| SooperKanoon Citation | sooperkanoon.com/38927 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | May-02-2005 |
| Judge | A Wadhwa, S T C., A M Moheb |
| Reported in | (2005)(103)ECC139 |
| Appellant | Goenka Industries |
| Respondent | Commissioner of Customs |
2. Subsequent samples were drawn and sent to SASMIRA for testing the grade of the yarn. As per the test report obtained from SASMIRA the goods were of first quality as against the sub-standard declared by the importer. It was further found by the custom authorities that yarn of first quality grade have been imported by the other importers at higher value ranging from US $ 2.49 to 2.70 per kg.
3. Based upon the above facts, the appellants were issued a Show Cause Notice proposing to enhance the value of the imported yarn to US $ 2.70 per kg. and confirm the differential duty against them. The notice also proposed confiscation of the goods and imposition of penalty upon the appellant on the alleged misdescription and under-valuation of the goods. The said Show Cause Notice was adjudicated upon by the Commissioner of Customs, who relying upon SASMIRA report, held that the goods were of first quality and not substandard, as declared by the appellant. As regards the appellants' contention that the minimum price of US $ 2.25 per kg. at which they had earlier imported the same goods should be adopted, he observed that the import pertains to the same importer who had mis-declared the goods in the present case and as such it cannot be said that the earlier price declared by them was correct.
However, he accept the appellants' contention of picking up the lowest price and accordingly adopted the value of the yarn as US $ 2.50 per kg. He also confiscated the goods covered by the two Bills of entry with an option, to the appellants to redeem the same on payment of redemption fine of Rs. 1.50 Lakhs in each case. Penalty of Rs. 60,000/- was imposed in respect of each Bill of Entry under the provision of Section 112(a) of the Customs Act, 1962. The above order of the Commissioner is impugned before us.
4. Shri V.M. Doiphode, learned Advocate appearing for the appellant has attacked the impugned order by submitting that the same has been passed on the sole basis of SASMIRA report which cannot be considered as correct inasmuch as the test have not been carried out in accordance with the ISI specification. Drawing our attention to the said specification I.S. 2427-1968 he submits that para 5.1 is to the effect that the Viscose rayon yarn and yarn shall be graded for each of various characteristics applicable to the type of package being tested as given in the appropriate tables 1 to 5 in accordance with B-4.
Drawing our attention to the said table for classification of yarns he submits that appearance (colour) is one of the essential characteristics for deciding the grade of the yarn. Three types of the colours have been enumerated in the said table which are uniform or very slightly off colours for grade I, medium off colour for grade II and heavy off colour for Grade III. Test report has described appearance as satisfactory without making any distinction between the various types as defined in the IS standard. Similarly, he submits that as per the table Tex or Denier with allowable variation specified value, percentage is one of the criteria to be adopted for grade of the yarn. Further tenacity and dyeing characteristics and turns per meter is also one of the criteria for arriving at the grade of the yarns. The said properties have not been tested as is clear from the test report.
As such, he submits that the test report cannot be made the basis for arriving at the correct grade of the yarn in question.
5. He also draws our attention to the invoice issued by the supplier which shows that the goods are of non-standard grade and the packaging list issued by the supplier reveals that the goods were of different weights and was of different denier and specification. As such, he submits that the same was in the nature of odd lot of goods and cannot be compared with the first quality importation made by other importers as held by the Hon'ble Supreme Court in the case of Etcher Tractors Ltd. v. C.C., Mumbai - 2000 (122) E.L.T. 321 (S.C.). He also submits that as per the strict standard of quality in Japan, the consignment in question was declared as sub-standard because they were not workable on Air Jet looms and fully automatic rapier looms which run on 400/500 RPM whereas in India they run on maximum 70/80 RPM. As such he has contended that the goods were of sub-standard quality and there was no mis-declaration as regards the description or value.
6. Shri Doiphode also argues that there is no evidence on record of any extra payment to the supplier of the goods and as such there is no ground for rejecting the transaction value. The goods were imported against the letter of grade and the documents were received through the bank and payment was made through the banking channel in which case the revenue should accept the transaction value in the absence of any flow back to the supplier. As regards contemporaneous imports he submits that they relate to import of lower quantity of the yarn whereas in their case the quantity is 3 to 4 times higher than covered by those Bill of Entries. As such, their import cannot be compared with the other imports. However, he fairly agrees that they had earlier imported identical goods from the same supplier at the higher value of US $ 2.25. per kg. and submits that the same may be adopted for valuation purposes in the instant case also.
7. Countering the arguments Shri Hitesh Shah, learned S.D.R. appearing for the Revenue counters the appellant's contention by submitting that SASMIRA is one of the prestigious test institute and the test report submitted by them should not be discarded. He submits that where the goods have been mis-declared in description the Revenue was justified in getting the same tested to find out the quality of the same and then adopting the value of the identical imports for the purpose of the determining the assessable value of the goods in question. He also supports the confiscation of the goods and imposition of penalty upon the appellant.
8. We have considered the submissions made by both the sides. The dispute involved is as regards the valuation of the goods described by the appellant as Viscose, Rayon, Filament Yarn (Sub-standard no claim basis). The invoice raised by the supplier of the goods also indicate that the goods are of substandard quality and of varying denier ranging from 50-500 and 75-120. The packaging list in respect of the two Bill of Entries also indicate wide range of denier and different quantities of each denier. The revenue has relied upon the SASMIRA report indicating that the samples drawn were of first quality as per IS 2427-1968. As detailed above learned Advocate has drawn our attention to the various characteristics required to be examined before granting a particular grade to the yarn, which have not been examined by the said agency. We also note that the goods were of different weights in respect of different deniers and was in the nature of mix lot in which case it would not be possible for SASMIRA to give a different opinion in respect of all the lots. There is nothing on record to show that representative sample were drawn from each and every lot. We also take note of the appellants' contention that the goods being of varying lots was considered as sub-standard and mix lot by the supplier inasmuch as the same cannot be made to run on the sophisticated Japanese machine.
In the circumstance, we are of the view that there was no mis-declaration of the goods in question.
9. As regards valuation, we find that the same has been enhanced by adopting the value of contemporaneous imports. The appellant had also in the past imported identical goods at US $ 2.25. The said value has not been considered contemporaneous by the Adjudicating authority by observing that the import is by the same importer who had mis-declared the goods in the present case. However, it is seen that there was no dispute as regards valuation of the earlier import and the same was cleared by the authorities without raising any objection in which case the same adopts the characteristics of the contemporaneous imports. In any case, we note that the other imports were of much lower quantity than the import made by the appellants and the same were also not contemporaneous in time of quality. There is no evidence on record to show that nothing more has flown back to the supplier than what has been reflected on records. In such circumstances, we are of the view that enhancement of the assessable value to US $ 2.50 per kg. were not warranted.
10. Learned Advocate appearing for the appellant has agreed to the valuation to be adopted in accordance with the earlier import of identical goods made by them from the same supplier. In view of the above we order that the assessable of the yarn in question be adopted as US $ 2.25 per kg. (GIF) and the assessment be finalized accordingly.
11. We do not find any justifiable reason to confiscate the goods or to impose penalty upon the appellant. The same is accordingly set aside.
12. I have very carefully perused the order dated. 27-4-2004 recorded by my learned Sister in this case which was heard on 25-03-2004 when the order was reserved. She has proposed enhancement of the declared value from US $ 2 per kg. to US $ 2.25 per kg. She has also proposed to set aside the confiscation and penalty ordered by the Adjudicating Commissioner. I am unable to agree with her proposals as above for the following reasons: - 13. I find that the Adjudicating Commissioner has passed a detailed speaking order dealing with all aspects of the case and has come to a judicious decision enhancing the declared value from US $ 2 per kg. to US $ 2.5 per kg. and has imposed reasonable amounts of redemption fine and penalty which are commensurate with the values of the imported goods and gravity of infractions of the provisions of the Customs Act, 1962. The findings of the Adjudicating Commissioner are lucid and based on earlier decisions of the Tribunal and the Apex Court, the main part of which is reproduced below :- I have carefully considered the written and oral submissions and examined the case records. The importer has challenged the SASMIRA Test Report on the ground that the IS Specifications IS : 2427-1968 classifies yarns in three grades viz., Grade-I, Grade-II and Grade-Ill. The grading in the said IS depends on various factors such as commercial weight denier, tenacity, number of filaments, number of knots, strength, broken filament, elongation etc., and the reports do not refer to these parameters and instead use the word "first grade" for describing the quality of goods. Accordingly, it has been submitted that there has been no misdeclaration. I do not find much force in these submissions. The SASMIRA test report gives the findings against 13 parameters starting from the appearance of yarn to twist per meter. Thereafter in the comments portion, it is mentioned that "the submitted sealed sample of Viscose Rayon Yarn was subjected to above test required for quality assessment as per IS : 2427-1968." It then mentions that all the characteristics meet the requirement of first quality yarn as there were no significant variation in the properties and finally concludes that the submitted yarn sample can be classified as of first quality. It has to be, therefore, concluded that all the parameters of the IS Specification were kept in mind in giving the report, I would, therefore, go by the test report of the SASMIRA and hold that the goods were of first grade quality and accordingly, the importer should be deemed to have deliberately misdeclared the goods as "Sub-standard yarn, no claim basis". The goods are, therefore, liable to be confiscated under Section 111(m) of the Customs Act, 1962 on account of the mis-classification. I do not find much force either in the plea that for the foreign supplier in Japan, the goods would constitute substandard goods and, therefore, the documents describe the goods as such. Whether the yarn is first quality or sub-standard is to be determined by the understanding in the country of import where the goods would be sold ultimately and in such technical matters it is well-settled that the views of competent technical authority (in this case SASMIRA, Mumbai who conducted the test) would prevail in determining how the goods are understood in trade and commercial parlance. Being regular, importer of such yarn, the importer could be expected to know what is yarn of first quality and what is sub-standard yarn.
The importer has then contended that even if it is assumed for a moment that there was indeed mis-declaration of the goods, still the transaction value declared cannot be rejected in the absence of evidence relating to repatriation of money in excess of that declared in the invoice and the Bill of Entry. This contention too is not acceptable. Once it is held that the goods were not of sub-standard but of first grade quality, it would imply that the invoice produced by the importer, wherein too the goods are described as "sub-standard, no claim basis" cannot be accepted as representing the true value of the goods. In the case of Pradeep Kedia v. Commissioner of Customs reported in 1993 (67) E.L.T. 519 (Tribunal), the Tribunal was dealing with a case where the appellant had imported electrical resistance wires of various gauges declared as low grade resistance wires with lower resistance capacity. But the goods were actually found to be of higher quality electric resistance wires of a famous Japanese brand without any defect and packed in original spools. The Tribunal held that the transaction value declared was liable to be rejected and valuation could be done on the basis of contemporaneous invoices relied upon by the Department being nearest to the date on which order was placed.
Again in the case of Polyvinyl Industrial Corporation reported in 1994 E.L.T. (74) 426 the rejection of transaction value was upheld by the Tribunal on two grounds, the contract being not genuine and the description of the goods having been mis-declared. Likewise, in the case of Shehla Enterprises reported in 1995 E.L.T. (80) 360 where there was mis-declaration in respect of description, the Tribunal upheld the rejection of transaction value. In view of the settled position, in the present case too where there has been mis-declaration of goods with first quality goods being misdeclared as sub-standard the declared value cannot be accepted as representating the true transaction value. Once the transaction value is rejected the question that arises is what should be deemed to be the value of the goods. The Show Cause notice proposes to take the value of US $ 2.70 per kg. The importer has contended that the computer print out relied upon by the Department refers to several imports of Viscose Filament Yarn with price ranging from US $ 2.49 to 2.70 per kg. and the minimum of these should be relied upon and not the maximum, I find from the computer print out that the minimum price of US $ 2.249 per kg. (and not US $ 249 per kg. as referred to by the importer) pertains to import by the present importer viz., Goenka Industries who has mis-declared the goods in the present case. Therefore, I hold that it would be proper to rely on the other invoices pertaining to other importers which too are contemporaneous. I, however, accept the importer's plea that it may not be proper to take the highest value of US $ 2.70 per kg. which also pertains to the earliest import made vide Bill of Entry dated 25-7-1998 whereas the other imports pertain to later dates.
Therefore, relying upon Bill of Entry No. 2434, dated 6-8-1998 and 2420" dated 6-8-1998 of import of Viscose Rayon Filament Yarn were too the supplier was of Japan, I hold that the value can be taken as US $ 2.50 per kg (GIF) for the purposes of assessment.
On the importer's plea that this is a case of finalisation of provisional assessment for which the provisions of Section 28(2) shall not apply and as a consequence penal provisions of Section 114A would not apply, I find considerable force in this submission.
They have correctly relied upon para 95 of the judgment of Hon'ble Supreme Court in the case of Mafatlal Industries Limited v. UOI in support of this contention. TheyS. Patnaik v. Commissioner of Customs reported in 2000 (118) E.L.T. 502 (Tribunal) where it was held by the Tribunal that the provisions of Section 28 of the Customs Act, 1962 would not apply to cases of finalisation of provisional assessment under Section 18 of the Customs Act, 1962. Thus Section 114A would not apply to the facts and circumstances of the present case. As a consequence penal interest under Section 28AB shall also not be applicable. However, as I have held that there was deliberate mis-declaration on the part of the importer relating to the quality and as a consequence of the value of the goods, on account of which the goods become liable for confiscation under Section 111(m) of the Customs Act, 1962, the importer is liable to be penalised under Section 112(a) of the Customs Act, 1962.' 14. The adjudicating Commissioner has also recorded that though in the written submissions request was made by the appellants for cross-examination of officers of SASMIRA, the same was not pressed during hearing.
15. As seen from the above findings, this is a case where the mis-declaration is established with reference to the test report from a reputed, reliable and independent organisation like SASMIRA and in any case it is clear that the declared value of US $ 2 per kg. is not acceptable (even my learned Sister has proposed enhancement of the declared value to US $ 2.25 per kg.). When mis-declaration is established and the declared value becomes unacceptable, it was appropriate for the Adjudicating Commissioner to determine the value of the impugned goods taking recourse to values of contemporaneous imports. While doing so, he has very judiciously applied the lowest of such values, rightly discarding the values at which the appellants had imported earlier consignments, since they were found to be indulging in mis-declaration. Moreover, when the impugned goods were not found to be sub-standard as declared, on the basis of test report from an independent and reputed agency, and the declared value of US $ 2 per kg. was not, therefore, found to be acceptable, the impugned goods were clearly liable for confiscation and the importer was liable for penalty.
16. I am, therefore, of the view that when the Adjudicating Commissioner has passed a perfectly legal and correct order and has very judiciously determined the value as well as the quantum of fine and penalty after adopting the lowest of the contemporaneous import values, the Tribunal need not and should not interfere with such fair orders. 1 am also of the view that valuation of goods for custom purposes is a highly technical job and where the lower authorities have determined such values fairly and in accordance with law, the same should not be disturbed by the Tribunal substituting its own judgment to arrive at a different value.
17. For the above reasons, I uphold the order passed by the Adjudicating Commissioner in toto and reject the appeal.
Whether the assessable value of the yarn is to be enhanced to US $ 2.25 per kg (GIF) and the confiscation of the goods and imposition of penalty is to be set aside as held by Member (Judicial) or the appeal is to be rejected in toto as held by Member (Technical).
Sd/- Sd/- 18. As there is difference of opinion between the Members who heard the appeal, the matter is referred to me to resolve the issue.
19. The facts are brought out by Member (Judicial) in paras 1 and 2 of her order. The issue pertains to valuation of imported goods, Viscose Rayon, Filament Yarn, described as sub-standard by the importer. On test by SASMIRA the goods turned out to be first quality. The transaction value was rejected and redetermined to be the US $ 2.50 per kg. as against the declared value of US $ 2. The appellant's contention was that under Rule 5(3) of the Customs Valuation Rules which reads "In applying this Rule of more than one transaction value of identical goods is found the lowest of such value shall be used to determine the value of imported goods", the lowest value of identical goods was US $ 2.25 per kg. and therefore that value alone should be the basis for valuation of the impugned goods. The Member (J) accepted this plea and held that US $2.25 per kg. should be the basis and not US $ 2.50 per kg. as was done by the Commissioner in the impugned order.
20. The Member (T), however, disagreed with the Member (Judicial) and recorded his finding thus : 'When mis-declaration is established and the declared value becomes unacceptable, it was appropriate for the adjudicating Commissioner to determine the value of the impugned goods taking recourse to values of contemporaneous imports. While doing so the Commissioner has very judiciously applied the lowest of such values rightly discarding the values at which the appellants had imported earlier consignments, since they were found to be indulging in mis-declaration".
21. I observe that there is no denial of the fact that US $ 2.25 per kg. was the lowest noticed during the relevant period. It was an accepted transaction value as per the print out relied upon by the Department. Assessment at US $ 2.25 per kg. became final and was not reopened. The ground that it is the same importer, involved in the present proceedings that imported the previous consignment at US $ 2.25 is not sufficient to reject it for adoption on the specious plea that he is now found to be indulging in misdeclaration. Member (J) has correctly recorded as to why the value of US $ 2.25 per kg. has to be adopted while determining the value in the case before her.
23. As per the content on of the Id. Member (Technical), that valuation of goods for Customs purposes is a highly 'technical' job and where the lower authorities have determined such values fairly and in accordance with law, the same should not be disturbed by the Tribunal substituting its own judgment to arrive at a different value, I hope that there is no suggestion here that the Tribunal cannot adjudge the rights and wrongs of a 'technicians' work in the field where his valued opinion in the form of an adjudication order, is appealed against.
24. The next issue pertains to liability of the impugned goods to confiscation under Section 111(m) of the Customs Act. The Id. Member (Judicial) sets aside the confiscation-observing quote : "There is nothing on record to show that representative samples were drawn from each and every lot. We also take note of the appellants contention that the goods being of varying lots was considered as sub-standard and mix lot by the supplier inasmuch as the same cannot be made to run on the sophisticated Japanese machine. In the circumstance, we are of the view that there was no mis-declaration of the goods in question." The Id.
Member (Technical) observed quote : "... mis-declaration is established with reference to the test report from a reputed reliable and independent organisation like "SASMIRA".
25. The Id. Advocate made the same pleading before me as he did before the Bench who originally heard the matter as to why SASMIRA report is unacceptable. He argued that the goods in question - Viscose, Rayon, Filament Yarn - is sub-standard as declared in the Bill of Entry and that the goods were sold at US $ 2.00 per kg as the sophisticated Japanese machines cannot handle the impugned goods etc. (The LESS sophisticated machines in India can handle ! The less sophisticated the better!!).
26. What is admitted need not be proved is an accepted principle of law of evidence. The Id. Advocate time and again argued that the impugned goods were identical to the ones imported by him previously at an unit price of US $ 2.25 per kg. When asked whether those goods imported at that price were also declared as sub-standard, he replied in the negative. So then, what were imported by the appellant contemporaneously at 2.25 peg kg. US $ were prime goods and since the impugned goods are identical to those goods, the impugned goods by implication have to be prime as well. Shouldn't they be? According to the appellants' own admission therefore, the impugned goods are not substandard apart from whatever SASMIRA IN ITS REPORT SAYS. In that event there is a clear mis-declaration rendering the goods liable to confiscation under Section 111(m) of the Customs Act. A case where one succeeds on valuation and loses on mis-declaration.
27. In my opinion, the value of the goods should be fixed at US $ 2.25 per kg and not at US $. 2.50 per kg as held by Member (Technical).
28. The goods are liable to confiscation as held by Member (Technical) for the reasons mentioned by me. The reference is answered accordingly.
29. The Registry may place the order before the Original Bench for passing appropriate orders.
As per the majority order, the value of the goods is fixed at US $ 2.25 kg. The goods are, however, liable to confiscation and importer liable to penalty for mis-declaration of the goods. The appeal is disposed of in above terms.