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United Veneers (P) Ltd. and ors. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1986)(6)LC464Tri(Chennai)
AppellantUnited Veneers (P) Ltd. and ors.
RespondentCollector of Customs
Excerpt:
.....as the case may be, in the course of international trade. he contended that if the full export value of the goods is not given in the relevant documents, the same would be liable for confiscation. fixation of minimum price for certain goods like mica, coir, etc. does not and will not mean that other articles sought to be exported need not reflect the correct market price in the relevant documents.6. i have carefully considered the submissions of the parties herein. a perusal of the provisions of the export control order 1977 with particular reference to rule no. 13 would make it abundantly clear that an exporter is under a statutory obligation to furnish in the shipping bills and other connected documents the value, sort, specifications, quality and description of the goods.....
Judgment:
1. The appeals are directed against the order of the Collector of Customs, Cochin, referred to supra, imposing a redemption fine of Rs. 25,000/- under Section 125 in lieu of confiscation of rosewood veneers and also a penalty of Rs. 5,000/- under Section 114 of the Customs Act, 1962, hereinafter referred to as the Act.

2. A consignment of 10 crates of rosewood veneers stacked in Ernakulam wharf for export under shipping bill No. 1699 dated 22.6.84 were seized by the authorities in pursuance of a search conducted in the business premises of M/s. United Veneers (P) Ltd., hereinafter referred to as 'appellants' on a reasonable belief that there was violation of the provisions of the Customs Act and Foreign Exchange Regulation Act. In a statement given before the Superintendent of Customs (Intelligence) on 10.8.1984, John Philipose, Chairman and acting Managing Director of the company (appellant in 98/85) stated that the quality of the veneers was not mentioned either in the contract or in other shipping documents, such as shipping bill, invoice etc. and the consignment was to be exported to one Takahashi Sholai of Japan for purposes of sale there.

Since the appellants have not indicated in the shipping bill and other connected relevant documents the value, specification, quality and description of the goods which were sought to be exported, as per the provisions of the Export Control Order 1977 and the provisions of the Foreign Exchange Regulation Act, proceedings were instituted against the appellants by issue of a show cause notice which ultimately culminated in the impugned order now appealed against.

(1) Since the description of the goods is in identical terms in the shipping bills and the relevant invoices also indicate the same, there cannot be any mistaken identity about the goods in question and therefore, the change of misdeclaration is not legally tenable.

(2) The goods in question are not prohibited either under the Export Control Order or any other orders and since no statutory definition has been given, confiscation of the goods on grounds of misdeclaration or under-invoicing is contrary to law.

(3) The finding of the adjudicating authority under the impugned order that value of the goods was higher in the market than what was indicated in the invoices is based on enquiries, the particulars of which were not ofinished too the appellants, and since the finding itself is on the basis of a conjecture, the same is not legally sustainable. When the Reserve Bank of India and Excise authorities have not questioned or disputed the appellants' valuation. Customs authorities cannot question it.

(4) Comparison of the market prices and the invoice price of the appelants has no legal sanctity since "market enquiries have no significance".

(5) The adjudicating authority failed to note that there is no need for an exporter to under-value the goods since Indian exporter can only sustain himself if the goods are sold at high cost and the incoming money is essential for running the firm and its activities.

A regular exporter like the appellants obtaining cash assistance and export incentive need not and would not resort to undervaluation.

The reliance placed by the adjudicating authority on a letter No. Sl(d) 285 dated 11.10.1983 addressed by the appellants to M/s.

Shingu Shoko Ltd., Tokyo, on a prior occasion has no correlation with the exports in question and could not be relied upon as an adverse circumstance against the appellants.

(6) The adjudicating authority has failed to prove mens rea and this would vitiate the impugned order. At any rate, the redemption fine and penalty are excessive and harsh.

4. The learned counsel for the appellants cited a number of authorities which I shall advert to at the relevant place.

5. The learned DR, repelling the contentions of the appellants, submitted that the relevant particulars relating to specification, quality, value etc. being absent in the connected shipping bill and other documents contravention of the provisions of the Export Control Order and Foreign Exchange Regulation Act has been made out. The plea of ignorance of the provisions of these Acts by the acting Managing Director would would avail the appellants under law in any way. He further urged that the appellants letter dated 11.10.1983 to M/s.

Shingu Shoko Ltd., Tokyo, would certainly be taken as a circumstance against the appellants evidencing transactions contrary to law, though the same is not connected to concerned with the present consignment.

The learned DR submitted that in terms of Sec. 14 of the Act the value of goods for purpose of assessment is the price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade. He contended that if the full export value of the goods is not given in the relevant documents, the same would be liable for confiscation. Fixation of minimum price for certain goods like mica, coir, etc. does not and will not mean that other articles sought to be exported need not reflect the correct market price in the relevant documents.

6. I have carefully considered the submissions of the parties herein. A perusal of the provisions of the Export Control Order 1977 with particular reference to Rule No. 13 would make it abundantly clear that an exporter is under a statutory obligation to furnish in the shipping bills and other connected documents the value, sort, specifications, quality and description of the goods that are exported. It will be useful to extract Sub-clause (4) of Clause 2 and Clause 13 of Export Trade Control Order, 1977 : "2(4) If in any case, it is found, that the value, sort, specification, quality and description of the goods to be exported are not in conformity with the declaration of the exporter in those respects or the quality and specification of such goods are not in accordance with the terms of the export contract, the export of such goods shall be deemed to be prohibited." " 13. Declaration as the value, sort, quality etc, of exported goods. - On the exportation from any Customs port of any goods, whether liable to duty or not, the owner or exporter of such goods shall, in the shipping bill, or other relevant document state the value, sort, specifications quality and description of such goods to the best of his knowledge and belief, and certify that the quality and specification of goods, as stated in those documents, are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe to a declaration to the truth of such statements at the foot of such shipping Bill or other documents." In the instant case admittedly these factual particulars have not been clearly indicated and mentioned in the shipping bill and other connected documents. In terms of Sec. 18 of the Foreign Exchange Regulation Act and exporter should declare the full export value of the goods that are exported In the instant case, john Philipose, the acting Managing Director and Chairman at the relevant time appeared before the authorities persuant to the summon issued to him under Sec. 108 of the Act and stated that veneers are graded according to their colour, stripe, absence of defects, thickness, length and width, and are priced on the basis of these charactristics, in addition to the cost of finished product. He has further stated that veneers having more length, width, thickness and quantity (more number of veneers in one flitch) would fetch higher price. In the context of this factual background and the statutory legal obligation cast on an exporter under the provisions of the Export Control Order and Foreign Exchange Regulation Act, besides the Customs Act, non-mention of the relevant particulars relating to the valuation of the export consignment in question would certainly be a contravention entailing confiscation. It is indeed strange that the Chairman and acting Managing Director has stated before the authority that he could not say whether the value of the consignment of rosewood veneers covered by shipping bill No. 1699 dated 22.6.84 represents "full export value of the goods". The acting Managing Director could not even say how much was the cost of slicing of the veneers in the consignment in question. Even in the statement given before the Superintendent of Customs (Intelligence) on 10.8.84, the acting Managing Director has admitted that he had not mentioned the quality of the veneers in the contract or in the other shipping documents such as shipping bill, invoice etc., notwithstanding the fact that the consignment was being exported for purposes of sale in a foreign country. The fact that the quality of rosewood veneers is determined mainly with reference to colour, structure, grains, absence of defects, thickness and other measurements, ad the purposes for which they are used, does not admit of any controversy; nor is the same controverted by the appellants. Thickness of the veneers exported would be one of the surest indicators regarding the value of the same and as rightly pointed out by the Collector in the inpugned order, while thickness of veneers exported is usually of two standard sizes, viz.

0.2 mm and 0.5 mm, 8 crates of veneers under sizuere contain veneers of 0.5 mm thickness and the remaining 2 crates contain veneers of 0.6 mm thickness. I therefore do not find any substance in the submission of the learned counsel that there is no under-invoicing or misdeclaration of the value of the consignment for export. The plea of the appellants that there is no prohibition either under the Export Control Order or any other order and that there is no statutory definition of the item in question is hardly relevant for determination of the issue relating to under-invoicing or undervaluation within the provisions of the Customs Act, Export Control Order and Foreign Exchange Regulation Act.

The ratio of the ruling in the case of Bimex International Maha Singh Gate, Amritsar v. Union of India and Ors. reported in 1984 (16) E.L.T.212 (P&H). has absolutely no relevance or application to the facts of the present case. That was a case where the Punjab and Haryana High Court held that in the absence of statutory definition of rags the meaning assigned to the term "woollen rags" in the trade have to be accepted. In the present case there is no dispute or controversy that the appellants attempted to export rosewood veneers. As a matter of fact in terms of Section 13 of the Export Control Order, 1977, on the exportation from any Customs port of any goods whether liable to duty or not the owner or exporter of such goods shall in the shipping bill or other relevant documents state the value, sort, specification, quality and description of such goods to the best of his knowledge and belief and shall subscribe to a declaration to the truth of such statements at the foot of such shipping bill or other documents. The export of such goods shall be deemed to be prohibited if they are not in conformity with the declaration as per Sub-clause (4) of clause 3 of the Export Control Order. The plea of the learned counsel that enquiries by the authorities of the market prices is only a conjecture cannot be countenanced. It is clearly stated in the show cause notice that on the basis of the result of market enquiries, the component opinions expressed by experienced traders and exporters in the field after personal inspection and evaluation of the consignment in question, the comparison of the prices or various export consignments of rosewood veneers of similar quality made from Cochin during the preceding few months, the comparison of the prices of rosewood veneers of comparable quality ruling in the local market and also after valuation of the consignment by the Department, the real value of the rosewood veneers under seizure was estimated at U.S. $ 2.40 per sq.

mtr. The appellants notwithstanding the receipt of the show cause notice and their reply to the same, besides participation in the personal enquiry, never joined issue with the authorities with reference to the enquiries conducted by the Department, the opinion of the experts, comparative prices ruling in the market, value of export consignments of rosewood veneers of similar quality exported from the same port in the preceding few months nor did they want to avail themselves of an opportunity to cross-examine the persons connected with the sources of such information. In such circumstances it is puerile for the appellants to merely assert that the market enquiry and the reliance on the aforesaid facts and circumstances are made conjectures. As rightly pointed by the learned DR, Sec. 14 of the Act deals with valuation of goods for purposes of assessment and the same shall be deemed to be, - (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale of offer for sale: Provided that such price shall be calculated with reference to the, rate of exchange as in force on the date on which a bill of entry is presented under Sec. 46 or a shipping bill or bill of export, as the case may be, is presented under Sec. 50; (b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this bahalf.

I do not find any substance in the argument of the learned counsel that there is no need at for an exporter to undervalue the goods since incoming money is essential for the running of the firm and one would not be inclined to forgo the advantages of export incentive, cash assistance etc. by undervaluation. The question is whether materials available on record under-invoicing or under-valuation is proved against the appellants and therefore the mere plea that an exporter would not have recourse to such undervaluation is neither here nor there. The learned counsel assailed the impugned order for placing reliance on the letter dated 11.10.1983 addressed by the appellants to M/s. Shingu Shoko Ltd., Tokyo. It is true that this particular letter does not have a direct nexus or connection with the export consignment in question. But in the context of the plea of the appellants that they are ignorant of the relevant rules and regulations and the full export value of the goods, this letter can be taken into consideration to show and prove that in the past the appellants have resorted to activities of undervaluation or under-invoicing contrary to law. This letter would disprove the plea of the appellants about their complete ignorance of the relevant rules and regulations. It is in the context of these facts and circumtances one would have to construe whether the appellants were actuated by malafides and mens rea in respect of the goods under seizuere. The plethora of circumstances and factual details do not leave any doubt in my mind that in the instant case the appellants had mens rea in attempting to export the goods under seizure in contravention of the provision of law.

7. At this stage let me refer to the authorities relied upon by the learned counsel for the appellants regarding under valuation or under-invoicing. The ruling in the case of Albin v. Union of India, judgment of the Kerala High Court, reported in 1'979 K.L.T. 585, has no application to the facts of the present case. That was a case where in terms of the notification issued under Sec. 6 of (Export Quality Control and Inspection) Act, 1963, Export Promotion Agency, the competent authority, certified to the quality and export worthiness of frozen shrimps and at the wharf the Customs authorities noticed some defects in the goods, called upon the Agency to conduct a fresh examination which the Agency did and declared the goods "unexport worthy". The finding of the Court was that the certificate issued by the competent Agency was valid and operated till cancellation and after the declaration of unexport worthiness, no attempt to export was made by the exporters. In the instant case the admitted fact remaining that goods were brought for export and the only issue is with reference to under-invoicing or undervaluation in terms of Sec. 14 of the Customs Act.

8. The learned counsel then referred to the ruling of the Calcutta High Court in the case of Harchand v. Additional Collector of Customs, Calcutta, and others, reported in 1981 E.L.T. 699 (Cal.) land contended that suspicion can never take the place of proof. Nobody can quarrel with the axiomatic proposition of law laid down by the learned Judge in the said ruling. But in the instant case, I have found the appellants guilty of the offence alleged against them on the basis of legal and acceptable evidence.

9. The reference of the learned counsel to the case of Marcandy Prasad Radhakrishna Prasad Pvt. Ltd. v. Collector of Customs, Calcutta, reported in 198f (18) ELT 547 is utterly irrelevant to the issues in the instant case. That was a case where the impugned order was set aside and the matter remitted back on the ground that non-summoning of a test officer who had conducted a test analysis of the goods for cross examination by the aggrieved party, as requested by him, was violative of the principles of natural justice. In the instant case admittedly the appellants did not want to cross examine anybody nor asked for one.

10. The reliance placed by the learned counsel on a judgment of the Kerala High Court in the case of Shanmukha Vilas Cashew Traders v.Collector of Customs, Cochin, reported in 1985 ECR 603 (Kerala), has totally no application to the facts of the present case. That was a case where the exporter consequent on labour strike and agitation in his factories could not honour his contractual export commitments dated 11.4.198.3 and the parties to the contract varied the mode of performance after negotiation under which the purchaser agreed for substitution of lower grade cashew kernels of interior variety. The Court found that there was no novation or substitution of contract and change in the mode of performance came clearly within the mischief and ambit of Sec. 63 of the Contract Act under which a promisee may dispense with or remit, wholly or in part, the performance of the promise made to him or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. The High Court observed : "...Here it is also relevant to note that it is not the case of the department that the price quoted and agreed upon between the parties at the time when the contract was entered into did not represent the market price prevailing at that time." The facts in the present case are entirely different and so this ruling has no bearing or relevance to the present case. Likewise, the ruling reported in 1985 ECR 646 (Cegat), Special Bench 'A', in the case of Rakesh Press v. Collector of Customs, Bombay has no relevance to the facts of the present case and is clearly distinguishable on facts. At the same time I should observe that the legal principles enunciated therein are against the appellants herein. That was a case where the charge of undervaluation was sought to be rested by the Collector in respect of an import on the basis of the value of similar goods imported in a solitary instance and the Tribunal found that the goods were not comparable in all aspects and the charge was not established "on account of insufficient supporting evidence". The ratio in the ruling is that the Department can discharge the burden of proving under-invoicing by making detailed enquiries and collecting materials, as has been done in the present case.

11. The ruling of the Special Bench 'A' Delhi, in the case of Babcock Venkateshwara Hatcheries (P) Ltd. v. Collector of Customs, Bombay, reported in 1985 (21) ELT 335 (Tribunal), relied upon by the appellants would not in any way held them. The Tribunal found in that case that the price agreed upon between the parties after normal negotiations reflected the ruling price in the international market in terms of Sec.

14(1)(a) of the Customs Act and there was no acceptable legal evidence contra. Here in the instant case, the comparison of the prices of rosewood veneers of similar quality exported from Cochin port in the immediate preceding months, comparison of the prices of rosewood veneers of comparable quality ruling in the local market, opinions expressed by experienced traders and exporters of the goods under seizure after personal inspection, market enquiries and other factors were relied upon by the Department to prove under-invoicing or undervaluation by the appellants herein, which were neither specifically challenged in the reply to the show cause notice nor did they seek to disprove the same by cross-examination.

12. The appellants' reference to Special Bench 'A1 ruling in the case of Tara Art Printers v. Collector of Customs, Bombay, reported in 1985 (21) ELT 358 (Tribunal), will not in any way avail the appellants since in that case the finding was that the basis of valuation adopted by the Collector was "ad hoc, if not totally arbitrary" unlike in the present case.

13. The appellants' reference to the judgment of the Madras High Court in the case of Ranjit Export Private Ltd. v. Collector of Customs, Madras, reported in 1985 (21) ELT 353 (Mad.) is not relevant to the facts of the present case. That was a case where the High Court on consideration of the evidence and materials found "what the petitioner did could not fall within the legal concept of attempt to export". In the present case, it is not the case of the appellants that the goods under seizure were not attempted to be exported and there was no such plea at any time.

14. Therefore, on careful consideration of all the materials available on record, I am inclined to hold that the charge found against the appellants under the impugned order is legally sustainable. In the facts and circumstances of the case, neither the quantum of fine in lieu of confiscation nor the penalty can be said to be harsh or excessive. The fine and penalty imposed on the appellants are therefore confirmed. In the result. appeal No. 88/85 in respect of M/s United Veneers (P) Ltd. is dismissed.

15. So far as appeals 97/85 and 98/85 filed by K.S. Simon and John Philipose are concerned, since no penalty or fine is imposed on them, they are dismissed as not maintainable.


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