1998 (1) TMI 188 - AT - Customs

Tribunal overturns Customs penalties for under-invoicing, citing goods were for R&D, not trade

The Tribunal allowed the appeal in a case involving under-invoicing of imported goods. The Customs Authorities suspected undervaluation based on ... Valuation - Undervaluation - Confiscation of goods Issues:1. Under-invoicing of imported goods.2. Assessment of assessable value based on complaints and manufacturer's invoices.3. Confiscation of imported goods and imposition of penalties.4. Reliance on evidence provided by complainant and competitor.5. Consideration of contemporaneous imports and trade purposes.Issue 1: Under-invoicing of imported goodsThe appellants imported Power Transistors and Fast Recovery Diodes, declaring a value of Rs. 20,824/- CIF. A complaint from a local manufacturer alleged under-invoicing. The Customs Authorities compared the declared prices with quotations from manufacturers provided by the complainant, leading to suspicion of undervaluation. The manufacturers disowned the invoices submitted by the appellants, claiming they were prepared by a trading company to save taxes. The Department issued a show cause notice proposing to enhance the assessable value.Issue 2: Assessment of assessable value based on complaints and manufacturer's invoicesThe Department relied solely on evidence from the complainant, a competitor of the appellants, to enhance the assessable value. The Additional Collector confiscated the goods and imposed penalties based on the proposed enhanced value. The appellants argued that the Department should have considered actual imports at comparable prices and not solely rely on quotations. They cited case law to support their contention that mere quotations are insufficient for valuation.Issue 3: Confiscation of imported goods and imposition of penaltiesThe Additional Collector confiscated the goods and levied fines under Section 112 of the Customs Act, 1962, for unauthorized import due to the enhanced value not covered by the Import License balance. The appellants challenged the confiscation and penalties, arguing that the confiscation under Section 111(d) was unjustified when the excess value was due to enhanced assessable value under Section 14.Issue 4: Reliance on evidence provided by complainant and competitorThe Tribunal criticized the Department for relying solely on evidence from a competitor and complainant without verifying independently. The Tribunal found the procedure followed by the Custom House in sharing manufacturer's invoices with the complainant unusual. The Department's failure to seek collateral information on contemporaneous imports and to establish deliberate undervaluation by the appellants weakened their case.Issue 5: Consideration of contemporaneous imports and trade purposesThe Tribunal noted the appellants' argument that imports at comparable prices had been accepted by Customs previously. They also raised the point that the import was for Research and Development purposes, not for commercial trade. The Tribunal agreed that confiscation under Section 111(d) was not justified when the excess value was due to enhanced assessable value under Section 14. The appeal was allowed, setting aside the impugned order.