2025 (11) TMI 1120 - AT - Customs

Corporate principal is beneficial owner; royalties addable under Rule 10(1)(c); duty, interest and confiscation under s.111(m); penalties limited under s.114A

CESTAT held that the contract manufacturers (CMs) were not the buyers of imported parts and components; the corporate principal is the beneficial owner. ... Contract manufacturers (CMs) who imported parts and components are the importers of the parts and components or not - Whether Xiaomi India is the Beneficial Owner of the imported parts and components? - Can the demand for duty be made from the beneficial owner in this case - Whether the payment of royalty can be added to the transaction value of the imported goods under Rule 10(1)(C)? - Whether extended time limit is invokable in this case? - liability of interest - Whether the goods are liable for confiscation under section 111(m) of the Customs Act? - Levy of penalties. Contract manufacturers (CMs) who imported parts and components are the importers of the parts and components or not - HELD THAT:- The exclusion of the royalty/ license fee from the price structure although it pertains to a whole-portfolio/ whole-device license, can be reasonably presumed to be at the behest of the dominant party which is Xiaomi India. The CM’s have no effective control on the inputs and only get paid a manufacturing cost for assembling/ manufacturing the finished mobile phones. Any material breach of the restrictive conditions could lead to the rights and licences of the Parties under the Agreement being terminated depriving the CM’s of further supply of goods. Hence it can be said that the CM’s did not enjoy unfettered rights of possession of the imported goods. Ownership of goods caries a bundle of right like the right to possess, right to use and enjoy, right to usufruct, right to consume, to destroy, to alienate or transfer, etc.. ‘Sale’ involves a transfer in the title of goods bundled with the afore mentioned rights. Sale is thus the acquisition of a right by the transferee, and loss of it by the transferor. As per Section 3 of the Evidence Act, 1872 [Section 2(1)(j) of the Bharatiya Sakshya Adhiniyam 2023], a fact is said to be 'proved’ when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. It is hence seen that the main object of the agreement is not for sale by the transfer of the property in the parts and components but it is one for work and labour. Xiaomi and the CM’s did not provide evidence to refute the charge, so the onus of proof has not been discharged and remains with them. The department has met its obligation to show that the CM’s are not the actual buyers under the Agreement. The test of a prudent man is satisfied. Although the CM’s may appear as the apparent owner of the goods, they are not its real owners. Hence the Ld. AA has erred in holding that the CM’s are the buyers of the goods. Whether Xiaomi India is the Beneficial Owner of the imported parts and components? - HELD THAT:- As the finding of fact by the Tribunal is final, it is obligated in the scheme of the CESTAT (Procedure) Rules, 1982, to examine the issue in detail and for that purpose it can even of its own motion, call for any documents or summon any witnesses on points at issue, if it considers necessary to meet the ends of justice. [Rule 23(4)]. The Apex Court in Karnani Properties Ltd Vs Commissioner Of Income Tax, West Bengal [1971 (8) TMI 18 - SUPREME COURT], held that it is for the Tribunal to find facts and it is for the High Court and the Supreme Court to lay down the law applicable to the facts found. Further in Standard Radiators Pvt. Ltd. Vs Commissioner Of Central Excise [2002 (4) TMI 69 - SC ORDER], the Hon’ble Supreme Court held that the Tribunal is the last fact finding authority and it is expected that it will discuss the facts in some detail and not cursorily and come to briefly stated conclusions on that basis. Hence this issue will be examined in detail. Can the demand for duty be made from the beneficial owner in this case - HELD THAT:- The Customs Act in special circumstances allows the Proper Officer to examine the actual person who is the importer and as per Section 28(4) ibid permits him to serve notice on the person chargeable with duty or interest which has not been so levied or not paid or which has been so shortlevied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The sub-section needs to be read in a manner that it can effectively stem the mischief that the insertion of the word ‘beneficial owner’ in the Customs Act was meant to achieve, considering the evolving history of the term in the Indian context and the rapid growth of this relatively new white collar crime worldwide. Hence once the foundational facts have been proved in this case, a purposive interpretation of the term ‘beneficial owner’, depending both on the text of the definition and the context in which sub-section (4) of section 28 has been freed from the requirement of demanding duty from the person who filed the Bill of Entry only, must help us in determining the legislative intent in favour of revenue. Hence in the peculiar facts of this case, including the ring fencing of the CM’s from Government related demands and making it reimbursable to the CM’s as discussed earlier, duty can be demanded from the beneficial owners. The veil of a corporation could be lifted where fraud is intended to be prevented or trading with an enemy is sought to be defeated (para 85). The judgment went on to recogonised that in cases involving complex transactions involving multiple parties and contracts, a non-signatory may be substantially involved in the negotiation or performance of the contractual obligations without formally consenting to be bound by the ensuing burdens, including arbitration (para 91). Therefore, there is a need to adopt a modern approach to consent, in matters of arbitration, which takes into consideration the circumstances, apparent conduct, and commercial facets of business transactions (para 92). Though the facts and issue differ from the present issue the need for considering the circumstances, apparent conduct, and commercial facets of business transactions, needs to be adopted. This approach is not new - when the changes made in the definition of importer is made in the Customs Act, to include ‘beneficial owner’, the history of the term showing the significant role it plays in tax transparency, the integrity of the financial sector and law enforcement efforts, the ring fencing clause in the Agreement with CM’s etc, all point to the deceptive nature of a service contract being passed of as a contract for sale. All these leads to the conclusion that the SCN satisfies the provisions of the said section and the duty sought to be demanded from Xiaomi Inia cannot be faulted. The investigation made by DRI has hence succeeded in piercing the veil and demonstrating that Xiaomi India exercises effective control over the goods and is the ‘beneficial owner’ of the goods. The allegation in the SCN on ‘beneficial owner’ hence stands proved. The decision in the impugned order on this matter dropping the demand hence merits to be set aside. Whether the payment of royalty can be added to the transaction value of the imported goods under Rule 10(1)(C)? - HELD THAT:- It is for Xiaomi and others to declare the facts about the number of patents involved with the imported goods at the time of import and pay duty accordingly, as the details are within their special knowledge. They cannot seek to get the whole Electronic Manufacturing Industry exempted from levy of Customs duty on Royalty as per section 14 of the Customs Act, citing the practice in the industry. Since the details of payment of Royalty is in their special knowledge they should have listed each such IPR related technology showing the factor of separability, its use/dual use and royalty paid for each of them, before the Original Authority. If Xiaomi and Ors had provided an item-wise, stage-wise breakdown of the royalties paid at the time of import, it would have facilitated in determining the extent to which such royalty had to be added to the transaction value with regard to each such item. This would then have shifted the onus of proof back to the department, and may have supported their stand that these technologies are for major use in post manufacturing/sale activity etc. Otherwise once a royalty for a whole-portfolio/ whole device license is paid as part of an Agreement on a price which includes the cost of imported parts and components, it’s a rebuttable assumption that the royalty is for the imported goods and the department would be correct in proceeding to tax it accordingly. The royalty payments are addable to the transaction value as proposed in the SCN. Accordingly, the Ld. AA erred in his finding that the transaction value invoking Rule 10(1)(c) ibid in respect of the CM’s is unsustainable. Hence the impugned order to that extent merits to be set aside. Whether extended time limit is invokable in this case? - HELD THAT:- With trust comes responsibility. Xiaomi India and the CM’s have not shown that they have discharged their obligations under the Customs Act by making a full and true disclosure of primary facts. They knew that Royalty payments in the Cellular Communications Industry is based on the whole-portfolio/ whole-device license and that the device (handset) price has been the widely used royalty base in license agreements, although it does not reflect the technologies and the stage of their use and would include such payments for parts and components. This was a critical information that impacts assessment. Further even to interpret these facts, the proper officer would require to be provided with Agreements that show the sale/purchase of goods as per the Sale of Goods Act and the degree of control exercised by Xiaomi on the goods for which the Bill of Entry was filed by the CM’s - it is clearly established that M/s. Xiaomi India has indulged in deliberate suppression of facts by way of willful misstatement and mis-declaration in not declaring the royalty and licence fee paid or payable by them to M/s Qualcomm and M/s. Beijing Xiaomi leading to the short levy of duty at the time of import and hence the demand for duty under the extended period is justified. Liability of interest - HELD THAT:- As per the Hon’ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009 (7) TMI 6 - SUPREME COURT], in a case under the Central Excise Act, the provisions of which are similar to the Customs Act, that interest is leviable on delayed or deferred payment of duty for whatever reasons. Hence the plea of Xiaomi India and others is rejected - it is agreed that no interest, penalty or redemption fine can be imposed on Xiaomi and others insofar as it relates purely to the demand for differential IGST. Whether the goods are liable for confiscation under section 111(m) of the Customs Act? - HELD THAT:- The value of the goods declared did not correspond in respect of value with that declared at the time of import as the royalty payments were deliberately not included. Hence the provisions of section 111(m) has been rightly invoked. It was also discussed above that Xiaomi and Ors knew that royalty payments in the Cellular Communications Industry is based on the whole-portfolio/ whole-device license through four generations of wireless communications technologies and that from the start of the cellular communications industry, the device (handset) price has been the widely used royalty base in license agreements, although it does not reflect the technologies involved and the stage of their use. Still, they failed to make a proper declaration of the value by including the royalty payment made and hence the goods are rightly liable for confiscation under section 111(m) of the Customs Act 1962. Levy of penalty on Xiaomi India under section 112(a), 114A and section 114AA of the Customs Act - HELD THAT:- The mainstay of Xiaomi’s pleading was that no penalty under Section 112 of the Customs Act can be imposed where the imported goods are not liable for confiscation under Section 111 of the Customs Act. Since we have already found that the goods were liable for confiscation under section 111 that argument does not hold water, and we find that the goods are liable for confiscation under section 112(a). Considering that the goods are found dutiable, as per discussions above, hence they are rightly liable to a penalty under section 112(a)(ii). However, since a penalty is also being imposed under section 114A, no penalty can be imposed under section 112 as per the fifth proviso to section114A. The same hence merits to be dropped - it is found while suppression is shown to be involved, this is not a case where any declaration, statement or document which is false or incorrect in any material particular, has been alleged in the SCN to be used in the transaction of any business by Xiaomi India for the purposes of this Act. Hence a penalty under section 114AA will not be applicable on Xiaomi India in the facts of this case - Since the duty has not been paid by reason of willful suppression of facts Xiaomi India are liable for a penalty under section 114A of the Customs Act. The statutory penalty under section 114A can only be equal to the duty demanded. Whether penalty can be imposed on Shri Sameer Bhatrahalli Sundar under section 112(a)(i) and 114AA of the Customs Act? - HELD THAT:- The revenue has not been able to prove that the offence has been committed with the active consent on the part of the CFO. The allegations are of a general nature based on his supervisory status in the company. While there may have been negligence on his part it does not necessarily mean that mala fides was involved. Something more than negligence is necessary. He has not been shown to be the directing mind which lead to the duty evasion. Since the company is being separately penalised, hence we feel that the impugned order has correctly dopped penalty proceedings against Shri Sameer Bhatrahalli Sundar Rao, under section 112(a). Further in the case of section114AA this is not a case where in the SCN any declaration, statement or document which is false or incorrect in any material particular, has been specifically alleged in the transaction of any business for the purposes of this Act, hence the section will also not apply against Shri Sameer Bhatrahalli Sundar Rao. Penalty proceeding mentioned in the SCN hence were correctly dropped by the Ld. AA. Whether penalty can be imposed under Section 112(a) and Section 114AA on the Contract Manufactures? - HELD THAT:- M/s. Xiaomi China a subsidiary of Xiaomi India, has shifted the responsibility of payment of royalty to M/s Qualcomm as per the aforesaid agreements from itself, which would have involved payment of duty on royalty at the import stage by the CM’s, to M/s. Xiaomi India i.e. to the post manufacturing stage. The CM’s hence willingly participated in the layering of transactions facilitating the evasion of taxes. They hence failed to disclose the true transaction details and agreements to the department, making the goods liable to confiscation and for them to be liable for penalties under Section 112(a) - In the circumstances the imposition of penalty under Section 112(a) is justified as per law. As regards Section 114AA it is seen that the Contract Manufactures knowingly made a false declaration relating to the transaction value in the Bill of Entry’s filed by them, by not adding the amount of royalty so as to arrive at the correct transaction value leading to a loss of revenue. Hence, they are liable for a penalty under section 114AA of the Customs Act. Conclusion - i) The CM’s are not the ‘buyers’ of the impugned parts and components. Xiaomi India is the ‘beneficial owner’ of the parts and components imported by the CM’s. ii) Royalties and License Fees paid by Xiaomi India are addable to the assessable value of the impugned goods as per Rule 10(1)(c) of the Customs Valuation Rules, 2007 and the differential duty is payable by Xiaomi India for the extended period. iii) The impugned goods are liable for confiscation under Section 111(m) of the Customs Act. However, since they are not physically available or covered by a bond no redemption fine can be imposed. iv) Penalty can be imposed on the Xiaomi India in terms of Section 112(a) however in terms of the fifth proviso to Section 114A, it has been provided that where penalty is levied under Section 114A, no penalty can be levied under Section 112 of the Customs Act. Hence the penalty under section 114A alone can be imposed. Further no penalty can be impose under section 114AA on Xiaomi India as this is not a case where any declaration, statement or document which is false or incorrect in any material particular, has been alleged in the SCN to be used by Xiaomi India, in the transaction of any business for the purposes of this Act. v) The imposition of penalty under Section 112(a) and Section 114AA on the CM’s is justified as per the facts of the case. vi) No penalty is imposable on Mr. Sameer Bhatrahalli Sundar Rao under Section 112(a)(i) and Section 114AA of the Customs Act, 1962. G) No interest and penalty can be imposed on Xiaomi India insofar as it relates purely to the demand for differential IGST. The redetermined value of the impugned goods confirmed - the differential duty with applicable interest confirmed - matter remanded to the Ld. Original Authority to redetermine the penalties on Xiaomi India and the Contract Manufacturers Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the contract manufacturers (CMs) who imported parts and components are the importers/buyers for customs purposes or merely holders of physical possession. 2. Whether the entity exercising effective control and on whose behalf the goods were imported is the 'beneficial owner' within section 2(3A) read with section 2(26) of the Customs Act, 1962, and therefore chargeable with duty under section 28(4). 3. Whether royalty and licence fees paid by the beneficial owner are includible in the transaction value of imported goods under section 14 read with Rule 10(1)(c) and (e) of the Customs Valuation Rules, 2007. 4. Whether the extended time limit for recovery under section 28(4) is invokable in view of alleged suppression/misstatement. 5. Whether interest under section 28AA is payable on the differential duty so determined and whether interest/penalty on differential IGST is leviable given the statutory scheme. 6. Whether goods are liable to confiscation under section 111(m) for mis-declaration of value and whether redemption fine can be imposed when goods are not physically available. 7. Whether penalties under sections 112(a), 114A and 114AA are attracted against the beneficial owner, the CMs and specified individuals (directors/officers) given the findings on suppression, control and declarations. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether CMs are the importers/buyers of parts and components Legal framework: Interpretation of contracts (Sale of Goods Act concepts), ownership/possession tests (bundle of rights), and customs-import formalities (manifest, bill of entry, IEC). Precedent treatment: Authorities distinguishing sale from work-and-labour and examining bundle of rights; principles from cases on possession/constructive possession applied. Interpretation and reasoning: Court examined the full text of the commercial agreements (Product Purchase Agreements, Goods Sales Agreements, Supply Agreements, Master clauses on IP, price, forecasts, risk, title, ring-fencing and reimbursement). The tribunal applied commercial common-sense and doctrine that nomenclature cannot mask substance; analyzed whether CMs enjoyed the bundle of rights attendant on ownership (possession, control, ability to dispose, price fixation freedom). The agreements show: (a) restrictive rights on CMs to resell; (b) supplier/affiliate control over pricing and supply; (c) ring-fencing of indirect taxes and liabilities to be reimbursed by the buyer/beneficial owner; (d) retained IP rights and license conditions; (e) pilot-to-mass production controls. Taken together these restrictions signify absence of effective control/ownership by CMs despite physical possession. Ratio vs. Obiter: Ratio - where contractual terms and surrounding conduct show dominant control and reimbursement of government charges to another group entity, apparent importation by a CM does not establish beneficial ownership; constructive/effective control may render CM not the true buyer. Obiter - comparisons to ECM industry norms and academic articles. Conclusion: CMs were not the bona fide buyers/importers in substance; they did not have the essential bundle of rights of ownership and therefore cannot be treated as the buyers for valuation/importer identity where contracts and conduct indicate otherwise. Issue 2 - Whether the entity exercising control is the 'beneficial owner' for customs Legal framework: Definition of 'importer' (section 2(26)) and 'beneficial owner' (section 2(3A)) of the Customs Act, purposive interpretation to prevent tax evasion; burden and onus principles in evidence law (Sections 101-106 Evidence Act / analogous provisions). Precedent treatment: Historical development of beneficial ownership in international/tax/AML instruments; domestic precedents showing legislative intent to plug evasion; principle that special provisions for preventing evasion should be given purposive construction. Interpretation and reasoning: Tribunal traced the history and policy behind insertion of 'beneficial owner', held that it encompasses any person on whose behalf goods are imported or who exercises effective control. Applied contract terms (ring-fencing of taxes to be reimbursed, control over pricing and supply, termination consequences affecting imports) to conclude that beneficial ownership rested with the group entity that bore economic burdens and maintained effective control. The tribunal stressed purposive interpretation against structures designed to conceal tax liability and relied on onus-shifting once revenue creates high degree of probability; facts in special knowledge of appellant required disclosure (section 106 analog). Ratio vs. Obiter: Ratio - where agreements and conduct show that an entity exercises effective control and bears economic consequences of imports (including reimbursement clauses), that entity qualifies as beneficial owner under section 2(3A) and can be chargeable under section 28(4). Obiter - discussion of international AML/tax policy context. Conclusion: The entity exercising effective control (and to whom costs ultimately attach) is the beneficial owner; demand on that beneficial owner is sustainable and the adjudicator erred in treating CMs as the buyers. Issue 3 - Inclusion of royalty/licence fees in transaction value under Rule 10(1)(c)/(e) Legal framework: Section 14 (transaction value + amounts such as royalties/licence fees); Rule 10(1)(c) & (e) of Valuation Rules 2007 (royalties/licences related to imported goods and payments that are condition of sale, direct or indirect) and the Explanation thereto; note provisions clarifying scope. Precedent treatment: Prior constitutional-court decisions (Essar, Tata Iron & Steel, Matsushita, Ferodo, Toyota Kirloskar) establishing tests: royalty must be related to imported goods, be a condition of sale (direct or indirect), be paid by buyer (directly/indirectly) and not already included in price; if goods are of no value without the licence/know-how the royalty is attributable to imported goods. Interpretation and reasoning: Tribunal analysed the multiple IPR/royalty agreements (SULA, MPLA, MSA, License & Royalty Arrangement, etc.), finding royalty relates to bundled software/hardware technologies embedded in imported parts and to finished devices; payment is a sine qua non for lawful manufacture/import/sale (termination for non-payment would stop supply and use); royalty computation uses device price including cost of imported components; agreements impose conditions which make royalty a condition of sale, and ring-fencing plus reimbursement clauses show economic burden ultimately on beneficial owner. Explanation to Rule 10(1) covers post-import processes; Rules explicitly permit inclusion even if process occurs after importation. Tribunal also rejected industry-norm arguments as insufficient to displace tax liability; onus on entities with special knowledge to disclose details at import. Ratio vs. Obiter: Ratio - where royalty/licence fees are related to imported goods and are a condition (directly or indirectly) of supply of those goods, such amounts are includible in transaction value under Rule 10(1)(c)/(e). Obiter - discussion on industry licensing practices and policy observations about taxation vs commercial norms. Conclusion: Royalty and licence fees paid by the beneficial owner are addable to transaction value under Rule 10(1)(c)/(e) and differential customs duty is leviable accordingly. Issue 4 - Invoking extended limitation under section 28(4) Legal framework: Section 28(4) allows extended recovery where duty short-levy/ non-levy results from collusion, wilful misstatement or suppression by importer/exporter/agent/employee; burden for revenue to show these elements. Precedent treatment: Principles that extended period can be invoked where suppression/wilful misstatement is demonstrated and that intent to evade is not a necessary statutory pre-condition in section 28. Interpretation and reasoning: Tribunal found revenue established suppression/wilful misstatement by showing non-disclosure of IPR agreements and late disclosure only after DRI investigation; ring-fencing clauses and contract architecture indicated deliberate structuring to exclude royalties from declared value; absence of full disclosure and special knowledge of appellants permitted shifting onus. Reliance on precedents emphasised purposive construction to suppress mischief of modern layering to evade revenue. Ratio vs. Obiter: Ratio - where suppression/willful misstatement is established on record, extended recovery under section 28(4) is invokable even absent proof of subjective intent to evade. Obiter - policy discussion on modern corporate structures. Conclusion: Extended period under section 28(4) is properly invoked; extended duty demand is sustainable. Issue 5 - Liability for interest and treatment of IGST-related interest/penalty Legal framework: Section 28AA (interest liability on duty determined under section 28); interplay with Customs Tariff Act/IGST charging provisions and borrowing of customs procedures for IGST. Precedent treatment: Supreme Court and High Court authorities indicate interest accrues on determined duty; statutory borrowing for IGST may or may not include interest/penalty depending on textual amendment timing. Interpretation and reasoning: Tribunal held interest on differential customs duty is leviable (interest accrual automatic on unpaid duty); however, for differential IGST the statutory machinery for interest/penalty was not available for imports before a later legislative amendment substituting section 3(12) of Customs Tariff Act - accordingly interest/penalty on IGST portion cannot be imposed for the relevant period. Ratio vs. Obiter: Ratio - interest under section 28AA is payable on duty determined under section 28; but interest and penalty on differential IGST require specific statutory borrowing/effective date and cannot be retroactively imposed if machinery provision absent at relevant import time. Obiter - discussion of judgments on automatic accrual of interest. Conclusion: Interest on customs differential is payable; interest/penalty on IGST portion is not leviable for imports prior to the statutory amendment incorporating 'interest' into the tariff Act. Issue 6 - Confiscation under section 111(m) and redemption fine when goods unavailable Legal framework: Section 111(m) provides confiscation where goods do not correspond in value/particulars to entry; section 125 redemption fine in lieu of confiscation. Precedent treatment: Tribunal and higher-court rulings indicate confiscation liability exists despite unavailability of goods but practical impossibility of confiscation makes imposition of redemption fine inappropriate. Interpretation and reasoning: Tribunal concluded mis-declaration of value (non-inclusion of royalty) attracts section 111(m); nevertheless, where goods are not physically available for confiscation or covered by bond, imposing a redemption fine is impractical and may be nugatory because importer may decline redemption and goods cannot be confiscated. Tribunal followed prior decisions declining redemption fines when goods unavailable. Ratio vs. Obiter: Ratio - mis-declared value attracting section 111(m) renders goods liable for confiscation; practical unavailability of goods precludes meaningful imposition of redemption fine. Obiter - procedural/practical considerations. Conclusion: Goods liable for confiscation under section 111(m); however redemption fine not imposed where goods are not physically available. Issue 7 - Penalties under sections 112(a), 114A and 114AA against beneficial owner, CMs and officers Legal framework: Section 112(a) (penalty where acts render goods liable to confiscation), section 114A (penalty equal to duty/interest where short-levy due to collusion/wilful misstatement/suppression), section 114AA (penalty for false or incorrect material declarations). Precedent treatment: Courts emphasize that civil penalties may attach even absent mens rea; section 114A penalty is confined to duty or interest determined; section 114AA requires a false/incorrect material declaration. Interpretation and reasoning: Tribunal held beneficial owner liable to penalty under section 114A (penalty equal to duty determined) because willful suppression established; fifth proviso to section 114A bars simultaneous penalty under section 112, so section 112 penalty on beneficial owner dropped; section 114AA not attracted against beneficial owner as SCN did not allege use of materially false/incorrect documents in transaction of business for purposes of the Act. Contract manufacturers were found to have abetted suppression (failure to disclose true transaction facts, acceptance of ring-fencing, reimbursement clauses, and non-cooperation), so penalties under section 112(a) and 114AA were sustainable against CMs. Penal action against a named officer (CFO) was dropped due to absence of evidence of active role or directing mind - supervisory status alone insufficient to establish personal culpability for penalties under sections invoked. Ratio vs. Obiter: Ratio - where suppression/willful misstatement is established, penalty under 114A (equal to the duty determined) is appropriate and bars a separate 112 penalty on same facts; 112 and 114AA can apply to CMs who abetted or made materially false declarations; personal liability of officers requires proof of active direction beyond supervisory role. Obiter - discussion on deterrence in white-collar contexts. Conclusion: Penalty under section 114A sustained against the beneficial owner (and this precludes a concurrent 112 penalty); penalties under sections 112(a) and 114AA sustained against CMs; penalty proceedings against the individual officer were correctly dropped for lack of direct culpatory evidence; no 114AA penalty against beneficial owner where SCN lacked specific allegation of materially false document usage for business purposes. OVERALL DISPOSITION (LEGAL CONCLUSIONS) 1. Contractual form cannot override substantive control: CMs were not true buyers; beneficial ownership and effective control lay with the group entity that bore economic burdens and controlled supply. 2. The definition of 'beneficial owner' must be given purposive application to prevent evasion; the beneficial owner can be charged duty under section 28(4) where suppression/wilful misstatement is established. 3. Royalty and licence fees that are related to imported goods and form a condition (direct/indirect) of sale are includible in transaction value under Rule 10(1)(c)/(e) and section 14; whole-portfolio/whole-device licence structures do not per se exclude taxability. 4. Extended recovery under section 28(4) is invokable where suppression/wilful misstatement is proved; interest on customs differential is payable under section 28AA; IGST interest/penalty requires statutory machinery at relevant time. 5. Goods mis-declared in value are liable to confiscation under section 111(m); redemption fine may be impracticable where goods unavailable. 6. Penalties: 114A penalty equal to duty determined is appropriate against the beneficial owner for suppression (112 precluded in such event); CMs may be penalised under 112(a) and 114AA for abetment and materially false declarations; personal liability of officers requires evidence of active involvement.