TMI Blog2005 (7) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the appellants and found certain irregularities. It appeared that the appellants were over invoicing exports, under invoicing imports diverting imported spares and components in the domestic market illegally and selling assembled computers in the home market and failing to repatriate foreign exchange. During the searches, certain goods and documents were seized. Under Mahazar, follow up action was taken in the premises of the dealers of computers in Visak. On the basis of the investigations, show cause notice dated 13-5-97 was issued to M/s. HCEPL on the following persons. (1) Shri Anil Narra Managing Director of M/s. HCEPL (2) Shri M. Sreekiran, Director of M/s. HCEPL (3) Shri A. Srinivas Director of M/s. HCEPL (4) Shri R. Phanindra, Director of M/s. HCEPL (5) M/s Shashi Bhushan Co No. 10. Tyagaraja Street, North Usman Road, T Nagar, Chennai The adjudicating authority held that the charges against the appellant except Shri R. Phanindra have been established. Therefore, the adjudicating authority issued the following Orders : (a) "The value of imported 1.2 MB FDDs, 1.44 FDDs and motherboards be enhanced to US $ 36.2 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs (Rupees ten lakhs) under Section 112(a) of the Customs Act, 1962 and Rs. 4 lakhs (Rupees four lakhs) under Section 114(i) of the Customs Act, 1962. Penal proceedings against Shri R. Phanindra, Director of M/s. HCEPL are dropped. (h) The proceedings to demand interest under Section 28AB are dropped. 3.Shri Sashidharan Senior Advocate and Shri M.S. Rajappa learned Consultant appeared for the appellants. Shri R.N. Viswanath learned SDR appeared for the Revenue. The learned Advocate advanced the following arguments : (1) The appellants and M/s. Technosys Pacific Pvt. Ltd., Singapore entered into an agreement dated 10-5-94. As per the agreement, M/s. Technosys would supply required computer components except I/O chords, casings and power supply units which would be procured locally. M/s. Technosys would buy back 85% of the finished computer systems and the appellants can sell the rest 15% in the DTA. It was also agreed that the prices of computer components and finished computer systems would be fixed as per the prevailing international market prices from time to time. The appellants and the Singapore Company were not related at all. (2) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious judicial pronouncements cited in defence by the appellants. (9) Out of the 29 consignments imported, 24 consignments were imported by sea and the comparison of values is made with goods imported by air. It is incorrect on the part of the Commissioner to adopt Rule 6 of Customs Valuation Rules, 1988 especially when there are no cogent reasons for discarding the transaction value in terms of Rule 4. (10) The following case laws are relied on - (1) Time Masters v. Commissioners of Customs - 2005 (179) E.L.T. 502 (T) = 2004 (64) RLT 312 (CESTAT-Mumbai) wherein it has been held that loading of value of imported goods on the basis of unsustainable admission and value of contemporaneous imports which took place after six months after the present import is not sustainable. (2) Munna Gift Centre v. Commissioner of Customs, Chennai - 2004 (178) E.L.T. 310 = 2004 (64) RLT 488 (CESTAT - Ban.) wherein it has been held that transaction value cannot be rejected without clear evidence in regard to same goods, quantity, quality and country of origin and place and time of import. (3) Pioneer Impex v. CC (Port) Kolkatta [2004 (175) E.L.T. 888 (T.) = 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Some components pertain to earlier consignments and got rusted surfaces due to sea weather. It is because of the rust or dust on the surface, the department cannot come to a conclusion that material is being substituted. The learned advocate referred to the findings of the Commissioner in the OIO and stated that there is lot of contradiction in the finding of the learned adjudicating authority with regard to the valuation of the imported items. He said on this count alone, the adjudication order is liable to be set aside. 4.The learned SDR reiterated the points in the adjudication order. He said that each allegation has been elaborately dealt with by the Commissioner. He pointed out to the statement of Shri Anil Narrah. In the said statement, he has accepted that there was an understanding between him and the foreign supplier with regard to the under-valuation of the imported consignments by 20%. He said that the other directors have also given non-incriminating statements with regard to the transaction by the appellant unit. Hence he requested the bench to confirm the O-I-O. 5.We have gone through the records of the case carefully. The entire case against the appellants has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Narrah. In our view such wealth of details could not have been the imagination of the departmental officers. Shri Anil Narrah had admitted that on occasions they had removed some mother boards, PSUs etc., out of the VEPZ and sold the same in the local market or assembled into computer systems. He has also stated that the removed components were replaced by some defective parts. The statement of Shri Anil Narrah has been corroborated by Shri Bastian Alexander, Service Engineer of HCEPL; Shri Phani Kumar, Service Engineer of HCEPL; Shri A Srinivas, Director of HCEPL; Shri Sreekiran, another director. All these persons have admitted the removal of imported items from the factory at VEPZ. 7.We do not attach much value to belated retractions. At the time of stock verification on 13-12-96, the departmental officers found some defective computer components in the outhouse. The adjudicating authority has carefully considered the available evidence and come to the conclusion that the allegation of clandestine diversion of imported components and their substitution by old and used ones is clearly established. Hence the conditions of Notification 133/94, dated 22-6-94 has been violated. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of this under-invoice value would be shared at 50:50 basis with him. In view of the above, the adjudicating authority held that the value of the remaining components should be enhanced by 25% of the declared value as indicated in table-2 Annexure B to the adjudication order. We find that in the peculiar circumstances of this case, where the voluntary statement has been made by the Managing Director of the appellant unit, the finding of the adjudicating authority appears to be in order. When there is doubt regarding the bonafides of transaction value on account of the admission of the importer, best judgment requires that such evidence is made use of. In cases, where the contemporaneous import price was available she has adopted those prices. For the remaining items, the enhancement is at 25%, based on the statement of Shri Anil Narrah. We uphold the decision of the adjudicating authority on this point. 9.The third allegation is smuggling of the computer component by selling the same inside the imported cabinets and suppressing these facts from customs. This allegation is also based on the statement of Shri Anil Narrah Managing Director. Further the corroborative evidence has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange, we are in agreement with the appellant that customs officer is not competent to adjudicate the case of non-realization of export proceeds in view of the decision of the Tribunal in the case of Chinku Exports v. CC, Calcutta (supra). In view of our above findings, the duty demanded as per Annexure 'C' 3(a) (b) are liable to be set aside. In other words, only the following amounts are recoverable. (1) The duty on computer components diverted/substituted from VEPZ Rs. 58,167/-. (2) The duty on concealed/smuggled components Rs. 33,89,636/-. (3) Duty on imported components consumed in ineligible DTA sales Rs. 4,17,785/-. The total works out to Rs. 38,65,588/-. 13.Summing up, we hold that the imported goods are liable for confiscation under Section 111(d)(l), (m) and (o) of the Customs Act. We uphold the Commissioner's order confiscating the goods valued at Rs. 33,11,105/-. However, we reduce the redemption fine from Rupees five lakhs to Rupees Two lakhs only. In view of the discussions above, the total duty demand is restricted to Rs. 38,65,588/- (Rs. 58,167/- + Rs. 33,89,636/- + Rs. 4,17,785/-). The penalty on M/s. HCPL is reduced to Rs. 4,00,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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