2010 (3) TMI 554 - AT - Customs

Demand -Assesseewere undervaluing the tyres imported by them during the period 1995-96 and 1996-97 investigation was taken up. After investigation issue of show cause notice and adjudication process, the impugned order has been passed wherein the undervaluation has been upheld and differential duty of Rs. 18,46,892/- has been demanded under Section 28(1) of Customs Act, 1962 with interest as applicable. Invoices forwarded by German Customs showing appellant as consignee and partner admitting undervaluation. Held that - reopening of assessment on receipt of original invoice sustainable. Suppression invocable when mis-declaration proved. Sufficient grounds for rejection of transaction value. Impugned order on duty demand and penalty on firm upheld. Penalty on partner set aside.

Issues Involved:
1. Undervaluation of imported tyres.
2. Correctness of the show cause notice citing wrong valuation rules.
3. Admissibility of retracted statements.
4. Applicability of penalties and interest under Sections 114A and 28AB of the Customs Act, 1962.
5. Imposition of penalties on individual partners.

Detailed Analysis:

1. Undervaluation of Imported Tyres:
The department alleged that M/s. Jogani Tyres (India) undervalued the tyres imported during 1995-96 and 1996-97. The investigation revealed invoices from Michelin, Bereich Vertrieb, Germany, showing a higher value of $79.78 per tyre compared to the $25 declared by the importer. The quantity of tyres matched the bills of entry, confirming the undervaluation. Statements from Shri Lalit B. Jogani admitted the undervaluation and voluntary payment of Rs. 10,00,000/- towards differential duty.

2. Correctness of the Show Cause Notice Citing Wrong Valuation Rules:
The appellant argued that the show cause notice incorrectly cited Rule 10 of the Valuation Rules, which deprived them of a proper defense. However, the Tribunal found that the department had clearly mentioned the procurement of the manufacturer's invoice and the necessity for the appellant to produce the correct invoice. The Tribunal held that quoting a wrong rule does not vitiate the show cause notice, as supported by several judicial decisions.

3. Admissibility of Retracted Statements:
The appellant retracted the admission of undervaluation after 12 days, arguing that the statement should not be relied upon. The Tribunal, referencing the Supreme Court decision in Vinod Solanki v. UOI, stated that mere retraction does not render a statement irrelevant if corroborated by other evidence. The Tribunal noted that the retraction appeared to be an afterthought and upheld the statement's evidentiary value due to corroborating documents from German Customs.

4. Applicability of Penalties and Interest under Sections 114A and 28AB of the Customs Act, 1962:
The appellant contended that penalties under Section 114A and interest under Section 28AB could not apply as the bills of entry were filed before these provisions became effective on 28-9-96. The Tribunal found that the Commissioner correctly applied these provisions only to the bill of entry dated 5-9-96, as the relevant date for duty payment was after the provisions came into effect.

5. Imposition of Penalties on Individual Partners:
The Tribunal examined the imposition of penalties on the partners, Shri Lalit B. Jogani and Shri Shailesh B. Jogani. Referring to the Bombay High Court decision in Commissioner of Customs (E.P) v. Jupiter Exports, the Tribunal held that separate penalties on partners are not sustainable when the firm is penalized. Consequently, the penalties on the partners were set aside.

Conclusion:
The Tribunal upheld the duty demand and penalty on M/s. Jogani Tyres (India). However, the penalties imposed on the partners were set aside, and their appeals were allowed. The judgment emphasized the importance of corroborative evidence in cases of retracted statements and clarified the applicability of penalties and interest based on the relevant date of duty payment.

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