Surjeet Singh Chhabra v. Union Of India

Per : Shri M. V. Ravindran, Member (Judicial) These two appeals are directed against the order-in-original no. CAO/10/CAC/CC I/A.H. dated 04.02.2003.

2. The relevant facts that arise for consideration are that Appellant M/s Photokina is importer of unexposed sensitized film/ indirect photo stencil films. The appellant was importing these goods from M/s Autotype International. On an information that the appellant was indulging in under invoicing the value of imported goods, documents and records were retrieved from the appellant i.e. Photokina and scrutinized. On scrutiny it was noticed by the revenue authorities that the appellant had imported unexposed sensitized film in jumbo rolls and after subjecting the goods to cutting and packing, were selling the same film at a higher price in the local market. Investigations were conducted abroad and statements of various persons were recorded. The authorities also seized the goods under panchanama of 26.06.1997, which were later released on submission of bond with bank guarantee. On conclusion of investigations, a show cause notice was issued proposing as under: "The show cause notice dated 30.05.2001 was issued asking that as to why- (a) the declared value should not be rejected and the same enhanced to US$ 1.80 /sq.m for M/s. Autotype product and US$1.50/Sq.m for M/s. H & H Exports; (b) Differential duty of Rs.1,21,64,904/- should not be recovered from the following noticees under the proviso to Section 28(1) of the Customs Act. Sr.No. Noticees CIF Value Differential Duty M/s. Photokina 41,57,884/- 73,68,417/- M/s. Deal Fine Exim 19,70,324/- 24,37,492/- M/s. Gold Coin Impex 16,78,088/- 23,58,995/- (c) The goods should not be confiscated under Section 111(d), (m) & (o) of the Customs Act, 1962. (d) Penalties on M/s. Photokina, M/s. Deal Fine Exim & M/s. Gold Coin Impex and their proprietor should not be imposed under Section 112 & 114A of the Customs act, 1962. (e) Interest on the differential duty should not be recovered under Section 28AA of the Customs Act, 1962. (f) The goods seized under panchanama dated 20.061997 valued at Rs. 11,20,150/- CIF, should not confiscated under Section 111 (d), (m) & (o) of the Customs act, 1962. (g) Rs.40 lakhs, Rs.10 lakhs and Rs. 14,30,250/- (taken over and later voluntarily asked to be adjusted towards the Customs duty liabilities of Shri Jagdish Sheth) should not be towards duty liabilities and penalties

3. Appellant Photokina contested the show cause notice on various grounds, mainly on the ground that the valuation proposed by the authorities is erroneous as the value is a transaction value, the demand of the duty for the period August 1993 to July 1996 is time barred as these bills of entries were finally assessed and since the demand of the duty is not sustainable the question of imposition of penalty does not arise. The adjudicating authority after granting a personal hearing and taking in to consideration all the submissions held as under : "The ratio of the law, laid down in none of the cases referred to by the noticee M/s. Photokina is of any avail to them keeping in view their conduct, facts and circumstances of the case. The noticee contended that the supplier in the subject case being the manufacturer, the manfuacturer's invoice is the best piece of evidence for the prupose of valuation as held by the Tribunal in case of M/s. Sai Impex and M/s. Indrejeet Singh Baiva. The said case laws are distinguishable on facts as well as in law. The evidences of the manufacturer price revealed by the investigation conducted by Indian High Commission in London and the price list of the manufacturers are in conflict with the invoices raised by the manufacturer in this case. Therefore, the said case laws have no application in the subject case. In regard to judgement cited in case of M/s. Ajay Exports and M/s. Amruta Hotesl (P) Ltd., I find that an order under Section 47 of the Customs act, 1962 can be challenged or set aside if fraud or deliberate suppressions is involved as held by the Apex Court in the case of M/s. Jai Hind Shudh Vanaspati - 1996 (86) ELT 460 (SC). The reliance placed on the judgement of M/s. Dabo India Ltd. is not applicable for the subject case as the duty demanded in this case is legally due to the government and the payments made before the show cause notice are voluntary in nature. In the light of the above discussions and findings, I, (a) order that the declared value of US$ 400 per roll is to be enhanced to US$ 1.80/Sq.m. in respect of goods imported from M/s. Autotype Internationa and US$ 1.50 Sq.m in respect of goods imported form M/s. H & H Exports Inc. USA (M/s Chromaline, USA). (b) Confirm the demand for Rs. 8,72,129/- out of a total demand of Rs. 1,21,64,904/- under section 28(2) of the Customs Act, 1962, which should be paid forthwith. (c) Order that voluntary payment of Rs. 64,30,250/- (which includes cas of Rs. 14,30,250/- seized by the DRI) already deposited towards liability of Customs Duty is ordered adjusted against the balance amount of total demand i.e. Rs. 1.12,92,775/- (Rs. 1,21,64,904/- (-) Rs.8.72,129/- as a duty demanded is otherwise due to the Government but for demand being time barred. (d) Hold goods of value on which differential duty incidence is Rs.8.72,129/- are liable for confiscation under section 111 (m) of the Customs Act, 1962. Since the goods are not available for confiscation, I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakhs) on M/s. Photokina under Section 112 (2) of the Customs Act, 1962. (e) hold goods of CIF value Rs. 11,20,150/- which were released against Bond are liable for confiscation under Section 111(m) of Customs Act, 1962. I impose redemption fine of Rs.10,00,000/- (Rupees Ten Lakhs) in terms of bond executed. (f) Further I impose a penalty of Rs. 40,00,000/- (Rupees Forty Lakhs ) on M/s. Photokina under Section 112(a) of the Customs Act, 1962. I also impose penalty of Rs. 5,00,000/- (Rupees Five Lakhs) on each of M/s. Gold Coin Impex Ahmedabad and M/s. Deal Fine Exim Ahmedabad. (g) Order interest to be recovered @ 24% p.a. on Rs. 8,72,129/- (being the duty confirmed under Section 28(2) of the Customs Act, 1962) in terms of Section 28AB of the Customs Act, 1962. (h) I further order that the duty liability and penal liability adjudge above be recovered from Shri Jagdish M. Sheth, if the said firms fail to pay the amount forthwith". These appeals are filed against the above order.

4. The learned advocate appearing for the appellants submits that the order is not sustainable on various grounds. It was submitted that the impugned order is erroneous on the face of fact that the adjudicating authority has not considered all the submissions made by the appellant before him. It was submitted that the order of confiscation of the seized goods is ex-facie wrong as there was no allegation as to any kind of mis-declaration. It was submitted that the goods, which were confiscated, were seized and again the very same goods were held to be liable for confiscation on the ground that the value has been mis-declared. It was submitted that the enhancement of value by the adjudicating authority is not correct as the reliance placed on the investigation made abroad with the help of High commission of India does not prove any under invoicing, on the contrary the said report clearly indicate that the supplier Autotype International has policy of producing goods country specific. It was submitted the goods, which were imported by the appellant, were not mentioned in the price lists annexed with the report. It is submitted that the price list of the supplier was for the pack quantities and the appellant had imported jumbo rolls. It is his submission that the reliance placed on the invoice by the adjudicating authority is for the pack quantity and not for the same goods imported by the appellants. It is his submission that the adjudicating authority has wrongly rejected the transaction value without any basis and has also without any evidence held that the supplier and the appellant are related persons for rejection of transaction value. It was also submitted that the adjudicating authority has not brought any evidence on record that appellant had remitted amount over and above the value of the invoice value. It was submitted that Gold Coin Impex and Deal Fine Exim are different importers and recovering the amount on their account from the appellant is erroneous. It is his submission that the adjudicating authority has erred in appropriating the amount paid by the appellant during the course of investigation. It is his submission that once it is held that the demand is time barred then the amount cannot be recovered illegally as penalty. As regards the cash seized from the appellant it is his submission that the adjudicating authority has not given any findings or reasons as to why the same is also sought to be appropriated. He draws our attention to the relied upon documents attached with the show cause notice and submits that the revenue has relied upon a price list which is specially for sale of the said goods to India, which would support the claim of the appellant that the price of foreign supplier is country specific. He relied upon various case laws, which are listed as under:

(i) Mahavir Spinning Mills Ltd. Vs. Collector of Customs [1992 (61) E.L.T. 730 (Tribunal)]

(ii) Rajendra Sanghvi Vs. Commissioner of Customs, Mumbai [2001 (130) E.L.T. 638 (Tri.Mumbai)]

(iii) Central Pulp Mills Ltd. Vs. Commissioner of Central Excise,Baroda. [2001 (130) ELT 642 (Tri.Del.)]

(iv) Dabur India Ltd. Vs. State of Uttar Pradesh [1990 (49) E.L.T. 3 (S.C.)]

(v) Agarwal Distributors Pvt. Ltd. Vs. Commissioner of Cus. New Delhi [2000(116) E.L.T. 613 (Tribunal)]

(vi) Shree Balaji Trade Overseas Vs. Commissioner of Cus.Delhi(Gen.)] [2003 (162) E.L.T. 659 (Tri.Del.)]

(vii) Trichy Steel Rolling Mills Ltd. Vs. Collector of C.Excise, Trichy [1997 (94) E.L.T. 158 (Tribunal)]

(viii) Cadila Laboratories Ltd. Vs. Collector of Customs, Bombay. [1997 (94) E.L.T. 160 (Tribunal)]

(ix) Maruti Udyog Limited Vs. Commissioner of Customs, Kandla [2001 (132) E.L.T. 340 (Tri.Mumbai)]

(x) Commr. Of Cus. Bangalore Vs. Motorola India Pvt. Ltd.

5. The learned SDR on the other hand submits that the appellant has not made out a case in their favor. It is his submission that the proprietor in his statement-dated 1.8.96 had admitted that there was under valuation of the imported goods. It is his submission that the statement of the proprietor before the authorities is a confession and had given the details in the statement, which are, only known to him. It is submitted that the so-called retraction of the statement is not at all retraction, as the letter of retraction-dated 15.10.1997, clearly informs the authorities that the proprietor has retracted the statement-dated 6.10.1997. It is his submission that the retraction, which is belated, is of no help or support to the appellant. As regards valuation it is his submission that the investigating authorities have brought on record that the appellant had imported the goods in jumbo rolls valued as per roll, while the supplier always invoiced the goods as per/sq.mtr. It is his submission that the appropriation of the amount seized and deposited by the appellant is correct as the duty is payable even if it is time barred. It was submitted that appellant had never declared the correct unit of measurement with intention to avoid the correct duty payment. It is his submission that the duty demanded from the appellant is correct hence even if the demand is technically time barred the amount deposited by the appellant is duty due to the government and hence the adjudicating authority has correctly appropriated the same. Reiterating the findings of the adjudicating authority he relies upon the following decisions:

[I] Noor Salman Makani Vs. Union of India [1994-AIR (SC)-0-575 1994-SCC-1-381] [ii] Illias Vs. Collector of Customs, Madras [1970-AIR (SC)-0-1065] [iii] Orient Paper Mills, Brajrajnagar Vs. Collector of Central Excise, Calcutta [1983 (14) E.L.T.1813 (CEGAT)]

6. In rejoinder the learned advocate submits that the retraction of statement-dated 6.10.1997 was retraction of earlier statements as the said statement dated 6.10.1997 starts with confirmation of earlier statements. He submits that there are no findings as to the fact that there was country specific valuation for the goods by the supplier.

7. Considered the submissions made at length by both sides and perused the records. It is seen from records that the show cause notice as issued to the appellant is for the period August 1993 to July 1996. All the bills of entries for the period were assessed finally. The main charge against the appellant is that they have under valued the goods imported by them by mis-declaring the unit of measurement. It seen from records that appellant was importing the goods on the unit measurement of rolls. It is also undisputed that supplier M/s Autotype International is supplying the same goods in the international market not in jumbo rolls but in smaller rolls. The question as to why M/s Autotype International was supplying to the appellant only in roll form is answered by the confessional statement of the proprietor in his statement dated 1st August 1996 and statements dated 21st and 27th June 1997. Statement dated 1st August 1996 was recorded on the initiation of the investigations and on retrieval of records from the appellant. In his statement dated 01.08.1996 (at internal page 7) the proprietor of the appellant has confessed as under : "I accept the calculation above shows that the price of fixed tax should be about 2.76 US$ per cm2. However, I state that actual price of HNN item is US$ 1.80 per cm2 for supply to India from Singhapur by M/s. Autotype India Ltd. The various invoices raised for this item showed the price a US$ 0.80 per sq. m. and which was not reflecting the actual cost. The price was shown like this because of understanding between my co. and M/s.Autotype. As per this tacit understanding between us M/s Autotype would issue an invoice for US$ 0.80 per sq. cm2 only and remaining US$ per cm2 was not declared to save custom duty. Similarly although the calculation about for Chromacine shows the cost to be about US$ 1.91 per sq. m. but I hereby state that the actual cost of this item is US$ 1.5 only. The price shown on invoices was only 0.80 $ per cm2 for saving custom duty". It can be seen from the above-reproduced portion of the statement that the proprietor of appellant's firm had categorically admitted that the billing of the invoices in unit measurement of jumbo rolls was done with a tacit understanding to discharge less customs duty. When the investigating officers recorded subsequent statements on 5th August 1996 and again on 21st and 27th June 1997 the proprietor never retracted the statement dated 1st August 1996. This would indicate that the statement recorded on 1St August 1996 and subsequent statements recorded were true. It is also seen from the statements that proprietor has recorded the information, which were only known to him and also in his own handwriting. It is also seen from the statement recorded on 6.10.1997, the proprietor had confirmed the statements made earlier but has not categorically stated in the letter that he is retracting the statements made earlier. This would mean, the proprietor has retracted the statement of 6.10.1997 and all other statements made earlier are to be accepted as admission. This our view is fortified by the judgment of the Hon,ble Supreme Court in the case of Surjeet Singh Chhabra Vs Union of India as reported at 1997 (89) E.L.T. 646 (S.C.).The so-called retraction of the statement-dated 6.10.1997 was made as an after thought. It is to be noted that the proprietor did not feel it necessary to retract the statements dated 1st and 5th August 1996, 21st June 1997 and 27th June 1997 earlier. It is unexplained why it dawned on him to only retract the statement- dated 6.10.1997. Be that as it may, it is seen that retraction of statement dated 6.10.1997 would in itself will not contradict the facts as the statement of the representative of the supplier Autotype International also confirms the special arrangement entered in to by the appellant firm and supplier for the supplies made specially to current appellant for supply of consignment in jumbo rolls. As such we find that the allegation of under valuation by adopting such novel way is established. As such the duty liability of the bills of entry No. 3367 dated 30.05.96,1580 dt. is correct and does not require any interference.

8. As regards the allegation of the mis-declaration of the value of the goods in respect of the six bills of entry it is seen that the adjudicating authority has imposed a penalty of Rs.Ten lakhs on the appellant holding that the goods are liable for confiscation but since they are not available penalty has been imposed. Such penalty imposed on the appellant is in lieu of confiscation and the subsequent redemption fine. We find that the consignments imported under the very same bills of entries were seized by the authorities and later released provisionally on execution of bond. The adjudicating authority has imposed a separate redemption fine of Rs. Ten lakhs on this misdemeanor. We are of the considered view that penalty in lieu of redemption fine and redemption fine cannot be imposed on the very same goods twice over as the physical seizure of the goods were for mis-declaration only. If that be so, the penalty imposed in lieu of redemption fine is liable to be set aside and we do so. As regards the redemption fine imposed on the seized goods and later released provisionally, the amount of fine imposed is very excessive. To meet the ends of justice, the redemption fine imposed is reduced to Rs.Two lakhs from Rs. Ten lakhs.

9. As regards the penalty imposed on the firm Photokina we find that it is totally dis-proportionate to the duty confirmed. As such the penalty imposed on the appellant firm is reduced to Rs. Eight lakhs Seventy Five Thousand only. We find that the adjudicating authority has directed to recover the amount of penalties imposed on other firms, from Shri Jagdish M. Sheth, without even recording how he has reached to conclusion. It is seen from records that there is no evidence that the current appellant was engaged in during the business with those firms. Hence this portion of order is also set aside. In the fine all the penalties imposed on the appellants are reduced to as indicated hereinabove.

10. Before parting with the appeal another issue which needs to be addressed is whether the amount of Rs. 50.0 lacs deposited by the appellant during the course of investigation and an amount of Rs.14,30,250/- recovered during the raid, totaling to Rs.64,30,250/- having ordered to be adjusted against the duty liability for the period August 1993 to July 1996 is correct or otherwise. We find from the order-in-original that the adjudicating authority has adjusted the said amount as duty otherwise due to the Government but for demand being time barred. We are unable to agree to this proposition of law on the fact of the case that the adjudicating authority has come to the conclusion that the duty demand for the period August 1993 to July 1996 is hopelessly time barred. If the duty demand is totally time barred it cannot be enforced in any manner. It is also seen from records that the said findings of adjudicating authority has attained finality in as much the revenue is not in appeal against the said findings. It is also surprising to note that the first statement of the proprietor of the appellant was recorded in August 1996, and it took the authorities almost five years to issue a show cause notice. There seems to be no plausible reason, for such belated issuance of show cause notice as it is seen that revenue has not filed any appeal against the said findings. As such we do not find any force in the arguments of the learned SDR that the amount, which has been paid by the appellant during the pendency of the investigation, is a payment of duty otherwise due and having been paid voluntarily the same is liable to be adjusted. Hon'ble High Court of Madras in the case of Pilmen Agents (Private) Ltd., Vs Collector of Customs, Madras as reported at 2000 (126) E.L.T. 79 (Mad) had an identical issue before them, wherein their Lordship held as under: "Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. There can be no dispute that the duty levied by the customs authorities is a tax, and therefore, can only be levied by authority of law. Section 12 of the Customs act, 1962 (Act 50 of 1962), other law for the time being in force, on goods imported provides that duets of customs shall be levied at such rates as may be specified under the Indian Tariff Act, 1934, or any into, or exported from India. It is not disputed that the goods cleared by the petitioners on 29.7.1963, are liable to duty and can be cleared after payment of duty. But by some mistake, the duty had not been levied on the goods. Section 28(i) of the Act provides that when any duty has not been levied, the proper office may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied, requiring him to show cause hwy he should not pay the amount specified in the notice. The expression 'relevant date", according to section 28(3) is the date on which the proper officer makes an order for the clearance of the goods. We are not concerned with the proviso to section 28(1) of the Act. Section 28(2) provides that the Assistant Collector, after considering the representation made" by the person on whom notice is served under sub-section (1) shall determine the amount of duty due from such person and thereupon such person shall pay the amount so determined. A reading of section 28 makes it clear that in the case of non-levy, the officer must within six months from the relevant date, which is the date on which the officer made an order for the clearance of the goods, serve a notice on the person chargeable with the duty calling upon him to show cause why he should not pay the amount. After service of the notice under sub-section 92) he must consider the representation made by the person to whom notice is issued and then determine the amount and call upon the person to pay the amount. Action under section 28 could not have been taken, and the Asst. Collector was clearly aware of it, for in his letter dated 25th April 1964, he had mentioned that a demand under Section 28 (i) is time-barred, but a payment if made voluntarily, would be accepted. As proceedings could not be taken under Section 28 no notice required under that section was given or the procedure prescribed under Sections 28(1) and (2) followed. Within 30 years from the date on which the duty became leviable. This contention cannot be accepted fro the Act itself, when providing for the levy of the duty, also specifies the manner in which it can be collected. The Customs Act is a code which defines the procedure and will have to be followed for collecting the duty which had not been levied and the procedure prescribed under Section 28 of the Act will have to be followed. In order to take advantage of section 28, the Asstt. Collector should give notice to the person concerned within six months form the relevant date, and if he fails to do so, he cannot fall back on the general law and try to collect the amount. It is futile for him to contend that even though the remedy under Section 28 is barred, he can avail himself of the general law and proceed against the petitioners".

11. The judgment of the Hon'ble High Court squarely covers this issue in favour of appellant. The reliance placed by the learned SDR in the case of Orient Paper Mills (1983 (14) E.L.T. 1813 (CEGAT) taking a view as proposed by the adjudicating authority, is not a good law in view of the judgement of the Hon'ble High Court of Madras. Accordingly we hold that the amount deposited by the appellant during the pendency of the investigation and the amount recovered during the raid at the appellant's premises cannot be considered as the amount of duty as such payable, though hit by limitation. Accordingly, we set aside the order that directs for adjustments of the amount. Needless to say that the said amount has to be returned to the appellants, after adjusting the amount of duty and penalty upheld by us in this order.

12. Accordingly, the appeal, are disposed off as indicated in the above paragraphs. (T.K Jayaraman) Member (Technical) (M. V. Ravindran) Member (Judicial)