TMI Blog1985 (8) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... the same rate. Records show that the LC was originally opened for a total figure of US $ 35437.00 for the shipment of about 100 MT of skimmed milk powder in 25 Kgs. packing, the terms being C.I.F. Calcutta. This was later amended by increasing the quantity and value of the goods to 130 MT and US $ 46474.00 respectively. The mode of packing was changed to 50 Ibs. and the terms to C.I.F. Bombay. The suppliers of the goods were M/s. A.M. Aronson, Holland (hereinafter to be referred to as Holland Party) and the shippers were M/s. Ronald A. Chishohine, Canada. As the declared price appeared to be very low, the lower authorities started investigations at Cochin as well as at Bombay. In the course of these investigations, it transpired that one Shri A.H. Gandhi of Bombay, who had long standing business connections with the Holland Party had actually acted as the indenting agent for the consignment in question. The preliminary investigations also indicated that the actual price paid for the goods was $ 530 per MT c.i.f. as against the declared price of US $ 356 per MT. The residential and office premises of Shri Gandhi at Bombay and also the premises of the appellants and their partners at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Feeling aggrieved with the Board s order, the appellants have preferred the present appeal before the Tribunal. As action against Shri Gandhi was dropped by the appellate order of the Board, he has not made any move in the matter. 6. Dr. Singhvi the learned Sr. Counsel, appearing on behalf of the appellants first took up the valuation of the goods with reference to the evidence contained in the import documents and as supported by evidence of certain contemporaneous imports. He submitted that right from the beginning the appellants case was that they had brought the goods at the price of $ 356 per MT. The price was somewhat lower because the goods were of 1977 year of manufacture. However, in all other respects, it was a fair price for like goods and in support he invited our attention to four importations of skimmed milk powder effected around the same time when the appellants effected their importation. The particulars of the importations such as the name of the importer, the quantity imported and the price declared in the Bill of Entry are given below :- 1.Bill of Entry No. 1318, dated 20-4-1978 for 45.729 MT @ $ 319 per MT f.o.b. imported by Mother Theressa. 2. Bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder-invoicing against the appellants, it was the duty of the lower authorities to have made necessary investigation at the major ports with regard to the price at which goods of the like kind and quality were being imported through different ports. No such investigation seems to have been conducted by the lower authorities according to the record before us. On the other hand, the appellants seem to have made serious efforts and have been able to collect and furnish evidence of contemporaneous imports which compare favourably with the price declared by the appellants in their Bills of entry. 10. Dr. Singhvi, thereafter took up the question of admissibility, relevance and legal force of 38 telex messages which, according to him constitute most material, rather pivotal piece of evidence for the department. According to the learned Counsel, the goods were imported in August, 1978 and the statements of Shri Gandhi and his employees as also of partners of the appellant company were recorded in the months of August, September and October. He stated that a really important turn in these proceedings took place on 18-10-1978. On that date, the investigating officer, for the first time, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the very origin and character of telex messages has remained shrouded in mystery. The appellants were never given an opportunity through the process of cross-examination of Gandhi or any other person with regard to the authenticity, veracity or relevance of the telex messages. It is contended on behalf of the appellants that the so called telex messages were fabricated documents procured through dubious sources and therefore have no evidential value whatsoever. Dr. Singhvi stressed that when there was full and authentic evidence of correct declared price available on record, how the department would place reliance on these telex messages which did not constitute legal evidence, being unauthentic and also not capable of being subjected to a check. 12. Shri Chatterjee, the learned JDR submitted that Dr. Singhvi s contention that the 38 telex messages had been fabricated was not well founded. When they were read in their entirety, there was lot of material in the said telex messages having a bearing on the importation of 3 consignments by the appellants. Shri Chatterjee supported the action of the lower authorities in placing heavy reliance on the evidential value of telex mes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s insurance memos issued by M/s. Phoenix Assurance Co. Ltd., Toronto, Canada for the goods in question. It has been pleaded that these insurance memos support the valuation adopted by the lower authorities. It has been argued before us by Shri Chatterjee that the normal mercantile practice is to get the goods insured for 110% of their value. According to him, if the total insured value of the goods as shown in the insurance memos is multiplied by 100/110, the resultant figure would come to the price adopted by the lower authorities. Since these documents are contemporaneous in nature qua the importation of the goods in question, we allow them to be produced at this late stage as they could not be fabricated and ends of justice so demand. 15. Regarding these documents Dr. Singhvi has submitted that, in the first instance, there is no such established mercantile practice that the goods must be insured for 110% of their value and secondly, whether the goods should at all be insured and, if so, for what value, is purely a matter of contract between the buyer and the seller of the goods. He further submitted that the mathematical coincidence of the figure as put forth by the learned J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication facilities to M/s. Orient Enterprises is not supported by the documents that were recovered. For example, in the letter addressed by Shri Gandhi to M/s. Aronson on 17-3-1978 he had clearly requested M/s. Aronson, the foreign indentor, as to let him know in which Swiss Bank wants Letter of Credit favouring A.M. Aronson to be opened and so also information regarding balance procedure. In other words, Shri Gandhi is fully aware of the modus operandi adopted by Shri Suri and had been instrumental in entering into correspondence with the foreign indentor in making arrangements for such under-invoicing and separate arrangements for transferring funds to the Swiss Bank. It is also further by the third para in the same letter in which Shri Gandhi has indicated that we shall request you to return L.C., telegraphically so as to enable clients open credit again through Swiss Bank as suggested by you and simultaneoutly effecting balance procedure . In other words, it is quite clear that the need for a change in the L.C. arose because of this transaction in which a lower price was to be indicated in the official L.C. and the balance amount to be credited by a different arrangemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial is old, since he wanted to import a large quantity under said licences. I told him that I would not book indent for him or any one for old or sub-standard material since I was representing Semi-Government National Dairy Corporation of Holland and Ireland. Since be insisted, I told him that he could contact M/s. A.M. Aronson of Holland and I will put him in touch with them. I gave him address of M/s. A.M. Aronson and asked him to deal directly with them. At this time Mr. Suri also told me that he was doing business in his firm name of Orient Enterprises, New Delhi." Further, In February 1978, Mr. Suri told me that he could not obtain milk powder from M/s. A.M. Aronson though he had placed a confirmed order at the rate of US $356.00 with them and asked me to contact M/s. A.M. Aronson on his behalf by telex. He also agreed to pay all telex and cable charges. I told him that prices in Europe were high and he should get Canadian material which was available then at cheaper rates. I also agreed to contact a supplier in Canada who can supply the Milk Powder at cheaper rates through M/s. A.M. Aronson with whom Mr. Suri had already placed direct order earlier. 23.Dr. Singhvi ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the safeguards under which confessions are recorded by Magistrates they must be specially scrutinized to finding out if they were made under threat or promise from some one in authority. If after such scrutiny they are considered to be voluntary, they may be received against the maker and in the same way as confessions are received, also against a co-accused jointly tried with him. Section 30 of the Evidence Act does not limit itself to confessions made to Magistrates, nor do the earlier Sections do so, and hence there is no bar to its proper application to the statements such as we have here." Section 171-A of the Sea Customs Act, 1878 is identical with Section 108 of the Customs Act, 1962. The only difference is that statement under Section 108 must be recorded by a Gazetted Officer, but it was not so in Section 171-A of the Sea Customs Act, 1878. The intention of the legislature is clear as it was intended to make the statement more authentic by requiring it to be recorded by a Gazetted Officer, who would obviously be more experienced and responsible. Indubitably a statement under Section 108 of the Customs Act is relevant and admissible in evidence. Its authenticity has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the following questions are relevant for our purpose : Question : Have you typed any letters of Orient Enterprises, New Delhi regarding the consignment of 130 tons of skimmed milk powder from Canada ? Answer : Yes I have typed letters of Orient Enterprises addressed to the shippers in Holland the dictation of which was given to me by A H. Gandhi in the presence of Suri. I had typed the said letters on the letter heads of A.H. Gandhi and handed over to the said Gandhi who then signed them and then attended to the dispatch work at his own level. Question : Could you tell me with whom else in your office the said Suri is friendly with ? If so please give his full name ? Answer : He is not friendly with any person in my office except Shri Gandhi. Question : You have stated in the statement that you have typed certain letters of M/s. Orient Enterprises as dictated by Shri Gandhi in the presence of Mr. Suri. Kindly explain exactly how this happened. Answer : Originally Shri Suri dictated the letter in half English, half Hindi and half Punjabi which I was unable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their statements have been placed on the record. We first take up the statement of Shri K.L. Suri. Following extracts from the statements of this witness are quite relevant :- We acted as the financiers for M/s. Bake Foods to produce milk powder against their licences for which we obtained letters of authority. We had seven licences for the total value of about Rs. 3,95,000/- under letters of authority. For the import of the milk powder I get 3% commission and another 2% as interest on the money financed. We have imported milk powder ten years back. We had no indenting agent for this transaction. We ourselves placed the order from the supplier. Regarding the present consignment Mr. Gandhi has not lent any help in corresponding with the suppliers. There is no correspondence with Mr. Gandhi regarding the import of this particular consignment. My office and house at Delhi were searched but no documents were seized. One L/C had been opened on 10-2-1978 in a Holland Bank which was returned by the suppliers because of exchange difficulties. As required by them a fresh L/C was opened on the Union Bank of Switzerland, Surich on 10-3-1978. On 13th March I went to the Bank and opened th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under-invoicing. The learned SDR, has tried to make capital of the fact that this witness had tried to escape from Cochin on 25-8-1978 by air when his statement had not yet been completed and had promised to re-appear for further evidence. This conduct of Shri K.L. Suri cannot be looked with favour, but at the same time it does not advance the allegation of under-invoicing in any way. This effort to escape from Cochin would have violated some provisions of law and legal action should have taken in this regard. But failure to take any action for that act does not raise any adverse inference with regard to the point in controversy. Further, the extracts of Shri K.L. Suri s statement appended with the show cause notice do not constitute any kind of incriminating evidence to prove the charge against him. 34. Similarly, statement of Shri R.K. Suri is also not in any way against the appellants. The witness has stated that finally they had agreed to the rate of 356 dollars and this was confirmed by the supplier. As regards the statement given by Mr. Gandhi which was read out to this witness by the Customs officer he has stated that he could only say that Mr. Gandhi had given a false st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that they have to supply Canadian material of July/September, 1977 production which would be acceptable utmost c.i.f. price of US $ 350.00 per ton. 37. In reply dated 1st January, 1978, M/s. A.M. Aronson intimated as under : One of the producers in Canada have these stocks and are willing to sell. Utmost they can offer the material is at the price of US $ 356/-per ton c.i.f. Canadian origin material in packing of 50 lbs. polylined paper bags for shipment to Bombay. In their reply dated 14-1-1978, the appellants had agreed to this price of US $ 356 ton c.i.f. 38. The copies of the whole correspondence have been placed on record. They appear at pages 61 to 67 of the paper book (Vol. II). It is clear from the correspondence that the invoice price was the contractual price. The lower authorities have not assigned any reason to hold that this correspondence was false or fabricated. We accept the authenticity of the correspondence relating to the contract and see no reason to hold the same as false or fabricated. 39. After considering all aspects of the case, we are of the firm view that the Revenue has failed to substantiate the allegation of under-invoicing of the impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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