Bird Retail Pvt. Ltd. Vs Commissioner of Customs (Import) (CESTAT Delhi)
Conclusion: Adjudicating Authority was right in in imposing a penalty under the provision of Section 114A and Section 114AA of the Customs Act, 1962 as both the appellants were fully aware that M/s B Pvt. Ltd. was importing complete Segway electrically operated product in CKD condition by mis-declaring the same as CKD parts of components such as Power unit, transmission kit, etc. for evading customs duty by wrongly availing the benefit of the Notification No. 12/2012-Cus. dated 17/03/2012.
Held: Assessee was appointed a distributor of “Segways” manufactured and patented by M/s Segways Inc., U.S.A. for Indian territory. As per the agreements, assessee were required to sale the Segway products/Segway personal transport products purchased from M/s Segway Inc., U.S.A. Assessee had been importing „Segway‟ product in CKD condition in the form of very assemblies such as power assembly, transmission assembly, wheel assembly etc. as well as Air Cargo Complex, New Delhi wherein they had filed bills of entry for assessment and clearance of the imported consignment declaring the product as “CKD Parts of electrically operated two wheeler/personal transport/lithium ION battery for captive use”. The product had been classified under Customs Tariff Heading 87149990/87144011 etc. They had also claimed benefit of Notification No. 21/2002- Cus. dated 01/03/2002 (Sl. No. 345) and Notification No. 12/2012-Cus. dated 17/03/2012 (Sl. No. 443 and 444). The department working on an intelligence had initiated investigations against assessee for mis-declaration of the product at the time of import and had entertained a view that the importer/appellant had imported a complete units of the Segway personal transport self-balancing vehicle in CKD condition. However, at the time of the import, they had mis-declared the same as “CKD parts of personal transport/electrically operated two wheelers for captive use and had mis-classified the same under Customs Tariff Heading 87149990 and thereby had evaded huge amounts of customs duty. The goods were seized and the penalty was imposed on these people against which the appeal was filed. It was held the appellants were fully aware that M/s B Pvt. Ltd. was importing complete Segway electrically operated product in CKD condition by mis-declaring the same as CKD parts of components such as Power unit, transmission kit, etc. Both the appellants were aware that the components which had been imported just indeed screw drive technology to make the same as functional Segway product. The sales manager was looking after the work pertaining to import, preparation of import documents and liaisoning with the customs clearing agent and subsequent sale of Segway products in a complete functional form. The other appeallant was controlling the activity of the imports as he was financing the same and gave financial approval for various activities of the import of the Segway product. Both of them were instrumental and devising a modus-operandi to evade customs duty by wrongly availing the benefit of the Notification No. 12/2012-Cus. dated 17/03/2012. Considering the involvement of both the appellants in entire activity, the Adjudicating Authority was right in imposing a penalty upon them under the provision of Section 114A and Section 114AA of the Customs Act, 1962.
FULL TEXT OF THE CESTAT JUDGEMENT
The brief facts of the matter are that the appellant No. I was appointed a distributor of “Segways” manufactured and patented by M/s Segways Inc., U.S.A. for Indian territory on 01/02/2010. The agreement authorized the appellant No. I as the distributor for Segway and thereafter have been revalidated on 01/11/2012 and 19/03/2015. As per the agreements, the appellant are required to sale the Segway products/Segway personal transport products purchased from M/s Segway Inc., U.S.A. The appellant have been importing „Segway‟ product in CKD condition in the form of very assemblies such as power assembly, transmission assembly, wheel assembly etc. as well as Air Cargo Complex, New Delhi wherein they have filed bills of entry for assessment and clearance of the imported consignment declaring the product as “CKD Parts of electrically operated two wheeler/personal transport/lithium ION battery for captive use”. The product has been classified under Customs Tariff Heading 87149990/87144011 etc. They have also claimed benefit of Notification No. 21/2002- Cus. dated 01/02/2002 (Sl. No. 345) and Notification No. 12/2012-Cus. dated 17/03/2012 (Sl. No. 443 and 444). The department working on an intelligence has initiated investigations against the appellant for mis-declaration of the product at the time of import and have entertained a view that the importer/appellant have imported a complete units of the Segway personal transport self-balancing vehicle in CKD condition. However, at the time of the import, they have mis-declared the same as “CKD parts of personal transport/electrically operated two wheelers for captive use and have mis-classified the same under Customs Tariff Heading 87149990 and thereby has evaded huge amounts of customs duty. It‟s a matter of record that during the course of investigation, the Departmental officer have visited the business premises of the appellant and the appellant was asked to produce the sample of the imported consignments. Shri Rony Abraham (appellant No. II) was present at the time of the visit of the DRI officers at their business premises. On the request of the DRI officers, Shri Rony Abraham presented sample of the imported vehicle/item before one Shri Vinod Soorma, Chartered Engineer which was appointed by the Department for examining the sample of the imported consignment. Shri Vinod Soorma, Chartered Engineer after examination of the goods and submitted his report on 01/08/2016 saying that :
“(i) this is to certify that I have inspected/examined the following units, which were imported by M/s Bird Retail Pvt. Ltd., New Delhi. The same were found in the form of assemblies off. ; (a) transmission assembly, (b) power base assembly (without batteries) ; (c) wheel assembly with tyre (d) info key [incomplete form].
(ii) All the above units were in the form of assemblies and not in knocked down condition. These units were in the form of assemblies are absolutely complete and are ready for use and only to be attached and fixed each other for use of the final product namely Segway. The said inspection was carried out at DRI, New Delhi office on 26/07/2016.
2. During the course of investigation, the DRI officers have also made a request to the National Automobile Testing and R&D Infrastructure Product, NBCC Place, Lodhi Road, New Delhi to depute a suitable export for examining gear box and transmitting assembly imported by the appellant. One Shri Devesh Parikh, Deputy Manager was deputed by National Automobile Testing and Infrastructure Institute on 22 December 2016. Shri Devesh Parikh after examining the samples of gear boxes and power base of the Segway submitted that the gear box and power base were in assembled condition.
3. After investigation, show cause notice was issued to the appellants by the Principal Commissioner/Commissioner of ICD, Tughlakabad, whereunder the appellants were asked to reply as to why –
(A) (1) The Segway (electrically operated) imported by them in parts with Gear Box/Power Base in Pre-assembled form mis-declaring them CKD parts of electrically operated two wheeler/of Personal Transport/Lithium ION Battery for captive use as detailed in Serial No. 1, 2 & 7 of Annexure – A to the Show cause Notice, should not be classified under CTH 87119091 and the benefit of Notification No. 12/2012-Cus. (Serial No. 444) dated 17/03/2012, as amended, fraudulently claimed by them towards the import of these goods should not be denied and BCD @ 30% should not be charged in view of Notification No. 12/2012-Cus. (Serial No. 443) (1) (b) dated 17/03/2012, as amended, towards the import of these goods ;
(2) The seized goods valued at Rs. 20,43,777/- should not be confiscated under Section 111 (m) of the Customs Act, 1962 ;
(3) The imported goods valued at Rs. 2,84,79,194/- other than the seized goods, as mentioned in Sr. No. (i) above should not be held liable for confiscation under Section 111 (m) of the Customs Act, 1962 ;
(4) The differential Customs duty amounting to Rs. 73,24,680/- (Rupees Seventy Three Lacs Twenty Four Thousand Six Hundred and Eighty only) evaded/ short paid by them as detailed in Serial No. 1, 2 & 7 to Annexure – A to the show cause notice should not be demanded and recovered from them by invoking the extended period as per provisions of Section 28 (4) of the Customs Act, 1962 ;
(5) Interest should not be demanded and recovered from them on the aforesaid evaded/short paid Customs duty in terms of Section 28AA of the Customs Act, 1962 ;
(6) Penalty should not be imposed upon them under Section 114A and 114AA of the Customs Act, 1962, as discussed in paras above ;
(A1) Now, therefore, that Shri Ankur Bhatia, Director of M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 and Shri Rony Abraham, Manager (Sales) M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 are hereby called upon to show cause to the Principal Commissioner/ Commissioner of Customs (Import), Inland Container Depot, Tughlakabad, New Delhi – 110 020 within 30 days of the receipt of this notice, as to why penalty should not be imposed upon them under Section 112 and/or 114AA of the Customs Act, 1962, as discussed in paras above”.
(B) Now, therefore, M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 are hereby called upon to show cause to the Additional/ Joint Commissioner of Customs, Air Cargo (Import), New Custom House, Near I.G.I. Airport, New Delhi – 110 037 within 30 days of the receipt of this notice, as to why –
(1) The Segway (electrically operated) imported by them in parts with Gear Box/Power Base in Pre-assembled form mis-declaring them CKD parts of electrically operated two wheeler/of Personal Transport/Lithium ION Battery for captive use as detailed in Serial No. 3, 4, 5, 6, 8 & 9 of Annexure – A to this Show cause Notice, should not be classified under CTH 87119091 and the benefit of Notification No. 12/2012-Cus. (Serial No. 443 (1) (a) and 444) dated 17/03/2012, as amended, fraudulently claimed by them towards the import of these goods should not be denied and BCD @ 30% should not be charged in view of Notification No. 12/2012-Cus. (Serial No. 443) (1) (b) dated 17/03/2012, as amended, towards the import of these goods ;
(2) The seized goods valued at Rs. 6,86,154/- should not be confiscated under Section 111 (m) of the Customs Act, 1962 ;
(3) The imported goods valued at Rs. 1,23,33,275/- other than the seized goods, as mentioned in Sr. No. (i) above should not be held liable for confiscation under Section 111 (m) of the Customs Act, 1962 ;
(4) The differential Customs duty amounting to Rs. 32,16,660/- (Rupees Thirty Two Lacs Sixteen Thousand Six Hundred and Sixty only) evaded/ short paid by them as detailed in Serial No. 3, 4, 5, 6, 8 & 9 to Annexure – A to the show cause notice should not be demanded and recovered from them by invoking the extended period as per provisions of Section 28 (4) of the Customs Act, 1962 ;
(5) Interest should not be demanded and recovered from them on the aforesaid evaded/short paid Customs duty in terms of Section 28AA of the Customs Act, 1962 ;
(6) Penalty should not be imposed upon them under Section 114A and 114AA of the Customs Act, 1962, as discussed in paras above ;
(B1) Now, therefore, that Shri Ankur Bhatia, Director of M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 and Shri Rony Abraham, Manager (Sales) M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 are hereby called upon to show cause to the Additional/Joint Commissioner of Customs, Air Cargo (Import), New Custom House, Near I.G.I. Airport, New Delhi – 110 037 within 30 days of the receipt of this notice, as to why penalty should not be imposed upon them under Section 112 and/or 114AA of the Customs Act, 1962, as discussed in paras above”.
(C) Now, therefore, M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 are hereby called upon to show cause to the Deputy/ Assistant Commissioner of Customs, Inland Container Depot Patparganj, Delhi within 30 days of the receipt of this notice, as to why –
(1) The Lithium Ion Batteries (which were the essential part of the Segway (electrically operated) imported by them in parts with Gear Box/Power Base in Pre-assembled form vide Bill of Entry No. 5146942 dated 04/05/2016 at New Custom House, Air Cargo (Import), Near I.G.I. Airport, New Delhi) imported by them by mis-declaration as Lithium Ion Batteries for Segway for captive consumption vide B/E No. 5413240 dated 27/05/2016 as detailed in Serial No. 10 of Annexure – A to this Show cause Notice, should not be classified under CTH 87119091 as part of the complete Segway and BCD @ 30% should not be charged in view of Notification No. 12/2012-Cus. (Serial No. 443 (1) (b)) dated 17/03/2012, as amended, towards the import of these goods ;
(2) The seized goods valued at Rs. 7,64,643/- should not be confiscated under Section 111 (m) of the Customs Act, 1962 ;
(3) The imported goods valued at Rs. 1,91,161/- other than the seized goods, as mentioned in Sr. No. (i) above should not be held liable for confiscation under Section 111 (m) of the Customs Act, 1962 ;
(4) The differential Customs duty amounting to Rs. 2,32,032/- (Rupees Two Lacs Thirty Two Thousand and Thirty Two only) evaded/ short paid by them as detailed in Serial No. 10 to Annexure – A to the show cause notice should not be demanded and recovered from them by invoking the extended period as per provisions of Section 28 (4) of the Customs Act, 1962;
(5) Interest should not be demanded and recovered from them on the aforesaid evaded/short paid Customs duty in terms of Section 28AA of the Customs Act, 1962 ;
(6) Penalty should not be imposed upon them under Section 114A and 114AA of the Customs Act, 1962, as discussed in paras above ;
(C1) Now, therefore, that Shri Ankur Bhatia, Director of M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 and Shri Rony Abraham, Manager (Sales) M/s Bird Retail Pvt. Ltd., E-9, Connaught House, Connaught Place, New Delhi – 110 001 are hereby called upon to show cause to the Deputy/Assistant Commissioner of Customs, Inland Container Depot Patparganj, Delhi within 30 days of the receipt of this notice, as to why penalty should not be imposed upon them under Section 112 and/or 114AA of the Customs Act, 1962, as discussed in paras above”.
4. The matter has been got adjudicated vide order-in-original No. 1/19/Pr. Commr./Import/ICD/TKD dated 28 January 2019. Vide the impugned order dated 28 January 2019 all the charges as leveled in the show cause notice have been confirmed by the Adjudicating Authority. The appellant are before us against the impugned order-in-original.
5. The learned Advocate appearing for the appellant has submitted that the appellant have imported the goods vide finally assessed bills of entry through ICD, TKD Tughlakabad at ICD Airport, New Delhi and ICD, Patparganj, New Delhi at lower rate of the basic customs duty at 10% in terms of Notification No. 21/2002-Cus. dated 01/03/2002 under Sl. No. 345 and thereafter under Notification No. 12/2012-Cus. dated 17/03/2012 by declaring the same as CKD parts assembly (part of electrically operated two wheeler for captive use) classifying the same under Customs Tariff Heading 87149990 primarily. The lithium Ion battery imported separately were classified under Chapter Heading 85076000 and appropriate rate of customs duty under the said heading has been paid at the time of import. The learned Advocate has contended that the Adjudicating Authority has erred in classifying the product under CTH 87119091 as this heading is applicable only for electrically operated motorcycles (including mopeds) and cycle fitted with auxiliary motors with or without cars. The learned Advocate has tried to impress that Segway in common parlance is not understood as motorcycle or moped or cycle fitted within an auxiliary motor. It has further been added by the learned Advocate that the Adjudicating Authority has wrongly taken a view that wheel power fitted for movement of a person are akin to the goods covered under CTH 8711. It has been the contention of the learned Advocate that Segway being battery operated vehicle cannot be classified to be a motor vehicle as per Motor Vehicle Act, 1988 as its maximum speed is 12.5 miles per hour equal to 20 km. and, therefore, Segway cannot be equated with the electrically operated motorcycle or moped or cycle fitted with the auxiliary the motor. It has further been argued that though the appellant had classified their product under a particular customs tariff heading and if the Department wants to change the classification of the product to some other tariff heading the burden of proof for classifying the product in a different tariff heading has to be discharged by the Department. The learned Advocate has taken reliance of following cases in support of his argument on this count : (a) Commissioner of Central Excise, Nagpur versus Vicco Laboratories – 2005 (179) E.L.T. 17 (S.C.) ; (b) Raptakos Brett & Co. Ltd. versus Commissioner of Central Excise, Raigad – 2014 (307) E.L.T. 565 (Tri. – Mumbai).
6. It has further been submitted that the Commissioner has wrongly denied them the benefit under Notification No. 12/2012-Cus. dated 17/03/2012 at Sl. No. 443 (1) (a) saying that the gear box imported by the appellant were in pre-assembled condition at the time of the import and, therefore, the benefit of above said notification is not available to the appellant. The learned Advocate submitted that the basic evidence for denying the benefit of this notification to the appellant is Chartered Engineer certificate and Chartered Engineer Shri Vinod Soorma has not been made available for cross-examination to the appellant at the time of adjudication. The report given by him cannot therefore be made basis for arriving at the conclusion that the gear box imported by them were at the pre-assembled form.
7. Regarding opinion of Shri Devesh Pareekh, it is submitted that during cross examination, in reply to question 7, he stated that the parts shown to him were not motorcycle parts and were parts of Segway. The opinion of Shri Pareekh doesn’t support the Department’s case that others electrically operated motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars classifiable under CTH 87119091 were imported.
8. The appellant further submit that learned Commissioner erred in denying the alternative submission of the appellant claiming benefit of Notification No. 12/2012-Cus. dated 17/03/2012 as per entry 444. Entry 444 of the said notification is extracted below for ready reference.
