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2024 (4) TMI 485 - AT - CustomsValidity of Show Cause Notices issued for revision of the assessable value and customs duty - Undervaluation and Mis-declaration of the goods imported - bypass the normal Customs Channels and clear the imported goods into domestic area by resorting to gross undervaluation and thereby defrauding the government exchequer by evading the payment of higher customs duty - demand for differential Customs Duty - confiscation - reasons to believe - Penalty under the provisions of Section 112(a) (b)/114A and 114AA - No independent inquiry / investigation with respect to goods imported - No opportunity of Personal Hearing - HELD THAT - The SCNs i.e. SCN dated 09.02.2022 read with Corrigendum dated 11.02.2022 and SCN 14.02.2022 have been adjudicated by the Ld. Commissioner ex parte vide the impugned OIO MUN-CUSTOM- 000- COM-14-23-24 dated 20.09.2023 without affording any opportunity of Personal Hearing to the Appellant by applying the said value as proposed in the SCN dated 08.09.2021 i.e. the first S.C.N to the subject Bills of Entry and accordingly have confirmed the entire demand along with interest and has also imposed penalty equal to the confirmed duty. In addition penalty u/s 114AA has also been imposed. It is further found that DRI has been stated to have developed an intelligence to the effect that one M/s Zip Zap Exim Pvt. Limited ( M/s ZZEPL ) a trading unit in Special Economic Zone Kandla (Gujarat) ( KASEZ ) was importing Knitted Polyester Fabrics and various other Electrical goods and subsequently clearing the same into DTA to various DTA importers including the Appellant by resorting to gross undervaluation. On the basis of said purported intelligence an investigation was conducted and after completion of the same a show cause notice dated 08.09.2021 was issued to M/s ZZEPL other DTA buyers including the Appellant proposing rejection of value declared by said SEZ Unit and demanding differential duty along with interest from DTA buyers (including the appellant) with respect to respective imported goods. Said show cause notice dated 08.09.2021 is yet to be adjudicated as per verification got done through Authorized Representative which has revealed that matter was still to be adjudicated in that show cause notice. However the learned Adjudicating Authority has adopted the value proposed to be re-determined in the said SCN and confirmed the demand accordingly. Thus determination of value proposed in the SCN is done u/s 28 (8) by depending on a show cause notice which has yet to be adjudicated. This is erroneous as value proposed in SCN dated 08.09.2021 the first S.C.N cannot be made basis to raise and confirm the demand in the present case without adjudication. Thus entire demand confirmed in the present case vide impugned show cause notices on the basis of alleged value proposed in another show cause notice dated 08.09.2021 is bad in law. It is nothing but putting the cart before the horse. Perhaps it is a fit case where common adjudicating authority for two jurisdictions should have been appointed by the C.B.I.C. An allegation which is yet to be decided in a show cause notice cannot be made evidentiary basis to sustain demand in another. A weak foundation of allegation alone in one matter cannot lead to strong edifice of sustainable evidence in another matter. Debile fundamentum fallit opus applies in the present case. An allegation which has not faced judicial scrutiny does not merit to be treated as authoritative evidence. We therefore find that order cannot be sustained same is set aside. Matter is remanded to be heard along with or after decision in show cause notice dated 08.09.2021 i.e. first S.C.N acquires sufficient evidentiary value and after due observance of natural justice in the impugned S.C.Ns and providing various relied upon materials to the appellant and after considering on submissions including made on the point of limitation vis-a-vis of corrigendum by the appellant. Impugned order is set aside and appeals are allowed by way of remand in above terms. Appeals allowed by remand.
Issues Involved:
1. Alleged undervaluation and mis-declaration of imported goods. 2. Rejection and re-determination of assessable value. 3. Demand for differential customs duty. 4. Liability for confiscation and penalties. 5. Adjudication based on unadjudicated show cause notice. 6. Time-barred demand and extended period of limitation. 7. Admissibility and reliability of evidence. Summary of Judgment: 1. Alleged Undervaluation and Mis-declaration of Imported Goods: The Directorate of Revenue Intelligence (DRI) developed intelligence suggesting that M/s. Zip Zap Exim Private Limited (M/s. ZZEPL) was involved in gross undervaluation of imported goods to evade customs duty. M/s. Jia Lighting and Audio Equipment, one of the domestic buyers, was also implicated for similar activities. 2. Rejection and Re-determination of Assessable Value: The department proposed to reject the declared value of Rs. 12,59,841/- u/s 14 of the Customs Act, 1962 and re-determine it to Rs. 8,64,81,379/-. The adjudicating authority confirmed this re-determined value based on the show cause notice issued to M/s. ZZEPL. 3. Demand for Differential Customs Duty: Show cause notices dated 09.02.2022 and 14.02.2022 demanded differential customs duty amounting to Rs. 1,85,15,174/- u/s 28(4) of the Customs Act, 1962, along with applicable interest u/s 28AA. 4. Liability for Confiscation and Penalties: The imported goods were deemed liable for confiscation u/s 111(m) and 111(d) of the Customs Act, 1962. Penalties were imposed u/s 112(a) & (b)/114A and 114AA of the Customs Act, 1962. 5. Adjudication Based on Unadjudicated Show Cause Notice: The adjudicating authority relied on the value proposed in an unadjudicated show cause notice dated 08.09.2021 issued to M/s. ZZEPL. The Tribunal found this approach erroneous, stating that an unadjudicated allegation cannot serve as authoritative evidence. 6. Time-barred Demand and Extended Period of Limitation: The appellant argued that the demand for certain Bills of Entry was time-barred, as the show cause notice was issued beyond the stipulated period of five years u/s 28(4) of the Customs Act. The Tribunal noted that the corrigendum did not alter the substantive content of the show cause notice, thus not affecting the time bar. 7. Admissibility and Reliability of Evidence: The Tribunal found that the reliance on the Chartered Engineer's report and retracted statements was not sustainable. It emphasized the need for contemporaneous data of imports for valuation and noted that electronic evidence must be certified u/s 65B(4) of the Indian Evidence Act. Conclusion: The Tribunal set aside the impugned order and remanded the matter for re-adjudication, to be heard along with or after the adjudication of the show cause notice dated 08.09.2021. The Tribunal emphasized the observance of natural justice and the provision of relied-upon materials to the appellant. Appeals were allowed by remand.
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