Shri Dharam Pal Aggarwal vs Commissioner Of Customs

[Arising out of Order-In-Original No. 04/Cus/2010 dated 24.5.2010 passed by Commissioner of Customs, Amritsar, Punjab]

For approval and signature:

Honble Mr Ashok Jindal, Member (Judicial)

Hon'ble Mr. R K Singh, Member (Technical)

1 Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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

4 Whether Order is to be circulated to the Departmental authorities?

Shri Dharam Pal Aggarwal Appellants

Shri Parveen Kumar

Shri Salil Kumar Magoo

Vs.

Commissioner of Customs Respondent

Delhi

Appearance:

Shri K K Sharma, Shri Tarun Chawla, Advocates for the Appellants

Shri Amreesh Jain, AR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. R K Singh, Member (Technical)

Date of Hearing /decision: 21.10.2015

FINAL ORDER NO. 53973-53975/2015-Cus(Br)

Per R K Singh :

These appeals have been filed by Shri Dharam Pal Aggarwal, Shri Praveen Kumar, proprietor of M/s. Praveen Kumar Hosiery and Shri Salil Magoo against order-in-original dated 24.05.2010 in terms of which the following order was passed:-

42(a). The imported goods i.e. 8,000 kgs of 100% Nylon Lurex Yarn imported vide Bill of Entry No. 4032 dated 24.10.2007, are ordered to be classified as 100% Nylon Lurex Yarn under CTH 56060090, instead of 100% Nylon Yarn under CTH 54021990, as declared by the noticee.

42(b) The total declared assessable value Rs.9,06,091/- of the goods i.e. 8,000 kgs. Of 100% Nylon Lurex Yarn, imported vide bill of entry No. 004032 dated 24.10.07, is rejected under Section 14 of the Customs Act, 1962 read with Rules 4 and 10A of the Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988 and enhanced to Rs.17,79,822/- under Section 14 of the Act and Rule 4 of Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988, as amended from time to time.

42(C) The goods i.e. 8,000 kgs, valued at Rs.17,79,822/00, imported vide bill of entry No.004032 dated 24.10.07 (i.e. 2,600 kgs. out of 8000 kgs of 100% Nylon Lurex Yarn, having actual re-determined assessable value of Rs.5,78,442/00 and the goods, i.e. 5,400 kgs of 100% Nylon Lurex Yarn, having re-determined assessable value Rs.12,01,380/-, seized in factory premises), imported through CFS Ludhiana, are confiscated under section 111(d), 111(o) & 111(m) of the Customs Act, 1962. However, in exercise of powers conferred upon me under section 125 of the Customs Act, 1952, I give the party an option to redeem the same on payment of redemption fine of Rs.4,50,000/00 (Rs.Four lacs and fifty thousand only).

42(d) Duty amounting to Rs.4,34,655/- leviable on reassessed value of Rs.17,79,822/00 is demanded and ordered to be recovered under the proviso to Section 28 of Customs Act, 1962 read with Notification No. 93/2004-Customs dated 10.9.2004 (as amended from time to time) alongwith interest payable thereon under section 28AB of the Customs Act, 1962.

42(f) I impose a penalty of Rs.4,34,655/- (Rs. Four lacs, thirty four thousand, six hundred and fifty-five only) on Shri Parveen Kumar (Noticee No. 1), Prop. of M/s. Parveen Kumar Hosiery, Ludhiana under section 114A of the Customs Act, 1962, I refrain from imposing penalty on Noticee No. 1 under section 112(a) and 112 (b) of the Act ibid.

42(g) I impose a penalty of Rs.2,00,000/00 (Rs.Two lacs only) on Shri Salil Kumar Maggo (Noticee No.2) s/o Parveen Kumar, Prop. of M/s. Parveen Kumar Hosiery, Ludhiana under section 112 (a) and (b) of the Customs Act, 1962.

42(h) Bank Guarantee No. 0506507BG0000295 dated 11.10.07 for Rs.2,00,000/- issued by State Bank of India and submitted by the Noticee to the Customs at Ludhiana against advance authorisation No. 3010053380 dated 08.10.2007, is ordered to be appropriated towards the duty & interest liabilities of the noticee.

43(a). The goods i.e. 10,000 kgs of 100% of 100$ Nylon Lurex Yarn imported vide Bill of Entry No. 118910 dated 31.12.2007 are classified as 100% Nylon Lurex Yarn under CTH 5606.0090, instead of 100% Nylon Yarn under CTH 540219890 as declared by the noticee.

43(b) The total declared assessable value Rs.11,26,958/- of the goods i.e. 10,000 Kgs. of 100% Nylon Lurex Yarn imported vide bill of entry No. 118910 dated 31.12.07 is rejected under Section 14 of the Customs Act, 1962 read with Rule 4 and 10A of the Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988 and enhanced to Rs.21,93,543/- under Section 14 of the Act & Rule 4 of Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988 as amended from time to time.

43(c) The said goods, i.e. 10000 kgs. of 100% Nylon Lurex Yarn having actual re determined Assessable value of Rs.21,93,543/- (seized at CFS, Ludhiana) which were imported vide bill of entry No. 118910 dated 31.12.07 through CFS, Ludhiana are confiscated under Section 111(d) and 111(m) of the Customs Act, 1962. However, in exercise of powers conferred upon me under section 125 of the Customs Act, 1962, I order the noticee to redeem the same on payment of redemption fine of Rs.5,50,000/00 (Rs.Five lacs and fifty thousand only).

43(d) Duty amounting to Rs.5,37,023/-, leviable on re-determined assessable value of Rs.21,93,543/-, is demanded and ordered to be recovered under the proviso to Section 28 of Customs Act, 1962 along with interest payable thereon under section 28AB of the Customs Act, 1962.

43(e) I impose a penalty of Rs.5,37,023/- (Rs.Five lacs, thirty seven thousand and twenty-three only) on Shri Parveen Kumar (Noticee No.1), Prop. of M/s. Parveen Kumar Hosiery, Ludhiana under Section 114A of the Customs Act, 1962. However, in terms of proviso to Section 114A of the Customs Act, 1962, I refrain from imposing penalty on Noticee No.1 under section 112(a) and 112(b) of the Act ibid.

43(f) I impose a penalty of Rs.2,50,000/00 (Rs.Two lacs and fifty thousand only) on Shri Salil Kumar Magoo (noticee No.2) s/o Parveen Kumar, Prop. of M/s. Parveen Kumar Hosiery, Ludhiana under Section 112 (a) & (b) of the Customs Act, 1962.

44. I impose a penalty of Rs.1,00,000/00 (Rs. One lac only) on Shri Dharam Pal Aggarwal (Noticee No.3), Prop. M/s. Shakti International, Ludhiana under section 112 (a) of the Customs Act, 1962.

45. I impose a penalty of Rs.1,00,000/00 (Rs.One lac only) on Shri Gagandeep Singh (Noticee No.4) s/o Shri Mohinder Singh, 166/2, Dr. Sham Singh Road, Ludhiana under Section 112(a) of the Customs Act, 1962.

46. This order is issued without pre-judice to any other action that may be taken against the noticee(s) under the Customs Act, 1962 or any other Act / law for the time being in force. 

2. The facts of the case are that the appellant M/s. Praveen Kumar Hosiery had taken advance authorisation as manufacturer exporter for duty free import of raw material, namely 100% nylon yarn (CTH 5402). Intelligence was received that it was importing 100% nylon lurex yarn (CTH 5602), mis-declared the description (as 100% nylon yarn) and value and cleared the same duty free under the said advance authorisation and was diverting it in the open market instead of using the same in the manufacture of export goods. It also came out during the investigation that the appellant did not have necessary machinery to carry out the manufacture of export goods, from 100% nylon yarn allowed to be imported duty free under advance authorisation and was also sending the differential amount to the supplier to cover undervaluation via hawala transaction. Shri Salil Kumar Magoo, son of Shri Praveen Kumar admitted in his statement that he was looking after the day to day business of M/s. Praveen Kumar Hosiery and admitted to not having manufacturing facility, mis-declaration, undervaluation, hawala payment and diversion of imported goods. Shri Dharampal Aggarwal was the indenter, who admitted that Shri Praveen Kumar had requested him that the description of yarn should be shown as 100% nylon yarn 1/14 NM in place of 100% nylon lurex yarn 1/14 NM and value should also be adjusted and accordingly he had asked the overseas supplier to do so. E-mails recovered from the computer of e-mail account of Shri Praveen Kumar clearly showed that the goods were under-valued and differential amount was remitted through hawala channels and even the evidence of hawala transaction was recovered. The persons from whom the (export) goods were claimed to have been got manufactured either denied having done so or stated that the goods manufactured by them were not made of 100% nylon lurex yarn. The samples drawn from the consignments clearly established that the goods imported were not 100% nylon yarn, but 100% nylon lurex yarn.

3. The appellants Shri Praveen Kumar and Shri SK Magoo (son of Mr. Praveen Kumar who admitted that he was looking after day-to-day functioning of M/s. Praveen Kumar Hosiery) have contended that 

(i) chemical test report was not trustworthy;

(ii) the goods can be got manufactured on job work basis;

(iii) M/s. Praveen Hosiery had some machinery in its unit and got some work done from job workers;

(iv) the statement of Shri SK Magoo was under duress;

(v) the test report in respect of Bill of Entry No.4302 was still awaited.

They questioned the statements given by various parties to the effect that they (i.e. various parties) did not manufacture goods for the appellant M/s. Praveen Kumar Hosiery or manufactured the same out of the domestically procured material.

Shri Dharam Pal Aggarwal contended that he had only indented one container and thereafter Shri Praveen Kumar started to deal with the supplier directly and he was not aware of mis-declaration or under-valuation.

4. Ld. Departmental Representative, on the other hand, referred to the impugned order to contend that the evidences available in this case show that the allegations were clearly sustainable and so the impugned order was sustainable.

5. We have considered the contentions of all sides. We notice that Shri Praveen Kumar and Shri SK Magoo, did not submit any reply to the Show Cause Notice nor appeared for personal hearing inspite of repeated opportunities. In these circumstances, for them to question the chemical examination report and that too without any basis at the stage of Tribunal can not be countenanced particularly when the chemical examination report is in conformity with the statements of Shri SK Magoo wherein he admitted that what was imported was 100% nylon lurex yarn and also the statement of Shri Dharam Pal Agarwal wherein he admitted that Shri Praveen Kumar had asked him that the goods should be described as 100% nylon yarn instead of 100% nylon lurex yarn and that he accordingly advised the supplier to do so. Shri Magoo also admitted that M/s. Praveen Kumar Hosiery did not have machinery to manufacture the export goods out of the 100% nylon yarn. Shri Magoo also admitted that the goods were under-valued and the differential amount was sent through hawala. He also clearly admitted that the goods were imported for diverting and were sold to various buyers.

Not only that, the job workers who, the appellant M/s. Praveen Kumar Hosiery, claimed to have manufactured the goods for it, categorically stated that they did not do so or the goods manufactured were from domestically sourced raw material. E-mails recovered from the appellants account corroborate these details. In his statement Shri Magoo, who is son of proprietor of M/s. Praveen Kumar Hosiery admitted that he was looking after the day-to-day functioning of M/s. Praveen Kumar Hosiery and in his subsequent statement, he admitted that the earlier statements dated 05.11.2007 and 06.11.2007 were correct and voluntary. Thus, his contention that the statements were taken under duress is totally untenable particularly when no evidence of duress / coercion is presented. It is seen that the e-mails as well as the evidence of hawala recovered during the investigation further corroborated the mis-declaration of description of goods as well as the value. It needs to be noted that M/s. Praveen Kumar Hosiery or Mr. Magoo did not submit any reply to the Show Cause Notice nor appeared for personal hearing.

Thus, the primary adjudicating authority did not have any arguments from their side to rebut. We find that the enhancement of value has been done on the basis of the concrete evidence of under-valuation found in various e-mails and on the basis of the contents of the statements of Mr. Magoo and Mr. Dharam Pal Agarawl and the evidence of hawala transaction. Thus, the enhancement of value has been done in accordance with the Customs Valuation Rules and do not suffer from any legal infirmity. All these evidences put together are clearly more than sufficient to establish and sustain the allegation contained in Show Cause Notice on the principle of preponderance of probability if not on the principle of beyond reasonable doubt. It is not in dispute that the goods (100% nylon lurex yarn) were not allowed to be imported under advance authorisation issued to the appellant M/s. Praveen Kumar Hosiery by Joint DGFT and further the said advance authorisation required the goods allowed to be imported (namely 100% nylon yarn) to be used in the manufacture of export goods under actual user condition.

Thus even if the goods imported were 100% nylon yarn, the same would not have been eligible for duty concession and would also have been liable to confiscation if the same were diverted and not used by the M/s Praveen Kumar Hosiery for manufacture of export goods. In these circumstances, liability of M/s. Praveen Kumar Hosiery and Shri Magoo to duty/ penalty is clear and evident. As regards the penalty imposed on Shri Dharampal Agarwal, he admitted in his statement on 16.02.2008 that he indented one consignment of nylon lurex yarn for M/s. Praveen Kumar Hosiery of 100% on the request of Mr. Praveen Kumar advised the supplier to misdeclare 100% nylon lurex yarn as 100% nylon yarn and also to undervalue the same. It is thus clear that Shri Dharampal Agarwal is clearly covered in the scope of Section 112(a) of the Customs Act, 1962 for inviting penalty thereunder. We find that having regard to the nature and magnitude of the offence and in view of the role played by the appellant, the penalties imposed are in no way disproportionate.

6. In view of the foregoing, we find that the order of confiscation and demand of duty and also imposition of penalties on the appellants ordered vide the impugned order are fully justified, reasonable and sustainable and therefore invite no appellate interference. Accordingly, the appeals are dismissed.

(Operative part of the order pronounced in the open Court)

(Ashok Jindal)

Member (Judicial)

(R.K. Singh)

Member (Technical)

ss

6. The appellant has essentially contended that

(i) acceptance of enhanced value does not preclude it from challenging the same by way of appeal.

(ii) The duty on the enhanced value was paid under protest.

(iii) The evidence of contemporaneous imports as reflected in the NIDB data cannot be the criteria for enhancing the value is the NIDB data does not have a column for declared price.

(iv) DRI alert was based on investigations which did not concern the appellant. Further DRI alert itself stated that it was a guideline.

(v) The assessment was arbitrary and illegal. The transition value should have been accepted and it can be rejected only in terms of Rule 12 of the Customs Valuation Rules, 2007. It refers to Section 14 the Customs Act, 1962 and various provisions of Customs Valuation Rules, 2007 to assert the point that there was no ground to reject the transaction value.

The appellant cited the judgements of the Supreme Court in the cases of Eicher Tractors Ltd. Vs. CC, Mumbai [2000 (122) ENT 321 (SC)], Tolin Rubbers Ltd. Vs. CC, Cochin 2004 (163) ENT 289 (SC) and Rabindra Chandra Paul CC (Prev.), Shillong [2007  TIOL  28  SC  Customs].

7. Per contra Ld. Department representative contended that (i) Rule 12 of the Customs Valuation Rules, 2007 provides for rejection of transaction value in case of reason to doubt the truth or accuracy of value declared and that there was sufficient ground in the present case to reject the transaction value under the shed rule. He relied upon the judgement in the cases of CC, Calcutta Vs. South India Television (P) Ltd. [2007 (214) ELT 3 (SC)], Gira Enterprises Vs. CC [2006 (196) ELT 92 (TriMumbai)], Techno Marketing Vs. CC, Kolkatta [2004 (164 ELT 113 (Tri  Del], Signal Bearing Co. Vs. CCE, Delhi-IV [2013 (293) ELT 284 (Tri-Del), Vikas Spinners CC, Lucknow [2001 (128) ELT 143 (Tri-Del)] and Grand Metal Industries Pvt. Ltd. Vs. CC (Prev), Amritsar [Final Order No.C/A/52569 52570/2015-CU(DB) dated 17.08.2015]. (ii) The value is enhanced not only on the basis of DRI Alert Notes dated 09.05.2011 but also on the basis of NIDB data with respect to similar goods imported during the contemporaneous period and therefore the enhancement of value was sustainable.

8. We have considered the contentions of both sides. The appellant is a regular importer of the impugned goods and in respect of imports of the impugned goods during the months of January and February, 2012, it declared the value which were less than the values declared in the Bills of Entry subject matter of the present appeals (like US$ 1.59/KG, US$1.58/KG etc) and had an unequivocally consented in writing to the assessable value of US$ 2.80/KG. In respect of the present appeals, we find that the appellant had categorically stated as under:-

We do not agree with the enhanced value and paying duty under protest. We do not want any Show Cause Notice/personal hearing. However speaking orders may be passed accordingly.

9. We find that the primary adjudicating authority passed a speaking order wherein it clearly stated that the declared values are liable to be rejected under Rule 12 of the Customs Valuation Rules, 2007 and relying on the recent past imports of the appellant itself assessed the value at US$ 2.80/KG, the Commissioner (Appeals) in a detailed order upheld the primary adjudication order.

10. The appellant has laid considerable stress on the point that there was no ground to reject the transaction value declared by the appellant.. We find that Section 14 (1) ibid clearly states that the value of the imported goods shall be the transaction value subject to such other conditions as may be specified in the rules made in this behalf. Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 clearly lays down that the assessable value shall be the transaction value subject to rule 12. Rule 12 of the said rules clearly states as under:-

12. Rejection of declared value. -

(1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3.

(2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).

11. In the present case, there existed DRI alert Notes and also NIDB data to doubt the declared value. Indeed Explanation (iii) in the said Rule makes it clear that in the sector stances it was totally reasonable to doubt the transaction value. Indeed the Ld. advocate for the appellant during the arguments conceded that there existed reasonable doubt to reject the transaction value but he questioned the enhancement of value saying that there was no legal basis for doing so. Thus none of the judgements cited by the appellant come to its rescue in as much as rejection of the transaction value was clearly within the competence of the primary adjudicating authority.

12. Having thus justifiably doubting the transaction value and rejecting the same for that reason, the primary adjudicating authority relied on the DRI alert circular and the NI DB data of contemporaneous reports to enhance the assessable value. We find that in the case of Techno Marketing Vs. CC Kolkatta (supra) it was held that letter written by one Commissioner to another indicating value of various brands of loudspeakers arrived at after considering prices observed in trade and from other sources can be relied upon for valuing loudspeakers. In the present case also DRI alert was issued based upon a thorough analysis including concrete evidence recovered during investigations conducted against various importers. Not only that in the case of appellant itself the imports made during the months of January and February, 2012 were assessed at US$ 2.80/KG and that too with the consent of the appellant. We find that in the present case, the appellant gave it in writing that although it did not agree with the enhanced value, it was paying duty under protest and did not want any Show Cause Notice/personal hearing.

It clearly means that the appellant did not want to counter/contest the grounds on which the enhancement was supposed/made. Having voluntarily foregone its right to contest the grounds on which the enhancement was made, its inability/freedom to contest the enhancement gets severely restricted save when the enhancement is arbitrary or absurd. In the case of Signal Bearing Co. Vs. CCE, Delhi-IV (supra) it was held that guidelines for valuation of ball bearing issued by the mission of Customs Mumbai take into account average cost of material, wastage, manufacturing cost and other charges after extensive studies with cooperation/involvement of other digital authorities, prices observed in trade as well as other sources had legal bearing on assessment of ball bearings. The judgement of CESTAT in the case of Balaji International/Artex textiles (the appellant) No.C/A/52570  52612/2014 dated 19.06.2014 is of no avail because the judgement does not lay down any ratio at all and in the nature of summary observations/conclusions. It is settled law that what is binding is the ratio of a judgement we find that CESTAT vide Fnal Order No. C/A/57593-57594/2013 dated 25.07.2013 rejected Revenues appeal enhancing the value observing that the case was covered __________ a judgement number A/1382/1390/13/CSTB/C-I dated 27.06.2013.

However, we find that CESTAT judgement dated 27.06.2013 proceeded on the facts that the adjudicating authority has assessed the value without assigning any reason and that there was no basis to form a view to reject the transaction value and the authority did not pass a speaking order. None of these inadequacies exist in the present appeal. In the present appeal, sufficient ground exists for rejecting the transaction value as discussed earlier, and a speaking order has been passed for enhancing the value. The primary adjudication order is not a detailed one because the appellant did not want to reply the Show Cause Notice or appeared for hearing and therefore there was no arguments to rebut from the appellants side. The appellant cited the judgement of Supreme Court in the case of Eicher Tractors (supra) and Dunlop India Ltd. Vs. Union of India [1983 (13) ELT 1566 (SC)]. In the case of Dunlop India Ltd (supra) the issue was classification of goods and the Supreme Court essentially stated that even when the goods are cleared under the classification consented by the assessee, assessee was not debarred from seeking refund.

This judgement did not in any way mean that the refund shall be necessary granted only because assessee questioned the classification earlier agreed to buy it. in the case of Eicher Tractors Ltd. and South India Television (supra) the Supreme Court clearly held that valuation has to be determined in accordance with the customs valuation rules. This legal position is well settled. In the present the appellant voluntarily give up its right to have a Show Cause Notice or personal hearing and therefore the primary adjudicating authority did not have any contentions/pleadings/arguments which it needed to counter. Even so the 1st appellate authority has dealt with the issue of rejection of transaction value is also the enhancement of value in fairytale when the show cause notices/hearing is expressly foregone, the appellants liberty to question the impugned order gets considerably restricted save when the impugned orders are absurd or arbitrary. This issue is deliberately discussed in CESTAT judgements in the case of Grand Metal Industries (supra) and DJP International Vs. CC, New Delhi [Final Order No. 52361/2015 dated 01.07.2015], wherein the implication for consenting for enhancement of value and of foregoing the requirement of a show cause noticeably personal hearing have been discussed.

The other case laws cited by the appellant adversely impinge upon the reasoning above. It is worth noting that the value has been enhanced to US$ 2.80/KG when the declared value was US$ 1.90/KG to US$ 2.03/KG while imports made by the appellant itself were cleared during months of January and February, 2012 at the same date (US$ 2.80/KG) with the full consent of the appellant when the value declared was for example US$1.59/KG, US$ 1.58/KG. It shows that the price of the impugned goods did not decline from January/February, 2012 to April, 2012 (when the impugned imports took place). Therefore, to enhance the value to the same level at which the goods were assessed in the appellants own case and with his consent when imported just a couple of months earlier can in no way be called unreasonable comparison with contemporaneous imports. As has been held in the case of DJP International (supra) when the value is consented voluntarily, it becomes the transaction value declared by the importer.

13.. In the light of the foregoing discussion, we do not find any such infirmity in the impugned order so as to invite appellate intervention. The appeals are therefore dismissed.

(Operative part of the order pronounced in the open Court)

(Ashok Jindal)

Member (Judicial)

(R.K. Singh)

Member (Technical)

Ss

It needs to be noted that M/s. Praveen Kumar Hosiery or Mr. Magoo did not submit any reply to the Show Cause Notice nor appeared for personal hearing. Thus, the primary adjudicating authority did not have any arguments to rebut. We find that the enhancement of value has been done on the basis of the concrete evidence of under-valuation to the extent of it found in various e-mails and on the basis of the contents of the statements of Mr. Magoo and Mr. Dharam Pal Agarawl and the evidence of hawala transaction. Thus, the enhancement of value has been done in accordance with the Customs Valuation Rules and do not suffer from any legal infirmity.

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