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TMI Blog2013 (3) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... of various persons. 2. At the time of initial assessment of goods customs suspected undervaluation of the goods, particularly the main item, namely PCB. For goods with declared value varying from HK $ 20 to HK $ 30 per piece the customs department loaded the value to values in the Range of HK $ 20.50 to HK $ 42.75 in different consignments. But later the Directorate of Revenue Intelligence did more investigations and they were of the view that the undervaluation was to a much higher extent. The present proceedings involve orders passed to load value based on such investigations and confirming duty along with interest and penalties. 3. Digital Satellite Receiver consists of five main parts namely, 1. Main PCB Board, 2. Power Supply Board, 3. Front Panel with PCB, 4. Remote Control, 5. Wires and cables. 4. The appellants were declaring prices of US $ 2.6 to US $ 3.9 per piece whereas intelligence received by DRI was to the effect that the cost of Main PCB was around US $ 16 per piece i.e. approximately HK $117, considering that during the period US $ was approximately 7.73 times costlier than Hongkong Dollar. 5. Revenue conducted investigations and collected evidence to supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of main PCB for DSR in the range of US $ 10.75 to US $ 18. 8.4 A quotation obtained from a Chinese manufacturer M/s. N Shin Exports showed that PC Board of Haier solution was offered to S.S. Enterprises at US $ 16.25. 8.5 Bharat Electronics Limited Bangalore stated that Cost of PCB for DSR was estimated to be 10 US $ for Haier, 15 US $ for Fijutsu and 18 US $ for ST Micro. 8.6 M/s. TVS Electronics Ltd. stated that the landed cost of PCB Board was estimated at Rs. 2054. Set Top Boxes were costing about US $ 25 to US $ 30 per unit and the mother Board was around 70% of the cost of the product value. 9. Revenue relies on the following data of contemporaneous imports as indicated in para 22(i) of the impugned order : Sl. No. Bill of Entry No. Date Name of the importer Value declared (in US $) Product Description Quantity Imported 1. 823307 27-11-2004 A.G. Incorporation 3.2 (equivalent to 25 HK $) Populated PCB for Receiver 3000 pcs 2. 896588 15-3-2005 A.G. Incorporation 3.3 (equivalent to 26 HK $) Populated PCB for Receiver 2000 pcs 3. 808285 3-11-2004 Catvision Products Ltd. 10.75 (CIF) Main Board for digital Satellite Receiver 505 pcs 4. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponding imports effected by M/s. AG Incorporation. After scrutiny of the value declared in the said export declaration Revenue came to the conclusion that the value declared therein was far higher than the value declared in the corresponding bill of entry No. 796262, dated 16-10-2004 and invoice No. QM-1003, dated 12-10-2004 filed by M/s. A.G. Incorporation at the time of import of goods into India. 13.2 The details of the export declaration Trade Declaration No. R 21858187004 L7 filed on 18-11-2004 vis a vis corresponding bill of entry are summarised below. 13.3 This declaration given to Hongkong customs covered goods declared as "Components of VCD" valued at HK $ 187200/- filed on 18-11-2004. It covered 51 cartons weighing 712 Kgs. shipped by Flt. No. CX 753 of 12-10-2004 under Master Airway Bill Number 160-HKG-51716980. 13.4 The Corresponding Bill of Entry filed with Indian Customs was 796262, dated 16-10-2004. This BE showed 51 packages weighing 712 Kgs. The flight details also matched. So correspondence between the declaration furnished abroad and the BE filed in India was established in material particulars except in description of goods and value. 13.5 The bill of entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was a housewife and according to her, the firm's import business was looked after by her brother-in-law Shri Ajay Kumar Agarwal. (f) Shri Nirmal Kumar Agarwal, Director M/s. Coir Cushion Ltd. was in transportation business, based at Bangalore and according to him the respective Directors/partners of each of the firms concerned took decisions about the business activities in these firms. (g) Shri Ajay Kumar Agarwal, on 18-1-2006 in his statement inter alia stated that he was looking after the day to day work of M/s. Coir Cushion Ltd. M/s. A.G. Incorporation and M/s. Overseas Business Corp.; that they had imported totally 65000 pcs (approx.) of populated PCB for receiver in all the three companies put together as under : From Quantum Meca Co. Ltd. Hongkong 57000 pieces From New Leaf International Hongkong 6000 pieces From Wichmore Enterprises Hongkong 1000 pieces (h) Shri Ajay Kumar Agarwal in his statement dated 13-3-2006 stated inter alia that for a long time, he was importing materials from Mr. Pankaj Surana's firm Quantum Meca Co.; that Mr. Pankaj Surana was son of Shri Vimal Pat Surana who was brother of Shri Kamal Pat Surana (Prop. of M/s. Rishav Udyog) and Shri N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6620 125570 15.2 Further penalties under Section 114A equal to the duties confirmed have been imposed on the three importers. Further penalty of Rs. 25 lakhs has been imposed on Shri. Ajay Kumar Agrawal, who was the main person behind such imports, under Section 112(a) of the Customs Act. 16. After hearing both sides and going through the case records we find the issues to be considered in dispute to be the following : (i) Since the customs officers loaded value once at the time of imports to a certain extent whether further proceeding for loading value for a second time can be initiated on the basis of new evidence. (ii) To what extent the decision in the case of Eicher Tractors Ltd. is relevant in this case. (iii) Whether the appellants were conduits for imports between closely related person relevant for determining under valuation. (iv) Whether the reference prices taken by Revenue were that of comparable goods. (v) How is the coorection in Export Declaration at Hongkong to be viewed. (vi) Relevance of retraction of Statements by Shri Ajay Kumar Agarwal. (vii) Relevance of imports by many other importers of such goods at more or less the same price as the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question were released on payment of redemption fine. The question before the court was whether another proceeding can be initiated for confiscation of the goods in the hands of bona fide purchaser alleging under valuation which was not adjudicated during the first proceedings. The Hon'ble Apex Court held that in such an event it matters little whether the adjudication was under which sub-clause of Section 111 because whichever is the sub-clause, there was an obligation on the adjudicating authority to find out the market value of the goods so imported and to collect all duty and other charges payable on the goods in question before releasing the goods on payment of redemption fine. [refer para 6 of the order]. 17.3.2 This decision in my view does not declare a law that no matter what if the value is loaded once no demand can be issued to the importer under Section 28 of the Customs Act to recover duties short levied. This decision only gives a protection to a bona fide purchaser and not to an importer who mis-declared value at the time of import. 17.4 The case of TTK Ltd. 17.4.1 This is case where the classification of goods was approved by the Assistant Commissioner of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er satisfying the conditions laid down under Section 47 of the Customs Act. In view of the decision of the Hon'ble Madras High Court in the case of Best & Crompton Engineering (supra), the order passed under Section 47 of the Customs Act is not an administrative order, therefore, the Central Board of Excise & Customs, while exercising its powers conferred under Section 129D of the Customs Act, is competent to review such order." 17.5.2 This order is cited basically to argue that the order of assessment on a bill of a Bill of Entry is an order which can be appealed against. Nothing turns out from this case on the issue whether an assessment made on a bill of entry can be re-opened through a Show Cause Notice issued under Section 28 of the Customs Act on the basis of mis-declaration or suppression of value unearthed subsequent to assessment of the Bill of Entry. 17.6 The case of Kalinga Gases Ltd. 17.6.1 This appeal is against an order passed by the Commissioner of Customs in adjudication of show cause notice dated 29-3-2001 issued to the party for confiscating certain goods (along with the vehicle used for transportation thereof) which were the subject-matter of final assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 The above decision is taken on the facts of the case and cannot read to infer an absolute law that assessment made under Section 47 cannot be opened through notice issued under Section 28 of the Customs Act, because there are judgements which lays down decisions to the contrary view canvassed by the appellants. Firstly let us see the decision of the Apex Court in the case of UOI v. Jain Shudh Vanaspati - 1996 (86) E.L.T. 460 (S.C). Two paragraphs from the decision are reproduced below : "5. It is patent that a show cause notice under the provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously refunded can be issued only subsequent to the clearance under Section 47 of the concerned goods. Further, Section 28 provides time limits for the issuance of the show cause notice thereunder commencing from the "relevant date"; "relevant date" is defined by sub-section (3) of Section 28 for the purpose of Section 28 to be the date on which the order for clearance of the goods has been made in a case where duty has not been levied; which is to say that the date upon which the permissible period begins to run is the date of the order under Section 47. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icher Tractors Ltd. is relevant in this case 18.1 The next issue to be examined is the import of the decision of the Hon'ble Apex Court in the case of Eicher Tractors Ltd. v. CC - 2000 (122) E.L.T. 321 (S.C.). This decision is often quoted to throw out under valuation cases booked by Revenue on the ground no proof of payment other than what was declared has been adduced by Revenue. It is quite relevant to look into the facts of the case as recorded in para 1 of the order are as under : "M/s. Eicher Tractors Ltd., the appellant before us, manufacturers tractors and tractor engines in India. From 1955 the appellant imported bearings of a specific size for their tractors and tractor engines from M/s. NTN Corporation, Osaka, Japan. This 33 year relationship was snapped in 1988 when the appellant started utilising bearings manufactured for them in India by M/s. HMT Ltd. The Japanese vendor was left with a stock of the bearings which had been manufactured by it for the appellant anticipating the appellant's continued custom. Not finding any customer for the bearings, by letter dated 12th February, 1993 the vendor's agent in India offered to sell the 1989 stock of 3579 bearings to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions without getting noticed by Government authorities. Existence of certain facts has to inferred based on acts that are proved and there is no reason to insist of producing proof of aspects which could be easily hidden in the circumstances of the case. 19. The issue whether the allegation that appellants were conduits for imports between closely related person relevant for determining under valuation. 19.1 The next issue is whether the transaction value can be rejected for the reason that supplier in China and the person to whom the goods were sold by the importer were related. The appellants canvass that this is just not an acceptable argument. They rely on the decision in Italia Ceramics Ltd. v. CC - 2005 (191) E.L.T. 1024 (Tri.) in this regard. The facts as recorded in para 6 of the order is relevant and is reproduced below : "6. The evidence produced by the appellants to substantiate their claim that the declared value was correct consists of (a) certificate from the manufacturer of tiles certifying that the sale value of 600 mm x 600 mm sized tiles was 30 RMB per piece (Chinese currency) one piece is = 0.36 Sq. Mtr. Thus one Sq. Mtr cost is 36.11 RMB taking the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x 600 mm sized tiles @ US $ 3.73 per piece, the appellants, contention that this price was not correct and amendment in the order was carried out vide purchase order amendment dated 5-8-2001 amending the price to US $ 3.725 is tenable." 19.2 In the above circumstances the following observation was made by Tribunal : "8. The value declared by the appellant cannot be doubted merely because the partners of the sellers (M/s. Noble Electronics, Hong Kong) were brother and father of one of the Directors of the appellant-company in India, for the reason that they do not fall within the definition of related person as per Rule 4(2) of the Valuation Rules, as there is no exercise of direct or indirect control over each other." 19.3 These observations cannot be interpreted like a Euclid's theorem. If at all it is to be interpreted so it cannot be after ignoring the words "merely because" used in the above para. That is not the way Euclid's theorems are interpreted. 19.4 It is relevant to note that the Apex Court in Kanwar Natwar Singh v. Director of Enforcement - 2010-TIOL-78-SC-FEMA = 2010 (262) E.L.T. 15 (S.C.) para 32 of the order observed as under : "32. In our opinion, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the PCBs were for monochrome reception only or that the PCBs were for reception of free channels only. If such was the position it would have been easy for the appellants to demonstrate such position since most of the imported goods were sold to one buyer only who was manufacturing DTH Reception apparatus from the goods imported by the appellants. Thus arguments for difference in quality for different types of MCBs are raised but no proof adduced that the goods were of inferior quality. If there was such possible explanation the most appropriate time to disclose such information is during investigation. During that time only one difference of Cheertek circuitry is pointed out and it is accepted that the difference due to such circuitry is in the range of HK$ 1 or HK$ 2 only. Even during the so called retraction of statements these issues are not pointed out. Having regard to all these facts we are of the view that these arguments raised do not justify lower prices as compared to prices of goods imported by others. 20.3 Regarding the evidence collected by the department from Electronic Industries the appellants point out that import was for 5050 pieces only whereas the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Rule 5 to Rule 7. There was no evidence of contemporaneous imports at higher price at all. 20.8 Case of J.D. Organics This was a case of import of "4,5 Dinitro Crysazine. The case of Revenue was that prior to Oct 99 the importer was importing the same goods from the same supplier at the price of US $ 18.7 per Kg. In Oct 99 the importer filed a Bill of entry declaring price of US$ 13.2 per Kg. The appellant in that case was the only importer of the goods. Revenue had no evidence of contemporaneous imports or other evidence to prove remittance of extra money. Apex Court held that the transaction value could not have been rejected. 20.9 This case is of different nature where Revenue is able to establish how adjustments of under-declared prices is easily possible though proof of such remittance could not be produced by Revenue because of the close relationship between supplier and the end-user. 21. Relevance of retraction of Statements by Shri Ajay Kumar Agarwal 21.1 The Counsel also submits that the statement dated 18-1-2006 of Shri Ajay Kumar Agarwal admitting undervaluation was taken under duress and it was retracted on 19-1-2006 before ACMM, Patiala House, New Delhi. So no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y increase further. I am of the opinion that it is not necessary that case of the accused should have been referred for adjudication. Since law on the subject is very clear and prosecution can be initiated against the accused for the alleged violation. In view of the above background, I am not inclined to admit the accused on bail at this stage. The application is dismissed." 21.3 The Magistrate did not give much credence to the statement in bail application because he refused the bail application on that day. The further application for bail filed before the Additional Sessions Judge which was also rejected on 4-2-2006. The judges have noted that the evidence gathered by Revenue was based on documents. It is very obvious that Shri Ajay Kumar Aggarwal had no reasonable explanation to give for the evidence appearing him. So much credence cannot be given to the so called retraction. 22. The Issue that many other importers were importing such goods at more or less the same price as the appellants. On this issue Revenue submits that cases were booked against those importers also and proceedings initiated. Such matters are at various stages of deciding the issue. In some cases the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner's observations and findings are without any evidence/proof; (v) Commissioner's rejection of 'export declarations' shows his biased mind; (vi) There was complete violation of natural justice since he failed to do justice. 23.2 The appellants have also raised the issue that the declaration produced by Revenue is not original of the declaration. We do not find any substance in this argument because the report is a report taken from computer data base of Hong Kong Customs where such declarations are filed electronically. So there will no original declaration. It is not clear whether the appellants are raising the issue that the report signed in original by the person who generated the report is not produced. The Revenue will be having this report. We are not examining the matter to see the report signed in original by the officer generating the report from computer for some collateral reasons being explained in the next paragraph. 23.3 We find that the Revenue had sent details of 19 shipments received A.G. Corporation and 8 shipments received by Coir Cushions to Hong Kong Customs as per annexure F-1 and F-2 of SCN. But discrepancy is brought to record only in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said DTH being sold in the market at a price of Rs. 1100 to Rs. 1150 and if value suggested by DRI was taken, costing will exceed Rs. 1100. I would like to mention here that the said price of the goods i.e. Rs. 1100 is the price at which the notice and other importees who were manipulating the value of the main boards, were selling the goods. Shri Gyan Chand Jain MD M/s. Modern Communication in his statement under section 108 of the Customs Act, 1962 has inter alia stated that the challenger series STB price in local market is Rs. 1350 to Rs. 1450 and their manufacturing cost for this product is Rs. 1250 to Rs. 1350/-. He further stated that the sale price with Dish Antenna, LNB and cable was about Rs. 2300 to Rs. 2500. In the present case, the notice is selling the set of SKD components to DTH as evident from the invoices raised by them, at a price of Rs. 370 to Rs. 466 appx. (invoice No. 17, dated 19-10-2004, 27 dated 15-12-2004, 55 dated 14-3-2005 and 35 dated 29-12-2005). The assembly charges for these components into a DTH are Rs. 100 (as per statement dated 7-2-2005 of Shri N. S. Surana, Director of M/s. SAG Audio Vision Pvt. Ltd. partner of M/s. Pranam Enterprises, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the only arguments of merit are (1) that the declaration No. R 21858187004 L7 filed on 18-11-2004 made at Hong Kong Customs was a result of an error and (ii) that the Revenue has not proved that the prices taken as reference are not of identical goods. As already explained the first issue is decided in appellants favour to the extent that mismatch in declarations at Hong Kong in the case of the relevant consignment by itself does not help to prove the case of Revenue. In the case of second issue in the facts and circumstances of the case the appellants had an onus to prove that the goods imported by them were substantially different which the appellant had not been able to do. This argument is not sufficient to throw the case as without merit considering the standard of proof laid down by various courts in deciding such issues of tax evasion as in following cases : (i) CCE v. International Cylinders Pvt. Ltd. - 2010 (255) E.L.T. 68 (H.P.) (ii) D. Bhoormull, 1983 (13) E.L.T. 1546 (S.C.), Paras 30, 31 (iii) Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali, H.M. Abdulali, Siyaganj, Indore as reported in AIR 1973 S.C. 2266 also at (1973) 90 ITR 271 (S.C.), 28. We note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined with reference to major cases cited. Of course many more such decisions can be examined and shown how the decisions cannot build an edifice of defence in this case. For the sake of brevity it is not being attempted. 31. When the facts are seen in the above light we see no reason to hold the impugned order to be bad. So we uphold the order in respect of revision of value as per the impugned order and consequent duty liability. 32. However, we note that in respect of the penalties imposed on the three importers under Section 114A of the Customs Act, the adjudicating authority has not given the option to pay 25% of duty demanded along with interest within 30 days of receipt of the order for final settlement. So we give such option to be exercised within 30 days of receipt of this order. We make this order on the basis of following decisions of the High Courts : (i) K.P. Pouches Pvt. Ltd. v. UOI - 2008 (228) E.L.T. 31 (Del.) (ii) CCE v. Balaji Exports - 2009 (258) E.L.T. A-108 (Guj.) 33. We uphold the penalty imposed on Shri Ajay Kumar Aggarwal. 34. The four appeals are disposed of in the above terms by giving partial relief in respect of penalty imposed under Section 114A o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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