2012 (4) TMI 69 - AT - Customs

Demand - Redemption file - Penalty - When the value declared and taken for determination of duty by the department is found to be not acceptable in these cases, we have to give a finding as to what value should be adopted for quantifying the duty amount - The two importers are 100% EOU viz. M/s. ETK Softech (P) Ltd. Ranipet and M/s. ORJ Electronic Oxides Ltd. Pudukottai, both licensed under Section 58 of the Customs Act, 1962 to operate as private warehouses for goods imported by them - Investigation by DRI also revealed that similar capital goods imported from Singapore by M/s. ORJ through Tuticorin Port and cleared under Bill of Entry No. 346 dated 27.5.97 were the same goods which M/s. ETKIF had manufactured and exported under Shipping Bill No. 1516 dated 9.4.1997 through Chennai Port - This is a case where admittedly the goods of Indian origin exported earlier have been re-imported. - if proper goods of the declared value were actually imported and the same was either mis-used or diverted for home consumption, and not used in an EOU unit, there would have been evasion of customs duty on that score - Held that the export value is available in respect of both the consignments in terms of FOB value in both the cases the value is indicated as USD 1,71,300 Whether any amount would have to be added to the value towards insurance and freight charges as the import value is required to be computed on CIF basis - Held that addition of actual freight and insurance charges or the addition of usual 20% when such amounts are not available may not be necessary as the FOB value in India can be taken as it is as the CIF value in India in respect of these cases for the purpose of determining customs value and customs - it is clear that the fraudulent transactions involved in these cases were not so much intended to defraud the customs department or cause customs duty evasion as was for obtaining inadmissible benefits violating provisions of other enactments such as the Income Tax Act and the Foreign Exchange Management Act etc In the eyes of the customs law, being owners, they were importers and under the income tax law being owners, they alone were eligible for claiming depreciation in respect of the impugned imported machinery - It makes no difference to the legal position that in respect of one Bill of Entry, the financing institution had signed the Bill of Entry and in the other case, the bank had not signed it, since in both the cases, the Bills of Entry were filed in the joint name, the ownership was retained with SFL/Bank, the purchase order was placed by SFL/bank, the Bill of Lading was in the name of SFL/Bank and the commercial invoice was also in the name of SFL/bank Regarding penalty - Held that the order passed in this case confirming the penalty in an export fraud case, has been passed in the larger interest of arresting fraudulent acts, in a Writ Petition and does not interpret the statutory provisions of Section 114 or under any of the sub-sections thereof to conclude that value under Section 14 has to be taken as the mis-declared value - the penalty imposed was very low even compared to the actual value of the goods. It was held by the Tribunal that the penalty imposed by the adjudicating Commissioner was very low considering the declared value of the goods, gravity of offence and the extent of mis-declaration - Appeals are partly allowed by way of remand to Adjudicating Commissioner

Issues Involved:
1. Valuation and Duty Determination
2. Jurisdiction of ADG, DRI
3. Identification of Importer under Customs Law
4. Liability Imposed Jointly and Severally
5. Imposition of Penalties

Issue-wise Detailed Analysis:

1. Valuation and Duty Determination:
The Tribunal noted that the adjudicating Commissioner had adopted inflated values of Rs. 30,45,12,203/- and Rs. 25,91,28,000/- for the impugned goods. It was established that the goods were mis-declared regarding their nature, origin, and value. The Tribunal held that the transaction value method could not be applied as the transaction was not genuine. Instead, the value for duty computation should be based on the actual export value of the goods, which was USD 1,71,300 in both cases. The Tribunal directed the original authority to re-compute the duty based on this value, emphasizing that the import value should be considered as CIF without adding freight and insurance charges due to the peculiar nature of the case.

2. Jurisdiction of ADG, DRI:
The Tribunal examined the jurisdiction of the ADG, DRI, to issue the impugned show-cause notices. It was found that ADG, DRI, had been appointed as a Commissioner of Customs, empowering him to assign the functions of a proper officer. The Tribunal referred to the Customs (Amendment and Validation) Act, 2011, which validated show-cause notices issued at all material times. Therefore, the Tribunal concluded that the ADG, DRI, had valid jurisdiction to issue the show-cause notices.

3. Identification of Importer under Customs Law:
The Tribunal analyzed who should be considered the importer liable to pay customs duty. It was determined that both the financing company and the bank, along with M/s. ETK Softech and M/s. ORJ, were importers under the Customs Act. The Tribunal cited the Supreme Court's decision in the case of Collector of Customs, Cochin Vs. Trivandrum Rubber Works Ltd., which held that the person chargeable with duty in case of imports is the importer. The Tribunal upheld the adjudicating Commissioner's decision to impose duty liability jointly and severally on the financing company/bank and the other parties.

4. Liability Imposed Jointly and Severally:
The Tribunal addressed the appellants' contention that the duty demand was vague. It was clarified that the adjudicating Commissioner had specified the duty liability to be joint and several, which is permissible in taxation. The Tribunal referred to the case of Supreme Engineering Works Vs. Collector of Central Excise, where joint and several liability was upheld. The Tribunal confirmed that the duty liability could be fixed jointly and severally on two persons who are jointly importers under customs law.

5. Imposition of Penalties:
The Tribunal considered the penalties imposed, which totaled over Rs. 22 crores. Given the reduced duty liability based on the re-determined value, the Tribunal directed that the penalties be fixed at a lower level. The Tribunal acknowledged the fraudulent nature of the transactions but noted that the primary intent was not to defraud customs but to obtain inadmissible benefits under other laws. The Tribunal reduced the penalties to Rs. 10,00,000/- each for M/s. SFL, M/s. ICICI Bank, and M/s. ORJ, and to Rs. 10,000/- each for Shri S. Kannan and Shri R. Raghavan. The confiscation of goods and the nominal redemption fine of Rs. 1 lakh were upheld.

Conclusion:
The appeals were partly allowed, and the matter was remanded to the adjudicating Commissioner for re-quantifying the duty amounts as per the Tribunal's directions. The judgment emphasized the importance of accurate valuation, proper jurisdiction, clear identification of importers, and justified imposition of penalties in customs cases.

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