2000 (2) TMI 90 - SC - Customs

Supreme Court Upholds Customs Duty Finding, Orders Penalty Redetermination

The Supreme Court upheld the Collector's findings that the imported Tape Deck Mechanisms were undervalued to evade customs duty. It affirmed the ... Valuation of imported goods by transaction value / such or like goods - Mis declaration of value and evasion of customs duty - Determination under Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - Acceptability of import licence produced after importation - Confiscation and penalty under the Customs Act for contravention of Import Control OrderValuation of imported goods by transaction value / such or like goods - Determination under Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - Mis declaration of value and evasion of customs duty - Collector correctly determined the value of the imported TDMs at S$ 343.45 per set and the finding of mis declaration and evasion of customs duty is upheld; differential duty directed by the Collector is affirmed. - HELD THAT: - The Court accepted the Collector's factual finding that the goods supplied by Yamato were the same as those ordered from Mohan Impex and that the declared lower invoice was a fabrication and part of a scheme to manipulate value after a change in import policy. The Collector's valuation was sustained under Section 14(1) as the price of 'such or like' goods ordinarily sold at the time and place of importation, and under Section 14(1A) read with the Valuation Rules, 1988 which recognise transaction value as the primary method. Yamato's supply was 'as per' the original order at S$ 343.45 and the transaction value thus remained S$ 343.45; alternative invoices relied upon by respondents were either inapposite as to date or did not establish a genuine fall in value. The Tribunal's contrary approach misread the Collector's reasoning and improperly relied on unrelated invoices. On these bases the Collector's finding on mis declaration and the order for payment of differential duty were held to be justified. [Paras 12, 20, 28, 32, 35]Finding of mis declaration and evasion upheld; unit price fixed at S$ 343.45 per set and Collector's order for differential duty affirmed.Acceptability of import licence produced after importation - Confiscation and penalty under the Customs Act for contravention of Import Control Order - Whether a licence produced after importation is acceptable in law, and whether the licences produced cover the imported items, was remanded to the original adjudicating authority for decision; quantum of penalty must be re determined thereafter. - HELD THAT: - The Court noted that the High Court had not finally decided whether licences produced after importation could be relied upon to avoid liability under the Control Order. The Tribunal had remanded the licensing issue to the original authority and the respondents' departmental representative before the Tribunal had conceded that the original authority should decide the matter. The Court clarified that the adjudicating authority must determine (i) whether, in law, a licence subsequently produced in respect of items already imported is acceptable and (ii) whether the licences in fact covered the imported items and are otherwise valid. Because the penalty imposed by the Collector was composite-imposed both for violation of the Import Control Order and for mis declaration-and apportionment between those heads was not possible on the record, the quantum of penalty must be re determined by the Collector after the licensing issue has been decided. [Paras 38, 39]Licensing issue remanded to the adjudicating authority for fresh decision on legal acceptability and factual coverage of licences; penalty quantum to be re determined by the Collector in light of that decision.Final Conclusion: Appeal partly allowed: Tribunal's contrary finding on valuation and evasion set aside and Collector's order for differential duty affirmed; question of post import licences remitted to the adjudicating authority for decision and penalty quantum to be re assessed thereafter; respondents to pay costs. Issues Involved:1. Mis-declaration of the value of imported Tape Deck Mechanisms (TDMs) and evasion of customs duty.2. Violation of the Import Control Order, 1955.3. Imposition of penalties on the respondent and its directors.Detailed Analysis:1. Mis-declaration of the Value of Imported TDMs and Evasion of Customs Duty:The primary issue was whether the TDMs imported by the respondent were undervalued to evade customs duty. The Collector found that the TDMs imported from Yamato were declared at S $ 250.00 per set, whereas the actual value should have been S $ 343.45 per set. This finding was based on several pieces of evidence, including proforma invoices, statements under Section 108 of the Customs Act, and the nature of the transactions between the respondent and Yamato. The Collector concluded that there was a deliberate mis-declaration of value, manipulation of documents, and an attempt to evade customs duty. The Supreme Court upheld this finding, stating that the Collector's determination of the value at S $ 343.45 per set was justified and in keeping with the relevant statutory provisions. The Court also noted that the dramatic fall in the declared value of TDMs did not reflect their real value and was manipulated due to changes in import policy.2. Violation of the Import Control Order, 1955:The second issue was whether the import of TDMs contravened the Import Control Order, 1955. Initially, TDMs were covered by Open General Licences (OGL) until a public notice dated 21-3-1989 removed them from the OGL list, requiring a licence for their import. The respondent sought to avail of an exemption based on an irrevocable letter of credit opened before the public notice. However, the Collector found that the letter of credit was amended through misrepresentation and that the import was not covered by the exemption. The Tribunal remanded the issue back to the Collector to decide whether the licences produced by the respondent subsequently could be accepted. The Supreme Court clarified that the adjudicating authority must decide if a licence produced after the import is legally acceptable and if the licences in fact covered the imported items.3. Imposition of Penalties:The Collector imposed a penalty of Rs. 40 lakhs on the respondent and Rs. 5 lakh each on its Directors for mis-declaration of value and evasion of customs duty, as well as for violating the Import Control Order. The Tribunal set aside the penalty due to its findings on valuation and remand order. The Supreme Court upheld the Collector's findings on mis-declaration and evasion, affirming the order for differential duty payment. However, it noted that the quantum of penalty must be re-determined by the Collector after resolving the licensing issue. The Court emphasized that the Tribunal did not find the penalty unreasonable, and the dissenting Tribunal Member had correctly opined that the penalty was justified.Conclusion:The Supreme Court partly allowed the appeal, setting aside the Tribunal's decision on mis-declaration and evasion, and affirming the Collector's order on differential duty. The adjudicating authority was directed to decide the licensing issue and re-determine the penalty quantum based on this judgment's findings. The respondents were ordered to pay the appellant's costs assessed at Rs. 5,000/-.