2020 (3) TMI 531 - AT - Customs

Mis-declaration of imported goods - Mobile Point of Sale (MPOS) Devices - POS (Point of Sale) devices - suppression of actual value of goods - undervaluation - non-inclusion of transfer/licence fee - non-submission of BIS and ETA/WPC licence - Confiscation - penalty - HELD THAT - The importer/appellant and its Executive Director Ms. Latha Priyadarshini were mis-classifying MPOS/POS consignments in utter disregard to the provisions of Customs Tariff Act and at their own free will and thus they have certainly resorted to mis-declaration and mis-classification of the import consignments with an intent to evade duty and to avoid compliance of other allied Acts as mentioned in preceding paras and thereby making all the import consignments liable for confiscation on this count under Section 111 of the Customs Act, 1962. Valuation of the import consignments of MPOS/POS - HELD THAT - The per unit price declared under various Bills of Entry have varied between U.S. 97 per unit to as low as U.S. 1.45 per unit for D-180 Model of MPOS. It has been established by the investigations that a Master Distribution Agreement has been signed by the appellant importer and its Executive Director Ms. Latha Priyadarshini with Pax Technology Ltd. Hongkong on 1 November 2014. On perusal of Appendix A of the master distributor agreement it reflects that the price of hardware of various models of the MPOS and POS have been provided by the Hongkong based company and it has very specially been provided that apart from the hardware price the licence fee for software for D series equipments of MPOS will be U.S. 45 per unit, for S series the licence fee was fixed at U.S. 60 per unit and for R series it was fixed at U.S. 40 per unit. This very fact indicates that the importing firm and its Executive Director were fully aware about the import value of the imported equipments - The arguments advanced by Ms. Latha Priyadarshini and the company are not acceptable in the facts and circumstances as well as legally as per the provision of Section 46 of the Customs Act, 1962 of sub-Section (iv) the importer presenting the Bill of Entry is required to subscribe to a declaration as to the truth and contents of Bills of Entry. Since the declarations made by the importer appellant and its director have been found grossly mis-declared on the counts of description, classification and value of the consignments. Ms. Latha Priyadarshini in her statement dated 19/01/2016 and other statement has admitted the facts of mis-declaration. There are no illegality in the conclusions reached in the impugned order-in-original regarding confiscation of the import consignments, confiscation of customs duty and with regard to imposition of penalty under various Sections of the Customs Act on the appellant importer and its Director Mrs. Latha Priyadarshini. We advice the Chief Commissioner to revisit the standard operating procedure in this regard to ensure that the system is enabled to take care of the instances where a blatant mis-declaration is avoided by the importers to bye-pass the Risk Management Module. We also direct the Chief Commissioner of Customs to consider whether it should be necessary to cause a vigilance enquiry to determine how the consignments were cleared when there were so many mis-declaration in description as well as classification of the imported Mobile Point of Sale equipments. Appeal dismissed.

Summary

Issues Involved: Mis-declaration of goods, undervaluation of goods, mis-classification of goods, non-compliance with BIS and WPC certification requirements, and the role of various parties in customs duty evasion.

Detailed Analysis:

1. Mis-declaration of Goods:
The appellants, including M/s Pax Technologies Pvt. Ltd., were found to have mis-declared the description of imported goods, such as MPOS devices, to avoid customs scrutiny and compliance with import regulations. The goods were declared under misleading descriptions like "paper rolls" and "barcode readers," which were far from their actual nature. This was done to circumvent the requirement of obtaining BIS and WPC certifications and to evade customs duty. The investigation revealed that the importer and its director, Ms. Latha Priyadarshini, were fully aware of the nature and value of the goods but chose to mis-declare them deliberately.

2. Undervaluation of Goods:
The goods were undervalued significantly below their actual transaction value. The Master Distribution Agreement between the importer and the supplier indicated the correct prices, which included hardware and software license fees. However, the declared values in the Bills of Entry were drastically lower, sometimes as low as USD 0.25 per unit. This undervaluation was a clear attempt to evade customs duty. The investigation confirmed that the importer and its director were aware of the correct values but chose to declare lower values to evade duty.

3. Mis-classification of Goods:
The imported goods were mis-classified under inappropriate Customs Tariff Headings to avoid higher duties and compliance requirements. For example, MPOS devices were classified under headings for paper products or plastic articles. The correct classification should have been under Chapter Heading 84713090, which pertains to Automatic Data Processing Machines. The investigation revealed that the importer and the clearing agents deliberately chose incorrect classifications to evade customs duty and compliance with BIS and WPC certifications.

4. Non-compliance with BIS and WPC Certification Requirements:
The imported MPOS devices required BIS certification and ETA from the WPC Wing of the Department of Telecommunication. The importer failed to obtain these mandatory certifications. Despite being aware of these requirements, the importer and its director chose to circumvent them by mis-declaring and mis-classifying the goods. This non-compliance rendered the goods liable for confiscation under Sections 111(d) and 111(m) of the Customs Act.

5. Role of Various Parties in Customs Duty Evasion:
The investigation highlighted the involvement of various parties, including Customs House Agents (CHAs), freight forwarders, and consultants, in facilitating the evasion of customs duty. The CHAs failed to verify the genuineness of the import documents and did not guide the importer about the statutory requirements. They filed Bills of Entry based on documents provided by unauthorized persons and mis-classified the goods. The freight forwarder and consultant also played crucial roles in the conspiracy by facilitating the clearance of goods without proper documentation and compliance.

Conclusion:
The judgment concluded that the appellants were involved in a deliberate and well-planned conspiracy to evade customs duty by mis-declaring, undervaluing, and mis-classifying the imported goods. The importer and its director were found to be the main architects of this conspiracy, with the active involvement of CHAs, freight forwarders, and consultants. The goods were rightly confiscated, and penalties were imposed under various sections of the Customs Act. The judgment also called for a systemic review and vigilance enquiry to address the lapses in customs clearance procedures and prevent such instances in the future.

(Order pronounced in open court on 12/03/2020)