TMI Blog2013 (8) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... an be issued without challenging the assessment was also settled in UOI v. Jain Shudh Vanaspati Ltd.[1996 (8) TMI 108 - SUPREME COURT OF INDIA ] - the allegation was regarding mis-declaration of value as was evidenced from correspondence sized from the assesse - Where there was such mis-declaration or suppression the extended period of five years specified in Section 28 of the Customs Act was applicable - amount worked out for short levy of duty could not be accepted - the matter was remitted back to the adjudicating authority for re-quantification of short-levy - The penalties also need to be decided afresh in view of the likely reduction in duty liability - C/478-480/2007 - C/407-409/2011(PB) - Dated:- 9-9-2011 - Ms. Archana Wadhwa and Shri Mathew John, JJ. Shri R.K. Handoo and Prem Ranjan, Advocates, for the Appellant. Shri Amrish Jain, SDR, for the Respondent. ORDER The case made out against the main appellant Kemtech International Ltd. (hereinafter referred to as Kemtech ) is that they undervalued certain goods manufactured by M/s. Precision Engine Controls Corporation (PECC) imported by them during 2001 to 2003 under 12 Bills of Entries and supplied by Kem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f foreign exchange and the rates of customs duty. Further there is no finding that Kemtech has billed any amount as customs duty though they might have given some worksheets indicating customs duty that may have to be paid. Indicating in a quotation, rate of exchange for currency and rate of customs duty that may be prevailing after 8 to 9 months after submitting the quotation, cannot attract the provisions of Section 28B of Customs Act. The provision of Section 28B of the Customs Act was invoked in the SCN but no amount is confirmed under this section in the impugned adjudication order. There is no appeal by Revenue against this part of the order. 5. In spite of the above position, this matter of loss caused to GAIL cannot be altogether ignored in this order because the differential duty demanded in the SCN and confirmed in the impugned order is worked out on the basis of loss caused to GAIL. It is seen from the annexure to the SCN that differential duty is worked out by taking the value quoted by EMSG to Kemtech and applying the duty rates indicated in the quotation by Kemtech to GAIL and arriving at the duty payable and deducting from such amount the amount of duty actually pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alve VG 1.5-30-200 6 107400 14700 8. Fuel Meter Valve VG 1.5-30-200 10 185500 24500 9. Fuel Control Monitor FC 58.6R 1 12240 2842.5 10. Fuel Control Monitor FC 56.3 R 4 48960 11370 11. Sped Monitor SM 26.1R 5 48850 13440 12. Speed Monitor SM 26.3R 2 38350 9056.4 13. Temp. Monitor TM 24.5R 2 38525 9056.4 14. Temp Monitor TM 24.11R 3 57525 13584.6 15. Power Supply Modul PS 10.0 2 21500 5353.8 8. Kemtech s main submissions to justify the variation in prices are as under : (a) No payment whatsoever in advance was to be made by M/s. GAIL to the supplier company whereas Kemtech had paid 50% of the price in advance; (b) Price settled with Kemtech by GAIL was in Indian rupees while the price quoted by foreign supplier was in dollars. The prices were frozen with Kemtech leaving the risk of currency fluctuations to the account of Kemtech. 9. Before recording the submissions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we have been trying in the past few days to impress upon EMSG PECC to reconsider their offered prices in view of the steep price increase for the two particular fuel and speed monitor analogue modules specially. We are pleased to inform you that after lot of persuation PECC EMSG have agreed to provide some substantial/reasonable one time special discount as per below for only the two below modules. Sl. No. Item Revised Unit Price of Kemtech in Rs. Revised Unit Price of EMSG/PECC in US $ 1. Fuel Monitor Model # FC 58-6R 8,27,500 11,129 2. Speed Monitor Model # SM 26-3R 7,26,500 9,770 However, the prices for all the other three analogue modules remains the same as per our offer Ref # KIL/PECC-MOD/EMSG/May 01/01 dated 8th May, 2001. EMSG s letter explaining above all is also enclosed herewith. We hope you would appreciate the one time special kind gesture extended by EMSG/PECC USA in doing the above and the efforts put by Kemtech to achieve the same. We may also clearly state that PECC/EMSG has offered this as a one time special discount and hence no repeat order wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to support for past couple of years as the cost of the various components which are used for its manufacturing were available at extremely high prices due to the fact that they were rapidly becoming obsolete. 2. Hence due to this supply and demand gap, the prices would rise every year. 3. Accordingly, due to this reason, PECC was forced to steadily increase the prices of the analog modules. The PECC have still absorbed much more at their end than what has been passed on to the customers as an increase, every time it happened, PECC were affected this way. 4. PECC then advised their customers to upgrade to a Digital system but as lot of them were very comfortable with Analog system and were struggling to upgrade to the digital system, PECC undertook a detailed study to evaluate the efforts required to support the Analog systems further. As a result of this PECC made a strategy life time buys of components that were obsolete or rapidly approaching obsolescence and the ones which go into the manufacturing of the Analog modules. 5. This was done in order to continue the support for Analog modules repair and replacement for years to come. 6. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S enquiry # GAIL/C P/HBJ/BJP/ID-20010060/2001-02/48/2187 dated 9th August, 2001 for fuel control valves of PECC Dear Mr. Sumit Saha, As requested in context to the new enquiry from GAIL, note prices for the fuel control valve model # VG1.5-30-200 is US $ 18450 list each + US $ 100 FOB charges + US $ 18550 each (FOB port of dispatch) effective from 1st October, 2000. We may also point out that the prices have been revised marginally by PECC only after a gap of 5 years as these remained unchanged at US $ 17800 each FOB port for past five years. The prevailing price of FCV is inclusive of only US $ 100 as FOB charges instead of US $ 250 as this has been reduced drastically from May onwards this year due to some cost reduction measures undertaken by PECC. Hence decent savings are now possible on account of FOB charges. Per Mr. Anurag s request to Annie Kinner the list of FCV orders received by us from GAIL in the past 5 years (I may have missed some orders as it s time consuming to dig all the files) : - ND/CP/HBJ/SPARES/614/96 dated 6-3-1996 - ND/CP/HBJ/SPARES/706/94-95/12-97 dated 2-20-1998 - GAIL/BJP/HBJ/C7P/I-9705/816 dated 5-26-1998 - GAIL/C P/HBJ/C7P/I-0024/2000/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturers invoice as required under Rule 10(b) of Customs Valuation Rules, 1988. The correspondence seized from the custody of the Appellants clearly shows that the value of goods were 4 to 5 time higher than the value declared to customs. He also points out that the refusal of the Appellant to show the copy of the Bill of Entry to GAIL clearly demonstrates the mala fide intention of the importers because GAIL would have detected the mis-declaration on first glance. The abnormal discounts seen during investigation is not something claimed at the time of assessment. This is a claim made when investigations were conducted. During investigation they promised to come up with the discount structure of the supplier. No such document was ever produced. In short he argues that the prices agreed to by PEEC for supply of goods to Kemtech as disclosed from the letters seized were the actual prices and not the prices declared in the Bill of Entry. 12. The arguments of the Appellants are examined below in view of the submissions of SDR and the available records. 12.1 This is a case where the allegation is regarding mis-declaration of value as is evidenced from correspondence sized from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um to Show Cause Notice shows that the expression was used in the sense that declared value was 20% of the actual value. Since actual figures were enclosed the confusion suggested by Appellants cannot be a serious defect to the SCN itself. Further, the evidence introduced through the addendum itself is being rejected and hence this argument has got no relevance. 12.6 The argument that Revenue is relying on list prices is not seen to be correct from the correspondence between the parties. The correspondence unearthed during searches do not disclose any further negotiation as claimed. No such documents have been produced by Appellants either. So the inevitable conclusion is that the further negotiation were stealthily done and for the purpose of mis-declaration of import value through the medium of Suntag USA and this argument is to be discarded. 12.7 In the matter of undervaluation of imported goods, proof of remittance of additional consideration is a sufficient proof. But it is not that if the Revenue is not able to unearth leads of this activity done stealthily the case has to necessarily fail. The decision of the Apex Court in the case of CC v. Shibani Engineering Systems - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted. 13.1 CC v. East Punjab Traders - 1997 (89) E.L.T. 11 (S.C.). The Appellants rely on this decision to contest the point that documents showing sale price of PEEC to Suntag cannot be relied upon as evidence because these were not signed invoices. In this, context para 5 of the judgment is reproduced below : 5. The single Technical Member, who wrote the minority judgment, however, held the view that it was not essential on the part of the Customs Officer to strictly prove the documents as required by the Evidence Act and that the authenticity of the documents, though copies, could not be doubted as they had been collected by the Collector from foreign sources and could be admitted in evidence by virtue of Section 139(ii) of the Customs Act, 1962 which permits the raising of a presumption in respect of documents received from any place outside India in the course of investigation of any offence alleged to have been committed by any person under the Act. The majority points out that these documents, which are photocopies, do not bear the signature either of the exporter, the forwarding agent, the stevedore or the Customs Officer. In fact, they do not bear any signature what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reconstructed and has been taken over under panchanama as described under serial No. 25 and is now shown to me and I have signed on it as having seen it. As shall be seen from the packing list of the consignment the entire material I have purchased at the rate of J Yen 1100 i.e. approximately US $ 10.68 per metre. [The price for the goods cannot be sent after the contract is completed and the goods are despatched. 11. The goods imported by appellant were assorted rolls of different colours and of odd lengths ranging from 24.1 metres to 21.8 metres. The presence of such odd lengths indicate that the goods were not part of a regular standard lot. The quotation in the fax dated 3rd August, 1995 is for length expressed in integers. As against this the other fax of 18th August, 1995 offers goods at Yen 800 per metre. Fractional lengths are shown for such goods in lengths of metres, e.g. 273.3, 255.8 etc. This lends credence to the contention that the goods imported by the appellant were sold at a lower price because they were all odd lot. 13.3 CC v. South India Television (P) Ltd. - 2007 (214) E.L.T. 3 (S.C.). Extracts from paras 2 and 3 are reproduced to show that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third party or in any legal proceedings. In other words, the importer contended that the charge of under-valuation cannot be based on xerox copies of the declarations which were not even certified by the competent authority in Hong Kong. According to the importer, such declarations had no bearing upon the actual sale price of the goods in the hands of Hong Kong exporters. According to the importer, there was no allegation in the show cause notice that it had paid higher value to the supplier than that declared by it in the Bill of Entry. Before the Assistant Commissioner, the importer supported the declared price mentioned in the Bill of Entry by relying upon various contemporaneous imports made during the above period by other importers whereas the price declared for identical goods was the same as the price declared by the importer in the present case in its Bill of Entry. It was further submitted by the importer that it was not open for the Assistant Commissioner to adjudicate the value under Rule 8 without going sequentially from Rule 5 to Rule 6 and Rule 6 to Rule 7 onwards. The importer further contended that, in the present case, the value of the goods could have been determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e difference had caused variation of approx. 27% over their prices in 1981-82 for US Dollar when compared with the exchange rate applicable to DM; and the local agent have a discount up to 20% and for any higher discount, prices had to be accepted for each import by the supplier. 5. The Additional Collector of Customs by his order dated April 16, 1985, discharged the notice since the charges set out in the show cause notice failed and directed that the consignments in question be assessed on their invoice value. The Addl. Collector of Customs has found that the appellants herein, particularly during the personal hearing, had led substantial evidence to chronologically show that despite the said price list there was a-development of a new sales and pricing policy for not only India but the world over, after exchange of numerous correspondences and personal discussions during visits of representatives of the seller and that this policy distinguished between following categories of buyers on logical commercial grounds :- (i) Replacement users who order small lots at infrequent intervals; (ii) Original Equipment Manufacturers (OEMs) who import for fitment in their manufactured pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were sold up to the year 2000 to GAIL and also from the prices initially negotiated for sale to Kemtech by PECC as is evident from correspondence seized from the Appellant. Prima Facie this case involves gross undervaluation. The Appellants have not given any justifiable reason for the abnormal discounts. As per Rule 10(1)(b) of the Customs Valuation Rules, 1988 the department was authorized to call for manufacturers invoice in such circumstances and invoices were so called for. However the Appellants chose not to submit such invoices. The correspondence seized from the Appellant, indicated undervaluation. The Appellant has not submitted any reason for such abnormal discounts. The Honourable Apex Court had occasion to consider such abnormally discounted price in the case of Collector of Customs, Bombay v. Shibani Engineering Systems, Bombay reported in 1996 (86) E.L.T. 453 (S.C.) wherein the Apex Court held that such abnormally discounted prices cannot be accepted. Therefore, we agree with the finding in the impugned order that the prices declared in the Bill of Entry merits rejection and goods should be assessed on the basis of prices at which goods were offered by EMSG to Kemt ..... 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