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Virchem Corporation Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(19)ELT257TriDel
AppellantVirchem Corporation
RespondentCollector of Customs
Excerpt:
.....17-12-1982 and the second one on 31-12-1982. both the statements were in the own hand writing of shri vira and were recorded in the presence of the investigating officer of the customs department. the appellants vide their letter dated 1-1-1983 addressed to the assistant collector of customs, s.i.b., bombay reiterated what had already come out in the statement of shri vira with regard to the nature of the transaction. the letter concluded with a prayer that they would like the waiver of the show cause notice but requested the case to be decided after personal hearing as early as possible. the additional collector of customs, bombay after granting a personal hearing to the appellants, through their advocate, adjudicated the case. with regard to all the three bills of entry, the said.....
Judgment:
1. Since the points involved in all the three appeals bearing Nos. CD (SB) 1015/83-A to 1017/83-A are identical, we will dispose them of by this composite order.

2. The facts of the case briefly are that the appellants imported 280 Jumbo rolls Magnetic Tapes under cover of 3 bills of entry. The particulars of the goods imported per these 3 bills of entry are as given below :-_______________________________________________________S. No. Bill of Entry No. No. of Rolls_______________________________________________________ The goods covered by the above mentioned bills of entry reached Bombay Port in the month of September, 1982. The Customs authorities had received some secret information that the appellants were likely to import Jumbo Rolls of Magnetic Tapes from M/s. Acme of Hong Kong at substantially lower prices. Accordingly, when the consignments arrived, the bills of entry were taken over for investigation by the Special Investigation Branch of the Custom House. Two statements of Shri Gulab Rai Vira, Proprietor of the appellant-company were recorded under Section 108 of the Customs Act, 1962 (hereinafter referred to as the Act). The first statement was recorded on 17-12-1982 and the second one on 31-12-1982. Both the statements were in the own hand writing of Shri Vira and were recorded in the presence of the Investigating Officer of the Customs Department. The appellants vide their letter dated 1-1-1983 addressed to the Assistant Collector of Customs, S.I.B., Bombay reiterated what had already come out in the statement of Shri Vira with regard to the nature of the transaction. The letter concluded with a prayer that they would like the waiver of the show cause notice but requested the case to be decided after personal hearing as early as possible. The Additional Collector of Customs, Bombay after granting a personal hearing to the appellants, through their Advocate, adjudicated the case. With regard to all the three bills of entry, the said Additional Collector held that the appellants had under valued the goods in question; thereby trying to evade the payment of full duty leviable thereon. The goods were accordingly confiscated under Section l11(in) of the Act and personal penalties were also imposed under Section 112 ibid. Particulars of enhanced value, fine and penalty with regard to the 3 bills of entry are given below :-___________________________________________________________________S. B.E. No. Enhanced value Fine in lieu PersonalNo. of confiscation penalty___________________________________________________________________3. 1373/126 Rs. 2,56,350/- Rs. 80,000/- Rs. 10,000/-___________________________________________________________________ 3. Dr. Singhvi, learned counsel for the appellants, has contended that the goods in question had been imported at a negotiated price, but the department had heavily relied on the statement of Shri Vira, Proprietor of the appellant-firm. Shri Vira had made it very clear that the price of Jumbo Rolls of 10,000 ft. could be as high as HK $ 1135, but for promotion of long term business interests, the representative of M/s.

Acme, a company in Hong Kong when visited India in July, 1982 had agreed to charge a special price of HK $ 1080 per roll of 15,000 ft. He has further submitted that the lower authorities had read more into the statements than was warranted under the law. Their mere statement of Shri Vira that the price of a Jumbo Roll of 10,000 ft. could be HK $ 1135 did not necessarily mean that the goods of this specification were being imported at the relevant time at the price of HK $ 1135 per roll of 10,000 ft. Further, the quotation of HK $ 1135 indicated the outer limit and, therefore, was not in the nature of a specific price figure.

Dr. Singhvi further emphasized that the secret letter dated 26-11-1982 sent by Shri A.K. Pande, First Secretary, Commision for India, Hong Kong addressed to Shri Tampi, Deputy Collector of Customs, Bombay supported his contention that there had been no mis-declaration on the part of the appellants. He referred to M/s. Acme's quotation dated 12-10-1982 wherein Jumbo Webs of 15,000 ft. bad been specifically mentioned at the quoted price of HK $ 1080 per roll. He pleaded that this was a document on which the Departmental authorities were themselves relying. Dr. Singhvi laid lot of stress on the fact that the case of the lower authorities was built up on surmises and conjectures, because they seemed to have been influenced by what had been a report from a secret contact. Further, the proforma invoice dated 5-8-1982, the final invoice dated 11-8-1982 and the documents retired through the Bank of Maharashtra, all showed the price of the goods as HK $ 1080 per roll of 15,000 ft. Dr. Singhvi has vehemently argued that the onus of proving undervaluation was on the department and that the department had leaned heavily on the statement of the proprietor of the appellant-company and quotations of one or two contemporaneous imports, allegedly made around the same time. In particular, he strongly criticised the reliance placed by the Department on the case of importation effected by Shri A.K. Singh as, according to him, the department had not conclusively established that the goods imported by Shri Singh were of the same grade as those imported by the appellants.

He has further contended that all commercial transactions need not conform to an iron clad pattern and that it is not uncommon to give the benefit of lower prices in the ordinary course of business for considerations, such as, higher quantum of imports, long term potential benefits and similar other commercial factors. He, therefore, submitted that the evidentiary value of the importation by Shri A.K. Singh was not of any assistance in building up a case against the appellants.

4. Referring to the letter dated 26-11-1982 from the High Commission, Dr. Singhvi submitted that the enclosure to the letter supported his client's case that at the relevant time, Jumbo rolls of 15,000 ft. were capable of being sold at HK $ 1080 per roll. He further stated that certain uncomplimentary references made to the business activities of M/s. Acme in the secret communication did not per se make the present importations tainted. As regards the telex message, another enclosure to the letter received from the Commission, Dr. Singhvi cited the Tribunal's decision in the case of M/s. Mangla Brothers [1984 E.L.T.155 (CEGAT)]. He submitted that in the said judgment it had been rightly held that no relevance could be placed on mere quotation unless there was corroborative evidence in the form of actual importations.

According to Dr. Singhvi the only importation cited by the respondent is that of Shri A.K. Singh, which does not in any way support the case of the Department.

5. Supplementing the arguments advanced by Dr. Singhvi, Shri K.Narasimhan, the learned counsel, made the following additional grounds on behalf of the appellants :- (i) A statement can be recorded under Section 108 of the Customs Act only in cases of smuggling. In this case the issue involved is not of smuggling but regarding under-valuation. Hence the statement of Shri Vira under Section 108 of the Act cannot be relied upon by the respondent to his advantage ; and (ii) No doubt it is on record that the appellants had sought waiver of the issue of the show cause notice. However, whenever a waiver ' of show cause notice is asked for and allowed, the procedure is to explain to the accused party the charges levelled against him. In this case, this was not done and therefore, the procedure followed was legally not sustainable.

6. Shri Ramanathan, the learned representative of the respondent has, on the other hand, contended that this was a clear case of under-invoicing of the imported goods. He has pointed out that in his statement dated 17-12-1982 recorded under Section 108 of the Act, Shri Vira, the proprietor of the appellant-company had clearly stated that the price charged to the appellants was a concessional price and that the then prevalent price for the goods in question was HK $ 1135 per roll of 10,000 ft. Not only this, in his subsequent statement recorded on 31-12-1982, Shri Vira affirmed what he had stated earlier in this statement of 17-12-1982. Not only this, on 1-1-1983, the appellants wrote a letter on their own volition to the Assistant Collector, S.I.B.in which they fully confirmed what had been stated by Shri Vira in his two statements before the Customs officers. Shri Ramanathan has argued that it was not the appellants' case at any stage that these statements had been made under duress or coercion. We find that Shri Vira is an educated person and the statements had been written by him in his own hand. The version about the price given in the two statements and the letter dated 1-1-1983 were in conformity with each other.

7. Shri Ramanathan has further submitted that the appellants are now trying to wriggle out of the voluntary statements without sufficient reason. According to him the adjudicating authority was fully justified in placing reliance on these voluntary statements in arriving at the final conclusion. With regard to the letter of the High Commission, Shri Ramanathan has pleaded that this letter sent by Shri Pande supported the Department's stand that M/s. Acme were in the habit of indulging in shady deals. Hence, no reliance should be placed on whatever documents were produced by the appellants emanating from M/s.

Acme, including the Affidavit dated 26-3-1983 of the President and Manager of M/s. Acme. In any event he contended that the affidavit was a self-serving document and did not have much evidentiary value.

8. Shri Ramanathan then took up the point raised by Dr. Singhvi that comparison of the appellants' goods with those imported by Shri A.K.Singh was not relevant. While conceding that the supplier in the case of Shri A.K. Singh and the appellants were different and the grade mentioned in the documents also differed, he maintained that at no earlier stage, the appellants had taken the stand that what they had imported was different from grade 800. In fact, according to Shri Ramanathan, grade 420 shown in the bill of entry was only a mark or number shown on the containers. Shri Ramanathan summed up his case by submitting that the case against the appellants stood fully established by virtue of the voluntary statements dated 17-12-1982 and 31-12-1982 and the letter dated 1-1-1983 addressed to the Assistant Collector, S.I.B., Bombay. Since this was a clear case of attempting to evade payment of customs duty and to infringe I .T.C. Regulations, the action to confiscate the goods was justified. In any case, considering the seriousness of the offence, the redemption fine imposed on the appellants could not be considered harsh or excessive. Further, it was a case of under-invoicing which stood proved and, therefore, penalty under Section 112 of the Act was also justified.

9. We have given our deep thought to the contentions of both the sides.

The Department seeks to establish its case on the following grounds :-- (i) Shri Vira, the proprietor of the appellant company in his statements dated 17-12-1982 and 31-12-1982 had clearly stated that the price paid by them was a special price. Further, the appellants were aware of the then ruling price for similar goods as prevalent in Hong Kong; (ii) The secret communication dated 26-11-1982 received from the Commission for India, Hong Kong addressed to Shri Tampi, Deputy Collector of Customs, Bombay ; and (iii) Comparison of appellants' price vis-a-vis the price of one Shri A.K. Singh.

10. On the first ground, we observe that the statements dated 17-12-1982 and 31-12-1982 were made by Shri Vira, the proprietor of the appellant-company, shortly after importation and were in his own handwriting. It has nowhere been alleged before the lower authorities or, for that matter, even before us that the said statements were obtained under duress or coercion. In other words their authenticity has not been challenged. Further, the letter dated 1-1-1983 sent by the appellants to the Assistant Collector, S.I.B. clinches the issue as it was sent of their own accord. There was sufficient time between the recordidg of the statements and the addressing of this letter to enable the appellants to ponder over the contents of the statements made by Shri Vira and gauge their implications. The appellants had also time at their disposal to obtain legal advice with regard to these statements, When these two; .statements are read in conjunction with the letter dated 1-1-1983, we find that the present is a futile effort on the part of the appellants to wriggle out of what was submitted by them before the lower authorities. Shri Vira had in unequivocal terms stated that he had obtained the goods on special basis and that the price at which the said goods were being sold at the relevant time was the such price.

In fact, in his second statement dated 31-12-1982, he has gone to the extent of saying that he had made inquiries in the Hong Kong market and confirmed the prevalent price which he had indicated in his first statement recorded on 17-12-1982. The letter of 1-1-1983 leaves no doubt, whatsoever, in our mind that by this time the appellants had found that no useful purpose would be served by keeping back the turth from the Customs authorities and it was to their advantage to seek waiver of the show cause notice so that the adjudication proceedings could be completed expeditiously.

11, We are impressed with the submission made by Shri Narasimhan that a statement recorded under Section 109 of the Act could not be relied upon except where a case of smuggling is involved. The expression 'smuggling' as defined in Section 2(39) of the Act is reproduced below :- "Smuggling in relation to any goods, means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113." In the present case, the Department's case was that the goods had been mis-declared in description and hence liable for confiscation under Section 11 Km). The lower authorities were, therefore, well within their right to make use of the statement recorded under Section 108 of the Act. It appears to us that the Legislature thought it expedient in the public interest to adopt a wider definition of the expression "smuggling" than is connoted by its popular meaning. The stand taken by Shri Narasimhan is, therefore, not sustainable. Regarding the second point taken up by Shri Narasimhan (cf. para 5 ibid), it is quite clear that right from the beginning the appellants were aware of the nature of the case being made out against them by the respondent. When, therefore, the appellants sought for a waiver of the issue of the show cause notice they were fully conscious of the action which they were seeking. Their letter dated of 1-1-1983 leaves no doubt, whatsoever, that the appellants sought the waiver of the show cause notice to cut short the proceedings against them. We, therefore, see no substance in the second contention put forth by Shri Narasimhan.

12. Dr. Singhvi strongly contended that the onus to prove the allegation of under-invoicing lay with the Department. Indisputably, when the goods were imported the onus to prove the charge of under-invoicing rested on the Department. However, it may shift from one side to the other during the course of the proceedings when evidence is collected or laid by the parties. In the present case, after the recording of statements of Shri Vira, the onus which originally was to be discharged by the Department, shifted on to the appellants. By making a voluntary statement, the appellants, in the absence of any evidence to the contrary, voluntarily wrote to disprove the charge of under-invoicing which, in the final analysis they failed to do.

13. We agree with Shri Ramanathan that the appellants cannot wriggle out from their stand taken in the statements of Shri Vira that the price of the goods imported by them was what had been ascertained by the Custom House. We, therefore, uphold the finding of the learned Additional Collector that the correct assessable value of the goods in question covered by the 3 bills of entry Should be as under : -___________________________________________________________________S. No.Bill of Entry No. Assessable Value3.

1373/126 Rs. 2.56,350/-___________________________________________________________________ 14. In view of the above conclusions we do not think it necessary to dwell at length other points urged during the course of arguments. But so far as the comparison of the appellants' goods with those imported by Shri A.K. Singh is concerned, the same cannot be considered just and proper. The suppliers were different and the goods were also different in that case. Moreover, the details of the importation made by Shri A.K. Singh are not available on record.

15. As regards the communication dated 26-11-1982 from the Commission for India, Hong Kong, read in its entirety, it tends to create a serious doubt in one's mind about the conduct of the supplier of the goods. However, the general conduct of a party cannot be made the basis of drawing any inference against him unless such conduct gets reflected in the transactions under consideration. We do not think that the High Commission's letter in any way advance the case of the appellants or helps the stand of the respondent.

16. As a result of the above discussion, we hold that the value of the imported goods for assessment purposes as determined by the Additional Collector in the impugned order was correct.

We, however, notice that no evidence has been found by the Department to show that the appellants had remitted clandestinely any amount towards the cost of the goods imported over and above what they had declared in the import documents. We further find that the appellants had not withheld any information from the very beginning and had made a clean breast of the whole transaction by giving the actual price paid by them as a result of the concession given to them. In these circumstances, we are of the view that the imposition of the redemption fine or personal penalty was not justified. We accordingly remit both the redemption fine and the personal penalty imposed on the appellants.

So much of the appeal, therefore, deserves to be accepted.

17. We thus partly accept this appeal in the above terms and direct the appellants be given consequential relief which flows thereform.


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