1997 (4) TMI 260 - AT - Customs

Summary

Issues Involved:
1. Misdeclaration of description.
2. Misdeclaration of value.
3. Confiscation of goods.
4. Imposition of penalty.
5. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Misdeclaration of Description:
The appellant was accused of misdeclaring the description of the imported goods, specifically, that the consignment included 2 sets of Media Varsity Developer packs (MVDP) more than the declared quantity of 25. The Bill of Entry and invoice described the consignment as consisting of "VDP-1 set and MVD-25." The department argued that this meant only 25 sets of MVD, but examination revealed two additional sets. The appellant contended that the Varsity pack itself consists of 25 right-to-use licenses and two sets of 20 CDs for a consolidated price of US $3500. The literature produced by the appellant indicated that every package consists of 2 sets of CDs containing software. The tribunal agreed with the appellant, concluding that there was no misdeclaration of quantity and the Commissioner erred in holding that the appellant had misdeclared the quantity of CDs. Hence, the confiscation of the 2 sets of CDs was not sustainable.

2. Misdeclaration of Value:
The Commissioner upheld the charge of misdeclaration of value based on several circumstances, including the commercial value of the software being US $10032.50 per set while the appellant declared US $100 per set, and the goods being supplied at throw-away prices as a sales promotion strategy. The appellant argued that the price shown in the price list (US $10032.50) was for commercial buyers, while SGI offered special prices for educational and research institutions. The appellant was the distributor in India for SGI and imported the package with 25 RUL together with 25 separate sets of media, allowing each set of media to be operated by one separate RUL, drastically affecting the price. The tribunal noted that the Commissioner did not provide a good reason to conclude that the lower price was a market promotion strategy and that the explanation offered by the appellant was not considered. Therefore, the case deserved fresh consideration.

3. Confiscation of Goods:
The Commissioner confiscated the goods under Section 111(1) and Section 111(m) of the Customs Act, 1962, on account of misdeclaration of description and value, with an option to redeem on payment of a fine of Rs. 10,00,000.00. Given the tribunal's findings on the misdeclaration of description and value, the confiscation of the goods was not sustainable as it was based on erroneous conclusions.

4. Imposition of Penalty:
A penalty of Rs. 5,00,000.00 was imposed under Section 112(a) of the Customs Act, 1962. Since the tribunal found that the conclusions regarding misdeclaration of description and value were flawed and required fresh consideration, the imposition of the penalty was also not sustainable.

5. Violation of Principles of Natural Justice:
The appellant contended that specific facts and information collected by the Commissioner and the inferences drawn were not disclosed in the show cause notice, denying the appellant an opportunity to offer an explanation. The tribunal agreed, noting that there was serious violation of principles of natural justice, especially regarding the grounds related to specific facts and inferences not disclosed to the appellant. This warranted a fresh consideration of the case.

Conclusion:
The tribunal set aside the impugned order and remanded the case to the jurisdictional adjudicating authority for fresh decision in accordance with the law and the observations contained in the tribunal's order. The appeal was allowed accordingly.