2005 (98) ECC 155 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Hon'ble Justice (Mrs.) K.K. Usha, President and Shri C.N.B. Nair, Member (T)

Ketan Construction Limited & Anr

Versus

CC, Mumbai

Appeals No. C/685-86/2002-NB-A

[Arising out of Order-in-Original No. 446/2001/CAC/CC/M.C.T dated 19.12.2001 passed by the Commissioner of Customs (Import), Mumbai]

Final Order No. 593-594/2004-NB(A), dt. 18.6.2004, Certified on 28.6.2004

Evasion of customs duty

-- Import -- Documents showing resale -- Since all the sale documents have been found to be false, the names in which the transaction are being mentioned (Dhanak Jewellers/ M/s Gulf Staf) can be treated only as fake entities to facilitate false transactions. The rest of the sale documents being absolutely unworthy of any credibility, the customs authorities could only go by the prices shown in the auction document. Fines and penalties are imposable-- Section 114, 112, 12, 111 of Customs Act.

Appeal dismissed

PRESENT :

S/Shri A.K. Chatterje and J. Vellapally, Advs. for the appellants.

Shri Viraj Gupta, JDR for the respondent.

Case Cited :

Collector of Customs, Bombay v. East Punjab Traders, 2002 (79) ECC 469 (SC).... [Para 5]

Per : C.N.B. Nair

The first appellant imported two consignments comprising in all 31 items of old construction machinery into Mumbai and sought their customs clearance under Bills of entries 1713 and 1721, both dated 8.2.2000. The imports were from Dubai and the appellant declared a value of about Rs. 1.2 crore CIF. In support of the declared value, the appellant produced invoice No. EXP/051/2000 and EXP/051A/2000 both dated 5.2.2000 issued by M/s. Gulf Stars Auto Spares Parts Establishment of Sharjah, UAE. The consignment were shipped in the same voyage under two bills of lading by vessel M.V. Harare.

2. Customs authorities received information that there was misdeclaration and suppression of facts for evasion of customs duty. Accordingly, investigations were taken up by them. Upon examination of the items it was observed that labels of M/s. Ritchie Brothers, Auctioneers along with lot Nos. were stuck on them. When the customs authorities searched the office of the importer at Ahmedabad they recovered inter alia the following items:

--"A. Various types of pamphlets, some of them pertaining to M/s. Ritchie Bros. for the publicity purpose with regard to the machinery auctioned at different location, preliminary notice.

--B.

--Visiting Cards of M/s. Ritchie Brothers, Auctioneers.

--C.

--Air Ticket No. 6296639469 for the sector Ahmedabad -Sharjah-Ahmedabad in the name of Barad H. Mr. Confirming his visit to UAE during the auction period of M/s. Ritchie Bros. i.e. 25.10.99 to 27.10.99.

--D.

--Listing catalogue No. 246 of M/s. Ritchie Brothers Auctioneers having pen circled of the value of the some of the Serial Nos. mentioned in the book.

--E.

--Listing catalogue No. 361 of M/s. Ritchie Brothers Auctioneers having penciled circled some of the Serial Nos. mentioned in the catalogue and remarked as "Purchased" and also showing value of the same".

--The Customs authorities also examined Shri Harisinh Amarsinh Barad, Director of M/s. Ketan Construction Ltd. In his statement dated 15th May 2000, Shri Harisinh Amarsinh Barad stated inter alia that he was in Dubai during the auction of the imported machines (25-27th October 1999) that the purchases were from Gulf Star; that he had inspected these machineries somewhere in July, August 1999 with the owner of M/s. Gulf Star prior to the import invoices; that Mr. Abdullah of Gulf Star had sent him a proforma Invoice No. 005/99 dated 24.10.99; licence to import the goods was obtained based on the proforma invoice; that the Listing catalogues seized from the office of M/s. Ketan Construction had been given to them by Mr. Abdullah of M/s. Gulf Star; that the goods under import mentioned in the invoices of M/s. Gulf Star tallied with the items circled in the Auctioneer catalogue. The customs authorities also obtained sale invoice for the goods issued by M/s. Ritchie Brothers' to Dhanak Jewellery, from Dubai, through the Indian Embassy there. The prices mentioned in those invoices tallied with the prices mentioned in the auction list for the circled items.

3. Based on evidence collected during the investigation show cause notice was issued alleging that the import documents had misdeclared prices at much lower amounts and the real prices of the machinery in question was as indicated in the auction list recovered from the appellant's office and confirmed by M/s. Ritchie Brothers, Auctioneers invoice to M/s. Dhanak Jewellers and that there was evasion of customs duty of about Rs. 1.2 crore. The proceeding so initiated culminated in the passing of the order impugned in these appeals. The Commissioner found in favour of the Revenue and passed an order confiscating the goods, demanding differential duty and imposing penalties on M/s. Ketan Construction Ltd. and its Director, Shri Harisinh Amarsinh Barad. We reproduce below the order portion of the impugned order:

--"a.

--I order that 31 pcs. of machinery imported by M/s. Ketan Construction Company Ltd., be assessed at Rs. 3,42,73,810 CIF.

--b.

--The differential duty on account of value difference amounting to Rs. 1,21,80,273 is recoverable and hence confirmed under Section 28(i) of the Customs Act, 1962.

--c.

--The interest @ 24% is also recoverable under Section 28 (AB) of the Customs Act, 1962.

--d.

--The B/G furnished in the sum of Rs. 1.60 crores may be enforced and adjusted against the duty amount confirmed.

--e.

--I order confiscation of the goods i.e. 31 pcs. of machinery valued at Rs. 3,42,37,810 under section 111(d) and 111(m) of the Customs Act, 1962. As the goods are not physically available for confiscation. I order to redeem the said goods released under B/G against a redemption fine of Rs. 38,00,000 (Rupees thirty eight lacs only) under Section 125 of the Customs Act, 1962. This may be adjusted from the B/G furnished by the party.

--f.

--I also impose a penalty of Rs. 1,21,80,273 (Rupees one crore twenty lacs eighty thousand two hundred seventy three only) on M/s. Ketan Construction Company Ltd., Ahmedabad under section 114(a) of the Customs Act, 1962.

--g.

--I also impose a penalty of Rs. 20,00,000 (Rupees twenty lacs only) on Shri Harisinh Amarsinh Barad under Section 112(b) of the Customs Act, 1962. So far as other Directors named in the notice is concerned their role has not been specifically discussed in the Show Cause Notice and they have not specifically been mentioned as responsible for said transaction, therefore, I refrain from imposing penalty on them".

4. Both the present appeals are directed against that order of adjudication. Accordingly, they were taken up together for consideration when he heard the learned Senior Counsel representing the appellants and the learned JDR for the Revenue.

5. The contention raised by the appellants are that the goods were indeed purchased from M/s. Gulf Star, Dubai at the prices indicated in the invoices and that the importers have no concern with the auctioneers or M/s. Dhanak Jewellers and that the auctioneer's prices had no concern with the prices paid by them to M/s. Gulf Star and the customs authorities were unjustified in rejecting the transaction value and assessing the goods based on the prices indicated in the auctioneer's listing catalogues or prices mentioned in the invoice obtained from Dubai. With regard to M/s. Ritchie Brothers sale invoice to M/s. Dhanak Jewellers obtained from Dubai, it was particularly emphasized that this document, which is the main evidence of the Revenue, is not acceptable at all in the proceedings inasmuch as it was a incomplete and unauthenticated document. It was also emphasized that the action list could not have been relied on inasmuch as the same had no concern with the appellant's purchase of the goods. These apart, it has been pointed out that two of the items imported are also having remark "resale" alongwith "purchased" in the Auction List. These two items are Sl. No. 946 and 947 in the Auction List. It has also been pointed out by the learned Sr. Counsel that six of the 31 items (Sl. Nos. 167, 347, 349, 351, 353 and 354) bearing the remark "purchased" in the Auction List under seizure, from the premises of the importer, do not find mention in the invoice showing sale to M/s. Dhanak Jewellers or in the invoice of M/s. Gulf Star. The learned Senior Counsel emphasized that findings in the impugned order are required to be set aside as the evidence upon which it is relied are either inadmissible or unreliable in view of the above defects. He has relied on the decision of the Apex Court in the case of Collector of Customs, Bombay v. East Punjab Traders, 2002 (79) ECC 469 (SC) : 1997 (89) ELT 11 (SC) in support of this submission. He has also pointed out that in the absence of any evidence linking the sale of the goods in question to M/s. Dhanak Jewellers and appellant's subsequent purchase of them, the adoption of the sale prices to M/s. Dhanak Jewellers for the assessment of appellant's imports would be to fix assessable value for the appellant's import based on the impermissible presumption that subsequent sale by M/s. Dhanak Jewellers and sale to appellants would be at the same prices as paid by M/s. Dhanak Jewellers. It has also been pointed out that the computation of value and (consequently) duty amount are not correct since freight and insurance have been taken as a percentage (%) of value after rejecting actual amounts paid.

6. The learned DR has contended that the import documents produced by the appellant are entirely false and unreliable and those documents have been procured only to get the goods assessed at the lower declared values and to evade custom duty. He has submitted that this position is clearly established by the documents forming the records of the case as well as the statement of Shri Harisinh Amarsinh Barad. The learned DR has pointed out that while the auction sale of the goods took place between 25th and 27th October 1999, it is seen that proforma invoice was issued prior to the auction itself on 24.10.99 by M/s. Gulf Star. According to the learned DR, this along was sufficient to show that M/s. Gulf Star was making available to the appellant false documents to facilitate imports, the way the appellant wanted. The learned DR has pointed out that the same false prices indicated in the proforma invoice have been repeated in the so-called import invoices also. According to him, in these circumstances all the documents produced from M/s. Gulf Star were required to be rejected and the import assessed in terms of reliable information from other sources. According to the learned DR, suppression of correct facts is clear from the conduct of parties. They are not disclosing how M/s. Gulf Star which is purported to be only a dealer in car parts, acquired the machinery in question, but at same time it is the statement of Shri Harisinh Amarsinh Barad that the Auction List was given to him by Shri Abdullah of M/s. Gulf Star and that Shri Harisinh Amarsinh Barad was present in Dubai during the auction. The learned DR has also pointed out that false nature of the transaction and explanations are clear from the claim of Shri Harisinh Amarsinh Barad that he had inspected the machinery in July - August 1999 when M/s. Gulf Star was the owner of the machinery. The learned DR has pointed out that this is a sheer impossibility inasmuch as the machinery in question became available for sale only much later upon its auction in October (25-27). According to learned DR, in the facts and circumstances of the case the documents issued by M/s. Gulf Star can only be treated as false documents and appellant's explanation about its transaction with M/s. Gulf Star can be taken as only a cover up to justify the false claims being made. Instead, the correct transaction is the sale in auction by M/s. Ritchie Brothers and the correct value should be the auction values. These values are also the values noted in the auction list as well as the sale invoice between M/s. Ritchie Brothers and M/s. Dhanak Jewellers. The learned DR has therefore, submitted that the Revenue authorities are entirely justified in rejecting the false documents produced and in assessing the goods based on their correct value as revealed by the auction list as well as invoice obtained from Dubai. The learned DR has pointed out that the main evidence in the present case are the auction documents seized from the appellants' premises and the statement of Shri Harisinh Amarsinh Barad. The invoice obtained by Embassy in Dubai and the fact of Shri Harisinh Amarsinh Barad's presence during the auction, corrobate the values indicated in the seized documents. The learned DR, therefore, submitted that the case law relied upon by the appellant has no application to the facts of the present case. He has also submitted that once the import documents produced were found to be false, the authorities were fully justified in going by the prices indicated in other documents and in assessing the goods to duty after making additions towards freight and insurance etc. at flat rates.

7. We have perused the records and have considered the submissions made by both sides. The documents produced by the appellants completely lack credibility. To begin with, the proforma invoice issued by M/s. Gulf Star is dated 24.10.99. On this date, goods had not even been put to auction and sold and, therefore, this proforma invoice can only be treated as a false document issued to enable the Indian importer to obtain import licence. The price indicated in the proforma invoice were only notional figures. Same prices have been put down on the sale invoices also. Thus, clearly, the invoice prices did not represent prices in a commercial transaction. These documents were documents of convenience, so created as to serve ulterior purposes. No assessment could be made based on them. The real state of affairs remains disclosed by the Auction List recovered from the appellants. Entries in the auction list relating to the imported items remain circled alongwith price and remark "purchased". The Director of the Company has admitted that he was present during auction and Sl. Nos. under circle are the items under import. He has also admitted that he had inspected the goods at Dubai, though in July - August, alongwith the owner of the goods namely Mr. Abdullah of M/s. Gulf Star. The appellant's version that he had inspected the goods in July-August when the seller, M/s. Gulf Star were the owner of the goods cannot find acceptance, since at that time, the goods had not been auctioned and transferred to any party. Going by the circumstances, a reasonable conclusion can only be that the appellant was present for the auction and the auction prices indicated in the auction list represented the commercial value of the goods. Since all the sale documents have been found to be false, the names in which the transactions are being mentioned (Dhanak Jewellers/M/s. Gulf Star) can be treated only as fake entities to facilitate false transactions. We are of the firm view that the entries in the auction list show the correct price of the items and those prices remain confirmed by the sale invoice between M/s. Ritchie Brothers and M/s. Dhanak Jewellers. The rest of the sale documents being absolutely unworthy of any credibility, the customs authorities could only go by the prices shown in the auction documents. M/s. Ritchie Brothers invoice in the name of M/s. Dhanak Jewellers, which has been obtained by Indian Embassy at Dubai lends corroboration to the prices indicated in the auction documents. The defects and inconsistencies pointed out by the appellant do not take away from the corroborative capacity of the Dubai invoice between M/s. Ritchie Brothers and Dhanak Jewellers. That six of the items mentioned in the auction list have not been imported does not affect the reliability of the document. The non-import of those six items under the present consignments does not disprove the auction sale. It may simply be that those items were sold to somebody else.

--After all, even these 31 items are being imported under two bills of lading and not under one Bill of Lading, for reasons best known to the parties. The arrival of the two items with the remark "re-sale" also does not affect the acceptability of the prices shown against these two items inasmuch as "re-sale" aspect has no relevance to the question as to what is the correct price of the items. In fact according to the appellant the Auction Lists were received by them from M/s. Gulf Star Traders. So the appellant and his seller were in the best position to explain as to how the goods purportedly auctioned off to M/s. Dhanak Jewellers were acquired by them and at what prices. They have chosen not to disclose any detail. So adverse inference has to be drawn against them. In these facts and circumstances, we are of the firm opinion that the findings of the Commissioner remain unaffected by the defects pointed out by the appellant and those findings are required to be confirmed. No interference with the fines and penalties are also called for since those amounts are reasonable when viewed in the context of the pre-meditated nature of the offence and the amount of duty evasion involved. In fact, the quantum of punishments are quite moderate.

8. In view of what is stated above, the appeals fail and are rejected. The original order is confirmed in full.

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