In a significant case relating to Customs Valuation, a recent judgement dated 26.07.2010 of the Honorable Supreme Court has confirmed the duty demand against a leading importer of Whiskeys, M/s Pernod  Ricard India Private Limited (earlier known as Seagram India Private Limited). The case pertains to imports between 1994 and 2001 involving duty evasion of about Rs 40 Crores. M/s Seagram would thus have to deposit this entire amount now. But this is only the tip of the iceberg.  In addition finalization of provisional assessments on imports of the goods by M/s Seagram from 2001  is likely to result in significant revenue to the government.

          Modus Operandi -Undervaluation: The case pertains to import of Concentrates of Alcoholic Beverages (CABs) of Scotch Whiskeys at highly undervalued rates by  M/s Seagram from the exporter - M/s Joseph     E   Seagram        and    Sons         Ltd.,   Scotland.  Both  the importer and exporter are wholly owned subsidiaries of Seagram Company Ltd. Canada. The CABs  so imported were diluted and bottled for introducing four different types of Scotch Whiskeys in the Indian market, namely, 100 Pipers, Passport, Something Special, International Malt (Royal Stag; Oaken Glow; Blenders Pride and Imperial Blue). The declared  prices at which the CABs were imported by M/s Seagram were suppressed and were much lower (by as much as 50%) vis-à-vis the prices of similar and comparable Scotch CABs imported by others.

          The importer also blatantly misdeclared quantity of whiskey imported for certain consignments with the intention to evade duty. In fact, the Bills of Entry had white ink marks and overwriting indicating a deliberate misdeclaration.

          Litigation History: The demand was initially raised following an extensive investigation by the Directorate of Revenue Intelligence (DRI)through two Show Cause Notices (SCN) that were issued in December 2000 and January 2001. The notices demanded the short paid duty besides proposing penalty on the party and it's  top office bearers in India. After issuing of the SCNs, the notices were adjudicated by the Commissioner of Customs, Inland Container Depot Tughlakabad. After availing the appellate remedies before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), the matter finally went to the Supreme Court. The H'ble Supreme Court has in the recent order completely vindicated the stand of the department on the valuation issues.

See full text of decision:

2010 -TMI - 77364 - SUPREME COURT OF INDIA

 

Customs valuation upheld: duty demand affirmed after finding undervaluation and misdeclaration in related party whiskey imports. Supreme Court affirmed a departmental duty demand arising from undervaluation and misdeclaration in imports of Concentrates of Alcoholic Beverages (CABs) by a major importer, sustaining findings that CABs were imported at suppressed related party prices and that bills of entry showed overwriting and quantity misdeclaration; the demand followed a DRI investigation, two show cause notices, adjudication, appellate proceedings, and final confirmation.