2011 (8) TMI 717 - AT - Customs

Validity of demand of duty under Section 28 - Appellant contended that department did not review the assessments made in the bills of entry at the time of importation before issuance of SCN under Section 129D - Held That - The conention of the appellant is not legal - In view of hon ble apex Court in UOI Vs. Jain Shudh Vanaspati (1991 -TMI - 43455 - SUPREME COURT OF INDIA), in case of Short levy or non-levy or short payment or non-payment or erroneous refund, show-cause notice under Section 28 for recovery of duty can be issued and the proceedings are sustainable. Competency of the ADG, DGCEI to issue show-cause - Officers of DGCEI have been appointed as officers of Customs vide Notification No.31/2000-Cus (NT) - Notification does not indicate any area of jurisdiction - Held That - We do not find any merit in this argument. In case of Konia Trading Co. Vs. CC, Jaipur (2004 -TMI - 48997 - CESTAT, NEW DELHI) held that DRI officers can issue show-cause notices once they are appointed as Customs officers. In the instant case, the DGCEI officers have been appointed as Customs Officers under Section 4 of the Customs Act. The only objection of the appellant seems to be that in Notification No.31/2000, the area of jurisdiction of the DGCEI officers has not been specified. If no area is specified, it has to be presumed that the jurisdiction is all India. Valuation of goods - inclusion of value certain items - The appellant s contention for the exclusion of payments made to Nichimen, Japan, under the two agreements is that if this value is included in the assessable value of the goods under importation, then the assessable value per body will work to ₹ 49 to ₹ 51 lakh whereas the complete vehicle is being sold in the market at a price ranging from of ₹ 6 to 8 lakhs. Therefore, there is something fundamentally wrong in the value computed in the show-cause notice. - Held that - Without these models, soft tools, soft jigs/fixtures, the BIWs and panels which were imported could not have been produced at all. Therefore, these costs have to be necessarily added to the value of the imported goods for the purpose of levy customs duty in terms of the provisions of Rule 9 (1) (b) (ii) and (iv) of the Customs Valuation Rules and we hold accordingly. Valuation of goods - inclusion of design and engineering charges - held that - the considerations paid to M/s Nichimen in terms of the agreements dated 20-11-98 and 4-1-2000 shall be added to the price actually paid for the imported goods in terms of Rule 9 (1)(b) (ii) and Rule 9 (1) (b) (iv) of the Customs Valuation Rules,1988. Exclusion from valuation - income tax / TDS paid on behalf of foreign vendor - Merely, because the appellant is obliged to deduct the tax at source and pay to the exchequer on behalf of the foreign supplier, it does not mean that the tax is payable by the appellant buyer/importer or the tax is on the goods. Extended period of limitation - Held That - The appellant/importer did not declare the various charges paid to HW, UK and Nichimen, Japan towards various services rendered. Thus, there is a willful mis-declaration made by the appellant with an intent to evade payment of appropriate customs duty. Therefore, the argument of the appellant the extended period of time could not be invoked is un sustainable. Confiscation and imposition of redemption fine in lieu of confiscation - Held That - The goods were not available physically, no actual confiscation would have been possible. When the goods are not available for confiscation, imposition of fine under Section 125 of the Customs Act can not be made unless the goods had been previously released under bond. Penalty under Section 112 (a) - Held That - Shri R.U. Prabhu was only an employee of the appellant and he did not stand to gain personally by making the wrong declarations. In as much as the appellant has been penalised, we are of the view that penalty on Sri. Prabhu is not warranted and accordingly we set aside the same.

Issues Involved:
1. Demand of differential customs duty under Section 28 of the Customs Act, 1962.
2. Jurisdiction of Additional Director General, DGCEI to issue show-cause notice.
3. Inclusion of payments made to HW, UK and Nichimen, Japan in the assessable value of imported goods.
4. Applicability of extended period for demand of duty.
5. Confiscation of goods and imposition of redemption fine.
6. Imposition of penalty on the appellant and its employee under Section 112 (a) of the Customs Act, 1962.
7. Liability to pay interest under Section 28AB of the Customs Act, 1962.

Detailed Analysis:

1. Demand of Differential Customs Duty:
The Tribunal upheld the demand of differential customs duty amounting to Rs. 7,78,67,696/- under Section 28 of the Customs Act, 1962. It was held that the department did not need to review the assessments made in the bills of entry under Section 129D before issuing a show-cause notice under Section 28. The Tribunal cited the Supreme Court's decision in UOI Vs. Jain Shudh Vanaspati Ltd., which clarified that a show-cause notice under Section 28 can be issued subsequent to the clearance of goods under Section 47.

2. Jurisdiction of ADG, DGCEI:
The Tribunal rejected the appellant's contention that the ADG, DGCEI lacked jurisdiction to issue the show-cause notice. It was noted that the DGCEI officers had been appointed as Customs Officers with all India jurisdiction under Notification No.31/2000-Cus (NT) dated 09/05/2000. The Tribunal referred to the case of OMI Textile Vs. CC&CE, Nashik, where it was held that DGCEI officers could issue show-cause notices once appointed as Customs officers.

3. Inclusion of Payments in Assessable Value:
The Tribunal held that the payments made to HW, UK, and Nichimen, Japan, for design and engineering services were necessary for the production of the imported goods and should be included in the assessable value under Rule 9 (1) (b) (ii) and (iv) of the Customs Valuation Rules, 1988. The Tribunal noted that the designs and engineering services provided by HW and Nichimen were used in the production of the imported BIWs and panels and had a proximate nexus to the production process.

4. Applicability of Extended Period:
The Tribunal upheld the invocation of the extended period for demand of duty, noting that the appellant had willfully misdeclared the value of the imported goods by not disclosing the payments made to HW and Nichimen. The Tribunal emphasized that the appellant was required to declare all costs and services not included in the invoice value as per Rule 9 of the Customs Valuation Rules, 1988.

5. Confiscation and Redemption Fine:
The Tribunal held that the imported goods were liable for confiscation under Section 111 (m) of the Customs Act, 1962, due to misdeclaration of value. However, since the goods were not available for confiscation, the Tribunal set aside the imposition of a redemption fine of Rs. 3.00 crore.

6. Imposition of Penalty:
The Tribunal upheld the imposition of a penalty of Rs. 1.5 crore on the appellant under Section 112 (a) of the Customs Act, 1962, for willful misdeclaration of value and evasion of customs duty. The Tribunal rejected the appellant's contention that the penalty could not exceed 25% of the duty demanded, noting that the penalty imposed was less than 25% of the duty confirmed. However, the Tribunal set aside the penalty imposed on Shri R.U. Prabhu, Dy. General Manager of the appellant company, as he was only an employee acting on behalf of the company.

7. Liability to Pay Interest:
The Tribunal allowed the department's appeal regarding the liability to pay interest under Section 28AB of the Customs Act, 1962. It was held that interest was leviable on the differential duty demanded under Section 28 in cases involving suppression, fraud, collusion, etc., even if the clearances took place prior to 11/05/2001.

Conclusion:
The Tribunal confirmed the demand of differential duty and interest, upheld the liability to confiscation of goods, set aside the redemption fine, upheld the penalty on the appellant, and set aside the penalty on the appellant's employee. The appeals were disposed of accordingly.

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