Time Masters Vs. Commr. of Customs (Exports)

1. The appellants entered for export wrist watches claiming benefit of the DEPB Scheme. The export goods were covered under AR-4A documents filed by the manufacturers. The containers had been sealed in the factory of the manufacturer by the jurisdictional Central Excise Officers. The value per watch was Rs. 44.25. The value per watch as per the AR-4 was Rs. 44.15. The Officers of the Customs detained this consignment and on examination were of the opinion that the value of similar watches in local market was substantially lower. The concerned persons were examined. The proprietor of the exporting appellants stated that the watches had been purchased from M/s. Cenzer Industries Ltd., Goa of whom he was one of the Directors. The Commercial Manager of Cenzer Industries Ltd. was examined. He stated that he did not possess any knowledge about valuation of watches but that he had signed the documents at the instance of the Director thereof. He produced bills of entry covering the importation of component parts of the watches made by his unit. The Customs thereafter secured opinions of watch dealers from the Musafir Khana/Mhotta Market areas. On comparision of the values they determined that the present consignment was inflated in value. The CHA's statement was recorded to the effect that the watches in the consignment were sub-standard. Based on these investigations, a show cause notice was issued alleging that on account of the overvaluation the exporters had sought to benefit to the tune of Rs. 17,83,477.25 by way of inflated DEPB benefits. The noticees replied to the show cause notice. In the reply Circular No. 69/97-Cus dated 8.12.1997 issued by the Ministry of Finance, Department of Revenue, was cited. This circular directed the Officers as to the determination of present market value of the goods exported under the DEPB Scheme. The circular advised the Customs Officers to accept 50% increase on the valuation of the manufacturer where the goods were exported either by the merchant manufacturer or by the manufacturer exporter. It was pleaded that the increase was only ten paise per piece. It was pleaded that the cost of manufacture by Cenzer Industries Ltd. was certified by the jurisdictional Officers. It was claimed that watches such as were exported were sold at comparative prices by Cenzer Industries Ltd. It was alleged that the evidence produced by the Department in the form of market enquiry was bogus and that the exporters would like to cross-examine such persons. It was claimed that the exporter being a Director in the manufacturing company could not result in the value being increased. The Commissioner after hearing the noticees passed the impugned order. He ordered confiscation of the watches in question but allowed their redemption on payment of a fine. He also imposed a penalty of Rs. 1,50,000 on the exporter proprietor. He did not pass any judgment on the other noticees saying that it could be issued separately. This appeal is against this order. This appeal was taken up for out of turn disposal on the plea made by the appellants that the goods had to be exported and that the appellants could not afford to pay the fine imposed.

2. We have heard Shri V.N. Doiphode, counsel for the appellants and Shri Deepak Kumar, SDR, for the revenue.

3. As regards the valuation of the watches, we find that the valuation was fractionally higher than the value at which the manufacturer cleared them. The AR-4 form establishes this. The valuation on the AR-4 form is supposed to be based with the declaration filed by the manufacturer under Rule 173C of the Central Excise Rules. Since the AR-4 was passed, it is to be held that the officers exercising jurisdiction at the manufacturer's factory did not question the valuation and in fact accepted the same. During the investigation such exporters had produced a certificate showing the cost construction of the watches which certificate was countersigned by the jurisdictional officer which was also not accepted by the learned Commissioner.

4. The sole ground, which the Commissioner has held that the watches were overvalued are some sale Memos issued by some dealers. We have seen these Memos. The show cause notice terms these as "vouchers/quotations". In the Commissioner's order these are held to be evidences collected by the investigating officers. We have seen these documents. These are on plain paper with the visiting card attached.

The appellants term them as "road side stall holders." 5. We have seen the description on these documents viz. "electronic digital watches". We observe that this description would cover watches manufactured by several manufacturers of varying sophistication, Such watches may cost Rs. 20 or Rs. 2,000 also. The technology is simple but the wide fluctuation in the market is partly due to the superiority of the component parts as well as the brand name. It is the usual phenomenon that watch companies get certain goods manufactured from small scale industries at a small cost and market them under their own brand name at a very high rate. It is an extremely hazardous proposition to attempt to negate the valuation of the given commodity by comparing it with the valuation of another commodity although technically both commodities may be the same, viz. electronic digital watches. Shri Doiphode submits that the same stall people had given the appellants higher invoices. We do not wish to be drawn into that controversy at all.

6. We also observe that the learned Commissioner did not permit cross-examination of the sellers. In the process he held that only the panchas could be called for cross-examination and not other persons whose evidence is relied upon. We do not wish to comment on this either.

7. As we have observed above, it is a hazardous operation to admit comparison of the prices of consumer goods generally described. In the present case the link for valuation was available in the form of the valuation declared and approved by the Department of the watches as made by the manufacturer. The peripheral reference that the exporter proprietor was a Director of the manufacturing company is neither here or there. If the Department was serious, they should have led evidence as to the relationship between these two units following the law laid down in both enactments namely the Customs Act, 1962 and the Central Excise Act, 1944. Such reference does not support the Department's case at all.

8. On very careful consideration of the facts before us, we are unable to uphold the findings of the Commissioner that the subject watches are overvalued. We set aside this order and direct consequential relief to be awarded, subject to the finding of shortages on which the claim stands denied.