2002 (8) TMI 433 - Commission - Customs

Summary

Issues Involved:
1. Under-valuation of imported goods.
2. Presentation of fabricated documents to Customs.
3. Admissibility of the Settlement Commission applications.
4. Full and true disclosure of duty liability.
5. Acceptance of the alleged discount by the foreign supplier.

Detailed Analysis:

1. Under-valuation of Imported Goods:
The main applicant, engaged in setting up kitchens, bedrooms, and bathrooms, imported kitchen furniture components and pre-fabricated housing materials. The Directorate of Revenue Intelligence (DRI) alleged that the applicant under-valued these imports, presenting fabricated invoices from a front company, M/s. SRL, Italy, instead of the actual supplier, M/s. Veneta Cuicine. The under-valuation was estimated to be between 60% and 75%, as evidenced by a fax message and other documents recovered during a raid.

2. Presentation of Fabricated Documents to Customs:
The Show Cause Notices (SCNs) issued alleged that the applicant presented fabricated documents to Customs, leading to the under-valuation of goods. The SCNs proposed re-determination of value by adding 65% of the original price to the declared assessable value under Rule 8 of the Customs Valuation Rules, 1988, read with Section 14 of the Customs Act, 1962. This resulted in demands for differential duty and proposed penalties and confiscations.

3. Admissibility of the Settlement Commission Applications:
The applicant admitted partial duty liability but contested the evidence and the methodology used by the Revenue for valuation. They argued that the extra payments by customers were for civil and related works, not for the value of imported goods. The applicant claimed substantial discounts from the overseas supplier as standard international practice, supported by certain letters.

4. Full and True Disclosure of Duty Liability:
The Settlement Commission emphasized that under Section 127B of the Customs Act, 1962, an applicant must make a full and true disclosure of duty liability and explain the manner in which it was incurred. The Commission found that the applicant neither admitted guilt nor provided an explanation for the alleged under-valuation. The willingness to discharge duty on certain discounts did not meet the requirement of full disclosure. The Commission referenced the Wanchoo Committee's recommendations and the Supreme Court's judgment in Commissioner of Income Tax v. Express Newspapers Limited, which stressed the need for full disclosure and explanation of the modus operandi.

5. Acceptance of the Alleged Discount by the Foreign Supplier:
The applicant's claim of receiving substantial discounts was not corroborated by independent evidence. The Commission noted inconsistencies in the discount rates and questioned the applicant's willingness to forego genuine discounts. The Commission concluded that the applicant had not provided acceptable evidence to support their claim of additional duty liability being limited to the admitted amount.

Conclusion:
The Settlement Commission rejected the applications for failing to satisfy the requirements of full and true disclosure of duty liability and indicating the manner in which such liability was incurred. Consequently, the applications filed by the co-applicant were also rejected.