2013 (8) TMI 506 - AT - Customs

Import of low quality rough diamonds - prohibited goods - Misdeclaration of Value Overvaluation Confiscation of goods Penalties Imposed - Revenue was of the view that the value of the rough diamonds was misdeclared and the value declared was highly exaggerated Whether the over-invoicing as claimed by the department was to be upheld and whether the value revised as per the provisions of Section 14 of Customs Act, 1962 Held that - The transaction value cannot to be accepted until and unless it was shown by some contemporaneous evidence that the price declared in the invoice was not the correct price - the department had shown from the contemporaneous evidence that the invoices were either fabricated or fake or that any relationship existed between the importer and the exporter sufficient evidence had been gathered to show that the price was inflated. Liability of consignments to confiscation Whether the consignments of rough diamonds were liable for absolute confiscation u/s 111(d) and 111(m) of the Customs Act, 1962 Held that - The value had been misdeclared and therefore the value declared had to be rejected - We have also taken note of the provisions of the Section 111(d) of Customs Act, 1962 and have already noticed that goods were to be treated as the ones which were prohibited for import under the Exim Policy - Therefore the goods were liable to confiscation u/s 111(d) of Customs Act, 1962. Absolute Confiscation - Whether absolute confiscation was warranted in the case Held that - It was not only that the parties concerned had attempted to import rough diamonds at highly exaggerated value but also they attempted to manipulate the records and mislead the department that there was a mistake in preparation of invoice The extent of over-invoicing was so high that the actual value of the goods was found to be 3.56% of the actual It would not be fair on to consider the past activity for the purpose of deciding whether goods have to be absolutely confiscated or not - Om Prakash Bhatia v. CC, Delhi 2003 (7) TMI 74 - SUPREME COURT OF INDIA - the rough diamonds had to be held as prohibited under the law - But the extent of over-valuation which if allowed would have resulted in repatriation of foreign currency itself would show that this was a case where no lenient view was called for - Therefore the decision to absolutely confiscate the rough diamonds under seizure had to be upheld - reduction of value of rough diamonds imported and the revised value determined by the Commissioner was upheld - the order of absolute confiscation u/s 111(d) of Customs Act, 1962 was also upheld. Whether all the assesses were liable to penalty u/s 112(a) of the Customs Act, 1962 - Held that - As the values of the goods to be imported was highly inflated and the same was also proved beyond doubt - thus Penalties were also imposed u/s 112(a) of Customs Act Decided against assesses.

Issues Involved:
1. Mis-declaration and overvaluation of 28 consignments of rough diamonds.
2. Mis-declaration and overvaluation of one consignment of cut and polished diamonds.
3. Liability of the 28 consignments of rough diamonds for absolute confiscation under Section 111(d) of the Customs Act, 1962.
4. Liability of the cut and polished diamonds for confiscation under Section 111(d) and (m) of the Customs Act, 1962.
5. Imposition of penalties on various firms and individuals under Section 112(a) of the Customs Act, 1962.

Detailed Analysis:

1. Mis-declaration and Overvaluation of 28 Consignments of Rough Diamonds:
The Tribunal upheld the findings that the 28 consignments of rough diamonds were mis-declared in terms of value. The goods were sent by exporters in Hong Kong, and the declared value was highly exaggerated. The actual value was found to be only 3.56% of the declared value. The Tribunal noted that the importers and exporters were experienced in the diamond trade, and the alleged mistake in the valuation was not credible. The overvaluation was deliberate to facilitate repatriation of foreign exchange from India.

2. Mis-declaration and Overvaluation of One Consignment of Cut and Polished Diamonds:
The Tribunal found that the value declared for the consignment of cut and polished diamonds was lower than the actual value determined by the expert panel. However, the difference was marginal (about 5%), and there was no concrete evidence of deliberate overvaluation. The Tribunal gave the benefit of the doubt to the appellants and set aside the confiscation and penalties related to this consignment.

3. Liability of the 28 Consignments of Rough Diamonds for Absolute Confiscation:
The Tribunal upheld the absolute confiscation of the 28 consignments of rough diamonds under Section 111(d) of the Customs Act, 1962. The goods were imported contrary to the provisions of the Foreign Trade (Development and Regulation) Act, 1992, and the Foreign Trade (Regulation) Rules, 1993. The Tribunal noted that the importation was prohibited due to the absence of a valid Kimberley Process Certificate (KPC) and the fraudulent intention behind the overvaluation.

4. Liability of the Cut and Polished Diamonds for Confiscation:
The Tribunal set aside the confiscation of the cut and polished diamonds under Section 111(d) and (m) of the Customs Act, 1962. The Tribunal found that the difference in value was marginal and there was no concrete evidence of deliberate overvaluation. The benefit of the doubt was given to the appellants.

5. Imposition of Penalties on Various Firms and Individuals:
The Tribunal imposed penalties on various firms and individuals involved in the importation of the 28 consignments of rough diamonds. The penalties were reduced for some individuals, considering their roles and the fact that they were employees acting under the directions of others. The penalties imposed are as follows:

- M/s. Multistar Gems & Jewellery Pvt. Ltd.: Rs. 1,00,00,000
- Shri Sushil Kumar Babel: Rs. 20,000
- Shri Rakesh Premchand Tater: Rs. 20,000
- Shri Himmatbhai Mohanbhai Kheni: Rs. 1,00,00,000
- Shri Manish Pravinbhai Kheni: Rs. 50,00,000
- Shri Prakash Sancheti: Rs. 50,00,000
- Shri Hiren Sanat Kumar Bhindi: Rs. 50,00,000
- Shri Mehul Girish Tanna: Rs. 50,00,000

For the other firms and individuals, penalties were also imposed but reduced considering their roles and the fact that they were employees acting under the directions of others.

Conclusion:
The Tribunal upheld the findings of mis-declaration and overvaluation of the 28 consignments of rough diamonds and their absolute confiscation. The confiscation and penalties related to the consignment of cut and polished diamonds were set aside. Penalties were imposed on various firms and individuals involved in the fraudulent importation of the rough diamonds, with some reductions considering their roles and circumstances.

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