TaxTMI 
TaxTMI 
2026 (8) TMI 111
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - Sl. No Details SIIB/63/2004 dated 25.06.2004 S.MISC. 45/2002-SIIB (ACC) dated 27.01.2005 SCN/SIIB/71/2005 dated 03.08.2005 SCN/SIIB/74/2006 dated 19.12.2006 1 Disputed Period 30.04.1999 to 16.03.2000 06.04.2000 to 22.04.2002 09.08.2000 to 29.10.2001 25.01.2001 to 15.03.2004 2 Duty demand - Undervaluation 10,95,924 10,01,35,750 1,23,68,551 19,60,92,849 3 RSP based Additional Duty 0 41,89,435 34,55,614 0 4 Classification - Conytakara 0 79,36,329 0 0 5 Total Duty 10,95,924 11,22,61,514 1,58,24,165 19,60,92,849 6 Rs. 32,52,74,412/- 2.0 The Show Cause Notices allege that Conybio India was established and operated under the control of Conybio (M) Sdn. Bhd., Malaysia, ( Conybio Malasiya). It is alleged that intermediary entities such as Bryncoch United Sdn. Bhd., Reka Network Sdn. Bhd. and Reka Macro Resources Sdn. Bhd. were merely facade suppliers used to conceal the identity of the real supplier and the relationship between the parties. 2.1 The Notices further allege that the declared transaction values did not represent the actual consideration paid for the importe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he determination of the assessable value of the imported goods. They further submitted that the Department had failed to produce contemporaneous import evidence or any legally acceptable material for rejecting the declared transaction values. 4.0 The adjudicating authority, after considering the allegations in the Show Cause Notices and the replies filed by the noticees, held that Conybio India was not dealing with the overseas suppliers on a principal-to-principal basis and that Conybio (M) Sdn. Bhd., Malaysia was the real supplier and controlling entity behind the imports. According to the adjudicating authority, the evidence on record, including correspondence, statements, seized documents and financial records, established a close commercial and operational relationship between the Indian importer and Conybio Malaysia. 4.1 The adjudicating authority further held that the relationship between the parties influenced the prices of the imported goods and that the declared transaction values did not represent the true price actually paid or payable. Consequently, the declared transaction values were rejected under the Customs Valuation Rules. 4.2 The adjudicating authority ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st for out of turn hearing was turned down by the Bench, vide Misc. Order Nos. 40642 to 40645/2025 dated 16.06.2025. Respondent filed Cross-objections under Section 129A(4) of the Act on 23/25.07.2025 challenging the substantive portions of the impugned common Order confirming the charge of under-valuation of the goods imported and the proposal for re-classification. 6.0 Both the Appeals and Cross-objections were heard on 02.02.2026. The Ld. Authorized Representative Shri. Anoop Singh, Joint Commissioner (AR) represented the Appellant department and the Ld. Advocate Shri. S. Jaikumar represented the Respondent importer. The Ld. AR raised a preliminary objection that Cross-objection was different from Cross Appeal and the provisions of Section 129A (4) of the Act enabling filing of cross-objection cannot be used as a means to challenge an entire Order without filing appeal against the impugned Order and the scope of cross-objection is restricted to contents of appeal i.e. only that part of the Order appealed against. The Ld. AR also said that such a long delay in filing Cross-objection is unexplained and therefore is not maintainable. Referring to the findings in the impugned Ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... against whom the appeal has been preferred may, notwithstanding that he may not have appealed against such order or any part thereof, file, within forty-five days of the receipt of the notice, a memorandum of cross-objections verified in such manner as may be specified by rules made in this behalf against any part of the order appealed against and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3)." 7.2 It is clear from Section 129A(4) of the Act that the Respondent in an appeal filed by the other party, in spite of not having filed an appeal under Section 129A(1)(a) of the Act, can still file a cross-objection contesting the Order as a whole or a part / portion thereof within a time-limit of 45 days from the date of receiving the appeal papers filed by the other party and the CESTAT is legally obliged to dispose of the said cross-objection as if it is an appeal filed against the impugned Order and against which an appeal has already been filed by the other party. This, we feel, is the plain, true and only meaning of Section 129A (4) of the Act. As rightly argued by the Ld. Advocate for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Authority decided the issue against the party on merit (say on liability to duty or eligibility of an exemption notification) but gives full relief on limitation, then the Department may file an appeal against the order quashing the demand of limitation. Even though no demand was due from the assessee, the assessee may also file an appeal seeking relief on merits as the issue may be of recurring nature. If the assessee has not chosen to file an appeal within the prescribed time, challenging the adverse decision on merits but the department may come up on appeal challenging the decision on limitation. In such a situation the law provides for cross-objection being filed within the specified time, even if appeal against the adverse findings has not been made by the assessee within the originally prescribed time. Such a cross-objection will be treated as an appeal and decided. This is only a deemed appeal in relation to the order of the Original Authority which was against the assessee in the first place." iii. Commissioner Central Excise vs. M/s. Kapish Print Pack Pvt. Ltd. And Vice Versa - 2016 (8) TMI 290 - CESTAT NEW DELHI "9. In any case, we find that another de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i conducted search of the business and residential premises of the Respondent and recovered various documents including balance sheet, parallel invoices, statement of accounts, number of communications, slides and CDs besides seizing a cash amount of Rs. 30.98 lakhs. On the direction of the High Court of Judicature at Madras, Respondent executed a Bank guarantee in a sum of Rs. 2.69 crores and the cash amount seized was retained by the department. Proceedings were initiated against the Respondent alleging under-valuation of the subject goods and mis-classification of a product called 'Cony Takara'. As already observed, there were 4 Show Cause Notices dated 25.06.2004, 27.01.2005, 03.08.2005 and 19.12.2006 and except the SCN dated 27.01.2005 which was issued by Air Customs, Chennai, all other SCNs were issued by Sea Customs, Chennai. The details of SCNs are as below: - i. SCN dated 25.06.2004 issued by the ADC Customs (Appraising), Seaport 3 Bills of Entry dated 30.04.1999, 18.02.2000 and 16.03.2000 all finally assessed. Imports took place from M/s Bryncoch United Sdn. Bhd, Malaysia (Bryncoch for short). Differential duty Rs. 10,95,924/-. ii. SCN dated 27.01.2005 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest of Conybio Malaysia in the Respondent firm. 9.0 After considering the submissions made by the Respondent, the Appellant Adjudicating Authority (AAA), in the impugned Order held that the charge of under-valuation of the subject goods including RSP on notified imported goods was established and the product "Cony Takara" merited classification as skin care product under CTH 3304 as proposed by the department and not as medicament under CTH 3004 as claimed by the Respondent. The proposals in the SCNs demanding interest and imposition of penalty were also confirmed. After finalizing the provisional assessment of 56 B/Es connected to SCN dated 19.12.2006, differential customs duty amounting to Rs. 15,65,91,315/- was demanded. As already said, though the imported goods were held liable to confiscation, in view of non-availability of goods, Appellant Adjudicating Authority (AAA) did not order confiscation thereby not imposing redemption fine. 9.1 The adjudicating authority in the impugned Order recorded the following findings on the merits of the case: - i. Letters / E-mails from Mr. Richard K. Lau, Executive Director, Conybio (Malaysia) and Mr. A.K. Lee, International....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame figuring in the Statement of Accounts clearly indicated that the goods were actually supplied by Conybio, Malaysia. vii. Rekamacro Resources was registered as a private limited company on 15.01.2001 whereas a Consultancy Agreement was entered into between the Respondent and Rekamacro Resources on 01.04.2000 for provision of services like product identification, quality control and marketing network and by virtue of the Agreement Respondent had paid USD 3,00,000 to Rekamacro Resources, Malaysia at the rate of USD 1 lakh per annum for the years 2000-01 to 2002-03. Rekamacro Resources having not been in existence on the date of signing of the Consultancy Agreement and further having been signed by Mr. N. Kanagendran when he was not the Director of the Respondent unit, the agreement is void ab-initio and there can be no rights or liabilities over the void agreement. The plea that it was in the nature of pre-incorporation agreement or contract cannot be accepted because entering into such an agreement before incorporation is violative of Section 34 of the Companies Act, 1956. In the normal course, once the remittances are found to be in violation of RBI guidelines, FEMA Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the sale proceeds of the smuggled (imported) goods. x. Respondent's claim that nothing was paid over and above the invoice price cannot be accepted since, as discussed, sufficient evidence is available proving payments over and above the invoice price. xi. In view of existence of parallel invoices; negotiations between the importer and the suppliers; and remittance of extra consideration other than the declared value, in terms of Rule 8 of the Customs Valuation Rues, 1988, the price at the country of exportation has to be taken as the actual assessable value of the goods. Except for the item "Cony Takara", parallel invoices are available for all the goods imported which find corroboration from e-mails, fax letters, statement of accounts and payment of extra consideration other than the value declared in the B/Es. The same i.e. the price mentioned in the parallel invoices is therefore accepted as the actual transaction value for purpose of re-determination of value. xii. The contention of the Respondent that sales invoices based on which RSP was arrived at are not known cannot be accepted for the reason that the RSP was determined based on the price lists ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hould be family members whereas in this case, the Respondent firm and the Malaysian entities are artificial persons and not natural persons; viii. Even conceding that the parties are related, in terms of Rule 4(3)(a) of the Customs Valuation Rules, the buyer and the seller can be termed as related if and only the examination of the circumstances indicates that the relationship influences price whereas in this case, it is not understood as to how salaries / dividends paid to Shri. N. Kanagendran in the course of employment / directorship as a legitimate remuneration as well as dividend paid to a an unrelated third party be linked to this case for establishing price influence; ix. Further, the above allegations under the caption "propriety of investment and its effect on valuation" elaborately discussed in the SCN issued by the Aircustoms find only a passing reference in the other 2 SCNs issued later by the Sea-customs; x. The findings of the adjudicating authority in the impugned Order on this allegation are nothing but reproduction of the allegations in the SCN dated 27.01.2005 issued by the Air-customs; xi. All payments made to Rekamacro Resourc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n excess of the declared value was remitted? iii. Whether Reka Network and Rekamacro Resources, Malaysia attract the mischief of Rule 2(2)(viii) of the Valuation Rules as related units and, if so, whether the relationship influenced the price? iv. Whether there had been remittances in foreign exchange over and above the value declared in the B/Es? v. Whether the decision of the adjudicating authority in adopting / revising the RSP is justified? vi. Whether re-classification of the product "Conytakara" as a skin-care product is correct? 12.0 The adjudicating authority has sustained the charge that Conybio Malaysia had an active participation in the financial and business affairs of the Respondent by relying on a few letters/e-mails, dealt with in para 195.5 of the impugned Order, sent by Mr. Richard K. Lau, Executive Director, Conybio Malaysia and Mr. A.K. Lee, International Department, Conybio Malaysia to Shri. K. Kanagendran. In the letter 17.12.1999, Mr. Lee requests Shri. Kanagendran to send documents such as stock inventory, share allotment, monthly bank statement and the Respondent's present financial statement for placing them before the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re merely assumptions sans evidence. We find force in the submission made. As no evidence could be placed on record that any Malaysia Cony Bio personnel were the shareholders of Cony Bio, India. Being a limited company registered under Indian Companies Act, it would not be difficult to ascertain whether any director of Cony Bio, Malaysia was also a director or shareholder in Cony Bio India for the investigation. Merely saying that the request for share certificate would arise only upon allotment of shares would not lend any legitimacy to the allegation. In the absence of evidence on record that either the shares were allotted or the request for forwarding the share certificates was complied with by Mr. Kanagendran, we have no option but to accept the contention of the Respondent that no shares were allotted to either Mr. K. Lau or to other directors of Conybio Malaysia. Therefore, the finding that Conybio Malaysia had administrative and financial control over the affairs of the Respondent has no basis. 12.4 The Ld. Advocate Mr. Jaikumar brought to our notice the contradictions in the allegations as contained in the relevant portion of the SCNs issued as regards the allotment of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for imports made from Bryncoch Malaysia having been debited in the said "Statement of Accounts as on 31.03.2000", the actual supplier of the goods is Conybio Malaysia and the prices are the ones reflected in the parallel invoices. 13.1 It is the contention of the Respondent that the parallel invoices are actually proforma invoices raised by Conybio Malaysia on the Respondent at the inception of the business towards their proposal for investment of RM350000 which however did not materialize. It was submitted that since no transfer of shares took place, the debit entries for proforma invoices made in the Statement of Accounts had no financial or other significance as the last entry made for Transfer to Investment was not acted upon thereby confirming the payment only to the amounts shown in the invoices raised by Bryncoch Malaysia. The learned Advocate said that in as much as the business activities were at incipient stage while procuring goods from Bryncoch and since there was a proposal for investment by Conybio Malaysia on the Respondent, certain transactions took place not keeping the identities of Conybio Malaysia and Bryncoch distinctly separate thereby raising a suspicion t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... invoices of Conybio Malaysia. Moreover, it needs to be noted that when such under-valuation is sought to be adjusted by allotment of shares which, however, did not fructify, the question of payment for the under-valued amount does not arise. Since the business was at an early stage, there might have been certain mix-ups which cannot be a ground to question the legitimacy of the transactions as a whole without any evidence. What is offered as evidence for payments and Allotment of shares is the Statement of Accounts which is not an audited financial account, and the latter alone can lend authenticity to a transaction. For all these reasons, we are inclined to accept the contention of the respondent that the goods covered by the 4 B/Es had been exported by Bryncoch Malaysia and the Respondent made payments to Bryncoch Malaysia only to the extent of the price mentioned in the respective import invoices filed at the time of import and not for the price mentioned in the impugned invoices issued by Conybio Malaysia. 13.4 Further, the respondents also contended that in this regard that the proceedings were initiated by relying on few proforma invoices which is not tenable. The respond....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the case of Alembic Glass Industries Ltd. Consequentially, we hold that the duty demand which has been confirmed by treating the manufacturer and the buyer as related persons is not sustainable. It is set aside......" Therefore, this provision does not come to the aid of the department. 14.1 This apart, in terms of Rule 4(3)(a) of the Customs Valuation Rules, the buyer and the seller can be termed as related if and only the examination of the circumstances indicates that the relationship influenced the price. In para 196.12 of the impugned Order, the adjudicating authority records a finding that there is clear evidence that the payment to the foreign supplier was made over and above the declared value and by virtue of parallel invoices, negotiation between the importer and the suppliers and remittance of extra consideration other than the declared value, in terms of Rule 8 of the Customs Valuation Rules, 1988, the price at the country of exportation should be taken as the assessable value. Parallel invoices and negotiation between the importer and the suppliers are connected to imports made from Bryncoch and we have dealt with the same in the preceding portions of this Or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s under consideration are family members, then the said persons would be related. In the present case, the Respondent i.e., Conybio India and Malaysian companies are artificial persons and not natural persons. Hence, this condition is not attracted. Sole agent: There is nothing on record which presupposes that the Respondent is the sole agent/ distributor of the Malaysian companies and hence, this condition is also not met. However, there is no counter by the department on the above contention which shows that the findings of the adjudicating authority are not legally sustainable. 14.4 The respondent also pointed out that the impugned Order in para 195.3 specifically records that Lau Kin Yen, Yeeh Hong Leong, Kili Anadaraj and Meenambal directors of Conybio India had resigned from 08.01.1999 and hence, at the time of import of goods i.e. April 1999 onwards, the above persons were not at all directors in the Respondent-company and thus neither the Respondent is a director nor had any shareholding in Conybio Malaysia and vice-versa. 14.5 We also notice that the adjudicating authority has erred to hold that since Lau Kin Yen is a common Director in Conybio India and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs and the business operations continued as earlier. It was also said that it was nothing but a pre-incorporation Agreement. Elaborating further, it was argued that: any agreement which is void is not per se illegal; at the most, terms of the agreement cannot be enforced in a void agreement; it does not mean that transactions already occurred became void or not occurred; it is a curable defect as the same can be ratified; and the parties are also at liberty to enter into a fresh agreement. We reiterate that the issue coming up for decision in this case is as to whether payments over and above the declared value had taken place in any manner and whether any evidence was placed on record and we are not called upon to pronounce our decision on the legality or justiciability of the Agreement. It is the contention of the Ld. Advocate that payments were made to Rekamacro Resources aggregating to 3 lakh USD in terms of the Agreement for provision of marketing techniques such as product identification, quality control, marketing network, product analysis for relative benefits, marketing plan and research analysis information and that the adjudicating authority had not denied the provision ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount of Rs. 44.05 lakhs was invested by Mr. Kanagendran for purchase of office equipments without approval from RBI and in violation of Companies Act; dividend amount of Rs. 1.47 crores paid & parked in a company in which loyalists of Mr. Kanagendran were directors represented income acquired from import of grossly under-valued goods and this amount is entitled to be appropriated towards eventual liability of the Respondent; comparison of the amount repatriated and the quantum of salary earned shows surplus amount of Rs. 49,00,000 which is nothing but under-declared value remitted illegally; and the dividend of Rs. 1.53 crores earned by Mr. Kanagendran towards dividend was utilized to pay the portion of the undisclosed value. 15.5 The Ld. Advocate Shri Jaikumar has contended that the earnings from dividend and the surplus amount worked out would not in any way influence the price or can be deemed as representing the undervalued portion of the imported goods. He has pointed out that the findings as contained in para 196.11 of the impugned Order are verbatim reproduction of the allegations as contained in paras 132 to 138 of the SCN dated 27.01.2015 and thus the adjudicating au....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exchange more than the amount declared in the bills of entry...." The allegation is therefore specific that prices of goods imported were under-valued in the B/Es and for such undervalued goods, amounts were remitted in foreign exchange. As rightly submitted by the Respondent, except the payment of 3 lakh USD in terms of the Consultancy Agreement with Rekamacro Resources and earnings on investments by Mr. Kanagendran, which we held has nothing to do with the issue under discussion, there is no evidence of any remittance of foreign exchange for the alleged under-declaration. Further, the afore-said payment of consultancy charges to Rekamacro Resources cited as evidence to establish the charge of foreign remittance over and above the invoice price forms a miniscule percentage of the quantum of evasion alleged and confirmed. 15.8 We also record the fact that in the case of imports made from Bryncoch Malaysia, the department cited as evidence the alleged parallel invoices raised by Conybio Malaysia to support the charge of under-valuation but for imports made from Reka Network and Rekamacro Resources, not even a shred of evidence has been made available for this purpose and as r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 3 of Customs Tariff Act,is reproduced as under : SECTION 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. - (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article : ... ... ... Provided that in case of an article imported into India,- (a) in relation to which it is required, under the provisions of the [Legal Metrology Act, 2009 (1 of 2010)] or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such article; and (b) where the like article produced or manufactured in India, or in case where such like article is not so produced or manufactured, then, the class or description o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction (4) to Section 4A for ascertaining or redetermining the RSP came to be introduced only w.e.f. 14.5.2003. Subsection (4) then merely said that the RSP of the goods shall be ascertained in prescribed manner. The Rules 2008 putting forth the prescribed manner or the method of ascertaining was introduced by Notification 13/2008 (NT) dt. 1.3.2008 only. The adjudicating authority has resorted to Rule 6 of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008. These Rules are as under : RULE 1. (1) These rules may be called the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. RULE 3. The retail sale price of any excisable goods under subsection (4) of section 4A of the Act, shall be determined in accordance with these rules. As per Rule 3 as above states that the Rules would apply in case of redetermination of sale price (RSP) of excisable goods under subsection (4) of Section 4A of the Central Excise Act. There is no mention that it would be applicable to Section 3 of Customs Tariff Act. Pertinently, Section 3 of Customs Tariff Act, though refers to Section 4A does not adopt it to determine th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry / provisions for ascertaining RSP, when the RSP is not declared by importer on imported articles. The differential CV Duty demand, interest and penalties were set aside.....". 16.2 In view of the legal position enunciated above with which we have no reason to disagree coupled with the fact that the documentary evidence relied to adopt/revise the RSP was not furnished to the Respondent despite specific request and the demand for Additional Duty of Customs being prior to 01.03.2008, we hold that the demand based on RSP is unsustainable. 17.0 Now, we turn to Classification of the product "ConyTakara". While the Respondent had classified it under CTH 3004, the adjudicating authority has re-classified the same under CTH 3304 recording the following findings: - "Takara draws upon the practical concepts and ideas from acupressure, reflexology, negative non-radiation, essential oils, research on Pyroligneous acid, crystal healing and the use of poultices. Takara sheet will absorb the toxin and make the painful parts of a person's body and nurtures energy to become more comfortable. Takara utilise Pyroligeneous acid that is made from a renewable source of wood. There are d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to how the product comes within the scope of "beauty or make-up preparations for the care of skin" despite possessing such therapeutic qualities and neither the adjudicating authority has recorded a finding as to how the product stands excluded from the scope of CTH 3004. Merely saying that there is specific exclusion under CTH 3004 and permitted inclusion under CTH 3304 does not advance the case of the department in any manner. AAA should spell out reasons for coming to such conclusions. 17.2 HSN Explanatory Notes under 3004 reads as under: - "This heading covers medicaments consisting of mixed or unmixed products, provided they are: - (a) Put up in measured doses or in forms such as tablets, ampoules (for example, re-distilled water, in ampoules of 1.25 to 10 cm3, for use either for the direct treatment of certain diseases, e.g., alcoholism, diabetic coma or as a solvent for the preparation of injectible medicinal solutions), capsules, cachets, drops or pastilles, medicaments in the form of transdermal administration systems, or small quantities of powder, ready for taking as single doses for therapeutic or prophylactic use. The heading also include....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a medicament. Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament." We, therefore, uphold the classification of the product "ConyTakara" under CTH 3004 as a Medicament rejecting the classification under CTH 3304 as a skin-care product. 18. In view of the above discussion and our findings thereon, we hold that i. there was no conclusive evidence for the allegation that Cony Bio, Malaysia was related to Cony Bio India and Cony Bio Malaysia had exercised any administrative or financial control over the Respondent ii. for the goods imported from M/s. Bryncoch, Cony Bio Malaysia could not be treated as actual supplier and there was no evidence produced for any excess payment other than the declared values for imports effected. iii. Reka Network and Rekamacro Resources, Malaysia are not related in terms of Rule 2(2)(viii) of the Customs Valuation Rules, and it is held that relations....