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TMI Blog2008 (4) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... iled investigations were carried out. It was revealed that the appellants are manufacturing "Memory Modules" with the brand name "SMART" and "Hynix". The technical know-how and necessary equipment and training to the appellant was provided by M/s. SMART. The capital goods required were also supplied to them free of cost. M/s. SMART continued to remain the owners of the capital goods and the appellant is not allowed to sell or lease the same. During investigations, the CIU recovered a document titled "Agreement between Smart Modular Technologies and M/s. Sun electronics Technologies Ltd. Though the agreement is unsigned, it confirmed the existence of a relationship between the supplier M/s. Smart and receiver M/s. Sun Electronics Technologies Ltd. (appellants). Earlier also, the appellant had imported four similar Chip Placer Machines along with Laser Microscope and Sigma tester vide Bills of entry dated 20-11-2000, 20-12-2000 and 16-12-2003. In view of the above facts, Revenue proceeded against the appellants by way of issue of show cause notice proposing rejection of the valuation of the machines imported by the appellants. In respect of the machines imported under Bill of Entry d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of the machine. (ii) The Commissioner admits in Para 84.01 that unsigned agreement has no evidentiary value but has concluded that the said agreement is a valid document for the purpose of valuation. There is no evidence to show mutuality of interest, flow back, etc. The Memory Modules manufactured by the appellants in India are sold to M/s. IBM, M/s. HP and M/s. WIPRO and they also undertake job work for M/s. HCL, M/s. ABB and M/s. BPL. (iii) The appellants are registered with Central Excise and they are paying substantial revenue to the government. The Excise department has not alleged any relationship between the appellant and M/s. Smart. The transaction between the appellant-company and M/s. Smart are on principal to principal basis and hence, they are not related persons. (iv) The learned Commissioner has no jurisdiction to decide the valuation under Central Excise but he has held that valuation of the product manufactured by the appellant is influenced by M/s. Smart and hence, they are related. The Central Excise department till date has not raised any objection to the value adopted by the appellant. (v) According to the department, no sale was involved as M/s. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Plama Laboratories Ltd. v. CC, Chennai - 2002 (145) E.L.T. 722 = 2002 (49) RLT 198. (j) Iron Master India Pvt. Ltd. - 2002 (150) E.L.T. 599. (k) Forte Garments v. CC, Chennai - 2002 (150) E.L.T. 622. (xii) For deciding valuation under Rule 8, the department had placed reliance on three documents. They are (a) the Agreement; (b) a printout from website www.smtinline.com; and (c) the Chartered Engineer's report dated 23-9-2004. The appellants furnished detailed counter to all the three documents. During the cross-examination of the Chartered Engineer, it was clearly brought out that the valuation was done only on high estimate basis and reliance was placed on some machinery purported to have been imported by IT companies. The Chartered Engineer admitted that the machineries imported by IT companies were not identical to the one under consideration in this appeal. The Chartered Engineer himself admitted that the valuation was only on estimation and that reliance placed by him on value of similar machines were not identical. (xiii) The appellants requested right from the beginning for certificate from a reputed evaluator and in fact by mutual consent M/s. SGS India had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by limitation. No investigation is conducted with the exporter of the machinery and no certificate from Chartered Engineer is obtained and hence, the allegation of suppression with an intention to evade duty is not correct. Hence, demand in respect of three previous imports is barred by limitation. The following case laws were relied on. (a) Champhor Drugs & Liniments - 1989 (40) E.L.T. 276 (S.C.) (b) Cosmic Dye Chem -1995 (75) E.L.T. 721 (S.C.) (c) Pushpam Pharmaceuticals - 1995 (78) E.L.T. 401 (S.C.) (d) Singareni Collieries - 1988 (37) E.L.T. 361 SRB (e) Padmini Products -1989 (43) E.L.T. 195 (S.C.) (f) Cadilla Lab. Pvt. Ltd. - 2003 (152) E.L.T. 262 (S.C.) = 2003 (55) RLT 1 (SC) (g) Raymond Cement Works - 1995 (76) E.L.T. 340 (T) (h) Tamil Nadu Housing Board - 1994 (74) E.L.T. 9 (S.C.) (i) Ellora Mechanical - 1998 (98) E.L.T. 109. (xx) When the duty demand itself is liable to be set aside, the question of confiscating the machinery and imposing redemption fine and penalty cannot be sustained in law. There is no mis-declaration warranting confiscation under Section 111(m). (xxi) The appellants produced the price of identical machinery whereas reliance placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequential relief, if any, as per law. 6. The learned departmental representative stated that the appellants had not paid any amount towards the import of the two machines and also the machines imported previously. This is very clear from the investigations. Even though, the agreement recovered from the appellants is unsigned, in Appendix A of the said agreement there is clear indication of the value of the impugned items. In any case, as the transaction does not involve any sale, the value given in the invoice cannot be accepted for duty purposes. In other words, the so-called value given in the invoice is not at all the correct transaction value. In such circumstances, the Commissioner had to take recourse to the Customs Valuation Rules which he has done as valuation could not be determined in terms of Rule 4, 5, 6 and 7, he had adopted Rule 8 and arrived at the correct valuation. The valuation adopted by the Commissioner is based on the Chartered Engineer's certificate, which is normally an acceptable method of valuation for second-hand machines. The appellant did not disclose the fact that the transaction did not involve any sale and that the machineries imported were refurb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the next step of arriving at the correct assessable value in terms of the above valuation Rules for the purpose of charging import duty. As per Rule 5 of the said Valuation Rules, value of identical goods sold for export to India and imported at or about the same time as the goods being valued is to be considered. In this case, I find that the machines imported vide B/E No. 650719 dated 19-7-2004 were second-hand machines which were refurbished. As the actual contemporaneous import of identical or similar goods are not available. Rule 5 and 6 of the said Valuation Rules cannot be applied. As regards Rule 7 of the said Valuation Rules, since no identical or similar goods are sold in India after importation, the same cannot be resorted to. For the purpose of applying the provisions of Rule 7A, details required to build up the value of the imported machine such as cost of materials/fabrication/processing employed in producing the imported machine are not known and therefore, the same cannot be resorted to. Further no brochure or document has come with the imported machines and the importer has not routed the documents through any bank against L.C. and has also admitted that val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in accordance with the Valuation Rules. Moreover, the cross-examination of the Chartered Engineer reveals that the said Engineer had done valuation for number of IT companies like Hewlett Packard, Intel, Global Symphony, Accenture, etc., and he had checked with his friends in those companies for the value of such machines. There is nothing wrong in ascertaining information from knowledgeable persons in the field. In any case, the appellant has no proper explanation with regard to the value of the impugned goods indicated in Appendix A. The Commissioner has also stated that the appellants had not produced the pricelists of identical goods from the manufacturer or any invoice of the manufacturer. 7.3 The Commissioner has discussed the valuation of four similar machines imported vide Bills of entry dated 20-11-2000, 20-12-2000 and 16-12-2003. The said machines were found in the factory of the appellant. On verification, they were found to be the same models imported in the Bill of Entry dated 19-7-2004. The serial numbers of the machines were found to be the same as those appearing in Appendix A to the draft agreement. These machines had also been supplied by the same foreign suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s he is responsible for the commissions and omissions of the appellant-unit, hence, he is also liable for penalty. 7.5 The Commissioner has rejected the request of the appellant for re-export of the capital goods. His conclusion that the appellant-unit have resorted to the option of re-exporting the machines so as to escape the clutches of law cannot be faulted in the light of the various facts revealed in the investigation. Already the importers had imported four machines and cleared them by resorting to undervaluation. Therefore, on commencement of the investigation the appellant had requested the Commissioner to re-export the machines. As it is clear that the appellants had resorted to undervaluation, in our view, the Commissioner is justified in rejecting their requisition for re-export. 7.6 The learned advocate argued that the unsigned agreement has absolutely no evidentiary value and therefore, the same should be ignored and invoice value should be accepted. It is very clear from the Order-in-Original that the Commissioner has not relied on the unsigned agreement to value the impugned goods. He has relied only on the Chartered Engineer's certificate after establishing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly in terms of the agreement. When one goes through the agreement, it appears that everything has been dictated by the foreign supplier. The foreign supplier not only supplies the machineries but also bears the customs duty burden. In any case, the appellant had not given any evidence to show that the value shown in the invoice had been paid to the foreign suppliers either directly or indirectly. The case laws relied on by the appellants in Para 15 of the grounds of appeal are applicable to situations where there is an existence of transaction value. In the present case, there is no transaction of sale at all in respect of the impugned imports. The investigations have clearly revealed that the impugned goods remained the property of the foreign suppliers. The value shown in the invoice appears to be-a sham value. Therefore, the Revenue has no other option but to take recourse to Customs Valuation Rules. The learned advocate's contention that for deciding valuation under Rule 8, the department has placed reliance on three documents is not correct. Even though the show cause notice relied on the three documents, ultimately the Commissioner has rejected two of them and has based his ..... 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