TaxTMI 
TaxTMI 
2022 (1) TMI 812
X X X X Extracts X X X X
X X X X Extracts X X X X
....eem it under section 125 of the Customs Act on payment of redemption fine of Rs. 3.5 crores. The order also seeks to confirm the demand of customs duty of Rs. 5.11 crores leviable on the Barge with equipments, spare parts and accessories. The order further appropriates customs duty of Rs. 5.15 crores and imposes a penalty under section 114A of the Customs Act. 2. Customs Appeal 87424 of 2014 has been filed by Hari Bhambhani, Managing Director of M/s. Bhambhani Shipping Ltd. to assail the aforesaid order dated February 24, 2014 to the extent it imposes a penalty of Rs. 1.75 crores upon him under section 112(a) of the Customs Act. 3. The appellant is engaged in offshore activities, like providing tugs, accommodation barges and supply vessels. It purchased the second-hand non-propelled accommodation Barge with all standard equipments and accessories from M/s. Halani International Ltd., Dubai [Halani] for a transaction value of US Dollars 60 lakhs 'Free on Board' [FOB], to be paid directly to the bank account of the seller, as detailed in the Memorandum of Understanding and the Agreement signed in Mumbai on August 12, 2010 [MOU]. The Bill of Sale was executed on July 05, 2011, and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... who observed that considering the number of people that could be accommodated on the Barge and the accessories, equipments on board the vessel, the vessel appeared to be grossly under invoiced. 10. On the basis of this observation, further inquiry proceedings were launched and in the said process, statement of the Managing Director was recorded under section 108 of the Customs Act on September 30, 2011. 11. In the light of the aforesaid observations of the Officers of SIIB (Import) and the statement of Hari Bhambhani, a re-inspection of the Barge was carried out by the same Chartered Engineer along with SIIB Officers on October 06, 2011. Thereafter, a revised Chartered Engineer Certificate was issued on October 12, 2011, which amended the FOB value from US Dollars 6,000,000.00 to US Dollars 7,385,000.00, with a remark that during the re-inspection, they gathered complete vessel particulars which had not been made available during their initial inspection regarding capacities, Year of Manufacture & other technical specifications of equipments, such as cranes, generators, compressors WMP and STP. 12. The Barge, along with the equipments, accessories and spares was placed under se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....consequent penal provisions to be invoked on the notices are the remaining issues which need consideration. xxxx xxxx xxxx 24. From the above, it is evident that the value of the equipments, which were not accessories of the barge, had not been included in the value of the impugned barge. Further, the freight component had also been mis-declared by M/s Bhambani Shipping Ltd., as admitted by Shri Hari Bhambani, Managing Director of M/s Bhambani Shipping Ltd, in his statement recorded under section 108 of the Customs Act, 1962 and detailed in para 22 above. Therefore, I hold that the declared CIF value of Rs. 26,97,49,1677- of the Impugned Barge "Halani Star" imported and sought to be cleared vide Bill of Entry No. 4460906 dated 25/08/201 is liable for rejection under Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules 2007 (hereinafter referred to as 'Customs Valuation Rules, 2007'). 25. Having rejected the declared, the same is required to be re-determined as per the provisions of the Customs Valuation Rules, 2007. Once transaction value is rejected the value shall be determined by proceeding sequentially through Rule 4 to 9 of the Customs Va....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 22.07.2011 and 12.10.11, it can be seen that the vessel particulars, which had purportedly not been made available during the first inspection, formed part of the First Report and have been verbatim reproduced in the Second Report. The appellant had always provided the true and correct facts and details about the Barge to the Chartered Engineer, which is evident from the fact that the description of the Barge and its equipment is identical in both the Valuation Reports. The Chartered Engineer had also inspected the Barge before issue of the First Report; iii. The question of wilful suppression with intent to evade payment of duty or mis-declaration of value on part of the appellant does not arise. Even the impugned order records a finding that it was the valuer who failed to consider the value of equipment; iv. The Chartered Engineer had altered the valuation without any sound reason. Hence, it was necessary to record his statement and grant a cross examination to the appellant. Infact, the appellant had made a specific request for cross examination of the Chartered Engineer but the respondent denied cross examination; v. It is not the case of the Department that the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....should be nominal, considering the facts and circumstances of the matter; xi. Penalty under section 114 A should be set aside when the duty purported to be demanded under section 28 itself does not survive; xii. The jurisdiction to impose penalty under section 114A can be assumed only if duty is confirmed under section 28 of the Customs Act and not under any other section. In this connection reliance has been placed upon Commissioner of Customs (Import and General) vs. M/s. Care Foundation [2014-TIOL-537-HC-DEL-CUS] and Surendra R. Choudhary vs. Commissioner of Customs (Import), Nhava Sheva; xiii. Penalty of Rs. 1,75,00,000/- under section 112(a) on the Managing Director of the Appellant should be set aside as the Impugned Order is silent and does not disclose existence of any of the ingredients for imposing penalty under section 112(a). There is no finding that the Managing Director personally indulged in any commission or omission rendering the Barge liable to confiscation under section 111 of the Customs Act; xiv. In any case, the entire case of alleged valuation has arisen due to the improper valuation done by the Chartered Engineer while issuing his valuation report and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d vii. Where it is intended to recover or demand duty from any person and also confiscate any offending goods related to such proposed demand of duty along with imposition of penalties provided in Chapter XIV, a combined notice has necessarily to be issued invoking provisions of both sections 28 and 124 of the Customs Act. In support of this contention reliance has been placed upon the decision of the Tribunal in Prince Fortified Steels Pvt. Ltd. vs. Commissioner of Cus., Tuticorin [2019 (369) E.L.T. 1228 (Tri.- Chennai)]. 18. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered. 19. The issue that arises for consideration in these appeals is regarding the valuation of the Barge. The value declared by the appellant in the Bill of Entry filed on August 25, 2011 under section 46 of the Customs Act seeking clearance under First Check Examination procedure was US Dollars 6,034,657.00 (CIF), equivalent to Rs. 26,97,49,167/-. The appellant had mentioned this value on the basis of the invoice, MOU, Bill of Sales, Insurance and Chartered Engineer Certificate and paid customs duty to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (2) Notwithstanding anything contained in sub-section (1) or subsection (1A), if the Board is satisfied that it is necessary or expedient so to do it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. *******" 23. Section 14 of the Customs Act, as amended on 10 October 2007, is as follows: "Section 14.Valuation of goods. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this beha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the first proviso of the amended Section 14(1), in the transaction value of the imported goods, certain charges are to be added which are in the form of amount paid or payable for costs and services including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner which can be prescribed in the rules. Sub-section (2) of Section 14, which remains the same, is an overriding provision which empowers the Board to fix tariff values for any class of imported goods or export goods under certain circumstances. We are not concerned with this aspect in the instant case." (emphasis supplied) 25. Thus, what has to be seen under section 14(1) of the Customs Act, as amended in 2007, is the transaction value of the goods imported or exported for the purpose of customs duty and transaction value is stated to be the price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 of the Customs Act also makes it clear that the price actually paid o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cate dated 22.07.2011 submitted by the importer for the clearance of the impugned barge, that the list of items for which the CIF valuation had been considered were "Old and Used Non Propelled Accommodation Barge "Halani Star", spares, consumables, and Provisions on board". Further, it appeared that the valuer had not considered the value of the equipments such as the Crane of "American" brand AMHOIST with a capacity of 225 Tones, three Power Generators of Caterpillar Make with capacity of 1030 Kilowatt, 4 Winches with 8 drums (one set was non functional and under repair), Water Maker with capacity under Reverse Osmosis process for making 25 tons per day. The value of the these equipments installed on the barge was required to be included to arrive at the assessable value of the barge under import. On being asked to state the value of the said equipments, Shri Hari Bhambani, Managing Director of M/s Bhambani Shipping Ltd requested that the said equipments may be resurveyed by the same Chartered Engineers as they would verify whether the value of some equipments had been left out and that if the value was enhanced after the survey he would pay the differential duty. Accordingly, as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of Built/Make/Model/Price in Year of Built, To appraise the value of items/components in the 'as is where is basis' 6. Details of Items Inspected 6.1 Technical Specifications : One Old, Used & Secondhand Non- Propelled Accommodation Barge "HALANI STAR" with related spares, accessories, consumables & provisions on-board. 6.2 Vessel Particulars Name of Vessel Type IMO no. Official No. Port of Registry Builder Place of built Owner Current Class Length Breadth Depth GRT NRT Summer Draft Dead Weight Light Ship Main Generator Emergency Generator Compressors Water Maker Accommodation Capacity : : : : : : : : : : : : : : : : : : : : : : "HALANO STAR" Non-Propelled Accommodation Barge 8646616 10674 Kingstown, Chuan HUP Marine Ltd., Singapore Halani Industries Ltd. Trust House, 1 12 Bandic Street, Kingstown Saint Vincent ABS - A1, Barge IRS - SU, Pontoon 91.440 Meters 27.430 Me....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Officials, we have gathered complete vessel particulars which were not made available during our initial inspection/documentation regarding capacities, YOM & other technical specifications of equipments such as cranes, generators, compressors WMP, STP etc. and against the following commercial details, we now amend our earlier certificate as under: ******** 9.5 CIF valuation of Non - Propelled Accommodation Barge "HALANI STAR" as under: One Old, Used & Secondhand Non - Propelled Accommodation Barge "HALANI STAR". USD [FOB] 6,000,000.00 Add. On account of cost of on board spares, consumables, accessories, provisions & Equipment on board with their respective capacities, YOM & other technical specifications of equipments such as cranes, generators, compressors WMP, STP etc. USD [FOB] 1,385,000.00 Add. Freight USD 5,000.00 Add. Insurance USD 29,657,00 CIF valuation of Accommodation Barge "HALANI STAR" USD 7,419,657.00 33. A comparative study of the two certificates dated July 22, 2011 and October 12, 2011 issued by the Chartered Engineer is reproduced below: COMPARATIVE STUDY TABLE CERTIFICATE DATED 22....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e US D 7.385.000.00 6. In column 8.5 of Certificate Comments on Valuation Taking into consideration the condition of the equipment, expected residual life and the enquiry in market, the fair and reasonable price in our opinion is USD 7,385,000.00 [FOB] [US Dollars Seven Million Three Hundred Eighty Five Thousand Only] 7. In column 9.4 of Certificate Add: On account of cost of on board spares, consumables, accessories, provisions & Equipment on board with their respective capacities, YOM & other technical specifications of equipments such as cranes generators, compressors WMP. STP etc. [FOB] US D 1,385,000.00 34. It is clear from a comparison of the two reports that the vessel particulars, which purportedly had not been made available during the first inspection report, form part of the first report and have also been reproduced in the second report. The description of the Barge and its equipment is same in both the valuation reports and the Chartered Engineer had also inspected the Barge before the first report was submitted. 35. What also needs to be noted is that the appellant had purchased the Barge at US Dollars 6,000,000.00 (FOB) and ear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....38. Such a requirement is necessary is clear from the observations made by the Allahabad High Court in Commissioner of Central Excise vs. Kurele Pan Products Pvt. Ltd. [2014 (307) E.L.T. 42 (All.)], wherein, it was held that documents cannot be relied upon if permission to cross examine the author of the documents has not been provided. The relevant portion of the judgment is reproduced below: "6. It is a settled principle of law that if the authority wants to rely upon the statement of any witness, the opportunity of cross-examination ought to have been given to enable the party to prove its case. Non-providing of the opportunity of cross-examination amounts to violation of the natural justice and in absence of denial of natural justice, such documents cannot be relied upon. In the case of Basudev Gard v. Commissioner of Customs [2013 (294) E.L.T. 353 (Del.), the Division Bench of the Delhi High Court has held that the statement against the assessee cannot be used without giving them opportunity of cross-examination. Cross-examination is valuable right of the accused/noticee in quasi-judicial proceeding which can have adverse consequences for them." (emphasis supplied) 39. Thu....