Sony Impex v. Commissioner Of Central Excise, Customs

[Order per : S.S. Sekhon, Member (T)]. - (a) In May, 2003 the appellant imported a consignment of photo copier parts through the Kolkata Port. The appellant filed a Bill of Entry dated May 12, 2003 for assessment of the said goods and thereafter clearance thereof upon payment of duty as assessed.

(b) However on the ground that the goods were misdeclared and under- valued the officers of the Directorate of Revenue Intelligences, Kolkata Zonal Unit (“DRI”) initiated an investigation and at its behest the concerned Customs Authorities passed an order for warehousing of the said goods with direction for examination thereof in the presence of the officers of the DRI.

(c) The investigation of the DRT led to issue of a show cause notice dated December 3, 2003 and, upon reply thereto being filed by the appellants the Commissioner of Customs passed the Order-in-Original on April 19, 2004 classifying the subject goods in the manner directed in the said order and increased the CIF value thereof as declared by the appellant to Rs. 37,87,479.64. The Commissioner also ordered confiscation of the goods under Section 111(m) of the Act, but allowed redemption thereof upon payment of a fine of Rs. 9 lakhs. A penalty of Rs. 2 lakhs upon the appellant under Section 112(a) of the Act was also imposed.

1.2 (a) Being aggrieved by the said order dated April 19, 2004 of the Commissioner the appellant, inter alia, preferred an appeal being Appeal No. CDM 108/2004, before this Tribunal.

(b) By an order number S-331/KOL/2004 dated July 1, 2004 this Tribunal was disposed of the stay petition filed by the appellant by directing the appellant to deposit Rs. 5 lakhs within a period of four weeks and penalty shall remain dispensed, thereafter this Hon’ble Tribunal by an Order No. A-799/KOL/04 dated November 8, 2004 [ (Tri. - Kolkata)] recording several infirmities of the said order dated April 19, 2004 of the Commissioner, held that the matter required fresh consideration by the Adjudicating Authority and, accordingly, set aside the impugned order, remanded the matter to the Commissioner for de novo adjudication in accordance with law.

(c) Pursuant to the direction of this Hon’ble Tribunal the Commissioner held a de novo adjudication proceedings, on June 16, 2005, the Commissioner passed an Order-in-Original No. KOL/CUS/PORT/85/05 dated June 16, 2005 (hereinafter referred to as the “said order”) wherein he not only confirmed the increased valuation of the said goods as contained in the earlier order dated April 19, 2004 and the classification of the subject goods as contained therein and confiscated the said goods under Section 111(m) of the Act. The Commissioner however, allowed redemption of the said goods but increased the redemption fine from Rs. 9 Lakhs to Rs. 10 Lakhs and the penalty from Rs. 2 lakhs to Rs. 7.50 lakhs under Section 112 (a) of the Act.

1.3 (a) Challenging the validity and legality of the said order dated June 21, 2005 of the Commissioner, the appellant filed an application under Article 226 of the Constitution of India before the Hon’ble Calcutta High Court, being W.P. No. 1678 of 2005 [Manish Chelani v. Union of India & Anr]. The said writ petition was disposed of by the Hon’ble Calcutta High Court by an order dated August 24, 2005. In view of the appellant not availing the alternative remedy available under the statute before approaching the High Court, the Hon’ble Calcutta High Court was pleased not to entertain the writ application. The Hon’ble High Court, however, was pleased to grant liberty to the appellant to challenge the said order dated June 21, 2005 before this Hon’ble Tribunal. This Hon’ble Tribunal was also granted liberty by the Hon’ble High Court to consider the issue relating to provisional release of the goods in question in accordance with the laws in the event an appropriate application therefore was filed on behalf of the appellant before this Hon’ble Tribunal, within a period stated in the said order.

(b) Thereafter, the appellant preferred the instant appeal against the said order, before this Hon’ble Tribunal, along with a stay application, which were registered as Appeal Nos. CDM 99/05 and SP 590/05 respectively.

(c) On a Miscellaneous Application, MA 419/05 on September 5, 2005, this Tribunal passed an order, upon hearing this order, so far as the appellant is aware of, has not been challenged by anybody before any superior court and, as such, has become final. In paragraph 3 of the said order it was observed by this Tribunal as follows :-

“We have heard both sides. We find that in this case, there was no application from the assessee for provisional release before the Revenue. The same should be produced before the Bench. As regards the Commissioner's observation on the Order passed by the CESTAT we are constrained to observe that the Commissioner does not know the provisions of law. It has been held by various Courts that the Orders of the Tribunal are binding on all Revenue Officers and the Assessee unless set aside by the superior courts, If the Commissioner was not agreeable with the Remand Order passed by this Tribunal with certain directions, he should have gone to appeal before the Higher Courts. But he had no power to sit over on judgment upon the Tribunal’s decision. A copy of this Order be sent to the Chairman, C.B.E.C., New Delhi for further action as deemed fit.”

This Miscellaneous Application thereafter came up for hearing again on September 27, 2005 when by an Order No. M-387/KOL/05 dated September 27, 2005, this Hon’ble Tribunal rejected the said application on the ground that the final order having been passed by the Commissioner, provisional release of the said goods under Section 18 of the Act was impermissible in law. The Stay Petition being SP 590/02 came up for hearing before this Hon’ble Tribunal on January 6, 2006 when after hearing the counsel on behalf of the parties, this Tribunal was pleased to record the fact of the earlier pre-deposit of Rs. 5 lakhs and disposed with the requirement of any further sum towards penalty imposed by the impugned order of the Commissioner till the disposal of the appeal.

2.1 We have heard and considered the matter and it is found :-

(a) A perusal of the order impugned shows that instead of complying with the direction contained in the order dated November 8, 2004 of this Tribunal, the Commissioner has purported to sit in appeal over the decision of this Tribunal and has in the said order arrived at findings determining faults with the decision of this Tribunal, which he had no right, authority, jurisdiction to do. The Commissioner fail to appreciate that no appeal nor challenge in any form whatsoever being there to the order of Tribunal before any higher forum by any of the parties, the said order dated November 8, 2004 had become final and binding on the parties. As a matter of fact, both the appellant and the respondent Customs Authorities have acted in terms of the direction of remand contained in the said order dated November 8, 2004 and de novo adjudication proceedings were held in terms thereof. It was, therefore, incumbent upon the Commissioner to, accept the findings contained in the said order dated November 8, 2004, including in paragraph 6 thereof and decide the matter afresh upon due consideration of the contentions, submissions made and the evidences placed before him, including the particulars of contemporaneous imports submitted, during the course of personal hearing which contained imports of identical and similar goods, including of ‘Katun’' brand. This shows that instead or doing so, the Commissioner has purported to rely upon and Commissioner which was set aside by this Tribunal. This by itself has rendered the said order illegal, invalid and bad ab initio.

(b) The Commissioner has erred in repeating alleged violation of the Public Notice No. 12/2002 dated February 27, 2002 in order to come to a finding of misdeclaration. Such reasoning was rejected by this Hon’ble Tribunal since the said Public Notices are issued only as and by way of directives for avoiding any hindrances in the assessment of the bill of Entry by the Appraising Group and for smooth and speedy clearance of the imported goods and the said Notice No. 112/2002 dated February 27, 2002 does not warrant for any penal consequences in default following is not mandatory.

(c) The Commissioner’s rejection of the invoice for allegedly having no full particulars, make etc., fails to appreciate that the Department during examination of the goods has reported that the goods were as per invoice. If the particulars were not sufficient, as alleged, how could the Department’s own officer could certify the same?

(d) Provisions of Section 17 of the Customs Act, 1962 stipulate, inter alia, that the proper officer should assess the goods to duty on the basis of statements made, in the entry, i.e. Bill of Entry, the documents produced and the information furnished and obtained. In the instant case, the appellant filed the Bill of Entry with documents, the Department examined the goods and particulars necessary for assessment were on record. In such a situation, the Assessment based on contemporaneous import, already supplied to the Department and which should be with them cannot be avoided. In such an event, there can be no allegation or finding of omission and/or suppression as wrongly held in the said order.

(e) The reliance upon the price list and/or quotation of “Katun” procured by DRI to concluding mis declaration of the value on the basis thereof cannot be upheld. It is settled law that, the said price list/quotation cannot be relied upon for the purposes of re determination of value. The re-adjudication of the case was to be based on the documents produced, submissions made and evidences disclosed, during the course of hearing and the finding of this Tribunal in the order dated November 8, 2004. From and the settled law it is seen from the said order that the Commissioner has purported to adopt deductive value method based on alleged retail prices in the local market and purported price list of ‘Katun’ , allegedly procured by DRI, in determining the assessable value of the imported goods. No evidence of any contemporaneous import of such goods in support of the said price/value has been disclosed in the said order. It is, therefore, apparent that there is no corroborative evidence of contemporaneous import supporting the misconceived and baseless assessable value of the subject goods determined by the said order. In this respect reliance is placed upon the decisions of this Tribunal in the case of Jindal Strips Ltd. v. Commissioner of Customs, (T) and Prasad Enterprises v. Commissioner of Customs, (T) and it is now settled by decisions of the Hon’ble Supreme Court that assessable value arrived at by taking into consideration local market price is not inconsonance with the Customs Valuation Rules, and as such, cannot form the basis of determination of assessable value of imported goods under the Act. In this respect reliance is well placed upon, decision of this Tribunal in Surya Products v. Collector of Customs, (T). As such, the determination of assessable value in the said order, allegedly based on deductive value method taking retail market price being impermissible in law, is invalid and bad on this ground also.

(f) The Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, (S.C.) has clearly held that neither Section 14(1) nor the Valuation Rules allow determination of the ordinary international value of the imported goods on the basis of date other than the price actually paid for the goods. There is no allegation nor finding that anything more than the price declared of the subject imported goods have been paid in the instant case. Hence, transaction value as declared, cannot be rejected and the Commissioner has erred in law in doing so. The onus to establish undervaluation of the goods, which was and is on the Customs Authorities, and shifted to the appellant, by methods known to law and in a satisfactory manner, as held by the Supreme Court in Sounds-N-Images v. Collector of Customs, (S.C.), cannot be said to have been satisfied in the instant case. Hence there is no justifiable legal basis or reason whatsoever not to accept the Transaction Value of the said goods declared by the appellant and determine the assessable value thereof on this basis.

(g) In this view Commissioner has erred in holding that the case is a case of smuggling by mis declaration of almost everything and that all the circumstances of the case pointed to that direction. No basis, material or any cogent evidence or reasoning has been disclosed, as none exists, in support of this erroneous and mischievous finding. On the contrary, evidence on record clearly established that the goods was found to be correct during the course of examination and the prices of contemporaneous import submitted by the appellant at the time of hearing, were more or less even in the show cause notice. The Commissioner has therefore, traversed beyond the show cause notice, which also has rendered the said order illegal, arbitrary and bad in law.

(h) The Commissioner's finding that the appellant did not furnish the details of quantity to records is to be to facts on record. A pursuant of the invoice and packing list contains the same and further, the Brand and make of the goods in which the items were meant to be used had also been furnished by the appellants, the goods have been examined in detail, by the officer of DRI When OEM Part numbers etc. of the items were found as is evident from the averments made in para 4 at page 3 of the said order itself. Thus, the purported finding in the said order that the appellant did not give OEM Part number and as such the invoice value was not acceptable is wholly erroneous, perverse and mala fide and such orders are not sustainable.

(i) The Commissioner also erred in holding that the goods were found to be misdeclared. The examination report endorsement that the goods' “Description found correct as per invoice and P/list” clearly demonstrates the untenability of this purported finding. As such, the purported finding the subject goods were liable to be confiscated under Section 111(m) of the Act is also incorrect, invalid and bad.

(j) In the order, the Commissioner while finding faults with this Tribunal’s findings as contained in the said order dated November 8, 2004, that the required data for determining the correctness of the value of the said goods was submitted by the appellant, has purported to observe and hold that the data that was submitted by the appellant did not have brand name etc. and correct details of the subject goods were available only upon the examination thereof, since, the appellant did not co-operate. The ex-finding would appear from the show cause notice dated December 3, 2003 itself. A perusal of paragraph 6 of the show cause notice and the char 5 contained therein would demonstrate the patently incorrectness of such wild allegations made in the said order.

(k) The finding of the Commissioner regarding Rule 10A(2), is also untenable and unsustainable. The show cause notice had been issued under Section  124 of the Act and not under Rule  10A(2) of the Customs Valuation Rules, 1988. Further, there was no personal hearing before coming to any final decision under Rule 10A(1) of the said Rules. The said Rule Stipulates that the Department shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision. There has been compliance with the said mandatory requirement of law.

(l) The Commissioner has erred in ordering to confiscate the imported goods under Section 111(m) of the Act. For the reasons as arrived as no condition precedent for confiscating the said goods under Section 111 of the Act, including Section 111(m) thereof, has not and cannot be said to have been satisfied. The direction allowing redemption of the said goods upon payment of a fine of Rs. 10 lakhs is therefore untenable and unsustainable. Therefore, no penalty upon the appellant under Section 112(a) of the Act is called. The penalty imposed by the said order is thus, illegal, invalid and bad.

(m) It is now well settled that in remand proceeding there cannot be any enhancement in either penalty or the redemption fine imposed in a particular case. In this respect reliance is placed upon, inter alia, the

(i)      HCL Ltd. v. Collector of Customs, (T). This decision was affirmed by the Supreme Court - (S.C.).

(ii)    Maestro Motors Ltd. v. Commissioner of Central Excise, (T).

(iii)   HCL Infosystem Ltd. v. Commissioner of Central Excise, (T).

In the instant case however, the Commissioner has wrongfully and illegally purported to increase in the said order the redemption fine to Rs. 10 Lakhs from Rs. 9 lakhs (passed in the earlier order which was set aside by this Hon’ble Tribunal on appeal by the appellant). Similarly, the penalty imposed has been increased to Rs. 7,50,000/- from Rs. 2 lakhs. The said purported redemption fine and penalty are, therefore, on this ground also untenable and unsustainable.

3.1 In the premises aforesaid, the appeal is allowed, the impugned order be set aside and the respondent Customs Authorities directed to forthwith assess the BE on the declared value and classification thereof, with consequential relief to the appellant.

(Pronounced in Court on 4-7-2006)