2004 (97) ECC 335 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Regional Bench -- Mumbai

Smt. Jyoti Balasundaram, Member (J) and Moheb Ali M., Member (T)

Mytri Enterprises & Ors.

Versus

Commissioner of Customs, Mumbai & Ors

Appeals No. C/382 to 384/03 and C/94 to 96/04

[Arising out of Order-in-Original No. CIU-GENL-34/2002 (15)/S/10-19/2002-03 dt. 28.2.2003 and 20/2003/CAC/CC/(G)-KKG dt. 3.3.2003]

Order No. A/490 to 495/WZB/2004-C-II, dt. 2.7.04, Certified on 6.7.2004

Confiscation and penalty

The value has been mis-declared so grossly that it attracts the charge of under-valuation. It is not merely an issue where a transaction value is rejected. Secondly an attempt to declare prices of all models at 9$ CIF per pair definitely constitutes mis-declaration of value. Goods in question are liable to confiscation under Section 111(m) and persons/partners are liable for penal action under Section 114A of the Customs Act.

PRESENT :

Shri V.S. Nankani, for the Importer.

Shri R.K. Pardeshi, JDR for the Revenue.

Cases Cited :

1. Aggarwal Distributors Pvt. Ltd. v. CCE, New Delhi, 2000 (117) ELT 49 (Tri.)........ [Para 8]

2. Aggarwal Trading Co. v. ACC Calcutta, 1983 ELT 1467 (SC).................. [Paras 16 & 29]

4. Hind Industries v. Commissioner, 1997 (90) ELT 499 (Tri.)............................... [Para 10]

5. Indian Sea Food v. CCE, Cochin, 1984 (16) ELT 243 (Kerala).......................... [Para 16]

6. Maya Enterprises v. CCE, Kandla, 1994 (74) ELT 817 (Tri.)............................. [Para 13]

7. Overseas International v. CCE, Chennai, 2000 (41) RLT 101 (Tri.)...................... [Para 8]

8. Pan Asia v. CCE, 1995 (79) ELT 322 (Tri.)..................................................... [Para 12]

9. Pooja Polyplastic v. CCE, Calcutta, 2001 (131) ELT 200 (Tri.)........................... [Para 8]

10. Poonam Plastic Industries v. CCE, 1989 (39) ELT 634 (Tri.).......................... [Para 11]

11. Priti International v. CCE, Chennai, 2001 (137) ELT 184 (Tri.).......................... [Para 8]

12. Satellite Engg. Ltd. v. Union of India, 1983 (14) ELT 2177 (Bom.)................... [Para 10]

13. Sounds Images v. CCE, 2000 (69) ECC 464 (SC)........................................... [Para 8]

14. Techno Marketing v. CCE, Calcutta, 2004 (91) ECC 659 (T)............................ [Para 8]

Per : Moheb Ali M.

These appeals arose out of a common order of the Commissioner of Customs, Mumbai. The importers are aggrieved by the order inasmuch as the Commissioner confiscated the goods (car speakers) under Section 111(m) of the Customs Act, rejected the declared value and imposed penalties on the partners of the importing firm under Section 114A.

2. The revenue is aggrieved that the Commissioner has merely imposed penalties on the partners without imposing a suitable penalty on the importing firm.

3. Both the importers, appeals and the Revenue's are taken up for disposal.

4. M/s. Mytri Enterprises is a partnership firm. It has two partners S/Shri Sushil Kumar Agarwal and Jayant Bachheta. The firm imported car speakers (declared them as load speakers) of three models, declared on uniform price of US $ 9 per pair totally valued at US $ 14,319 CIF and filed a bill of entry for their clearance. They were assessed to duty enhancing the value from US $ 9 to US $ 11.60 per pair in respect of one model, US 9 to 11.74 per pair in respect of another and US $ 9 to 11.81 per pair in respect of the third one. This revision of value is in accordance with a formula invented by the Commissioner of Customs, Mumbai. The formula is contained in a letter dt. 11.1.2003 by the Commissioner addressed to the Chief Commissioner. We append the letter to this order so that we don't have to reproduce its contents here. After the bill of entry was assessed the goods were examined by the shed appraiser in the presence of officers of C.I.U. Such an examination resulted in the discovery that the consignment consisted of three different models, of three different sizes and wattage. The model numbers are TS-A 6955, TS-A6985 and TS-A6995. The invoice doesn't speak of any `TS' though. The goods were seized on the ground that the importers mis-declared the value and material particulars. The goods were imported from a trader in Dubai. Apart from the brand, the sizes and the wattage on other technical details of each of the models are either given in the invoice or in the packing list. The department could know the exact specification of each of the models through a catalogue.

5. It is the department's contention that the importer mis-declared the value of the goods rendering them liable to confiscation under Section 111(m) of the Customs Act, and the importers themselves rendered themselves liable to penalty under Section 114A of the same Act. The goods were seized but however were released provisionally after the importer executed a bank guarantee and bond on the directions of the Hon'ble High Court of Bombay before whom the importers agitated against seizure of their goods.

6. The Commissioner in the adjudication order re-determined the value on the basis of evidence gathered during the course of investigation. Such evidence mainly consisted of quotations received from abroad (Dubai) from other sellers of the same goods and the prices available on the internet. The prices shown in the quotations and the internet were wholesale prices. In the impugned order the Commissioner demanded a duty of Rs. 13,32,042 in addition to the duty admitted by the importers. He confiscated the goods and imposed penalties on the partners.

7. Heard both sides.

8. The order of the Commissioner was assailed by the Ld. Advocate Shri V.S. Nankani on the following grounds:

(a) The department failed to produce a single invoice where the prices of the same goods were found to be higher. He furnished details of contemporaneous imports, the prices declared, the assessable value accepted/loaded by the customs and argued that the appellants' price compared well with the ones declared by other importers.

(b) He referred to the letter addressed by the Commissioner of Customs Mumbai to the Chief Commissioner in regard to valuation of car audio speakers. In this letter the Customs House adopted a particular method of valuation of car speaker of both lesser and well known brands. The same method should have been adopted for determining the value of the appellants' goods as well. In fact the method adopted in the said letter was brought to the notice of the Tribunal at Delhi in identical proceedings. The Tribunal accepted the contention that the same norms as stated in the letter should be adopted in the case of the appellants before them. The present appellants are put to a dis-advantage vis-a-vis other importers when a different norm is applied to their goods. The case of Techno Marketing v. CCE, Calcutta, 2004 (91) ECC 659 (T) : Order No. 640/03 dt. 18.11.2003 was relied upon.

(c) The Commissioner erred in discarding the transaction value relying on some prices quoted in some obscure quotations engineered by the investigating officers themselves (S/Shri Sharma and Colaco). The case of Overseas International v. CCE, Chennai, 2000 (41) RLT 101 (Tri.) is relied upon to agree that quotations cannot over-rule the prices shown in the invoice.

(d) Reliance on prices exhibited in the internet is erroneous. Aggarwal Distributors Pvt. Ltd. v. CCE, New Delhi, 2000 (117) ELT 49 (Tri.) was relied upon.

(e) Cross examination of Shri Sharma and Shri Colaco was not allowed resulting in gross violation of principles of natural justice.

(f) Burden of proving under-valuation is on the department and it can only be discharged by production of affirmative evidence and not on the basis of suspicion etc. The department failed to produce any worthwhile evidence. Pooja Polyplastic Pvt. Ltd. v. CCE, Calcutta, 2001 (131) ELT 200 (Tri.) and Sounds Images v. CCE, 2000 (69) ECC 464 (SC) : 2000 (117) ELT 538 (SC) were relied upon in support of the contention.

(k) Price quotations addressed to non-existing parties are not offers for sale under Section 14 of the Customs Act. Priti International v. CCE, Chennai, 2001 (137) ELT 184 (Tri.) is relied upon.

(h) Penalties on both the partners of the firm should not have been imposed under Section 114A of the Customs Act, whereas the section provides for imposition of penalty on the importer who contravened the provisions of the Act.

9. The Ld. JDR Shri R.K. Pardesi strongly supported the impugned order insofar as it related to confiscation of goods; rejection of transaction value and imposition of penalties on the partners of the firm. His grouse is confined to non-imposition of penalty on the firm as well.

10. In support of his contention that prices indicated in a quotation can be relied upon to reject a declared price the Ld. JDR found support in the case of Hind Industries v. Commissioner, 1997 (90) ELT 499 (Tri.). An appeal against this decision was dismissed by the Supreme Court, wherein the Tribunal held that an adjudicating authority can determine the value of the basis of the prices indicated in quotations after giving suitable allowance. In the present case a suitable allowance was given by the adjudicating authority. He also relied on the decision of the Tribunal in the case of Satellite Engineering Ltd. v. Union of India [1983 (14) ELT 2177 (Bom.), wherein the High Court held that non-disclosure of names of exporters who sent the quotations has not caused any hardship to the petitioners. He argued that in the present case the names of the exporters who sent the quotations were disclosed although the recipients of the quotations were not permitted to be cross examined. No hardship is caused to the importers in such an event.

11. The Ld. JDR relied on the case of Poonam Plastic Industries v. CCE, 1989 (39) ELT 634 (Tri.) wherein the Tribunal held that the department is not required to prove actual value with mathematical precision when transaction is veiled in secrecy. In the present case the prices declared are veiled in secrecy as the importer failed to disclose the actual value of each of the models of speakers, a fact which is known to him alone.

12. He cited the case of Pan Asia v. CCE, 1995 (79) ELT 322 (Tri.) which is later upheld by the Supreme Court and argued that when the imported goods were not supplied by the manufacturer and when the investigation revealed that higher prices were indicated in quotations, declared value could be rejected.

13. He argued that when goods of various models were imported but uniform price for all the models declared irrespective of model and combination without any details, invoice price is not acceptable. In support of this contention he relied upon the case of Maya Enterprises v. CCE, Kandla, 1994 (74) ELT 817 (Tri.). In the present case the three models of speakers have different specifications but a uniform price is declared. Once the declared value is rejected on this ground the department can determine the assessable value on the basis of evidence, under Rule 8 of the Valuation Rules, in the absence of any other recourse available under Rules 5, 6, 7 of Valuation Rules.

14. In regard to the letter dt. 11.1.2003 of the Commissioner Mumbai addressed to the Chief Commissioner which according to the appellants formed the basis of Valuation of car speakers in earlier imports he argued that the circular clearly speaks of rejection of the basis stated therein if evidence of higher prices is brought out. The department is not bound to adopt the norms prescribed in the letter cited supra in all cases and particularly so when evidence of higher values is gathered.

15. He distinguished the case of Aggarwal Distributors cited supra wherein the Tribunal held that internet prices cannot be relied upon to reject the transaction value. In the present case the internet price relied upon is a wholesale price unlike the ones in the above-said case. In Aggarwal's case there was no indication as to whether the internet price was wholesale price or a retail one. He averred that the impugned order he upheld in regard to enhancement of value of the imported goods, confiscation of the goods and imposition of penalties.

16. On the issue whether penalty can be imposed on the firm as well on its partners the Ld. JDR argued that a firm is an association of persons and is distinct from its partners. A penalty can be imposed both on the firm as well as on its partners as held by the Tribunal in several decisions. He also relied upon the Hon'ble Supreme Court decisions in the case of Aggarwal Trading Company & Ors. v. ACC Calcutta, 1983 ELT 1467 (SC) wherein the Hon'ble Court discussed the status of a partnership firm in the eyes of law. He relied upon the case of Indian Sea Food v. CCE, Cochin, 1984 (16) ELT 243 (Kerala) wherein the Hon'ble High Court of Kerala held that a penalty can be imposed on the importing firm as well as on its Managing partner if his complicity is established. In the present case the import was in the name of the firm and the partners did commit acts of omission and commission which rendered the goods liable to confiscation. He prayed that a suitable penalty may be ordered on the firm by modifying the order of the Commissioner to that extent.

17. We have considered the rival contentions and perused the records.

18. The appellants have relied heavily on the decision of the Tribunal at Delhi in its Order No. 640/2003 NBA dt. 18.11.2003 in which the Bench while allowing the appeal observed, we quote "Since the value indicated in this letter (letter dt. 11.1.2003) of the Commissioner of Customs Mumbai has been arrived at after considering the prices observed in the trade as well as from other sources and the prices are also indicated size-wise and brand-wise, the prices indicated in the circular should commend itself for adoption in cases of doubt". We have perused the said letter. The letter further reads thus "However, if evidence of higher price is noticed or provided by agencies the aforementioned floor price (emphasis provided) will be revised." In the present case evidence of higher prices is gathered by the agency (CIU). The letter cited supra provides for revision/determination of price in case of fresh evidence indicating higher prices for car speakers. What the Commissioner did was exactly this. Again, we are not aware whether the imported goods in the case before the Delhi Bench are identical with the ones we are concerned with. Valuation Rules themselves do not provide for any floor prices that could be adopted while determining the value of imported goods. It is the transaction value or the value determined in accordance with the said rules that should commend itself for adoption and not those mentioned in some letter of some Commissioner irrespective of the fact that evidence of higher prices is brought to the notice of the department. In fact the basis of valuation of car speakers enunciated in the said letter can be easily challenged on the ground that it is not in accordance with Valuation Rules.

19. The letter under reference is nothing much to talk about. Determining prices of car speakers on the basis of their sizes and their out put ignoring other specifications such as the size of the woofer, midranges and Dom tweeter, frequency response etc., is to say the least appears, looks archaic. That perhaps is the reason while the department wished to reopen the past clearances in the light of evidence gathered by the department. And rightly so. Apart from the fact that Valuation Rules do not permit the customs authorities to revise declared prices by adopting the methods suggested in the said letter the method itself is irrational. It has no statutory backing. Further it provides escape clauses such as the ones mentioned elsewhere in this order. There is no gainsaying the fact that the goods under import have different specifications even though a uniform price of 9 US $ per pair is declared. Any layman would know that the price of a speaker does not merely depend on its size and wattage.

20. Further it appears that the invoice itself is tailor made to suit the method adopted in the Commissioner's letter for determining the value of a speaker. The invoice gives the size wattage and the brand of the speakers while indicating a price slightly lower than the one the department would have ultimately adopted by applying the thumb rule mentioned in the letter. The packing list also does not give any further details of the speaker under import. It is only by referring to the catalogue the department came to know the technical details of each of the models under import. This itself can be construed as suppression of facts in order to evade duty.

21. We are in agreement with the decision of the Tribunal in the case of Maya Enterprises wherein the Tribunal held that when uniform prices are declared irrespective of model and combination without giving further details, invoice value can be rejected. The Commissioner has rightly rejected the invoice value. The appellants do not seem to have any grouse on rejection of the declared price but seem to contest such revision because the prices ultimately determined were not in accordance with norms prescribed in the letter. We observe that the department is not bound to go by the letter and spirit of the Commissioner's letter while determining the value of imported goods. This is particularly so when the department decided to reopen the cases of similar goods cleared in the past.

22. Rejection of the declared price is one thing determination of value is another. It is therefore necessary to see whether the Commissioner re-determined the value of the impugned goods in accordance with the valuation rules. We proceed to do so.

23. The evidence suggesting that the speakers command a much higher price that what it declared by the appellants is in the form of quotations, and prices indicated to the internet. The prices indicated both in the website and the quotations are wholesale prices. A lot of arguments were advanced against acceptance of the prices indicated in the quotations. It appears that the quotations themselves, though were given by traders in Dubai, were engineered by two over enthusiastic officers. We observe that so long as the quotations themselves are tendered as evidence, the appellant had opportunity to demolish them by producing evidence in their favour. They did not avail of the opportunity except asking for cross examination of the officers concerned. We have the authority of the decision of the Tribunal in the case of Satellite Engineering Ltd. relied upon by the Ld. JDR, which held that non-disclosure of intending importers and not producing them for cross-examination will not amount to violation of natural justice.

24. The Commissioner has also considered the prices indicated in the internet, which are wholesale prices, to determine the prices at which the impugned goods are ordinarily sold in the course of international trade. At page 9 of the impugned order the Commissioner analyses as to how the prices indicated in the internet compare well with the ones shown in the quotations from other dealers in Dubai and the distributor of the same goods in that country. For each of the models indicated in the invoice the prices, on enquiry ranged as follows:- Serial No. -1 US $ 37.80 to 39.69; Serial No. 2 US $ 47.50 to 58.05 and Serial No. 3 US$ 53.64 to 67.50. In this range the lowest quotation except in the case of model No. TSA 6995 happened to be of the distributors only. Now, a product which costs as high as the ones mentioned above is sought to be imported at 9 US$ per pair. The reliability of such a price can be easily guessed. In a scale of 0 to 10 the invoice price could be given the bottom most mark insofar as its reliability is concerned.

25. The Commissioner arrived at the value of the impugned goods on the basis of the lowest quotation offered by one of the dealers in Dubai and not the highest price given by other dealers. One cannot find fault with such a decision.

26. The Ld. Advocate argued that not a single import at the prices arrived at by the Commissioner was noticed during the period in question and therefore the quotation prices cannot form the basis for determining the value. We examined this contention carefully. One of the features of Indian International Trade is that our export prices always tend to be very high (rags are exported at such prices that even the richest living abroad would think twice before purchasing them similarly the export price of ball point pens would scare away any decent students) and the prices of imported goods tend to be abysmally low. No wonder then, that nobody imported the speakers declaring the real value during the period in question. And the letter of the Commissioner referred to earlier has not exactly served the cause of finding out the real value of the speakers. A few more of such letters would permanently discourage the importers from declaring the real value of the goods.

27. We have also considered the argument that just as a single Swallow does not make a summer, a single quotation or a couple of them cannot form the basis for rejecting a declared price. We could have agreed with that preposition but for the fact that in the present case the Commissioner relied on not a just of couple of quotations but also on the interent prices, distributor prices etc. to reject the declared price. We feel that it is perfectly in order to do so. We do not find any infirmity insofar as the revision of the value.

28. We observe that the adjudicating officers do not normally confiscate the goods and impose penalties on the importers while rejecting the transaction value. In the present case the Commissioner confiscated the goods and imposed penalties. We find that such an action is called for in the present case at least for two reasons. The value has been mis-declared so grossly that it attracts the charge of under-valuation. In other words it is not merely an issue where a transaction value is rejected. It is something more. And secondly an attempt to declare prices of all models at 9 $ CIF per pair definitely constitutes mis-declaration of value. We hold therefore that the goods in question are liable to confiscation under Section 111(m) and persons concerned are liable for penal action under Section 114A of the Customs Act.

29. The departments appeal is in regard to non-imposition of penalty on the firm. The Commissioner argued that a firm is not a legal entity and therefore no penalty can be imposed on it. According to him a partnership firm is not a legal entity within the meaning of Section 3(42) of the General Clauses Act. The Ld. JDR relied on the decision of the Hon'ble Supreme Court in the case of Aggarwal Trading Corporation & Ors., 1983 ELT 1467 and similar other pronouncement by the Tribunal on the issue of imposition of penalties on both the firm and its partners. This Tribunal also held that while penalty on both proprietor and the proprietary firm cannot be imposed, penalties can be imposed on the partnership firm and the partners simultaneously. We agree therefore that the Commissioner's reference to General Clauses Act is not in accordance with the views expressed by judicial forums. However, we refrain from imposing a further penalty on the firm in view of the penalties imposed by the Commissioner on both the partners. There does not seem to be any point in flogging any horse excessively.

30. The appeals of the importing firm and its partners are rejected. The appeal of the Revenue allowed under the above terms.

…………………..