TaxTMI 
TaxTMI 
2022 (4) TMI 1214
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....the SCN and will not rely on Canon India and will argue on merits and that the respondent has a very strong case on merits. Accordingly, with concurrence of both sides, this appeal is taken up for hearing for a decision on merits ignoring the jurisdictional issue as it has been given up by the learned counsel for the respondent. 2. This appeal is filed by the Revenue assailing Order-In- Original [Impugned order] dated 19.07.2019 passed by the Commissioner of Customs, Hyderabad Customs Commissionerate, Hyderabad dropping all the proceedings initiated by the Show Cause Notice [SCN] dated 20.10.2018 issued to the respondent. 3. M/s Sachdev Overseas Fitness Pvt. Ltd. [Respondent] , imports fitness equipment from China and Taiwan. Officers of DRI received intelligence that the respondent was evading Customs duties by mis-declaring the value of the goods imported by it and the goods that it imported were being shipped directly from the manufacturer in China but the purchase invoices for a lower value than the manufacturer's price were issued by Shri Durga Prasad Khera [Khera] alias Rajan Khera of Taiwan. 4. Acting on this intelligence, officers searched the office of the r....
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....rabad, filed 'Into Bond Bills of Entry' and stored the goods in customs public bonded warehouse located in Kompally and thereafter cleared goods from time to time as required. 6. Some of the imported goods were pending clearance at the ICD and some were lying in the Custom bonded warehouse and still some other goods were in the office-cum-godown of the respondent which were examined and thereafter seized. The details are as follows: (i) Fitness equipment imported under B.E. No.4244143 dated 13.02.2016 valued Rs. 57,69,445/- which was pending clearance was seized at ICD, Hyderabad on 09.03.2016. (ii) Fitness equipment imported under BE. No.4244128 dated 13.02.2016 valued at Rs. 59,77,739/- which was pending clearance was seized at ICD, Hyderabad, on 10.03.2016. (iii) Imported goods which were already cleared by the customs valued at Rs. 71,07,973/- were seized at the Office cum godown of the respondent on 14.03.2016 (iv) Imported goods valued at Rs. 5,53,82,470/- which were stored in Custom bonded warehouse were seized on 31.3.2016 in the bonded premises of M/s. Raghava Warehousing and Logistic Services Pvt. Ltd., Kompally. 7. The total value of the goods seized as was rev....
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....s of the importer, which were raised by the manufacturer in China on the supplier in Taiwan, indicated a higher value of goods. The goods mentioned in these invoices are found to be exactly the same as the ones imported, as evidenced by the serial numbers. The corresponding packing lists also indicate that the goods received by the respondent were stuffed into containers by the manufacturer and shipped directly from China. As such, for all practical purposes, the value stated in the invoices issued by the manufacturer reflects the value of the imported goods and the SCN details the conspiracy entered into by the importer in routing the invoices through Taiwan for undervaluation. The validity and accuracy of the invoices recovered from the premises of the respondent have not been questioned and contended by the importer before the adjudicating authority. They only contested the relevance of these invoices in, firstly, rejecting the declared value of the importer, and secondly, re- determining the value using the residual method. (iv) The fact of recovery of parallel invoices with much higher value from the office premises of the importer for exactly the same goods being imported i....
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.... it is found that the debit entries are even higher, on account of mark-up by the supplier, as discussed in Para 9.1 (vi) and (vii) of the Show Cause Notice. (vi) The above facts, as laid out in Para 14 of the Show Cause Notice, form the grounds for doubting the accuracy of the declared value, and proposing for rejection thereof under Rule 12 of the Customs Valuation Rules, 2007. (vii) The adjudicating authority at Para 82 of the OIO observed that "The mere ground that the invoice of manufacturer at China, issued to the trader at Taiwan had higher value than the value declared to the Indian Customs cannot be a ground to reject thevalue, particularly when much emphasis was laid down under the Rules on what are the grounds available while considering for rejecting a declared value". Further, at Para 83 that it was held that "......it can be unarguably concluded that none of the ingredients specified under Rule 12 are available in the present import to re-assess the value of the impugned goods". (viii) It is reiterated that the grounds provided in the explanation to sub-rule (2) of Rule 12 of the Customs Valuation Rules, 2007 for rejection of declared value are merely indicative....
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....rted in [1992 (62) ELT 616 (Tribunal)] (Page Nos. 18 to 20) wherein the Tribunal held as under: "The best evidence of the price of the imported goods is available and, therefore, it is not necessary to go to other contemporaneous imports of identical or similar goods. In our view, the manufacturer's invoice represents the transaction under Rule 4 of the Rules. Under the amended rule, importer has to produce invoice of the manufacturer. Since, we are of the view that the manufacturer's invoice is genuine document, there is no reason why it should not be acted upon". The Hon'ble Supreme Court affirmed the above view of the Hon'ble Tribunal in the appeal filed by M/s Sai Impex against the Tribunal decision reported in [1996 (84) ELT A47 (S.C.)](Page Nos. 21). In view of the above, the Tribunal's above order, which was affirmed by the Hon'ble Supreme Court, manufacturer's invoice, if available and genuine, is the best evidence of the price of imported goods and it is not necessary to go to other contemporaneous imports and identical and similar goods and the manufacturers invoice price should be taken as the transaction value under the valuation rules. Thus, the Commissioner's reje....
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.... for taking such agreement into consideration and deciding the case by solely relying on the same and dis-regarding the variegated evidences both documentary as well as depositions which was brought out in the SCN. (xiii) Another piece of evidence corroborating the undervaluation was the presence of Statements of Accounts in the pen-drive recovered during the search proceedings at the residential premises of Shri Prem Kumar Sachdev, Authorized Signatory of M/s. SOFPL on 03.03.2016. The adjudicating authority in Para 89 of the OIO held, that the party has contended that they were not provided with any analysis report, and in Para 90 of the OIO that in the absence of evidence that the data so collected from the third agency was shared with the importer, it cannot be said that the principles of natural justice were followed by the investigating agency, who failed to share the data with the importer. The adjudicating authority has relied upon the judgment of the Hon'ble Tribunal in Surya Boards Ltd. vs. CCE, Rohtak, reported in 2014 (312) ELT 282 (Tri- Delhi) in this regard. (xiv) It is factually incorrect that the digital evidences extracted by the Central Forensic Science Lab....
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....ver, Davinder Pal Narang in his statement dated 23.09.2016 has admitted that he had travelled to Taiwan and China several times to attend exhibitions pertaining to fitness equipment on behalf of Shri Prem Kumar Sachdev and has also attended Shri Rajan Khera's son's marriage in Chandigarh. This goes on to indicate that the persons mentioned in the Statement of Accounts retrieved from the pen drive recovered at the residence of Shri Prem Kumar Sachdev are not alien to M/s SOFPL. Sri Prem Kumar Sachdev in his written submission admitted that the pen drive was recovered from his residence. It is for Sri Prem Kumar Sachdev to explain the contents of the pen drive found from his residence and the burden of proof shifts on him to explain the same. (xviii) The adjudicating authority, in Para 85 of the OIO, held that it has not been proven beyond reasonable conclusion that "Sri Pal Ji" listed in the document is none other than Sri Devinder Pal Narang. However, it is well established that the standard of proof in Customs adjudication proceedings is preponderance of probability and not proof beyond reasonable doubt. The preponderance of probability of amounts paid to the supplier in....
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....opied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely: - (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period....
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....eproduction or derivation from the information fed into the computer in the ordinary course of the said activity". (xx) However, the Learned Adjudicating Authority did not consider the digital evidence extracted by the Central Forensic Laboratory, Hyderabad holding that the same was not shared with the importer and violative of principles of natural justice. (xxi) Shri Prem Kumar Sachdev, in his written submissions stated that admissions of undervaluation in the Panchnama dated 09.03.2016 and 10.03.2016 are hearsay. This averment of the importer is far from the truth. The two seizure Panchnamas are proceedings narrated by the Panch witnesses and also signed by Sri Prem Kumar Sachdev himself. He has categorically stated before the Panchas and the officers that the value declared did not represent the true transaction value and have been undervalued. 8. Learned Departmental Representative prayed that the impugned order may be set aside and the demand, interest, confiscation and penalties as proposed in the SCN may be confirmed. 9. On behalf of the Respondent, the following submissions have been made: a) The Respondent imports fitness equipment as per an agreement entered into....
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....ot even based on the inadmissible evidence of the file in the pen drive and merely based on assumption of undervaluation. e) Even if the invoice value is rejected on suspicion based on the entries in the pen drive, valuation has to be done sequentially as per the Valuation Rules. This was not done on the ground that there were no imports of identical or similar goods during the relevant period. This was a wrong claim and the respondent disproved it by producing evidence of imports of similar goods. This evidence has not been rebutted. f) The entire investigation by the DRI is too meager to establish any undervaluation of goods. g) There was no admission of undervaluation of goods at any stage by the Respondent. h) If DRI found a difference between the manufacturer's invoice and the invoice under which the goods were imported, the logical step would be to ask Shri Sachdev, the authorised signatory of the appellant or his office staff about the differences and they would have explained. No question was put to them asking to explain why there were differences. i) The manufacturer's invoices found in the office of the respondent are not relevant for examining the value ....
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....ed by the manufacturer in China on Shri Khera's companies is for a higher value and the corresponding invoice raised by Shri Khera's companies on the respondent was for a lower value. Samples of corresponding invoices were pasted in the SCN. The manufacturer's invoice reflects the correct transaction value and the invoice raised by Shri Khera for a lower value on the respondent is only meant to declare a lower value and pay less Customs duty. According to the Revenue, the respondent paid to Shri Khera's companies, the amount declared in the invoice through banking channels and paid the difference between invoice value and the manufacturer's price (which is the true value) through various persons as indicated in the excel sheet in the pen drive. The differential value and duty was worked out as follows: a) Differential duty of Rs. 13,00,13,327 was worked out in WORKSHEET II based on the EXCEL file that was in the pen- drive. b) Differential duty of Rs. 2,44,92,805/- was worked out in WORKSHEET IIIA based on the averaged margins in Worksheet II. In other words, since some undervaluation was found in Worksheet II based on the evidence found in the pen-drive, extrapolating similar ....
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....specified in the rules made in this behalf: Provided further that the rules made in this behalf may provide for,- (i) the circumstances in which the buyer and the seller shall be deemed to be related; (ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section: Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2) Notwithstanding anything contained in sub-section (1), 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....
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....e transaction values are available. 15. The first proviso to sub-section 1 of section 14 provides for some additions to the transaction value which are not relevant for the present case. The second proviso to this sub-section provides for Rules to be made in this behalf to provide for: a) the circumstances in which the buyer and the seller shall be deemed to be related; b) the manner of determination of value in respect of goods when there is no sale, c) the manner of determination of value in respect of goods if the buyer and the seller are related, d) the manner of determination of value in respect of goods where price is not the sole consideration for the sale; e) the manner of determination of value in respect of goods in any other case; and f) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section. 16. The Valuation Rules were framed as per the second proviso to sub-section 1 of section 14. It has 13 Rules in all of which Rules 1 and 2 are Preliminary rules. Rule 3 states th....
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....o tariff value is fixed by the Board, valuation is as per the transaction value, if necessary, with some additions (as per the first proviso to sub-section 1 of section 14 and as per Rule 10); c) If the transaction value is rejected as per Rule 12 by the proper officer, valuation has to be done as per the value of identical goods (Rule 4); d) If transaction value is rejected and there is no value of identical goods, then it must be as per the value of similar goods (Rule 5); e) If transaction value is rejected and there is no value of identical goods or similar goods, value must be determined through Deductive method (Rule 7) f) If transaction value is rejected and there is no value of identical goods or similar goods and it is not possible to determine value following deductive method, then value must be determined through computation (Rule 8) g) If the importer so chooses, computational method may be adopted without examining the deductive method first (Rule 6). h) If the transaction value is rejected and there is no value of identical goods or similar goods and if it is also not possible to determine the value through deductive method or computational method, then va....
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....lity, quantity, country of origin, year of manufacture or production; (e) then on declaration of parameters such as brand, grade, specifications that have relevance to value; (f) the fraudulent or manipulated documents. 21. Thus, if the officer has reason to doubt the truth and accuracy of the transaction value, he can call for information including documents and evidence. If the information and evidence is presented and after examining it or if no information or evidence as called for is presented, if the proper office has reasonable belief then it shall be deemed that the value cannot be determined as per Rule 3 (i.e., based on transaction value with additions, if necessary). While the officer can, in the first place call for information and evidence if he has reason to doubt, at the second stage, he should have not just some reason to doubt but a reasonable doubt. If he has such reasonable doubt, then the transaction value can be rejected. The grounds on which the proper officer may raise doubts about the truth and accuracy of the transaction value have been illustrated in explanation 1 (iii) to Rule 12. The list is inclusive and not exhaustive. In this case, DRI officers f....
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.... expressly admitted that the value declared to the Indian Customs, for the goods imported by M/s SOFPL from Taiwan suppliers represents merely 35% to 45% of the actual value. iv) All consignments imported by M/s SOFPL are relating to fitness equipments, shipped directly from China and invoices raised by same 'Taiwan suppliers'. The invoices of the Chinese manufacturers recovered during investigation range over a wide period starting from 09.11.2011 to 02.02.2016. From the values available over this long period it appears that there is a consistent suppression of value to the extent of 30% to 40% on the values contained in the Chinese manufacturers invoice. Moreover the values contained in the statement of accounts obtained from the pen drivealso matches with the manufacturer's invoices and support the fact that the import of fitness equipment by M/s SOFPL are under- valued. Hence it appears that there has been suppression of values by M/s SOFPL for all the imports of fitness equipment made by them and that all the imports made by M/s SOFPL from Taiwan supplier do not represent the true transaction value and the declared value is liable for rejection." 23. The grounds for proposa....
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....nd M/s SOFPL. The values mentioned against each invoice appear to be the true transaction value inasmuch as this is the amount paid/payable by M/s SOFPL to the Taiwan suppliers. Based on the values contained in the excel file invoice wise, the true transaction value appears to be USD 1,86,75,220. The value not declared to Customs i.e., differential value is USD 79,38,180 and the differential duty payable comes to Rs. 13,00,13,327/-. 15.4 The details of the values available in the invoices of the Chinese manufacturer recovered from the office premises of M/s SOFPL and from the hard disk drives (recovered from the office premises of M/s SOFPL) are provided in Worksheet-IIIA/B. However, the values available in the manufacturers invoices raised on the Taiwan suppliers, is further enhanced by the Taiwan suppliers when the very same goods are sold to M/s SOFPL. The enhanced values can be seen in the 'statement of accounts' available in the pen drive recovered from the residential premises of Sri Prem Kumar Sachdev. The proportionate increase in value by the Taiwan suppliers is adopted to arrive at the true transaction value in terms of Rule 9 of valuation rules and the same is detailed....
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.... which no direct documentary evidence is forthcoming. 15.8 Accordingly, Worksheet-IV has been compiled arriving at the true transaction value under Rule 9 of the Customs Valuation Rules for all the imports where the Chinese manufacturer's invoices are not available and which are not covered by the said statement of accounts during the last five years. The true transaction value arrived at under Rule 9 is USD 1,93,27,997 and the differential duty liable to paid by M/s SOFPL works out to Rs. 15,45,74,102/-. 15.9 Consolidating the differential duties payable as worked out in Worksheet II, IIIB and IV, the total duties of customs payable by M/s SOFPL for the imports made from Taiwan suppliers works out to Rs. 72,70,52,235/- and the differential duty payable works out to Rs. 30,90,80,233/- as detailed in the Worksheet-V annexed to this show cause notice." 24. As may be seen, the proposal to reject the transaction value in respect of those imports listed in WORKSHEET II to the SCN [indicated in paragraph 10 (a) above] is based on the EXCEL sheet recovered from the Pen drive recovered from the residence of Shri Sachdev of the respondent and the copies of invoices recovered from the o....
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....e similarly underreported 30 % of his income for the past five years. If Central Excise officers find that a truck of goods has been clandestinely removed by the manufacturer on a day, it cannot be presumed that the manufacturer has been clandestinely removing one truck of goods every day for the past five years. Each case must be examined only based on the evidence in it. Since each assessment is a quasi-judicial order based on the transaction value in it, transaction values cannot be rejected under Rule 12 by extrapolations. They can be rejected if the officer has reasonable belief based on the evidence in that case, that the transaction value is not true and accurate. We, therefore, find that the rejection of the transaction value in the imports covered in Worksheets IIIA and IV of the SCN by extrapolation and re-determination of the value have no legal basis and need to be set aside. Consequently, the demands in these cases by re-determination of the values cannot also sustain. 26. As far as the consignments covered by WORKSHEET II of the SCN are concerned, the rejection of the transaction value and its re-determination is based on the EXCEL file retrieved by the CFSL from the....
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....share. However, the trade discount is not given so as to lose money on each transaction. Greater volumes in such a case will result in larger losses and no prudent business will run its business so that it can increasingly lose money on transactions. Thus, the submission of the learned counsel does not provide any satisfactory answer as to how the trader is buying at a higher price and selling at a lower price again and again and again so as to enhance its losses. 28. Learned counsel's submission is that the respondent is not aware what kind of deal the trader in Taiwan has with the manufacturer in China. It does not help answer the mysterious business arrangement; there could be some explanation but nothing is apparent from either the records or the submissions of the learned counsel. For instance, if the trader is giving a discount of say, 30% and the manufacturer, in turn, is giving back to the trader more than 30% of the manufacturer's invoice in some form (say, at the end of the year) it is understandable. The logical thing for any investigating officer who found two sets of invoices is to question the importer and if possible the trader and the manufacturer about the apparen....
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.... somebody else and was only found in his home during search for some reason. It is inconceivable that the pen-drive belongs to someone else. We can think of no reason for someone else to keep a meticulous record of the transactions of the respondent in an EXCEL file and also leave the pen-drive in the residence of the respondent. 30. Learned counsel also argued that the statement of accounts in the form of EXCEL sheet contained some names against which cash payments were shown to have been made to Shri Khera which forms the basis of the allegation of the Revenue that additional payments were made to Shri Khera. Neither were the persons named in the file identified nor were they questioned to establish that cash payments were indeed made and if so, at whose behest. We agree with the learned counsel. If the case built by the investigating agency is that the goods were under-invoiced and that the differential amount was paid in cash to the supplier in Taiwan and the names of the persons through whom the amounts were paid are available in the EXCEL file, the logical step would be to identify and question these persons so as to establish that the amounts were, indeed paid in cash and i....
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.... would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely:- (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. (3) Where over any pe....
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....d to that computer, shall be taken to be supplied to it in the course of those activities; (c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment. Explanation.-For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process. Section 3 in The Information Technology Act, 2000 3. Authentication of electronic records.- (1) Subject to the provisions of this section, any subscriber may authenticate an electronic record by affixing his digital signature. (2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and hash function which envelop and transform the initial electronic record into another electronic record. Explanation.-For the purposes of this sub- section, "hash function" means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as "hash result" such that an electronic record yields the same hash result ev....
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....operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether - (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. ....
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....logy Act, 2000 or section 138C of the Customs Act were followed. Learned Departmental representative could not also produce anything on record to show that these were followed. Therefore, the pen-drive is inadmissible as evidence despite the vital information which it contained and which was relied upon by the Revenue. 34. Learned Departmental Representative relied on the judgment of the larger bench of the Supreme Court in the case of Arjun Panditrao Khotakar vs Kailash Kushanrao Gorantyal and others [2020 (7) TMI 740- Supreme Court] to assert that merely not providing a certificate under section 65B of the Evidence Act does not necessarily vitiate the evidence when the pen drive itself is available as primary evidence. We have examined this assertion. In the case before the Supreme Court was an election dispute. The winning candidate's candidacy was challenged by the losing candidate on the ground that he had filed the nomination papers after the time for filing the nomination was complete. The Returning Officer returned the winning candidate anyway. The losing candidate sought to rely on the CCTV footage available with the election commission which was date and time stamped to ....
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....se directions shall apply in all proceedings, till rules and directions under Section 67-C of the Information Technology Act and data retention conditions are formulated for compliance by telecom and internet service providers. d) Appropriate rules and directions should be framed in exercise of the Information Technology Act, by exercising powers such as in Section 67-C, and also framing suitable rules for the retention of data involved in trial of offences, their segregation, rules of chain of custody, stamping and record maintenance, for the entire duration of trials and appeals, and also in regard to preservation of the metadata to avoid corruption. Likewise, appropriate rules for preservation, retrieval and production of electronic record, should be framed as indicated earlier, after considering the report of the Committee constituted by the Chief Justices' Conference in April 2016. 35. In the present case, the person who had control over the pen drive has not given a testimony on oath that it reflects his transactions. On the contrary, the counsel for the respondent disputes that the pen drive reflects the true transactions. Hence, Arjun Panditrao Khotkar does not advan....