AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 113
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....f mis-declaration and under valuation of Zinc and Aluminum scrap were issued Show Cause Notice dt. 07.05.2007. It was contended that M/s SMRI had imported consignments of Zinc Ash and Aluminium Scrap from many parties. In case of 32 consignments of Zinc Ash imported from U.S. Zinc, U.S.A and detailed in Annexure - 'A- II' of show cause notice it was alleged that the documents received from the Consulate General of India, USA shows that M/s US Zinc Ltd entered into the agreement for payment of higher rate and the formal contracts were prepared at under-valued rates through indentor, Shri Tarun Jhingon of M/s Trendene India Pvt Ltd, New Delhi. The email correspondence dated 5.4.2003 between Shri Tarun Jhingon and the officials of M/s US Zinc Ltd, USA and emails between the persons of M/s U.S. Zinc were relied upon to allege that the goods were Zinc skimming and not zinc ash containing higher zinc content. Also the test report dated 31.07.2006 of the Chemical Examiner, Vadodara was relied upon that the sample drawn from the factory of M/s SMRI showed the sample to be other than Zinc Ash. It was alleged that the invoice issued by exporter were indicating lower value and the balance amo....
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....inc Dross/ Ash, the samples were drawn and sent to Deputy Chemist at Nhava Sheva/ Mumbai and the test reports were received of the same were directly received by the Customs Authorities and based on test reports the consignments assessed provisionally were finalised. During investigation against M/s SMRI the imported scrap of Zinc and Aluminium lying at different ports and factory of M/s SMRI were seized on grounds of undervaluation. Statement dt. 16.01.2007 of Shri Mihir Bhatt, Prop. of M/s Metal Resources, Mumbai , who was dealing in import & export of non-ferrous metal & scrap was relied upon wherein he stated that the minimum metal content in the Aluminium Scrap was 70% to 80% and considering impurities content in the respective lot, the prices of the metal content therein could be the purchase price. He also stated that his business with M/s SMRI was only of around 300 MT, which is negligible quantity. Statement of Shri Haji Amin Gadawala, Chairman of Bibi Group of companies was recorded 17.1.2006 wherein he stated that he was acting as a follow-up agent of M/s Ala International Trading, Sharjah. The Indian buyers were importing Aluminium Scrap from M/s Shar Metals, Sharjah, M....
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....n consignments with the discount bands provided in said circular it revealed that M/s SMRI has under-declared the value of Aluminium Scrap. The show cause notice also relied upon the report dt. 10.01.2007 of Consulate General of India of U.K. and alleged that in case of supplier M/s Sunberg Ltd. U.K, the value declared by the said exporter are on the higher side as compared to that declared by SMRI at the time of clearance in India. Based upon above contention/ allegation the show cause notice proposed duty demands as under : (i) A demand of Rs. 4,31,00,86/- as detailed in Annexure - 'A - II' to show cause notice was proposed on the ground that M/s SMRI has imported Zinc Skimming from M/s U.S. Zinc by mis-declaring the same as Zinc Ash. That the Zinc content in Zinc Ash is only 35%, whereas the recovery of the pure metal in Zinc Skimming ranges from 60 to 65%. In trade parlance, the presence of pure metal is guiding factor for fixation of prices of scrap. It was, thus, proposed to reject the declared value under Rule 10A and to determine the value under Rule 3 (i) read with Rule - 9 (1)(e) of Customs Valuation Rules, 1988. (ii) A demand of duty of Rs. 43,71,891/- ....
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....unt band was applied in terms of Circular issued by Director General of Valuation Circular No. 14/2005 dt. 16.12.2005. (viii) In case of Annexure - D to show cause notice the duty of Rs. 95,168/- was proposed to be made in respect of Aluminium scrap (Telic/Taint/ Tabor) by adopting the LME price for virgin Aluminium to which discount band was applied in terms of DGOV Circular No. 14/2005 dt. 16.12.2005. (ix) In Annexure E to the show cause notice demand of duty in respect of Aluminium scrap imported from Kandla port was made. The basis adopted for valuation is LME price for virgin raw material to which a discount band was applied in terms of DGOV Circular supra on valuation. (x) In Annexure F to show cause notice duty demand of Rs. 31,02,341/- was proposed in respect of Aluminium and Zinc Scarp imported through Tuglaqabad port. The basis adopted for valuation was LME Price for virgin material to which discount band was applied in terms of DGOV Circular supra. 1.4 The show cause notice also proposed the confiscation of seized goods and in respect of goods which not be seized, it was proposed to Impose redemption fine. Penalty under section 114A/11....
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....CN, the assessments were provisional and therefore the demands could not have been made under Section-28 of the Customs Act. The adjudicating authority though accepted the proposition that in respect of provisionally assessed Bills of entries the demand under section 28 is not maintainable, but confirmed the demand by holding that the Appellants had not specifically mentioned which bills of entry are provisional and that there was no evidence of provisional assessment in the form of execution of bond. This contention of the adjudicating authority is erroneous and he has overlookedthe material facts. He points out from the submissions of reply to SCN dated 29.12.2018 that the Appellants had specifically shown that the bills of entry in Annexure A-II, A-III and A-IV were provisionally assessed pending test. He submits that the findings of the adjudicating authority that there is no evidence of execution of bond is also incorrect since the provisionally assessed bills of entry were clearly had inscription / mention as Test Bonds. He list out the Bills of entry and print-outs taken from EDI systems which clearly shows the assessment to be provisional. 2.2 He submits that in case of ....
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....riginal dt. 21.02.2011 and 03.07.2012 accepting the transaction value and holding that value cannot be determined under Rule 8 on the basis of LME less discount band. The order attained finality. 2.4 Ld. Counsel submits that adopting LME price of Virgin metal and applying discount bands as a principle of valuation of scrap has been outrightly rejected in decisions of Tribunal which stands accepted by the CBEC and Apex Court. He relies upon judgments in case of Pushpak Metal Corporation 2014 (312) ELT 381, Bharati Rubber Lining & Allied Services Pvt. Ltd. 2013 (287) ELT 124. He submits that in view of aforesaid two judgments, the demand cannot be re-determined under Rule 8 by adopting LME price of prime raw material and applying the discount bands. He also draws our attention to the communication of CBEC to the effect that while accepting the aforesaid decision of Pushpak Metal, the CBEC has categorically taken a view that recourse to LME price cannot be taken to substantiate the charge of undervaluation when contemporaneous import of almost same prices was available during the material time. He also submits that the adjudicating authority has erred in relying upon statement of S....
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....e submitted year-wise charts for the period 2002 to 2006 depicting the quantum of imports of Zinc Ash / Dross / Scrap and Aluminum scarp covering 2200 import consignments running into 120 pages, which was not possible since all the import documents such as bills of entry etc. were seized by the DRI in May 2006 itself. This clearly shows that his statements were not true or voluntary and he has merely signed the statement prepared by the DRI. 2.5 As regards reliance placed in the show cause notice and impugned order upon the statement of indentors, he submits that those statements cannot be relied upon for the reason that they did not appear for cross examination. Similarly, no reliance can be placed on the alleged recovery of e-mails from the laptop of the indentor as no cross examination was given of panch witness and the officers who conducted the Panchnama. It is inconceivable that the activities alleged to have been undertaken, as recorded in the panchnama, could have been undertaken within a short term period during which the Panchnama is alleged to have been conducted. He relies upon the judgments in caseofMotabhai Iron & Steel Industries 2015 (316) ELT 374 (GUJ), Basudev ....
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....eman Home Products Pvt Ltd vs CC - 1997 (95) ELT 278. 2.8 The Ld. Counsel also points out that in respect of 550 Bills of entries covered under Annexure - C, value was already enhanced at the time of assessment and hence there cannot be any reassessment of the said values, which had become final for want of appeal against the same. He places reliance on judgments in the case of CC vs Lord Shiva Overseas - 2005 (181) ELT 213, Malhotra Impex vs CC - 2006 (203) ELT 561 and CC vs Paras Electronics - 2009 (246) ELT 231. As regard export declaration in respect of one consignment shipped from New Zealand and 11 consignments shipped from Spain, he submits that the declarations have no relevance as the same were not authenticated by the News Zealand Customs and Spanish Customs. Most of them are in respect of goods other than those imported by the Appellants and they are not consignees. He points out that in some declarations, the goods are Iron& Steel scrap which are not imported by them. He submits that in any event, the values not been re-determined on the basis of these declarations and hence they have no relevance. 3. Shri T.G Rathod, Ld. Joint Commissioner (AR) appearing for the ....
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.... The Chemical Examiner in his report has reported that the goods are other than Zinc Ash. However it is nowhere appearing that the goods are skimmings. The Appellant had requested cross examination of chemical examiner which was also not allowed. In our view when the goods on importation were found to be zinc ash and permitted to be cleared after testing and also that the chemical examination report of goods seized from factory is inconclusive, the goods would merit classification as Zinc Ash only. Even though there is communication from the Indian Consulate or the emails between the indentor and supplier, but in the light of the fact that the goods were found to be Zinc Ash during imports, we are inclined to hold that the charges of mis-declaration are not sustainable and hence no duty demand can be made. There is no evidence found at the end of the Appellant and the documents relied upon to support the allegation were of third party. Hence in such circumstances , we are of the view that the charges of misdeclaration and undervaluation does not sustain. 4.1 Further coming to the demands made in above Annexure - II, Annexure A-III on Zinc Ash and in Annexure A-IV on Zinc Dross, ....
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....uation Rules i.e Transaction value of similar goods or determination under rule 6 by determining under provisions of Rule 7. The Appellant in their reply to show cause notice had provided list of contemporaneous import of identical goods at the same price and we have perused the same. This has been overlooked by the adjudicating authority. We are of the view that if the declared value is to be rejected in that case the CVR, 2008 has to be applied sequentially i.e Rule 5 and 6 is to be applied. If the value of the contemporaneous goods are available, the same shall be basis for re-determining the prices. Whereas in the case of instant demands the prices of contemporaneous imports were same as that of Appellant and hence the LME Prices reduced by discount band could not have been basis for re-determining the prices and rejecting the declared value. The Appellant has pointed out that identical goods were imported in case of Pushpak Metal Corporation 2014 (312) ELT 381 which were imported during the same period and comparable with Appellant's import price. The said prices were upheld by the Tribunal and it was held that value cannot be determined on the basis of LME prices. Also that t....
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....Court in the said case held as follows : "The valuation of the imported goods where the transaction value in the opinion of Assessing Authority is liable to be rejected because of invoice manipulation or under-invoicing or un-realistic price or misdeclaration in respect of valuation of goods or description or where transaction value of the goods declared is ridiculously low, which of course the Assessing Authority has to justify, he must proceed to determine valuation of goods by following Customs Valuation Rules. The availability of evidence of contemporaneous import of the same goods obviously provides the best guide for determination of value of the import of goods but in the absence of evidence of contemporaneous import, reference to foreign journal for finding out correct international price of imported goods may not be irrelevant." 5.5 In the instant case, the proposition in the show cause notice is that the value of the contemporaneous imports indicated a higher price. If that be so, that should have been the starting point for determination of value of the imported goods and not some other basis. Further even when we take the values of the contemporaneous ....
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.... short "the Tribunal") as it then existed. By the impugned order, the Tribunal has allowed the appeal and quashed the additional amount of duty demanded from the respondent. While accepting the plea of the assessee that they were not confronted with any contemporaneous material relied upon by the revenue for enhancing the price declared by them in the bills of entry, the Tribunal has observed thus : "In the present case as mentioned above, even though there is a reference to contemporaneous import in the order passed by the Deputy commissioner no material regarding such import has been placed before us or made available by the appellant at any point of time. Therefore, assessment in this case has to be taken as having been made purely on the basis of LME Bulletin without any corroborative evidence of imports at or near that price which is not permissible under law. We, therefore, set aside the impugned order and allowed the appeal." 5. Not being satisfied with the said order, the revenue is before us in this appeal. 6. We have heard Mr. Biswajit Bhattacharya, learned Additional Solicitor General on behalf of the revenue. The assessee remains unrepresented....
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....Customs, Kandla v. Meera Impex - 2004 (167) E.L.T. 446 (Tri.-Mumbai) holding that LME prices are indicative and cannot be the basis for enhancing the value in the absence of corroborative evidence of contemporaneous imports at higher price, we hold that enhancement of the value is not justified in the present case and accordingly set aside the impugned order and allow the appeal. The above Tribunal judgment stands upheld by the Apex Court as reported in Commissioner Vs. GKN Sinter Metals Limited - 2010 (254) E.L.T. A43 (S.C.)]" Same analogy has been taken by the Tribunal in case of Bothra Metal & Alloys 2013 (9) TMI 546. It is therefore absolutely clear that the redetermination of value based upon LME prices less discount band as per DGOV Alert Circular supra is not sustainable. 7. From the above judgments it is absolutely clear that applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 - Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap u....
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....ws relied upon by the Department will not help our causebecause these decisions were applicable in respect of prime metals only and not w.r.t. scrap except in the case of Varsha Plastics. In Varsha Plastic also, the Hon'ble Supreme Court held that the availability of evidence of contemporaneous import of the same goods obviously periods the best guide for determination of value of the import of goods. But in the absence of evidence of contemporaneous import, reference to foreign journals for finding out the correct international prices for the purpose of Section 14 of the Customs Act is not irrelevant. Since contemporaneous import prices were available in the present case as being noted but not accepted by the Commissioner in the Order-in-Original, departmental case for undervaluation become weak and appeal in Supreme Court is not merited" We find from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI), wherein they have stated as under : "We have been asked to explain how aluminum scrap prices are determined. Please be advised that ISRI, as a trade association, does not become involved in scrap pricing. However, our understan....
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....ements dated 29.5.2006 and 23.04.2007 which were contradictory in respect of value of imported goods. In his statement dated 29.5.2006 on being shown an alleged abstract of LME prices of Aluminium Scrap, which showed price of Aluminium scrap as 80% of the LME price he had stated that the prevailing LME prices formed the basis of negotiation and that normally, the prices of Aluminium scrap were negotiated at 80% of the LME. However in his statement dated 23.04.2007, he has stated that the import price of Aluminium Scrap was negotiated by applying different discount bands ranging from 5% to 35% to the LME price of various grades, viz. Trump, Tense, Taldon, Trob etc., which corresponded to the discount band provided in Alert Circular No. 14/2005 dated 16.12.2005 of the Director General of Valuation. In such a case, we are inclined to accept the submission of the Appellant that initially the investigating officers were attempting to apply 80% of the LME, but later on realizing that even the Director General of Valuation was not recommending valuation of 80% of the LME, the statement of Shri Sushil Agarwal was recorded to match the discount band, as per DGOV Circular. In such view of th....
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....il Agarwal was denied by the adjudicating authority on the ground that no new facts are likely to come out at such examination and cross-examination. This reasoning of the adjudicating authority is highly erroneous since it cannot be assumed that the cross examination of a person would not bring any material not already available. Our views are based upon the judgment of the Hon'ble apex court in case of Andaman Timber Industries - 2015 (324) ELT 641 (SC) , wherein the apex court held as under : "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to not....
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....s held that the statement against the assessee cannot be used without giving them opportunity of cross examining the witness as it is valuable right of accused/ noticee in quasi judicial proceedings which can have adverse consequence for them. The Adjudicating authority had allowed cross examination of indentors and even they were also issued notice, none of the indentor was made available for cross examination. In such circumstances when these persons could not be produced for cross examination, their statements could not have been relied upon. Especially in case of Mihir Bhatt, Ehsan Amin Gadawala where the only evidence was their own statements stating undervaluation. In case of other persons also in the light of above facts, the adjudicating authority should have allowed the cross examination. In absence of the opportunity to cross examine the above persons, we are of the view that no reliance can be placed upon their statements. Our views are supported by the judgment of Hon'ble High Court of Gujarat in case of CC Vs. Motabhai Iron & Steel Industries 2015 (316) ELT 374 (GUJ) wherein the Hon'ble High Court has held that "no reliance can be placed on the statement of such witnes....
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....cular No. 1027/15/2016-CX dated 25.04.2016, Slugs India Ltd Vs. CCE - 202 (278) ELT 611, CC vs Tata Iron & Steel Co. Ltd - 2004 (165) ELT 386 (SC), Bhushan Steel Ltd vs CCE - 2012 (284) ELT 713, Shri Ram Agro Chemicals (P) Ltd vs UOI - 2009 (234) ELT 218 (P & H), CC vs L. Madanlal (Aluminium ) Ltd - 2010 (258) ELT 107, Karnataka Chemical IndusCorpn. Ltd vs CC - 2005 (183) ELT 207.The adjudicating authority also held that since the issue of non-payment of Additional duty was not raised at the time of assessment, hence cannot be raised in reply to show cause notice under section 28. The contention of adjudicating authority is not sustainable as when notice under section 28 is issued to an assessee, he can contest the whole assessment to say that duty is not payable for a reason not taken up at the time of original assessment. He is entitled for all reliefs/ exemption associated with the assessment. The issues is well settled by the Tribunal's order in case of Decora Ceramics P. Ltd. 1998 (100) ELT 297, Lili Foam Indus. P. Ltd. 1990 (46) ELT 462, Bakeman Home Products P. Ltd. 1997 (95) ELT 278. 13. Further, we also find that in respect of 550 Bills of entries covered under Annexure....