TMI Blog2010 (8) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... limited purpose of quantifying the correct amount of duty to be paid by the respondents and determining the penalty to be imposed on them under Section 114A of the Act - C/172-173/2003 - A/321-322/2010-WZB/C-II/(CSTB) - Dated:- 27-8-2010 - S/Shri P.G. Chacko, S.K. Gaule, JJ. REPRESENTED BY : Shri P.K. Agarwal, JCDR, for the Appellant. Shri S.N. Kantawala, Advocate, for the Respondent. [Order per : P.G. Chacko, Member (J)]. - These appeals are directed against the Commissioner s order dropping all the charges levelled against the respondents in the show-cause notice dated 17-3-1999 issued by the department. M/s. Electronic Instrumentation (proprietor: Shri Vinod Kumar Agarwal) and M/s. Videomax Electronics (proprietress: Smt. Sneh Lata, w/o. Shri Vinod Kumar Agarwal) are the respondents in these appeals filed by the department. Components/parts required for electronic goods, namely, rechargeable lights and radio cassette recorders, were imported by the respondents during the period from April, 1997 to February 1998. These imports were made in several consignments during the said period. A set of Bills of Entry were filed by Electronics Instrumentation and anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents. These kits were found to be restricted items for import under the Import Policy which was in force during the material period. It was alleged that the respondents imported these goods without specific licence in breach of the above restriction imposed under the Policy and with intent to evade payment of appropriate duty. The show-cause notice further alleged that the respondents had wilfully suppressed before the department the fact that they had imported restricted items in CKD/SKD condition without import licence. On this basis, the show cause notice proposed to invoke the extended period of limitation under the proviso to sub-section (1) of Section 28 of the Act. Apart from demanding differential duty on radio cassette recorders and rechargeable lights in terms of ANNEXURE-X and ANNEXURE-Y respectively, the notice proposed to confiscate the goods under Section 111(d), (m) and (o) of the Act as also to impose penalties on the respondents under Sections 112 and 114A of the Act. The demand of duty was contested both on merits and on the ground of limitation, and other proposals in the show-cause notice were also contested on a few grounds by the respondents. It was in adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two or more Bills of Entry by a person or by more than one person (where they are found to have common economic interests) at or about the same time, so as to make up such article in CKD/SKD form, where the intention of the importer(s) is admitted or otherwise established. In the present case, Shri Vinod Kumar Agarwal admitted that he had imported all the items covered by Annexures X Y to the show-cause notice, some of them in the name of Videomax Electronics and other items in the name of Electronic Instrumentation. He also admitted that these were components of rechargeable lights and radio cassette recorders and could be assembled into these articles. He further admitted that such assemblage of components into finished goods viz: rechargeable lights and radio cassette recorders was actually done and that no component was disposed of as such. Shri Vinod Kumar Agarwal clearly admitted that rechargeable lights and radio cassette recorders had been imported in CKD/SKD condition on the pretext of importing individual components. He also expressed his willingness to pay differential duty as applicable to the finished goods. It was also admitted that, in the absence of import licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... description, classification, quantity or value of the goods covered by any of the Bills of Entry was misdeclared or that the duty assessed by the assessing authority was not paid. According to the learned counsel, it was open to the respondents to import freely importable components and clear the same on payment of appropriate duty. The respondents are separate assessees for purposes of the Customs Act, the Income-tax Act and the Sales Tax Act and there is no reason why their imports, which were made over a period of time, should be clubbed. It is submitted that, under Rule 2(a) of the Interpretative Rules, only those components which are imported by the same person and presented together for assessment at the same time can be clubbed into a complete article or an incomplete article having the essential character of the complete article, in CKD/SKD condition. In the present case, various components of radio cassette recorders (RCRs) and rechargeable lights (RCLs) were imported over a period of time and, on no occasion, the components of any RCR or RCL were presented together at the same point of time before the assessing authority by any of the respondents. The learned counsel has, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar Agarwal came in the same container and, upon scrutiny of the Bills of Entry filed on the same date in respect of these consignments, it was found that the components imported by the husband matched those imported by the wife so as to make up complete kits of radio cassette recorders and rechargeable lights in CKD/SKD condition in terms of Rule 2(a) of the General Rules of Interpretation of the CTA Schedule. Even where a consignment of the husband and a consignment of the wife came in separate containers, the department found perfect match between components covered by the Bill of Entry filed by the husband and the components covered by the Bill of Entry filed by the wife on the same date and such components were also found to be constituting complete articles (RCRs or RCLs) in CKD/SKD condition. There were also cases in which similar match was noticed between components covered by the husband s Bill of Entry filed on a particular date and components covered by the wife s Bill of Entry filed a day before or a day after. In all these situations, according to the Revenue, the complete article (radio cassette recorder or rechargeable light) was imported in CKD/SKD condition fraudu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot permitted to be imported except against a licence or in accordance with a Public Notice issued in this behalf vide para 156A ibid. M/s. PIL and M/s. PIND imported the respective parts of footwear over a period from 21-6-1995 to 4-11-1995 and also in the month of February, 1996. All these imports were claimed under OGL and duty was paid on the basis of the CIF value declared in the relevant Bills of Entry. After investigations, the department took the view that the two importers had jointly imported footwears in SKD condition with intent to get over the restriction imposed under para 156A of the EXIM Policy and to evade payment of appropriate duty. The modus operandi of the two companies was believed to be a subterfuge or a fictitious arrangement to evade customs duty. The allegations of the department were denied by the importers. The dispute eventually came up before the Apex Court. Their lordships noted that M/s. PIL had funded M/s. PIND with interest-free loans running into Rs. 18 crores (approx.) and also that the latter s name had been shown as the former s supporting manufacturer in the DEEC held by M/s. PIL. Their lordships further noted that the components imported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar Agarwal in the name of Electronic Instrumentation on a particular date perfectly matched those imported by his wife in the name of Videomax Electronics on the same date. (In one of these cases, the consignments covered by the Bills of Entry filed by the husband and the wife came in the same container.) There are also numerous instances of matching imports having been made by the couple on successive dates. In a few cases, matching components figured in Bills of Entry filed by the couple with a short gap of a few days. In Annexure-X to the show-cause notice, the department has brought out spectacular groupings of imports of components by the couple, each group indicating import of radio cassette recorder kits in CKD/SKD condition . Similarly Annexure -Y to the notice has brought out similar groupings of components imported by couple, each group indicating import of rechargeable light kits in CKD/SKD condition for the same period. The show-cause notice also clearly brought out the couple s intention (a) to get over the restriction laid down in para 15.2 of EXIM Policy 1997-2002 (which is pari materia with para 156A of EXIM Policy 1992-97 which was considered in Phoenix cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in other terms, we cannot accede to the position that it is the intention of the rule that the importers are permitted to do indirectly what they are forbidden to do directly, and that it permits the importation separately of components which have no use other than as components of an article whose importation is prohibited, and that an importer is thereby enabled to assemble them here as a complete article though if they were assembled beyond the customs frontiers the importation of the assembled article into India is prohibited. (emphasis added) As held by the Hon ble Supreme Court, an importer cannot be permitted to do indirectly what he is forbidden to do directly. This ruling of the apex court prompts us to take the view that Rule 2(a) cannot be interpretted in a manner that permits an importer to import components (which have no use other than as components of an article whose importation is prohibited or restricted) under OGL and assemble them in India into an article in respect of which there is a ban or restriction on importation. In the instant case, Vinod Kumar Agarwal admitted that, without licence, he imported the restricted items (RCRs and RCLs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e party was held to have split their import so as to make it appear that they imported decorative rivets, for which partial exemption from customs duty was available under Notn. No. 224/85-Cus., as amended by. Notn. No. 290/87-Cus. They were also held to have contravened the Import (Control) Order, 1955, whereunder snap fasteners were not importable without licence. Thus, in the case of Shiv Shakti Enterprises also, a fraud on the Revenue as well as on the Import Policy was exposed. 12. In Micro Electronics case (supra), the goods imported in four consignments and declared as spare parts of video cassettes in the 4 Bills of Entry - two of these filed in the name of M/s. Bharat Laxmi Trading Co. Ltd. the other two in the name of M/s. East Asia Skin Corporation - were held to be complete video cassettes in SKD condition which were not importable as per para 186(A) of the Import Policy in force during the period of the subject imports (1984 -85). 13. In the case of Sharp Business Machines Pvt. Ltd. (supra), the Apex Court observed that the appellant was doing indirectly what they were not permitted to do directly. The Import Policy of the relevant period had, by way of incen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The court wondered whether the ghost of Westminster , which had been exorcised in England, should be allowed to rear its head in India. It was also opined that it was high time for the judiciary in India, too, to part its way from the principle of Westminster and the alluring logic of tax avoidance. The apex court further held as under : Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. (underlining added) In McDowell s case, it was also held as follows : It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices should be related to the existing legislation with the aid of emerging techniques of interpretation....... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (prop: wife) with obvious intent to circumvent the Policy provision as also to short-pay duty. The husband admitted the facts under Section 108 of the Customs Act. He often referred to Videomax Electronics as his firm. He admitted that he had imported, in the names of the two firms, all the components required for a complete electronic item; that he had taken precaution not to import all the components for a complete article in the name of the same firm and at the same time; that, at a time, some parts of one article were imported in the name of one firm and other parts of that article in the name of the other firm; that they did this to avoid scrutiny and detection by Customs officers at the time of processing of papers and examination of goods; that they had imported whole kits in CKD/SKD condition through Bombay port; that the Export Import Policy did not permit import of consumer goods in CKD/SKD condition without specific advance licence which they did not have; that they used to sell complete mini RCLs both in bulk and in retail to customers from the factory of Electronic Instrumentation at B-153, G.T. Karnal Road, Industrial Area, Delhi and also from the shop of Videoma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Qty. Description Qty. Description and quantity of goods Tape Deck Mechanism 2141 pcs. Plastic Moulded Cabinet 2141 pcs. Populated PCB 2141 sets Speaker 2141 sets Transformer 2141 pcs. Accord 2141 pcs. Antenna 2141 pcs. Hardware 2141 sets Separate Bills of Entry, No. 682 and No. 534 respectively, were filed on 5-1-1998 in the name of Videomax Electronics and Electronic Instrumentation describing the above goods in the same manner as in the respective invoices and claiming clearance under OGL as components of electronic goods. All these components covered by the two Bills of Entry were clubbed in the show-cause notice to make 2141 kits of radio cassette recorders as seen from Annexure - X to the show-cause notice. Similar clubbing of other contemporaneous imports of components into RCR kits was also made and such kits were also included in Annexure - X . Similarly kits of rechargeable lights were also made, in the SCN, from RCL components contemporaneously i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of components by the respondents during the material period, as a matter of fact, constituted importation of complete RCRs and RCLs in CKD/SKD condition. Having admitted the Revenue s case on facts, the respondents cannot claim the benefit of any of the decisions cited by their counsel, as the importers in the cited cases had apparently relied on Rule 2(a) without admitting subterfuge. We are of the view that, in respect of importers like the respondents who deliberately resort to subterfuge by importing complete articles against policy restriction on the pretext of importing components/parts thereof and also admit the offence as in this case, any interpretation of Rule 2(a) is only of academic interest. Moreover, the issue in the present case is squarely covered by the ratio of the Apex Court s decision in Phoenix case, the facts of which are similar to the facts of the present case. 18. In the result, we hold that the respondents committed breach of para 15.2A of the Exim Policy 1997-2002 by importing consumer goods, viz., radio cassette recorders and rechargeable lights without import licence. They also evaded payment of customs duty by presenting the goods as components inste ..... X X X X Extracts X X X X X X X X Extracts X X X X
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