2004 (8) TMI 644 - Commission - Customs

Issues Involved:
1. Under-valuation of imported goods.
2. Mis-declaration of goods under incorrect Customs Tariff heading.
3. Determination of assessable value for duty calculation.
4. Imposition of penalties and interest.
5. Request for immunities from penalties and prosecution.

Issue-wise Detailed Analysis:

1. Under-valuation of Imported Goods:
The applicant company, M/s. Micro Village Communications Pvt. Ltd. (MVCPL), imported Total Control Hyper Hub Systems from 3 Com USA via M/s. Micro United Network Pvt. Ltd., Singapore (MUN). The goods were declared at a significantly lower price of US $ 3500 per unit, while the actual negotiated price with VSNL was US $ 15,101 per unit. The Department of Revenue Intelligence (DRI) alleged under-valuation based on the price list of 3 Com USA, which indicated a price of US $ 83,698 per unit with an admissible discount of 40%. The SCN proposed to assess the goods at US $ 50,219 FOB per system and demanded differential duty of Rs. 3,95,20,249/- along with interest.

2. Mis-declaration of Goods under Incorrect Customs Tariff Heading:
The SCN also alleged that the imported goods were mis-declared as parts of data processing machines under Customs Tariff heading 8473.30, while they should have been classified under CTH 8517.50 as Remote Access Servers. This mis-declaration was purportedly done to evade payment of higher duty.

3. Determination of Assessable Value for Duty Calculation:
The applicant argued that the negotiated price of US $ 15,101 per unit with VSNL, a government undertaking, should be accepted as the transaction value. The Department, however, contended that the heavy discount of 81.953% and the condition that the goods were to be sold only to VSNL justified their rejection of the declared value. The Bench found that the restriction on the disposition or use of goods by the buyer should apply to general trading imports, not project-specific imports like those for VSNL. The negotiated price with VSNL, being a government undertaking, and the absence of evidence of additional consideration, justified accepting US $ 15,101 per unit as the transaction value.

4. Imposition of Penalties and Interest:
The SCN proposed penalties under Section 114A and Section 112(a)(iii) of the Customs Act, 1962. The applicant had already paid Rs. 1 crore during the investigation and the balance of Rs. 2,17,413/- after the Admission Order. The Bench noted the considerable delay in discharging the duty liability and decided not to grant full immunity from interest. Instead, the applicant was granted immunity from interest in excess of simple interest @10% per annum.

5. Request for Immunities from Penalties and Prosecution:
The applicant requested immunities from penalties and prosecution, citing cooperation during the proceedings and payment of the admitted differential duty. The Bench granted immunity from confiscation, fine, penalty, and prosecution under the Customs Act, 1962, considering the applicant's cooperation and the facts of the case.

Conclusion:
The case was settled with the following terms and conditions:
(i) Differential duty liability fixed at Rs. 1,26,38,821/-, already paid by the applicant.
(ii) Immunity granted from confiscation, fine, penalty, and prosecution.
(iii) Immunity from interest in excess of simple interest @10% per annum, with Revenue to calculate and communicate the interest payable to the applicant.

The judgment emphasized the acceptability of the negotiated price for project-specific imports, the importance of cooperation during proceedings, and the balance between granting immunities and ensuring compliance with duty payments.

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