TaxTMI 
TaxTMI 
2010 (8) TMI 422
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....nd another set by Videomax Electronics. These Bills of Entry were accompanied by the respective invoices and packing lists. In each Bill of Entry, the imported items were described in the same manner as in the invoice and the packing list. The declared description, classification, quantity and value of the goods covered by each Bill of Entry were accepted and assessment made accordingly. The duty assessed was paid and the goods were allowed to be cleared under out-of-customs-charge orders issued under Section 47 of the Customs Act. Later on, the department launched investigations into the above imports, as part of which several statements of Shri Vinod Kumar Agarwal were recorded under Section 108 of the Customs Act. Statement of his wife Smt. Sneh Lata were also recorded likewise. Documents produced by Shri Vinod Kumar Agarwal in response to queries made by the department were scrutinised. Upon completion of the investigations, the aforesaid show-cause notice was issued to the respondents. ANNEXURE-X to the show-cause notice was a "CHART FOR CALCULATION OF DIFFERENTIAL DUTY ON THE KITS OF RADIO CASSETTE RECORDERS MADE BY THE IMPORTS BY M/S. ELECTRONIC INSTRUMENTATION & M/S. VIDEOM....
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....n adjudication of this dispute that the learned Commissioner of Customs passed the impugned order dropping the demand of duty and other charges. 2. In the present appeals, the Revenue has raised numerous grounds, both factual and legal, against the Commissioner's order. Elaborating these grounds, learned JCDR has submitted that the learned Commissioner who passed the impugned order has not applied his mind properly to the case law cited before him and also has not taken into account the crucial facts admitted by Shri Vinod Kumar Agarwal in his statements under Section 108 of the Customs Act. It has been argued that, on the basis of admitted facts, the adjudicating authority could have easily discerned the subterfuge behind the subject imports and unearthed the fraudulent device resorted to by the respondents. It has been contended that a fraud was played on the Revenue in the name of 'tax planning'. In support of this contention, the learned JCDR has relied on the following decisions. (i) Commissioner v. Phoenix International Ltd. - 2007 (216) E.L.T. 503 (S.C.); (ii) Commissioner v. Sony India Ltd. - 2008 (231) E.L.T. 385 (S.C.); (iii) M....
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.... finished goods. It was also admitted that, in the absence of import licence, he was not in a position to import complete radio cassette recorders or complete rechargeable lights on account of the restriction imposed under the Import Policy and, therefore, took to the device of importing individual components in the name of the two proprietorships. The husband and wife also admitted that the husband was entirely managing the affairs of the wife's business (Videomax Electronics) too. Learned JCDR has argued that, on these admitted facts, it was not open to the adjudicating authority to drop the proceedings initiated in the show-cause notice. Relying on Rule 2(a) and case law, the learned JCDR submits that the crucial finding recorded by the Commissioner cannot be sustained in law. The finding referred to by the learned JCDR reads thus: "It is a well settled position that each consignment covered by each B/E is to be assessed in the condition in which the goods are presented for assessment". He has referred to certain judgments in support of the challenge against this finding. Learned JCDR has also sought to justify invocation of the extended period of limitation. Claiming support fr....
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....ore the assessing authority by any of the respondents. The learned counsel has, therefore, argued that the view taken by the adjudicating authority is sustainable in law. In this connection, he has relied on the following decisions. (i) Commissioner v. Sony India Ltd. - 2008 (231) E.L.T. 385 (S.C.); (ii) Thomson Consumer Electronics (I) Pvt. Ltd. v. Commissioner - 2004 (177) E.L.T. 872 (Tri.-Chennai); (iii) Vishal Electronics Pvt. Ltd. v. Collector - 1998 (102) E.L.T. 188 (Tribunal); (iv) Trident Television Private Ltd. v. Collector - 1990 (45) E.L.T. 24 (Cal.); (v) Susha Electronics Industries v. Collector - 1989 (39) E.L.T. 585 (Tribunal). Learned counsel has also made an endeavour to distinguish the cases cited by the learned JCDR. According to him, all those cases are factually distinguishable and hence the decisions are not applicable to the instant case. It is submitted that it is legally valid for the respondents to have taken judicious recourse to tax planning and that neither any subterfuge nor any fraud can be read into what they have done. 5. Learned counsel has also pleaded limitat....
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....ituations, according to the Revenue, the complete article (radio cassette recorder or rechargeable light) was imported in CKD/SKD condition fraudulently with intent to get over licensing provisions of the relevant Import Policy as also to evade payment of duty. The adjudicating authority has rejected this view of the department by holding that, in terms of Rule 2(a) ibid, the components covered by each Bill of Entry should be assessed independently. This decision of the learned Commissioner is under challenge in the present appeal. 7. In our view, of all the cases cited before us, Phoenix International case is the most proximate to the present case in factual matrix. Therefore, this case should be decided on the basis of the ratio of Phoenix case which also involved the application of Rule 2(a) which reads as under : "2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be cla....
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....e 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 M/s. PIND were given to M/s. PIL who manufactured the finished product viz: synthetic shoes by using all the components together with 28 other items (peripherals) procured domestically. They held that the importation of one component (shoe uppers) by M/s. PIL and three components (outer soles, insoles, and sock liners) by M/s. PIND was a subterfuge/fictitious arrangement intended to deceive the department and also a fraud on para 156A of the EXIM Policy 1992-97. It was found that the obvious reason behind the bifurcation of footwear into components was to bypass the EXIM Policy and obtain the benefit of Exemption Notification No. 45/94-Cus., dated 1-3-1994. The Hon'ble Supreme Court, accordingly, held the two companies to be guilty of violating para 156A of the EXIM Policy and also held them liable to pay duty on the goods viz. footwear (CTH 64.04) imported in SKD condition. We note that, in the case of Sony India Ltd., the Supreme Court had occasion to examine the impact of Rule 2(a) on the facts of Phoenix case vide para (10) of the....
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....riction 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 case.) In our view, Rule 2(a) was correctly applied in Annexures-X and Y to the show-cause notice. 9. Learned JCDR has also relied on Girdharilal Banshidhar v. Union of India - AIR 1964 Supreme Court 1519. In that case, the appellant had obtained a licence for importing "iron and steel bolts, nuts, set screws, machine screws & machine studs, excluding bolts, nuts and screws adapted for use on cycles". During April-July, 1954, they imported bolts and nuts described in the Bill of Entry as "stove bolts and nuts". The imported goods were found to be identifiable parts of bolts and nuts of "Jackson type single bolt, oval plate belt fasteners", importation of which had been prohibited by a Notification of the Ministry of Trade issued in January, 1952. A show-cause notice was issued to the party alleging inter alia that they had misdeclared the goods as "stove bolts and nuts" with intent to import them in breach of the above prohibition. In adjudication of this show-cause notice, the Collector of Customs held that the bolts and nuts im....
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....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) in CKD/SKD condition on the pretext of importing individual components in the name of Electronic Instrumentation and Videomax Electronics. This admission amounted to acceptance that Rule 2(a) was applicable to the imports in question. The highly belated claims to the contra made in the reply to the show-cause notice cannot be accepted as a valid retraction of the confessional statements made by him under Section 108 of the Customs Act. 10. In the case of Monica Enterprises (supra) considered by the Tribunal, it was found that one Shri Jatinder Uppal had imported electronic consumer goods (car stereo cassette player; stereo cassette tape recorder-cum-radio etc.) in SKD condition in the names of different firms in which he had direct or indirect interest. These were prohibited items under the EXIM Policy, 1985-88. The imported goods were found to have been misdeclared as electronic 'components' in seven Bills of Entry filed on 17-3-1986 for ....
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....orts (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 incentive to small scale industrial units, allowed such units to import, initially, 62% of the components of plain paper copiers (final product), the balance 38% of components having to be indigenously manufactured by them. The appellant (SSI unit), under this scheme, made imports in a few consignments during January-March, 1987 and declared the goods as parts and accessories of copiers in the Bills of Entry. The Collector (adjudicating authority) held that the goods imported by the party were fully finished copiers in CKD/SKD form, which were prohibited item for import. The dispute travelled through the Tribunal to the apex court. The Supreme Court, dismissing the party's appeals, observed that the device adopted by the appellant was a complete fraud on the Import Policy. 14. Thus it can be seen that, whenever it was found that freely importable components or parts of articles which were prohibited or restricted for import under ....
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.... 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....... to expose the devices for what they really are and to refuse to give judicial benediction." (underlining added) We further note that, in certain exceptional cases where the legal personality of a company was misused for tax evasion or for circumventing tax obligation, the Supreme Court held that tax authorities and courts were entitled to pierce or lift the corporate veil to find out the economic realities behind the legal facade vide Commissioner of Income Tax v. Sri Meenakshi Mills Ltd. - AIR 1967 SC 819 and Calcutta Chromotype Ltd. v. Collector - 1998 (99) E.L.T. 202 (S.C.), both cited by the learned JCDR. We are of the view that, if the corporate veil can be lifted to see the economic realities involved in the transaction in question in an appropriate case involving one or more corporate entities, the principle underlying this procedure must a fortiori be applicable to transactions involving natural persons in appropriate....
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....fic 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 Videomax Electronics at 539, Old Lajpat Rai Market, Delhi; that they sold only finished mini RCLs and never sold components; that these goods were assembled at the basement of the residential building No. B-232 Derawal Nagar, Delhi and at B-15/3, G.T. Karnal Road, Delhi; that these goods did not have any indigenous component and were as good as goods manufactured abroad and imported into India; that radio cassette recorders, mini rechargeable lights, emergency lights, electric iron, microwave oven, toasters, hand mixers etc. were assembled in the above manner; that all components of these items, including plastic cabinets, wires, nuts and even packing, were imported; and that only complete articles were sold, but cash memos were issued for the components and these cash memos used to be torn off. Vinod Kumar Agarwal also stated that he was willing to pay the duty short-paid and also to make payment towards personal penalty and redemptio....
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....cluded in Annexure - 'X'. Similarly kits of rechargeable lights were also made, in the SCN, from RCL components contemporaneously imported by the respondents. Annexure - 'Y' to the SCN gives the relevant particulars of 'RCL kits'. Each kit borne on Annexure - 'X' or 'Y' represents import, in CKD/SKD condition, of the complete article, namely, RCR or RCL, as the case may be. We find that the scheme of Annexures 'X' and 'Y' to the show-cause notice eminently reflects the respondents' modus operandi as admitted by Vinod Kumar Agarwal. In other words, the complete articles, which were restricted items for import during the material period, were admittedly imported in CKD/SKD condition by Mr. & Mrs. Vinod Kumar Agarwal on the pretext of components (freely importable) being imported by two different firms. It is a basic and settled law that what is admitted need not be proved vide Commissioner v. Systems & Components Pvt. Ltd. - 2004 (165) E.L.T. 136 (S.C.) and that a confessional statement made by a person before a customs officer under Section 108 of the Customs Act binds him vide Surjeet Singh Chhabra v. Union of India - 1997 (89) E.L.T. 646 (S.C.). The respondents' intention to evade....
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....orders and rechargeable lights without import licence. They also evaded payment of customs duty by presenting the goods as components instead of complete articles. As Shri Vinod Kumar Agarwal admitted the offence clearly in his statements under Section 108 of the Customs Act, it is not open to the respondents to plead that they did not suppress any material fact with intent to evade payment of duty. Hence the extended period of limitation is invocable in this case. For the same reason, it is also not open to the respondents to argue that no penalty is liable to be imposed on them under Section 114A of the Customs Act, as the legal requirements for a penalty under this provision are the same as the legal requirements to be established for invoking the extended period of limitation under Section 28(1) of the Act. We also hold that the goods imported by the respondents and misdeclared as freely importable components instead of complete consumer articles restricted for import are liable to confiscation under Section 111(d) and (m) of the Customs Act. However, Section 111(o) of the Act has not been shown to be applicable in this case. 19. We, therefore, set aside the impugned orde....