1996 (7) TMI 368 - AT - Customs

Summary

Issues Involved:
1. Confiscation of imported materials under Section 111(d) and (m) of the Customs Act, 1962.
2. Imposition of redemption fine and penalty under Section 112 of the Customs Act, 1962.
3. Determination of the actual CIF value of the imported goods.
4. Compliance with the actual user (industrial) condition under the Import Policy AM 1985-88.

Detailed Analysis:

1. Confiscation of Imported Materials under Section 111(d) and (m) of the Customs Act, 1962:

The Collector of Customs, New Delhi, ordered the confiscation of imported materials under Section 111(d) and (m) of the Customs Act, 1962, due to violations in the importation process. The goods were imported by M/s. Magpie Elechem Pvt. Ltd. in SKD condition and were found to be grossly undervalued. The DRI officers seized the goods under Section 110 of the Customs Act, 1962, based on a reasonable belief that they were liable for confiscation. The investigation revealed that the importer did not have the necessary infrastructure to manufacture or assemble the photocopiers, thus failing to meet the actual user (industrial) condition required by the Import Policy AM 1985-88. Consequently, the goods were liable to confiscation under Section 111(d) for importing without a valid license and under Section 111(m) for not corresponding in value with the entry made under Section 46 of the Customs Act, 1962.

2. Imposition of Redemption Fine and Penalty under Section 112 of the Customs Act, 1962:

The Collector imposed a redemption fine of Rs. 10,00,000/- and penalties of Rs. 5,00,000/- each on Mr. Kailash Chand and Shri V. K. Dubey under Section 112 of the Customs Act, 1962. The Tribunal, however, found that the redemption fine was excessive given the declared value of the goods was Rs. 2,28,941/-. The Tribunal reduced the redemption fine to Rs. 2,00,000/-. As for the penalties, the Tribunal noted that the appellants admitted their involvement in the importation scheme and the modus operandi adopted to violate the law. The penalty on Mr. Kailash Chand was reduced to Rs. 1,00,000/- considering the lack of evidence of under-valuation and no attempt to evade duty. The penalty on Shri V. K. Dubey was set aside due to his sudden death and the financial burden on his surviving family members.

3. Determination of the Actual CIF Value of the Imported Goods:

The department compared the declared CIF value with the retail prices of similar models imported from the USA. The Tribunal found this comparison flawed as the goods were imported from Hong Kong, not the USA. The principle of valuation requires the value of comparable goods at the time and place of importation. The Tribunal concluded that the Revenue did not prove the case of under-valuation as the prices were not comparable and the country of origin was different. Therefore, the enhanced value of Rs. 11,72,046/- was not justified.

4. Compliance with the Actual User (Industrial) Condition under the Import Policy AM 1985-88:

The investigation revealed that M/s. Magpie Elechem Pvt. Ltd. did not have the necessary infrastructure or power connection to manufacture or assemble the imported photocopiers. The General Manager of the Department of Industries confirmed this lack of infrastructure. The Tribunal upheld the Collector's finding that the appellants did not satisfy the actual user (industrial) condition required by the Import Policy. The appellants' claim that they were actual users based on their SSI certificate and previous imports was rejected. The Tribunal emphasized that the existence of a factory for manufacturing the goods was a prerequisite for fulfilling the actual user condition. The appellants' admission of selling the imported goods through a broker further supported the violation of the actual user condition.

Conclusion:
The Tribunal upheld the confiscation of the imported goods under Section 111(d) and (m) of the Customs Act, 1962, due to violations in the importation process and failure to meet the actual user (industrial) condition. The redemption fine was reduced to Rs. 2,00,000/-, and the penalties were adjusted considering the circumstances. The Tribunal found that the Revenue did not prove the case of under-valuation, and the appellants did not comply with the actual user condition required by the Import Policy. The appeals were disposed of accordingly.