TaxTMI 
TaxTMI 
2024 (11) TMI 882
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....penalties of Rs. 5,00,00,000 under section 112 and Rs. 4,00,00,000 under section 114AA of Customs Act, 1962 in the same order while Shri Sanket Anand, with no reason for cavil that proposal to invoke 114AA of Customs Act, 1962 did not find favour with the adjudicating authority, is aggrieved that penalty of Rs. 10,00,000 has been imposed on him under section 112 of Customs Act, 1962. Underlying their plea for relief is the claim of the appellants that these detriments have been erected on shaky foundations of fact and law which, according to them, suffices to assail insinuation that the price at 'port of loading' and price at 'port of destination' are the same in all the impugned consignments while demonstrating incorrect appreciation of both section 14 of Customs Act, 1962 and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 2. M/s Exclusive Motors Pvt Ltd is authorized dealer of M/s Bentley Motors Ltd, United Kingdom (UK) in India and, in accordance with industry practice, buys cars for sale in India. However, unlike most such contractual arrangements of dealership and owing to demonstrational and aspirational aspects of consumer behaviour, these high-en....
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....the case may be, and to suggest that it varies at either end of a transaction or contract, as the case may be, is an inaccurate interpretation of the price transacted or price contracted, as the case may be, as well as of the liability terms agreed to between buyer and seller in order or contract, as the case may be. The acronyms deployed in the price clause reflect agreement on responsibility for risk involved in transport and delivery of goods and are universally understood. Suffice it to say, the discharge of transport charge and insurance premium by the seller is the norm and, save by contrary conditions in order or contract, included in the price charged from the buyer. Declaration of price has, more often than not, tax significance only at place of import and the law on valuation for assessment to duties of customs is designed so for the purpose. 5. In the impugned order, at the first level, charging of differential duty on 51 cars, imported between August 2018 and October 2022, rests on supplementary invoices purporting to add air freight cost, varying between GBP 4509.50 and GBP 9640.00, to the original price with further loading of 1.125% to the cost towards insurance res....
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.... it with the last resort afforded by Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for imports by sea and air. 8. For this, the adjudicating authority drew upon a comparison of the pro forma invoice and final invoice of such transactions pertaining to which correspondence for revision of transport mode was available - five such in the 'case study' of Learned Authorized Representative- to conclude that, irrespective of the mode of transport, the transaction price remained unchanged for inferring therefrom that the 'supplementary invoices' reflected actual freight for air mode lacking the 'grace' of being differential freight. From that, it was but a step further to draw upon the 'export declaration' of consignments and corresponding invoices to conclude that freight and insurance were not included in the latter warranting, in the absence of information on these elements from the appellant, deployment of the last resort of loading the declared price by 21.125% afforded by Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Learned Authorized Representative highlighted three such transactions in his 'case study' classification in defen....
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....ated to the former by the latter; that these were not available on the records of the former is abundantly clear from the scrutiny of their documentation by investigators. He submitted that, even if the amounts were claimed to have been adjusted by supplier, the liability of further payment would not devolve on the dealer in the absence of such supplementary invoices and adjustment would not have been possible in the absence of account with the supplier. He argued that there is nothing on record to establish that any payments had been made to M/s Bentley Motors Ltd either through banking channels or through 'hawala' route. 11. According to Learned Counsel, the 'transaction value' for assessment of import goods is by law, as set out in section 14 of Customs Act, 1962, the declared price, inclusive of all costs charged by seller for delivery at place of import, which was to be accepted as being that which the buyer was obligated to recompense the seller. He contended that, other than upon rejection of declared value by recourse to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and substitution by one of the enumerated alternatives therein, the on....
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....liding of several provisions of the statute and rules merely to set out a case, ipse dixit, for recovering differential duty and imposition of penalty. He drew attention to lack of evaluation that would conform to the pathway laid out by the judgement [order dated 13th July 2015 in commercial suit no. 9 of 1999] of Hon'ble High Court of Madras in Evergreen Sea Foods Pvt Ltd v. Ruskim Sea Foods Ltd & others for distinguishment of CIF and FOB contracts. 14. He also pointed to the selective application of the 'evidence' gathered during the course of investigation - as it is, lacking credibility of their own owing to absence of any corroborative material or from not having been subjected to tests mandated in law - that puts paid to the integrity of all the findings as well. He submitted that statements, such as they are, of the 'freight forwarders' were found to be conveniently credible to hold that air freight charges had not been included in the price while rejecting their testimony on sea freight only because the optics may not have presented itself well. He also submitted that the report of the High Commission of India, on the back of which the 'supplementary invoices' were accord....
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....des to the transaction. 15. Learned Authorized Representative set out his arguments in the backdrop of documentation allegedly suppressed by appellants at time of import and statements of freight forwarders before the investigators in India as well as the mandate of declaration devolving on appellants under rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 as he led us though a narration of the intelligence inputs and follow-up investigation that culminated in issue of notice. He submitted that revision of assessable value from Rs. 191,86,47,659, as declared, to Rs. 225,61,45,272, as re- determined by process of law, on 170 cars to recover differential duty of Rs. 71,74,43,863 was attributable to deliberate suppression of the correct assessable value by parading of invoice value, on FOB terms, as the transaction value, in CIF terms, prescribed for the entry envisaged in section 46 of Customs Act, 1962 and which, along with contravention of section 11 of Foreign Trade (Development & Regulation) Act, 1992 read with rule 11 and rule 14 of Foreign Trade (Development & Regulation) Rules, 1993, rendered the goods liable to confiscation under section 111....
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.... Properties Ltd [2007 (216) ELT 659 (SC)], and of the Tribunal, in Rajasthan Prime Steel Processing Centre Pvt Ltd v. Commissioner of Customs, New Delhi [2019 (369) ELT 1350 (Tri.-Del] and in Haji Sumer v. Commissioner of Customs, Chennai [2020 (371) ELT 533 (Tri.-Chennai], were misplaced owing to factual distinctions. 17. Per contra, he contended that the niceties of procedure - both of evidencing as well as jurisdictional limitation - was not required to be extended in the light of decisions of the Hon'ble Supreme Court in SP Chengalvaraya Naidu v. Jagannath [1994 (1) SCC 1], in Commissioner of Customs v. Candid Enterprises [2001 (130) ELT 404 (SC)], in Commissioner of Customs, Kandla v. Essar Oil Ltd [2004 (172) ELT 433 (SC)] and in Union of India v. Jain Shudh Vanaspati Ltd [1996 (86) ELT 460 (SC)] on nullifying effect of fraud on everything, solemn act included. Likewise, he contended that disruption of the norms of privilege, normally accorded to noticees, by reason of fraud had been approved by the Hon'ble Supreme Court in Ashok Leyland v. State of Tamil Nadu and another [AIR 224 SC 2836]. According to him, statements before customs officials were conferred with sanctity by....
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....f Customs Act, 1962 which emplaces a particular jurisdiction of limitation upon a finding on facts that 'fraud' was an ingredient in the alleged evasion of duty. In re Chengalrayya Naidu, the Hon'ble Supreme dealt with a dispute under civil law and was anguished by the suppression of relevant document before the courts. In re Candid Enterprises, the Hon'ble Supreme Court was concerned, not about the tax recovery which was remanded for determination by the Tribunal but, with the finding that a decision of the Hon'ble Supreme Court was applied to alienate discretion in condoning delay for denying Revenue opportunity to plead the merit of its case for recovery of duty. In re Essar Oil Ltd, the Hon'ble Supreme Court had before it a matter which, on uncontested facts, was about two mutually exclusive determinations of duty liability - each undeniable on its own set of facts and law - that was decided on applicable 'date of determination of duty' without touching upon the factual circumstances that guided the adjudication order. These clearly were not about recovery of tax but about jurisdictional limitation having been decided on technicality. The fraud that was remarked upon in these d....
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....core is 'valuation' - which, along with 'rate of duty', is one of the two pillars on which assessment in accordance with law is erected - and, like classification, is incorporated in the taxing statute as evolving, dynamic tools emerging from trans-national deliberations. Not only, thereby, is there similarity across customs administrations but also the compulsion of process consistency at exporter and importer ends. In the light of challenges to the essence of the foundation of the case of assessment to differential duty that is before us, those judgements do not assist the defence of the impugned order. We take up both the statements relied upon in, and the documents that were sought to sustain, the impugned order for evaluation of evidentiary value. 22. The statements are relevant to the extent that they purport to evidence the nature of fiscal transactions relating to the goods before shipment from the country of production. In particular, that of the officials of the freight forwarders are said to adduce the charging of freight from the supplier, the submission of value in the export declarations and the advice that importer would be privy to the freight charges. Learned Auth....
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....to oracular acceptability by a process unknown to law. Statements are accorded credence by the apprehension of legal consequences of proved misreporting as well as of any consequent culpability for the authorizing entity. It would be interesting to evaluate the testatory consistence of the person as authorized representative of M/s Bentley Motors Ltd and assuming all consequences - legal, contractual and fiscal - of information so provided in proceedings under section 108 of Customs Act, 1962. If the transaction was tainted by wrong- doing, as it must be if the supplementary invoices were not left unpaid, either from inappropriate practices in the operations of M/s Bentley Motors Ltd or from the turpitude of any of its employees acting on their own at the instance of the importer, the bitter fruit of retribution is unavoidable. That risk of consequences of incorrect testimony is more of a path- straightener in ascertainment of truth, as near as possible, than an unconvincing belief that it is human morality which lends credence to statements recorded under section 108 of Customs Act, 1962. As things stand, the evidentiary value of the 'statements' relied upon are jeopardized except....
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....vidence of the contrary. It appears improbable that invoices are raised and recorded without any payment insisted upon. 25. The certification in terms of section 138C of Customs Act, 1962 would also make it appear that the documents were sourced from the electronic records of M/s Bentley Motors Ltd and, though said to have been raised on M/s Exclusive Motors Pvt Ltd, was absent in the electronic records of the buyer. The contention of Learned Counsel for appellants that intensive scrutiny of physical and electronic records of M/s Exclusive Motors Pvt Ltd had not yielded such invoices has not been disputed. It is also surprising that such supplementary invoices, on which, along with the finding that the original invoices are on FOB terms, has the enhancement of value of 51 cars despatched as air freight been justified, are not available for cars despatched by sea transport which were also held to be liable for enhancement owing to the original invoices being on FOB terms. This is quite a leap of logic that may reasonably cast doubts on adjudicatory acknowledgement of the supplementary invoices. Moreover, it is no less surprising that the correlation of 51 of the 63 supplementary in....
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....sent mathematical approximation which, according to Learned Authorized Representative, has been approved by the Hon'ble Supreme Court in re D Bhoormull and adopted by the Tribunal in re Arjun Sah. Both these decisions were rendered in cases of gold smuggling and not in demand for recovery of duties of customs based on documents; even if mathematical exactitude is not de riguer in adjudication proceedings, it cannot be allowed to rest on documents that fail the test of legal mandate. 27. It now remains for us to apply known law to established facts for evaluating the correctness of the outcomes in the impugned order stemming from alleged non-inclusion of freight and insurance in the declared value which was allegedly only on FOB terms. It is clear that the contract for payment on CIP/DAP terms between M/s Bentley Motors Ltd and M/s Exclusive Motors Pvt Ltd squarely placed the risk liability till import into India on the former. No evidence is available that these terms of contract underwent change. There is no provision in the contract for price revision or issue of supplementary invoices; indeed, it could not be as the contract mandates payment in advance. The payment terms would ....