| SooperKanoon Citation | sooperkanoon.com/4997 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Jun-06-1989 |
| Reported in | (1990)(45)ELT249TriDel |
| Appellant | Mehta Impex |
| Respondent | Collector of Customs |
2. The subject-matter of the appeals is the importation of four consignments by the appellants from, according to them, M/s. F.M.Noordin and Company (hereinafter referred to as "Noordin"), Singapore and their sister concern M/s. M.S. Mohamedbhai (hereinafter referred to as "MSM"). The particulars of the four consignments of Defective CR Low Carbon MS Sheets are as under :____________________________________________________________________________________SI.Name of the Vessel Invoice No. & Date Thickness No.____________________________________________________________________________________4.
VOLTA-RIVER SP/14,15-1-1985 0.4 mm to 1.25 mm____________________________________________________________________________________ 3. From the packing list of each of the aforesaid four consignments it appeared that there were the following discrepancies in the consignments:____________________________________________________________________________________Name of the RemarksVessel____________________________________________________________________________________NADIA DM 520 3 out of 79 bundles contained sheets of thick- 50% to 70% Rangeness 0.6 mm i.e. only 3.8% of the total goods were of thinner variety (page 81 to 81-A in the paper book)FAETHON DM 5 out of 64 bundles contained sheets of thick- -do- 520 ness of 0.6 mm i.e. only 8% of the total goods were of thinner varietyBAARNDM520 6 out of 73 bundles contained sheets with -do-VOLTA- None of the sheets were of thickness 0.6 mm -do-RIVER DM 520 or below i.e. all the sheets contained total bags (page 86 to 86B of the paper book)____________________________________________________________________________________ 4. Customs through DRI had some intelligence according to which there was manipulation by the importers in respect of the value of the goods.
They made enquiries, recorded statements and issued show cause notices on 4-7-1985 (Volta-River, and Faethon), 4-12-1985 (Baarn) and 24-2-1987 (Nadia). Amongst other things Customs alleged that in respect of Volta-River the correct value was DM 759 per metric tonne against the declared value of DM 520 by the appellants. In respect of Faethon it was alleged that the declared value of DM 550 was wrong and the correct value was DM 800 per metric tonne. In respect of Baarn, it was alleged that the declared value DM 550 is wrong and the correct value was DM 759 PMT. In respect of Nadia it was alleged that the declared value of DM 550 PMT was wrong and the correct value was DM 775 PMT.5. The matters were adjudicated. In respect of Volta-River the Additional Collector of Customs passed orders on 12-6-1986 enhancing the assessable value of the goods to DM 759 PMT rejecting invoice No.SD/14, dated 15-1-1985 showing the price at the rate of DM 550 PMT. In respect of Faethon the Collector of Customs passed orders on 2-12-1986 increasing the value of goods at DM 800 PMT and rejecting the contract price declared by the appellants at DM 550 PMT. In respect of Baarn the Collector of Customs passed orders, inter alia, increasing the value to DM 709 PMT against the invoice price of DM 550. In respect of Nadia the Collector of Customs passed orders on 16-5-1988 ordering assessment at DM 775 PMT and rejecting the declared value of DM 550 PMT. In all the 4 orders the Additional Collector and the Collector of Customs ordered confiscation of the goods and allowed redemption thereof on payment of varying amounts of fine and imposed penalties. Hence these appeals.
6. Before we proceed to the facts, merits and discussions etc. of the matters we note that in the adjudication orders passed by the Customs, there has been violation of the principles of natural justice. It is an admitted fact that the Department received a dossier containing 51 pages of the documents from the West German Customs Authorities. When the appellants wanted inspection of these documents privilege was claimed in respect of them. This was expressed in a letter dated 15-3-1987. They further submitted that in the order passed on 16-5-1988 (in respect of Nadia) the Collector made an observation that non-supply of the documents did not cause any injury or prejudice to the appellants. Shri Nankani, the learned Advocate for the appellants pleaded that it is not upto the Collector to decide on the prejudice or otherwise caused to the defence. He argued that the documents were relevant and were relied upon by the Department. It was, in the interest of justice in accordance with the principles of natural justice obligatory on the Collector to allow inspection of these documents. Specifically the grievance of the appellants is that the following 4 documents were not disclosed to them: 1. Invoice No. 653 dated 31-12-1984 of M/s. Possehl in favour of Noordin for DM 709/- per MT CIF; 2. Correspondence between M/s. Possehl and M/s. Uni Tej & Co., Bombay; 3. Investigation report received from the West German Customs Authorities; 4. Invoice No. 639 dated 15-12-1984 of M/s. Possehl in favour of Noordin for DM 800 PMT CIF, Bombay.
7. We must also place on record that Shri Nankani, while repeatedly pleading that the non-supply of the documents was a clear violation of the principles of natural justice, equally he repeatedly submitted that the matter should not be remanded to the Collector. What he wanted was that the appeal should be allowed on the ground that there was violation of the principles of natural justice. Even when we put it to him that allowing the appeals would not necessarily be a consequence even if a violation of the principles of natural justice was held to be established, Shri Nankani adhered to his request not to remand the matters.
8. Shri Sunder Rajan, the learned DR who in the initial stages supported the claim for privilege changed his arguments and submitted that in fact all the documents have been disclosed to the appellants.
Both sides were asked to compare notes inasmuch as some of the documents were disclosed in each appeal. That is how the appellants reduced the number of documents undisclosed to them to 4 as mentioned above. In respect of these documents Shri Sunder Rajan explained that the investigation report of the West German Customs Authorities was never asked for by the appellant s and in any event did not form part of the impugned order. Regarding the other documents his explanation contained in the written memorandum filed at our behest was as follows : "In the facts and circumstances, it is submitted that even though the DRI had initially claimed privilege and also the Collector had not permitted inspection of all the documents. It is the admitted position that all the 51 documents referred to in the addendum to show cause notice are within the knowledge and/or possession of the appellants. The documents purported to be pages 1 (189), 2 (190), 3 (191), 7 (192), 8 (193), 9 (194), 11-12 (196-197), 13 (198), 14 (199), 16-17 (200-201), 18 (202), 19 (203), 32 (224), 33 (226), 35 (218), 36-37 (219-220), 38 (221), 39-40 (222-223), are factually part of the paperbook filed by the appellants. The documents at pages 4, 5, 6, 14 relates to goods imported per S.S. Celya and are part of separate proceedings. The documents at pages 20-31 are referred to in the show cause notice at pages 23-28 of paperbook.
The documents at pages 41-51 are referred to in the show cause notice at pages 11-15 of the paperbook. A detailed chart is annexed and also a complete set of the 51 documents are enclosed.
In the circumstances, the 51 documents are no longer secret and are deemed to be declassified being in the knowledge and/or possession of the appellants. The privilege is now confined only to the source report for which there is neither a demand from the appellants nor can a case be made out on the basis settled law." After hearing both sides extensively on the question we are satisfied that at one time or the other the Department made the documents available to the appellants. Therefore, we propose to dwelve no more on this aspect.
9. The Department's allegation is that in each case the appellants under-valued the goods as mentioned in paragraph 5 supra. The appellants have an elaborate explanation in their defence. Before we proceed to examine this explanation we refer to the arrangements made by the appellants for import of the goods. In all these cases the exporter is a West German Firm Possehl. The goods are in the first instance said to be consigned to F.M. Noordin and Company (hereinafter referred to as Noordin) of Singapore. Noordin in turn invoices the appellants for the goods. The goods themselves come directly from West Germany to Bombay. The documents are made out in the name of Noordin and notified party are the appellants. The invoice price of Possehl to Noordin and Noordin's to the appellants are as follows:____________________________________________________________________________________ Possehl to Noordin Noordin to Appellants____________________________________________________________________________________Volta-River DM 759 DM 550Faethon DM 800 DM 550Baarn DM 759 DM 550Nadia DM 775 DM 550____________________________________________________________________________________ 10. The appellants have explained before the Collector as well as before us that the value declared by them which includes about DM 30 per metric tonne as charges by Noordin are the correct values. They submit that the steel sheets imported are of 3 varieties, depending on the thickness of the same. Thickness of 0.4 mm is considered to be thinner variety and above 0.6 is considered to be of thicker variety.
The price of the sheet is according to the proportion of their thickness. In other words thinner sheets was the higher price PMT and vice-versa. The appellants explained the supplies were made by the mills directly and Possehl issued invoices on the assumption that there is an opportunity of mix of a thicker and thinner variety in each consignment. However, according to the appellants, the consignments consisted mainly of thicker variety and as a result thereof the exporter in each case gave a credit note to Noordin resulting in the value of the goods being reduced from the higher values to the lower values. The appellants produced such credit notes before us during the course of hearing. They also showed certain correspondence between Possehl and Noordin consisting of letters dated 20-12-1984 and 3-1-1985. By the letter dated 20-12-1984 Possehl stated that the importer would not be in a position to supply assorted variety of thinner and thicker variety and the exact assortments would be known only at the time of shipment due to cut in the production. However, Possehl said that the consignments should be 15% to 20% thinner variety and that they have credited the amount of Noordin for the difference in the price of shipment on Volta-River, Faethon and Nadia. The appellants filed a copy of the certificate dated 13-11-1987 of Standard Chartered Bank of support confirmation that a credit note was issued to Noordin.
10. Possehl in the letter dated 3-1-1985 and 13-1-1985 are said to have first is sued credit note and then fresh contracts for the dates of shipment for the values of the goods shipped by the vessel Baarn and Volta-River.
11. Therefore, according to the appellants the arrangement was that Noordin would open the letter of credit in accordance with the terms and conditions of the contract. Possehl not being sure of the actual mix of the goods to be shipped would charge at the agreed price but would reduce the same proportionately if the mix was not as per the agreement and letters of credit opened by Noordin would be realised in full and credit notes and fresh contracts issued to Noordin.
12. As mentioned earlier the appellants made elaborate arguments about the non-observance of the principles of natural justice during the course of passing the impugned order. However, in view of what we recorded earlier and in view of the fact that the Customs directly or indirectly disclosed all their documents, and also in view of the vehement request by the appellants for not remanding the matter we do not enter into detailed examination of this ground.
13. Coming to individual matters, it is a submission of the appellants in respect of shipment of Nadia (Appeal No. C/1969/88-A) that only 3 out of 79 bundles of sheets are of thinner variety. They plead that the description of the goods, shipping marks, contract No. and letter of credit number are all irrelevant because the price is to be determined on the basis of the thickness. They also submitted that as per the agreement between Noordin and M/s. Possehl the price would be determined after the shipment depending on the mix of the goods according to the thickness. Referring to the enquiries made by the Indian Customs with Possehls the appellants submitted that in the absence of information about the questions put to Possehl and details of the actual documents picked up by the Customs, the allegations that the real value was according to the invoice issued by Possehl cannot be sustained.
14. In respect of Baarn and Faethon (Appeal Nos. C/2584/87-A and C/630/87-A) the appellants pleaded that they filed the invoices, credit notes issued by Possehl to Noordin showing the value of DM 520 PMT C & F Bombay before the Bombay High Court in June 1985, well before the show cause notices were issued to them. They also produced sale confirmation dated 19-11-1984 of Possehl in favour of Noordin showing a price of DM 520 C & F Bombay. They pleaded that these are other documents placed before the adjudicating authority which were not considered at all and the Customs relied on the West German Customs documents.
15. In respect of Volta-River (Appeal No. C/281/87-A) the appellants pleaded that the statement of Shri Sunil Mehta recorded on 27-2-1985 was not confessional and was based on the material at the relevant time, Shri Sunil Mehta not having any knowledge of the transactions and correspondence relating to the importation and exchange between Possehl and Noordin. The appellants argued that these details came to light subsequently and, therefore, the statement cannot be given full reliance. They also plead that the note in Gujarati and Invoice No. 640 dated 154-1985 showing a price of DM 759 has nothing to do with the import of the consignment by Volta-River. They pleaded that the original invoice No. 640 produced by them showing a price of DM 520 was unjustly rejected as manipulation. They pleaded that the note in Gujarati does not bind the appellants nor does it create any liability.
They also pleaded that the rejection of the certificate dated 22-2-1985 of Possehl, veracity of which was not doubted was wrong. The rejection of the credit note was also unjust and illegal. The appellants also denied in conspiring between S/Shri Narendra Mehta, Praful Kamdar and Paresh Shah.
16. Insofar as the assessable value, the arguments advanced by Shri Nankani, the learned Advocate are that the invoice price of these consignments are genuine and should be accepted, like goods have been imported by other independent importers (contemporary imports by various parties pages 291 to 299 of the paper book). Shri Nankani also pleaded that the appellants and Noordin and Possehl are not notably interested and that the Customs have not been able to show any contemporary import at higher prices than those declared by the appellants. Shri Nankani also referred to some imports to Pakistan from Possehls (pages 300 to 312) to plead that the value should be assessed as declared by the appellants. The learned Advocate submitted that in respect of Baarn and Faethon the adjudicating officers did not refer to the invoices of the contemporary imports submitted by the appellants along with the reply to the show cause notice. In respect of Volta-River Shri Nankani argued that the Additional Collector wrongly invoked Rule 8 of the Customs Valuation Rules without discarding Rule 3. However, the Additional Collector did not give any reasons for doing so. Shri Nankani also submitted that the defective M.S. sheets is a class of goods by itself and the price of such goods can be compared.
For all these reasons the learned Advocate pleaded that the declared value should be accepted keeping in view that the imported goods consisted, upto 90% of thicker variety whose value was less than that of thinner variety.
17. Shri Nankani also submitted that the fines in excess of ceiling permissible under Customs Act was imposed and these fines were imposed without finding out the market value of the goods. He also referred to the hardships undergone by the appellants who had to approach the High Court for getting the show cause notices and also to the delays in finalising the adjudicating orders and pleaded that these should be considered when fixing the redemption fine which the learned Advocate submitted were excessive harsh and disproportionate. He also referred to the demurrage charges incurred by the appellants.
18. Shri Nankani argued that the penalties imposed against the appellants were unjustified as there was no deliberate defiance of law by the appellants.
19. Shri Sunder Rajan, the learned DR opposed the arguments and referred to the facts of the case. To assist the Bench the learned Representative summarised the particulars of all the 4 appeals as given in page 13.__________________________________________________________________________________ __________________________________________________ _____________ Volta-River Faethon Baarn Nadia__________________________________________________________________________________Appeal Nos.
C/281/87-A C/630/87-A C/2584/87-A C/1969/88-ADeclared value 7,74,788 3,14,338 6,61,134 4,39,757Ascertained 10,81,235 4,62,362 8,61,849 6,26,630valueDifference (Ex- 3,06,447 1,48,024 2,00,715 1,86,873tent of under-Loss of Revenue 3,06,447 1,75,290 2,00,715 1,88,000Shortfall in - - 3,55,433 1,26,630LicenseeRedemption fine 2,50,000 4,50,000 8,60,000 7,00,000PP on Mehta 3,00,000 3,50,000 1,50,000 2,00,000ImpexDeclared value of 4 appeals = Rs. 21,90,017Ascertained value = Rs. 30,32,076Difference (Extent of under-valuation) = Rs. 8,42,059Loss of Revenue = Rs. 8,70,452Shortfall in Licensee = Rs. 4,82,063Redemption fine = Rs. 22,60,000PP on M/s. Mehta Impex = Rs. 7,00,000____________________________________________________________________________________ 20. Shri Sunder Rajan, the learned Representative pointed out that the appellants did not produce any correspondence or documents relating to the transactions except those appended to the bills of entry. He made the point that in spite of the very complicated nature of the imports and the high amounts involved the genesis of the transactions was not shown by the appellants by way of documents relating to enquiries, clarifications, correspondence, finance arrangements, etc. etc. He recalled the course of investigations undertaken by the Department and submitted that during the course of the said search the Department seized invoice No. 640 dated 15-1-1985 issued by M/s. Possehl as also the letter of credit No. GDA 242984 opened through Indian Overseas Bank, Singapore and the packing list of M/s. Possehl along with a note from Shri N.N. Mehta (Father-in-law of Shri Sunil Mehta, Proprietor of Mehta Impex). Shri Sunil Mehta admitted the authenticity of the documents. In this context he made a reference to the statement of Shri Sunil Mehta extracted in show cause notice pertaining to the importation by Volta-River. The learned Representative argued that in reply to the show cause notice the appellants claimed that Shri N.N.Mehta, Father-in-law of Shri Sunil Mehta deliberately misguided the Indian Customs authorities by attempting to implicate Shri Sunil Mehta.
He referred to the alleged matrimonial discord between the appellant and his wife and also referred to a copy of the legal notice sent to Shri Sunil Mehta by the Advocate of his Father-in-law and submitted that these, documents were deliberately produced to create an impression that the Father-in-law caused all the troubles and submitted that such a claim could not be borne out by the facts.
21. Shri Sunder Rajan submitted that the appellants relied on a letter dated 3-1-1985 from M/s. Possehl which stated that the letter of credit was opened at the rate of DM 709 per metric tonne C&F and pleaded that it clearly indicated that the invoices based on original letter of credit were the correct and genuine documents and the later invoice to show, issued credit notes by way of compensation or after thought aimed at reckoning out of the situation. In this context the learned Representative invited our attention to para 4 of the reply to the show cause notice (Baarn) wherein the appellants questioned the authenticity of the two letters of credit. Shri Sunder Rajan wondered how if the two letters of credit were not genuine the appellants could get recredit out of them at a later stage." 22. Shri Sunder Rajan referred to ground V in appeal No. C-2584/87-C wherein the appellants stated that the original letter of credit was encashed to the extent of DM 520 only. He contrasted this claim with a statement that they obtained a credit note for the difference between DM 775 and DM 520.
23. Pointing out the inaccuracies in the case of the appellants, Shri Sunder Rajan submitted that according to the appellants Possehl offered in their letter dated 8-11-1984 a particular variety of goods which were later negotiated and confirmed vide letter dated 16-11-1984 and further a credit note dated 17-12-1984 was issued after the despatch of the goods. The learned Representative contrasted this position with the statement of Shri Sunil Mehta wherein he deposed that the enquiries were carried on orally.
24. Another instance underlined by Shri Sunder Rajan was that the appellants contended that the goods supplied were not in accordance with the agreement and, therefore, Possehl issued a credit note under cover of a letter dated 17-12-1984. He invited our attention to the confirmed orders [pages 200-201 (Tapega)] and 222,223 (for Madan Lal Shah). He submitted that the orders stipulate "Declassified material particularly in unpacked lots can be inspected prior to shipment and be examined in view of the terms and conditions of the contract and that once the goods are supplied FOB, they have to be considered being in accordance with the contract and the suppliers cannot be held responsible for any possible further claims". Shri Sunder Rajan argued that there is no averment by the appellants about the inspection of the goods prior to shipment. If inspection took place there could be no question of any credit note. He further submitted that the goods imported appear to be in accordance with the contract in the sense that the goods were in fully assorted condition with varying width and thickness and also confirmity to the specifications and limits indicated in respect of thickness, width, length and weight per bundle.
Referring to the stipulation about each bundle being limited to 2-6 tonnes per bundle, Shri Sunder Rajan submitted that if such a requirement was there, each bundle should be considered of thicker variety. Therefore, the assorted block should have referred the dimensional assortments rather than thickness alone. He underlined that the dimensional assortment was necessary in order to prove that the goods are not prime quality but were only mill rejects.
25. Shri Sunder Rajan vehemently emphasised that the packing specification supplied by Possehl is identical to the one supplied by Noordin to the appellants. In the Court the learned Representative demonstrated how Noordin took a photo copy of the packing specification issued by Shri Sunil Mehta super imposing his own letter head over that of Possehl. He argued that since the packing list of Possehl and Noordin were of the same date and referred to the same letter of credit, invoice No., bill of lading, vessel's name etc. it was clear that the invoice bearing the prefix SP issued by Noordin were fabricated documents because the price shown in the original documents from Possehl to Noordin was higher than the price shown in the documents prepared by Noordin. Shri Sunder Rajan further submitted that the transactions between Possehl and Noordin were completely within the knowledge of the appellants because the invoice No. 640 dated 15-1-1985 issued by Possehl to Noordin was seized from Shri Sunil Mehta. This document related to Volta-River but the inference is available in respect of the documents in view of the circumstantial evidence according to the learned Representative.
26. Shri Sunder Rajan expressed much doubt about the genuineness of the credit notes. He submitted that the transactions relating to all the importations took place in 1984 and though according to the appellants credit notes were all issued on dates immediately following the dates of shipment, the appellants never stated as to when credit notes were encashed through the Bank. Shri Sunder Rajan pointed out that in respect of credit notes 288 (P 350 of paper book), 274 (P 354 of paper book), 277 (P 358 of paper book), 346 (P 363 of PB) & 410 (P 368) were certified to have been encashed but the date of encashment was not mentioned by the Standard Chartered Bank. The certificate was issued on 13-11-1987. For similar reasons the learned Representative argued that the credit note documents at pages 350, 354, 358, 363 and 368 of the paper book and the letters at 334,346 and 369 cannot be considered as genuine and in any event they are not contemporaneous.
27. Shri Sunder Rajan also pointed out to a letter dated 20-12-1984 from Possehl to Noordin (page 345) wherein Possehl expressed the inability of the Mill to supply assortment of thinner and thicker material as per contract. This letter also referred to credits having been extended to the appellants in respect of Faethon (Appeal No. 630 and 1969/88-A) and Nadia. The learned Representative submitted that by that times 4 shipments had already taken place and that in respect of Baarn and Volta-River invoice was made at the higher price even though the inability to supply the goods was known to Possehl. Shri Sunder Rajan pointed out that when Possehl knew that the goods could not be supplied according to the contract where was the need for issuing invoice at a higher price and later resorting to credit notes to adjust the price. He submitted that the entire evidence was only manufactured evidence, brought into existence at a later date just to be advanced as defence for the appellants. In this context Shri Sunder Rajan referred to the various documents sent by the German Customs to DRI. Shri Sunder Rajan submitted that in respect of Tapega the invoice and bill of lading were both dated 24-11-1984 but in the letter dated 26-11-1984 (page 334) Noordin asked for credit and compensation even before he received invoice and shipment. The learned Representative submitted that it clearly indicated the appellants' intention to under-invoice the goods on the basis of manufactured documents.
28. Shri Sunder Rajan referred to the affidavit given by Shri Hatim Nakhoda, Proprietor of F.M. Noordin and Company where Shri N.N. Mehta (Shri Sunil Mehta's Father-in-law was employed as Manager) and submitted that from this affidavit it was revealed that the contract was in fact signed for prices ranging from DM 709 to 800 per tonne depending upon the thickness and assortment. The learned Representative submitted that this deposition made all the claims of the appellants regarding the failure of the principles of natural justice invalid and also showed that the negotiated prices were in the range of DM 700 to 800 DM per metric tonne. Shri Sunder Rajan also argued that from this affidavit it was seen, that the goods were found to be not in order, only after they were shipped, whereas the credit notes at pages 350, 354, 358, 363 and 368 made it appear that the credit was given simultaneously. Shri Sunder Rajan continuing his reference to the affidavit submitted that according to this document prices were renegotiated, as Possehl were supplying the goods to other countries at lower rates as compared to India. He contrasted this and submitted that it is the appellants' case that the price reduction was due to supply of a different mix of goods than the goods for which orders were placed.
29. Shri Sunder Rajan submitted that in all these matters there were 3 invoices for each ship. One invoice was the genuine invoice, the second invoice was fabricated by Noordin and the third invoice was given by Possehl to Noordin showing a reduced price. The Customs through DRI obtained genuine invoices in all the 4 cases and at least one of the genuine invoices was seized from Mehta Itnpex proving that the Department's case was based on firm evidence and not on speculations.
Shri Sunder Rajan submitted that in another shipment (not a subject-matter of the appeals) by S.S. Tapega, the Customs succeeded in recovering all the documents viz. the genuine invoice issued by Possehl to Noordin, packing specifications, relevant correspondence, etc. and the Collector adjudicated the matter. All the documents were given to the appellants and the Collector determined the value of the goods at DM 735 per metric tonne C & F, confiscated the goods and imposed penalties. Shri Sunder Rajan submitted that the appellants did not file an appeal against this order and the reasons were, in this case, quite clear to the effect that there was no ground on which the appellants could fight out. The learned Representative argued that the same pattern as prevailed in Tapega prevails in respect of all the 4 matters also and even though the Customs could not lay their hands on all the documents they had enough documents to prove their case in respect of all of them.
30. Shri Sunder Rajan submitted that the Department has established under valuation by producing documentary evidence which was supplied by German Customs and with the other documents seized in Bombay.
Therefore, the charges against the appellants are proved beyond reasonable doubt. In this context he referred to a Judgment of the Tribunal in the case of Tara Art Printers v. Collector of Customs [1985 (20) E.L.T. 358] and submitted that as there is documentary evidence available the licences should be ordered to be debited to the full value and not the declared value. He also referred to another Judgment of the Tribunal in the case of Delhi Plastics v. Collector of Customs [1988 (36) E.L.T. 360] (stated to have been upheld by the Supreme Court) and pleaded that the appeals should be dismissed and there should be no reduction in any of the amounts adjudged against the appellants. He also opposed the debiting of the licence with the declared value only, submitting that it is the ascertained value which should be debited in view of an amendment brought under Section 2E of the Imports and Exports (Control) Order, 1955 which equated the value for the purposes of imports as being the same as under Section 14E of the Customs Act.
31. In his rejoinder Shri Nankani, the learned Advocate submitted that the fines imposed were not legally sustainable under Section 125 of the Customs Act as the market prices were not disclosed by the authorities.
He submitted that the Custom House took unduely long time to issue show cause notices for which purpose the appellants had to approach the Bombay High Court. He denied any deliberate defiance of law. Referring to the Delhi Plastics case (supra) he reiterated that the invoice of the appellants had to be read together with the credit notes unlike the cited case wherein the final value was invoiced. Further, according to the learned Advocate, there was very reliable evidence in the hands of the Department in respect of Delhi Plastics whereas it is not so here.
With regard to debit of licence the learned Advocate referred to a Judgment in the case of Union of India v. Glaxo Laboratories [1984 (17) E.L.T. 284 Bom.] to argue that only the C.I.F. value should be debited to the licences.
32. We have considered the arguments of both sides. The appellants' case is that their importing goods from West Germany and getting an invoice from Singapore is nothing out of the way and that the invoice values declared by them were all genuine. The arrangement by which they imported the goods viz. the shipper in Germany to send invoice to Singapore and Singapore issuing invoice to the appellants, is not, by itself, too unusual. One cannot say that there is anything objectionable in such an arrangement. The presence of Shri N.N. Mehta, Father-in-law as a senior officer in Noordin & Co., however, creates a suspicion. We do not give credence to the plea that Shri Mehta has not been getting along with his father-in-law on account of harassment of his wife. This defence could have been created just to show that the transactions are independent. In that case, the appellants should have established before us the genuineness of the arrangements with Noordin.
After all, a firm in Singapore, even if it is neutral, does not enter into an arrangement with an Indian Company without any properly drawn out agreement which should be beneficial to both parties. No such agreement has been placed before Us or before the Bombay Customs at any time. We observe that if the relationship between Shri Sunil Mehta of the appellants and Shri N.N. Mehta of Noordin were so strained as to lead to issue of legal notices a cosy arrangement like the one between those two would not have been possible even in the best of circumstances. However these observations do not lead to any conclusion one way or the other.
33. Before we proceed further we would like to refer to the repeated assertion of Shri Nankani that the Collector relied on various documents which were not disclosed to the appellants. In the initial stages, the Department took the ground that these documents being privileged documents the appellants were not entitled to their disclosure However, at a later stage Shri Sunder Rajan made a statement in the Court and filed a complete set of 51 documents and submitted that except the covering letter from the German Customs all other documents were disclosed to the appellants at one stage of the other.
In fact the learned Representative placed the set before the appellants. The originals were perused by the Bench and the appellants and returned to Shri Sunder Rajan. Therefore, the wind is taken out of the sails insofar as the pleas about the violation of the principles of natural justice are concerned. In any event the learned Advocate's argument that the appeals should be allowed for the reasons of the violation of the principles of natural justice is entirely untenable.
We told him repeatedly that if such a violation is established the matters may be remanded to the Collector for re-examination. Shri Nankani fervently pleaded that remand should not be ordered in view of the long drawn-out nature of the proceedings. Since the appellants cannot have it both ways, we proceed to examine the matter on merits, reiterating that even if there was a failure of natural justice, the grounds are taken as not pressed because the appellants wanted a decision on merits. There does not, however, appear to be any such violation as Shri Sunder Rajan has, conclusively shown that all the 51 documents obtained from German Customs were disclosed to the appellants at various stages.
34. The question that is to be decided is whether the various invoice values declared by the appellants should be accepted or it should be held, as Customs have done, that the correct values were those mentioned in the invoices issued by Possehl to Noordin. Copies of these invoices were sent by German Customs to DRI. The doubts thrown against these documents by the appellants were more as a formality than as a serious argument. We do not find any reason to disbelieve the genuineness of these documents.
35. The appellants did not similarly deny genuineness of the documents.
Their case, however, is that while these invoices were issued the shipper Possehl later of revised the values and issued credit notes.
Correspondence, and credit notes, were produced before us in each case.
We have recorded the details in the recital portion of this order and do not want to repeat it here. According to the appellants the reduction in prices was on account of the supplier being unable to ship the goods as per the contract. We do not know what is the contract in each case. If the appellants could show the details of the goods they ordered, the details of goods sent, and had they cogently explained how the shipped goods were lower in value we would have examined the facts However, here there is no such information. What they produced before us were only specifications. Though lakhs of rupees worth of goods were imported, there are no documents, relating to enquiry, offer prescription, acceptance, renegotiations, etc., produced before us. All the deals were effected almost misteriously. We say so because one would expect that when the goods are being imported, the importer would try to find out the best, cheapest and main reliable supplier and would protect himself by entering into correspondence and agreements. This is not the case here.
36. These circumstances indeed create suspicion, which is not enough.
But the circumstances do not end there either. These further circumstances transform the suspicion into reasonable belief that all is not well with this importation. These circumstances which lead us to such a conclusion are as follows: 1. The first is the statement of Shri Sunil Mehta when Invoice No. 640 was seized from him. In this statement (extracted at page 2 of the paper book) Shri Mehta noted the difference in the price shown in Invoice 640 dated 15-1-1985 of M/s. Possehl and No. SP/14 dated 15-1-1985 of M/s. Noordin. He admitted in his statement the correct price of the goods covered by the invoice was DM 759 per metric tonne C & F. The explanation later given that Shri Mehta was not aware of the transactions between Noordin and Possehl has to be dismissed straightaway. Shri Sunil Mehta is the Propietor of the Importers' Firm and he should know what is happening. The invoice in question was issued from the office of Shri Mehta. If the elaborate arguments that arrangements were made by Noordin, who receives the invoices and reinvoices them and in the meanwhile, he receives the credit notes were all true, Invoice No. 640 had no business to be found in the office of Shri Sunil Mehta. Letter of Credit Note No. GDV 242984 was recovered from Standard Chartered Bank at Bombay.
Therefore, as far as this shipment is concerned, there is for all practical purposes, a clear admission which later was sought to be diluted. The attempt was, in our opinion, unsuccessful.
2. The second circumstance is the statement in the affidavit of Shri Hatim Nakhoda. This relates to Nadia shipment. In this affidavit Mr.
Nakhoda owns that the goods were agreed to be shipped at prices ranging DM 709 to 800 PMT depending upon the thickness and assortment. As pertinently pointed out by the learned DR the reduction in the prices is attributed to the composition of the goods as also the price to other importers including some from Pakistan. The appellants never disclosed the correspondence that took place in this regard. It is fair to presume that a supplier would not reduce from a range of DM 700-800 to a range of DM 400 to DM 450 without some arguments and some bargaining. No document is visible to show any such process. Insofar as the difference in mix is concerned we shall be commenting later.
37. While we are on this affidavit we also note that Mr. Hatim Nakhoda stated that the revised contracts, and invoices were furnished by Possehl. We have not seen how these documents look. Another very interesting observation, also relating to this affidavit of Mr. Nakhoda is that according to this document Mr. Nakhoda forwarded correspondence and credit notes to Mehta Impex through Standard Chartered Bank, Singapore. The appellants' case is that they were invoices at the lower values and the credit notes were issued to and realised by Shri Noordin. We do not know what happened to the credit notes said to have been sent to Mehta Impex. This discrepancy seems to have originated in the confusion of the already confused system of documentation.
38. Another interesting aspect relates to the system of invoicing.
Noordin goes on opening letters of credit for prices ranging DM 700 to 800, and supplies are made and within a day or two of the shipment credit notes are said to be issued. We note that Possehl is not the manufacturer but is a supplier. They obtained the goods and shipped them. Why do they not encash the letter of credit for the actual amount only? To all questions during the course of hearing the learned Advocate for the appellants merely stated that when a letter of credit is opened the entire amount should be recovered. Even if it was so, there is no reason why the supplier cannot make out his invoice to Noordin according to the correct value. The materials would have been billed to him and he would have paid the bills and, therefore, known the correct price. In any event Possehl were said to be issuing credit notes almost immediately after the shipment indicating the ready availability of the information about 'correct' value. Still the invoice go at the higher price followed immediately by a credit note.
Even in respect of such credit notes the learned DR pointed out some discrepancy which we have mentioned in the earlier para of this order.
39. We also take note of the uncontroverted submissions made by Shri Sunder Rajan that though the appellants have been stating the dates of credit notes (which are soon after the receipt of the shipments) and they produced bank certificates dated November 87, they never made a statement as to when each of the credit notes was encashed. This circumstance is very relevant.
40. Shri Sunder Rajan submitted about one shipment of Tapega, not directly relevant to the present matter, but important in the chain of events and circumstances. The submission was that in respect, of this one shipment the Customs had all the documents and that in respect of an order passed thereon on 2-12-1986 there was no appeal filed (appeal filed cannot be lost sight of). Shri Sunder Rajan's statement to this effect was not contradicted by the appellants.
41. The contemporaneousness of the credit notes is open to suspicion, not only because it has not been shown that they were encashed in the years 1984 and early 1985 but also because the German Government did not recover any documents pertaining to credit notes at the time of their taking over the documents from Possehl. We further note that the German Customs took over the documents some time in the month of August 85. They recovered some correspondence, copies of invoices, etc. and these do not consist of the credit notes or any correspondence in the shape of renegotiations. The appellants have not been able to show any reason why we should disregard this circumstance. We do not think it is correct to believe the German Customs deliberately omitted any reference to such correspondence.
42. These circumstances form a chain which renders the pleas of the appellants unacceptable. We hold that the invoices recovered from Possehl represent the true value of the goods and that the credit notes were only an afterthought. The appellants' pleas that the goods were supplied cheaper to some parties in Pakistan remained unsubstantiated.
In any event once there is an invoice which is reliable there is no question of arriving at a different value based on some other imports at some other place. In view of the factual position we hold that the invoices recovered by German Customs are the true invoices and reject the appellants' arguments to the contrary.
43. As a result we uphold the findings of the Collector of Customs in all the 4 appeals insofar as the value is concerned.
44. The next question is whether there was a shortfall in the licences.
In respect of two shipments (Volta-River and Faethon) there is no finding of any shortfall. In respect of Baarn and Nadia there is alleged to be a shortfall of Rs. 4,82,063/- in the licences on debiting them with the ascertained value. In this case we are adopting the invoice value, on the basis of the genuineness. Debiting that value to the licences will be in consonance with the judgment in Glaxo Laboratories (supra). The licences were correctly debited with the ascertained value of the imported goods. The appeal in this regard is rejected.
45. The next question is whether there should be any modification of the fines and penalties imposed. All the findings are against the appellants. At the same time we take note of the plea that the Customs did not disclose the market value but arbitrarily fixed the quantum of fines. We note that the appellants too did not disclose any particular market value or margin of profit based on which the fine should have been fixed. We also keep in mind that the Customs did take an unusually long time to issue show cause notices; the reason could have been that they were investigating the case as is borne out by their obtaining documents from the German Customs and also from Singapore. At the same time the indirect punishment by way of demurrage and deterioration of goods inflicted on the appellants cannot be ignored. We also take note that nearly 4 1/2 to 5 years elapsed between the importation and the passing of this order. Taking all the circumstances into consideration and noting the amount of duty sought to be evaded in each case, we order, in respect of fine, as follows: In respect of Volta-River the fine of Rs. 2,50,000/- is reasonable.
It is upheld. In respect of Faethon the fine is reduced to Rs. 1,50,000/-. In respect of Baarn the fine is reduced to Rs. 1,75,000/-.
46. In respect of penalties we note that the Collector imposed reasonable amounts. Considering that the appellants deliberately attempted mis-declaration and evasion of duty we do not find any justification to interfere with the penalties. They are upheld.47. As a result the appeals are partly allowed only to the extent that the redemption fines in 3 appeals are reduced as indicated above. The impugned orders are confirmed in all other respects.