2016 (1) TMI 551 - AT - Customs

Under valuation and mis-declaration of the goods namely AB King Pro, 5 in 1 Air-O-Space Sofa, Slim-N-Lift (Female Shorts), Magic Bullet (Food Processors), Sauna Belt (Fat Reduce Belt), Tool Kits - In one of the statement undervaluation was admitted by Shri Narendra Mehta, proprietor of importer firm. However, the said statement was retracted. Undervaluation was further supported by the difference in the value declared to the Custom, sale price of importer to M/s. Telebrand and sale price of the Telebrand to their ultimate customers, the difference thereof was also considered for alleging the undervaluation. Held that - at the time of assessment and clearance of the goods, the customs officers have already enhanced the value considering the contemporaneous value of the identical goods. As per Rule 5 and 6 of the Customs Valuations Rules, 1988 where there are two or more values of contemporaneous imports are available the lowest of such value has to be adopted. - herefore even though it is assumed that price of the M/s. Shreenath and M/s. GNG & Co. are correct, the price of contemporaneous goods adopted at the time of assessment and clearance of the goods which is lowest between the two contemporaneous value, the further enhancement cannot be done. In this legal position, the adjudicating authority has erred in applying the alleged value of M/s. Shreenath and M/s. GNG & Co. for enhancement of the value. In the case of present appellant, this legal position has been reinforced by the case of SRK enterprises 2012 (11) TMI 735 - CESTAT, MUMBAI The impugned order has given much weightage to the fact that there is substantial difference in price declared to the customs, price at which goods sold to M/s. Telebrand India and price at which imported goods were sold by M/s. Telebrand to the ultimate customers. On this basis Ld. Commissioner observed that this difference in price shows that prices of the imported goods were undervalued. In this regard, it is our observation that firstly even if there is difference between import price and sale price of the said goods in the domestic market, the difference cannot be made the basis for holding that the price of the imported goods has been undervalued. In the present case there is no material evidence on record to show that there is flow back of amount over and above the sale value between importer and M/s. Telebrand India. Demand set aside - Decided in favor of appellants.

Summary

Issues Involved:
1. Undervaluation of imported goods.
2. Enhancement of value based on contemporaneous imports.
3. Admissibility and reliability of evidence.
4. Invocation of extended period of limitation.
5. Validity of penalties imposed.

Detailed Analysis:

1. Undervaluation of Imported Goods:
The case revolved around the allegation that M/s. Rico Gems Corporation and others were evading customs duty by undervaluing imported goods. The investigation revealed that M/s. Telebrand India Pvt. Ltd. negotiated the price of goods with foreign suppliers, and M/s. Rico Gems Corporation acted on their behalf. Statements from various individuals, including Shri Narendra Mehta, admitted undervaluation, but these statements were later retracted. The Commissioner confirmed the charges based on the difference between the declared value and the actual value as per the Hong Kong Customs report.

2. Enhancement of Value Based on Contemporaneous Imports:
The Commissioner enhanced the value of goods imported by M/s. Rico Gems Corporation based on the prices of similar goods imported by M/s. Shreenath and M/s. GNG & Co. However, it was noted that the customs department had already enhanced the value at the time of import based on contemporaneous imports. The Tribunal held that further enhancement of value is not permissible once the value has been enhanced based on contemporaneous imports, citing several judgments, including Commissioner of Customs (Prev.), Mumbai Vs. Paras Electronics and Vittessee Export Import Vs. Commissioner of Customs (EP), Mumbai.

3. Admissibility and Reliability of Evidence:
The Tribunal found that the evidence relied upon by the Commissioner, including the report from Hong Kong Customs, was not admissible under Section 139 of the Customs Act, 1962, as it lacked authenticated copies of invoices and bore a caveat against use in proceedings. The Tribunal also noted that the statements of Shri Narendra Mehta were not signed by a Gazetted officer and were retracted, making them inadmissible as evidence. The Tribunal emphasized that mere price negotiation by M/s. Telebrand India does not establish undervaluation without evidence of payment over and above the declared value.

4. Invocation of Extended Period of Limitation:
The Tribunal held that the extended period of limitation under Section 28(1) of the Customs Act, 1962, was not applicable as the basis for enhancement was already available with the department at the time of import and assessment. The Tribunal cited the case of Milton Plastics Ltd., stating that demand for a longer period cannot be made when the enhancement of price is based on contemporaneous imports. The Tribunal concluded that the demand was time-barred.

5. Validity of Penalties Imposed:
The Tribunal set aside the penalties imposed on M/s. Rico Gems Corporation and its proprietor under Sections 114A and 112(a) of the Customs Act, 1962, respectively. The Tribunal noted that a proprietary firm and its proprietor are the same entity in law, and imposing penalties on both amounts to double jeopardy. The Tribunal also found no evidence to support the penalties imposed on M/s. Telebrand India Pvt. Ltd. and Shri Hitesh Israni, as there was no proof of their involvement in undervaluation.

Conclusion:
The Tribunal set aside the impugned order, holding that the enhancement of the value of goods imported by M/s. Rico Gems Corporation was not correct on merit and was also time-barred. Consequently, the demand for customs duty, confiscation of goods, fines, and penalties were not sustainable. All appeals were allowed with consequential reliefs in accordance with the law.