TMI Blog2000 (6) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... onal loan for some equipments and grant for others. The cost of the design, construction, supply and delivery of the dredger were supposed to have been discussed by the various authorities of the Govt. of India and only thereafter this contract was executed. As a result, appellants made arrangements for procuring the dredger by obtaining necessary licence to cover the value of the goods. The same was granted vide Licence dated 1-8-1990 for a sum of Rs. 86,63,94,350/- (96,906,208 DGL). They filed a Bill of Entry No. 170 dated 23-4-1991 before the Customs Department, Visakhapatnam for clearance of one number TSHD Trailing Suction Hopper Dredger (TSHD) No. XIV along with the relevant documents including the two invoice, contract etc. The declaration made in the Bill of Entry was One TSHD XIV of 4,500 Cu.M. Hopper capacity (a self propelled) together with the required accessories, spare parts and the repair implements . They claimed classification under 8905.10 CTA 1985 and claimed the benefit of Notification No. 180/90 dated 31-5-1990. The goods were inspected by the Customs Department including the contract, the invoice and all the materials available on board. The value was arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not an integral component of dredger and is essential only for the purpose of knowing the position of the vessel during operation. Therefore, position finding system cannot be equated with an integral component and is to be termed as optional accessory. Similarly, in respect of fenders which are supplied along with dredger XIV on a request made by M/s. DCI it is observed that fender is only a protective accessory to absorb the shock of impact with Jetty by dredger or in the case of double banking with another vessel. The fenders have been charged separately for an amount of 32,000 DGL and therefore they can be considered as protective accessory. Therefore, the fenders also do not attract the benefits of Accessories (Conditions) Rules, 1963. Further, in respect of loose parts as per schedule they are found to be spare parts which are essential and required for maintenance of dredger. However, even though these spare parts are essential in nature, still they are found to be supplied based on a request made by M/s. DCI and are not compulsorily supplied by M/s. IHC. Therefore, these spares appear to be optional in nature. As could be seen from the cost schedule of the contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfully procuring a tailor-made invoice which is not in conformity with the cost schedule of the contract and also by wilfully misdeclaring in the Bill of Entry that the price shown is inclusive of the cost of spares and accessories and no separate charge is made in respect of spares and accessories. Accordingly, the duty on the above items were worked out to Rs. 5,44,65,058/- as per the work sheet enclosed to the show cause notice on the ground of misstatement and suppression of facts by the appellants. 5. The appellants vide their reply, dated 26-8-1996 submitted as follows :- (a) They submitted that since the goods were released by the Customs authorities after examining the contract, other related documents and goods, the customs department is aware of the goods imported by M/s. DCI and hence M/s. DCI have not removed anything clandestinely without the knowledge of the Customs authorities. (b) They submitted that there is no suppression of facts for invoking the proviso to Section 28 of the Customs Act, 1962. (c) They also submitted that once the goods are cleared under Section 47 of the Customs Act, 1962, the only recourse available is to invoke Section 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have procured a tailor made invoice which is not in continuity with the cost schedule of the contract. (m) They contended that no basis for invoking the provisions of Section 111(o) or 111(m) have been shown. (n) They submitted that no provisions of Sec. 111(o) are totally inapplicable to this case. (o) They submitted that there is no mens-rea established for invoking Section 112(a) in this case for confiscation or levy of penalty. (q) Finally they submitted that the question of levy of duty does not arise as far as the goods are on board the dredger and have not crossed the frontier and when the dredger is exempted from payment of duty, the spare parts on board the vessel are also exempted from duty. They finally requested to grant permission for cross examining 1) Shri T. Devaraman, Chief Engineer, V.P.T.; 2) R. Venkateswar Rao, Manager (Materials), DCI, and requested to accord an opportunity to be heard in person before finally deciding the case. 6. The appellants availed of the opportunity of personal hearing and also to cross-examine initial witnesses whose statements have been recorded by the Department. The Commissioner, after a detailed analyses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods. This Invoice was furnished to the Customs authorities by suppressing the fact that separate charges were paid for the supply of spare parts, accessories, parts, etc. at the time of clearance of the goods. In addition to the loose parts valued 2,366,980 DGL the appellants had also imported fenders valued 32,554 DGL which is a protective accessory to absorb the impact of shock of dredger with Jetty (Office Memos, DCI dated 10-5-1990 and 31-5-1991) on payment along with the dredger XIV. These were cleared without payment of duty claiming benefit of Accessories (Conditions) Rules, 1963. The spares list indicated valued 2,366,980 DGL and the contract indicated that the position finding equipment was charged to 340,000 DGL separately free of duty under CN. 133/87 dated 19-3-1987 and CN. 180/90 dated 31-5-1990 applying the provisions of Accessories (Conditions) Rules, 1963. (d) The Commissioner has noted from the statement of T. Devaraman that he had admitted that he was associated with the import of dredger XII XIV and had sent the telex to IHC, Holland to send an Invoice in the manner suggested by the Consultant. In his statement he had admitted that the words initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally recommended spares worth Rs. 5,824,280 DGL for the first dreder - XII and 4,898,300 DGL for in respect of second Dredger XIV. However, the amount provided for in the grant-in-aid for spare parts come to 2,366,980 DGL for each dredger. The appellants had pruned down the requirement to be in line with the grant-in-aid available as per the contract to the extent of 2,566.980 DGL for each dredger. Therefore, from this circumstantial evidence he has concluded that DCI in connivance with the supplier had suppressed the information relating to payment of separate charges in respect of position finding equipment valued at 340,000 DGL which is not an integral part of the dredger being an accessory, loose parts valued at 2,366,980 DGL and fenders valued at 32,554 DGL as per the advice offered by the Consultant by producing fabricated documents at the time of clearance of the goods with an intention to evade huge amount of customs duty. Therefore, the Commissioner held that charge of suppression which established without an iota of doubt and hence proviso to Section 28 had been correctly invoked. (g) He rejected the plea that demands cannot be initiated under Section 28 and that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition finding equipment, loose parts and fenders and had evaded Customs Duty amounting to Rs. 5,44,65,058/-. However, after thorough examination with regard to penalty, he did not impose the same for detailed reasons given therein. 9. We have heard Sr. Advocate Shri Habibulla Basha assisted by R. Sudhakar, Advoate for appellants and Shri V.T. Gopalan, Addl. Solicitor General of India and Shri S. Kannan, ld. DR. 10. Ld. Senior Counsel, while strenuously arguing for appellant, took us through the entire records of the case and submitted that the entire case and charge is built on the basis of the statement and letter sent by the Consultant of the appellant company Sri Appa Rao, who had suggested the term initial and price be erased from the invoice. He contends that this charge is not maintainable as this advice was not acted upon. The Consultant had also not advised to make any separate payments for spares and that there was no suppression of price arising out of the said advice. The appellant company also did not claim the benefit of Accessories (Condition) Rules as charged. He submitted that the further charge was that position finding equipment was part of the dredger. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding short levy in the matter. He submitted that the Customs had inspected all the item including all the documents and annexures before approving the classification under sub-heading 8505.10 and they have not given any appropriate reason for short levy and no levy can be raised in the absence of revision of the approved classification. He contends that although there was separate shipment of spares but they are entitled to the benefit of the notification. It was not supplied free and its price had been built in the contract. He pointed out to the relevant Bills of Entry to demonstrate that no benefit of Accessories Rules were availed. He pointed out that Commissioner had wrongly raised the issues and findings were beyond the charges as made out by the SCN. He submitted that as no separate charges were paid other than the contracted price, hence there was no undervaluation. He contended that although separate invoice was raised for spares, it was only to facilitate the release of grant of Dutch Government and no separate payment was made in terms of the separate invoice as the contract price was fixed one. Therefore, the finding arrived at by the commissioner that invoice was fabr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambit of Accessories (Condition) Rules and separate accessories are chargeable to duty. Learned Addl. Solicitor General further took us though the records and the show cause notice and the annexures therein and pointed out that each item had been classified on merits. It is clear from the said classification adopted that they were not under the same heading as in the Notification. The valuation had been arrived at on the basis of separate heading of classification of each item as they were not integral part of the dredger and therefore, it cannot be argued by the appellants that the Revenue had not adopted separate classification or re-classification in the show-cause notice. The appellants had been put to clear notice on the re-classification i.e. required to be adopted in respect of the three impugned items for the purpose of levy of short duty and therefore, he contended that the charge of suppression has been clearly brought out in terms of the documents and statements made out and also the plea that the three items cannot be classified along with the dredger and hence the appellants were required to discharge the duty thereon. He submits that the order impugned passed by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents were seized and the statements recorded. He points out that the cause schedule worked out also clearly indicates that it did not include the value of the position finding equipment and the dredger had been valued at 41,460,000 DGL and the excluded items were valued at 6,000,000 DGL. He points out that the contract cannot be considered as final for the purpose of valuation neither it can be considered as technical literature nor to decide the details of spares. He submitted that the spares value had been included in the value of main equipment i.e. dredger only for the purpose of evasion of duty. The appellants ought to have shown separate invoice for spares and clearing the same on payment of duty. The appellants getting single invoice was at their own instance which is patent on record. It is contended that there should have been two Bill of Entry filed in the matter one for the main dredger and one for the other three impugned items. The appellants have filed a combined Bill of Entry which clearly indicated mis-declaration in terms of the seized documents. They have cleared spares, fenders and position finding equipment as part and parcel of main dredger knowing full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty in the matter. He submitted that there was no need to file two Bills of Entry as contended and as the contract was single one, which had met approval of the Ministry of Finance and the licence had been issued by the authorities for total price, the contract had envisaged supply of parts and dredger and therefore, they were to be treated as parts of dredger. He submitted that the Notification was clearly applicable to position finding equipment as it is part and parcel of dredger and dredger cannot work without this item. So also with regard to the other spares which had been classified along with the dredger as they are falling under the same heading. He submitted that there is no separate heading for such parts and they are rightly classifiable along with the dredger and there is no claim for re-classification made by the Revenue. He pointed out that on reversal of the Bill of Entry to show that there was thorough inspection done on all the items and the authorities had satisfied themselves in applying the mind both on packing list and the items imported in terms of the contract and the technical literature. He submitted that once the goods are exempted and passed out of cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no ambiguity in terms of the contract, the price entered into, the value and mode of payment which is required to be made in the matter. The details of contract entered in the matter has been placed before us for perusal and on a perusal thereof, we confirm that there is no alteration or changes brought into, the contract after the import and the same was entered into after due negotiation and the price was negotiated price. The correspondence between the appellants Chairman and the Development Adviser (Ports), Ministry of Surface Transport dated 24-8-1988, which is at Volume III of the paper book indicates clearly that the appellants had negotiated for the price which includes also the initial spares for dredgers. They had clarified to the Government that the same is required to be purchased in Dutch Aid Package. Ministry of Surface Transport vide their letter, dated 18/21-11-1988 to the appellants Chairman has conveyed the sanction of Central Government for the purchase of two nos. of Shallow Draft Trailer Suction Hopper Dredgers of 4500 M3 Hopper capacity from IHC Holland with Dutch assistance and the financial arrangements entered into has been discussed therein. The arrangem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm, in accordance with the aforesaid decision of the Government. Six copies of the contract agreement signed with the firm may be forwarded to this Ministry at an early date for onward transmission to the Ministry of Finance (Dept. of Economic Affairs) for further necessary action. Another copy of the contract agreement may also be sent for record in the Ministry. 4. This sanction issues with the concurrence of Ministry of Finance, Deptt. of Economic Affairs vide their U.O. No. 248-DS (EEC)/88 dated 24-10-1988 and with the approval of Finance Wing vide their U.O. No. 4453/TF-I/88 dated 15-11-1988. Yours faithfully, Sd/- (MUNSHI RAM) DESK OFFICER(PD-IV) From the above sanction granted by the Government of India the cost of dredger is inclusive of additionals such as additional floating pipelines, position finding equipment, optional items, spares, crew familiarisation etc. has been shown as Dfl 47,460,000. The next document is the one received from the Netherlands Embassy dated 30th November, 1988 confirming the financial offer for the purchase of Trailing Suction Hopper Dre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve examined the details of spares parts list which was furnished as annexures along with Bill of Entry giving the entire details like date of manufacture, description etc. These documents clearly disclose that the price arrived at and declared is inclusive of all the items purchased and supplied and that there was no other payments made for the items which are impugned. The allegation made in the present case is that the appellants had wilfully suppressed the information relating to collection of charges in respect of the following three items :- (a) Position finding equipment valued at 3,40,000 DGL; (b) Loose parts valued at 2,366,980 DGL and (c) Spare parts purchased just before sailing of dredger valued at 1,20,000 DGL out of administrative expenditure fund of 2,80,000 DGL. Thus alleging that the appellants had wilfully suppressed the information relating to collection of separate charges in respect of three items over and above the basic building price of dredger by erasing the words initial and price from the spare parts list and also by wilfully procuring a tailor-made invoice which is not in conformity with the schedule of the Contract, therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as they would give wrong impression to the Customs authorities and it may create difficulties. This was not with a view to suppress facts or with a view to evade payment of duty or anything suggesting fraud or collusion between the two Governments with respect to the price or manner in which the items are required to be treated. The reason being as already stated is that the price for the dredger and its equipments including position finding equipment, loose parts and fenders had been negotiated, fixed and stated clearly in terms of the contract. The Commissioner has proceeded to examine the statements and held that they are inculpatory. We have carefully examined all the statements and find that the appellants and witnesses in the cross-examination had clarified that statements were taken under coercion. However, without going into the aspect of retraction but on close of scrutiny, we do not find anything coming out in the statements to suggest that the contract was altered or negotiated price was deferred or separate payments were made through a different channel in respect of three impugned items or that the three items impugned are not part of the negotiated price. Sri G.G. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee items and technical literature/technical opinion is also not relied upon by the Revenue for change of classification in the matter. In the absence of any charge or an adjudication finding on the classification to be adopted, it is, therefore, to be held that the Revenue has not proved the case at all for changing the classification from the one adopted earlier while finalising the asssessments under Heading 8905.10 along with the benefit of Notification in question, which clearly grants exemption to all items in question. 18. The only allegation under which the case has proceeded is on separate charges received in respect of three items and the opinion of Sri Appa Rao and statements of witnesses are relied. For the purpose of under-valuation, the Revenue has to show that separate payments were received and the same was not brought to the notice of the Department. Such a charge has not been made at all and the Revenue is unable to demonstrate through evidence that separate payments were made for the three impugned items. The price was negotiated by two Governments and the contract was executed after the due approval of the Secretary of Ministry of Finance in consultation with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd price from the spare parts list to ensure that the spares are assessed under Accessories (Conditions) Rules. However, no such claim was made at the time of clearance seeking benefit under Accessories (Conditions) Rules and therefore, much of the effect of advice of Sri Appa Rao looses its significance and all statements from the witnesses have no meaning to support the allegation brought out in the matter. As already discussed, in order to make out a case against the appellants, the Revenue ought to have re-opened the assessment by charging that three impugned items cannot be considered as part of dredger and they are required to be classified separately and they are not entitled for the benefit of Notification, but the same had not been done, therefore, the assessments originally made assessing the position finding equipment, loose parts under sub-heading 8905.10 stands continued to be remained and classified thereunder. Hence, no case has been made out by the Revenue for mis-declaration or suppression for re-opening the classification. 20. We also notice the decision of East Regional Bench in the case of Boskalis Dredging India Pvt. Ltd. (supra) relied upon by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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