2023 (4) TMI 880 - AT - Customs

Levy of penalty - guar gum was of food grade or not - Revenue s contention that it is of food grade is based on the test reports of AES to whom the samples were sent by CRCL - valuation should be based on transaction value or not - Rejection of transaction value - determination of value based on the contemporaneous values available in the NIDB - HELD THAT - The appellant did not dispute the samples being sent to this laboratory and in fact, had paid the fee for the testing also. Learned authorised representative for the Revenue has produced before the covering letter under which the samples were sent to the CRCL for testing which were further forwarded to AES. All samples which are drawn are entered in a register by the Customs and the entry number in the registered gives the correlation with the sample and these numbers were further correlated with the test reports. For these reasons, the test reports of AES credible and they state that the imported guar gum was of food grade. The test report of Balaji and the declaration of the Director of Balaji submitted during the hearing were examined. Neither the test report nor the declaration state any marks and numbers of the samples which were tested. Therefore, it is not satisfied that the test report of Balaji pertains to the imported goods and the samples which were tested were those samples which were drawn in the presence of both sides. Needless to say that any test report is as good as the sample which was tested. Unless the report can be correlated with the sample, the test report cannot be relied upon. Also the test report of Balaji mentions at the top See note 150 E(f) Under the Drugs and Cosmetics Act, 1940 and the Rules made thereunder and indicates against different parameters I.P. which apparently refers to the standards of Indian Pharmacopeia. The test conducted by Balaji is to check the imported guar gum against pharmacopeial standards and in so testing, it found that the total microbial content was higher than what was permissible as per IP. All other parameters were within the pharmacopeial standards. This report nowhere states that it tested the samples to check if the guar gum is of food grade or that it is not of food grade and it does not advance the case of the appellant that the imported guar gum is not of food grade. The appellants contention that valuation should be based on the transaction value is not correct for four reasons. Firstly, the quantity of the goods is much larger than what was declared. Secondly, the buyer and seller are related parties. Thirdly, the grade of the guar gum has been mis-declared by the appellant as not of food grade but on testing, it is found to be of food grade. Fourthly, the declared value is Rs 19.264 per kg as opposed to the contemporaneous import prices of Rs. 424.95 per kg. For all the reasons, the impugned order is correct in rejecting the transaction value and determining the value based on the contemporaneous values available in the NIDB. The impugned order is correct in rejecting the transaction value and re-determining the value based on the contemporaneous values of imports available in NIDB - Undisputedly, Shri Puri and Shri Malhotra were involved in the mis-declarations and therefore, the impugned order is correct in imposing penalties on them. All three appeals are rejected.

Summary

Issues Involved:
1. Mis-declaration of the quantity of imported goods.
2. Relationship between the importer and the overseas supplier.
3. Grade of the imported guar gum.
4. Valuation of the imported goods.
5. Imposition of penalties on the directors.

Summary:

1. Mis-declaration of Quantity:
The appellant, M/s. Nanz Med Science Pharma Pvt. Ltd. (Nanz), imported guar gum and declared a quantity of 32,580 kg. However, the actual quantity imported was found to be 34,260 kg, resulting in an excess of 1,680 kg. This mis-declaration was not disputed by the appellant.

2. Relationship Between Importer and Supplier:
The appellant initially declared that the overseas supplier and itself were not related buyers. However, upon investigation, it was found that they were related parties as per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. This relationship was also not disputed by the appellant.

3. Grade of Imported Guar Gum:
The appellant declared the guar gum as not of food grade or pharma grade. Samples tested by the Central Revenue Control Laboratory (CRCL) and AES Laboratories (AES) confirmed that the guar gum was of food grade. The appellant presented a contradictory report from Balaji Test Lab, but the tribunal found the AES report more credible due to procedural integrity in sample collection and testing.

4. Valuation of Imported Goods:
The declared value of the guar gum was Rs. 19.264 per kg, significantly lower than the contemporaneous import price of Rs. 424.95 per kg. The tribunal upheld the rejection of the transaction value and re-assessed the value based on contemporaneous imports data from the National Import Data Base (NIDB), given the mis-declaration of quantity, related party status, and mis-declared grade of the guar gum.

5. Imposition of Penalties:
Penalties were imposed on Nanz and its directors, Shri Manmit Singh Malhotra and Shri Lakhvinder Pal Singh Puri, under Sections 112(a)(ii) and 114AA of the Customs Act, 1962, for their involvement in the mis-declarations. The tribunal found the penalties justified given their roles in the violations.

Conclusion:
The tribunal upheld the impugned order, rejecting all three appeals and affirming the reassessment of the value, confiscation of goods, and imposition of penalties. The order was pronounced on 18/04/2023.