2017 (12) TMI 1571 - HC - Customs

Imposition of Safeguard Duty - N/N. 71/2009 dated 19.6.2009 - justification for imposition of Safeguard Duty when the manufactures certificate reflected 6 microns as the thickness at the time of export recognizing the concept of transaction value as per provision of section 14 of the Customs Act 1962 read with WTO Valuation Agreement (Earlier GATT Valuation Code) - Cross-examination of witnesses sought at appellate stage - whether the cross-examination as sought could be allowed? - Held that - Before proceeding with the matter it will not be out of place to mention that on the cross examination it is right of the assessee and such request should be made at the very first opportunity when it is available i.e. before adjudicating authority and not after adjudicating authority accepts the report and decides the matter against the assessee - The cross examination or request for referring the matter to the expert laboratory should be made at the very first time and if such request is made then only the laboratory should decide thickness quality after physical verification of the product. However such request cannot be made the appellate stage. In the present case if the appellant would have made such request at the first stage then it could have been open for the authority to send the product for further examination at the cost of the appellant. However in the present case no such request was made and therefore the authorities upto the tribunal have correctly accepted the report of Shriram Institute. Reference to Tolerance Limit - Whether non grant of tolerance limit factor in the micron calculation as fixed by BIS (Bureau of Indian Standards) makes the report unreliable specially when there are contradictory results of highest order in the different reports? - Held that - Benefit of tolerance limit cannot be granted to the appellant and the liability of duty is ascertained as per actual thickness of the product. Personal penalty U/S 114A of CA - Held that - The appellant has bonafidely imported products pursuant to the invoices which were received from the manufacturer. In that view of the matter for penalty we are of the opinion that present case being the first instance for mis-declaration on part of the appellant we absolve appellant from penalty and personal penalty - penalty waived. Appeal dismissed.

Issues Involved:
1. Justification of safeguard duty imposition under Notification No.71/2009.
2. Reliability of contradictory CRCL reports.
3. Non-grant of tolerance limit factor in micron calculation.
4. Violation of principles of natural justice due to non-grant of cross-examination.
5. Justification of personal penalty under Section 114A of the Customs Act.
6. Simultaneous penalty on importer company and its director.

Detailed Analysis:

1. Justification of Safeguard Duty Imposition:
The appellant contested the imposition of safeguard duty on imported aluminum foils, arguing that the manufacturer's certificate indicated a thickness of 6 microns, which should be recognized under the concept of transaction value as per Section 14 of the Customs Act, 1962, and the WTO Valuation Agreement. However, the tribunal upheld the safeguard duty, emphasizing that multiple tests conducted by CRCL and an independent laboratory consistently reported the thickness as 7 microns or more, thus justifying the duty imposition.

2. Reliability of Contradictory CRCL Reports:
The appellant challenged the reliability of CRCL reports, which showed significant discrepancies in the thickness measurements of the same sample. The tribunal noted that despite variations, all reports indicated a thickness of 7 microns or more, which contradicted the appellant's declaration of 6 microns. The tribunal found the appellant's argument unconvincing and upheld the CRCL reports' findings, stating that the competent labs had the necessary expertise to conduct such tests.

3. Non-Grant of Tolerance Limit Factor:
The appellant argued that the non-grant of the tolerance limit factor in the micron calculation, as fixed by BIS, rendered the reports unreliable. The tribunal rejected this argument, stating that the liability of duty is ascertained based on the actual thickness of the product, and the benefit of the tolerance limit could not be granted to the appellant.

4. Violation of Principles of Natural Justice:
The appellant contended that the non-grant of cross-examination of the CRCL Chemical Examiner and other report writers violated the principles of natural justice. The tribunal and the High Court held that the request for cross-examination should have been made at the adjudicating authority stage and not at the appellate stage. Since the appellant did not seek cross-examination initially, the authorities correctly accepted the CRCL report, and the principles of natural justice were not violated.

5. Justification of Personal Penalty under Section 114A:
The appellant argued that the imposition of personal penalty under Section 114A of the Customs Act was unjustified as there was no intent to suppress, misstate, or evade duty. The High Court found merit in this argument, noting that the appellant had imported the products based on the manufacturer's invoices and had no intention to misdeclare. Consequently, the court absolved the appellant of the penalty, considering it a first instance of mis-declaration.

6. Simultaneous Penalty on Importer Company and its Director:
The appellant questioned the simultaneous imposition of penalties on the importer company and its director. The High Court, while absolving the appellant of the personal penalty, implicitly addressed this issue by waiving the penalties, thus providing relief to both the company and its director.

Conclusion:
The High Court dismissed Appeal No.2/2016, upholding the tribunal's decision on the imposition of safeguard duty and the reliability of CRCL reports. However, in Appeal No.1/2016, the court waived the penalties imposed on the appellant, recognizing the lack of intent to misdeclare and the appellant's bona fide reliance on the manufacturer's invoices. The court emphasized the importance of seeking cross-examination at the earliest opportunity and upheld the actual thickness as the basis for duty liability.

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