2016 (11) TMI 1516 - AT - Customs

Scope afforded by Customs Act 1962 for disposition of amounts deposited by noticees during investigations into misdeclaration of imported goods and re-determination of value of imported goods merely on the support of statements - short payment of duty - penalty. Held that - There can be discounting of conscience among the good denizens of a nation and it is well within the realms of rational reality that importers may of their own volition come forward to pay duty that was short-levied without waiting for a demand under Section 28 or seizure of offending goods under Section 110 of Customs Act 1962. Unfortunately the temporal facet of the legislature shies away from foraying into the spiritual domain to acknowledge by a special provision a special enabler for conscience in duty collection. And that gap has ensured that there is no legal sanctity to voluntary payment of duty during the pendency of investigation. Such provisions do exist in Central Excise law and Finance Act 1994; as yet such does not under Customs Act 1962 because unlike the other two laws each transaction is discrete and separate with no registration or status as assessee or importer except during the pendency of a consignment for clearance. Assessment is not an exercise in value judgment serendipitous divination or inspired revelation. Specific Rules have been notified to ensure consistency and objectivity. These Rules are the distillate of experiences and wisdom of not just a people but peoples. Non-acquiescence of the propriety and sanctity of the Rules is to betray an ignorance or obduracy that does no credit to the organizational commitment to professionalism. Valiantly attempting to assure that the impugned order is legal and proper learned Authorized Representative contends that no such error has been committed. It would appear that Revenue prefers to ignore the test of relevancy of statements in Section 138B(2) of Customs Act 1962 as it applies to adjudication proceedings; the truth of any statement that has not the support of any other corroborative evidence is ascertainable only when the authority concerned admits that as evidence after examining the deponent as a witness. The statements recorded under Section 108 of Customs Act 1962 purportedly admitting to undervaluation has apparently elicited the prevailing price and also essayed the manner in which the additional consideration has been routed to suppliers. These are valuable inputs acquire sanctity only in the tempering heat of challenge and survival. Credibility is accorded only in cross-examination which though demanded by appellant at the adjudication stage was refused on the ground that there was no need to do so. Indubitably the Indian Evidence Act 1872 has been interpreted to accord evidentiary value to statements recorded by officers of Customs in contradistinction to that recorded before police officers. That however is no claim to infallibility or imposition in the absence of corroboration. The lack thereof requires rectification by the original authority - the matter to be heard afresh with opportunity afforded to noticees for cross-examination of deponents - appeal allowed by way of remand.

Issues Involved:

1. Scope of Customs Act, 1962 for disposition of amounts deposited by noticees during investigations.
2. Re-determination of value of imported goods based on statements.
3. Legality of penalties imposed under Section 114A of Customs Act, 1962.
4. Appropriateness of invoking Section 28 of Customs Act, 1962 for provisional assessments.
5. Validity of demand for duty on imports beyond the statutory period of limitation.
6. Rejection of declared values and sequential application of Customs Valuation Rules.
7. Evidentiary value of statements recorded under Section 108 of Customs Act, 1962.

Detailed Analysis:

1. Scope of Customs Act, 1962 for disposition of amounts deposited by noticees during investigations:
The judgment highlights that remittance of any amount during investigations is considered a deposit. Such deposits can only be appropriated towards duty demanded and confirmed under Section 28 of Customs Act, 1962. The adjudicating authority's adjustment of Rs. 26,27,103 and interest of Rs. 13,86,709 from the voluntary deposit was deemed beyond legal authority.

2. Re-determination of value of imported goods based on statements:
The rejection of declared values and re-determination based on statements recorded under Section 108 of Customs Act, 1962 was found improper. The adjudicating authority failed to follow the due process of sequential application of the Customs Valuation Rules. The re-determined values lacked statutory foundation and were considered arbitrary.

3. Legality of penalties imposed under Section 114A of Customs Act, 1962:
The imposition of penalties twice on the importer under Section 114A was found irrational. Penalties on individuals under Section 114A were also without authority, as this provision applies only to the person liable to pay the duty under Section 28, which was the importers, M/s. Gopalji Heavy Lifters and M/s. Dhanlaxmi Cranes.

4. Appropriateness of invoking Section 28 of Customs Act, 1962 for provisional assessments:
The adjudicating authority's invocation of Section 28 for goods provisionally assessed was deemed improper. Section 28 is to be invoked only after final assessment under Section 17 or Section 18. The Tribunal emphasized that Section 18 provides a self-contained mechanism for adjusting differential duty, making Section 28 superfluous in such cases.

5. Validity of demand for duty on imports beyond the statutory period of limitation:
The demand for duty on imports effected before 12th July 2007, more than five years before the issuance of the show cause notice, was contested. The judgment rejected the proposition that voluntary deposits of duty beyond the statutory period could be adjusted, emphasizing that such adjustments lack legal sanctity.

6. Rejection of declared values and sequential application of Customs Valuation Rules:
The impugned order failed to cite the specific rule adopted for valuation and disregarded the sequential application required by the Customs Valuation Rules. The re-determination of value was not in accordance with the prescribed legal process, rendering it arbitrary and devoid of statutory foundation.

7. Evidentiary value of statements recorded under Section 108 of Customs Act, 1962:
Statements recorded under Section 108, purportedly admitting to undervaluation, require corroboration through cross-examination to gain credibility. The adjudicating authority's reliance on these statements without allowing cross-examination was deemed legally invalid, necessitating a fresh hearing with opportunities for cross-examination.

Conclusion:
The judgment set aside the impugned order, directing a fresh hearing with opportunities for cross-examination and adherence to legal pre-requisites. The original authority was instructed to rectify specific acts of omission and commission outside the authority of law. The appeals were allowed by way of remand.

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