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3. On the basis of the intelligence that the importers were connected with the foreign suppliers and were indulging in misdeclaration of value of the imported goods,, their office premises were searched on 26-11-1986 and 27-11-1986 by the officers of the Special Investigation Branch of the Customs House as a result of which several incriminating documents were seized. Amongst the seized documents were the following :-

(i) Telex No. CX by 2831456 dated 10th October, 1986 sent by Paresh Kapadia to one Phyllis Simon of Raychem Corporation, California stated that Radiation Technology (I) Pvt. Ltd. was a Raychem Corporation owned Indian Company and not a customer.

4. On the basis of the declarations made by the importers in the Bill of Entry and the seized documents, a show cause notice dated 9th December, 1986 and the supplements were issued, and in the show cause notice it was stated that it appeared that :-

"(1) By suppressing and not filing Invoice No. Y-33759 dated 15-10-1986 covering goods valued at Rs. 1,93,441/-, the importers had knowingly misdeclared the value and goods/net weight of the imported goods and had thus attempted to evade duty amounting to Rs. 3,40,456/-.
(ii) The importers had deliberately misdeclared on the reverse of the Bill of Entry that they were not connected with the suppliers of the goods.
(iii) They had been instructing the foreign suppliers to make incorrect declarations in the documents in respect of imported goods in order to evade customs duty*.
(iv) Under an arrangement between M/s. Raychem Corporation Menlo Park, U.S.A. and the importers, the suppliers in Munich were to supply goods at a previously agreed low price. The Munich Suppliers were to be compensated and difference between the special low price and the standard price was to be paid by the Raychem Corporation, USA to Munich and the goods were to be invoiced to M/s. Radiation Technologies (I) Pvt. Ltd. at a lower price to enable them to evade duty. On basis of the printed price lists issued by M/s. Raychem Corpn. USA and their European subsidiaries, the values of the imported goods were worked out and indicated in the annexure to the show cause notice as Rs. 78,74,746/- as against the declared value of Rs. 6,84,554/-. It was pointed out that this misdeclaration would have resulted in loss of duty amounting to Rs. 1,26,54,737/-. It was alleged that in view of the evidence disclosed in the seized documents and also in view of the fact that the importers and the suppliers were related parties, the values as indicated in the relative invoices could not be deemed as representing the values at which similar goods were being sold or offered for sale in the ordinary course of business and as such the values indicated in the invoice did not appear to be assessable values of the goods under Section 14(1) (a) of the Customs Act, 1962. It was stated that in respect of items at Sr. Nos. 2 and 9 of the annexure whose prices were not available in the seized price lists and the price had been arrived at on prorata basis keeping in view the mis-declaration of value in-respect of other items.
6. The Collector did not accept the contentions of the appellants and had held that M/s. Radiation Technologies (India) Pvt. Ltd. were related to suppliers M/s. Raychem Corporation for the purposes of Section 14 of the Customs Act, 1962 and had further observed that from the price lists which were seized from the importers' premises it was evident that the prices at which the imported goods were being supplied by M/s. Raychem Corporation to Radiation Technologies (India) Pvt. Ltd. were vastly different from the prices at which the goods were sold and offered for sale by M/s. Raychem Corporation to unconnected buyers in different parts of the world. The Collector held that the value of the imported goods under Section 1.4(1) (b) read with the Customs Valuation Rules, 1963 shall be Rs. 74,78,870/-. He had further ordered the confiscation of the goods covered by invoice No. Y-33759 dated 15-10-1986 under Section 111(1) and (m) of the Customs Act, 1962. However, he had given an option to redeem the goods on payment of fine of Rs. 13,00,000/- (Rs. thirteen lacs only). He had also ordered the confiscation of the imported goods of declared value of Rs. 6,84,554/- and had ascertained the value at Rs. 74,78,870.00 whose value was misdeclared by the importers under Section 111(m) of the Customs Act, 1962. He also ordered the confiscation of the goods of ascertained value of Rs. 59,05,870.00 under Section 111(d) of the Customs Act, 1962. However, he had given an option to redeem the same on payment of Rs. 38,00,000/- (Rs. thirty eight lacs only). He had also imposed a penalty of Rs. 20,00,000/- (Rs. twenty lacs only) under Section 112 of the Customs Act, 1962.