2001 (11) TMI 126 - AT - Customs

Issues Involved:
1. Confiscation of goods under Section 111(m) of the Customs Act, 1962.
2. Determination of the value of imported goods.
3. Imposition of redemption fine and penalties under Section 112 of the Customs Act, 1962.
4. Validity of the declared value and invoice.
5. Justification for adding a profit margin to the value of goods.
6. Appeals by importers for vacation of penalties and fine.
7. Appeal by Revenue for enhancement of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Confiscation of Goods:
The Commissioner of Customs & Central Excise, Goa, confiscated the consignment of I.Cs imported by M/s. U.K. Enterprises under Section 111(m) of the Customs Act, 1962, on the grounds of under-valuation. The consignment was declared at Rs. 2.3 lakhs (CIF Goa) but was determined to be worth Rs. 23.4 lakhs (FOB).

2. Determination of Value:
The consignment was declared as 20 cartons of electronic components with 11282 I.Cs. The Directorate of Revenue Intelligence (DRI) examined the consignment and found that the I.Cs were products of renowned manufacturers like Philips, Motorola, and NEC. The value provided by these manufacturers indicated that the declared value was significantly lower than the actual value. The Commissioner added 10% towards the profit margin of the Hong Kong dealer, fixing the value at Rs. 23.4 lakhs.

3. Imposition of Redemption Fine and Penalties:
The Commissioner imposed a redemption fine of Rs. 2.5 lakhs and penalties of Rs. 50,000 each on M/s. U.K. Enterprises, Shri Devender Kumar Chopra, and Shri Jawahar Lal Luthra under Section 112 of the Customs Act. The appeals sought to vacate these penalties and fines, while the Revenue appealed for their enhancement.

4. Validity of Declared Value and Invoice:
The appellants contended that the goods were bought as a stock lot from a Chinese supplier at the declared price. However, the Commissioner found that the invoice from the Chinese supplier was fictitious and the transaction was actually between M/s. U.K. Enterprises and M/s. Asia Lucky Industrial Ltd., Hong Kong. The declared value was found to be grossly under-stated.

5. Justification for Adding Profit Margin:
The customs authorities justified adding a 10% profit margin to the value of the goods, considering the goods were first shipped to Hong Kong and then to India. This addition was deemed necessary to account for the costs and non-banking transactions involved.

6. Appeals by Importers:
The importers argued that the goods were a stock lot and the investigation did not prove the link between the Chinese supplier and the goods shipped from Taiwan to Hong Kong. They also contended that the customs authorities should have assessed the goods based on the value of comparable imports. These appeals were rejected as the evidence showed that the declared value was fictitious and the real transaction was between the Indian and Hong Kong parties.

7. Appeal by Revenue:
The Revenue argued that the Commissioner should have imposed higher redemption fines and penalties given the gross under-valuation and premeditated tax fraud. The Tribunal agreed, enhancing the redemption fine to Rs. 10 lakhs and the penalty on Shri Devender Kumar Chopra to Rs. 10 lakhs. The penalty on M/s. U.K. Enterprises was set aside, while the penalty on Shri Jawahar Lal Luthra was confirmed at Rs. 50,000.

Conclusion:
The Tribunal upheld the confiscation and revaluation of the goods, finding the declared value to be fictitious and the transaction to be a premeditated tax fraud. The appeals by the importers were rejected, and the Revenue's appeal for enhancement of fines and penalties was allowed. The redemption fine was increased to Rs. 10 lakhs, and the penalty on the importer was also increased to Rs. 10 lakhs.

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