TMI Blog2008 (10) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Om Fabrics and M/s. Vedant Enterprises - one invoice showing the actual price and the other showing 30 to 35% less value for presenting to the customs authorities, were recovered. Since the Appellant company was also importing identical fabrics from the same supplier, inquiry was started in respect of their imports also, in course of which the godown and office premises of the Appellant company and residential premises of its Director Shri Subhash Gupta were searched and statements of Shri Subhash Gupta were recorded whereas he stated that his company is importing silk fabrics from various suppliers in China, including M/s. Zhejiang at Chennai and Kolkata and that he had negotiated with M/s. Zhejiang as a result of which his company gets 10% to 20% price concession. However, in view of adverse record of the supplier M/s. Zhejiang (as they were conniving with other imports of silk fabrics - M/s. Purnima Enterprises; M/s. Om Fabric and M/s. Vedant Enterprises) and of the Appellant company, as in June 2004 Chennai custom house had issued a show cause notice dated 30-06-04 to the Appellant company alleging duty evasion amounting to Rs. 10.40 lakhs by under invoicing and in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to be redeemed by the Appellant Company on payment of redemption fine in lieu of confiscation of Rs. 20 lakhs; and (d) imposed penalty of Rs. 1,00,66,366/- on the Appellant company under Section 114A of the Act, and penalty of Rs. 25 lakhs on Shri Subhash Gupta under Section 112 of the Act. No penalty was imposed on Shri Sunil Gupta. 1.1 It is against the above order that these appeals have been filed. 2. Heard both the sides. 2.1 Shri Rupesh Kumar, Advocate, the learned counsel on behalf of the Appellants, made the following submissions :- (i) It is an admitted fact that nothing incriminating was found in course of search of the Appellant company s office and godown and residential premises of Shri Subhash Gupta, Director of the Appellant company, suggesting fraud or under invoicing, or that the values declared by the Appellants were not representing true transaction value. (ii) Annexure A to the show cause notice refers to clearances of silk fabrics of quality Nos. 10101, 12101, 11216, 10103, 14654, 11206, 13255, 12103 and 12108 made through Chennai Port under 24 bills of entry and Annexe B to the show cause notice refers to clearances of silk fabrics of quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods imported by the Appellant company, are not contemporaneous. In fact, in a number of cases, contemporaneous imports of identical goods by others are at lower prices. (ix) All the bills of entry, covered by the show cause notice were properly examined by the respective custom house with regard to valuation and only in some stray cases where the assessing officer felt that the value was on lower side, the Appellant were directed to pay duty at higher value. The department has never challenged the said assessment orders. Therefore, in view of Hon ble Supreme Court s judgment in case of M/s. Priya Blue Industries v. Commissioner of Customs (Prev.) reported in 2004 (172) E.L.T. 145 (S.C.) the Department is now precluded from raising any dispute on valuation. (x) The entire duty demand and penal proceedings are based on assumptions and presumptions, without any tangible evidence. There is no misdeclaration of value by the Appellant company. Hence there is no case for confiscation of any goods or imposing penalty on the Appellants. 2.2 Shri Amit Jain, the learned Departmental Representative made the following submissions - (i) In view of the reputation of the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould become redundant. 4. Coming to the main point of dispute, the allegation against the Appellant company and its Directors is that they have misdeclared the transaction value in connivance with the foreign supplier M/s. Zhejiang of China and on this basis invoking Rule 10A of the Customs Valuation Rules, 1988 read with Rule 3 thereof, the declared transaction value is sought to be rejected and the same is sought to be determined under Rule 5 of the Valuations Rules. 4.1 Rule 10A of the Customs (Valuation) Rules, 1988, empowers a proper officer of Customs to conduct inquiry, if he has reasons to doubt the truth or accuracy of the value declared in relation to any imported goods and reject the declared value and proceed to determine the same by sequentially applying Rule 5, 6, 7 and 8 of the Valuation Rules, if after inquiry with the importers and considering other evidence, he still has reasonable doubt about the truth or accuracy of the declared transaction value. Now what is the reasonable doubt ? In this regard it is worthwhile looking at the reasons for adding Rule 10A to the Customs Valuation Rules, 1988 vide notification 10/98-Cus. (N.T.), dated 19-2-98, as given in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to doubt or reasonable doubt about the declared transaction value - it cannot be based on mere suspension based on adverse past record or bad reputation of an importer or a foreign supplier. In our view the Rule 10A can be invoked in situations like - there being evidence of invoice manipulation, the importers claiming to have got an abnormal discount which is against the normal trade practices, the declared transaction value is much lower than the transaction value of the contemporaneous imports of identical or similar goods in comparable quantity and the importer is unable to give any satisfactory explanation for this or some electronic goods of latest model have been imported as stock lot by declaring a very low value etc, which create doubt about the declared transaction value. 5. The main basis for exercising reasonable doubt about the declared transaction values and rejecting the same by invoking Rule 10A is - (a) record of the supplier - M/s. Zhejiang in abetting import under invoicing in import of silk fabrics by M/s. Vedant Enterprises, M/s. Om Fabrics and M/s. Purnima Enterprises by issuing parallel set of invoices; and (b) adverse record of the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 5.2 A reasonable doubt about the declared transaction value can be exercised if the declared transaction value is much lower than the price of contemporaneous imports of identical or similar goods in comparable quantities, after taking into account the normal price fluctuations and normal trade discounts, for which the importer is unable to give any valid explanation. 5.2.1 However in this case, on going through Annexure A (imports made through Chennai under 24 bills of entry) and Annexure B (imports made through Kolkata under 38 bills of entry) to be show cause notice, we find that - (a) while the imports have taken place during May 2003 to October 2004 period, throughout this period, uniform prices for various qualities of silk fabrics have been adopted and, (b) in some cases the invoice price of imports of a particular variety of silk fabrics imported by the Appellant company from M/s. Zhejiang, at a particular time has been applied to the imports of the same variety during much earlier period without considering the factors like price fluctuation or difference in quantity imported. 5.2.2 For example the import price of quality No. 10101 had varied from U.S. $ 0.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate different prices and for this reason, the declared transaction value can not be rejected and that it is well settled that transaction value cannot be rejected unless the exceptions enumerated in Rule 4(2) of the Customs (Valuation) Rules, 1988 warrant rejection. 6. Thus in this case, on the basis of the evidence on record against the Appellant, we do not find any justification for exercising reasonable doubt about the declared transaction values and rejecting the same by invoking Rule 10A of the Valuation Rules. The impugned order does not discuss any evidence to prove that the declared transaction values do not satisfy the criteria for acceptance of the transaction value as laid down in Rule 4(2) of the Valuation Rules. 7. In view of the above, the rejection of declared transaction value in respect of imports of various qualities of silk fabrics, made by the Appellant company at Chennai and Kolkata, confirmation of duty demand under Section 28(1) of the Customs Act, 1962 and confiscation of the goods under Section 111(d) and 111(m) of the Act, are without any basis. 8. The impugned order is, therefore, not sustainable and the same is set aside. The appeals are allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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