1983 (8) TMI 293 - AT - Customs

Issues Involved:

1. Loading of invoices by 100% of the f.o.b. value.
2. Charge of mis-declaration under Section 111(m) of the Customs Act, 1962.
3. Levy of penalty under Section 112 of the Customs Act, 1962.
4. Special relationship between the appellants and OAK.
5. Application of Section 14(1)(b) versus Section 14(1)(a) of the Customs Act, 1962.
6. Invocation of the proviso to Section 28 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Loading of Invoices by 100% of the f.o.b. Value:

The appellants challenged the Collector's order of loading the invoices by 100% of the f.o.b. value, arguing that their declared values were in accordance with Section 14(1) of the Customs Act, 1962. They contended that the Collector's decision was based on a few stray importations by other parties, which should not be the basis for loading their invoices. The Tribunal found that the Collector was justified in applying the best judgment formula but held that the figure of 100% was on the higher side. Instead, the Tribunal decided to load the invoices by 50% of the f.o.b. value, considering 5% towards royalty expenses, 7.5% as over-riding commission, and 37.5% towards overhead and administration expenses.

2. Charge of Mis-declaration under Section 111(m) of the Customs Act, 1962:

The appellants refuted the charge of mis-declaration, asserting that their transactions with OAK were on a principal-to-principal basis and that all relevant documents were duly presented to the Customs authorities. The Tribunal, however, found that the appellants had not made true declarations regarding their relationship with OAK on the bills of entry, which constituted deliberate suppression of material evidence. Thus, the charge of mis-declaration under Section 111(m) was upheld.

3. Levy of Penalty under Section 112 of the Customs Act, 1962:

The Collector had imposed a personal penalty of Rs. 5 lakhs under Section 112 of the Act. The Tribunal agreed with the imposition of the penalty but reduced the amount to Rs. 1 lakh, considering the circumstances of the case.

4. Special Relationship between the Appellants and OAK:

The appellants argued that their dealings with OAK were strictly commercial and that OAK's 45% equity participation did not constitute a special relationship. The Tribunal, however, found that the appellants and OAK had common commercial interests beyond mere equity participation. Factors such as a common Chairman, the right to an over-riding commission, and the receipt of inter-company price lists indicated a special relationship. Therefore, the Tribunal concurred with the Collector's finding that the imports had to be assessed under Section 14(1)(b) of the Act.

5. Application of Section 14(1)(b) versus Section 14(1)(a) of the Customs Act, 1962:

The appellants contended that their invoice prices should be assessed under Section 14(1)(a), which pertains to transactions without mutual business interests. The respondent argued that Section 14(1)(b) was applicable due to the special relationship between the appellants and OAK. The Tribunal agreed with the respondent, concluding that the transactions fell under Section 14(1)(b).

6. Invocation of the Proviso to Section 28 of the Customs Act, 1962:

The appellants argued that invoking the proviso to Section 28 for past imports was illegal since they had been regularly importing goods and complying with customs formalities. The Tribunal found that the appellants had made incomplete or incorrect declarations regarding their relationship with OAK, justifying the invocation of the proviso to recover duties short levied for the past period.

Conclusion:

The Tribunal upheld the Collector's order with modifications. The loading of invoices was reduced to 50%, and the penalty was reduced to Rs. 1 lakh. The appeal was disposed of accordingly.

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