2015 (2) TMI 1138 - HC - Customs

Legality and validity of Tribunal s order - Direction of confiscation of 8 seized prerecorded cassettes as also the cassettes already exported - Misdeclaration i.e overvaluation of goods resulting in contravention of the provisions of section 113(d) and (i) of the Customs Act - Held that - the very transfer of the right to telecast of the said serial overseas is not given appropriate weightage while drawing a conclusion that the goods were over valued. The valuation of the goods concluded by the revenue at the rate of Rs. 21, 000/ is rightly overturned as the valuation of the blank video cassettes and not the artrights which are sought to be transferred. Also the order of the Tribunal reflects that the said fact was appropriately weighed before it concluded that there is no contravention of the provisions of Customs Act. It has looked into the fact that the evidence as to the terms arrived at in the agreement between the Respondent No.1 and the purchaser about transfer of the rights thereof was not dealt with on record so as to establish that the said was over valued. Also it looked into the approach of the learned Commissioner that the export though also admitted to be under an agreement entered into with a foreign buyers and the remittance of Rs. 1.32 crores received by the Respondent No.1 through local banking channel was also not properly appreciated. Also it looked into the description and the valuation of the goods as was declared in the shipping bill in terms of the agreement and the physical value of the cassettes and the cost of recording thereof. The Tribunal having regard to the evidence brought before it has rightly taken into account the transaction value of the goods declared as per the agreement to the extent i.e. Rs. 1.32 crores having regard to the transfer of not only the video cassettes but the contents thereof and right to telecast the same. Therefore the view taken by the Tribunal is a plausible view and no material illegality or irregularity can be noticed therein. - Decided against the appellant

Summary

Issues Involved:
1. Whether the CESTAT erred in setting aside the Order in Original dated 9.7.2003, which directed confiscation of 8 seized prerecorded cassettes as also the cassettes already exported, under Shipping Bills dated 27.1.1999 and 16.2.1999, on the ground of misdeclaration, resulting in contravention of the provisions of section 113(d) and (i) of the Customs Act?
2. Whether the CESTAT erred in disregarding the contraventions of relevant statutory provisions of the Customs Act and FERA, justifying the confiscation of the said cassettes under section 113(d) and (i) as held in the order in Original?
3. Whether the CESTAT erred in disregarding the contraventions of the Income Tax Act, leading to the confiscation of the said video cassettes for violation of the Customs Act provisions as well as other applicable statutes collateral to the Customs Act?
4. Whether the CESTAT was justified in allowing the consequential relief to the respondents herein, in terms of setting aside the penalty imposed under section 114 despite illegal exportation of goods, which were held liable to absolute confiscation under section 113(d) and (i) vide Order in Original dated 9.7.2003?

Detailed Analysis:

Issue 1: Misdeclaration and Confiscation under Section 113(d) and (i) of the Customs Act
The case revolves around the export of VHS cassettes containing the television serial "Dekh Bhai Dekh" by Respondent No.1 to SetSatellite Pvt. Ltd., Singapore. The Revenue argued that the goods were overvalued to claim benefits under section 80HHC of the Income Tax Act. The Commissioner of Customs ordered the confiscation of the cassettes under section 113(d) and (i) of the Customs Act, 1962, and imposed penalties under section 114(i). However, the CESTAT set aside this order, noting that the goods were neither dutiable nor prohibited for export. The Tribunal concluded that the transaction was genuine, supported by foreign remittance certified by the bank, and found no contravention of the Customs Act.

Issue 2: Contraventions of Statutory Provisions of the Customs Act and FERA
The Revenue contended that the Tribunal disregarded the contraventions of sections 2(33), 11, 50(2) of the Customs Act, and section 18(1)(a) and section 67 of FERA. The Tribunal, however, found that the goods were not prohibited and the transaction was genuine. It noted that the valuation of the goods included intellectual property rights, which were not adequately considered by the Commissioner. The Tribunal emphasized that the agreement between Respondent No.1 and SetSatellite was legitimate and the foreign remittance was properly documented.

Issue 3: Contraventions of the Income Tax Act
The Revenue argued that the overvaluation of the goods was intended to claim undue benefits under section 80HHC of the Income Tax Act. The Tribunal, however, stated that any allegations of undue benefits under the Income Tax Act should be addressed by the Income Tax Department. It found no evidence of contravention of the Customs Act and noted that the valuation of the goods included the intellectual property rights, which justified the declared value.

Issue 4: Justification of Penalty under Section 114
The Commissioner imposed penalties under section 114(i) on Respondent No.1 and others, based on the alleged overvaluation of the goods. The Tribunal set aside these penalties, finding no contravention of the Customs Act. It noted that the valuation of the goods included intellectual property rights and the transaction was supported by proper documentation and foreign remittance. The Tribunal concluded that the penalties were not justified as there was no evidence of illegal exportation.

Conclusion:
The High Court upheld the Tribunal's decision, noting that the Tribunal's view was plausible and there was no material illegality or irregularity. The appeal by the Revenue was dismissed, and the Tribunal's order setting aside the confiscation and penalties was affirmed. The Court emphasized that the valuation of the goods included intellectual property rights and the transaction was genuine, supported by proper documentation and foreign remittance.