TaxTMI 
TaxTMI 
2026 (6) TMI 1430
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....CN] issued by the Additional Director General [ADG] Directorate of Revenue Intelligence [DRI] Delhi Zonal Unit [DZU] Delhi. In the impugned order, the Commissioner rejected the declared values of the goods (watch parts and watch movements) imported by M/s. Rochees Watches Private Limited [The importer] through three ports, re-determined the values, confirmed demand of differential duty amounting to Rs. 3,70,60,870/- under the proviso to section 28(1) of the Customs Act, 1962 [Act] along with interest under section 28AB of the Act, confiscated the imported watches under section 111 of the Act and imposed redemption fine in lieu of confiscation under section 125 of the Act and imposed penalties on the importer under sections 112 and 114A of the Act. He also imposed personal penalties on some persons including the appellants in Customs Appeals No. 226/2011, 227/2011, 228/2011, 229/2011 and 230/2011 as follows: Appeal Appellant Dut/Fine/ Penalty (Rs.) Sections C/224/2011 Rochees Watch Pvt Ltd (the importer) Duty Rs 3,70,60,870/- Redemption fine. Rs. 2,48,000/- Penalty Rs. 3,70,60,870/- Proviso to section 28(1) Confiscated under section 111(d) & (m) and fine impo....
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....tter was called Shri Keshav Krishnan appearing proxy for the counsel sought another adjournment. As the matter is over 15 years old, we have declined to adjourn the matter. The question which arises is how should this Tribunal decide if the appellant does not appear on the dates fixed for hearing has been decided by the Supreme Court in Shri Balaji Steel Re-Rolling Mills Versus Commissioner of Central Excise & Customs [2014 (36) S.T.R. 1201 (S.C.)] the relevant portion of which is reproduced below: 12. A similar question came up for consideration before this Court in The Commissioner of Income-Tax, Madras v. S. Chenniappa Mudaliar, Madurai - 1969 (1) SCC 591 wherein this Court considered the provisions of Section 33 of the Income-tax Act, 1922 and Rule 24 of the Appellate Tribunal Rules, 1946 which gave power to the Tribunal to dismiss the appeal for want of prosecution. For ready reference, Section 33(4) of the Income Tax Act, 1922 and Rule 24 of the Appellate Tribunal Rules, 1946 are reproduced below :- Section 33(4) of the Income Tax Act, 1922 "33(4). The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pas....
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.... be done unless the Tribunal itself has passed proper order under Section 33(4). It follows from all this that the Appellate Tribunal is bound to give a proper decision on questions of fact as well as law which can only be done if the appeal is disposed of on the merits and not dismissed owing to the absence of the appellant. It was laid down as far back as the year 1953 by S.R. Das, J. (as he then was) in CIT, v. Mtt. Ar. S. Ar. Arunachalam Chettiar that the jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under Section 33(4) and a question of law arising out of such an order. The Special Bench, in the present case, while examining this aspect quite appositely referred to the observations of Venkatarama Aiyar, J. in CIT v. Scindia Steam Navigation Co. Ltd. indicating the necessity of the disposal of the appeal on the merits by the Appellate Tribunal. This is how the learned judge had put the matter in the form of interrogation : "How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no op....
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....is not payable by the importer. x) Since the goods were not liable to confiscation, no penalties are imposable on the importer or others. xi) Simultaneous imposition of penalty under sections 112 and 114A of the Act is illegal. Submissions of the Revenue 9. Learned special counsel for the Revenue made the following submissions: i) The importer herein and five related firms viz., (i) Rochi Ram & Sons, (ii) Rajasthan Watch Manufacturers; (iii) Rochees Time Pvt. Ltd., (iv) Jaipur Time Industries and (v) M/s. HMD Exim Pvt. Ltd. were engaged in manufacture of wrist watches and wall clocks for which purpose, various parts like watch cases, watch movements, watch, dials, hands, leather straps, metal bands and winding knobs, etc. were imported from Hong Kong. Intelligence was gathered by DRI that all the above firms were controlled by Shri Ishwar Das Moolrajani, and were evading customs by mis-declaring the value and description of the goods imported. The officers searched the premises of the importer and its partners and directors on 23 June 2006 and seized relevant records. After conducting a detailed ....
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....am & Sons, etc. more than one invoice of the same number were found and the lower values were declared before the Customs. ix) Shri Ishwar Das Moolrajani paid the actual price to the Hong Kong suppliers in cash through Shri R K Mansukhani and others during his visits to Hong Kong. Shri Moolrajani had with him, even signed and unsigned copies of invoices in the name of Legend Watch, HK and even letters addressed by this firm to the bank in India for remission of payments. He also had various letterheads of the exporting companies. x) The appellants cannot disown the invoices issued by the HK suppliers calling them third parties because these were the companies which sold them the goods. xi) With reference to Leather straps the duplicate invoice no. LW/8843/05 dated 30.9.2005, was not the original invoice and the discrepancies between the two were pointed out by the importer in its letter dated 29.11.2010 although a copy of this letter was not enclosed with the appeal. xii) As per invoice no. LW9090/06 received under email dated 23.1.06, M/s. Legend Watch despatched 583 cartons of various watch parts for USD 32,268.77 (C&F). But before the Customs,....
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....consideration for sale or if some other elements such as cost of transport and transit insurance were not included in the transaction value, Rule 9 provides for addition of such amounts to the transaction value to arrive at the value for determining the duty. In other words, the transaction value is considered after some adjustments. 13. On the other hand, if the buyer and seller are related or if there are other reasons to doubt the truth and accuracy of the transaction value, Rule 10A provides for rejection of the transaction value by the proper officer instead of making some adjustments to the transaction value as in Rule 9. If the proper officer rejects the transaction value under Rule 10A, the value should be determined sequentially through Rules 5 to 8. 14. The relevant Rules are reproduced below: Rule 5 Transaction value of identical goods. -(1) (a) Subject to the provisions of Rule 3 of these rules, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued. (b) In applying this rule, the transaction value of identical goods in a sale at the s....
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....ses in connection with sales in India of imported goods of the same class or kind; (ii) the usual costs of transport and insurance and associated costs incurred within India; (iii) the customs duties and other taxes payable in India by reason of importation or sale of the goods. (2) If neither the imported goods nor identical nor similar imported goods are sold at or about the same time of importation of the goods being valued, the value of imported goods shall, subject otherwise to the provisions of sub-rule (1) of this rule, be based on the unit price at which the imported goods or identical or similar imported goods are sold in India, at the earliest date after importation but before the expiry of ninety days after such importation. (3) (a) If neither the imported goods nor identical nor similar imported goods are sold in India in the condition as imported, then, the value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons who are not related to the seller in India. (b) In such determination, due allowance shall be made for the value added by p....
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....ion; (iii) the cost of packing whether for labour or materials; (b) the value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, namely:- (i) materials, components, parts and similar items incorporated in the imported goods; (ii) tools, dies, moulds and similar items used in the production of the imported goods; (iii) materials consumed in the production of the imported goods; (iv) engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods; (c) royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; (d) the value of any part of the pro....
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.... ....... Rule 10A. Rejection of declared value. - (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the value of such imported goods cannot be determined under the provisions of sub-rule (1) of Rule 4. (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1). 15. In the impugned order, the transaction values were rejected under Valuation Rule 10A and the values were re-determined. The relevant part of the impugned order is reproduced below: "ORDER 1. I reject under Rule 10A of the Customs Valuat....
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....wise/ parcel wise details of the goods are given in different rows. However, nothing in the Annexures or in the operative part of the impugned order indicates as to which Valuation Rule was adopted to re-determine the value of which good under which Bill of Entry or parcel and why. Thus, the basis on which the values were redetermined are neither in the operative part of the impugned order nor in the Annexures to the SCN referred to in it. 18. The first part of the question to be answered is whether the Commissioner has correctly rejected the transaction values under Rule 10A. The second part is whether he has correctly re-determined it as per the Rules. The reasons for rejecting the transaction values given in the impugned order and summarized in the submissions of the learned special counsel as follows: (i) The importer and five other importer firms were all related and owned by the same set of people with Shri Ishwar Das Molrajani being the main person. The goods were imported from Legend Manufacturers Ltd. Hong Kong and Royal Exports Hong Kong. The Hong Kong based firms were also owned and managed by the same family. Thus, they are related persons. (ii) The....
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....ntry also cannot be considered. Lastly, they cannot be based on some arbitrary fictional values. 19. It is a well settled legal principle that the above Rules have to be followed sequentially, i.e., before adopting the method prescribed under one Rule, all the preceding Rules have to be ruled out. Within a Bill of Entry, if there are several goods, one Rule may apply to some goods (say, because there are contemporaneous imports of identical or similar goods) and may not apply to some other goods. Further, the same goods may be valued under one Rule (say, based on value of identical goods) in one Bill of Entry and under some other Rule in another Bill of Entry (say, if there were no contemporaneous imports during the relevant period). Neither the operative part of the order nor the Annexures to the SCN which it refers to give any indication as to which Rule was adopted for which good imported under which Bill of Entry or parcel and why. 20. However, in the discussion part of the impugned order in paragraphs 163 (i) to (xiii), the methods of valuation adopted have been given for each category of goods but without referring to the Bill of Entry, i.e., all goods of a particular c....
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....ues of identical goods or of similar goods and there was no sale price of identical or similar goods in India nor was there any cost data to compute the cost of manufacture of the goods in India and the value could not be determined under Rules 5, 6,7 &7A not possible hence Rule 8 was adopted. 24. We find the assertion in the impugned order that no identical or even similar Watch dials were imported or sold or manufactured in India during the relevant period unbelievable. How is it likely that in a country of almost a billion people (even during the relevant time), watches and their parts including watch dials were not imported, or manufactured or sold during the relevant period (two financial years 2005-06 and 2006-07)? Having asserted so, the Commissioner has, in the impugned order determined the value based on : (i) Bill of Entry no. 857611 dated 15.1.2005 filed by M/s. P A Time Industries indicating a price of HK$ 1.25 per piece (CIF), (ii) a letter dated 12.6.2006 of the All India Electronic Watch & Clock Manufacturers Association indicating the price of watch dials as HK 1 per piece FOB; (iii) the cost sheet submitted by the All India Electronic ....
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....e of watch cases was HK$3.50 per piece. Evidently, if the association was aware of the prices, someone must have been buying these cases from Hong Kong suppliers and some imports must be there of watch cases which, if not identical, were similar. The second was a cost sheet submitted by the association stating that the cost of each watch case is Rs 22/- which also shows that someone or the other must have been manufacturing it in India. The third piece of evidence was that there was an average undervaluation of 60% by the appellant which cannot be relied upon unless there was clear evidence of the extent of undervaluation based on some documents. This, in our considered view is nothing but an arbitrary value whose use is explicitly prohibited under Rule 8. The fourth piece of evidence are the invoices issued by a Hong Kong company and retrieved from the computer of the importer herein which also shows that there were transactions and imports of such watch cases. The last piece of evidence is also an invoice of Rochees Watches Pvt. Ltd. to Rajasthan Watch Manufacturers (both are Indian companies) which also shows that there were not only imports but also sales within India. Thus, th....