2018 (11) TMI 624 - AT - Customs

Evasion of custom duty - mis-declaration of the goods under import - Food supplements - smuggling - Absolute Confiscation - no redemption fine imposed - penalty. Held that - Admittedly Mr Kshitiz Sharma had been importing food supplements in the past. This fact is evident from several bills of entry filed in the name of Kshitiz International. So far valuation as adopted by the revenue is concerned, the undeclared/mis-declared goods, being of Chinese origin and manufacture, are not similar or identical to the goods manufactured in USA and imported from USA - the valuation done by revenue under rule 3, 4 and 5 is erroneous and the same is set aside. The valuation of the goods in question being food supplements, not containing beef has to be done under rule 7 of the Valuation Rules (deductive method). The absolute confiscation of food supplements containing beef is upheld. The confiscation of food supplements not containing beef is also upheld but are redeemable on payment of duty (already released provisionally). However confiscation of A4 copy paper is set aside - as no redemption fine has been imposed by the ld Commissioner, the order of appropriation of the bank guarantee furnished towards redemption fine is bad and accordingly the same is set aside. Penalty u/s 112(a) read with Section 114AA of the Customs Act - Held that - The appellant M/s Balaji Overseas is liable to penalty under Section 112(a) read with Section 114AA of the Customs Act. However, such penalty is restricted to 100% of the duty sought to be evaded, as worked in terms of para 21 of this order - So for the penalty on the partner Mr Kshitiz Sharma is concerned, the same is set aside in view of the penalty confirmed on the firm - So far penalty on M/s Him Logistics under Section 112 of the Act is concerned, they have not done any act of omission or commission attracting the provisions of section 112 of the Customs Act. Accordingly the penalty on them is set aside. Appeal allowed in part.

Issues Involved:
1. Alleged evasion of customs duty by misdeclaration of imported goods.
2. Seizure and confiscation of undeclared/misdeclared goods.
3. Valuation of imported goods for duty calculation.
4. Imposition of penalties under Sections 112 and 114AA of the Customs Act.
5. Appropriation of bank guarantee towards redemption fine.

Detailed Analysis:

1. Alleged Evasion of Customs Duty by Misdeclaration of Imported Goods:
The appellant, M/s Balaji Overseas, was accused of evading customs duty by misdeclaring imported goods. The Show Cause Notice alleged that the appellant declared the import of A4 plain copy paper but upon inspection, a large quantity of undeclared food supplements was found. Statements from Mr. Kshitij Sharma, partner of M/s Balaji Overseas, indicated an alleged admission of misdeclaration.

2. Seizure and Confiscation of Undeclared/Misdeclared Goods:
The Directorate of Revenue Intelligence (DRI) found a short quantity of declared goods and a large quantity of undeclared food supplements during the inspection of containers. Consequently, the goods were seized under the belief that they were liable for confiscation under the Customs Act. The Show Cause Notice proposed confiscation under Sections 111(l), (m), and (n) of the Customs Act. The adjudicating authority confirmed the confiscation of food supplements not containing beef and A4 paper, while food supplements containing beef were ordered for absolute confiscation.

3. Valuation of Imported Goods for Duty Calculation:
The valuation of undeclared food supplements was done using data from the internet and Customs NIDB, considering the retail sales price (RSP) for levy of Additional Customs Duty (CVD). The value of food supplements not containing beef was determined at ?2,29,03,044/- with a duty payable of ?1,28,73,481/-. For food supplements containing beef, the value was determined using the deductive method under Rule 7 of the Customs Valuation Rules, as import of beef products is prohibited. The total value of the consignment was ?2,55,12,823/-.

4. Imposition of Penalties Under Sections 112 and 114AA of the Customs Act:
Penalties were imposed on M/s Balaji Overseas, Mr. Kshitij Sharma, and M/s Him Logistics under Sections 112 and 114AA of the Customs Act. The adjudicating authority imposed a penalty of ?10 crore on M/s Balaji Overseas, ?5 crore on Mr. Kshitij Sharma, and ?12.5 lakhs on M/s Him Logistics.

5. Appropriation of Bank Guarantee Towards Redemption Fine:
The provisional release of the seized goods was allowed upon payment of customs duty, submission of a bond, and furnishing a bank guarantee. The adjudicating authority ordered the appropriation of the bank guarantee towards redemption fine, although no redemption fine was imposed.

Judgment:
- The Tribunal held that the valuation of goods of Chinese origin cannot be compared with those from the USA, and thus the valuation done under Rules 3, 4, and 5 was erroneous. The valuation should be done under Rule 7 (deductive method).
- The absolute confiscation of food supplements containing beef was upheld, while the confiscation of food supplements not containing beef was upheld but redeemable on payment of duty. The confiscation of A4 copy paper was set aside.
- The order of appropriation of the bank guarantee towards redemption fine was set aside as no redemption fine was imposed. The bank guarantee should be adjusted against customs duty payable and penalty.
- The penalty on M/s Balaji Overseas was restricted to 100% of the duty sought to be evaded. The penalty on Mr. Kshitij Sharma was set aside in view of the penalty on the firm. The penalty on M/s Him Logistics was also set aside as they did not commit any act attracting Section 112 of the Customs Act.
- The appeals of M/s Balaji Overseas were allowed in part, and the appeals of Mr. Kshitij Sharma and M/s Him Logistics were allowed. The appellants were entitled to consequential relief in accordance with the law, and the balance amount of duty and penalty, if any, was to be paid.

Conclusion:
The Tribunal's judgment addressed the issues of misdeclaration, valuation, and penalties comprehensively. The valuation was corrected, penalties were adjusted, and the appropriateness of bank guarantee appropriation was clarified, providing a fair resolution to the appellants.

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