1994 (9) TMI 190 - AT - Customs

Summary

Issues Involved:
1. Validity of the contract.
2. Determination of assessable value.
3. Misdeclaration of goods.
4. Imposition of penalty.
5. Release and sale of goods.

Issue-wise Detailed Analysis:

1. Validity of the Contract:
The appellants argued that the contract for the sale of goods was entered into on 5th September 1990, and thus the prevailing market price on that date should determine the assessable value. The Tribunal examined the validity of this contract and found it lacking. The contract was not substantiated by sufficient evidence such as prior references, mutual consent, or enforceability in a court of law. The Tribunal concluded that the letter dated 5-9-1990 was a manipulated document and not a genuine contract. Therefore, the assessable value could not be based on the date of this purported contract.

2. Determination of Assessable Value:
The Tribunal noted that the goods imported were of high-grade HDPE, specifically blow moulding grade, which was not specified in the Bill of Entry. The Collector had determined the value based on the prevailing market prices in December 1990, supported by international magazine quotations. The Tribunal found that the Collector had resorted to Rule 8 of the Valuation Rules without exhausting the previous rules in sequence and without giving specific reasons for not applying Rules 5 and 6. The Tribunal directed the Jurisdictional Collector to re-examine the assessable value considering the evidence provided by the appellants and to follow the valuation rules in sequence.

3. Misdeclaration of Goods:
The Tribunal agreed with the Collector that there was a clear case of misdeclaration. The grade of the HDPE was not mentioned in the Bill of Entry, and the Department only discovered it upon examination. The Tribunal found the explanation for not specifying the grade unconvincing and upheld the finding of misdeclaration. Consequently, the declared price could not be accepted as the transaction value.

4. Imposition of Penalty:
The Tribunal upheld the imposition of penalties under Section 112 of the Customs Act, 1962, due to the misdeclaration of the goods. However, considering the circumstances, the Tribunal reduced the penalty from Rs. 10,00,000/- to Rs. 2,50,000/- for the importer and from Rs. 7,50,000/- to Rs. 2,50,000/- for the supplier. The Tribunal acknowledged the argument that the importer abandoned the goods after the proceedings were initiated, but did not find sufficient evidence to label him a habitual offender.

5. Release and Sale of Goods:
The Tribunal directed the Collector to release the goods upon payment of duty on the redetermined value and collection of incidental charges. The Tribunal also allowed the supplier to sell the goods to another party in the country, subject to the payment of duties and charges. The quantum of redemption fine was left to be reviewed by the Collector in light of the redetermined assessable value.

Conclusion:
The appeals were disposed of with directions for re-examination of the assessable value, reduction of penalties, and instructions for the release and potential sale of the goods. The Tribunal emphasized the need for adherence to the valuation rules and proper substantiation of contracts and declarations.