TaxTMI 
TaxTMI 
2019 (6) TMI 576
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....be goods by classification in the First Schedule of Customs Tariff Act, 1975, notification no. 12/2012-Cus dated 17th March 2012 (and its predecessor notification no. 15/2005-Cus dated 1st March 2005) exempts it from duty liability and the proceedings centred around the allegation that these, being of no use for the importer, were put through the process of import, by dispatching the ones that were already in their possession to the ostensible supplier in Singapore for facilitating transfer of money out of the country. The trajectory of the investigations, and the impugned order, focuses on the doubtful provenance, the proximate superfluity, the inflated worth and the, of the 'drawings' to establish that the ploy was hatched solely to enable the illegal transaction in money. The primary question, therefore, is the scope afforded by Customs Act, 1962 to address this allegation. 2. On commencement of hearing, it was contended, on behalf of Revenue, that, with the importer not having resorted to the appellate remedies available under Customs Act, 1962, the confiscation of the imported goods was not amenable to dissection by the Tribunal and that the final outcome should not, if at al....
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....n the impugned order, all the goods, whether entered for import under section 46 or not, were ordered to be revalued at 'nil' in accordance with rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and goods in 20 of these consignments, yet to be cleared for home consumption, were confiscated under section 111 (m) of Customs Act, 1962 with option to redeem on payment of fine of Rs. 1,00,000 besides imposing various penalties under section 112 and section 114AA of Customs Act 1962 on the importer in addition to imposing various penalties on different individuals, including the present appellants, under Customs Act, 1962. Two elements of the operative portion of the impugned order are novel and, to say the least, bizarre: on the one hand, the evidence lined up by the investigation has been collated to arrive at the conclusion that the imported goods be assessed at 'nil' value and that the shipper on record is non-existent and, yet, redemption fine has been determined on value as scrap and penalty imposed on the non-existent entity. A value, even as scrap, is ascertainable, and must, perforce, be ascertainable for assessment of any goods; the adjudicating....
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....competence to pursue alleged offences beyond that contemplated in Customs Act, 1962, and by the officers appointed thereunder, it was decided that Therefore, section 111(m) of Customs Act, 1962 is not to be considered as a special law to deal with over-invoicing and the amendment enlarged the scope for confiscation in the event of any misdeclaration, including value, and even on goods under transshipment; the obliteration of 'dutiable or prohibited goods' is merely an extension of that intent. That is not an angle to be pursued. In the absence of validly determined value, the breach for invoking section 111 (m) of Customs Act, 1962 is not established. In the absence of goods that are yet to be cleared for home consumption, there is no scope for invoking jurisdiction to hold the goods liable for confiscation. before going on to elucidate that 44. The State does not crusade. Its legislative arm enacts laws that criminalize and, to secure the State from the consequences of such crime, vests the authority to bring transgressors to book under that law in an official or agency while laying down the boundaries of such executive authority. So it is with officers of Customs. If the Sta....
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....iled, on the possible use of the ploy of import for transmitting payments to itself through a 'front' established in Singapore and has concluded that these allegations are true. In taking recourse to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the adjudicating authority appears to be guided by the relationship between the two for rejection of the value declared in the bills of entry. 6. An adjudicating authority is not obliged to restrict itself to facts elicited in investigation and could, subject to unchallenged expertise and availability of wherewithal, undertake the task of filling missing gaps or for assuring itself that the tentative conclusions, inferred from available evidence, may be confidently adopted but cannot shy away from the obligation to afford opportunity for defence or counter ensure that the noticees are afforded opportunity to defend or counter for that which has not found a place in the show cause notice. Suffice it to say, that the doubts of the adjudicating authority about the existence of the source of the imports, based on his foray into investigation, which led to firming of the conclusion that the imports were a 'sham' ....
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....orted goods to. 10. It was further determined by the adjudicating authority that the imported goods had been prepared at the Dahej facility of the importer by making minor alterations in the drawings originally procured from genuine sources and already in their possession. The evidence for this appears to be the retention of certain marks of the original while making the alterations and the record of alterations within the system was found to be attributable to certain individuals deployed at the Dahej facility. 11. It would also appear that the adjudicating authority frowns with disfavour on the internal mechanism by which approval was accorded to the purported procurement of the impugned goods for not being appropriately elaborate for such huge investments. It would also appear that the placing of the purchase orders was, in the absence of the persons who were concerned with it or their inability to offer a credible explanation, considered to be dubious. The absence of additional particulars in the declarations entered in the bills of entry was also held to be an impediment to proper valuation of the imported goods. The goods that were, as yet, pending for clearance by M/s ABG ....
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....portionate with the gravitas. As the penalty imposed under section 112 of Customs Act, 1962 assailed in these appeals is the consequence of liability to confiscation under section 111 of Customs Act, 1962, it is but natural for the confiscation itself to be questioned on grounds of competence and circumstances. We are compelled to deal with the legal arguments posited for and against the confiscation even if the appellants before us do not have the locus to seek the quashing of confiscation. 16. Learned Counsel contends that the Tribunal, in re Knowledge Infrastructure Systems Private Limited, had occasion to deal elaborately with an adjudication order that had been assailed for confiscating imported goods, under section 111 (m) of Customs Act, 1962, and for imposing penalties under section 112 and section 114AA of Customs Act, 1962, on the premise that, even in the absence of any prejudice to duty that was leviable, resort could be had to the machinery prescribed for computing the value in circumstances envisaged by section 14 of Customs Act, 1962 and argues that the goods impugned herein, being neither prohibited nor liable to recovery of any duty that was short-paid at the time....
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....e cannot be sustained inasmuch as no valuation is required to be arrived at by the Customs. We are of the view that in such circumstances neither the goods can be confiscated nor any penalty can be imposed upon the appellants. In view of the above, it is seen that the receipt of drawing and designs by the appellant from M/s. CIPL was admittedly part of the rendered service on which the appellant has already discharged their Service Tax liability under reverse charge basis. The said payment of Service Tax stand accepted by the Revenue. When the appellant brought the said fact to the notice of the adjudicating authority, he simply dismissed it without giving any concrete finding on the same. The appellant have already discharged the Service Tax on the said receipt of drawings, we are of the view that there was no further requirement to file Bill of Entry with the declared value. It may also be noted that while charging the Service Tax, the Revenue has nowhere disputed the value of design and drawings and have accepted the same value as correct value of the services. In this scenario also, the Revenue stand adopted in the present proceedings cannot be adopted. 46. Apart from refer....
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....had it been the intent of the Parliament to confer the power to alter the values downward, express provisions as exist in Explanation (1)(iii)(b) of rule 8 of Customs Valuation (Determination of Value of Export Goods) Rules, 2007 would have been enacted. 21. Moving on to other aspects of the impugned order, it is contended by Learned Counsel that there is no finding that the appellants had anything to do with declaration of value in the filed bills of entry and there is no evidence on record of preparation of 'drawings' or placement of purchase orders by the appellants. It is further contended that the impugned order has misconstrued section 111 (m) of Customs Act, 1962 as a weapon against an alleged act of remittance outside the country. It is also argued that findings, based on statements that were not subjected to the rigour of section 138B of Customs Act, 1962, cannot be sustained for which reliance is placed on the decision of the Hon'ble High Court of Delhi in Basudev Garg v. Commissioner of Customs [2013 (294) ELT 353 (Del)]. Raising further doubts on the acceptability of the impugned order, Learned Counsel drew attention to the letter of the importer addressed to Directora....
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....al particular with the entry made under this Act or in the case of baggage with the declaration made under section 77' and the notes on clauses of the bill for enactment of Act 36 of 1973 explicitly referring to over-invoiced imports, their Lordships did not forbear to decide that 'It is not in dispute that a penal provision has to be strictly construed and reading Sec. 111 (m) before the amendment it is not possible to draw an inference that any difference in material particulars may be referable to 'value'. This argument therefore can not be accepted. The scheme of Sec. 111 (m) as it stood then nowhere referred to the difference in value as one of the ingredients which may attract this provision. In such a situation therefore if it is not the specific intention of the provision, a difference in respect of value therefore could not be said to attract this provision and on that basis no penalty could be imposed.' Therefore, section 111(m) of Customs Act, 1962 is not to be considered as a special law to deal with over-invoicing and the amendment enlarged the scope for confiscation in the event of any misdeclaration, including value, and even on goods under transshipment; the o....
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...., had cause to examine the legal aspects that were before the Tribunal in re Knowledge Infrastructure Systems Private Limited. Probably, Learned Authorised Representative was emboldened to suggest discarding of this precedent by the citing, on behalf of the appellants, of the decision in re Lalitpur Power Generation Co Ltd, which relied upon the decision in re Sahil Diamonds Pvt Ltd, and gave an opportunity to raise the contrary decision in her arguments. We can safely assume that Learned Counsel did so because the decision in re Sahil Diamonds Pvt Ltd found favour with the Hon'ble Supreme Court whereas the other decision cited is, as yet, untested. We would not be prejudicing judicial consistency in overruling this suggestion of Learned Authorised Representative because a decision which did not have an opportunity of examining a legal aspect that lies at the root of exercise of jurisdiction is no precedent for contending that a subsequent decision, which did, is bad law. A case law that is built on the shifting stands of jurisdiction, accepted by consent, is not comparable with one that is erected on the foundation of jurisdictional competence which was, itself, contested and argu....
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....hort-paid or that the prohibition on the import of goods escaped the attention of the 'proper officer'; section 28 of Customs Act, 1962, for a limited time, and section 111 of Customs Act, 1962, without limit, permit restoration of the tentative clearance for home consumption of goods to that of 'imported.' Accordingly, it is not open to re-visit an assessment unless short-paid duty was to be recovered or prohibition was to be enforced as the nexus with 'imported goods' is restricted to these two aspects of clearance. 29. It was further held, in re Knowledge Infrastructure Systems Private Limited, that the submission of Revenue of section 111 of Customs Act, 1962 being a means and an end, all on its own, could not only draw upon the definition of 'value' in section 2 (41) of Customs Act, 1962 for resort to section 14 (1) of Customs Act, 1962 and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for quantification was not tenable as the 'valuation' intended by the amendment, effected in 1973 to section 111(m) of Customs Act, 1962 was not with reference to 'overvaluation' alone, as held by the Hon'ble Supreme Court in Rib Tapes (India) Pvt Ltd v. Union of Indi....
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....iscation under section 111(m) of Customs Act, 1962 may have been justified. With the mechanism of valuation having been transfigured, by placing the importer on notice of non-acceptability of the declared price before proceeding to re-value the goods, in the absence of acceptable defence, the question of confiscation under section 111 (m) of Customs Act, 1962 brings up the spectacle of administrative overreach. Value is susceptible to many interpretations and definitions. For the purpose of levy of duties of customs, certain rules of engagement, universally acknowledged, are enacted in the statute and the governing Rules. Mere application of the Rules for enhancement of value does not carry with it the stigma of mis-declaration. To do so would be to place a premium on, and accord a finality to, the value arrived at for the limited objective of levy without in any way impinging upon the contractual obligation between buyer and seller operating in a commercial marketplace. Therefore, it will be essential for an adjudicating authority to establish that the difference between the assessed value and the declared value arises from circumstances in which there has been an attempt to conce....
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....e visited upon importers with the penal provisions in section 112 of Customs Act, 1962 and section 114AA of Customs Act, 1962. It was posited that section 111(m) of Customs Act, 1962 was specifically endowed with the provision pertaining to value in order to check overvaluation. We have no doubt that this was so. However, the Tribunal did not find it justifiable for that provision to be invoked when the allegation of overvaluation flows from a fictional assumption of incorrect declaration incorporated in the valuation mechanism for the limited purpose of levy of duty. Undoubtedly, overvaluation, when established with sufficient evidence of money flow to beneficiaries, other than the seller, would justify the invoking of section 111 (m) of Customs Act, 1962 as enacted by the sovereign legislature of the Union. Any other circumstantial evidence which may justify the invoking of the Rules flowing from section 14 of Customs Act, 1962 will not suffice for the purpose. 34. In the present dispute, it is not necessary for us to examine the question of jurisdiction and to assess the extent of conformity of the evidence with the rigours prescribed in the statute, and of the principles of na....
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....ion that the 'drawings' were manufactured in India and exported is based on certain premises and inferences; while we forbear from venturing into the legality and propriety of such conclusion in the absence of an appeal with appropriate locus, the legal consequences of such an assumption cannot go unnoticed. Under section 20 of Customs Act, 1962, goods that have originated in India are, on subsequent import, to be given the same treatment as any other imported goods. There is a privilege that flows from such origin and that privilege is the abatement of certain duties to be claimed by the importer with reference to the exemption notification issued under section 25 of Customs Act, 1962. There is no doubt that this privilege has not been sought for and the declining of this privilege cannot be construed as an offence or be held against any person. In the absence of a claim for such privilege, the appropriate rule in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 must needs to be invoked for ascertaining the assessable value. That has not been carried out in the impugned order. 36. There can be no offence in re-import of validly exported goods. Though facts....