1. In this appeal, dispute is on the correct value of a consignment of 10.130 Metric Tonnes of Nickel Alloy Tubes Inconel 600 & 601 imported by the appellants in October 1984 against a contract entered into in July 1984. By the impugned order, the Collector held that the appellants were guilty under Section 111(m) of the Customs Act, 1962 for having under-declared the value of the goods at 2190.00 per Metric Tonne. Acting under Rule 8 of the Customs Valuation Rules, 1963 (best judgment assessment rule) the Collector re-assessed the value of the goods on the basis of costing at 9,439.88 per Metric Tonne. The Collector ordered confiscation of the goods under the same Section and adjudged the fine in lieu of confiscation at Rs. 5 lakhs. In addition, the Collector imposed a penalty of Rs. 1 lakh on the appellants under Section 112 of the Act. The appellants are in appeal against this order.
2. When the matter came up before us first on 8-9-1988, we noticed that though the goods were made of very costly metals, there is no evidence on record as to at what price the manufacturers were selling the goods in wholesale at the relevant time. The appellants had filed their import invoice but it was not from the manufacturers but from a middleman. The Bench felt that International Price List of like goods as in force during the middle of 1984 or so would be of great help for a just and proper disposal of this case.
Both sides agreed that it would be so and undertook to make an effort to get such a price list and produce it before the Bench. We gave time to both sides for this purpose. When the matter came up again on 11-1-1989, neither side filed such a price list. The appellants instead filed two price quotations which they procured from two middlemen in U.K. and Japan. This is not what the Bench had intended to see.
However, for the sake of the record we may mention it that even the prices quoted by these two middlemen were about double the prices declared by the appellants to the Customs.
3. Since there was no likelihood of any further evidence of manufacturers' prices being placed on record, we resumed the hearing on 11-1-1989, concluded it and reserved the order.
4. We have given our earnest consideration to the submissions made by both sides and the record. According to the information given to us during the hearing, the subject tubes are used in chemical plants (Condensor Tubes, Heat Exchanger Tubes etc.) where anti-corrosion property is required. They are pre-dominantly (83.5 to 87.5%) made of Nickel and Chromium both of which are very costly non-ferrous metals.
When the present consignment arrived in India and the appellants filed their Bill of Entry, value declaration and the import invoice, the Customs authorities had before them two earlier instances of import of similar goods. The prices in those two cases were found to be 10 to 13 times higher even after making allowance for the difference in the exchange rate parity between US $ and British . In one case the c.i.f. prices declared were US $33,968.08 per Metric Tonne and in the other case they were US $ 20,292.75 per Metric Tonne. The quantities imported in those two cases were no doubt, small, 150 kgs. in the first case and 70 kgs. in the other case, as compared to the quantity of 10,130 Metric Tonnes of the appellants. But even then, there could not possibly be so much of price difference. It is well known to all dealing with customs valuation that quantity discounts normally range from 5 to 10% only and not more. The prices declared by the appellants were, therefore, too low. In any case, we find that the Collector himself did not adopt the earlier two prices. Instead, the Collector proceeded on the costing method. Since the composition of the goods was known, the Collector ascertained the international prices of the constituent metals and added thereto the average manufacturing cost of 150%. The resultant price worked out and adopted by the Collector came to about one-third and one-half of the earlier two small lot prices.
This shows that the Collector was quite liberal in his approach.
5. However, the appellants attach the Collector's valuation on two counts. Their first point is that 150% manufacturing cost added by the Collector was on the high side and that since their tubes had been manufactured from scrap, the manufacturing cost would not exceed 100%.
We cannot agree with the appellants for the simple reason that there is absolutely no evidence to show that the goods imported by the appellants were manufactured from scrap. The goods did not come directly from the manufacturer abroad. They came from a middleman.
There is nothing in the record to substantiate the bland contention of the appellants that the goods were manufactured from scrap. We find that the Collector was more than fair in the various ingredients of valuation, including the manufacturing cost, which he adopted. The second plea of the appellants is that their goods were a stock-lot and so there should be a 50% reduction in prices. We find that this too is an unsubstantiated contention. The import invoice does not show that the goods supplied were a stock-lot. Though the order placed by the appellants talks of "random lengths", we find that it was really not so. The order was for specific sizes and against each size and specification a fixed quantity, in round figures, had been ordered. We do not agree that the goods were a stock-lot. We may add it here that looking to the verycostly metals of which the goods were made, even in the case of stock-lots there could not be as much as 50% reduction in prices. It is common knowledge that even scrap of non-ferrous metals is sold all over the world at very high prices.
6. In the circumstances, we hold that the value finally adopted by the Collector was more than fair and there is no scope to reduce it further. The value declared by the appellants was too low by every standard and the charge of under-valuation was, therefore, correctly held as proved by the Collector.
7. The appellants pleaded that in any case confiscation of the goods and imposition of personal penalty were not justified. Looking to the facts of this case, the steep under-valuation and consequent loss of customs duty, if the offence had not been detected, we hold that the action taken by the Collector to confiscate the goods and to impose the penalty cannot be faulted. The amounts of redemption fine and penalty were, in view of the magnitude of the attempted duty evasion, not excessive or harsh.