2006 (1) TMI 43 - AT - Customs

Misdeclaration Alleged that appellant had mis-declared the description the goods under import and there was large evasion of tax and accordingly demanded for differential duty and penalty Authority find the allegation right and the prior decision was sustainable

Issues Involved:
1. Mis-declaration of description/weight/value of imported goods.
2. Valuation of pending consignments.
3. Reassessment of previously cleared consignments.
4. Evidence supporting duty evasion and misdeclaration.
5. Legality of using London Metal Exchange (LME) prices for valuation.
6. Availability and relevance of original assessment documents.
7. Specific evidence related to certain consignments.

Detailed Analysis:

1. Mis-declaration of Description/Weight/Value of Imported Goods:
The appellant was accused of mis-declaring the description, weight, and value of imported brass scrap/dross and copper scrap, leading to a significant evasion of duty. The Commissioner of Customs upheld these charges, confirming a duty demand of approximately Rs. 2.7 crores along with penalties.

2. Valuation of Pending Consignments:
The Commissioner enhanced the value of the pending consignments to 90 cents per pound for copper scrap and 63 cents per pound for brass scrap based on the London Metal Exchange (LME) prices for prime metal, which he correlated to scrap prices using a 100:85 ratio. The Tribunal found this method contrary to the Customs Valuation Rules, emphasizing that the valuation should be based on transaction value and comparable import prices. The Tribunal noted that the Commissioner's reliance on LME prices and the ratio was arbitrary and unsupported by commercial practice, especially since the scrap was 'ungraded.' Consequently, the Tribunal set aside the valuation, confiscation, duty demand, and penalties for the six pending consignments, directing their release at declared values.

3. Reassessment of Previously Cleared Consignments:
The Commissioner reassessed 173 consignments cleared over five years at uniform prices without considering differences in supplier, country of supply, and time of import. The Tribunal highlighted the illegality of this approach, noting that reopening assessments requires new material showing original assessments were erroneous. The Tribunal emphasized the importance of original assessment documents, which were largely unavailable. As a result, the Tribunal ruled that reassessments could only be considered for consignments with specific evidence, rejecting reassessment for 40 consignments with no Bills of Entry and 98 consignments with only exchange control copies.

4. Evidence Supporting Duty Evasion and Misdeclaration:
The Tribunal acknowledged specific evidence for 35 consignments, including documents seized from an ex-manager and statements indicating undervaluation and payments through Hawala. However, the Tribunal found that evidence related to these consignments could not be extended to others due to differences in time, supplier, and place of import.

5. Legality of Using LME Prices for Valuation:
The Tribunal accepted the appellant's submission that adopting LME prices was illegal. The Commissioner's method of deriving scrap prices from virgin metal prices was unsupported by the Customs Valuation Rules and commercial practice. The Tribunal noted that LME does not publish prices for metal scrap and that the Commissioner's derived values were arbitrary and fictitious, violating Rule 8(2)(vi) of the Customs Valuation Rules.

6. Availability and Relevance of Original Assessment Documents:
The Tribunal criticized the revenue for failing to produce original assessment documents, stressing that their absence undermines the case, especially since original assessments were contentious and finalized after detailed investigation and tests. The Tribunal noted that reassessment without original documents and files is impermissible, as it is impossible to verify the facts and materials known at the time of original assessments.

7. Specific Evidence Related to Certain Consignments:
The Tribunal found merit in the appellant's contention regarding supplies from all but BICC, Sharjah. The recovery of a higher-priced bank invoice from an ex-manager did not necessarily mean it was withheld from customs authorities. Correspondence showed disputes over quality and revised prices were accepted by assessing officers. However, for six consignments from BICC, Sharjah, the Tribunal found the working sheets of Shri Arun Jain, correlating with container numbers and higher prices, to be credible evidence of undervaluation. Thus, the Tribunal confirmed a differential duty demand of Rs. 6,44,916/- and a penalty of Rs. 3 lakhs for these consignments.

Conclusion:
The Tribunal set aside the duty demands and penalties imposed by the Commissioner, except for the confirmed duty demand and penalty for the six consignments from BICC, Sharjah. The appeals were ordered accordingly.

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