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3. On 16.2.1994 the officers of Mumbai Zonal Unit of DRI, while working on intelligence (we are not aware of the nature of intelligence), intercepted 20 post parcels despatched from Hong Kong to M/s. Triveni Industries, Ahmedabad at FPO Mumbai. In the Customs declaration along with names of the consignor and consignee, the words 'As per invoice' were also found. That means value and the number of pieces each carton contained were not shown. On examination of the DRI officers, it was found that the 20 parcels consisted of 128000 pieces valued at Rs. 25,60,000/- of liquid crystal display watch modules with button cells. No invoice was found in the parcels. The goods were seized on the reasonable belief that they were smuggled into the country.

4. During the course of investigation, some statements were recorded (of the addressees), some premises were searched and some, what we call, incriminating documents were recovered. One Jagdish C. Trivedi, one of the partners of the firm to whom the consignments in question were addressed, handed over the invoices covering the parcels. The value shown in the invoices is HK $ 1.5 per piece. Another partner, Atmaram J. Vaghela in his statement, narrated the circumstances under which he came to obtain SSI certificate in the name of M/s. Triveni Industries for manufacture of digital watches, quartz watches etc., how he obtained IE code number and other details and as to how he, in connivance with the foreign supplier, planned to import watch modules, undervaluing them etc. He however could not go through this plan to undervalue the goods as he came to know that the goods were intercepted by DRI. He advised the foreign supplier to correctly declare the value (HK $ 1.5 per piece). The rest of the statements and investigation are not relevant to decide the issue. In due course, a show cause notice was issued and the case was adjudicated by the Deputy Commissioner, Mumbai, where by he confiscated the goods under Section 111(d) and (m) of the Act and imposed penalties.

5. The Commissioner (Appeals), before whom the appeal came up, held that the goods are not liable to confiscation under Section 111(d) as there was no prohibition against import of watch modules. The goods could be imported under OGL by an actual user and the respondents were actual users inasmuch as they had SSI registration; that the goods were not liable to confiscation under Section 111(m) as there was no misdeclaration of value or quantity; that the persons concerned were not liable to penal action as the goods themselves were not liable to confiscation. He also held that the DR1 should have allowed the consignment to proceed to Ahrnedabad before taking any action; that the goods were in transit to Ahmedabad and such goods should not be intercepted, seized and confiscated enroute. He set aside the order of the Deputy Commissioner.