2005 (12) TMI 185 - AT - Customs

Demand and penalty - undervaluation of imported goods - payment of customs duty - seized incriminating documents - HELD THAT - No doubt there are certain deficiencies in the investigations on account of the above facts. It should be borne in mind in the case of undervaluation like this it is extremely difficult to attain mathematical precision. DRI officers do not possess a magic wand which would unfold the entire events which had taken place. On the basis of the available documents and the statements recorded during investigation they have to come to a conclusion. In a quasi-judicial like this we are concerned more with a pre-ponderance of probability rather than proof beyond reasonable doubt as held by various judicial fora. On the basis of the available records we are convinced that undervaluation to the extent of 65% has taken place. Shri Thomas Mathew has played a crucial role in this nefarious activity. After considering his submissions we find he is trying to wriggle out of this case on the ground that the Show Cause Notice has not been served on him as per law. The Commissioner has dealt with this issue and we agree with this. S/Shri Ravi Karumbaiah and Thomas Mathew are liable for penalty u/s112(a). The appellant M/s. CCEPL are liable for penalty u/s 114A of the Customs Act. The differential duty demanded is liable to be paid by them along with the interest. As regards the imposition of penalty on Shri Sanjeev Kabbur we find that he was an employee of the appellant-firm and he had acted under the directions of his bosses. There is no evidence to show that he personally benefited from the under-invoicing. Thus we set aside the penalties on Shri Sanjeev Kabbur. With these modifications we confirm both the Orders-in-Original.

Summary

Issues Involved:
1. Allegation of undervaluation of imported goods.
2. Seizure of incriminating documents and statements recorded under Section 108 of the Customs Act.
3. Role of various individuals in the alleged conspiracy.
4. Admissibility and reliability of evidence, including statements and documents.
5. Application of penalties under Section 112(a) and Section 114A of the Customs Act.
6. Service of Show Cause Notice and limitation period under Section 153 of the Customs Act.
7. Principles of natural justice and right to cross-examine.

Analysis of the Judgment:

1. Allegation of Undervaluation of Imported Goods:
The primary charge against the appellants was the undervaluation of imported goods. The investigation revealed that the appellants, through a conspiracy, prepared manipulated invoices to show lower prices for customs assessment, thereby evading customs duty. The modus operandi involved creating front companies and falsifying invoices to present lower CIF values for customs clearance.

2. Seizure of Incriminating Documents and Statements Recorded Under Section 108 of the Customs Act:
The DRI officers, based on intelligence, searched the business and residential premises of the concerned individuals, seizing incriminating documents. Statements were recorded from key individuals, including the Managing Director, ex-Marketing Manager, and other employees, under Section 108 of the Customs Act. These statements revealed the involvement of the appellants in undervaluing the imported goods.

3. Role of Various Individuals in the Alleged Conspiracy:
The investigation identified key individuals involved in the conspiracy:
- The Managing Director and Thomas Mathew were central to the scheme, with Mathew allegedly orchestrating the undervaluation through a front company.
- Other employees, including the ex-Marketing Manager and an executive, were also implicated but acted under the directions of their superiors.

4. Admissibility and Reliability of Evidence:
The appellants challenged the reliability of the evidence, arguing that the documents were unsigned photocopies and that statements were obtained under duress. They contended that the statements of co-accused could not be solely relied upon without corroboration. The Tribunal, however, found that the statements corroborated the seized documents and that no retraction of the statements was evident.

5. Application of Penalties under Section 112(a) and Section 114A of the Customs Act:
The Tribunal upheld the penalties imposed under Section 112(a) and Section 114A of the Customs Act. The Managing Director and Thomas Mathew were found liable for penalties due to their central role in the undervaluation scheme. The company was also liable for the differential duty, along with interest and penalties.

6. Service of Show Cause Notice and Limitation Period under Section 153 of the Customs Act:
Thomas Mathew argued that the Show Cause Notice was not served within the limitation period as prescribed under Section 153 of the Customs Act. The Tribunal, however, agreed with the Commissioner's finding that the notice was served in accordance with the law and dismissed this contention.

7. Principles of Natural Justice and Right to Cross-Examine:
The appellants argued that they were denied the right to cross-examine individuals whose statements were relied upon. The Tribunal acknowledged certain deficiencies in the investigation but emphasized that in quasi-judicial proceedings, the focus is on the preponderance of probability rather than proof beyond reasonable doubt. The Tribunal found sufficient evidence to conclude that undervaluation occurred.

Conclusion:
The Tribunal confirmed the Orders-in-Original with modifications, setting aside the penalties on the ex-Marketing Manager due to lack of evidence of personal benefit. The penalties on the Managing Director, Thomas Mathew, and the company were upheld, along with the differential duty and interest. The judgment emphasized the importance of corroborated evidence and adherence to principles of natural justice in customs proceedings.