value of US$10000 declared by them is liable to be rejected and I hold accordingly.
25. To determine the transaction value, one has to proceed sequentially through Rule 5, 6 & 7 of the Customs Valuation rules, 1988. For this purpose, the value of identical goods or similar goods have to be known. In th instant case, this being a specified or customized import of the importer, no such values are available and hence application of Rule 5 and 6 do not arise.
26. For applying rule 7 or 7A also, either the value of the identical or similar goods should be available or the cost or the value of materials and fabrication or other processing employed in the producing of imported goods should be known, In the absence of this data, it is not possible to apply Rule 7 or 7A of the Customs Valuation Rules in the instant case. That leaves the application of Rule 8, which is the residual method, for evaluation of the goods under importation. In the instant case, the foreign chartered Engineer's Certificate clearly reveals that the value of the goods under importation is US$1,77,800/- as certified by the foreign Chartered Engineer, who has arrived at this value as "reasonable price assessed on the basis of current market trend". The party's contention is that this value is the price of new goods and in the instant case, the goods are old and used. The valuation done by the local Chartered Engineer engaged by the department indicates the value as US$1,80,000 in respect of new goods and after applying the depreciation norms for 5 years, he has arrived at a FOB value of US$82800/-. The only contention made by the party during the personal hearing is that if depreciation norms is allowed taking into account the year of manufacture indicated in the foreign Chartered Engineer's Certificate, the CIF value comes to US$74617/-. But on examination of the goods by the local Chartered Engineer, it is found that SI.Nos. or Model numbers are not available on the items and the year of manufacture is also not indicated. Therefore, the - question of accepting the foreign Chartered Engineer's Certificate to be correct with respect to the year of manufacture does not arise. On inspection of the goods by the local Chartered Engineer has opined that the goods might have been in use for about 5 years and the cost of the entire goods when new would be US$1,80,000. After allowing the depreciation for 5 years, he has arrived at a fair FOB price for the goods at US$82,800 and after taking into account the freight and insurance at actuals and the handling charges, he has arrived at an assessable value of P,s.40,48,301/-. I find that the method adopted by the local Chartered Engineer is fair and reasonable and takes into account all the relevant factors. Accordingly, I hold that the assessable value of the goods under importation is Rs.40,48,301/- under Rule 8 of the Customs Valuation Rules, 1988, read with sub-section (1) of Section 14 of the Customs Act, 1962. 4.1 Further, we find that the learned Commissioner has correctly valued the imported goods on the basis of various rules of valuation as contained in Customs Valuation Rules and he has also come to the conclusion that the method adopted by the Chartered Engineer was fair and reasonable and has taken into consideration all the relevant factors. Further with regard to the intention of the importer to mis-declare the value of the goods, the evidence which has come clearly shows that he has an intention to mis-declare the value and has not rightly declared the value of the imported products. Therefore after considering the submissions of both the parties, we do not find any infirmity in the impugned order and we uphold the same by dismissing the appeal of the appellant.
(Order was pronounced in Open Court on 02/01/2017.) V. PADMANABHAN TECHNICAL MEMBER S.S GARG JUDICIAL MEMBER rv 10