Case Law Details
Jain & Sons Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi held that re-valuation of goods without first rejecting the transaction value of the goods is not in accordance with law. Show cause notice without proposal of rejection of transaction value or demanding differential duty is both speculative and presumptive.
Facts- The issue in this appeal is whether order of confiscation with respect to paper cup machines imported vide bill of entry No. 5275518 dated 16th May,2016 is justified under Section 111 (m) of the Act, with option to redeem on payment of redemption fine of ₹ 20 lakhs. Further, penalty of Rs.2,20,000 is imposed on the appellant under Section 112 (a) of the Act.
Notably, it is mainly alleged that the imported goods are under-valued as well as mis-declared.
Conclusion- I further find the show cause notice is bad as the same does not propose rejection of transaction value nor the demand of differential duty. Thus, I find that the show cause notice is both speculative and presumptive.
It has been held by the Hon’ble Supreme Court in the case of Revenue’s appeal in Sanjivini Ferro Alloys, that Revenue cannot proceed to re‑value the goods without first rejecting the transaction value in accordance with law. It was incumbent upon the Court Below to record reasons for rejection of declared value.
I also hold that the adoption of unit price of USD 12450 per machine is bad as the said price is in respect of import of only one machine. Hence, the same is not comparable, as in the present case the appellant have imported a lot of 16 machines.
FULL TEXT OF THE CESTAT DELHI ORDER
The issue in this appeal is whether order of confiscation with respect to paper cup machines imported vide bill of entry No. 5275518 dated 16th May,2016 is justified under Section 111 (m) of the Act, with option to redeem on payment of redemption fine of ₹ 20 lakhs. Further, penalty of Rs.2,20,000 is imposed on the appellant under Section 112 (a) of the Act.
2. The Appellant is a proprietorship concern of Mr Pankaj Jain situated at Jaipur. The Appellant regularly imports paper cup machines for resale in India. The machines are mainly imported from China. There is another proprietary concern namely M/s.Tradewell, Prop. Mrs. Sonal Jain w/o Mr. Pankaj Jain. Mr. Pankaj Jain manages the affairs of M/s.Tradewell as its C.O.O. Revenue have earlier booked a case of undervaluation and mis-declaration against M/s. Tradewell for import of similar goods /paper cup machines. Goods imported vide Bill of Entry dated 31.10.2015 by M/s. Tradewell were seized and show cause notice was issued.
3. The DRI officials conducted enquiry with respect to Bill of Entry No. 5275518 dated 16th May, 2016 (filed at ICD-Garhi Harsaru by appellant) with respect to import of 16 paper cup machines at declared value of US D 80,000 (USD 5,000 per machine) equivalent to ₹ 54,86,759/-, duty liability of ₹ 14,50,055/-.It appeared to Revenue that the machines were under-invoiced. Accordingly the machines were seized under Section110 of the Customs Act and were put under the care of the custodian of the ICD GhariHarsuru, Gurgaon vide seizure dated 17th May 2016. Search was also conducted at the residential premises of the proprietor, Shri Pankaj Jain. During the search, some relevant documents and electronic gadgets were recovered.The imported machines bore the brand name – “Tradewell”. The model number of the machine was mentioned as TW – D16. Commercial invoice dated 6th March, 2016was issued by the Shipper-Zhejiang New Debao, China in favour of Appellant. In the said invoice, the description of the goods was mentioned as ” Paper Cup Machine TW – D 16 with standard accessories” and in packing list, the description of the goods were mentioned as TW – D 16 with standard accessories of paper cup machine. At the time of examination of the machines on 17th May, 2016 in presence of CHA, custodian, customs officers and 2 independent witnesses, it appeared that besides under-valuation of the goods, the importer has also mis- declared the goods, as much as they have declared model/brand of paper cup machines imported, in the invoice as ‘TW – D 16’. Whereas on physical verification, the same were found to be of the model/brand as ‘DEBAO D-16’. The inspection was conducted under panchnama, and on reasonable belief of the paper cup machines being mis-declared in terms of description as well as value of the machines, were seized, as stated above.
3. Search was also conducted at Transport Nagar Office, A-13, Transport Nagar, Jaipur under panchnama on 19th May, 2016. Search was also conducted at the premises at 22, Shanti Sadan Complex, Gangoli Bazar, Chhoti Choper, Jaipur under panchnama on 19th May, 2016.
4. Statement of the Proprietor, Mr Pankaj Jain was recorded under Section 108 of the Act on 23rd May, 2016, wherein, he, inter alia, stated that he was looking after all the work of his concern – M/s. Jain & Sons and sister concern, M/s. Bhartiyas. He also stated that M/s. Tradewell is another family firm having its office at C-6,Indrapuri, Lal Kothi, Jaipur and the proprietor of which is his wifeSonal Jain. M/s. Tradewell and M/s.Bhartiya Trading Company have their godown at Transport Nagar. It is further stated that he obtained the IEC in November, 2015, in the name of ‘Jain and Sons’ and thereafter started importing paper cup machines. He imported total 4 consignments and out of these, 3 consignments were sold-out and the last one has been seized by the DRI, Jaipur at ICD, Garhi Harsuru. He further stated that Mobile handset of Samsung 4G LTE brand was used by him for the last 2 years for business purposes, on which he received and sent messages. However, the messages received and sent to Ms. Kitty Jiang, China were not done by him. That his employee, Mr. Om Prakash Sharma could tell about those messages. The mobile handset of Samsung 4G LTE brand was handed over (while recording statement) for further investigation and sealed in an envelope, duly signed by Mr. Pankaj Jain. The seized 16 paper cup machines were provisionally released on the request of the appellant, onexecution of bond and bank guarantee by order dated 16th May, 2016 by the Principal Commissioner, ICD, Patparganj, New Delhi.
5. Forensic testing of the Samsung 4G LTE mobile phone was conducted by the Computer Engineer – Shri Santosh Kumar in the office of DRI, Jaipur on 27th May 2016. Shri Santosh Kumar retrieved the saved and deleted data, out of the said mobile phone. The proceedings of data retrieval were recorded under panchnama dated 27th May, 2016.
6. From the retrieved data, it was revealed that one mobile number was saved as – Hawala China Tarun Baid. It was found that appellant was involved in whatsapp chat with Tarun Baid, the Hawala Operator based at Jaipur, and was also exchanging messages on whatsap with Ms. Kitty Jiang, Sales Manager of M/s. Zhejiang New Debao Machinery Co Ltd, China (the China-based supplier of paper cup machines).
7. Investigation was conducted in respect of Mr.Tarun Baid, the Hawala Operator and his statement was recorded on 3/4th June 2016, wherein he, inter alia, admitted that he facilitated the transfer of funds to China against the import of goods made by Shri Pankaj Jain. That such funds were first transferred to Hong Kong – based accounts. That on seeing the WhatsApp messages exchanged between him and Shri Pankaj Jain, and that his mobile number was saved as ‘Hawala China Tarun Baid’, he confirmed the WhatsApp messages exchanged, wherein funds were transferred by him to the accounts of the Chinese suppliers. Further stated that he had received money in cash from Shri Pankaj Jain in Indian rupees, which was transferred to China in dollars (USD) through Hong Kong. Shri TarunBaid retracted his statement on 6th June, 2016. The Additional Director, DRI replied by letter dated 30th August, 2016, intimating Mr. Tarun Baid that his retraction were baseless and an afterthought.
8. Further, on scrutiny of the WhatsApp messages exchanged between Shri Pankaj Jain and Shri Tarun Baid and simultaneously messages exchanged between Shri Pankaj Jain and Ms. Kitty, it was observed that Shri Pankaj Jain was sending messages to Shri Tarun Baid for transferring money to China and at the same time, was also sending messages to Ms. Kitty informing such transfers. Communication between these three persons was compared, from which, it appeared to be related to the complete amount paid in respect of bill of entry 9553280 dated 12th, June, 2015 and in respect of bill of entry no. 2002700 dated 23rd July, 2015, with respect to paper cup machines imported by M/s. Tradewell, Jaipur.
9. Further statement of Shri Pankaj Jain, Proprietor was recorded on 10th June, 2016, wherein, he, inter alia, stated that he tried to contact Mr. Om Prakash (his ex-employee), but he was not in Jaipur. On enquiry from his neighbours, nobody could inform about his whereabouts. Also stated that he did not know the mobile number and home address of Mr.Om Prakash Sharma.
10. Statement of the Mr. Om Prakash Sharma, son of Shri Chotu Ram Sharma was recorded on 22nd October, 2016, wherein, he, inter alia stated that he used to work for Shri Pankaj Jain at his home situated at Lal Kothi. He had to do both housework and office work such as photo copy, the deposition of cheque and bank work, etc. He had left the job in September, 2015 and he started trading in disposable glasses in the local market. After seeing the statement of Shri Pankaj Jain dated 23rd May, 2016 (wherein, Mr.Jain submitted the Samsung 4G LTE mobile phone), he stated that he never had any Samsung brand mobile phone and had never purchased such phone. That Shri Pankaj Jain and his other members of family never gave any mobile phone for use. Further, he has never sent any messages from the said Samsung brand mobile phone to Ms. Kitty Jiang. Therefore, the contention of Shri Pankaj Jain that Mr.Om Prakash Sharma could tell about the messages exchanged with Ms. Kitty Jiang, was completely wrong. He did not even know any Ms. Kitty Jiang, nor he has ever met her.
11. Statement of one Mr. Kanchan Sanyal, Regional Manager – M/s. Unicorn Logistics, Nehru Place, New Delhi was recorded on 23rdAugust, 2016, wherein he stated that they have handled 2 shipments/consignment of M/s. Tradewell, Jaipur; that they did not handle the customs clearance and have handled only freight activities in China. Mr. Sanyal also submitted copy of documents (commercial invoice, customs declaration and packing list in respect of M/s. Tradewell) received from M/s. Best shipping Co Ltd., China, who had obtained documents from the Chinese supplier. Further stated that Best Shipping have arranged B/L number NJBH57878100 from Hanjin Shipping Company Ltd., and further submitted documents namely – commercial invoice number B010 – 1 –1500031 dated 23rd October, 2016, packing list dated 23rd October, 2016 and copy of customs declaration (in Chinese language).He further stated that in this Bill of Lading four sets of paper cup machines had been imported with description TW–D 16 in one set, TW-D16 and TWL – 12 in other 3 sets, that freight amount mentioned in the customs declaration in respect of aforementioned bill of lading for US$1450, which has been collected by Best shipping company, who in turn issued debit note for USD 1450 and, therefore, the price/amount mentioned in the customs declaration were correct.
12. After recording statement of Mr. Om Prakash – Ex-employee and Kanchan Sanayal, the Investigating Officer issued summons for appearance of Mr. Pankaj Jain, in DRI Office on 31st August, 16, 14th September, 2016 and 27th September,2016, but he did not appear. Rather Mr. Pankaj Jain sent reply stating that he declines to appear. As Mr. Pankaj Jain was avoiding the summons and not cooperating in the investigations, in the circumstances, show cause notice could not be issued within the prescribed of 6 months and accordingly, time was extended by the Additional Director-General, DRI, New Delhi.
13. Revenue further recorded statement of Mr. Yogesh Dutt Sharma, Proprietor of Shree Vasu Industries, Ajmer on 1st November, 2016, who, inter alia, stated that Mr. Pankaj Jain, Proprietor of M/s. Jain & Sons had dealings with him, he used to look after all the day-to-day work like sale, purchase etc.; that he has seen the whatsapp messages/chat exchanged between his mobile and mobile of Shri Pankaj Jain and the messages are correct and further signed the printouts of the same. WhatsApp messages were during the period 12th April, 2015 to 5th August, 2015, these messages were related to rates and payment of paper cup machines. Such messages were sent by him from his iPhone. He further stated that as per message exchanged with Mr Pankaj Jain on 9th May, 2015, was regarding the DBL – 16 machines, having speed of 72 to 75 pieces per minute, which Mr. Pankaj Jain had offered to give him for ₹ 12 lakhs. That on one occasion in October, 15, he had visited China along with Mr. Pankaj Jain and they had visited Canton Fair as well as factory ofZhejiang New Debao and hadfinalised deal of DBL – 16 machines, which was high speed machine and better than DBL – 12 machines. Further stated that one machine was imported at Kolkata Port by M/s. Tradewell, Jaipur and later on, Jain & Sons imported 16 paper cup machines DBL – 16 at ICD Garhi Harsaru, Gurgaon. In his further statement recorded on 5th April, 2017, Mr. Y.D. Sharma reiterated his earlier statement and also stated that Mr. Pankaj Jain used to take consultancy from him on drawing and design of various machines. He had visited China along with Mr. Pankaj Jain on the request of Mr. Pankaj Jain and also the cost of tickets etc. was borne by Mr. Pankaj Jain, and thereafter, Mr. Pankaj Jain had imported 16 DebaoD-16 paper cup machines through ICD Garhi Harsaru.
14. Revenue got the valuation of the 16 paper cup machines done by Mr. R.K. Agarwal, Chartered Engineer, a Government Registered Valuer located at New Delhi on 21st March 17. Mr. Agarwal submitted his valuation report dated 22nd March, 2017, wherein as per the valuation report, the C&F value of each D – 16 machine was USD 13,000. Accordingly, it appeared to Revenue that a case of mis- declaration and under-valuation is made out as the appellant had declared the value at USD 5000. It further appeared that Mr. Pankaj Jain have wrongly stated the fact that the mobile handset – Samsung 4G LTE 4 was used by his employee –Om Prakash Sharma, and that messages were exchanged by Mr. O.P. Sharma. It further appeared that Mr. Pankaj Jain in order to mis-lead the investigation stated that only Mr. O.P. Sharma could tell about the data or use of the Samsung Mobile handset. Whereas Mr. O.P. Sharma in his statement dated 22nd October, 2016 denied and stated that Mr. Pankaj Jain had given a completely wrong statement. Further, Mr. Jain knew the mobile number of Mr. Sharma as well as his residential address. It further appeared to Revenue from the scrutiny of WhatsApp messages exchanged between Mr. Pankaj Jain and Mr.Tarun Baid, the Hawala Operator and simultaneous messages exchanged between Mr. Pankaj Jain and Miss Kitty of the Exporting Company, that Mr. Pankaj Jain was sending messagesto Mr. TarunBaid – Hawala Operator for transferring funds to China (for differential value) against imports made by him and at the same time was also sending messages to Miss Kitty at China, communicating the details of transfer of funds to them. It appeared from the comparison of simultaneous WhatsApp messages between these 3 persons, that complete payment of USD 7,415 per machine C&F was made for 24 machines, as mentioned in the customs declaration dated 11th May, 2015, which appears to be in respect of bill of entry No. 9553280 dated 12th June, 2015 filed by M/s. Tradewell, Jaipur (sister concern). It also appeared that complete payment of amount USD 7593 per machine was made for the 16 machines (as mentioned in the customs declaration by exporter dated 16th June, 2015) with respect to Bill of Entry filed by M/s. Tradewell, Jaipur. Therefore, it was apparent that Mr. Tarun Baid, Hawala Operator facilitated transfer of funds through Hawala to China against imports made at undervaluation prices by Mr Pankaj Jain. Mr. Tarun Baid had admitted that he had received money from Mr.Pankaj Jain in Indian rupees in cash, which was transferred to China in US dollars through Hong Kong.
15. It appeared to Revenue that the appellant have mis-declared the description of the machines by declaring the model /brand of the machines as TWD-16 whereas the same on inspection appeared to be of “DEBAO D-16” Model. The appellant also mis-declared the actual transaction value as C &F USD 5000 per machine. Whereas the actual transaction value (C & F) was USD 12,450 per machine, as mentioned, in the Customs declaration dated 01.11.2015 in the invoice of the Chinese Exporter dated 23.10.2015 (before Chinese Customs).
16. As it appeared to Revenue, in view of the aforementioned facts that a case of mis-declaration as to value and brand of the machine is made out against the appellant, show cause notice dated 8.5.2017 was issued by the Additional Director, DRI, Jaipur dated 8.5.2017, proposing confiscation of 16 paper cup machines, imported vide bill of entry No.5275518 dated 16.05.2016 at ICD, Ghari Harsaru, under Section 111(m) of the Act. Further, penalty was proposed under Section 112(a) and (b) of the Act. Show cause notice was adjudicated on contest by the Joint Commissioner of Customs, ICD, Patparganj, New Delhi vide order-in‑ original dated 28.09.2018 confirming confiscation of 16 paper cum machines re‑ valued at Rs.1,36,62,031/-.Further, with option to redeem on payment of redemption fine of Rs.20 lakhs. Further, penalty of Rs.2,20,000/- was imposed under Section 112 (a) on the appellant, and penalties under Section 112(b) was dropped. Being aggrieved, the appellant preferred appeal before the ld. Commissioner (Appeals), inter alia, on the grounds that :-
16.1
That Revenue have not supplied the relevant RUDs relied upon in the show cause notice, as well as nonRUDs.
16.2 Evidently, as per the statement of Shri Y.D. Sharma and the whatsapp messages exchanged with him by the appellant, D-16 Model paper cup machines was not even ready with the manufacturer on the date of message – 4th August, 2015. Thus, the statement of Shri Y.D. Sharma that the appellant had offered similar machine to him at value of Rs.12 lakhs in May, 2015, is vague. Further, from the e-mail and correspondence of the Overseas supplier, it is evident that due to some problem at the supplier’s end, wrong machines were supplied (with respect to brand).
16.3 Admittedly, the machines imported are marked with brand TW-D16. Revenue have erred in alleging misdeclaration without pointing out the actual difference or similarity in the specifications, quality and value of the two models (DEBAO D-16).
16.4 The allegation of under-valuation is based on the basis of the documents supplied by freight forwarders, Unicorn Logistics (KanchanSanyal), who have been involved in import of similar machines for M/s.Tradewell. Such documents are not reliable. Firstly, they relate to M/s.Tradewell and secondly, such documents being unauthenticated, by any appropriate Authority, are fit to be rejected.
16.5 Revenue have failed to consider the submissions of the appellant that similar paper cup machines are also being manufactured in India, which are of equal or higher quality and are available in the domestic market for about Rs.5 lakhs. The unit price of one machine at USD 12450 adopted by Revenue on the basis of unauthenticated documents supplied by Unicorn Logistics in respect of M/s.Tradewell, are not reliable also for the reason that such price is in respect of one set of paper cup machine. Whereas in the instant case, the appellant have imported a bulk quantity of 16 sets of machines.
16.6 It is further urged that as Samsung 4G LTE phone has not been recovered under any panchnama and further, the data has been retrieved from the said phone without giving notice and behind the back of the appellant, is bad and cannot be relied upon. Further, such data (electronic evidence) is also not supported by an appropriate certificate, as required under Section 138 C(4) of the Act read with Section 65 (B) of the Indian Evidence Act.
16.7 The statement of Mr. Tarun Baid cannot be relied upon. Firstly, because Mr. Tarun Baid has immediately retracted from his statement. Secondly, he has not been made a party to the show cause notice nor has been examined by the Adjudicating Authority in the proceedings. Thus, his statement is not reliable for failure to meet the conditions precedent under Section 138 B of the Act. The statement is also not reliable as the appellant was given a copy of such statement without the Annexure to the statement.
16.8 The show cause notice is also bad as the Revenue have proceeded to re-value the goods without rejecting the transaction value. Further, the goods have not been valued as required under Rule 14 of the Act read with Customs Valuation Rules, 2007.
16.9 Further, urges that in absence of proper determination of the fair market value of the imported goods under Section 14 of the Act read with the Valuation Rules, the show cause notice is bad and the impugned order is fit to be set aside.
16.10 He further urges that no differential duty has been worked out by Revenue nor alleged to be evaded and hence, the show cause notice is bad on this score also.
16.11 Further, the statements of various persons have been relied upon in the show cause notice, but whose cross-examination were refused by the Adjudicating Authority in violation of the principles of natural justice and Section 138 B of the Act, is bad in law and it be held that such evidence is bad and cannot be used against the appellant.
16.12 The appellant relied upon the relevant NIDB data for import of DBL-16 paper cup machines during the relevant period, which have been imported by other importers at matching prices USD 5000 per paper cup machines. Such data of contemporaneous import is binding on the Revenue.
16.13 The report of the Chartered Engineer relied upon by the Revenue is bad as the valuation has been done on the basis of visual inspection and perusing data from the Internet-website. It has come out in the cross examination that the said Chartered Engineer, Mr. R.K Agarwal had no previous experience of valuing new machines and further, such valuation report is in violation of provisions of the Act and the Valuation Rules. As per the Valuation Rules, an approved Chartered Engineer can value only second hand machinery.
17. The Commissioner (Appeals) was pleased to reject the appeal relying on the impugned order-in-original observing that the appellant have challenged the findings of the Adjudicating Authority on technical grounds without producing any documentary evidence to claim that the declared value was correct. Further, observed that Revenue was not required to prove its case with mathematical precision and also observed that various circumstantial evidences indicate towards mis-declaration and under-valuation. Being aggrieved, the appellant is before this Tribunal in appeal.
18. Counsel appearing for the appellant, Ms. Priyanka Goel reiterated the grounds taken before the Court below and further urges that the impugned order is cryptic and non-speaking. The Commissioner (Appeals) have dismissed the appeal without dealing with the grounds of appeals raised, in a general manner. Relying on the ruling of the Apex Court in Siemen Engineering and Manufacturing Co. Ltd. Vs. Union of India – AIR 1976 SC 1785, she urges that the rule requiring the reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice. Recording of the reasons is necessary to eliminate vice of arbitrariness.
19. It is further urged that show cause notice is speculative and based on assumptions and presumptions. Further, the allegations of mis-declaration is bad and not sustainable as admittedly the appellant have filed the bill of entry on the basis of import documents. There is no mis-match in the bill of entry with the import documents. The supplier has admitted that there is an error at their end in dispatching the goods, instead of dispatching the machinery of Model TW-D 16, they have mistakenly sent machines of DEBAO D-16 model. Such statement of foreign supplier has been ignored without the same being found to be untrue. It is further urged that Revenue have failed to point out the trail of money involved in respect of alleged Hawala transactions. Revenue have merely relied upon the whatsapp chat and the retracted statement of Mr. Tarun Baid, in support of their contentions.
20. Further, urges that in the facts and circumstances, the appeal may be allowed and the impugned order set aside.
21. The appellant also relies on the Final Order No.50096-50097/2022 dated 08.02.2022 passed by the Division Bench of this Tribunal in the appeal of M/s. Tradewell, wherein under the similar facts and circumstances, the appeal was allowed and the order of confiscation and penalty was set aside.
22. Opposing the appeal, ld. Authorised Representative for Revenue, Shri Gopi Raman urges that the present show cause notice was issued for confiscation of 16 paper cup machines of model/brand Debao D-16 seized at ICD, Garhi Harsaru, Gurgaon on 17.5.2016 in respect of bill of entry filed on 16.05.2016. In the show cause notice, it has been mentioned that for the duty liability (differential duty) in respect of the seized machines, as well as past imports, as well as action under law for other omissions and commissions committed by the appellant, if any, further investigation is pending and shall be dealt with by issuing separate show cause notice. Accordingly, the present show cause notice dated 18.05.2017 was issued for the limited purpose of confiscation and penalty. Further, upon completion of investigation, show cause notice F.No.DRI/DZU/JRU/19/Enq-24/Int-1/2016/Pt.1 dated 29.05.2019 has been issued with respect to the present import, for rejection of the declared assessable value and for re-valuation of the goods with proposal to demand the differential duty and confiscation also with respect to three past bills of entries. Further, penalty has also been proposed under Section 114A and 114 AA of the Act. The said show cause notice is pending as the same has been kept in call book by the Commissioner of Customs, in view of the Ruling of the Apex Court in Canon India Ltd. Vs. CC, wherein it has been held that DRI have got no power or jurisdiction to issue show cause notice under Section 28 (4) of the Customs Act. Sofar the retraction of the statement by Shri Tarun Baid, the Hawala Operator, is concerned, though the retraction has been made on the very next day but evidently, Shri Tarun Baid has recorded the statement after going through the whatsapp messages exchanged between him and Shri Pankaj Jain. Further, urges that there is no controversy with regard to Samsung 4G LTE mobile phone, as the same was, admittedly, submitted by Shri Pankaj Jain in the course of recording of his statement on 23.05.2016. This fact is mentioned in the statement, which bears the signature of deponent /Shri Pankaj Jain. As regards non-rejection of declared transaction value, evidently, show cause notice has been issued for under-valuation of the imported goods. Thus, ipso facto the declared value has been rejected by the Revenue. Further, urges that the rate per machine of USD 12450 has been adopted by the Revenue pursuant to investigation, wherein this fact was known from the declaration made by the shipper before the Chinese Customs, copy of which was given to Revenue by the freight forwarder-M/s. Unicorn Logistics, New Delhi, which was received by them from their principal‑ M/s. Best Shipping Company Ltd., China, via email. As regards the Valuation Report by Chartered Engineer, Shri R.K. Agarwal, it is urged that he is Government registered Valuer having B.E. degree in Production Engineering. Hence, the Valuation Report by Chartered Engineer cannot be rejected on the ground that he is competent under the law to value only second hand machinery. As regards opportunity to cross-examine the witnesses of the Revenue, the Adjudicating Authority have rejected such request, wherein such examination was not required and has allowed the cross-examination, wherever it was felt necessary of Mr. R.K. Agarwal, Chartered Engineer and Shri Santosh Kumar, Computer Expert. As regards the appropriate certificate under Section 138 C (4) of the Act, it is urged that Samsung phone was submitted by Shri Pankaj Jain for further investigation and the identity of the phone with respect to IMEI number was established by the DRI. Further the extracts of the whatsapp messages have been admitted by the concerned party – Shri Tarun Baid in his voluntary statement recorded under Section 108 of the Act. Thus, no separate certificate under Section 138 C (4) of the Act is required. So far the statement of freight forwarder and the documents supplied by them are concerned, it is beyond reasoning why the Freight Forwarder Agency, who were working for the importer, would submit any fake and/or concoctive document. He further relies on the ruling of the Supreme Court in Dinesh Kumar Vs. State of U.P. and Another – C.A.No.1034/2013, wherein it is held that – it is settled legal position that even ifa document is procured by improper or illegal manner, there is no bar to its admissibility, if it is relevant and its genuineness is proved. If the evidence is inadmissible, it does not matter how it has been obtained.
23. Further urges that the charge of under-valuation of the imported goods and sending the differential price through Hawala, is established with the series of simultaneous messages exchanged by the appellant with Shri Tarun Baid, Hawala Operator and Ms.Kitty Jian, Sales Manager of the Exporting Firm in China. Further, the fact of under-valuation is also proved by the statements recorded by the Revenue of Mr. Vipin Sangai, Ex-Director of MSAPL, who has stated that due to good family relations with Shri Pankaj Jain, they have provided the accommodation entry by purchasing the paper cup machines at lower price from M/s.Jain& Sons and thereafter, re-selling the machines at higher price, as required by Shri Pankaj Jain. In fact, they have not taken the delivery of the machines and had only exchanged invoices at the instance of Shri Pankaj Jain. Such fact of under-valuation is also supported by the statement recorded by Shri Shanti Lal Daad, Proprietor of Jai Siya Ram Industries. Further, urges that under the similar facts and circumstances, some other importers of similar machines, whose declared transaction value was similar, have also admitted under-valuation and paid differential duty with interest. Accordingly, prays for dismissing the appeal.
24. Having considered the rival contentions, considered the material facts on records, and record my findings as follows:-
24.1 Admittedly, Shri Pankaj Jain has not admitted any under-valuation ofthe imported goods. Shri Pankaj Jain has stated that such machinery is also manufactured in India and he has purchased one similar machine from M/s. Lami Coats Shivakashi (T.N.) vide their invoice No.0281 dated 16.12.2015 for Rs.4,50,000/- plus GST of Rs.9,000/-. This machine was equivalent in efficiency with the model imported by the appellant viz. TW- D16. This fact has not been found to be untrue by the Revenue.
24.2 So far the allegation of mis-declaration of brand is concerned, admittedly, there is no mis-match in the data contained in the bill of entry filed by the appellant and the import documents viz. bill of lading, invoice, etc. The appellant have stated that he had ordered for TW-D16 machines whereas the supplier has erroneously dispatched the DEBAO D-16 model machines. This error has been admitted by the shipper/exporter, which fact has not been found to be untrue. So far whatsapp data obtained from Samsung 4 G LTE mobile phone, alleged to be submitted by Shri Pankaj Jain to the Revenue at the time of recording of his statement on 23.05.2016, a question was put to him by Revenue – please tell since when u are using the Samsung 4G LTE brand phone. In answer, Shri Pankaj Jain stated – that this phone is being used at his home for almost 2 years. This phone is also used for the purpose of the business. It is further recorded that Shri Pankaj Jain submitted the Samsung 4G LTE mobile phone to the Revenue for further investigation, which was sealed in an envelope (without recording the IMEI No.) bearing signature of Shri Pankaj Jain. Evidently, IMEI number is the identification number of a mobile phone. Further, I find that the appellant have, in course of recording his further statement by Revenue on 18.05.2018, stated that he has never used Samsung 4 G LTE mobile phone and it was under coercion exercised by the officers of DRI, he was made to write that he has used the Samsung 4 G LTE phone and is submitting the same for further investigation. He has never used Samsung 4 G LTE phone having Sl.No.R 33 C50059El having IMEI No.359554043878258.
24.3 From the appreciation of the facts and circumstances, I find that submitting of Samsung 4 G LTE mobile phone by the appellant is vague as no IMEI number of the said phone has been mentioned in the statement dated 23.05.2016, wherein the said phone has been said to have been submitted by the appellant to Revenue Further, admittedly, recovery of data has been done behind the back of the appellant and such data is not supported by the appropriate certificate as required under Section 138 C (4) of the Act. Accordingly, I hold that the whatsapp data recovered by Revenue from the Samsung 4 G LTE phone is not reliable. The whatsapp data is also not reliable as no proper panchnama was drawn by Revenue at the time of receiving or recovery of the said phone.
24.4 Similarly, I hold that printouts of email submitted by the person concerned, Ms. Kanchan Sanyal of M/s. Unicorn Logistics, New Delhi is also not reliable. Further, admittedly, such documents are not authenticated by the Chinese Customs or any other competent authority.
24.5 So far the allegation of sending money to the Chinese supplier of differential amount through Hawala is concerned, I find that firstly the alleged Hawala Operator – Shri Tarun Baid has immediately retracted his statement on the very next day. Further, in spite of prayer of the appellant, Revenue failed to examine Shri Tarun Baid in the adjudication proceedings and also failed to offer its witnesses for cross examination. I further find that the statement of Shri Tarun Baid is not reliable also for the reasons that he has not been made a co-noticee in the show cause notice. Accordingly, I hold that the statement of Shri Tarun Baid is not a reliable piece of evidence.
24.6 So far the Valuation Report submitted by the Chartered Engineer, Shri R.K. Agarwal is concerned, who had valued the imported machines as USD 13,000 per machine. The appellant have disputed the valuation by Shri R.K. Agarwal, Chartered Engineer on the ground of competency and also on merits. The Chartered Engineer has been empowered to value only in case of import of second hand machinery under the Customs Valuation Rules. In case of new machinery, Rules require valuation to be done on the basis of contemporaneous imports (NIDB data). In absence of such data, authority is required to follow the Valuation Rules in seriatum, which has not been done. Further, the appellant have admittedly relied upon the data of contemporaneous imports (NIDB data), as stated in the Grounds of Appeal, wherein the appellant have stated that during the same period, there had been import of similar DB-C-16 model machine as USD 4545 vide bill of entry no.269206 dated 23.09.2015. Similarly, the same machine has also been imported by other importer at USD 4545 vide bill of entry no.3273858 dated 17.11.2015 and also vide bill of entry no.4414294 dated 29.02.2016. Revenue have not assigned any reasons for not adopting NIDB data. Admittedly, the appellant have declared a higher value of USD 5000 per machine.
24.7 I further find the show cause notice is bad as the same does not propose rejection of transaction value nor the demand of differential duty. Thus, I find that the show cause notice is both speculative and presumptive.
24.8 I also hold that statements of other persons recorded namely – Shri O.M. Shanghvi, Shri Yogesh Dutt Sharma and others are not reliable as none of such persons has been examined by Revenue in the adjudication proceedings nor were offered for cross-examination, which is in violation of the conditions precedent in Section 138 B of the Act.
It has been held by the Hon’ble Supreme Court in the case of Revenue’s appeal in Sanjivini Ferro Alloys, that Revenue cannot proceed to re‑ value the goods without first rejecting the transaction value in accordance with law. It was incumbent upon the Court Below to record reasons for rejection of declared value.
24.10 I also hold that the adoption of unit price of USD 12450 per machine is bad as the said price is in respect of import of only one machine. Hence, the same is not comparable, as in the present case the appellant have imported a lot of 16 machines.
24.11 So far the issue of jurisdiction raised by the appellant as to jurisdiction of DRI officers to issue show cause notice, in view of the ruling of the Apex Court in Canon India (supra), I leave the said ground open, in view of my findings on merits.
25. In view of my aforementioned observations and findings, I allow this appeal and set aside the impugned order. The appellant shall be entitled to consequential benefit, in accordance with law.
[ Order pronounced on 28-04-2023 ]
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