TaxTMI 
TaxTMI 
TaxTMI 
2008 (10) TMI 537
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/s. Purnima Enterprises; M/s. Om Fabrics and M/s. Vedant Enterprises - one invoice showing the actual price and the other showing 30 to 35% less value for presenting to the customs authorities, were recovered. Since the Appellant company was also importing identical fabrics from the same supplier, inquiry was started in respect of their imports also, in course of which the godown and office premises of the Appellant company and residential premises of its Director Shri Subhash Gupta were searched and statements of Shri Subhash Gupta were recorded whereas he stated that his company is importing silk fabrics from various suppliers in China, including M/s. Zhejiang at Chennai and Kolkata and that he had negotiated with M/s. Zhejiang as a result of which his company gets 10% to 20% price concession. However, in view of adverse record of the supplier M/s. Zhejiang (as they were conniving with other imports of silk fabrics - M/s. Purnima Enterprises; M/s. Om Fabric and M/s. Vedant Enterprises) and of the Appellant company, as in June 2004 Chennai custom house had issued a show cause notice dated 30-06-04 to the Appellant company alleging duty evasion amounting to Rs. 10.40 lakhs by und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n, the same were confiscated with option to be redeemed by the Appellant Company on payment of redemption fine in lieu of confiscation of Rs. 20 lakhs; and (d) imposed penalty of Rs. 1,00,66,366/- on the Appellant company under Section 114A of the Act, and penalty of Rs. 25 lakhs on Shri Subhash Gupta under Section 112 of the Act. No penalty was imposed on Shri Sunil Gupta. 1.1 It is against the above order that these appeals have been filed. 2. Heard both the sides. 2.1 Shri Rupesh Kumar, Advocate, the learned counsel on behalf of the Appellants, made the following submissions :- (i) It is an admitted fact that nothing incriminating was found in course of search of the Appellant company's office and godown and residential premises of Shri Subhash Gupta, Director of the Appellant company, suggesting fraud or under invoicing, or that the values declared by the Appellants were not representing true transaction value. (ii) Annexure A to the show cause notice refers to clearances of silk fabrics of quality Nos. 10101, 12101, 11216, 10103, 14654, 11206, 13255, 12103 and 12108 made through Chennai Port under 24 bills of entry and Annexe B to the sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is sought to be adopted for determining the assessable value of the goods imported by the Appellant company, are not contemporaneous. In fact, in a number of cases, contemporaneous imports of identical goods by others are at lower prices. (ix) All the bills of entry, covered by the show cause notice were properly examined by the respective custom house with regard to valuation and only in some stray cases where the assessing officer felt that the value was on lower side, the Appellant were directed to pay duty at higher value. The department has never challenged the said assessment orders. Therefore, in view of Hon'ble Supreme Court's judgment in case of M/s. Priya Blue Industries v. Commissioner of Customs (Prev.) reported in 2004 (172) E.L.T. 145 (S.C.) the Department is now precluded from raising any dispute on valuation. (x) The entire duty demand and penal proceedings are based on assumptions and presumptions, without any tangible evidence. There is no misdeclaration of value by the Appellant company. Hence there is no case for confiscation of any goods or imposing penalty on the Appellants. 2.2 Shri Amit Jain, the learned Departmental Representative made the fol....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Appellant's contention is accepted, the proviso to Section 28(1) of the Act would become redundant. 4. Coming to the main point of dispute, the allegation against the Appellant company and its Directors is that they have misdeclared the transaction value in connivance with the foreign supplier M/s. Zhejiang of China and on this basis invoking Rule 10A of the Customs Valuation Rules, 1988 read with Rule 3 thereof, the declared transaction value is sought to be rejected and the same is sought to be determined under Rule 5 of the Valuations Rules. 4.1 Rule 10A of the Customs (Valuation) Rules, 1988, empowers a proper officer of Customs to conduct inquiry, if he has reasons to doubt the truth or accuracy of the value declared in relation to any imported goods and reject the declared value and proceed to determine the same by sequentially applying Rule 5, 6, 7 and 8 of the Valuation Rules, if after inquiry with the importers and considering other evidence, he still has reasonable doubt about the truth or accuracy of the declared transaction value. Now what is the "reasonable doubt"? In this regard it is worthwhile looking at the reasons for adding Rule 10A to the Custom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from the Ministry's circular about the scope of Rule 10A is that there must be concrete basis for having 'reason to doubt' or 'reasonable doubt' about the declared transaction value - it cannot be based on mere suspension based on adverse past record or bad reputation of an importer or a foreign supplier. In our view the Rule 10A can be invoked in situations like - there being evidence of invoice manipulation, the importers claiming to have got an abnormal discount which is against the normal trade practices, the declared transaction value is much lower than the transaction value of the contemporaneous imports of identical or similar goods in comparable quantity and the importer is unable to give any satisfactory explanation for this or some electronic goods of latest model have been imported as stock lot by declaring a very low value etc, which create doubt about the declared transaction value. 5. The main basis for exercising reasonable doubt about the declared transaction values and rejecting the same by invoking Rule 10A is - (a) record of the supplier - M/s. Zhejiang in abetting import under invoicing in import of silk fabrics by M/s. Vedant Enterprises, M/s. Om F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the Settlement Commission, it can not be presumed that the Appellant company had indulged in under invoicing during subsequent period also. 5.2 A reasonable doubt about the declared transaction value can be exercised if the declared transaction value is much lower than the price of contemporaneous imports of identical or similar goods in comparable quantities, after taking into account the normal price fluctuations and normal trade discounts, for which the importer is unable to give any valid explanation. 5.2.1 However in this case, on going through Annexure A (imports made through Chennai under 24 bills of entry) and Annexure B (imports made through Kolkata under 38 bills of entry) to be show cause notice, we find that - (a) while the imports have taken place during May 2003 to October 2004 period, throughout this period, uniform prices for various qualities of silk fabrics have been adopted and, (b) in some cases the invoice price of imports of a particular variety of silk fabrics imported by the Appellant company from M/s. Zhejiang, at a particular time has been applied to the imports of the same variety during much earlier period without considering ....