Commissioner of
Customs (Gen), Mumbai Vs Abdulla Koyloth
JUDGMENT
D.K. JAIN, J.:
1. Challenge in this
appeal, by the revenue, under Section 130E(b) of the Customs Act, 1962 (for
short "the Act") is to the order dated 10th December 2004 passed by
the Customs, Excise and Service Tax Appellate Tribunal, (for short "the
Tribunal") whereby the appeal preferred by the respondent has been allowed
holding that the assessable value declared by the respondent in the bill of
entry should be accepted for the purpose of valuation in terms of Section 14 of
the Act.
2. M/s. IPCO Enterprise,
Thane, a proprietorship concern of the respondent imported a consignment of
assorted consumer goods ranging from glass ware, hair dryers etc. to gas filled
cylinders and refrigerant-22 gas (R-22). The bill of entry for the said goods
was filed on 3rd May 2002, by M/s Vegha Shipping & Transport Pvt. Ltd. on
behalf of M/s. IPCO Enterprise, whereby the total assessable value of the goods
was declared at ` 6,75, 796.90/- with duty liability of ` 3,86,352/-.
3. On an examination of
the bill of entry, invoice dated 17th April 2002, and packing list issued by
one M/s. Plizer Trading, Dubai, certain discrepancies were noticed by the
Central Intelligence Unit, and therefore, first check appraisement was ordered.
Subsequently, 100% examination of the goods was carried out on 13th-14th May
2002, and it was found that there was mis-declaration with respect to country
of origin, quantity and value of the imported items.
4. On 31st May 2002, the
respondent was summoned by the Central Intelligence Unit, and his statement
under Section 108 of the Act was recorded. Subsequently, another statement was
recorded on 6th June 2002, wherein the respondent stated that he was not aware
that he required license for import of certain goods, and that he did not remember
the country of origin of some of the goods.
5. Due to large number
of discrepancies found in the bill of entry, and the fact that the import of
R-22 gas filled cylinders required actual user license, the goods were seized
on 4th July 2002.
6. On 26th August 2002,
the respondent wrote a letter to the Central Intelligence Unit whereby he
stated that he had accepted the wholesale prices found out by the department by
market survey, and that the case be finalized and settled at the earliest.
Thereafter, duty liability was calculated in terms of Rule 6A and 7(1) of the
Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (for
short "the 1988 Rules") as it was observed that Rules 3(i) and were
not applicable due to mis-declaration, and Rule 5 and 6 could not be invoked as
there were no contemporaneous imports of similar or identical goods.
7. On 13th September
2002, another statement of the respondent was recorded under Section 108 of the
Act, wherein he admitted, inter alia, that there was difference in the items
declared and the items actually found and seized under Panchnama, and that the
prices of the items, in question, found by the market survey were acceptable to
him.
8. Vide his order dated
21st April 2003, the Commissioner of Customs rejected the assessable value
declared in the bill of entry. Dealing with explanation furnished on behalf of
the respondent regarding some of the crockery items, the Commissioner observed
thus :
"As regards the
contention that inadvertently in the packing list and the invoice, the word
"Set" was omitted and officers took it as single piece in place of
set, I find that whoever there are dinner sets mentioned in the invoice and
packing list, the quantities in sets have been specifically mentioned while for
other items the declaration have been in pieces. If the contention of the
learned advocates that value declared is for a set is accepted then the value
of these crockery items would become so low that such a proposition itself
appears ridiculous. For example, the wholesale price of a single Arc brand, 25
CI, glass mug of France origin in the local markets is Rs.40/- and of a set of
6 mugs is Rs.240/-, the declared CIF price of a single same mug, if it is accepted
that this price is for a set of 6 mugs as agitated by the learned advocates,
would thus be Rs.0.41 or Rs.2.46/- per set of 6 pieces. It is beyond any
comprehension how the wholesale price of a single or set of this mug in the local
markets can be Rs. 40/- and Rs.240/-respectively if they are so cheap as (sic)
declared by the importers. Similar is the situation in case of all other
crockery items. The advocates have not given me any explanation for such a vast
difference in market values of the goods and the declared prices. On the other
hand Shri Abdulla Koyloth, the proprietor of the import firm has, in his
letters dated 26,08,02,09.02 and statement dated 13.09.02, accepted the
determination of assessable value and the duty liability thereon in the basis
of market surveys which were conducted in his presence. Under the
circumstances, I am not inclined to accept the contention of the advocates that
the value declared is of a complete set. In any case, these goods are mis-declared
in respect of both quantities as well as value. This was done with a clear
intention of evade duty." Thus, having rejected the value declared by the
respondent for the purpose of Section 14 of the Act, the Commissioner held that
the assessable value of the goods had to be determined under Rules 6A and 7 of
the 1988Rules. Accordingly, he confirmed the assessable value of the goods at`23,69,838/-
and the duty demand of `13,17,091/- as customs duty on them. Additionally, the
Commissioner ordered the confiscation of the said goods under Sections 111(d)
and (m) of the Act, with the option of redemption nonpayment of fine of
`30,11,525/-. However, R-22 gas filled cylinders were confiscated absolutely
under Section 111(d) of the Act. The Commissioner also imposed a penalty of `10
lakhs on the respondent under Section 112(a)of the Act.
9. Being aggrieved by
the said order of the Commissioner, the respondent carried the matter in appeal
before the Tribunal. As afore- mentioned, the Tribunal allowed the appeal of
the importer in relation to the assessable value and confiscation of the
imported glassware, inter alia, observing thus: "4. After going through
the impugned order, we find that the Commissioner has rejected the invoice
value on the sole ground majority of the goods were declared with their generic
description only without disclosing any brand name or make, etc. He has also
gone on the reason that the glass items were found to be in excess quantity
than the declared one. However, we find that the invoice as also the packing
list was annexed with the bill of entry and the consignments in any case were
of assorted items from different countries. As such, it cannot be said that
there is mis-declaration as regards description of the goods. As regard,
variation in quantity of glass items, the appellant have submitted that they
had declared the number of sets instead of number of pieces.
.................................... ........................................ The
explanations tendered by the importer are plausible, and no case be made for
rejecting the invoice value in the absence of any importation or evidence to
reflect upon the flow back of money by the importer to the
supplier................................ ............ We are of the view that
in the absence of any evidence to show that the invoice value was not correct
and further in the absence of contemporaneous imports of identical goods, the value
declared by the appellant should be accepted as transaction value and not to be
rejected."In relation to the confiscation of the R-22 gas filled
cylinders, the Tribunal held that the confiscation of the said goods was
justified on the ground that the said goods had to be imported against an
actual user license, which the respondent did not possess. The Tribunal also
deleted the penalty levied on the respondent on the ground that since the value
enhancement had not been upheld by it, there was no cause for imposition of
penalty.
10. Hence, the present
appeal.
11. 11. Mr. K. Swami,
learned counsel appearing for the revenue, while assailing the order of the
Tribunal, strenuously urged that since the respondent had made
mis-declarations in the bill of entry in relation to quantity, country of
origin and value of the goods, the transaction value had to be rejected in
terms of Section 14(1) of the Act and Rule 4(2) of the 1988 Rules. Learned
counsel further contended that in the absence of contemporaneous imports of
identical or similar goods, Rule 7 of 1988 Rules would apply. Commending us to
the decision of the Tribunal in Prasant Glass Works P. Ltd Vs. Collector of Customs1,
Calcutta which attained finality because of dismissal of assessee's appeal by
this Court in Prasant Glass Works P. Ltd Vs. Collector of Customs.2, wherein
it was held that in a case where the invoice value shown is inadequate,
incomplete or erroneous, then such invoice and the price declared therein will
carry little weight, and the department is not required to show that the invoice
price is defective and cannot be accepted.
12. 12. Per contra, Mr.
Tarun Gulati, learned counsel appearing for the respondent contended that in
light of the decisions of this Court in Eicher Tractors Ltd., Haryana Vs.
Commissioner of Customs, 1996 (87) E.L.T. 518 (Tri.-Del) 1997 (89) E.L.T. A 179
Mumbai3 and Varsha Plastics Private Limited & Anr. Vs. Union of India &
Ors.4, the onus lies on the revenue to establish that the transaction value
disclosed by the importer is not correct. Learned counsel contended that in the
instant case, the revenue having failed to bring on record any material
indicating undervaluation in the invoice, the value declared by the importer
had to be accepted. While candidly conceding that though there could be some
discrepancy in the mode of declaration of the quantity of certain glassware, in
as much as the respondent had declared the quantity in sets, whereas the Commissioner
had gone by the actual numbers, learned counsel asserted that as such there was
no mis-declaration in relation to the assessable value, more so, when the bill
of entry was supported by the invoice and the packing list. It was thus,
pleaded that there is no merit in this appeal.
13. Thus, the short issue
that arises for determination relates to the manner of computing the assessable
value of the imported goods. For the sake of ready reference, it would be
useful to extract Sections 2(41), 14 (1) (as it stood at the relevant time) and
14(1-A) of the Act, which read as follows:
"2(41) `value',
in relation to any goods, means the value thereof determined in accordance with
the provisions of sub-section (1) of Section 14; 14. Valuation of goods for
purposes of assessment.--(1) For the purposes of the Customs Tariff Act, 1975
(51 of 1975), or any other law for the time being in force where under a duty
of customs is chargeable on any goods by reference to their value, the value of
such goods shall be deemed to be-- the price at which such or like goods are
ordinarily sold, or offered for sale, for delivery at the time and place of importation
or exportation, as the case may be, in the course of international trade,
where-- (a) the seller and the buyer have no interest in the business of each
other; or (b) one of them has no interest in the business of other, and the price
is the sole consideration for the sale or offer for sale: Provided that such
price shall be calculated with reference to the rate of exchange as in force on
the date on which a bill of entry is presented under Section 46, or a shipping
bill or bill of export, as the case may be, is presented under Section 50; (1A)
Subject to the provisions of sub-section (1), the price referred to in that
sub-section in respect of imported goods shall be determined in accordance with
the rules made in this behalf."
14. It would be also
useful to extract Rules 2(f), 3 and 4 of the 1988 Rules, which provide that: "2(f)
"transaction value" means the value determined in accordance with
Rule 4 of these rules3. Determination of the method of valuation.-For the
purpose of these rules - i. the value of imported goods shall be the
transaction value, ii. if value cannot be determined under the provisions of clause
(i) above, the value shall be determined by proceeding sequentially through
Rules 5 to 8 of these rules. 4. Transaction value.--(1) The transaction value
of imported goods shall be the price actually paid or payable for the goods when
sold for export to India, adjusted in accordance with the provisions of Rule 9
of these rules. (2) The transaction value of imported goods under sub-rule (1) above
shall be accepted: Provided that--
a. there are no
restrictions as to the disposition or use of the goods by the buyer other than
restrictions which--
i.
are
imposed or required by law or by the public authorities in India; or
ii.
limit
the geographical area in which the goods may be resold; or
iii.
do
not substantially affect the value of the goods;
a.
b. the sale or price is
not subject to same condition or consideration for which a value cannot be
determined in respect of the goods being valued;(c) no part of the proceeds of
any subsequent resale, disposal or use of the goods by the buyer will accrue
directly or indirectly to the seller, unless an appropriate adjustment can be
made in accordance with the provisions of Rule 9 of these rules; and (d) the
buyer and seller are not related, or where the buyer and seller are related,
that transaction value is acceptable for customs purposes under the provisions
of sub-rule (3) below. (3)(a) Where the buyer and seller are related, the
transaction value shall be accepted provided that the examination of the circumstances
of the sale of the imported goods indicate that the relationship did not
influence the price. (b) In a sale between related persons, the transaction value
shall be accepted, whenever the importer demonstrates that the declared value
of the goods being valued, closely approximates to one of the following values
ascertained at or about the same time-- (i) the transaction value of identical
goods, or of similar goods, in sales to unrelated buyers in India; (ii) the
deductive value for identical goods or similar goods; (iii) the computed
value for identical goods or similar goods: Provided that in applying the
values used for comparison, due account shall be taken of demonstrated
difference in commercial levels, quantity levels, adjustments in accordance
with the provisions of Rule 9 of these Rules and cost incurred by the seller
in sales in which he and the buyer are not related; (c) substitute values
shall not be established under the provisions of clause (b) of this
sub-rule."
15. Both Sections 14(1)
of the Act (as it existed at the relevant time) and Rule 4 of the 1988 Rules
provide that the price paid by an importer to the vendor in the ordinary course
of commerce shall be taken to be the transaction value in the absence of any of
the special circumstances indicated in Section 14(1) of the Act and
particularized in Rule 4(2) of the 1988 Rules. Therefore, the Customs
authorities are bound by the declaration of the importer unless on the basis of
some contemporaneous evidence the Revenue is able to demonstrate that the
invoice does not reflect the correct value. (See: Commissioner of Customs,
Mumbai Vs. J.D. Orgochem Limited5 and Commissioner of Customs, Calcutta Vs.
South India Television (P) Ltd.6) It is only when the transaction value under
Rule 4 is rejected, that by virtue of Rule 3(ii), the value shall be determined
by proceeding sequentially through Rule 5 to 8 of the 1988 Rules. (See:
Commissioner of Customs, Mumbai Vs. Bureau Veritas & Ors.7 and Eicher
Tractors Ltd. (supra)). Rule 5 allows for the transaction value to be computed on
the basis of identical goods imported into at the same time whereas Rule 6
provides for the computation of transaction value on the basis of the value of
similar goods imported into India at the same time as the subject goods. In the
absence of contemporaneous imports into India, the value is to be determined
under Rule 7 on the basis of a process of deduction contemplated therein. If
this is not possible, then recourse must be had to Rule 7-A, and if none of
these methods can be employed to compute the transaction value, Rule 8 provides
that the transaction value can be determined by using reasonable means consistent
with the principles and general provisions of these Rules and sub-section (1)
of Section 14 of the Act and on the basis of data available in India.
16. In Varsha Plastics
Private Limited (supra), this Court while dealing with a similar situation
where the importer had mis declared in terms of value, description and quality
of the imported goods, had held that:
"It has to be
kept in mind that once the nature of goods has been mis declared, the value
declared on the imported goods becomes unacceptable. It does not in any way
affect the legal position that the burden is on the Customs Authorities to establish
the case of mis declaration of goods or valuation or that the declared price
did not reflect the true transaction value."
17. Similarly, in
Collector of Customs, Calcutta Vs. Sanjay Chandiram8, a three judge bench of
this Court observed that:
"These rules
are based on the assumption that the price actually paid or payable for the
goods has been genuinely disclosed by the importer. But, if the certificates of
origin of the goods have been found to be false, the value declared in the
invoices cannot be accepted as genuine."
18. It is evident from a
bare reading of the impugned order that having regard to the factual scenario
emerging from the record, the Tribunal has failed to apply the procedure
envisaged in Section 14(1) of the Act read with 1988 Rules for determining the
value of the imported goods. Having carefully perused the Tribunal's order, in
particular the above-extracted paragraph, we are convinced that the finding of
the Tribunal in para 6 (supra) of the impugned order is clearly perverse and
cannot be sustained, particularly in light of the fact that the information
collected by the revenue from the market, veracity whereof was not questioned
by the respondent, has also not been examined by the Tribunal. Importantly, the
Tribunal has also overlooked the statement made by the respondent on 13th
September 2002 under Section 108 of the Act, whereby he admitted that there was
difference between the items declared, and the items actually seized by the
Customs authorities, and that the value arrived at after market enquiries was
acceptable to him. The said statement was not contested by the respondent
either before the Commissioner or the Tribunal.
19. In light of the
foregoing discussion, we are of the opinion that the Tribunal needs to
re-examine the entire matter afresh, particularly in relation to the manner of
valuation, redemption fine and penalty. Consequently, the appeal is allowed,
and the matter is remitted back to the Tribunal for fresh consideration in
accordance with law after affording proper opportunity of hearing to both the
parties.
20. There will be no
order as to costs.
...........................................J.(D.K.
JAIN)
............................................J.
(T.S. THAKUR)
NEW
DELHI;
OCTOBER
29, 2010.
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