Indian Kanoon - Search engine for Indian Law

2. The relevant facts are that, based on intelligence that certain importers of self-adhesive tapes were resorting to undervaluation in such imports, the Directorate of Revenue Intelligence, Chennai initiated investigations against M/s. Raj Guru Industries, Chennai, and M/s.BM Shah Corporation, Chennai. In the course of investigation, the premises of M/s.BM Shah Corporation, Sowcarpet, Chennai were searched by DRI on 20.06.2007. Shri Surya Prakash Bhandari, the power of attorney holder of M/s. B.M Shah Corporation who was present at the premises during the search, informed that the transactions relating to three firms, namely, M/s.BM Shah Corporation, of which his mother Smt. Chand Kavar was the proprietrix, M/s. Raj Guru Industries, of which his wife Smt. Usha Bhandari was the proprietrix, and Surya Impex, for which he was the proprietor, were dealt with in the said premises. Search was also conducted at the godowns and factory premises resulting in the recovery and seizure of a hard disc, a few files and documents. Statements were also recorded from Shri Surya Prakash Bhandari.

xxx xxx xxx

12. 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(1A) 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. When undervaluation is alleged, the Department has to prove it by evidence or information about comparable imports. For proving undervaluation, if the Department relies on declaration made in the exporting country, it has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to adjudication proceedings. They apply strictly to the Courts' proceedings. However, even in adjudication proceedings, the AO has to examine the probative value of the documents on which reliance is placed by the Department in support of its allegation of undervaluation. Once the Department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus shifts to the importer to establish that the invoice relied on by him is valid. Therefore, the charge of underinvoicing has to be supported by evidence of prices of contemporaneous imports of like goods

21. The adjudicating authority, in his narration of facts, has noted that in reply to the show cause notice, it has been stated that the statements of Shri. Surya Prakash Bhandari recorded under Section 108 of Customs Act, 1962, purportedly admitting to undervaluation, has been retracted stating that they were not voluntary and recorded under threat and pressure. The fact that a notarised affidavit in this regard has been filed also remains uncontroverted. It is seen that the appellants have repeatedly during the adjudication proceedings reiterated the said contentions. The appellants have, vide their letter dated 25.05.2011, pointed out that in their interim reply dated 23.07.2008 they had brought out the contradictions in the statement of Shri. Sura Prakash Bhandari and stated that only cross examination will reveal the truth. It was also stated in the letter dated 25.05.2011 that in response to their request, even date was given. It was further stated that no reason has been stated why the permission already given by the earlier commissioner was changed. The appellants are seen to have cited the CBEC Circular F.No.4/61/61-Cus VI which clarified interalia that where the evidence of any person is relied upon the party concerned must be given an opportunity to test such evidence in cross examination as otherwise it would amount to violation of principles of natural justice. Reliance was also placed on judicial decisions. The appellants again reiterated their request for cross examination vide letter dated 03.08.2011. Yet, the adjudicating authority has chosen to reject the request. We find that the Adjudicating Authority has failed to appreciate that the deponent, as a power of attorney holder, is only acting on behalf of the Principal. In fact the SCNs having been issued separately to the Principal and the power of attorney holder, itself recognizes them as distinct. That being the case, denial of the right to cross examine the power of attorney on the actions that he has purportedly undertaken on the principal's behalf is violative of the principal's right of defence.

26. We find that the approach of the adjudicating authority in this regard, of ignoring the contemporaneous import evidence adduced by the appellant justifying the values as declared by them, does not indicate a fair and unbiased approach. Moreover, rejection of the evidence of contemporaneous import is clearly opposed to the principles laid down by the Apex Court in its decisions in Eicher Tractors and Sanjevani Non

-Ferrous Trading cases cited above, whereby it has been laid down in unambiguous terms that, when undervaluation is alleged, the Department has to prove it by evidence or information about comparable imports. It has been held that casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. The Apex Court has also held that 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. More than two and a half decades ago, the lament on this count expressed by the Hon'ble Apex Court, in its decision in Sounds n Images v. Collector of Customs, 2000 (117) ELT 538 SC, while allowing the appeal of the appellant, which squarely applies to the appeals at hand, merits reproduction and is as below: