2013 (8) TMI 775 - AT - Customs

Tribunal Upholds Decision Dismissing Revenue's Appeal for Lack of Evidence

The Tribunal upheld the adjudicating authority's decision, dismissing the Revenue's appeal due to insufficient evidence to prove undervaluation or ... Undervaluation of Duty Demand – Interest and Penalty - Revenue was of the view that both Di-Octyl Phthalate (DOP) and Di-2-Ethyl Hexyle Phthalate (DEHP) were the same compounds and they started importing the goods adopting a new name with the purpose of undervaluing the goods with an intention to evade Customs duty – Held that:- veracity of the contentions of the revenue was not verified by investigations – there was no merit in the argument that the Commissioner, while adjudicating the SCN, erred in studying the literature on DnOP and then concluding that DOP and DEHP were different products. The evidences produced by Revenue can at best create a doubt but cannot prove a case of undervaluation because of three main reasons - Firstly, the case was made about quality of goods which were already cleared and there were no samples of goods available to prove or disprove the rival submissions about quality - Secondly, no investigations were carried out about the claim that the goods in question were in fact sold at low prices, corresponding to the Import prices, to end users - Thirdly, there was no proof of remittance of any additional amount by the importer to the supplier abroad - no reason to interfere with the order passed by the adjudicating authority and the same was upheld – Decided against Revenue. Issues Involved:1. Alleged undervaluation of imports.2. Synonymity and quality difference between Di-Octyl Phthalate (DOP) and Di-2-Ethyl Hexyle Phthalate (DEHP).3. Evidence and statements supporting the Revenue's and Respondents' claims.4. Adjudicating authority's observations and conclusions.5. Committee of Chief Commissioners' objections to the adjudicating authority's order.6. Final decision on the appeal by the Revenue.Issue-wise Detailed Analysis:1. Alleged Undervaluation of Imports:Revenue alleged that three importers undervalued imports of certain plasticizers from M/s. LG Chem, Korea, during 2003-04. The Show Cause Notice (SCN) demanded duty totaling Rs. 3,40,36,777/- along with interest and penalties. The Commissioner, however, dropped the proceedings against the importers and the concerned CHAs, leading to the Revenue's appeal.2. Synonymity and Quality Difference Between DOP and DEHP:The Revenue's case was based on the assertion that DOP and DEHP are synonymous, supported by technical literature from various sources indicating that both names refer to the same compound. The Respondents countered with an affidavit from Sh. Sang Mok Kim, Plant Manager of LG Chem Korea, stating that DOP and DEHP are different in quality and price, with DEHP being an inferior and cheaper product.3. Evidence and Statements Supporting the Revenue's and Respondents' Claims:Revenue relied on technical literature and statements from industry representatives to support their claim of synonymity. The Respondents provided an affidavit from LG Chem Korea's Plant Manager, explaining the differences in quality and cost between DOP and DEHP. The Commissioner considered these arguments and observed that commercial products can have different grades, making the manufacturer's claim plausible.4. Adjudicating Authority's Observations and Conclusions:The Commissioner noted that it is inappropriate to assume a chemical product has only one quality and highlighted the existence of different commercial grades. The Commissioner concluded that the assessed Bills of Entry had not been appealed against by the Customs Commissionerates, indicating that both DOP and DEHP were being assessed simultaneously. The Commissioner found no mis-declaration, as the importers declared superior quality as DOP and inferior quality as DEHP, and the initiative to import inferior grades could not be considered as an attempt to evade Customs duty.5. Committee of Chief Commissioners' Objections:The Committee found the Commissioner's order erroneous, arguing that the reliance on the affidavit from LG Chem's Plant Manager was misplaced. They contended that DEHP is more commonly used internationally and that the importers exploited the situation by switching nomenclature to undervalue the product. The Committee argued that the onus was on the department to prove that DEHP is identical to DOP and that the department had provided sufficient evidence to this effect.6. Final Decision on the Appeal by the Revenue:The Tribunal considered arguments from both sides and reviewed the technical literature, which showed that DOP and DEHP are used interchangeably but can differ in quality and price. The Tribunal found that the evidences produced by Revenue could at best create a doubt but could not prove undervaluation. The Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal, as there was no conclusive evidence of undervaluation or mis-declaration.Conclusion:The Tribunal upheld the adjudicating authority's decision, dismissing the Revenue's appeal on the grounds that the evidence presented was insufficient to prove undervaluation or mis-declaration by the importers. The Tribunal emphasized the importance of verifying the quality and price differences claimed by the importers and the lack of proof of any additional remittance by the importers to the supplier abroad.