TMI Blog2006 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... or visualization and analysis, in sciences for technical computing, media, for animation and broadcasting and in defence for visualization and technical computing. In the present case the applicant imported the said goods vide 4 Bills of Entry for selling those to local buyers. The Central Intelligence Unit (CIU) officers of Customs Air Cargo Complex, Mumbai on information that the applicant had resorted to mis-declaration of value to evade payment of proper Customs Duty investigated into the matter. The brief particulars of the said imports are as under :- S. No. Bill of Entry No. Date Declared Price CIF (US $/Rs.) Price as per Revenue (CIF) Differential Duty Payable Duty Admitted 1. 442595 dt. 18-6-02 4.33,972.90 (2,14,43,065/-) 14,29,610.91 (7,02,65,376/-) 1,91,45,271/-Released on provisional basis 25,98,968/- Released on provisional basis 2. 445736 dt. 24-6-02 1,10,325.00 (54,22,473/-) 3,67,128.65 (1,80,44,373/-) 49,38,092/- 13,70,512/- Paid Rs.21,21,473/- 3. 445738 dt. 24-6-02 2,06,100.00 (1,01,29,815/-) 5,04,982.87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 445738 both dt. 24-6-2002 were also released on provisional basis against PD Bond for the declared CIF value. 3. After investigations a Show Cause Notice vide F. No. CIU/VIG-18/2002-ACC dated 1-11-2004 was issued to the applicant and the co-applicants proposing to :- reject the transaction value of the goods and to re-assess the goods covered by Bills of Entry Nos. 442595 dated 18-6-2002, 445736 dated 24-6-2002 and 445738 dated 24-6-2002 by demanding a differential duty of Rs. 2,98,30,621/-; demanding duty amounting to Rs. 4,89,279/- short levied in the Bills of Entry No. 445740 dated 24-6-2002 The Show Cause Notice also proposed confiscation of the impugned goods besides invoking interest and penal provisions on the applicant and proposing penal action against the co-applicants. 4. The applicant filed application under Section 127B of the Customs Act, 1962 (in short the Act) for settlement of the case covered by the aforesaid Show Cause Notice before the Commission on 8-6-2006 admitting a duty liability of Rs. 47,12,008/-. 5. The case came up for admission hearing on 3-8-2006 and the Commission vide Order No. 61/ADMISSION ORDER/CUS/RKT/2006, dated 9-8-2006 allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n SGI, USA and the applicant. Thus the fact that similar machines may be imported by M/s. ONGC directly from SGI, USA at a higher price, cannot discountenance the veracity of the price paid by applicant to SGI, USA. The question of comparison could only arise if the goods imported by M/s. ONGC are identical to those imported by the applicant, however, for settlement of the case, the applicant was willing to accept the stand of the Revenue. In the Show Cause Notice it was alleged that the transfer price between SGI, USA and the applicant was so determined as to allow the applicant to earn a 2% net profit in its further sale of the item to M/s. ONGC. Working back from the price charged by M/s. ONGC, the applicant had worked out the differential duty against the goods imported under Bill of Entry No. 442595 to Rs. 25,98,968/-. (iii) The Revenue has, in its report, not raised any substantial challenge to the manner in which the applicant has worked out its differential duty liability, for the purpose of the assessment, beyond baldly averring that such a method of transaction was outside the Valuation Rules. It is respectfully submitted that if the clauses of the Rules are strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prices are merely because of market strategy on account of which no adverse inference can be drawn. (vi) The ld. Advocate in fine sought settlement of the case on the additional duty admitted and prayed for grant of immunity from fine, interest, penalty and prosecution to the applicant and co-applicants as applicable. 7. The Revenue was represented by Shri N.K. Tiwari, Appraising Officer from the office of the Commissioner of Customs (Import), Air Cargo Complex, Mumbai. The representative submitted that the applicant being a related entity of the exporting firm, the transaction price cannot form the basis of Customs duty payment as provided under Section 14 of the Act and in this regard relied upon the decision of the Hon ble Supreme Court in the case of Mirah Exports Pvt. Ltd., v. Collector of Customs reported in 1998 (98) E.L.T. 3 (S.C.) in support of his contention. The Revenue further submitted as under :- (i) In respect of the goods covered by Bill of Entry No. 442595 dated 18-6-2002 it had rightly invoked Rule 5 of the Customs Valuation Rules, 1988 in as much as the goods covered by the Bill of Entry No. 444015 dated 20-6-2002 are identical and contemporaneous to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue had strong reservations. (v) The ld. representative for the Revenue finally concluded by saying that in view of the submissions, the reassessment proposed together with the demand for differential duty short levied is sustainable. He also opposed the grant of immunities to the applicant and co-applicants. 8. The ld. Advocate for the applicant in his rejoinder pointed out that the Order of the Hon ble Supreme Court in Sharp Business Machines Pvt. Ltd. was distinguished in the case of Eicher Tractors Ltd. v. Commissioner of Customs restricting the application of the said Ruling to facts of the said case. 9. The Bench has gone through the facts of the case, arguments putforth by the applicant and the Revenue so far oral and written, and accordingly observe the following namely : - (i) In respect of goods imported by the applicant vide B/E no. 442595 dated 18-6-2002, application of Transaction Value in terms of Rule 4 of the Customs Valuation Rules, 1988 is not required as the applicant itself in para 2 (iv) of Annexure - A to the settlement application dated 8-6-2006 had stated that for the purposes of settlement it would accept the assertion of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 x R14000 CPUs with 600 MHZ/8 MB Cache 1. 16 x R14000 CPUs with 600 MHZ/8 MB Cache 2. 24 GB Main Memory 2. 32 GB Main Memory 3. 18 GB x 2 FC Disk 3. 36 GB x 2 FC Drive 4. IR GFX Pipes - Qty 2 4. IR GFX Pipes - Qty 3 5. Two Raster Managers per pipe (total 4 for two pipes 5. Two Raster Managers per pipe (total 6 for three pipes 6. 24 Monitor (Quantity 3) 6. 24 Monitor (Quantity 4) 7. 21 Monitor (Quantity 1) 7. 21 Monitor (Quantity 1) 8. Display Generator (DG5-8) per pipe (Quantity 2) 8. Display Generator (DG5-8) per pipe (Quantity 3) 9. PCI Expansion Brick with 12 slots (Quantity 1) 9. PCI Expansion Brick with 12 slots (Quantity 1) 10. PCISCSI Cards (Quantity not mentioned) 10. PCISCSI Cards (Quantity 4) 11. PCI Giganet Card (Quantity 1) 11. PCI Giganet Card (Quantity 1) 12. Two Keyboard and Two Mouse 12. Two Keyboard and Two Mouse 13. Two Serial Ports 13. Two Serial Ports 14. One 10/100 Base T Port 14. One 10/100 Base T Port 15. CD ROM 40 X 15. CD ROM 40 X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. As regards the extra items contained in the present import as compared to the items imported by ONGC, the Revenue has adopted the duty calculation based on application of Rule 8 as Rules 5 to 7 are not applicable. As regards the contention of the applicant that the goods are not identical and hence Rule 8 has to be applied in toto, it is observed that the application of Rule 8 would be in order only when Rule 5, 6 and 7 are exhausted, which is not the case in respect of the main system imported in the present case. Hence the Bench is of the view that the valuation under Rule 5, for the main items treating the items as identical goods and for the extra items under Rule 8 as worked out by the Revenue in Annexure B2 of the SCN could be taken to be in order. (iii) As regards the items covered by B/E 445756 and 445740 dated 24-6-2002, the applicant had stated that the valuation should be under Rule 8 of the Customs Valuation Rules and while working out the same the calculation has been done on the basis of net profit margin, as per the agreement with the parent company SGI, USA. However, based on the details given in the various e-mails recovered from the applicant as listed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s otherwise reported to be earlier running in losses as indicated earlier in this para. A huge margin of Rs. 4.85 crores as expenses allocated to this deal cannot be ignored for duty liability calculation without proper justification having regard to the basic provisions of Section 14(1) of the Customs Act, 1962. Similarly such position is present as per Annexure A2 in respect of the balance 3 bills of entry namely, 445730, 445740 and 445738, which have been discussed in this para. Hence the methodology adopted by Revenue in respect of goods covered by these B/Es can be taken to be in order, as the valuation had been done under Rule 7(1) i.e., Deductive value method read with Rule 3(ii), since this Rule has to be applied first in preference to Rule 8. In this case in applying Rule 7 of the Customs Valuation Rules, 1988, the Revenue had rightly adopted the prices given in the invoices for sale of the said goods to local buyer and due consideration given to the deductions as provided in Rule 7 of the Customs Valuation Rules, 1988. As, for example, in the case of goods imported vide Bill of Entry No. 445738 dated 24-6-2002 and sold to M/s. Sahara India Media Communications Ltd. for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty when it was due. The applicant is, therefore, liable to pay interest on the belated payment of duty. However, keeping in view the co-operation extended by the applicant, the Bench levies simple interest @ 10% per annum from the date the duty was due till it is paid. The Bench grants immunity to the applicant from interest in excess of 10% per annum. The Revenue shall calculate the amount of interest as ordered within 15 days of receipt of this order and communicate it to the applicant, who thereupon shall pay it within the next 15 days. The applicant shall furnish proof of payment of interest, both to the Commission and the Revenue. On payment of the balance duty and the interest due the bank guarantee/bond furnished by the applicant shall be released. Penalty Prosecution : The Bench grants immunity to the applicant and co-applicants from penalty and prosecution under the Customs Act, 1962. 11. The above immunities are granted under sub-section (1) of Section 127H of the Act. Attention is also invited to the provisions of sub-section (2) and (3) of Section 127H ibid. 12. This order of settlement shall be void in terms of sub-section (9) of Section 127C of the Act, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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