2019 (1) TMI 1447 - AT - Customs

Reliability on statements - Undervaluation of imported goods - Booster Pumps and water purifier parts like RO Membrane - rejection of declared value - demand of differential duty - whether the statement of the partner of the Company recorded can be taken as reliable evidence with allegation of coercion etc. is made and when the evidence is not corroborated by independent evidence/documents? Held that - The evidence that the Department claims to possess is nothing but some documents which were obtained through the appellants themselves and is contained in emails. On a perusal of the said e-mails from M/s Micro Filter Co. Ltd & others would clearly indicate that they were tailor made as per request of the importer well after the imports have taken place. The existence of the emails/ documents at the time of import is very much doubtful. It is pertinent to note that it is not the case of the department that such evidences were recovered in course of search. The records indicate that the same are produced by the appellants. The appellants submitted that they have obtained the value declared by other importers during the relevant time. Perusal of the same reveals that prices at which other importers imported identical items, from the same companies at about the same time, are either comparable or less than value declared by the appellants. It is found that the Department has ignored this fact and has not produced any import data of the contemporaneous import to indicate that the appellants have misdeclared the value of the import. This being the case the Department s contention that the appellant misdeclared the imported items cannot be accepted. Therefore the declared prices cannot be rejected in terms of Customs Valuation Rules. Thus, because of the very fact that the Department has not relied upon any other important documentary evidences or any contemporaneous import which were made at higher price than the appellants, we are not inclined to accept the contention of the Department - demand not sustainable - penalty also set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of undervaluation of imported goods.
2. Reliability of statements recorded under alleged coercion.
3. Lack of corroborative evidence for undervaluation.
4. Validity of penalties imposed under Sections 114A and 112(a) of the Customs Act.
5. Admissibility of email correspondences as evidence.
6. Comparison with contemporaneous imports.

Issue-wise Detailed Analysis:

1. Allegation of Undervaluation of Imported Goods:
The case revolves around the allegation that the appellants undervalued imported water purifier parts, including RO Membrane and Booster Pumps, to evade customs duty. The Directorate of Revenue Intelligence (DRI) issued a Show Cause Notice (SCN) proposing re-determination of value and recovery of differential customs duty amounting to ?9,25,627/-, ?6,77,436/-, and ?23,086/- with interest, along with penalties under Sections 114A and 112(a) of the Customs Act.

2. Reliability of Statements Recorded Under Alleged Coercion:
The appellants contended that the statements of the partner were obtained under duress, threat of third-degree treatment, and misrepresentation by the investigating agency. The partner's statements recorded on 16.12.2008 and 20.05.2009 were claimed to be coerced, and the partner was allegedly lured into signing to avoid arrest. The Tribunal noted that the statements were not retracted and ?7 Lakhs duty was voluntarily paid during the investigation, questioning the claim of coercion.

3. Lack of Corroborative Evidence for Undervaluation:
The appellants argued that the demand was confirmed without positive and tangible corroborative evidence. They submitted that the investigation agency failed to provide any proof of undervaluation except the coerced statements. The Tribunal observed that the Department did not produce any contemporaneous import data to substantiate the undervaluation claim and relied solely on the statements and emails obtained from the appellants.

4. Validity of Penalties Imposed Under Sections 114A and 112(a) of the Customs Act:
The original adjudicating authority imposed penalties under Sections 114A and 112(a) of the Customs Act. The Commissioner (Appeals) confirmed the differential duty and penalty but set aside the redemption fine and reduced the penalty on appellant No. 2. The appellants argued that penalties under Section 112(a) were unwarranted as no confiscation of goods was made, and there was no evidence of any commission or omission of an offense by the partner.

5. Admissibility of Email Correspondences as Evidence:
The appellants provided email correspondences with overseas suppliers to support their claim of genuine transaction values. The Tribunal found these emails to be tailor-made and obtained well after the imports took place, casting doubt on their authenticity. The Department did not recover these documents during the search, and the emails did not categorically indicate they pertained to the impugned imports.

6. Comparison with Contemporaneous Imports:
The appellants submitted import data of identical items by other importers during the relevant period, showing comparable or lower values than those declared by them. The Tribunal found that the Department ignored this fact and did not provide any contemporaneous import data to prove higher values. Consequently, the allegation of misdeclaration of value did not stand.

Conclusion:
The Tribunal concluded that the demand for differential duty was not sustainable due to the lack of corroborative evidence and reliance on coerced statements. The penalties imposed were also set aside. The appeals were allowed with consequential relief, following the ratio of decisions in similar cases, including CC (Import) Vs Wings Electronics and Ambika International Vs UOI. The Tribunal emphasized the need for positive and tangible evidence to substantiate serious allegations of undervaluation.

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