TMI Blog2013 (11) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... different parts of window air-conditioners. As we have held that there is no import of complete air-conditioners, we reject the adoption of value in respect of one model based on import of a complete air-conditioner by ETA General which in any event, is a distributor to the supplier. Commissioner has ordered the classification of the goods imported under sub-Heading 8415 90 00 which relates to parts of air-conditioner. The classification has not been disputed. The Commissioner, at the same time, has described the modus operandi as import of air-conditioners from Thailand, disassembled at Singapore and imported then into India - there is no evidence that complete air-conditioners were imported from Thailand to Singapore and were disassembled at Singapore before shipment to India. KCM has also not admitted this in his statements to which we shall refer in greater detail hereafter. None of the documents either seized or recovered from the computers during search also support this modus operandi. The report from the High Commission of India, Singapore vide letter dated 22.8.2007 is also silent on this aspect. The enquiry with ETA General Pvt. Ltd which apparently revealed that O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E COURT] and Sunil Gulati vs Commissioner [2002 (8) TMI 787 - CEGAT, NEW DELHI] - Decided in favour of assessees. - Appeal No.C/185, 189 to 193, 197, 198, 213, 214/2012 - Final Order Nos. A/11279 to 11288/2013-WZB/AHD - Dated:- 10-10-2013 - Mr. M.V. Ravindran and Mr. H.K. Thakur, JJ. For the Appellant : Shri V.S. Nankani, Shri C. Subba Reddy, Shri P.M. Dave, Shri Paritosh Gupta, Shri Amit Laddha - Advocates For the Respondent : Dr. J. Nagori, Additional Commissioner (A.R.) JUDGEMENT Per: H.K. Thakur 1. By an order dated 29.3.2012 the Respondent Commissioner confirmed an aggregate customs differential duty of ₹ 4,85,22,215/- under proviso to Section 28(1) from the Appellant K.C.Mankani (KCM, for short) with equal penalty under Section 114A of the Customs Act, 1962 (the Act) in respect of consignments of components/parts of air-conditioners by 8 different entities. Penalties under Section 112 (a) and (b) have been imposed on certain individuals connected with these imports. Redemption fine has been imposed on seized goods on the ground that the same are liable for confiscation under Section 111 (d) and (m) of the Act. Hence these appeals. 2. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary and since Mehul Patel and Jitendra Manek of Subh Electromech and Jaidev Enterprises respectively had said in their statements that all orders were placed and price negotiated by KCM, he was the defacto importer, and hence the Commissioner had correctly demanded duty from him. 5. The issues involved in the present case are as under: A. Whether the transaction value of parts of air-conditioners, both split as well as window, can be rejected and re-determined, proportionately, on the basis of price of complete air-conditioner? B. Whether the Appellants had imported complete air-conditioners split/disassembled in Singapore before shipment to India? C. Whether duty can be demanded from KCM as an individual or ought to have been demanded from the different importing entities? D. Whether KCM managed and controlled Subh Electromech, Vinayak Enterprises and Jaidev Enterprises in addition to the 5 entities to import complete air-conditioners? E. Whether fines and penalties as imposed are justified under Section 111(d) and (m) and Section 112 of the Act? 6. The main issue relates to re-determination of value on account of alleged under invoicing. Before dealing with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singapore and imported then into India in paragraph 46.28 of the impugned order. A more detailed finding is also found in paragraphs 47.1 to 47.7 of the impugned order. Having read these findings carefully, we have given our anxious consideration. The Appellants are right in saying there is no evidence that complete air-conditioners were imported from Thailand to Singapore and were disassembled at Singapore before shipment to India. KCM has also not admitted this in his statements to which we shall refer in greater detail hereafter. None of the documents either seized or recovered from the computers during search also support this modus operandi. The report from the High Commission of India, Singapore vide letter dated 22.8.2007 is also silent on this aspect. The enquiry with ETA General Pvt. Ltd which apparently revealed that O General does not sell parts is belied by large number of imports of parts into India by independent third parties before and after the period covered by these appeals, which is April 2004 to May, 2007, a fact which has not been denied by the Revenue. There is no explanation from the Department how thousands of consignments of parts of air-conditioners of O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he evidentiary value of the statements, each of these is summarized below: (a) In his first statement dated 9.7.2007 KCM has deposed on behalf of Nishimitsui Electronics, Saimehar Industries, Trinity Industries, Echovision Electronics and Dev Peripherals and stated that these entities have imported components/parts of air-conditioners from Singapore, Dubai, etc. as inputs since these entities are engaged in the assembly of air-conditioners, and that the main suppliers are M/s. Uptron Electronics Pte. Ltd., (Uptron) M/s. Jackys Electronics (Singapore) Pte. Ltd. (Jackys) and M/s.Ninja Electronics Pte. Ltd. ( Ninja ) all from Singapore. He has given names and telephone numbers of persons with whom he has been dealing in with three companies supplying the components/parts of air-conditioners. He has also explained the process of assembly and given the brand names of each of the entities engaged in the imports of components/parts under which they sell complete air-conditioners in India. KCM has also explained his relationship with M/s. Jaidev Enterprises, M/s. Shubh Electromech, M/s. Vinayak Enterprises, M/s. BGM Enterprises, M/s. Japonica International as suppliers of parts, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents against the respective models are in US Dollars and are the actual prices of full air-conditioner unit; (c) In his statement dated 6.9.2007, KCM has stated that the consignments were imported in mutual packing, so as not to reveal the original packing at the time of examination of the goods and intention of clearing the unit by declaring as components is fulfilled and that this packing was done, so that the description of the goods mentioned in the invoice would be correct, whereas the goods contained complete outdoor/indoor split AC except window unit . KCM stated that his letter dated 1.9.2007 (which is the retraction letter) was sent on legal advice and that his statement dated 22.8.2007 was volunteered. He also explains pages 2 and 3 of the files containing pages 1-24 being the print-outs from his office computer to the effect that the same give a statement of the excess and shortage of number of pieces found in each consignment; (d) In his statement dated 1.11.2007, he has stated that air-conditioners were imported at an undervalued rate with a clear understanding that the amount over and above the undervalued amount will be sent separately to the suppliers abroad. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents cannot be read in isolation. On the other hand document speaks for itself. Besides one needs to examine that the statements are not only voluntary, but also true with reference to the documents in relation to which the statements have been made. The Apex Court in K.I. Pavunny vs. Asst. Collector (1997 (90) ELT 241 ) has also referred to the twin test of proving that statements are voluntary and true. 11. So also in Vinodkumar Solanki vs. UOI (2009 (233) ELT 157), the Hon ble Supreme Court held that both the statement and the retraction must be taken into account, and retracted statement be corroborated by independent material. The first test is to see that statements are voluntary. We have summarized the statements above and also, reproduced relevant extracts therefrom. While KCM has retracted his statement dated 22nd August, 2007, he has thereafter given three more statements on 6th September, 2007, 1st November, 2007 and 12th November, 2007. We may have considered that KCM s statement dated 22nd August, 2007 was involuntary because of the threat to him on account of his daughter s interrogation and her impending marriage in the following month, but in view of his three st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnumerable consignments of parts allowed to be imported at all times on regular basis and therefore, such an extreme stand taken by the Department cannot be sustained. Contrary to the statements, there is no evidence to show that what was actually imported is a complete air-conditioner, and not parts thereof. The Commissioner has been unable to show that what has been imported, when presented together, constitutes a complete or a finished article. Model numbers and quantities both differ and this mismatch is seen not only amongst the containers lying under clearance at the start of the investigation, but also out of the various annexures to the show cause notice where duty has been calculated. In none of the seized documents or statements has KCM mentioned about import of complete air-conditioner from Thailand to Singapore, disassembly by Uptron or any other person into parts, and repacking the parts for shipment to India. There is no conclusive proof either in the documents or statements to support this fundamental presumption on which the entire investigation has been premised. 14. We also find strong force in the contention that there is a serious contradiction amongst the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete air-conditioners. As observed hereinabove there is no evidence of import of complete air-conditioner. These statements of KCM do not support the further assumption that complete air-conditioners were shipped from Thailand (country of origin is not in dispute), disassembled at Singapore, repacked and shipped to India. All the statements are unfortunately silent on this aspect which goes to the root of the case. It is the totality of all the facts and circumstances which should inspire confidence in relying solely on the statements. By itself neither Page 3 of File 26 nor Page 7 of the computer print out are incriminating. A perusal of other documents from Pages 1-24 of the computer print out shows that just like price quotes for air-conditioners, KCM received various mails offering prices quotes of various items like HIFI with VCD, Home Theatre, refrigerators, etc. The report dated 25.10.2007 from Directorate of Forensic Science shows that Page 7 is a word document in the folder My Documents. There is no evidence of transmission to Mr Pradeep and no evidence of reply from Mr.Pradeep. It is undated and unsigned document containing rates for the period April 2004 and KCM does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satguru Electronics, who are in the same business, were also searched and the statement of Mr. Raju Ram, proprietor of M/s. Kheteswhar Electronics was also recorded on 16.7.2007, but in their case, the invoice prices of identical/similar goods has been accepted, and no show cause notice has been issued to them; (ii) There is evidence of sale by Shri Jitendra Manek, proprietor of M/s. Jaidev Enterprises of parts of air-conditioners to M/s. Kheteshwar Electronics of identical/similar goods, but those transactions have also not been questioned. (iii) The Appellant has produced evidence of large number of contemporaneous imports comparable to the prices declared by it as against which the Department has failed to produce evidence of contemporaneous imports at higher prices of either complete air-conditioners or parts of air-conditioners at the same rates, proportionately or otherwise, as shown in the price quotation fax; (iv) The debit notes and the price quotation fax relate only to Uptron, whereas there is no document at all to show that the other suppliers like Jackys, Ninja and Anisuma also supplied complete air-conditioners at the same prices mentioned in the price quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Invoice is the evidence of value. Casting suspicion on invoice produced by the importer is not sufficient to reject it as evidence of value of imported goods. Undervaluation has to be proved. If the charge of undervaluation cannot be supported either by evidence or information about comparable imports, the benefit of doubts must go to the importer. If the Department wants to allege undervaluation, it must make detailed enquiry, collect material and also adequate evidence. When undervaluation is alleged, Department has to prove it by evidence or information about comparable imports. For proving undervaluation, if the Department relies on declaration made in the exporting country, it has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to adjudication proceedings. They apply strictly to court proceedings. However even in adjudication proceedings, AO has to examine the probative value of documents on which reliance is placed by the Department in support of its allegation of undervaluation. Once the Department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which cast a doubt on the correctness of ETA General s price who are admittedly distributors of O General and hence the level of transaction is different. 21. In respect of 4 consignments, the Department has adopted the value based on the insurance certificates on the ground that the insurance value is not 110% of the declared value, but three times thereof. The show cause notice covers the total of 108 consignments. It is not shown that the insurance certificates correspond to the values shown in the price quotation fax. It is not unusual for businessman to over insure the goods, as has happened in the case of M/s. Sadguru Electronics, where despite finding the insurance certificate of a higher amount like in the present case, the declared value lower than the insurance certificate was accepted. 22. As we have held that there is no import of complete air-conditioners, we reject the adoption of value in respect of one model based on import of a complete air-conditioner by ETA General which in any event, is a distributor to the supplier. 23. So far as appellants argument that Commissioner could not have demanded duty and imposed Section 114A penalty upon KCM in his indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utely no evidence against Joit Kumar Chaudhary. Penalty under Section 112 cannot be imposed for not responding to summons. We therefore set aside the penalties of these three Appellants. 27. We must also deal with the finding of the Commissioner that all the units/entities who imported the parts are controlled by KCM. Heavy reliance is placed on the statements of Mehul Shah and Jitendra Manek and the fact of signed cheque books of their respective entites with KCM. These statements must however be read with the evidence in cross examination of Mehul Shah and Jitendra Manek. However, in view of our finding that there is no warrant or justification in rejecting the transaction or the declared value and the case of import of complete air-conditioners being based on assumptions, this issue would not result in either the imports of parts being prohibited or restricted or the declared value incorrect. As a matter of law, parts and complete air-conditioners are freely permissible for import under the Foreign Trade Policy. We therefore do detain ourselves with this issue. 28. Subject to the verification suggested in Para 24 above, all the present appeals are allowed by setting aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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