TMI Blog1997 (6) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... BHPL Bill of Entry 11-4-1990 9-2-1990 Invoice 27-10-1989 27-10-1989 Goods and FOB value in US $ (1) Cream Sandwiching Machine, including Cream bite export box 58,000 (1) Same (2) F I 75,000 2,030 77,030 (2) Spares 5,600 (3) Dies 2,700 (4) Change parts 8,800 (5) Insurance and Freight 1,930 77,030 (1) Wrapping Machine with audo and Collating Unit and export box 2,92,360 Machine (1) Wrapping 2,99,860 FBCL BHPL (2) Spares 7,500 (2) F I 6,635 (3) I F 6,035 3,06,495 3,06,495 3. On receipt of information that invoices in the two cases had been manipulated so as to reduce the value of Cream Sandwiching Machine attracting higher rate of duty under tariff sub-heading 8438.80 and proportionately increasing the value of Wrapping Machine attracting lower ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8438.80 with lower duty liability and excess duty had been paid by wrong declaration of classification. Wrapping Machine could be imported under OGL. By declaring Creaming Machine , they were obliged to produce specific licence which they did. Value of one machine was not shifted to another. There was no evasion of duty; on the other hand, excess duty was paid erroneously. There was no payment of extra-consideration as alleged. Statements were recorded without making available requisite documents and by deceit and coercion. Documents said to have been obtained by USA customers were only copies and cannot be relied on. The importers are entitled to refund of excess duty paid. Notice under the proviso to Section 28(1) of the Customs Act, 1962 was without jurisdiction as Assistant Collector was not competent to issue the notices and only Collector had competency to issue it. 5. Collector overruled the identical contentions raised by the importers and others and confirmed demand of differential duty of Rs. 28,13,233/- on FBCL and of Rs. 27,36,125/- on BHPL. He ordered confiscation of Cream Sandwiching Machines, Feeders, Accumulators, Stencils and Spares under Clauses (d) and (m) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 222 are correct. The description given in one document at page; 200 is incorrect. Initially the supplier prepared one invoice for a consolidated price describing the goods as Cream Biscuit Packing Line . The importers apprehending that the entire consignment may be treated by Custom House as attracting sub-heading 8438.80, suggested that suppliers may furnish break up of price for the machine and creaming attachment and accordingly the invoices were prepared by the suppliers and furnished to the importers. This is supported by the Explanatory Notes 5 and 6 under Heading 84.22 and the language used in Heading 84.38. Reference has to be made to the language in Notification No. 125/86. Assuming that there was extra payment of US $ 8,000, it would be referable to interest on advance required to be paid and such interest cannot be included in assessable value. Where valuation is sought to be reopened, importers have right to point out error in the classification shown in the Bills of Entry and this right cannot be affected by the circumstance that any claim for refund would be barred by time. 7. Shri K.K. Jha, SDR rebutted the above contentions and made submissions which can be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be issued only by the Collector of Customs. The proviso was again amended with effect from 14-5-1992 deleting the requirement of notice being issued by the Collector. In other words, with effect from 14-5-1992, the provision under sub-section (1) requiring the proper officer to issue notice would apply to notice under the proviso also. Notices in the present case were issued subsequent to 14-5-1992 and, therefore, were required to be issued by the proper officer, that is, officer of Customs assigned the particular function by the Board or the Collector. There is no dispute that prior to 27-12-1985, Assistant Collector and officers of the rank of Assistant Collector had been assigned all functions under the provisions of the Act required to be attended by the proper officer. It is in this light that the Department contended that notice by the Assistant Collector under the proviso to Section 28(1) of the Act would be valid. Appellant relies on Board s circular dated 14-5-1992 which has been extracted in paragraph 16 of the order of the Tribunal in C.O.C. v. Poona Roller - 1997 (89) E.L.T. 604 (Tribunal). The Circular read thus : Section 28 of the Customs Act is being amended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the proposal for demand of differential duty under the proviso to Section 28(1) was concerned were without jurisdiction. Point No. 2 : The show cause notices comprehended three aspects, namely, demand of differential duty, confiscation of the imported machinery and imposition of penalty. According to the Department, even if notices to the extent they proposed demand of differential duty fail on account of jurisdictional defect, the parts of the notices under Section 124 of the Act proposing confiscation and also proposing penalty have no such jurisdictional defect inasmuch as the Assistant Collector could issue such notices and survive as valid notices. There is no dispute that Assistant Collector was competent to issue notice proposing confiscation and imposition of penalty. According to the appellants, the basis of all the three proposals was the alleged mis-declaration of value and consequent inadequacy of licence in one case and when demand of differential duty based on mis-declaration of value fails, the other actions proposed also must fail. We shall advert to the decisions relied on by both sides in this behalf. 9. In Shree Dyeing and Bleaching Works v. CCE, Meerut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice dated 17-10-1983 was issued under the proviso to Section 11A of the Central Excise Act, 1944 for duty for the period from 1-4-1981 to 31-1-1983 and two notices dated 7-11-1983 and 19-11-1983 were issued proposing imposition of penalty under Rule 9(2) read with 173Q of the Rules. It was held that the proviso to Section 11A was not attracted and question of penalty would arise only if the department was able to sustain its demand under the first notice. 11. COC, Bombay v. Poona Roller - 1997 (89) E.L.T. 604 (Tribunal), three consignments imported were cleared duty-free. Parts of two consignments were subsequently seized. Three show cause notices dated 15-5-1993 were issued by the Assistant Director, DRI proposing demand of duty on the ground of non-availability of benefit of exemption, confiscation of seized goods and imposition of penalty. The notices invoked the proviso to Section 28(1) of the Customs Act. In all the three cases, the Commissioner held that notice of demand under Section 28 was without jurisdiction. Two cases were disposed. In the case of M/s. Parekh Food International, he also held on merits that a part of the demand and confiscation were not sustaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was not in issue. 12. In Manohar Bros. (Capacitors) v. COC - 1996 (15) RLT 581, aluminium foils were imported at concessional rate as per Notification No. 345/96. Show cause notice was issued on the ground that concessional rate of duty was not available and proposing demand of differential duty and proposing confiscation of those articles. It was held that show cause notice under Section 28(1) of the Customs Act, 1962 was without jurisdiction and invalid. It was contended that adjudication in regard to Section 124 of the Act would stand. The Bench rejected this argument in the following manner :- The subject notices are composite notices and segregation thereof is not possible. There do exist some pronouncements which held that if part of the notice is beyond jurisdiction, adjudication can be continued for that much part which is within his jurisdiction, adjudication can be continued for that much part which is within his jurisdiction to adjudicate upon. They however relate to the issues where part of the demand is time-barred and the authority adjudicating could not invoke extended period, whereas the other part was within his powers to adjudicate, the position here howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials in support of the allegation of mis-declaration of value are the following :- Statement of Shri Pankaj Agarwal, Vice President of FBCI, that (a) he came to know from his sources that the correct FOB value in US $ was as follows : Sandwiching Machine 1,31,670 Wrapping Machine 1,91,600 Feeder 38,860 Stencil Dies 2,565 Spares 5,510 Export Boxing 4,655 (CIF value reckoned on the above basis was the same as the value alleged by the Department. Feeder had not been declared in the Import documents. US $ 8,000 was paid by each importer during a visit to USA.) The statement was retracted subsequently. (b) Statement of Shri Inder Mohan Kapoor, Vice President of FBCL that he met officers of supplier and finalised the order and required them to furnish value separately. US $ 16,000 was paid additionally on account of two consignments, though as interest. He had asked supplier to show lesser value of US $ 58,000 FOB for Sandwiching Machine as against the correct value of US $ 1,31,670 FOB and to inflate the value of Wrapping Machine from US $ 2,92,300 FOB to US $ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request for multiple changes in the proforma invoices and for showing the Wrapping Machine as the main event with the Creaming Machine as merely being a part of the system since import duty on Wrapping Machine was much lower than that on Sandwiching Machine and since it will take months to obtain import licence for Sandwiching Machine. (g) Failure to declare Feeder in the Bill of Entry and import without licence. 16. The impugned order shows that the adjudicating authority relied mainly on the documents of the Supplier procured by the USA Customs and various documents of Supplier dealt with in the report of USA Customs. We do not find much reliance placed on the retracted statements recorded by the investigator from various persons connected with the imports. The documents and materials of the Supplier clearly establish that invoices submitted along with the Bills of Entry were manipulated with the intention of depressing the value of goods with higher burden of duty and of inflating the value of goods with lesser burden of duty. There was also suppression of the value of Feeder, etc. These acts were committed by or at the instance of the importers and prima facie, could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l contentions raised in regard to classification. According to him Chapter Notes and Section Notes cannot be looked into for the purpose of understanding the scope of exemption notification. He relied on the decisions in Khody Brewing Distilling Inds. Ltd. v. Collector - 1997 (90) E.L.T. 336 (Tribunal), Thermax Pvt. Ltd. v. Union of India - 1987 (27) E.L.T. 68 and Set Telecommunications Pvt. Ltd. v. C.C., Bombay - 1997 (19) RLT 629 (Tribunal) for this purpose. He contended that exemption notification has to be construed strictly and liberal construction which enlarges the scope of the notification would not be permissible. According to him, Feeder and Accumulator can at best be regarded as accessory to Wrapping Machine and hence would not attract the exemption notification applicable only to Wrapping Machine. 18. We are not convinced of the tenability of the contention of the Department that importers cannot in this case go back on the classification declared in the Bill of Entry. When allegation is made of mis-declaration of value by adjusting the value of one item under one sub-heading with the value of another item falling under another sub-heading to take illegal advantage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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