Agarvanshi Aluminium Ltd. v. Commr. of Cus. (I), Nhava Sheva

[Order per : Ashok Jindal, Member (J)]. - The appellants namely M/s. Agarvanshi Aluminium Ltd. (Importer) and Shri Bharat Bhushan Agarwal (Director of the Importer) and Ehsan A. Gadawala and Shri Purshottam Parolia (Indenter) have challenged the Order-in-Original No. 164/2009-CC(I) JNCH passed by the Commissioner of Customs (Import) dated 15-12-2009.

2. The brief facts of the case are that the importer imported aluminium scrap during the period July, 2004 to June, 2006 through various ports located at Nhava Sheva, Nagpur, Hyderabad, Kandla and Chennai. The total quantity of aluminium scrap imported was 3889.998 MTs and the value declared was Rs. 23,84,81,992/-. The DRI, which investigated the imports, came to the conclusion that the appellant had misdeclared the value of imports and the actual value of imports amounted to Rs. 28,40,85,648/- and accordingly issued a show cause notice dated 31-12-2007 demanding differential duty of Rs 1,40,76,571/-. This demand of duty was based on the evidence unearthed from the indenting agent’s premises involving differential duty of Rs. 48,80,774/-, contemporaneous value of imports involving duty of Rs. 42,06,213/- and on the basis of LME prices minus permissible discount involving a duty of Rs. 49,89,584/-. The case was adjudicated vide the impugned order and the learned Commissioner confirmed the duty demand of Rs. 1,40,76,571/- under Section 28 of the Customs Act, 1962, interest thereon under Section 28AB of the Act and imposed equivalent penalty on the importer under Section 114A of the Customs Act and imposed penalties of Rs. 1,00,00,000/- each on Shri Bharat Bhushan Agarwal, Partner of the importing firm and on Shri Purshottam Parolia, one of the indenting agents and a penalty of Rs. 5,00,000/- on Shri Ehsan Gadawala, another indenting agent. The importer, his partner and the two indenting agents are in appeal before us.

3. The ld. counsel for the appellant Shri S. Jaikumar submitted that the demands towards differential duty is based on computer printouts recovered from the premises of the indenting agent (Shri Purshottam Parolia) cannot be relied upon as per Section 138C of the Customs Act, 1962. As per the said provisions, the computer printouts can be taken as evidence only subject to fulfilling the terms and condition specified in the section and same has not been complied with in the instant case. To support this contention he relied upon the decision of Premier Instruments and Controls Ltd. - . He also submitted that during the course of investigation, panchnama was drawn. Panchnama was typed and thereafter item No. 103 added in handwriting, which shows the description that four computer units without any mouse, keyboard, monitor and other accessories i.e. peripherals is mentioned but the report of Directorate of Forensic Science, Gujarat State mentions that there were 5 CPUs. Therefore, the contents of panchnama were also doubtful. Accordingly, printouts cannot be relied upon and demand is not sustainable.

4. He further submitted that for the demand based on contemporaneous import, the value of imports which were found in the computer printouts and value of imports declared in the bills of entry are much higher than the value of the contemporaneous imports. As per provision of Customs Valuation Rules, lowest value has to be taken for arriving at the transaction value and if that is taken there is no undervaluation. As far as merits are concerned, it is further submitted that based on the publication of minerals and metal review, which is a publication and report on imports of aluminium scrap at various ports in India based on the import data provided by the department, a comparative data has been prepared in respect of the imports of the appellant. The worksheet clearly demonstrates that the value declared by the appellant is much more than the list of the value of contemporaneous imports. Therefore, the demand on the basis of contemporaneous imports is not sustainable.

5. With regard to the demand of differential duty on account of LME price, it is submitted that the price of the prime metal namely aluminium, the value of scrap cannot be arrived as their substance variation in the price of aluminium scrap for different variety of scrap.

6. For the differential duty demanded on the LME price for prime metal, it is also submitted that the valuation cannot be resorted to the same as the same pertains to the prime metal and in the instant case the appellants have imported the scrap only. To support this contention, he relied on the decision of Sonia Overseas Pvt. Ltd. v. CC - (Tri.-Del.).

7. He further submitted that the statement taken during the course of investigation cannot be relied as same has been retracted by the indenter and the retracted statement was shown to the Director of Shri Bharat Bhushan Agarwal without brining to his notice that this statement shown has been retracted. Therefore, it cannot be relied as it is not a true statement. He further submitted that as demands are not sustainable, therefore penalties cannot be imposed on the appellants.

8. On behalf of the indenters, Shri Anil Balani, and Shri J. Sanghvi, consultant appeared and submitted that the penalty has been imposed on them for aided and abetting in undervaluation of the scrap. As argued by Shri Jaikumar for the importer and its director, the statement which have been retracted during the course of investigation and the computer printout are not admissible document as per Section 138C of the Customs Act, 1962. Therefore, the allegation of aiding and abetting for undervaluation of the indenter is not sustainable. Accordingly, penalty is not sustainable at all.

9. On the other hand, ld. AR reiterates the finding of the adjudicating authority and also contended that demand has been confirmed on computer printout. It has been corroborated by the statement of indenting agent Shri Purshottam Parolia and Shri Bharat Bhushan Agarwal, partner of the importing firm. Therefore demand is sustainable. For contemporaneous imports, it is submitted that identical scrap was also imported from various ports and it could not be considered lowest of such value has been loaded for differential duty. He further submitted that discount was given on the LME price for the scrap also in the impugned order. Therefore, impugned order is to be upheld.

10. Heard the parties and considered their submissions in detail.

11. In this case demands have been confirmed against the importer on three counts -

(a)     on the basis of computer printout and statement of the indenter and the partner of the importer

(b)     On the basis of contemporaneous imports

(c)     On the basis of LME price.

We have seen the panchnama. In the list of the documents seized, initially the list of document typed was till Sr. No. 99, thereafter five items were added in hand written and Sr. No. 103 its mentioned that four computer units without any mouse, keyboard, monitor and other accessories i.e. peripherals is mentioned. In the panchnama, the description of the item i.e. make, model, serial no. of the CPU were not mentioned. Moreover, they are handwritten and other 99 items are typed one. Further we find that as per panchnama 4 CPUs were seized but as per the report of Directorate of Forensic Science, computers are found to be five in numbers and printouts are taken from these five CPUs which has been relied in the impugned order. Therefore veracity of the panchnama is doubtful. Further, we find that for computer printouts can be relied as per the provisions of Section 138C of the Customs Act, 1962 which is reproduced as under :

“Section 138C. Admissibility of micro films, facsimile copies of documents and computer printouts as documents and as evidence - (1) Notwithstanding anything contained in any other law for the time being in force, -

(a)     a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or

(b)     a facsimile copy of a document; or

(c)     a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a “computer printout”), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.

(2)     The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely :-

(a)     the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

(b)     during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;

(c)     throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and

(d)     the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities.

(3)     Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in Clause (a) of sub-section (2) was regularly performed by computers, whether -

(a)     by a combination of computers operating over that period; or

(b)     by different computers operating in succession over that period; or

(c)     by different combinations of computers operating in succession over that period; or

(d)     in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.

(4)     In any proceedings under this Act and the rules made thereunder where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, -

(a)     identifying the document containing the statement and describing the manner in which it was produced;

(b)     giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer;

(c)     dealing with any of the matters to which the conditions mentioned in sub-section (2) relate,

and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.

(5)     For the purposes of this section, -

(a)     information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;

(b)     whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;

(c)     a document shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.

Explanation. - For the purposes of this section, -

(a)     “computer” means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and

(b)     any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.”

12. From the above provisions, it is clear that for admissibility of computer printout there are certain conditions have been imposed in the said section. Admittedly condition 4C of the said section has not been complied with and in the case of Premier Instruments & Controls (supra) this Tribunal relied on the case of International Computer Ribbon Corporation - (Tri.-Chennai) wherein this Tribunal has held that “computer printout were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by the Tribunal that printouts were neither authenticated nor recovered under Mahazar. It was also found that the assessee in that case had disowned the printout and was not even confronted. The Tribunal rejected the printouts and the revenue’s finding of clandestine manufacture and clearance. Thereafter it was found that there is strong parallel between the instant case and the case cited. Nothing contained in the printout generated by the PC can be admitted as evidence for non-fulfilment of the statutory condition.” In this case also, we find that the parallel situation as to the decision of Premier Instruments & Controls (supra).

13. Therefore, the printout generated from the PC seized cannot be admitted into evidence for non-fulfilment of statutory condition of Section 138C of the Customs Act, 1962.

14. Further, we find that the statement recorded during the course of investigation from Shri Purshottam Parolia was retracted immediately but retraction was not shown to Shri Bharat Bhushan Agarwal, the partner of the importer and Shri Bharat Bhushan Agarwal admits that what is stated by Shri Purshottam Parolia is correct. If the statement of Shri Purshottam Parolia is retracted immediately (without showing retraction) it is presumed that Shri Bharat Bhushan Agarwal admitted the retracted statement. Therefore, demand is not sustainable on this account.

15. There is allegation against the appellant that they have paid the amount over and above the transaction value to their foreign supplier. From the records available before us, it is not ascertainable whether appellant has paid the amount over and above the transaction value to their foreign supplier and in the adjudication order, the ld. Commissioner has not discussed the same. This aspect is to be examined by the ld. adjudicating authority.

16. With regard to the demands confirmed on account of contemporaneous imports, the demand has been worked out without taking into consideration the provisions of Customs Valuation Rules for contemporary imports. The adjudicating authority considered the evidence retrieved from computer printout. As discussed hereinabove, the same is not admissible as per Section 138C of the Customs Act, 1962. Further, we find that the contemporaneous imports shown in the computer printout were related for redetermination of the assessable value which is not correct. Further, as per Rule 6 of the Customs Valuation Rules, if there are different contemporaneous price available for the same period for the same goods, the lowest value shall be considered. This issue has been dealt with Bharti Rubber - wherein this Tribunal as held as under :-

“In the instant case, the proposition in the show cause notice is that the value of the contemporaneous imports indicated a higher price. If that be so, that should have been the starting point for determination of value of the imported goods and not some other basis. Further even when we take the values of the contemporaneous imports, the lowest of such value has to be adopted as provided for in Rule 6 and not the highest. In the instant case no such thing has been done by the assessing officer.”

17. We also find that the demands have been confirmed on the basis of publication of mineral and metal review which is a publication and reports of imports of aluminium scrap on various ports in India based on the import data provided by the Customs Department, the appellant prepared a comparative chart in respect of the imports that has not been considered by the adjudicating authority. In fact the adjudicating authority has to consider the data of the contemporaneous imports of aluminium scrap on various ports as per the worksheet prepared by the appellant which has not been done in this case. Therefore, demand on account of contemporaneous imports is not sustainable.

18. Coming to the valuation based on the LME price is prime metal and admittedly in this case the appellant has imported the scrap and a discount has been provided to the appellant. For scrap the quantity of the scrap is imported that cannot be compared with the prime metal. As prime metal is of high quality, and if the scrap is processed to obtain the prime quality, there is some process cost but the discount given on the prime metal is without any basis and is only on presumption and assumption. Demand cannot be made on that. The similar issue was dealt with in Sonia Overseas Pvt. Ltd. v. Commissioner of Customs, Amritsar - (Tri.-Del.), wherein, while considering the valuation adopted for arriving at the value of Zinc Ash/skimming’s, the Tribunal have observed certain facts which are reproduced below :

(a)     There are evidences to show undervaluation of the impugned goods as seen from the fact that the prices declared remained more or less static, irrespective of increase in value of zinc in international market and the fact that in the case of few Bills of Entries undervaluation is proved by acceptable collateral evidence and is accepted by the Appellant.

(b)     Waste materials by its very nature cannot be of uniform standard and it is difficult to assess its value unless more information about the usable material and the form in which such usable material is present, in the waste are available.

(c)     While LME prices can be good indicator to detect undervaluation it cannot be a measure for undervaluation of commodities like zinc ash/skimming and zinc dross without taking into account other relevant factors.

(d)     The Department is not having test reports to show the zinc contents in each of the consignments and the content of metallic zinc in each of the consignment which are crucially required for assessing the value of the goods.

(e)     The suggestion to fix the value of zinc skimming equal to 65% of the value of zinc of prime quality quoted on LME is nearly absurd.

Further this Tribunal has also held that -

“After considering arguments on both sides we find that a demand based on the argument that the price of these goods should be fixed at 65% of LME price for zinc is not consistent with laws and common sense. This formula does not take into account the fact that the Appellants were not manufacturing prime metal zinc for which price is quoted on LME. It does not take into account any processing cost or profit margin. It does not take into account the actual contents of zinc in the impugned goods and the form in which such zinc is present. It is also seen that the statement recorded under Section 108 accepts undervaluation of a few consignments only and not all consignments.”

Therefore demand on the basis of LME price is also not sustainable.

19. We find that there is allegation against the appellant during the course of investigation they have paid over and above the transaction value to their foreign supplier and the same has not been considered by the adjudicating authority by way of independent evidence apart from the computer printout. Therefore, matter needs examination at the end of the adjudicating authority to examine the issue whether the appellant has paid any amount over and above the transaction value to their foreign supplier with independent evidence apart from computer printouts. Therefore, matter is remanded to the adjudicating authority for this limited purpose only.

20. Appeals are disposed of in the above terms. The adjudicating authority is directed to pass the order in accordance with law after giving opportunity to the appellant to present their case within 30 days of the communication of this order.

(Pronounced in Court on 16-4-2013)