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1. These are two appeals filed by the Supplier and Importer respectively with reference to common impugned order involving common issues. Therefore, they are clubbed together and are being disposed of by this common order.

2. The First appellant Shri Aamir H. Nakhoda is the proprietor of M/s. Aamir Universal Trading Centre carrying on business as Importer and Exporter in Singapore. The second appellant is the sole proprietor of M/s. Polyvinyl Industrial Corporation, New Delhi. This unit is registered as small scale unit engaged in the reprocessing and manufacturing of PVC Granules out of the damage wasted PVC material. On 31-12-1990, the second appellant filed a Bill of Entry through their authorised Clearing Agent, M/s. Loknath Shipping & Clearing Agency for clearance of the goods declared as 118.10 M/T high density Polyethylene Resin in the Bill of Entry/Invoice. Since the grade was not mentioned and the Clearing Agent did not produce original documents at the time of filing the Bill of Entry the Assistant Collector of Customs sent goods to the Appraiser for examination of the goods with specific direction that the goods to be examined in the presence of A.C. (Docks). In the meanwhile on 3-1-1991, a case was detected by the Special Investigation Branch wherein 16 M/T Polyamide was sought to be cleared by the second appellant in the guise of High Impact Polystyrene. According to the Department on two previous occasions, the same Importer had cleared 210 M/T Acrylonitrile Butadiene Styrene (ABS) granules covered under Appendix-2, Part-B of the Import Policy against provisional duty bond and after clearance on test of samples, the goods were found to have been misdeclared as High Impact Polystyrene involving duty evasion of over Rs. 75 lakhs. Hence the detailed investigation started with reference to consignment in question on the plea that the Importer was involved in misdeclaration in collusion with the suppliers in a number of recent imports with a view to evading proper payment of duty, accordingly the goods covered by the Bills of Entry were seized on 19-2-1991 under Section 110(1) of the Customs Act, 1962. The proprietor of the Clearing Agency indicated that he had not put up the Bills of Entry for examination as the Importer had not sent to him the original documents. It was further transpired that apparently the Importer had returned the documents to his bank for not taking delivery of the goods. During the investigation on the intervention of Hon'ble High Court of Calcutta on the Writ Petition filed by the Supplier of the goods, the goods were allowed to be stored in a bonded warehouse as per Hon'ble High Court's directions and as the supplier had shown interest in taking the delivery of the goods and selling it to the another Indian buyer of its re-export. Further the Court directed the Department to issue show cause notice against the goods as well as the parties involved if the Customs were not satisfied with the bona fides the transaction and also to take a view on the request of the first appellant. A detailed show cause notice was issued both to the supplier and to the importer charging among other things that there was deliberate attempt on the part of the importer to misdeclare the value of the goods as also to suppress/mis-declare the grade of the HDPE resin imported with a view to evading Customs Duty. It was charged that the Suppliers also have connived with the Importer in this attempt of evasion. The show cause notice was duly answered by both the appellants denying the charges. After considering the facts and circumstances and material evidence placed on record and on considering the submissions made by the parties, the Collector who adjudicated the proceedings observed that it would be fair and reasonable to take a view that the value of the HDPE of blow moulding grade consignment in question at material time would not be less than U.S. $1200 M/T. It was observed that the price declared on the invoice cannot be held to be genuine at arm's length transaction price at which any other buyer would have obtained identical/similar goods at the same price. Accordingly he ordered for confiscation of the goods under Section 111(m) of the Customs Act, 1962, a penalty of Rs. 10 lakhs was imposed on the Importer and of Rs. 7 lakhs 50 thousands on the supplier. However, he gave an option to the Importer to redeem the goods on payment of redemption fine of Rs. 5 lakhs subject to the condition that the goods are re-exported after following the prescribed procedure (including submission of no objection certificate from the Reserve Bank of India), alternatively, the Collector agreed to allow release of the goods on payment of redemption fine to another importer provided such Indian Importer was agreeable to pay the duty on goods on the assessed value of U.S. $ 1200 per M/T without any objection and in that case redemption fine was however reduced to Rs. 2,50,000/-. On filing the supplementary affidavit by the supplier in the pending Writ Petition before the Calcutta High Court, the Hon'ble High Court as per the Matter No. 465/91, dated 18-7-1991 passed the order by giving directions to both sides while desposing of the Writ Petition and the relevant said order is as follows :-

1. Sneha Traders Pvt. Ltd. v. Collector of Customs - 1992 (60) E.L.T. 43 (Calcutta)

2. Kishco Cutlery Ltd. and Anr. v. Union of India -1984 (15) E.L.T. 367 (Bombay)

3. India Infusion Ltd. v. Collector of Customs -1993 (63) E.L.T. 263 (Tri.).

There was no reason to disbelieve contract which was duly entered into between the parties and in the absence of allegation on this issue in the show cause notice, the order is not sustainable referring to the decision - Raphael Pharmaceuticals Pvt. Ltd. v. Superintendent of Distilleries 1988 (38) E.L.T. 11 (A.P.), Motilal Lalchand Shah v. L.M. Kaul and Anr. 1984 (17) E.L.T. 294 (Gujarat) and Pradyumnna Steels Ltd. v. Collector of Central Excise 1989 (41) E.L.T. 556. He said that the appellants were neither related nor have got mutual interest in the business and in the absence of any evidence, the Collector was not right in arriving at the conclusion that the first appellant was connived with the second appellant in misdeclaring the value. It was charged that Importer was involved in misdeclaration in collusion with the Suppliers in a number of imports, but for the first time the Supplier entered into a contract with the Importer for the supply of goods in the normal course and on knowing through the Banker that Importer had refused to retire the documents, they had approached.the concerned authorities either to allow them to sell the goods to other Indian buyer or to allow reshipment of the goods to safeguard their interest. He said that prices for HDPE were lower in August as well as in early September, 1990 and prices were raised upto 20th December, 1990 due to gulf war and as soon as war was over prices have fallen as can be seen from the evidence placed on record and same was accepted by the Adjudicating Authority. He said that there are four types of HDPE but since the grade was not specified by his Supplier and in the absence of direct contact with the manufacturer non-mentioning of grade cannot be construed as misdeclaration to discard transaction value. Further there has been no importation of identical goods at the time of shipment of the goods at Calcutta port, but the Collector compared with various imports of different types/grades of the goods from different countries which have no relevance in determining the assessable value. For instance, prices of the goods of Japanese origin, and of other European countries were compared in determining the assessable value of the impugned goods of U.S.A which were totally irrelevant. He said that comparing with different type/grade of the goods of different origin of country or of comparing with the goods at single instance of similar goods imported for lesser quantity cannot be considered to be contemporaneous evidence. He argued that even applying the Valuation Rules in determining the assessable value, it was not followed in sequence as specified therein and in the instant case the value is to be determined under Section 14 of the Act, since the transaction was principal to principal basis and the goods were sent by the appellant to India at price which was the internationally prevailing market price on the date of contract and that price is the basis in determining the assessable value under Section 14 of the Act. He cited a series of decisions in support of his contention that burden lies on the Department to prove undervaluation and in the absence of contemporary imports of comparable goods, the value of the goods is to be determined by adopting transaction value. Particularly he referred to the following decisions :-

1. Shiv Shakti Enterprises v. Collector of Customs - 1991 (52) E.L.T. 439 (Tribunal).

2. Photo Copy Centre v. Collector of Customs -1991 (56) E.L.T. 801 (Tri.).

3. Globe Engineering Works v. Collector of Customs - 1988 (38) E.L.T. 471 (Tribunal).

Referring to the decision in the case of Crescent Corporation, Calcutta v. Collector of Customs - 1992 (41) ECR 444, he said that there is no infirmity in the order in invoking any rule of the Valuation Rules in determining the value under best judgment though that rule as such was not specified in the show cause notice. As regards Importer's liability, he submitted that Importer has misdeclared the description and value of the goods with connivance of the Supplier with an intention to evade payment of duty. At the first instance he filed a Bill of Entry with an intention to clear the goods but on knowing the detailed investigation in this case and further it was detected that he was involved in other imports in evading to the tune of Rs. 75 lakhs, he backed out and instructed the Banker to return the document without specifying any valid reason. He said that this type of habitual offender should be punished severelly and no lenient view is called for and accordingly the Department was justified in imposing penalty of Rs. 10,00,000/- (ten lakhs).

10. As regards imposition of penalty under Section 112 of the Act, having regard to facts and circumstances of the case and particularly taking into consideration that they have misdeclared the description of the goods in as much as grade was not mentioned in the Bill of Entry and the goods are liable for confiscation under Section 111(m) of the Act, the imposition of penalty on both the Importer as well as Supplier was justified. There is force in the arguments advanced by the learned JDR that the Importer has misdeclared the goods and had an intention to clear the goods for lower value but on initiating the proceedings and on detecting similar offences with reference to different imports he has backed out and abandoned the goods. However in the absence of clear findings with reference to charges in respect of other imports we are not convinced that he is a habitual offender and although imposition of penalty was justified. In the facts and circumstances of this case, we are of the view the quantum requires to be reduced. Accordingly penalty is reduced to Rs. 2,50,000/- as against Rs. 10,00,000/- (ten lakh) in case of Importer and similarly penalty is reduced to Rs. 2,50,000/- as against Rs. 7,50,000/- on Supplier. As regards prayer of the Supplier for allowing them to sell the goods in the country to another party, we direct the Collector to release the goods on payment of duty amount on redetermined value and on collection of other incidental charges. Quantum of redemption fine can also be reviewed by the Collector in the light of the redetermination of the assessable value.