2025 (5) TMI 1459 - AT - Customs

Duty demand - undervaluation of the transaction value and retail sale prices - collection of actual direct evidence and corroborative evidence - photocopies without signatures - Confiscation of goods - No opportunity for hearing - Principles of Natural Justice - HELD THAT - This is one of the rare cases in which the Department has made efforts to collect actual direct evidence of under valuation. The appellants obtained two types of invoices for the same goods. The basic Customs Duty was payable on the disputed goods on the transaction value. In order to evade payment of basic Customs Duty the appellants had requested the overseas supplier to send invoices for fraction of the actual transaction value for customs purposes and submitted those documents along with the Bills of entry. Thus they evaded payment of basic Customs Duty. The officers of DRI along with their overseas network of officers obtained the invoices of actual value and accordingly the demands were made in the show cause notice and confirmed in the impugned order. The second under valuation was mis-declaration of the Retail Sale Prices. The Additional Duty of Customs is payable on certain goods based on the Retail Sale Price of the goods with abatement. The appellant had declared a lower Retail Sale Price in its Bill of Entry and documents and evaded additional duty of customs but actually sold the goods at much higher price. Records of this undervaluation were found during investigation and were confirmed in the statements of the Proprietors of the appellants recorded during investigation. Thuds we find that confirmed demand of duty evaded by the appellants is correct. Confiscation of goods under section 111 of the Customs Act for the mis-declaration and imposition of redemption fine in lieu thereof were also correct and proper for the reason. The penalties imposed under section 114A and 112 also call for no interference. Hence the impugned order is upheld and all appeals are dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

(i) Whether the appellants evaded customs duty by undervaluation of transaction value and retail sale price of imported goods;

(ii) Whether the principles of natural justice were violated by the Commissioner in passing the impugned order without providing adequate opportunity to the appellants to rebut the allegations and cross-examine witnesses;

(iii) Whether the Reliance Upon Documents (RUDs) and other evidentiary materials relied upon by the Customs authorities, including photocopies obtained from foreign sources, are admissible and sufficient to sustain the demand and penalties;

(iv) Whether the adjudicating authority applied its mind properly in confirming the demand and imposing penalties;

(v) Whether the confiscation of goods, imposition of redemption fine, demand of duty, interest and penalties under the Customs Act, 1962 were justified and lawful;

(vi) Whether the appellants' failure to comply with procedural directions, including collection of RUDs, filing replies, and appearance at hearings, affects their entitlement to relief.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Alleged Duty Evasion by Undervaluation of Transaction Value and Retail Sale Price

Relevant legal framework includes the provisions of the Customs Act, 1962 relating to valuation of imported goods for levy of customs duty, particularly the transaction value method and provisions for Additional Duty of Customs based on Retail Sale Price with abatement. Section 28 of the Customs Act empowers recovery of duty along with interest and penalties for undervaluation and mis-declaration. Section 111 authorizes confiscation of goods in cases of undervaluation or mis-declaration.

The Court noted that the Directorate of Revenue Intelligence (DRI) initiated investigation upon intelligence that the appellants declared undervalued transaction prices and retail sale prices in Bills of Entry. Evidence included seized goods, statements recorded during searches, and crucially, e-mails between the appellants and overseas suppliers requesting invoices reflecting substantially lower values "for customs purpose." For example, an e-mail dated 29.12.2003 showed a request for an invoice at one-fourth the actual value, and two invoices were produced: one reflecting actual price and another undervalued invoice used for customs clearance.

Further, the investigation established that the Retail Sale Price (RSP) declared in customs documents was significantly lower than the actual selling price, as in the instance of Plasma TV P-63XHA declared at Rs. 3.60 lakhs but sold at Rs. 10.95 lakhs. These findings were corroborated by statements of the proprietors of the appellants recorded during investigation.

The Court applied the law to facts and found that the appellants deliberately undervalued the goods to evade payment of basic customs duty and Additional Duty of Customs, thereby violating the Customs Act. The demand confirmed by the Commissioner under Section 28 was thus held to be justified.

Issue (ii): Alleged Violation of Principles of Natural Justice

The appellants contended that the impugned order was passed without affording them opportunity to rebut the allegations or cross-examine witnesses, thus violating the principles of natural justice. The Tribunal had earlier directed the appellants to collect Reliance Upon Documents (RUDs) within two months and file replies within 45 days before the Commissioner, who was to pass a reasoned order thereafter.

The Court examined the procedural history and found that the appellants failed to collect the RUDs within the stipulated time despite repeated reminders, collecting them only after a delay of about seven months. Even after collecting the documents, the appellants submitted only an interim reply and requested further documents, which they did not collect despite phone calls and letters. Moreover, the appellants failed to appear for three scheduled personal hearings and did not file any written or oral submissions.

Under these circumstances, the Commissioner proceeded to pass the impugned order based on available records and evidence. The Court held that the appellants' failure to cooperate and avail the opportunity provided disentitled them from claiming violation of natural justice. The Tribunal's directions and the Commissioner's efforts to provide documents and hearings were adequate to satisfy the principles of natural justice.

Issue (iii): Admissibility and Sufficiency of Reliance Upon Documents (RUDs) and Evidence

The appellants argued that the RUDs and materials obtained from foreign sources were mere photocopies lacking signatures of exporters or customs officers, thereby rendering them inadmissible and unreliable.

The Court observed that the Department, through the DRI and its overseas network, obtained the actual invoices and corroborative evidence establishing the undervaluation. The presence of e-mails requesting undervalued invoices and the production of dual invoices (actual and undervalued) constituted direct and substantive evidence of fraudulent intent. The Court found no merit in the contention that photocopies without signatures were insufficient, given the corroborative nature of the evidence and the appellants' failure to challenge or cross-examine on these documents.

Issue (iv): Application of Mind by the Adjudicating Authority

The appellants contended that the Commissioner had not applied his mind in confirming the demand and penalties.

The Court reviewed the impugned order and the procedural history, noting that the Commissioner had examined the records, the RUDs, and the submissions (or lack thereof) by the appellants. Given the appellants' non-cooperation, the Commissioner's reliance on the available evidence and reasoned confirmation of demand and penalties was proper. The Court found that the adjudicating authority had applied its mind appropriately.

Issue (v): Justification and Lawfulness of Confiscation, Redemption Fine, Demand, Interest, and Penalties

The impugned order confiscated goods valued at Rs. 47,83,064/- under Sections III(d) and III(m) read with Section 118 of the Customs Act, 1962, with an option to redeem upon payment of Rs. 20 lakhs as redemption fine under Section 125. Demand of customs duty and interest under Section 28 and 28AB, and penalties under Sections 114A and 112 were confirmed and imposed.

The Court found that the confiscation was justified due to mis-declaration and undervaluation. The redemption fine and demand for duty were in accordance with statutory provisions. Penalties under Sections 114A (for evasion of duty) and 112 (for failure to comply with provisions of the Customs Act) were warranted given the deliberate undervaluation and non-compliance. Interest was rightly imposed under Section 28AB for delayed payment.

Issue (vi): Effect of Appellants' Procedural Defaults on Entitlement to Relief

The appellants repeatedly failed to comply with procedural directions, including timely collection of RUDs, filing replies, appearing at hearings, and making pre-deposit of duty and penalty. Their appeals were dismissed for non-compliance, and restoration applications were initially dismissed for non-appearance. Even after restoration, the appellants did not appear and failed to prosecute the appeals diligently.

The Court held that such procedural defaults undermined the appellants' claims and justified dismissal of their appeals. The Department's efforts to provide documents and opportunities were not reciprocated by the appellants, thereby justifying the impugned order.

3. SIGNIFICANT HOLDINGS

"This is one of the rare cases in which the Department has made efforts to collect actual direct evidence of under valuation. The appellants obtained two types of invoices for the same goods. The basic Customs Duty was payable on the disputed goods on the transaction value. In order to evade payment of basic Customs Duty, the appellants had requested the overseas supplier to send invoices for fraction of the actual transaction value 'for customs purposes' and submitted those documents along with the Bills of entry. Thus, they evaded payment of basic Customs Duty."

"The Additional Duty of Customs is payable on certain goods based on the Retail Sale Price of the goods with abatement. The appellant had declared a lower Retail Sale Price in its Bill of Entry and documents and evaded additional duty of customs, but actually sold the goods at much higher price. Records of this undervaluation were found during investigation and were confirmed in the statements of the Proprietors of the appellants recorded during investigation."

"The appellants' failure to collect Reliance Upon Documents within the stipulated time, failure to file replies despite extensions, and failure to appear at personal hearings disentitle them from claiming violation of principles of natural justice."

"Confiscation of goods under section 111 of the Customs Act for the mis-declaration and imposition of redemption fine in lieu thereof were also correct and proper for the reason. The penalties imposed under section 114A and 112 also call for no interference."

Final determinations:

- The confirmed demand of customs duty evaded by the appellants is upheld as lawful and justified.

- The confiscation of goods and imposition of redemption fine under the Customs Act are valid.

- The penalties under Sections 114A and 112 are proper and warranted.

- The appellants' grounds challenging natural justice, evidentiary sufficiency, and application of mind are rejected.

- The appeals are dismissed and the impugned order is upheld in entirety.