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2010 (8) TMI 685 - AT - CustomsDemand - Evasion of duty - Undervaluation - Investigation revealed that the HSBs (except M/s. Visen Industries Ltd. and M/s. Pidilite Industries Ltd.) had entered into long term contract (usually valid for an year) with SPL for purchase of Styrene Monomer (SM) on HSS basis - Even if it was assumed that appellants were liable to pay duty on the total amount paid to SPL charges paid for post importation facilities were required to be deducted to arrive at the correct assessable value - Till issuance of Circular No. 32/2004-Cus. dated 11-5-2004 Public Notice No. 145/2002 dated 3-12-2002 of the Custom House had prescribed addition of 2% towards HSS commission to the original invoice for computation of value for assessment of goods purchased on HSS basis - As rightly argued by the Revenue in the case of warehoused goods the process of import is complete only when the goods cross the customs barrier viz. when the goods are cleared for home consumption from the warehouse on payment of duty Regarding time limitation - As per the declaration in the Bills of Entry the transaction was governed by the HSS contract and there was no other contract relevant to the value - this was a conscious and deliberate mis-declaration made by each of the HSBs in respect of each of the impugned imports. Therefore the Commissioner rightly invoked the larger period to confirm the demands Regarding penalty - Held that penalty imposed on each of the HSBs under Section 114A equal to the duty evaded is sustainable in view of our finding of deliberate suppression of payment of additional amounts for high seas purchase of SM. We consider the penalty of Rs. 3, 00, 00, 000/- imposed on SPL under Section 112(a) of the Act to be on the higher side - As rightly argued penalties could not be imposed on them u/s 114A as the provision is for imposing equal penalty as the duty on a person from whom duty is demanded u/s 28 (2) of the Act; there is no such demand on them - Appeals are partly allowed
Issues Involved:
1. Sustainability of demand of differential customs duty on the service charges paid by HSBs to SPL invoking larger period. 2. Sustainability of demand raised on SPL under Section 28B of the Act. 3. Sustainability of penalties under Section 114A and fine under Section 125 imposed on HSBs. 4. Sustainability of penalty imposed on SPL under Section 112. 5. Sustainability of penalty imposed on employees of SPL and HSBs under Sections 112/114A. Detailed Analysis: 1. Sustainability of demand of differential customs duty on the service charges paid by HSBs to SPL invoking larger period: The Revenue's case was that HSBs paid consideration on HSS of SM by SPL as per undisclosed contracts, submitting false HSS contracts for imports. SPL recovered a basic price plus service charges, including barge charges, demurrage, transport, storage, and interest. The HSBs declared lower prices, suppressing the transaction value as per supply contracts to avoid paying duty. The judicial authorities supported the demand invoking a larger period, making the demands for short levy raised on HSBs sustainable. The Tribunal found that HSBs' argument of following industry practice was invalid as they deliberately misdeclared values. 2. Sustainability of demand raised on SPL under Section 28B of the Act: SPL argued that it did not collect the amount of Rs. 62,50,241/- as representing customs duty but towards adjustment of the total cost. Section 28B applies when an amount is collected as representing duty of customs and not deposited with the Government. The Tribunal found that the demand could only be raised if SPL, liable to pay duty, collected an amount representing customs duty. As HSBs were the importers liable to pay duty, the demand raised against SPL under Section 28B was vacated. 3. Sustainability of penalties under Section 114A and fine under Section 125 imposed on HSBs: The Tribunal found that the HSBs' deliberate misdeclaration of values rendered the goods liable to confiscation under Section 111(m) of the Act. Penalties under Section 114A equal to the duty evaded were sustainable due to deliberate suppression of payment of additional amounts for high seas purchase of SM. However, fines were set aside as the goods had already been released without any undertaking or bond executed by the HSBs, following the settled law that fine could not be ordered when goods are not available for confiscation. 4. Sustainability of penalty imposed on SPL under Section 112: The Tribunal found that SPL connived with its buyers, executing HSS contracts to evade customs duty by the HSBs. SPL abetted misdeclaration of value, rendering the goods liable for confiscation under Section 111(m) of the Act. Although SPL was not the primary beneficiary, its complicity warranted liability to penalty. Considering the totality of the case, the penalty imposed on SPL was reduced from Rs. 3,00,00,000/- to Rs. 50,00,000/-. 5. Sustainability of penalty imposed on employees of SPL and HSBs under Sections 112/114A: The Tribunal found no specific findings on the role of employees in the offending transactions. Penalties under Section 114A could not be imposed on individuals as they were not liable to pay any duty. Since the appellants operated through their employees/executives, separate penalties under Section 112(a) were deemed unnecessary. Consequently, penalties imposed on employees were vacated. Conclusion: The Tribunal upheld the demand of differential customs duty on HSBs and penalties under Section 114A. The penalty on SPL was reduced, and the demand under Section 28B was vacated. Penalties on employees were also vacated, and fines were set aside due to the unavailability of goods for confiscation. Appeals were partly allowed, with individual appeals fully allowed.
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