Shri Mangilal Ranka vs Commissioner Of Customs (Import), ...

(Arising out of Order-in-Appeal No. 58 to 61/2007/MCH/AC/CC dated 17.4.2007 passed by the Commissioner of Customs (Appeals), Mumbai-I).

For approval and signature:

Honble Shri Anil Choudhary, Member (Judicial) Honble Shri P.S. Pruthi, Member (Technical)

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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 : Yes 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? ======================================================

Shri Mangilal Ranka Shri Harish Turakhia Shri Jayesh Turakhia Appellant

Vs.

Commissioner of Customs (Import), Mumbai Respondent

Appearance: Shri Anil Balani, Advocate for Appellant

Shri Ahibaran, Addl. Commissioner (AR) for Respondent

CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) SHRI P.S. PRUTHI, MEMBER (TECHNICAL)

Date of Hearing: 07.01.2015

Date of Decision: .2015

ORDER NO.

Per: Shri Anil Choudhary

The present appeals have been filed by the appellant against Order-in-Appeal No. 58 to 61/2007/MCH/AC/CC dated 17.4.2007 passed by the Commissioner of Customs (Appeals), Mumbai-I.

2. The issue relates to valuation of 10 varieties of Integrated Circuits and 6 varieties of transistors imported under Bill of Entry dated 8.9.2003. The consignment was examined by the Customs in normal course. Values of 8 out of 16 items were enhanced or loaded and the duty was assessed. Further investigation was taken up on 17.9.003 and the consignment was again examined by the Appraiser of Customs under supervision of DRI. On such examination, it was found that the goods are as per the description/quantity and Country of origin was found as declared in the Bill of Entry and the invoices etc. Thus, it was found that M/s Krunal Corporation of Rajkot, Gujarat have imported in all following electronic components from Singapore: -

(1) National Integrated Circuits 318 Japan Origin - 600 pcs.

(2) National Integrated Circuits 0800 Japan Origin - 1100 pcs.

(3) National Integrated Circuits 818 Thailand Origin - 700 pcs.

(4) National Integrated Circuits 2930 Malaysian Origin - 1035 pcs. (5) National Integrated Circuits 2931 Malaysian Origin - 1035 pcs.

(6) Intersil Integrated Circuits 232 China Origin - 10000 pcs.

(7) Intersil Integrated Circuits 7107 China Origin - 10000 pcs.

(8) Intersil Integrated Circuits 7135 China Origin - 5000 pcs.

(9) National Integrated Circuits 27C010 Korean Origin - 1089 pcs.

(10) National Integrated Circuits 329 Malaysian Origin - 2000 pcs.

(11) IRF Transistors 530 Mexico Origin - 10000 pcs. (12) IRF Transistors 640 Mexico Origin - 13500 pcs. (13) IRF Transistors 840 Mexico Origin - 12000 pcs. (14) IRF Transistors 150 Mexico Origin - 10000 pcs. (15) IRF Transistors 540 Mexico Origin - 24000 pcs. (16) Integral Mini Transistor 2646 Belarus Origin - 15000 pcs.

2.1 The DRI, Mumbai further requested its counter part at Jamnagar to verify the address of the importer, M/s Krunal Corporation and carry out further investigation, wherein report was received from the DRI, Jamnagar that the said firm is proprietorship concern of Jayesh Vithaldas Turakhia and he had been found in the given address. In the statement recorded of Jayesh V Turakhia, he said that he had opened this firm and started business about six months back and had obtained IEC No. 2402001780 from DGFT, Rajkot. He further stated that all the documents regarding the import are available in Mumbai office of one Harish Bhai Turakhia. He further stated that prior to venturing in export-import business, he was in the business of manufacture of artificial jewellery.

2.2 Further, the Revenue found that in the Bill of Lading in respect of the said goods, freight and insurance have been shown as Nil, which indicate that freight and insurance must have been borne by the supplier located at Singapore. It further reduced the FOB price and as such the case of under-valuation was prima facie made out.

2.3 The investigation also revealed that the said JV Turakhia, proprietor of M/s Krunal Corporation was a dummy or name lender and was getting some commission from Harish Bhai Turakhia towards the same. Finally, the consignment was taken under seizure on 14.10.2003 and the office premises of Harish Bhai Turakhia was searched on 10.10.2003 and during such search file of M/s Krunal Corporation was found and taken over. In the statement recorded under Section 108, Mr. Harish Turakhia stated that he is doing business of license transfer on brokerage basis and during the course of his business as broker, he came in contact with Shri Mangilal Ranka an importer of electronic components situated at Mumbai. That the said Shri Mangilal Ranka, appellant herein was importing electronic goods by using the IEC code of the said Mr. Jayesh Turakhia, properitor of M/s Krunal Corporation. Theeafter, statement of said Shri Mangilal Ranka was recorded on 16.1.2004 wherein he inter alia stated that he is Director of company M/s Regency Semiconductors Pvt. Ltd. situated at Lamington Road, Mumbai, in which he is doing business of electronic components. Pursuant to import, the electronic components are sold by them to the traders and they maintained the purchase and sale records and they are assessed to Sales Tax. It was further claimed by the said appellant - Mangilal Ranka that he is actual importer and have financed the import under the Bill of Entry, in question. Further, Shri Ranka offered to pay differential duty on the basis of evidence collected by the Revenue and to furnish the Bond of actual value of the consignment. He confirmed that he is importer and/or financier of the goods imported in the name of M/s Krunal Corporation. Further, the Revenue enquired as to the contemporaneous prices of the electronic components seized and it was evident from the import invoice that IC of National Brand, Intersil Brand have been imported among others. The Revenue has made enquiry from the market from dealers and distributors of the similar goods and received the quotations. The Revenue has also enquired into some contemporaneous imports, recorded in para 36 and 39 of the Order-in-Original.

2.4 The Revenue felt that the importer has been unable to adduce any evidence to justify the declared transaction price as normal transaction price. The invoices submitted by the importer were held to be tallied with various importers whose import value compared with genuine authorized dealers, as reflected by the sale price ascertained from one M/s Singodia Electronics (P) Ltd., New Delhi and M/s Shreeji Sales Corporation, Pune and accordingly was lower, the Revenue rejected the transaction value and re-assessed the transaction value to Rs.18,56,418.78 as per Annexure-B to the show-cause notice and estimated duty liability of Rs.5,85,917/- and accordingly, the Revenue called the case as of mis-declaration of the value and the differential duty was worked out to Rs.5,53,322/-. Accordingly, a show-cause notice dated 4.3.2004 was issued to the appellants and the CHA as to why not the transaction value at Rs.99,530.66 shown in the invoices and under Bill of Entry, be not rejected and the price of the goods at Rs.18,56,418.78 should not be taken as the correct transaction value under Rule 5 of the Customs Valuation rules, 1988, read with Section 14 of the Customs Act and as to why not the goods not be held liable to confiscation under Section 111(m) of the Customs Act, 1962 and further an amount of duty short paid Rs.5,53,322/- be not recovered along with interest and why not further penalty be imposed.

2.5 The appellants appeared and contested the show-cause notice, the same was adjudicated vide Order-in-Original dated 11.10.2006 rejecting the transaction value as shown in the Bill of Entry under Rule 10A of the Customs Valuation Rules, 1988 and the price of identical goods as mentioned in Annexure-B to the show-cause notice was taken as correct transaction value under Rule 5 of Customs Valuation Rules, 1988. Further, the goods were held liable to confiscation with option to redeem on payment of redemption fine of Rs.5 lakhs. Further, differential duty was assessed at Rs.5,53,322/- along with interest and further penalty of Rs.2 lakhs were imposed on the importer Shri Mangilal Ranka under Section 112(a) of the Customs Act. Penalty of Rs.1 lakh each was imposed on the purported importer M/s Krunal Corporation and its proprietor Mr. Jayesh V Turakhia and further penalty of Rs.1 lakh on Harish T Turakhia under Section 112(a) of the Customs Act.

2.6 Being aggrieved, the appellants preferred appeals before the Commissioner (Appeals). The grounds raised before the Commissioner (Appeals) were that the value adopted by the Revenue is wrong. The appellants relied on the contemporaneous imports of the same items whereas the basis of valuation adopted by the Revenue was quotations which are only offer for sale and are not reliable. That, no proofs of additional payments were brought out in the investigation having been made by the appellant, for the imports of the goods in question. Further, the goods were already loaded and cleared in the original assessment, after filing of Bill of Entry and the Revenue has attempted to further load a second time without any corroboration for the same. It was also contended that Customs were still clearing the goods at the rate they were declared and the show-cause notice did not allege any differentiation in the items.

2.7 The learned Commissioner (Appeals) rejected the appeal and held that the Counsel, for the appellants has contended that the higher prices quoted by the dealers can at the most be taken as justification for higher prices billed by them for their sales to ultimate consumers. The question of billing at a higher price does not arise as the import of the goods has not been completed nor is there the question of reaching them to the ultimate consumers. The quotations of the dealers relied upon by the Revenue are the prices at which they themselves were importing or could have been imported from their principals. At this stage also, the goods are not billed for ultimate consumers but are the prices at the import level and are, therefore, relevant. It is seen that valuation arrived at under Rule 4(1) of Customs Valuation Rules, 1988, as per Rule 3(2), the value should be determined by proceeding sequentially through Rule 5 to 8 and conversely if the transaction value can be determined under Rule 4(1), and does not fall under any exception in Rule 4(2), there is no question of determining the value under subsequent Rules. Thus, the present case follows the law as laid down in the case of M/s Eicher Tractors  2000 (122) ELT 321. Accordingly, the adjudication order was held to be legal and proper.

3. Being aggrieved, the appellants preferred the appeal before this Tribunal on among others the following grounds that the Commissioner (Appeals) has failed to appreciate that the Bill of Entry was provisionally assessed. As such, notice under provisions of Section 28 of the Customs Act is not sustainable in case where the Bills of Entry are provisionally assessed. Accordingly, the duty assessed is not sustainable.

3.1 The Commissioner (Appeals) have failed to appreciate that the value of the goods declared under the Bill of Entry is the transaction value under Rule 4 read with Section 14 of the Act. It is settled law as held by the Apex Court in the case of Eicher Tractors Vs. Commissioner  2000 (122) ELT 321, wherein it was held that when the transaction value is rejected then under Rule 3(2), the value shall be determined by proceeding sequentially through Rule 5 to 8. Conversely, if the transaction value can be determined under Rule 4(1) and the transaction does not fall under any of the exceptions as per Rule 4(2), there is no question of determining the value under the subsequent Rules. In the facts of the case of the appellant, there is no allegation that the transaction value is prescribed under Rule 4(2) of the CV Rules. As such, it was incumbent upon the authority to have accepted the declared value.

3.2 The Commissioner (Appeals) has further failed to appreciate that the show-cause notice proceeded on a mere suspicion and surmise based on statements of Shri Jayesh V Turakhia and Shri Harish Turakhia and further suspicion was created as the appellant Shri Mangilal Ranka claimed the ownership of the said goods. The appellant had explained the circumstances for claiming the ownership in the fact that although he was only a financer, but as the goods were discovered by Jayesh Turakhia, in the facts and circumstances he had no other choice but to claim the ownership of the goods in question.

3.3 The learned Commissioner (Appeals) has failed to appreciate that suspicion, howsoever grave, cannot be a substitute of proof and that a case of undervaluation cannot be made out only on the basis of suspicion. It is further contended that in the course of examination by the DRI, the goods were found as per description in the Bill of Entry. The Customs authority failed in accepting the value as declared in the Bill of Entry, for the goods in question, imported by other importers. Tables running into 6 pages contained details of such contemporaneous import were placed on record in the adjudication proceedings pertaining to the period Jan, 04 to March, 04. The said examples of contemporaneous import were obtained from NIDB websites, which give details like Bill of Entry No., name of the importer, description of goods, country of origin, value assessed etc. by the Customs at Mumbai. In view of such evidence on record, the rejection of transaction value is fit to be held unjustified and bad. The Commissioner (Appeals) has also not considered the same.

3.4 It is further pointed out that quotation letters relied upon by the Revenue are not reliable, and fit to be discarded. Further, the Bill of Entry relied upon by the Revenue are in respect of different quantities and/or country of origin. It is further contended that the Revenue have failed to prove the case of undervaluation and accordingly, has not discharged its onus. The under-valuation arrived at by the Revenue ignoring the country of origin and the quantity, have rendered their finding perverse and not reliable, is thus fit to be set aside. Reliance is placed on the ruling in the case of Nitee Trading Company Vs. Commissioner of Customs (Sea), Chennai  2003 (161) ELT 279 (Tri-Chennai), Makalu Trading Ltd. Vs. Commissioner of Customs, Mumbai  2014 (310) ELT 622 (Tri-Mum). The appellant further relies on ruling of the Hon'ble Kerala High Court in the case of Karnvir Mehta Vs. Commissioner of Customs, Cochin  1998 (97) ELT 42 (Ker), wherein it has been held that quotation and letters cannot be relied upon for discarding the transaction value.

3.5 The appellant further contended that where contemporaneous import data is available, the lowest value of the contemporaneous import of the goods is to be considered, if different contemporaneous prices are available. Reliance is placed on the Tribunals decision in the case of Agarvanshi Aluminium Ltd. Vs. Commissioner of Customs (I), Nhava Sheva  2014 (299) ELT 83 (Tri-Mum).

3.6 The appellant further states that the declared value cannot be rejected merely on the basis of import by another party at the higher price without any other corroborating evidence or incriminating evidence on record. The appellant have also field the comparative chart showing the item wise description of the goods as mentioned in the Annexure-B to the show-cause notice, comparing with the evidence relied upon by the Revenue for enhancement of the value giving the specific reason in each case, without giving the reason for rejecting the declared value.

3.7 The appellant also relies on the ruling of the Hon'ble Supreme Court in the case of Mirah Exports Pvt. Ltd. Vs. Collector of Customs  1998 (98) ELT 3 (SC), wherein it has been held that in case of under-valuation, burden is on Revenue to prove the charge based on evidence or the agreements and what needs to be examined is whether the Revenue have succeeded in showing that apparent is not the real and that the price shown in the invoices does not reflect the true sale price. The Hon'ble Supreme Court have further held that quantity discount is allowable and it is not unusual for foreign supplier to give a higher discount to an importer who is importing in much larger quantity.

3.8 The learned Counsel further relies on the ruling of the Division Bench of this Tribunal in the case of Makalu Trading Ltd.  2014 (310) ELT 622, wherein it has been held that in the case of contemporaneous import from different country of origin, the same cannot be treated as contemporaneous price and the decision of the Tribunal in enhancing the value is not sustainable in law.

3.9 The appellant further relies on the Division Bench ruling of this Tribunal in the case of Commissioner of Customs, New Delhi Vs. Grover Imports  2003 (162) ELT 992 (Tri-Del), where in the case of rejection of transaction value, it was held that the Revenue authority has to be established with the help of specific imports that goods comparable in physical characteristics, quality, reputation, country of origin and time of import are being imported at higher value. The finding that the evidence was not adduced to show that the invoice value was much lower than the value of contemporaneous imports, it was held that the finding of the Commissioner (Appeals), rejecting the transaction value is unjustified was upheld. Accordingly, the appellant prays for allowing the appeals and setting aside the impugned order.

4. The learned AR for the Revenue, Mr. Ahibaran, relies on the impugned order. He further states that the modus operandi for import adopted, indicates to under-valuation and as such prays for dismissal of the appeal.

5. Having considered the rival contentions, we hold that the assessable value cannot be determined on the basis of quotation. Quotations are merely indicative price having no relevance as to the Country of Origin, which is admittedly not mentioned on the quotation. With respect to the IC No. 0800HCN, (Sr. No. 2 of Annexure-B to show-cause notice), the Revenue has relied on the NIDB website, wherein the number of ICs are not reflected at all, whereas under the Bill of Entry, the Country of Origin is other than Japan. In the case of Bill of Entry No. 655048 relied upon by the Revenue, copy of the same have not been supplied to the appellant leading to violation of principles of natural justice and the finding is thus perverse. In another Bill of Entry as relied upon by the Revenue, the quantity is only 300 of M/s Shreeji, whereas the quantity imported by the appellant is 10,000 and there is also difference in Country of Origin. It is something different and/or short with respect to comparison adopted by the Revenue for the purpose of under-valuation. Considering the facts on record, we find that the Revenue has not discharged the burden to establish under-valuation as required under the Customs Valuation Rules, 1988. In this view of the matter, we reject the value adopted by the Revenue. As a result, the impugned order is set aside. The appellant shall be entitled to consequential relief, in accordance with law. In case any refund arises by way of consequential relief, the same shall be payable to the appellant Shri Mangilala Ranka, who has been accepted to be owner and importer of the goods by the Revenue. The Bank Guarantee furnished shall also be released forthwith.

(Pronounced in Court on )

(P.S. Pruthi) (Anil Choudhary) Member (Technical) Member (Judicial)

Sinha

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