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 ... Whether the order of the Collector should be upheld or not? Whether the question of acceptability of the licences covering the import of the TDMs should have been remanded by the Tribunal? Held that:- The two Members misread the order of the Collector completely. The Collector had referred to the date of L/C only in connection with applicability of paragraph 4 of the Public Notice and not in connection with the valuation at all. They also misconstrued the statement of the Collector relating to the fall in prices. What he had said was that the fall in price of TDMs was manipulated because of the change in the import policy by which the import of TDMs was restricted considerably. We would, therefore, uphold the finding of the Collector that the unit price of the TDMs for S $ 343.45 as also his further order regarding payment of differential duty. It is not clear on what basis the High Court was persuaded to allow the import licence to be produced subsequent to the importation of the goods. However in directing the matter to be proceeded with in accordance with law, it is clear that the High Court did not decide finally whether the licences could, at all, be relied upon by the respondent No. 1 for avoiding their liability for contravention of clause (3) of the Control Order. The adjudicating authority will, therefore, have to decide (i) whether in law, a licence subsequently produced in respect of items already imported is acceptable in law, (ii) If so, whether the licences in fact covered the items imported and are otherwise valid. We make it clear that there was no finding by the Tribunal that the penalty imposed was unreasonable. On the other hand, the dissenting Member who had opined against the remand, had held, in our opinion correctly, that in the circumstances of the case the quantum of the penalty was justified. Appeal partly allowed. 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/-.