Sanjay Kumar Agarwal vs Commissioner Of Customs, Mumbai

(Arising out of Order-in-Original No. 17/2013/CAC/CC(G)/PKA/ICD (M) (I), dated 14.2.2013 passed by the Commissioner of Customs (Gen & ICD), Mulund, Mumbai )

For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical)

Honble Mr. Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Sanjay Kumar Agarwal : Appellant Balaji International

VS

Commissioner of Customs, Mumbai : Respondent

Appearance

Dr. Prabhat Kumar, Advocate for Appellant

Shri M.K. Sarangi, Joint Commissioner (A.R) for respondent

CORAM:

Mr. P.S.Pruthi, Member (Technical) Mr. Ramesh Nair (Judicial)

Date of hearing : 22/07/2015 Date of pronouncement : 13/08 /2015

ORDER NO.

Per : P.S. Pruthi

These appeals are directed against Order-in-Original No. 17/2013/CAC/CC(G)/PKA/ICD (M) (I), dated 14.2.2013.

2. The appellant filed Bill of Entry dt. 4.6.2008 for import of Flex Sheeting Frontlit and Flex Sheeting Backlit from M/s. Grand Dignity Industrial Co. Ltd., Taiwan declaring the price as US$ 1100 PMT and US$ 1200 PMT respectively. On examination of the goods the following was noticed -

(a) Goods were found to be of Star Flex brand made in Korea as against unbranded as declared in the Bill of Entry.

(b) 2052 rolls Flex were found as against the declared 2044 rolls.

Doubting the declared transaction value, the department obtained a quotation from M/s.Max Flex & Imaging Systems Pvt. Ltd., Mumbai. From the quotation of retail sale prices, the assessable value was worked out to be US$2520 and US$ 3520 PMT respectively. The differential duty was determined to be Rs.15,15,319/-. The proprietor Shri Sanjay Kumar Agarwal in his statements dt. 22.02.2011, 19.06.2008 and 13.8.2008 agreed with the retail rates mentioned in the quotation. He also agreed that the prices of goods imported by him during 2008 would be around 85% of the prices listed in the quotation and the prices of the goods imported in 2007 would be around 75% of the prices listed in the quotation. On this basis, the assessable value were determined to be US$ 1890 PMT and US$ 2640 PMT for the year 2007 and US$ 2142 and US$ 2992 for the year 2008 for Frontlit/Backlit Sheeting respectively. Accordingly, differential duty of Rs.1,06,59,598/- was demanded for the imports made in 2007 and 2008. In adjudication, the Commissioner redetermined the assessable values as above, confirmed the duty demands, confiscated the goods imported under B/E dt. 4/6/2008with option to redeem on payment of redemption fine and imposed penalty under Section 114A on the first appellant and under Section 112(a) & 114AA on the proprietor, the second appellant.

3. The Ld. Counsel for the appellant stated that no rational method whatsoever has been followed in redetermining the value of the live consignment as well as the past consignments. He referred to the following Supreme Court judgment holding that there must be contemporaneous evidence to reject the invoice value.

i) Commissioner of Customs, Calcutta Vs. South India Television (P) Ltd. 2007 (214) ELT 3 (.C.)

ii) Commissioner of Customs, Mumbai Vs. J.D. Orgochem Ltd. 2008 (226) ELT 9 (S.C.)

iii) Commissioner of Customs, Vishkhapatnam Vs. Aggarwal Industries Ltd.

2011 (272) ELT 641 (S.C.) He stressed the supplier of the goods was merely a Distributor. The appellant in his letter to Assistant Commissioner of Customs dt. 26.6.2008 had submitted a copy of the Sales contract with the supplier/distributor, commercial invoice of the manufacturer from Korea to their supplier which shows the invoice values to be US$ 1100 and US$ 1200 PMT respectively of Frontlit/Backlit Sheeting as well as the copy of the LC opened by the supplier on Korean manfuacturer, and copy of letter from supplier that they are an order booking agent for the Korean Co. and get commission from the Korean Co. With these documents the Ld. Counsel contended that the quotation on which the whole case is made is totally unreliable. It does not give the country of origin or the size of the Flex Sheeting. To buttress his argument that quotation cannot be become a basis of determining assessable value under the Customs Act, he relied on the following judgments:

i) Rashtriya Metal Corpn. Vs. Commissioner of Customs, Nhava Sheva 2004 (172) E.L.T. 380 (Tri.-Mumbai)

ii) Commissioner of Customs, Mumbai Vs. Ridhi Sidhi Furniture Fitting Co. 2002 (144) E.L.T. 444 (Tri. - Mumbai)

iii) Krishna Trading Co. Vs. Commissioner of Customs, Calcutta 2001 (137) ELT 429 (Tri.Kolkata)

iv) Commissioner of Customs, Chennai Vs. Shakthi Trading Co.

2003 (160) E.L.T. 225 (Tri.-Chennai)

3.1. He also stated that the import has been made at prices which are in consonance with the floor prices fixed by the Commissioner of Customs vide F. No. SVC/04/08 dated March 2008. According to him, as per Valuation Rules contemporaneous prices can only be considered within a period of 90 days. He relied on Tribunal judgment in the case of United Steel Bearing Vs. Commissioner of Customs, Calcutta 2002 (139) E.L.T. 642 (Tri.-Kolkata). He added that the burden of proof lies on the department which has not been discharged while rejecting invoice values.

3.2. Ld. Counsel said that statement alone cannot be relied for enhancement of value. He relied on Tribunal judgment in the case of Orient Enterprises, New Delhi Vs. Collector of Customs, Cochin 1986 (23) ELT 507 (Tribunal). He mentioned that the department refused cross-examination of the company which gave the quotation.

4. Ld. A.R. reiterated the findings in the adjudication order.

5. We have carefully considered the facts of the case and submissions made. It is indeed surprising that the whole case has been made on the basis of one quotation. The value has been determined by proceeding sequentially through the Valuation Rules. No contemporaneous data was available. Therefore, as the value could not be determined under Rules 4,5,7 & 8, resort was made to Rule 9 residual method. And as a residual method, by way of best judgment the quotation has been made the basis. We have seen the quotation. We agree with the Ld. Counsel that this quotation is not reliable. It does not mention the country of origin. It does not mention the sizes of the goods. Further it states that the price offered is applicable from 16.7.2008. The Ld. Counsel contended that Star Flex is not a brand. No reasoned response to this claim is given by the Commissioner. We do not understand why a proper quotation could not be taken by the department. And why quotations or actual sale invoices could not be obtained for the prior periods? There is a fundamental flaw in the manner of obtaining quotation in that the market enquiry was not conducted in the presence of the appellant or their authorized representative. This amounts to violation of natural justice. The department could have at least verified from two or three more sources for credible evidence. From the procedure adopted, it seems the Department was not serious in conducting investigations through a proper market enquiry. For authentic enquiries the department should have at least sought the purchase invoices and the sale invoices of M/s. Max Flex & Imaging System Pvt. Ltd. to lend credibility to their evidence. A sample of goods in respect of which quotation was taken should have at least been shown to establish that the goods in the quotation and the sample are identical in brand, country of origin, specifications, quantities etc. It is for this reason that the appellant sought cross-examination of the Director of M/s. Max Flex & Imaging System Pvt. Ltd. but the same was denied unjustifiably. Commissioner has brushed away this plea by relying on judgments which are unrelated to the facts in this case. He has missed the crucial point that cross-examination of Max Flex was sought and not of Sanjay Agarwal. The Ld. Advocate has correctly relied on judgments referred to in para 3 above.

5.1. The appellant submitted sales invoices in respect of goods imported by them but these documents were not considered appropriately and no cogent reason was given to discard the value shown in these invoices. Even the VAT return filed with Sales Tax authorities was not considered. A mere quotation is vastly different from commercial invoice in the eyes of law. Thus, we find that the reliance on the quotation is not acceptable and the determination of value on the basis of this quotation is bad in law. We are supported by the CESTAT judgment in the case of Krishna Trading Co. (supra).

5.2. We also find that the declared value is comparable to the floor price fixed by the Commissioner of Customs. Therefore substantial evidence has to be brought forth to conclude that the declared prices are not true. Once the department has fixed the floor prices in March 2008, it is not possible to reject the declared value at the same level without any cogent evidence.

6. The Valuation Law under Section 14 read with the Valuation Rules provide a proper method to determine the assessable value if there is a doubt regarding the accuracy of the declared value. A mere suspicion is not enough to reject the transaction value. In the present case the department relies on a quotation without checking whether Star Flex is a Brand or not. The test of satisfying criteria under Rule 4(2) of the Valuation Rules must be passed first before seeking to enhance the value. It has not even been explained how contemporaneous data was not available. Fixing of floor prices indicates that the goods are frequently imported . A question arises why floor prices should be fixed if there are no other imports. Transaction value cannot be rejected on basis of a quotation which gives domestic retail sale price. If this were to be accepted, it would cause unimaginable distortion in interpreting the Valuation Law.

7. The only other evidence on the basis of which undervaluation is sought to be established is the statement of the Proprietor. We find that the statement was also retracted in August 2008 but the department did not issue any rebuttal on the retraction. It has been held by the Tribunal that although the statements under Section 108 are admissible in evidence, their evidentiary value has to be gauged in the circumstances of the case as held in Orient Enterprises Vs. Collector of Customs 1986 (23) ELT 507 which is a decision of three Member Bench. In the present case, we find that the evidence in the form of the quotation is not reliable and, therefore, the statement recorded is not supported by any evidence.

8. As regards the issue of excess rolls, we find the percentage of excess miniscule. Moreover the duty is on specific rate basis i.e. on weight basis. And the weight was declared correctly. We see no mischief or any attempt to evade duty. Therefore we hold that confiscation is not warranted.

9. We would like to add that the Ld. Advocate has presented a plethora of judgements to substantiate every aspect of his arguments. But we do not think it necessary to go into all these judgements. It would suffice to say as discussed above that the Revenues case suffers from too many infirmities both in fact and in law. Accordingly, we hold that the re-determined values are unsustainable in law. Consequently confiscation, the demands of duty and penalties are set aside.

10. Appeals are allowed with consequential relief if any.

(Pronounced in court on 13/08/2015)

(Ramesh Nair) Member (Judicial)

(P.S.Pruthi) Member (Technical)

SM.

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