Case Law Details

Case Name : H S Chadha Vs Commissioner of Customs (Preventive (CESTAT Delhi)
Appeal Number : Customs Appeal No. 51768 of 2016
Date of Judgement/Order : 09/01/2020
Related Assessment Year :
Courts : All CESTAT (991) CESTAT Delhi (316)

H S Chadha Vs Commissioner of Customs (CESTAT Delhi)

Mails and other electronic evidence cannot be relied upon to prove undervaluation in absence of compliance of provisions of Section 138C of the Act ibid as held by Anvar P. V  and S.N.Agrotech. It is trite law that statements can be relied upon only if they are voluntary and true. It can be seen from above that all the statements of the Director Shri H S Chadha recorded on 16.07.2014, 25.08.2014, 24.09.2014, 26.09.2014, 12.11.2014, are conflicting. There are many such instances in the statements of the appellants which have been brought to our notice by the Ld Counsel but the Department has picked only those which support it while discarding those which support the appellant. Thus statements of Shri H S Chadha cannot be relied upon and given credence to substantiate the Departments claim of undervaluation without any corroborative evidence and the charge of undervaluation cannot be made out on mere assumptions and presumptions especially since he himself has stated on various occasions that there is no undervaluation and these are quotations. Tyres are regularly imported all over the country and therefore the Department could have easily garnered evidence of contemporaneous imports which it admittedly did not do. Otherwise also, Mr. Chadha has not been examined by the Adjudication Authority before placing reliance on his statements, which was mandatorily required to be observed in compliance of Section 139 of the Customs Act. It is also trite law that quotations cannot be the basis for re-determining the value of goods as held Ld CESTAT in Nava Durga Enterprises vs Commissioner of Customs (Sea Import) 2013 (295) ELT 277. Thus the allegation of undervaluation is not proved.

FULL TEXT OF THE CESTAT JUDGEMENT

The issue in these appeals being common – undervaluation of tyres imported by the appellant company is for trade and further the companies are under same management. Under common investigation against both the appellant Companies – M/s Indo Silicon Electronics Pvt Ltd and M/s Vortex Industries Pvt Ltd and the common managing director namely Shri H S Chadha revenue alleged undervaluation and rejected the transaction value. Thereafter revenue determine the valuation and have demanded differential duty taxguru.in along with order of confiscation and penalty. In both the cases, penalty has also been imposed on Shri H S Chadha, who is also in appeal before the tribunal in both the cases.

2. The appellants M/s Indo Silicon Electronics Pvt Ltd and its Director Shri H S Chadha are in appeal against the order-in-original dated 03.03.2016 wherein the Ld Adjudicating Authority have:-

a. Rejected the declasred value under Rule 12 of Customs Valuation Rules 2007 and redetermined the value.

b. Confirmed the differential duty demand of Rs 55,17,472/- for the past imports, and Duty of Rs.1,64,800/- and Rs.1,38,919/- for Bills of Entry Nos 6708636 and 6708637 both dated 10.03.2014

c. Ordered for recovering interest under section 28AA of the Customs Act 1962

d. Imposed Penalty of Rs. 55,17,472/- under Sections 112/114A & 114AA of the Customs Act 1962.

e. Imposed Penalty of Rs. 10,00,000/- under Sections 112/114A & 114AA of the Customs Act 1962 on the Director of M/s Indo Silicon Electronics Pvt Ltd, namely Shri H S Chadha

f. Duty of Rs.4,74,512/- deposited and Bank Guarantees furnished during Provisional Release were appropriated

1. The appellants M/s Vortex Rubber Industries Pvt Ltd and Shri H S Chadha are in appeal against the order-in-appeal dated 27.05.2019, whereby the order-in-original dated 13.10.2016 was upheld wherein the Ld Adjudicating Authority had:-

a. Rejected the declared value under Rule 12 of Customs Valuation Rules 2007 and redetermined the value

b. Confiscated the goods with option to redeem them on paying Fine of Rs.1,75,000/- under section 125 of the Customs Act 1962.

c. Confirmed the differential duty demand of Rs 17,40,052/-

d. Ordered for recovering interest under section 28AA of the Customs Act 1962

e. Imposed Penalty of Rs. Rs 17,40,052/- under Section 114A of the Customs Act 1962

f. Denied exemption from payment of SAD under Serial Number 2 of Notification No. 21/2012-Cus dated 17.03.2012 on Wanli Brand tyres seized from godown and the goods imported under Bill of Entry No 6224101 dated 24.7.2014

g. Imposed Penalty of Rs.1,00,000/- under Section 112(a)(ii) on the Director of M/s Vortex Rubber Industries Pvt Ltd, namely Shri H S Chadha

2. The brief facts are that appellant M/s Vortex Rubber Industries Pvt Ltd filed Bill of Entry No. 6224101 dated 24.07.2014 for clearance of Tyres and Tubes. However, the consignment was examined by Customs Preventive and the goods were seized under Section 110 of the Customs Act, 1962. The Department also alleged undervaluation and misdeclaration in the previous imports of the appellant. Investigation regarding undervaluation of appellant M/s Indo Silicon Electronics Pvt Ltd was also done since this Company also had the same Director Shri H S Chadha which also imported tyres and tubes. Search was also conducted in the godown of the appellant-Vortex on 16.07.2014 and RSP Stickers were not found on some tyres, following which the goods were seized under Section 110 of the Customs Act 1962 since the appellant did not produce documents at that moment for proving legal possession of those tyres. Data and some emails were retrieved from the electronic devices found in the office and residence of the appellants. Statements of the Shri H S Chadha, Director of the appellant Cos were recorded on five different occasions namely, 16.07.2014, 25.08.2014, 24.09.2014, 26.09.2014 and 12.11.2014.

3. On 16.07.2014, under Section 108 of the Customs Act 1962, Shri H S Chadha denied submitting lower commercial invoice to suppress value of consignments and sending of remittances.

4. In his statement recorded on 25.08.2014, Shri H S Chadha was shown email dated 13.04.2014 exchanged with Mr Gurbir Singh Kandhari having quotation for Infinity Brand tyres, for which he stated that sometimes they were further able to secure more discount on these quoted prices.

5. In his statement on 24.09.2014, Shri H S Chadha stated that he had seen emails dated 12.05.2014, 13.04.2014, 14.05.2014, 19.03.2014, 13.02.2014, 25.03.2014, 06.04.2014, 09.03.2014 exchanged with Gurbir Singh Kandhari regarding supply prices of Infinity Brand Tyres and he accepted them as true prices and would have no objection if the same was taken for assessment of import of Infinity Brand tyres.

6. Shri H S Chadha’s statement was recorded again on 26.09.2014, and was shown a table on the basis of his emails (reproduced in the SCN). He said that he had no objection if these values were taken for calculating his duty liability. He then submitted that these were quotations and final price was negotiated and charged by the supplier as displayed in the invoices.

7. Shri H S Chadha’s statement was recorded again on 12.11.2014, and was shown a table on the basis of his emails with respect to Wembley brand of tyres exchange with Ms Christgau of Guangzhou Wali tired trading company limited, South China tiger and rubber company limited and Quincy you – South China tyre and rubber company (reproduced in the SCN). And accepted them as prices at which he imported the goods. He submitted that some of these are prices on the basis of Proforma Invoice and which were further negotiated with the foreign supplier. On being asked regarding the reason behind two sets of commercial invoices on the same email, he answered that one was the negotiated price while the other was the un-negotiated price.

8. Accordingly, on the allegation of undervaluation, Show Cause Notice vide C.No VIII(SB)10/Cus.Prev./Delta/IndoSilicon/258/2014/676 dated 14.1.2015 was issued to appellant M/s Indo Silicon Electronics Pvt Ltd as to why the declared value of the goods should not be rejected under Rule 12 of Customs Valuation Rules and redetermined, why the goods under Bills of Entry Nos 6708636 and 6708637 dated 10.03.2014 should not be confiscated, why differential duty of Rs. 55,17,472/- for previous imports alongwith interest, and duty of Rs.1,64,800/- and Rs.1,38,919/- for Bills of Entry Nos 6708636 and 6708637 dated 10.03.2014 should not be demanded from appellant M/s Indo Silicon Electronics Pvt Ltd and penalty should not be imposed on the appellants M/s Indo Silicon Electronics Pvt Ltd and its Director Shri H S Chadha. This was adjudicated by the Ld Adjudicating Authority on contest vide order-in-original No 04/KJ/Pr.Commr/2016 dated 03.03.2016. Aggrieved by the said order-in-original, the appellants are in appeal before this tribunal.

9. Also, mainly on the allegation of undervaluation, another Show Cause Notice  vide C.No VIII(SB)10/ Cus/Prev/ Delta/135/2014/745 dated 15.1.2015 was issued to the appellant- M/s Vortex Rubber Industries Pvt Ltd as to why the declared value of the goods should not be rejected under Rule 12 of Customs Valuation Rules and redetermined, why the goods should not be confiscated, why differential duty of Rs.17,40,052/- alongwith interest should not be demanded from appellant M/s Vortex Rubber Industries Pvt Ltd, and Penalty should not be imposed on the appellants M/s Vortex Rubber Industries Pvt Ltd and its Director Shri H S Chadha. This was adjudicated by the Ld Adjudicating Authority on contest vide order-in-original No DLI/CUSTM/ PREV. /ASR/ ADC/154/2016 dated 13.10.2016. Aggrieved, the appellant had filed an appeal before the Ld Commissioner (Appeals) who dismissed the appeal by Order-in-Appeal No. CC(A) CUS/D-II/Prev/NCH/217-218 dated 27.05.2019. Aggrieved by the said order-in-appeal, the appellant is in appeal before us.

10. Assailing the impugned orders Shri Aakarsh Srivastava, Ld.Counsel for the appellants states that the impugned order has been passed in a mechanical manner without appreciating that the prices as reflected in the the emails are only quotations and not the final price and thus cannot be relied for value enhancement of the goods, as has been held by this tribunal Delhi in Sai Impex vs Commissioner of Customs 1992 (62) ELT 616 confirmed by the Hon’ble Supreme Court in 1996(84) ELT A47, and of this tribunal in Nava Durga Enterprises vs Commissioner of Customs (Sea Import) 2013 (295) ELT 277. He submits that the impugned order has been passed only on the basis of statements of Director of appellant and quotations received on emails, and these cannot be the basis to enhance the value of the goods since it is trite law that statement can be relied upon only if they are voluntary and true. It can be seen from the various statements of the Director recorded on five different dates that he have given conflicting statements and thus the statements cannot be relied upon. Ld Counsel submits that the Department cannot pick and choose the statements in their favour and not give credence to the statements not in their favour. He seeks to rely on the judgements of the Hon’ble Apex Court in Mahabir Biswas vs State of West Bengal (1995) 2 SCC 25 and K L Pavunny vs ACCE 1997 (3) SCC 721. He also submits that the emails were never part of the RUDs and thus they cannot be relied upon against the appellant. Further, the Department made no effort to investigate the truth from the suppliers regarding correctness of the prices and these emails are also hit (not an admissible evidence) by Section 138C and 139 of the Act ibid. He relies on the judgement of the Hon’ble Supreme Court in Anvar P. V vs P. K Basheer 2017 (352) ELT 416(SC) and this Tribunal in S.N.Agrotech vs Commissioner of Customs, New Delhi 2018 (361) ELT 761, wherein it was held that Section 138C of the Act ibid is pari materia to Section 65B of Evidence Act 1872 and therefore evidence in form of computer printouts etc can be admitted only subject to satisfaction of conditions precedent under Section 138C of the Act ibid and in absence of certificate, these electronic documents cannot be relied upon by the Department to prove undervaluation. In this case there is no such certificate. Therefore without verification of emails as these were quotations for further negotiation, thus statements of the appellant are unreliable, the Department is devoid of any proof to prove the charge of undervaluation.

11. Ld Counsel further submits that since these goods had been assessed by the proper officer based on transaction value, onus is on the Department to prove undervaluation. He states that as per Section 14 of the Act ibid, assessable value has to be arrived on the basis of price actually paid and transaction value can be rejected if price is not the only consideration or if the buyer and seller are related parties, and admittedly this has not been done by the Department in the present case. He submits that there is no proof, nor has it been averred in the SCNs or in the impugned orders that the buyer and seller are related parties or that the commercial invoices accompanying the Bills of Entry do not reflect the actual transaction value and thus this is a commercial transaction based on arms length. He submits that the Department has not shown evidence of any contemporaneous imports or NIDB data to show undervaluation and so the invoice value should have been accepted and the transaction value itself could not have been discarded, as has been held by the Hon’ble Apex Court in the matters of

12. Ld Counsel states that the Department has not adduced any proof to show any extra payment of the alleged undervaluation amount through unofficial channels and the amount declared in the Bills of Entry is the actual value which has been paid only through proper banking channels and so the transaction value cannot be rejected since there is no evidence of any higher amount being paid to the supplier and seeks to rely upon the order of this tribunal Ld. in Kelvin Infotech Pvt Ltd vs Commissioner of Customs, Central Excise and Service Tax Meerut 2015 (316) ELT 146. He further adds that in the emails, wherein certain invoices were found, these are not the actual transaction value but are mere quotations.

13. Ld Counsel for the Appellant further submits that the impugned orders suffer from fatal infirmity since it is not mentioned anywhere in the impugned orders or in the orders-in-original, which rule of the Customs Valuation Rules 2007 has been applied to arrive at the redetermined value and so the Rules have not been sequentially applied and thus the impugned order merits being set aside as held by the Hon’ble Supreme Court in Eicher Tractors Pvt Ltd vs Commissioner of Customs Mumbai 2000 (122) ELT 321.

14. Ld Counsel further states that as far as appellant M/s Vortex Rubber Industries Pvt Ltd is concerned, the order of denying exemption from SAD(special additional duty in lieu of sales tax) on ‘Wanli brand’ goods detained at godown of appellant and those imported vide Bill of Entry No 6224101 dated 24.07.2014 is bad in law as it travels beyond the scope of the SCN, as this proposal has not been made in the SCN and thus merits being set aside. Even otherwise, if RSP stickers were not found on some goods in the godown, it was much after their clearance from the Port and is attributable to normal wear and tear. This does not mean that there were no RSP stickers at the time of clearance since these were cleared after due examination and assessment. Onus is on the Department to prove that the tyres were devoid of RSP/MRP Stickers at the time of import, since these are freely importable goods.

15. He submits that the whole case has been made on the basis of assumptions and presumptions and that undervaluation has not been proved and so for the appellant- M/s Vortex Rubber industries Pvt Ltd, the goods cannot be confiscated, SAD exemption cannot be denied and differential duty, interest or penalty cannot be demanded from the appellant and its Director Shri H S Chadha. Similarly for the appellant M/s Indo Silicon Electronics Pvt Ltd, differential duty, interest or penalty cannot be demanded from the appellant Co and its Director Shri H S Chadha.

16. The Ld. Authorised Representative of the department opposes appeals reiterates the findings in the impugned orders and accordingly prays that the appeals be dismissed. He further urges that admittedly MRP/RSP was not found on some of the tyres in the ground of Vortex. Further it is admitted fact that the parallel invoices were found in the emails exchanged between the appellant and the suppliers. He further states that rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (for short Valuation Rules) have been followed for the determination of value for the rejection of the declared value. He further refers to annexure B to the SCN and states that value has been redetermind of the imported goods as per rule 3 of the valuation rules.

He further refers to whether 17 of the SCN in case of Vortex wherein Mr HS Chadha in his statement after going to the emails with Shri GS Kandhai of Al Dobovi along with invoices raised by him regarding supply of Infiniti brand tires of different categories. After going to the printout of the emails he signed on the printouts as token of having seen and accepted them as true prices at which the imported the consignments of Infiniti brand tyres and would have no objection if the same were taken as the basis for assessment of import of Infiniti brand tyres through ICD TKD. He also refers to the compilation of quotations of various specifications of Infiniti brand tyres as compiled by revenue from the emails as reported in para-18 of the SCN. Mr HS Chadha had agreed with the values for the purpose of valuation for payment of customs duty in a statement dated 26 September 2014. Learn India further states that when the appellant have himself admitted undervaluation and the existence of parallel quotations on the email, revenue justified in rejecting the condition value and did remind value in accordance with the valuation rules. He further urges that what has been admitted did not be proved by the Department. The the onus of proof of undervaluation is discharged on the part of the Department.

17. Having considered the rival contentions, we find that tyres are not prohibited item under Exim policy, and can be imported freely. Further as the tyres are generally required all over the country there are several importers of identical/similar goods. We find that it is trite law that since the goods were assessed by proper officer based on transaction value, onus lies on the Revenue to prove undervaluation, which it has failed miserably to do so since it did not show any contemporaneous import data of identical or similar items or NIDB data to indicate undervaluation and therefore the invoice value is required be accepted and the transaction value itself and hence could not have been discarded, as held by various judgements of the Hon’ble Supreme Court like CCE Vs Sanjivani Non-Ferrous Trading Pvt Ltd (2019) 2 SCC 378 and CC Vs South India Television Pvt Ltd (2007) 6 SCC 373. We find that there is no allegation or finding that the buyer and seller being related or of any extra payment to the supplier beyond the normal authorized banking channels and thus undervaluation is not established as held by this tribunal in Kelvin Infotech Pvt Ltd (supra) .

18. We also find that there is no mention regarding which rule of the Customs Valuation Rules 2007 has been applied to arrive at the re­determined value and there is also no sequential application of Rules. We find that it is trite law that there has to be sequential application of rules to re-determine the value as has been held by the Hon’ble Apex Court in Eicher Tractors Pvt Ltd vs Commissioner of Customs Mumbai 2000 (122) ELT 321. Merely based on some emails, the transaction value cannot be disputed and negated without any cogent material.

19. Further we find that no copy of the emails on which the Department seeks to rely has been made as RUDs. Emails and other electronic evidence cannot be relied upon to prove undervaluation in absence of compliance of provisions of Section 138C of the Act ibid as held by Anvar P. V (supra) and S. N. Agrotech (supra). It is trite law that statements can be relied upon only if they are voluntary and true. It can be seen from above that all the statements of the Director Shri H S Chadha recorded on 16.07.2014, 25.08.2014, 24.09.2014, 26.09.2014, 12.11.2014, are conflicting. There are many such instances in the statements of the appellants which have been brought to our notice by the Ld Counsel but the Department has picked only those which support it while discarding those which support the appellant. Thus statements of Shri H S Chadha cannot be relied upon and given credence to substantiate the Departments claim of undervaluation without any corroborative evidence and the charge of undervaluation cannot be made out on mere assumptions and presumptions especially since he himself has stated on various occasions that there is no undervaluation and these are quotations. Tyres are regularly imported all over the country and therefore the Department could have easily garnered evidence of contemporaneous imports which it admittedly did not do. Otherwise also, Mr. Chadha has not been examined by the Adjudication Authority before placing reliance on his statements, which was mandatorily required to be observed in compliance of Section 139 of the Customs Act. It is also trite law that quotations cannot be the basis for re-determining the value of goods as held Ld CESTAT in Nava Durga Enterprises vs Commissioner of Customs (Sea Import) 2013 (295) ELT 277. Thus the allegation of undervaluation is not proved.

20. We also find that in the impugned order passed against the appellant M/s Vortex Rubber Industries Pvt Ltd denying exemption from SAD on Wanli brand goods detained at godown and those imported by Bill of Entry No 6224101 dated 24.07.2014 cannot be sustained as it was nowhere proposed in the SCN. The RSP stickers which were not found on some goods in the godown was much after their clearance from ICD and the Department has not shown that the RSP stickers were not there at the time of clearance.

21. In view of the above discussions and decisions cited supra, for the appellants M/s Indo Silicon Electronics Pvt Ltd, demand of differential duty, interest and penalty cannot be sustained on the appellant Company and appellant Director Shri H S Chadha. Resultantly, the impugned order against M/s Indo Silicon Electronics Pvt Ltd and its Director Shri H S Chadha is set aside. The appeals are allowed with consequential benefits and any amount appropriated by the impugned orders stands revoked.

22. In view of the above discussions and decisions cited supra, for the appellants M/s Vortex Rubber Industries Pvt Ltd, confiscation of goods,denial of SAD exemption, demand of taxguru.in differential duty, interest and penalty cannot be sustained on the appellant Company and appellant Director Shri H S Chadha. Resultantly, the impugned order against M/s Vortex Rubber Industries Pvt Ltd and its Director Shri H S Chadha is set aside. The appeals are allowed with consequential benefits and any amount appropriated by the impugned orders stands revoked.

(Pronounced on 09.01.2020)

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