1. Since the issues involved in both the appeals are identical, the same are being taken up for disposal together and a consolidated order is being issued. The facts of the case briefly are that the appellants manufacture electronic goods of various types including colour television sets. The appellants imported 744 picture tubes of 20" size, Hitachi Brand from Hong Kong for the manufacture of colour television sets. On importation, the goods were put under three separate Into-Bond Bill of Entry bearing Nos. 899/134, 135 and 136. The appellants had declared the FOB price of these picture tubes at JY 16480 per piece.
The Customs Authorities after making investigations took the view that the correct FOB price of the goods should be JY 23690 per piece.
Accordingly, the appellants were served a show cause notice dated 9-8-1983 to explain the discrepancy in the declared value and also called upon as to why action should not be taken against them for infringement of the ITC Regulations. On receipt of the reply to the show cause notice and after granting a personal hearing to the appellants' representative, Shri Sunil Wadhwani, the case was adjudicated by the Additional Collector of Customs, Bombay vide his order dated 11-8-1983. By this order the learned Additional Collector gave the following findings : (a) The correct FOB value of the goods should be JY 23690 per piece as against the declared FOB price of JY 16480 per piece.
(b) The GIF value of the 3 consignments was fixed at Rs. 8,02,414.44.
(c) As the appellants had ITC licences (3 in No., each of Rs. 2 lakhs) of the total value of Rs. 6 lakhs only, the goods to the extent of Rs. 2,02,414.44 were held to be not covered by the licences produced. The goods were ordered to be confiscated in terms of Section 111(d) read with Section 11 Km) of the Customs Act, 1962 (hereinafter referred to as the Act). However, option was given to the appellants to redeem the offending goods on a fine of Rs. 35,000/- (Rupees thirty-five thousand only) for each of the 3 Bill of entries.
It is against these findings of the Additional Collector contained in his order dated 11-8-1983" that the appellants have come up in appeal before us.
2. Shri K. Narasimhan, the learned counsel for the appellants argued the case at length. He submitted that the appellants had made a true and correct declaration of the assessable value of the goods in question. The lower authorities had enhanced the declared value on flimsy and arbitrary grounds. The first ground taken in the adjudication order was that the appellants themselves had imported a consignment of colour television picture tubes of 20" a few months earlier and cleared the same at the price of JY 23690 per piece FOB. It was pointed out by the learned counsel that the appellants did not dispute this position. Their case was that the earlier consignment imported by them was imported under pressing circumstances of urgency to meet their schedule of supply commitments. Further, the earlier consignment was a small one, namely, for 500 tubes only whereas the present importation was a part of a contract for 5000 pieces of which the 3 BEs covered 744 pieces in -.11. Shri Narasimhan further urged that when the earlier consignment was imported by the appellants they were not aware that such tubes of similar quality/Brand were being supplied at lower prices. When they came to know of this, they started negotiations with M/s. Necola Ltd., authorised agents of M/s. Hitachi Ltd. who agreed to effect the future supply of colour television picture tubes at lower rate of JY 16480 per tube. The other ground taken by the learned Additional Collector for enhancing the declared value of the goods was that the same had" been procured through M/s.
Necola Ltd., Hong Kong, who according to his finding, had a special relationship- with the appellants. This allegation of the lower authorities, it was submitted by the learned counsel, was factually incorrect. M/s. Necola Ltd., Hong Kong were an independent party and their deal with the appellants was on principal to principal basis. The appellants have a branch of their own in Hong Kong but that has nothing to do with M/s. Necola Ltd. who are a separate party. Department's allegation that the importation was effected through a party with special relationship with the appellants was, therefore, based on incorrect facts. The other ground taken by the learned Additional Collector for enhancing the value of the appellants' goods viz-a-viz other brands of similar tubes was that Hitachi brand tubes are of a superior quality than other brands such as Toshiba of Japan and some other brands originating from South Korea, West Germany etc. Shri Narasimhan vehemently argued that this was a finding without any basis.
No evidence had been led to prove that Hitachi brand tubes are of a superior quality than other brands. Shri Narasimhan submitted that the entire case of the department with regard to the valuation of the goods was based on surmises and factual errors. No attempt had been made to establish that at the relevant time similar goods were imported or were being capable of being imported at prices higher than the ones declared by the appellants. Finally, the department had not adduced any evidence to show that over and above the declared prices in the import documents the appellants had clandestinely made any remittances towards the cost of the goods in question.
3. Shri Ramanathan, the learned representative of the Collector merely reiterated the grounds set out in the order of the Additional Collector. In support of the Additional Collector's finding that the Hitachi brand tubes are superior in quality compared with those of other companies, he produced a copy of an advertisement inserted by the appellants in The Hindustan Times, dated 27th December, 1983.
4. We have carefully considered the submissions made by both sides. The Additional Collector has taken three main grounds for holding the appellants guilty of misdeclaration of the value of the goods in question : (i) He has compared the value of the present importations with reference to an importation made by the appellants themselves a few months earlier; (it) the present importation had been effected by the appellants from a related party in Hong Kong and hence the value declared by them could be discarded as being special in character; and (iii) Hitachi brand tubes being superior, the appraised value determined qua the value of other inferior brands was justified and was in accordance with the Law.
Shri Narasimhan, the learned counsel for the appellants has given very cogent reasons as to why the above grounds cannot be sustained in law.
We agree with him that the entire adjudication order has proceeded on grounds which lack any force. The onus to prove the charge of undervaluation against the appellants was on the Custom House and the evidence relied upon by them, as contained in the adjudication order, is not at all sufficient to discharge that onus. There is no cogent evidence on record to prove that there is any special relationship between the appellants and the foreign supplier. This misconception on the part of the lower authorities has been explained by Shri Narasimhan. Similarly, no evidence has been adduced by the lower authorities to show that Hitachi brand tubes are superior to other brands with reference to which the valuation of the appellants goods has been made. We accordingly accept the appellant's contention that the correct assessable value of the goods is as declared by them in the relevant import documents.
5. The infringement of Import Trade Control Regulations on the part of the appellants is directly linked with the valuation of the goods. The I.T.C. licences produced cover a value of Rs. 6 lakhs. As we have accepted the contention of the appellants with regard to their declared value which comes to Rs. 5,82,948/- the goods imported are duly covered by the three licences. The charge of infringement of Import Trade Control Regulations, therefore, cannot be sustained.
6. In the result we allow the appeal, set aside the order of the Additional Collector of Customs, Bombay with the direction that excess duty and redemption fine, if paid, be remitted to them in the light of our order.