TMI Blog2000 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 30 lakhs in lieu of confiscation. Shri Rajesh Jain and Shri Mahesh Jain (appellants in appeal Nos. C/410/99-A and C/411/99-A respectively) are partners of the said firm and are aggrieved by the order of the Commissioner imposing personal penalties of Rs. 20 lakhs each on them. Nipun Impex (appellant in appeal No. C/20/2000) is a proprietary concern of Shri Ashwini Kumar Sarin and is a Customs House Agent. They are aggrieved by the order of the Commissioner imposing a penalty of Rs. 5 lakhs on them. The stay applications are for waiver of pre-deposit of penalty amounts for purpose of hearing appeal Nos. C/410 411/99-A and C/20/2000-A. 3.After careful examination of the records and consideration of the submissions made before us by both sides, we are convinced of the strong prima facie case in favour of the stay applicants. We, therefore, allow the stay applications unconditionally and proceed to consider the appeals on merits. 4.M/s. J.G. Exports (hereinafter called 'exporters') filed a shipping bill on 14-3-1999 for export of 215 Quartz analog watches to the consignees at Sharjah, claiming Customs duty credit @ 21% under the Duty Entitlement Pass Book (DEPB) Scheme. The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods declared by the party was Rs. 82,75,995.00 and the PMV of the goods declared by them was Rs. 56,50,000.00. Customs authorities also recorded statements of Shri Rajesh Jain under Section 108 of the Customs Act. On the basis of all the findings so arrived at the Department issued show-cause notices to the appellants. The noticees contested the Department's allegations and pleaded for dropping the proceedings. But proceedings ensued and culminated in the impugned order. 6.Heard both sides at length. Shri J.S. Agarwal, Advocate and Shri J.M. Sharma, Consultant argued for the appellants. Shri P.K. Jain, SDR presented the respondent's case. 7.The allegations in the show-cause notice as against the exporters were (i) that they misclassified the goods in the shipping bill by classifying the same under ITC Code No. 9101 whereas the goods were classifiable under ITC Code No. 9102; (ii) that they over-valued the goods at an FOB value of Rs. 82,75,995.00 and declared the PMV of the goods as Rs. 56,50,000.00 whereas the correct PMV as determined by the Department was only Rs. 37,82,112.00 and (iii) that such overvaluation was done to avail high DEPB benefit of Rs 17,27,959.00. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort consignment in question; Only the values of the watches (without straps/belts) and the gold straps/belts as suggested by AIEWCM Association and certified goldsmith were considered by Department in valuing the goods; Necessary elements such as transportation and handling charges, labour charges for gold-polishing of watch-cases, labour charges for manufacture of gold belts, packing costs, and overhead charges were completely ignored; There is no evidence to disprove the price declared by the exporter and the value worked out by the Department is without any basis; Consignment ought to have been permitted to be exported atleast provisionally without DEPB benefit, pending the Departmental proceedings; It was held up by the Customs authorities disregarding the instructions issued by the Government in relation to DEPB scheme; In the wake of cancellation of export order by the foreign buyer, the exporter would like to withdraw the shipping bill, in which event the question of DEPB credit did not arise and the goods were liable to be released; In the past, Department had cleared exports of identical goods by accepting the exporter's similar declaration of FOB value etc., and the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record and submitted that these documents were produced before the adjudicating authority. A break-up of the approximate cost of the 215 wrist watches with gold straps was also furnished to the said authority. It was without considering such documents and materials that the Commissioner went into valuation of the goods. The report of examination of the goods submitted by the Department's Jewellery Appraiser on 18-3-1999 had certified the declared price of the goods to be fair, but the report was also not considered by the adjudicating authority. It was in utter disregard of the principles of natural justice that all the proceedings after 18-3-1999 were resorted to by the Department. Ld. Advocate explained this submission by pointing out that the drawal of the samples of the goods for testing by certified Goldsmith, the taking of samples to the market for valuation, the removal of gold straps/belts from the watch-cases for separate valuation, the weighment of gold by the Goldsmith and the seizure of the goods on 6-4-1999 were all done behind the back of the exporters. Counsel, on this ground, challenged the credibility of the certificates of AIEWCM Association and Goldsmith. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He also pointed out that the appeal filed against this decision of the Tribunal was dismissed by the Supreme Court as reported in [2000 (115) E.L.T. A-219]. Counsel further relied on the decision of the Tribunal in the case of CC, Kandla v. Dimple Overseas Ltd. - 1995 (76) E.L.T. 48 (T) = 1995 (8) RLT 126 and pointed out that the appeal filed by the Collector of Customs against this decision of the Tribunal was also dismissed by the Supreme Court vide [1996 (86) E.L.T. A-167]. 13.Counsel further submitted that, since Section 18(1)(a) of FERA, 1973 was not attracted in the appellants' case, the provisions of Section 113 (d) and Section 114 of the Customs Act, 1962 were also not invocable against them. In support, he relied on a plethora of decisions of the Tribunal including MVT International (supra). 14.Ld. Advocate challenged the action of the Department separating the straps/belts from the watch-cases for market enquiry purposes behind the back of the exporters. The action of the Customs authorities vitiated the whole proceedings, he said. He submitted that each Quartz analog (sic) watch with gold straps/belts attached thereto was an integrated unit. In this connection, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit amounted to a breach of Rule 14(1) of the Foreign Trade (Regulation) Rules, 1993. He further argued that the ' full export value' of the goods, to be declared by an exporter under Section 18(1)(a) of the FERA, 1973 was the value to be determined in terms of Section 14 of the Customs Act, 1962. In this connection, he relied on the decision of the Calcutta High Court in the case of CC v. Pankaj V. Sheth - 1997 (90) E.L.T. 31 (Cal.). Ld. DR also relied on the decision of the Tribunal in the case of Galani Infin (P) Ltd. v. CC, New Delhi - 2000 (118) E.L.T. 360 (Tribunal) = 1999 (35) RLT 3 (T) as also on a later decision of the same Bench in the case of Amit Batra v. CC, New Delhi in appeal No. C/115/98-A (Final Order No. 1573/99-A dated 5-11-1999). Ld. SDR also relied on the decision of the Calcutta High Court in the case of Tosh Sons Pvt. Ltd. v. Asstt. Collector of Customs - AIR 1979 Calcutta 386 in support of his plea that the misdeclaration by the exporters should be held to be a breach of Section 18(1)(a) of the FERA, 1973. However, there was no answer to a query from the Bench as to whether the adjudicating authority in the instant case determined the correct value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value addition achieved by export of such product shall also be taken into account while determining rate of duty credit under the scheme. An exporter, under the scheme, is eligible to claim credit as a specified percentage of FOB value of export made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade (DGFT) by a Public Notice issued in this behalf. Quartz analog watches are among the export products notified by the DGFT vide Sl. No. 37 under Product Group Code 83 and the DEPB credit rate applicable to the said goods is 21% of FOB value. The description of the goods in the alphabetical index of export items is "Quartz analog Watches - Digital electronic watches". Under the "Standard Input-Output and Value Addition Norms" applicable to the DEPB scheme, goods of the description viz., "Quartz Analog Watches" - figured as export item at Sl. No. B132 and watch-case, watch-strap/bracelet etc. stood mentioned as separate import items against the said export item. The relevant extract of the Input-Output Norms is given below :- Duty Exemption Scheme ELEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards FOB value of the goods also, no discrepancy whatsoever has been found between the shipping bill and the corresponding invoice. The PMV declared for the 215 wrist watches with gold belts is Rs. 56,50,000.00. As per Public Notice No. 66 dated 25-6-1997 issued by the Delhi Customs read with Circular No. 15/97-Cus., dated 3-6-1997 of Govt. of India (Ministry of Finance), the correctness of PMV could be examined at the stage of processing of shipping bills, having regard to the description and specification of the export product declared with reference (in the case of factory-cleared products) to AR-4 or Excise Invoice or (in the case of export goods procured from the market) to the sale invoice of the authorised dealer or any other evidence based on enquiries. In the instant case, the watches were procured from the market and the sale invoice of the suppliers at Chennai had been furnished by the exporters to the Department. The exporters had also provided the approximate break-up of the cost of the goods. These materials ought to have been considered by the Customs authorities at the stage of processing of the shipping bill for the purpose of verifying the correctness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certified market price. On these grounds, we hold that the above certificate is not a valid evidence in relation to the consignment in question and, therefore, the reliance placed by the adjudicating authority on the above certificate for the purpose of determining the value of the goods cannot be accepted. 24.We have also seen the certificate dated 6-4-1999 issued by the certified goldsmith, Shri Kuldeep Sugandh. This certificate deals with the bracelets and the watches (without bracelets) separately. As regards the bracelets, it was certified that 205 out of 215 pieces were 22 ct. gold bracelets and the remaining 10 pieces were 18 ct. gold bracelets. The weights of the 22 ct. and 18 ct. gold bracelets were also stated. The 215 watches were certified to be ordinary gold-polished. The total market value of the gold bracelets was stated to be Rs. 37,56,312.00. 25.It is evident from the above certificates that, in the process of market enquiry, each of the 215 pieces of the export product was dismantled into watch (without bracelet) and bracelets. The watches were examined by the AIEWCM Association and the bracelets, removed from the watch-cases, were examined by the goldsmith. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the appellate judgments of the Supreme Court, we find that the Tribunal's decisions in Shilpi Exports (supra) and Dimple Overseas (supra) still hold the field and the Calcutta High Court's decision on the aforesaid point has ceased to have precedent value. 27.In the case of Galani Infin (supra) cited by ld. DR, the Tribunal was following the Calcutta High Court's decision in the case of Pankaj V. Sheth (supra) in its finding that the power to assess the value of goods under Section 14(1) of Customs Act was independent of any question of assessability of the goods to duty, which were sought to be exported. This decision in Galani Infin (supra) cannot be accepted as good law inasmuch as the ruling of the Calcutta High Court in Pankaj V. Sheth (supra) was rendered nugatory by the Supreme Court's decision upholding the Tribunal's decision in Shilpi Exports (supra). For the same reason, the decision of the Tribunal in the case of Amit Batra (supra), which was rendered by following the decision in Galani Infin, also cannot be successfully relied on by the Revenue. We, therefore, hold that, since the goods in question were not assessable to duty, it was not open to the Customs aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments did not amount to violation of Section 18(1)(a) of the FERA and, for that matter, there was no violation of Section 11 of the Customs Act, 1962. This decision was followed by the Tribunal in MVT International (supra). The Calcutta High Court (Single Bench) decision in Tosh Sons (supra) relied on by ld. DR is not good law after the Division Bench decision in Lexus Exports (supra) and the same has been correctly distinguished by the Tribunal in MVT International (supra). We would follow the High Court's ruling in Lexus Exports (supra), which was rightly relied on by the Tribunal in MVT International (supra), to hold, in the instant case, that any over-valuation by the exporters in their shipping bill did not violate Section 18(1)(a) of the FERA, 1973 and, therefore, there was no deemed violation of Section 11 of the Customs Act, 1962. Section 67 of the FERA, 1973 did not have any operation in the instant case. 29.We have also noted that the Calcutta High Court in Lexus Exports (supra) considered the applicability of Section 113(d) of the Customs Act, 1962 to the facts of that case and held that the writ-petitioner had not contravened the said Section since the export of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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