Commissioner Of Customs vs M/S. National Lamination Indus

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3748-3751 OF 2007

COMMISSIONER OF CUSTOMS (SEA), CHENNAI ...APPELLANT

VERSUS

M/S. NATIONAL LAMINATION INDUSTRIES & ...RESPONDENTS ANR.

J U D G M E N T

A.K. SIKRI, J.

The respondent/assessee herein imported sixteen

consignments of secondary/defective CRGO Electrical Steel in

the form of Sheets, Coils, Strips and Cuttings, for which it

filed different Bills of Entry. The unit price of the goods

was declared as US$ 250 Per Metric Ton (PMT) for CRGO

Electrical Steel Strips and US$ 300 PMT in respect of other

variety of goods. The Directorate of Revenue Intelligence,

Chennai Zonal Unit, received some information to the effect

that the assessee was undervaluing the goods and violating the

EXIM Policy as well as conditions of Customs Exemption

Notifications. The goods were, thus, examined and seized Signature Not Verified under reasonable belief that they were undervalued. Four show Digitally signed by ASHWANI KUMAR Date: 2015.11.27 09:58:53 IST Reason: cause notices were issued. In the show cause notice dated

26.11.2001, it was alleged that the country of origin in

respect of the said goods imported were USA, Japan, U.K., 2

Russia, Europe etc. and the value of these goods assessed

ranging between US$ 475 (C&F) to US$ 750 PMT (C&F). On that

basis, the show cause notice proceeded as under:

“15. In terms of Rule 3 of the Customs Valuation Rules, 1988, the value for the purpose of assessment shall be the transaction value of the goods under Rule 4 of the said Rules, ibid, the transaction value of the imported goods shall be the price actually paid or payable for the goods when sold for export to Indian adjusted in accordance with the provisions of Rule 9 of these Rules. Section 14 of the Customs Act, 1962 inter alia, states that “... duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale...”. In the instant case, from the facts stated above and the tables showing the comparative declared/assessed values of other importers as well as M/s. Alfa & National for import of Secondary/Defective CRGO through the Port of Mumbai / Nhava Sheva as against the values declared by M/s. Alfa for their imports (currently under investigation) through Port of Chennai, have not declared are price/ value at which such or like goods are ordinarily sold or offered for sale as contemplated under Section 14 of the Customs Act, 1962 read with Rule 4 of the Customs Valuation Rules, 1988 in as much as they have declared much lower values for their imports through the Port of Chennai as compared to the values declared by them and other importers for imports through Mumbai/Nhava Sheva for their goods. The values declared by M/s. Alfa for their imports through Ports other than Chennai is very much in line with the values declared by the other Importers through the above said Ports, and thus it appears that the prices declared by M/s. Alfa, their sister concern M/s. National as well as the other Importers at the above said Ports are to be the values/prices at which such goods are ordinarily sold or offered for sale.” 3

2) It is clear from the above that the main ground on the basis

of which undervaluation of the goods was alleged was that the

assessee had imported the same material declaring higher price

which was cleared at Mumbai port. Order-in-Original was

passed affirming the said show cause notice and the demand of

differential duty, including interest contained therein. The

assessee had taken up the defence that the goods imported at

Mumbai port at a higher value were of better quality and that

they had the warranty of the suppliers. In support, the

assessee had filed photographs of coils, strips and cuttings

and also full description and the sizes/specifications of the

goods imported through Chennai port to substantiate the claim

that these goods were of inferior quality compared to those

imported through Mumbai port. However, this defence was

brushed aside by the Adjudicating Authority on the ground that

the plea was not supported by any documentary evidence.

3) The assessee filed appeal against this order before the

Customs Excise & Service Tax Appellate Tribunal (in short

'CESTAT'). The CESTAT, vide impugned decision dated

18.07.2006, set aside the order of the Adjudicating Authority,

by accepting the plea of the assessee and holding that the

declared values representing the true and correct transaction

value under Rule 4 of the Customs Valuation Rules and,

therefore, was required to be accepted.

4

4) According to the Tribunal, the Commissioner had treated the

goods of higher value on the basis of statements of the two

partners of the assessee in respect of goods imported by them

in Mumbai wherein the goods were assessed at values ranging

from US$ 485 to US$ 600 PMT. However, on going through the

statement of these two partners, the Tribunal purportedly

found that there was no such admission of undervaluation made

by them on their part, which was made the basis of the

Order-in-Original passed by the Commissioner. The Tribunal,

finding fault with the Order-in-Original, gave following

reasons:

“11. We also find substance in the contention that there is a variation between the prices of goods imported through Mumbai Port and through Chennai Port for the reason that, while the goods imported at Mumbai were under contract containing a guarantee clause, contracts under which the Chennai imports took place had no such clause.

12. There is yet another reason for rejecting loading and that is while applying Rule 8 of the Customs Valuation Rules, for determining the value of the goods the Commissioner has adopted Rule 8 read with Rules 5 and 6, which deal with the valuation of similar/ identical goods, in the face of categories averment in the show cause notice, and his finding in the impugned order, that there were no imports of similar or identical goods, elsewhere, so as to resort to valuation under Rule 5 or 6, specially when the material was secondary/defective in nature. In other words, while ruling out Rules 5 and 6, what he has done in fact, is to adopt the value of Mumbai imports of the appellants, which cannot be sustained for the reason that admittedly no similar or identical goods are found to have 5

been contemporaneously imported elsewhere in India. Valuation under Rule 8 is also not sustainable for the reason that the rule provides that reasonable means for determining the value read with Customs Valuation Rules and Section 14(1) of the Customs Act have to be adopted and as per Section 14(1), time and place of delivery is very relevant and, therefore, the Commissioner has erred in enhancing the values on the basis of imports at a place other than the price of delivery of goods in question, by adopting Mumbai values for Chennai imports.”

5) Contesting the aforesaid reasons and rationale given by the

Tribunal, learned counsel for the appellant/Department

referred to the averments and allegations made in the show

cause notice which, according to him, were based on the

investigations carried out in the matter, and clearly depicted

that the assessee had shown the value of the same goods in

question at a lesser price in the Bills of Entries filed by

the assessee. He pointed out that on the basis of a specific

information that the assessee and their sister concern M/s.

Alfa Laminations, Plot No. B-8-9, IODC Industrial Area,

Ringanwada, Daman. 396210 are importing consignments of

Secondary Defective ARGO Electrical Steel in the form of

Sheets in Coils/Steel Sheets/ Sheets in interleaved

coils/Steel Strips in cuttings/used an old Strips/Sheets in

Coils through the port of Chennai by grossly undervaluing,

violating the EXIM Policy and the conditions of Customs

Exemption Notification, investigation was initiated by the

officers of the Directorate of Revenue Intelligence, Chennai 6

Zonal Unit. Investigation conducted revealed that the above

said goods, when imported through Mumbai, Nhava Sheva port and

ICD Muland, were being cleared at declared/assessed values

ranging from US$ 485 per MT (CIF) to US$ 750 PMT (CIF),

depending upon the nature of the product, whereas the goods

were being cleared at declared/assessed values ranging from

US$ 210 to US$ 300 PMT CIF for import through Chennai port.

The learned senior counsel also argued that the Tribunal

wrongly recorded that there was no admission in the statements

of the partners. He pointed out that Mr. Mahendra Parekh, one

of the Partners of M/s. National Lamination specifically

admitted that they were importing through the port of Chennai

since the values assessed in Mumbai were very much higher and

agreed to pay the duty differentials. Pursuant to the

initiation of the investigations by the DRI, the importer

reduced the imports of the impugned items through the port of

Chennai and whatever clearances were effected the value was

declared at US$ 485 PMT (CIF) for purposes of assessment.

Based on the above investigation, show cause notices were

issued to the importers/assessee asking them to show cause as

to why the values declared by them in their Bills of Entry

should not be rejected and the same be refixed under the 'Best

Judgment' method in terms of Rule 8 of the Valuation Rules,

1988 and the differential duty demanded apart from proposing

confiscation of the goods and imposition of penalty. 7

6) Learned counsel also drew our attention to the

Order-in-Original wherein the evidence collected against the

assessee was discussed by the Adjudicating Authority in the

following manner:

“I have perused the documents and the list of Bills of Entry of other importers through Chennai port evidencing import of CRGO electrical steel at about US$ 250-350 same range as that of the importers. I find that there are 125 Bills of Entry in all filed by M/s. National Lamination Industries and M/s. Alfa Laminations covered under four show cause notices. Their main suppliers of CRGO electrical steel at Chennai as well as Mumbai and Nhava Sheva ports were M/s. J. Pearson International Inc, USA, M/s. Electrical Steel International, M/s. Trans Metal Gmbh, M/s. Orbit Metals Gmbh, M/s. Gold Arrow Metals, USA, ARB Metals, USA, Norek Trading etc. This list submitted by the importers in respect of imports by others indicate supplies made by M/s. J. Peason International in one case, M/s. Oribti Metals in 3 cases and M/s. Transmetal in 6 instances wherein the values were shown in the range of US$ 280 to US$ 350 PMT. On the other hand, the investigation brought out much clear and many more evidences of imports by others both through Chennai and Mumbai ports indicating much higher prices. I find that the investigation clearly brought out that other importers through Mumbai/Nhava Sheva Ports also imported secondary/defective steel cuttings and strips at US$ 485 PMT or more. Thus, the evidences were overwhelming in support of the argument that the goods imported through Chennai port where undervalued. Hence, I am unable to accept the contention that the imports made by others through Chennai port at the same price as the importers should be accepted for assessment. Such imports were stray cases of lower values being adopted and in any case cannot form the basis of comparison when clear evidences are available to arrive the conclusion that the correct value of the goods was more than US$ 485 PMT when imported in any form.” 8

7) Another significant material which was referred to by the

learned counsel is the statement of the partners of the

assessee wherein it was admitted that the prices/values

declared by the assessee for import through Chennai port for

similar items was much less compared to the value declared at

Mumbai port. It was also argued that keeping in view the

clearances at Mumbai port by the assessee themselves, minimum

value of the various clearances was taken, which could not be

faulted with.

8) After giving our due consideration to the submissions with

reference to the records, we are of the firm opinion that the

impugned judgment of the Tribunal is unsustainable. In fact,

the Tribunal has not only misinterpreted the statements of two

partners of the assessee, it has also sidetracked and ignored

other relevant material. We have gone through the statements

of the two partners of the assessee and find that there is a

categorical admission on their part that the prices/values

declared by them for imports through Chennai port for similar

items was much less compared to the values declared at Mumbai

port. At this juncture itself, it would also be pertinent to

point out that while recording the statement of Mr. Nilesh

Parekh, partner of the assessee where he admitted the

aforesaid facts, he also stated that the exact reason for

declaring different values, even when the goods were similar, 9

would be explained by his elder brother Mr. Mahendra Parekh,

who looked after these imports. The justification which was

ultimately sought to be given was that the goods imported at

Chennai port were defective in nature which was the reason and

for this reason, these goods were brought at lesser price. It

was also explained that though there was guarantee clause in

the contracts in respect of goods imported at Mumbai, no

similar provision was there for the products imported and

cleared at Chennai port. However, we find that assessee has

not substantiated the aforesaid plea by producing the contract

in respect of Mumbai port and Chennai port. In the absence

thereof, it was not permissible for the Tribunal to accept

this plea of the assessee.

9) There is yet another material circumstance which is

specifically taken note of by the Adjudicating Authority but

glossed over by the Tribunal. The factory of the assessee is

at Daman and, thus, Mumbai port was much closer. On this

basis, specific query was put to the assessee as to why

certain imports were made through Chennai port instead of

Mumbai port. However, no satisfactory reply was given to this

question except making a bald averment that landing charges

etc. were much less compared to rates at Mumbai which does not

inspire any confidence, that too in the absence of any

material given by the assessee in support of this plea.

Insofar as the plea that goods which were cleared at Chennai 10

port were defective in nature and, therefore, were not similar

or identical goods, the Tribunal has only gone by the

photographs that were produced. Here also, we find that

approach of the Tribunal is faulty and the Commissioner

rightly observed that these photographs did not conclusively

establish that goods in such form were not imported through

Mumbai port. It was also not clear when and how the

photographs depicting goods cleared through Mumbai port were

taken in order to compare with the goods cleared through

Chennai port. Above all, as already pointed out above, no

documentary evidence was produced by the assessee to support

the plea that the goods at Chennai port were inferior in

quality than the goods imported and cleared at Mumbai port and

there was no warranty clause of the goods imported at Chennai.

10) The Tribunal also erred in holding that the Commissioner

wrongly applied Rule 8 of the Custom Valuation Rules.

Order-in-Original shows that it had taken into evidence 55

Bills of Entry pertaining to goods imported and cleared at

Mumbai port which showed price ranging from US$ 485 PMT to US$

600 PMT. The goods imported by the assessee which were

cleared at Mumbai port were found to be similar in nature.

These imports were by the assessee itself. Therefore, price

declared therein could be made the basis of valuation.

Minimum price was taken as the transaction value. It was

clearly permissible under Rule 8 read with Rules 5 and 6 of 11

the Valuation Rules.

11) We, thus, allow the appeals, thereby setting aside the order

of the Tribunal and restoring the Order-in-Original passed by

the Commissioner.

...................J. (A.K. SIKRI)

......................J. (ROHINTON FALI NARIMAN)

NEW DELHI;

OCTOBER 07, 2015.

12

ITEM NO.117 COURT NO.14 SECTION III

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Civil Appeal No(s). 3748-3751/2007

COMMISSIONER OF CUSTOMS Appellant(s)

VERSUS

M/S. NATIONAL LAMINATION INDUS & ANR. Respondent(s)

(with office report)

Date : 07/10/2015 These appeals were called on for hearing today.

CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN

For Appellant(s) Mr. K. Radhakrishnan, Sr. Adv.

Mr. Sanjai Kumar Pathak, Adv.

Mr. Ritesh Kumar, Adv.

Mr. Aviral Kashyap, Adv.

Mr. B. Krishna Prasad,Adv.

For Respondent(s) Mr. K. L. Janjani,Adv.

UPON hearing the counsel the Court made the following O R D E R

The civil appeals are allowed in terms of the signed judgment.

(Ashwani Thakur) (Renu Diwan) COURT MASTER COURT MASTER

(Signed non-reportable judgment is placed on the file)