TaxTMI 
TaxTMI 
2013 (8) TMI 795
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....ods manufactured by PECC. After importing the goods and making payment of the same to Kemtech, GAIL developed doubts whether Kemtech had paid correct customs duty on the goods involved. Thus doubt arose from the fact that Kemtech was not willing to furnish copies of the Bill of Entries under which the goods were imported and it was found that the clause in the contract for submitting such Bills of Entries was deleted at some stage of finalization of the contract allegedly due to some collusion of a few officers of GAIL. GAIL alerted customs authorities about their doubts. Enquiries were conducted by the Customs Authorities. It was seen that Kemtech had imported goods almost at 1/5th to 1/4th of the prices which were initially negotiated by GAIL with PECC and EMSG and prices disclosed to GAIL by Kemtech. On the basis of evidence gathered, a SCN alleging undervaluation of the goods and proposing recovery of duties short paid and imposition of penalties was issued. The SCN was adjudicated by the impugned order. 3. The imports made by Kemtech were invoiced by SUNAG (USA). This company is owned by PECC. 4. The case made out has got somewhat confused because GAIL in its letter date....
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....he said amount deducted the duty already paid to arrive at the differential duty to be paid. After deciding not to confirm demand under Section 28B, the reason for calculating the differential duty payable as per the method adopted in the SCN is not explained in the impugned order. 6. The main evidences produced by Revenue to prove undervaluation are the following : (i) The prices at which goods were imported by GAIL prior to Aug. 2000; (ii) Documents seized from the premises of Kemtech International in a search conducted on 11-2-2004. These are mainly a series of correspondence among EMCG and GAIL, EMCG and Kemtech, Kemtech and GAIL etc. showing the negotiations among the parties and final price agreed upon; (iii) The price at which goods were supplied by PECC to SUNAG (USA) who raised invoices for import made by Kemtech. (This evidence is defective as will be seen in later discussions); (iv) Statement of Shri Anurag Mahajan, Director of Kemtech company admitting undervaluation to some extent and voluntary payment of differential duty to the extent of Rs. 66.5 lakhs made by Kemtech. 7. The prices as per ....
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....e are year 2001 prices. 1. Model # EC 58-6R, Fuel Monitor US $ 11129 each 2. Model # SM26-1R, Speed Monitor US $ 8399 each 3. Model # SM26-3R, Speed Monitor US $ 8399 each 4. Model # TM24-11R, Temp. Monitor US $ 15094 each 5. Model # TM24-11R, Temp. Monitor US $ 15094 each These prices are based on the few strategic 'Life-time buys" of components and hence may not be relevant with the prices of previous years. PECC has done a considerable investment on this subject to ensure that customers are comfortable with the analogue systems and also can avoid higher investments on digital upgrade. All other terms as per contract. Hope you would have received fax letter dated 30th April from PECC. PECC's shop floor is heavily booked for next five months with orders for analogue modules due to the heavy rush. So quick delivery would be a real problem on this job. In case you need further info then kindly let me know." 9.2 Copy of letter Ref : KIL/PECC-MOD/EMSG/JUN 01/03 dated 22nd June, 2001 from Anurag Mahajan for Kemtech International Ltd. A-12....
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....suring you the best of our services at all times." 9.3 Copy of letter dated June 21st, 2001 from Jay D. Chief International Sales, Export Management and Services Group, Rep for PECC, 170/A7 Changebridge Road, Montville, NJ 07045 USA addressed to Kemtech International Ltd. A-125, Shivalik; Malviya Nagar, New Delhi 110017 India. Sub : GAIL's ongoing Spare Analog modules Inquiry # GAIL/C&P/HBJ/00162/370/00-01 dated 6th April. Ref : Your discussion at GAIL and our telephonic discussions We were expecting your order to be with us by this time in order to deliver these modules within this year as you are aware that these have minimum 8 months delivery, as PECC is completely booked with orders upto December 2001 as per situation today. Reference GAIL's letter for negotiations and the query raised by them during your meeting on 14th June regarding the increase in prices of these modules between 1998 and 2001. I also discussed with PECC once again today this matter and we may clarify as under for the last time. Apart from the slightly higher price increase in fuel monitor FC-58-6R the other modules have a price increase of only 15% approx. which is very normal keeping i....
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....ved to explore the other alternatives in case the Analogue systems would have been completely obsolete. But still considering GAIL's concerns/objections on the steep price rise, we can offer a one time special discount only for two particular modules and the below mentioned are our revised discounted prices : 1. FC 58-6R, Fuel Monitor US $ 11129 each 2. SM 26-3R, Speed Monitor US $ 9770 each Kindly inform GAIL that they can place order for additional quantities for these two modules at this stage itself in case they want to avail this special one time discount. Any order received by us after this order for these two particular modules will be charged only as per our list prices applicable at that time. Also no reduction of prices is possible on the other three modules of this enquiry. In view of the above, we once again assure you that the prices offered by us now are below our list prices and are the best we can offer at this stage due to all the above. No further reduction on these prices is possible as these are the bare minimum prices we can offer at this stage. I hope you would understand....
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....(i) The notice is time-barred because it does not allege any collusion, fraud or connivance and in the absence of such elements extended period of five years cannot be invoked; (ii) After the goods have been assessed and cleared the Revenue could not have made in demand unless the assessment order was appealed against. (iii) The adjudicating authority has erred in relying on the list prices quoted by the foreign supplier to GAIL for assessing the goods imported by Kemtech because the terms of import were different. They paid 50% of the value on placing the order and 50% on shipping of the goods. Further Kemtech had to deliver goods at the door of GAIL. Kemtech were also responsible for after sales service; (iv) The Revenue should have relied on the transaction values; (v) As per the addendum to the SCN dated 2-1-2006 the price difference was only 20% to 25%. But the demand confirmed is based on much higher levels of under valuation; (vi) Revenue is relying on the list price of the company. Kemtech had negotiated further and got the prices reduced; (vii) Revenue has hot ....
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....an be issued without challenging the assessment is also settled by the Honourable Supreme Court in the case of UOI v. Jain Shudh Vanaspati Ltd.- 1996 (86) E.L.T. 460 (S.C.). 12.3 The prices taken are the prices quoted by the manufacturer to Kemtech and not just the list prices. No factor that would justify such abnormal discount when the Bill is raised by a third party is presented. Payment of 50% in advance cannot justify supply of goods at 1/4th the price. The prices quoted by Kemtech in Indian Rupees to GAIL give reasonable profit margin to Kemtech thus demonstrating that these were the correct prices. Going by the prices declared by Kemtech to customs there is abnormal profit. So it is very obvious that this is a case of mis-declaration of transaction value just to save Customs duty. 12.4 Revenue has presented enough evidence to assail the truthfulness of the transaction value. Further the manufacturer's invoice as requested under Rule 10(b) of the Customs Valuation Rules, 1988 was not produced. So the order rejecting transaction value is maintainable even though Revenue has not been able to trace evidence of remittance of the differential value. 12.5 We have examined ....
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....d to letter C. No. GAIL/ND/VIG/218/03/175 dated 5-5-2005 issued by GAIL to Customs Department. Though the letter was supplied to Kemtech the note attached has not been disclosed to Kemtech. The impugned adjudication order also refers to this note in para 11. However the adjudicating authority observes in his findings that the case is not made on the basis of the said note and discards this evidence as per the second para in the "Discussion and Finding" part of the order in page 28 of the order. If this note was not relied upon it would have been desirable not to include it in the SCN and the part of the impugned order giving "Brief Facts of the case". However Revenue has chosen to the contrary. But we take note of the findings given in the impugned order and keep references to this note totally out of mind while assessing the evidence. 12.9 The export declarations are not relied upon in the Show Cause Notice. Further when PEEC itself is involved in bringing in a third entity to raise invoice to Kemtech, the export declaration in US also show the mis-declared value and such documents by itself cannot prove that the goods were not under-valued. 12.10 Since the evidence produced....
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....ty did not consider it safe to place reliance on photocopies of copies of the documents recovered by the Customs Officer not from the Customs Department in Japan but from the agencies which are stated to have exported the material in question. It is also found that one of these copies of the alleged declarations bears the seal of the Customs at Kobe and the name of the vessel is shown to be Raya Fortune' but the itinerary of that vessel collected at the instance of the Indian Customs shows that the said vessel had never touched Kobe which raises a serious doubt as to how far this document is authentic." In the present case also the documents are not authenticated by anyone except for a seal of Consulate General of India New York. The source from which these documents are obtained is not disclosed. So we agree with the argument that these documents cannot be accepted as evidence. However this is not the main evidence in this case. The correspondence retrieved from the office of the Appellants is the main evidence. 13.2 CC v. Uttam Mohanlal Jain - 2001 (130) E.L.T. A261 (S.C.) confirming decision in Uttam Mohanlal v. CC - 2000 (124) E.L.T. 661 (Tri.). This decision is relied....
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....gnments of ceramic capacitors and one consignment of diodes from Hong Kong during the above period. The goods were shipped from Hong Kong by M/s. Compo Export of Hong Kong and M/s. Pearl Industrial Company of Hong Kong. The price of ceramic capacitors was declared by the respondent in its Bill of Entry @ HK US $ 600 per 1000 pcs. whereas the price of diodes was declared @ HK US $ 29406 CIF as reflected in the invoices. On 27-4-1998 a show cause notice was issued by the Assistant Commissioner of Customs, Calcutta alleging inter alia that as per the overseas investigation report of the Hong Kong Customs and Excise Department the declared price did not represent the transaction value under Rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 ("Customs Valuation Rules") as the price actually paid appeared to be different than the declared price and that the importer had under-invoiced the value of the goods to evade huge amount of the Government's revenue. At this stage it may be pointed out that in the show cause notice the Assistant Commissioner had specifically invoked Rule 8 of the Customs Valuation Rules, 1988, which was subsequently given up by t....
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....her Tractors Ltd. v. Commissioner of Customs, Mumbai reported in 2000 (122) E.L.T. 321. "3. -------------Further, according to the Tribunal, in the present case, the importer has relied upon instances of import of identical goods at identical rates by other importers from the same supplier (namely, M/s. Pearl Industrial Company, Hong Kong) during the aforesaid period. The Department had accepted those rates. This evidence led by the importer herein has not been rebutted. It had not been discussed by the adjudicating authority. In the circumstances, the Tribunal allowed the appeal filed by the importer. Hence, this civil appeal has been filed by the Department." Thus in that case the goods imported were items which were being imported by many other importers and for those importers the department had accepted the price as declared by the litigant in that case. This is not the situation being dealt with in the case at hand. 13.4 Mirah Exports Pvt. Ltd. v. CC - 1998 (98) E.L.T. 3 (S.C.) Para 4 and 5 of the judgment illustrates the difference between the case decided by Apex Court and the case at hand. These are reproduced below : 4. Replies to the said show cause notice....
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....and the competition involved, the sales policy allowed up to 20% discounts (on quantity) upon the prices of the said price list; (iii) Canvassers and Skefko, who import in even greater bulk for the purposes of only trading, and may secure even lower price, particularly if they generated additional volumes of sales. This policy was aimed at a more aggressive marketing objective and envisaged discounts even over 20% (but on the approval of the sellers on a case-by-case basis, on reference to them). 13.5 Overseas International v. CCE - 2001 (127) E.L.T. 599 (Tri.-Chennai) Extracts from para 1 and para 7 are reproduced below : "The short question that arises for consideration in this appeal is as to whether the Customs authorities can reject the transaction value and the invoices which reflected the value of the imported goods namely "toys". The customs authorities through their DRI unit obtained a quotation from the supplier and on that basis enhanced the value." "7. ---------- In this case, the DRI obtained unauthenticated quotation from the supplier and based on that the valuation has been enhanced. Such an exercise has not accepted by the Apex Court and held to be....