2025 (5) TMI 1934 - AT - Customs

Importers Face Penalties for Undervaluing Glass Chatons, Tribunal Confirms Duty Demand Based on Payment Records

Shri S. Iqbal and Shri G. James Versus Commissioner of Customs (Air), Chennai

Tribunal upheld customs penalties against importers for misdeclaration of goods. The SC found appellants liable for undervaluing imported glass Chatons, ... Misdeclaration and undervaluation of imported goods - goods declared as “China Glass Imitation Stone” - No opportunity of cross-examination during the adjudication process - differential - confiscation - appropriateness of the valuation method - imposition of penalty under Section 112 (b) read with Section 114AA of the Act ibid - HELD THAT:- Apart from the grounds urged, the first appellant has also contended that the impugned order deserves to be set aside since he was not given any opportunity of cross examining the persons despite his repeated requests. He has also contended that the order has been passed based on assumption that this appellant was involved in declaration and undervaluation of the imported goods, however, there is no direct evidence linking him to the alleged acts. In the prayer, he has requested for setting aside the impugned order and the demands therein. In so far as the primary contention of Shri S.Iqbal, the first appellant before us is concerned, we find from the impugned order that the Proprietor of M/s.Royal traders has revealed the name of Iqbal as the main person at whose instance, even the business entity namely M/s.Royal traders came into existence; even the IEC was obtained at his instance; various other entities that were named in the impugned order at paragraph 10 of the OIO also opened at the very instance of Shri Iqbal. Further, to a query as to who made the payments like port charges, etc., Shri James appears to have indicated that all the payments were made by Shri Iqbal. In his statement recorded on 18.10.2010, the said Iqbal has nowhere denied his involvement in the whole saga of importing by misdeclaring the consignment and also declaring very less transaction value. We have recorded elsewhere in the earlier paragraph of this order the modus operandi and the involvement of many persons as explained by Shri Iqbal himself, but strangely we do not find any retraction to his own statement, rather he has chosen to request for cross-examining the other persons. Had there been any inconsistency from the statements of other persons vis-a-vis his own statement, then perhaps cross examination would have brought the truth on record, but it is not the case here. Hence, we are of the view that denial of cross examination is of no consequence. From the record, we find that the Original Authority has chosen to go by a contemporaneous import rather than NIDB data and hence, the determination of transaction value by rejecting the declared value cannot be found fault with. With regard to penalty, even if we ignore the statement of Shri G James indicting Iqbal; but however, his own statement explaining the modus operandi is glaringly against him to which, there has been no denial either during investigation after recording his statement or at least during the course of adjudication proceedings. In that view of the matter, we do not find any reasons to interfere with the demands made in the impugned order and hence, we reject the appeals. The core legal questions considered by the Tribunal in this matter include: (1) Whether the appellants, particularly the first appellant, can be held liable for the alleged misdeclaration and undervaluation of imported goods under the Customs Act, 1962; (2) Whether the penalty and differential duty imposed under Sections 112(a), 112(b), and 114AA of the Customs Act are justified; (3) Whether the appellants were denied a fair opportunity of cross-examination during the adjudication process, affecting the validity of the impugned order; and (4) The appropriateness of the valuation method adopted by the Original Authority in determining the transaction value of the imported goods.Regarding the first issue of liability for misdeclaration and undervaluation, the legal framework primarily involves the Customs Act, 1962, particularly provisions relating to confiscation, penalty, and duty demand for undervaluation and misdeclaration of imported goods. The Original Authority relied on the Bill of Entry and accompanying commercial invoice which declared the goods as 'China Glass Imitation Stone' valued at $12 per kg. However, upon examination by the Directorate of Revenue Intelligence (DRI), the goods were found to be '888' brand glass Chatons, a fact which was seized and recorded in a mahazar. The statements recorded during investigation, notably from the Proprietor of M/s. Royal Traders and the first appellant, Shri Iqbal, revealed a modus operandi involving multiple persons and entities, with Iqbal identified as the main orchestrator behind the import and business setup. The Tribunal noted that the first appellant did not deny involvement in the import scheme during his statement recorded on 18.10.2010 and did not retract or contradict his own explanation of the modus operandi. The Tribunal held that the appellants' denial of ownership or involvement was insufficient to absolve them since the evidence, including contemporaneous statements and payment records, indicated their participation. The payment of Rs.6,88,328/- towards part payment of differential duty by M/s. Royal Traders further supported the finding of liability.On the second issue concerning penalty and duty imposition, the Original Authority imposed penalties of Rs.10,00,000/- on the first appellant under Section 112(a) read with Section 114AA, and Rs.50,000/- on the second appellant under Section 112(b) read with Section 114AA of the Customs Act. The Tribunal examined whether these penalties were justified based on the evidence. The Tribunal found that even ignoring the statement of Shri G. James which implicated Iqbal, the first appellant's own statement explaining the modus operandi was sufficient to justify the penalty. The Tribunal emphasized that there was no denial or retraction from the appellant during investigation or adjudication proceedings. The Tribunal thus upheld the penalty imposition, finding no grounds for interference.The third issue pertained to the appellants' contention that they were denied the opportunity to cross-examine witnesses, which they argued was a violation of natural justice. The first appellant specifically requested cross-examination of other persons involved. The Tribunal analyzed this contention and observed that since there was no inconsistency or contradiction between the statements of the other persons and the appellant's own statement, the denial of cross-examination was inconsequential. The Tribunal reasoned that cross-examination could have been relevant only if contradictions existed which could have brought the truth on record. Hence, the Tribunal rejected the argument that denial of cross-examination invalidated the impugned order.On the fourth issue concerning valuation methodology, the Original Authority rejected the declared value of $12 per kg based on the commercial invoice and instead relied on contemporaneous imports to determine the transaction value. The Tribunal found no fault with this approach. It noted that the Original Authority's preference for contemporaneous import data over the National Import Database (NIDB) was justified and consistent with valuation principles under the Customs Act. This rejection of the declared undervalued transaction value was upheld as valid and in accordance with law.The Tribunal's conclusions on the issues are as follows: The appellants were rightly held liable for misdeclaration and undervaluation of the imported goods. The penalty and differential duty imposed under the relevant provisions of the Customs Act were justified and warranted. The denial of cross-examination did not vitiate the proceedings or the impugned order, given the absence of contradictory evidence. The valuation method adopted by the Original Authority, relying on contemporaneous imports rather than the declared value or NIDB data, was appropriate and lawful.Significant holdings include the Tribunal's statement: 'Had there been any inconsistency from the statements of other persons vis-a-vis his own statement, then perhaps cross examination would have brought the truth on record, but it is not the case here. Hence, we are of the view that denial of cross examination is of no consequence.' This underscores the principle that the right to cross-examination is contingent upon the presence of contradictory evidence that could affect the outcome. Another key principle established is the acceptance of contemporaneous import data over declared invoice values or NIDB data for valuation purposes in customs investigations, reinforcing the discretion of the Original Authority in valuation determinations.Ultimately, the Tribunal upheld the Original Authority's Order-in-Original confirming the demand of differential duty, penalty, and confiscation of goods, and dismissed the appeals filed by the appellants.