2020 (4) TMI 108 - AT - Customs

Undervaluation of imports - payment of differential amounts to foreign buyers through Hawala - rejection of declared value - redetermination of value of imported goods - imposition of penalties on various persons individually and severally. - Retracted statements. - Scope of the term Importer HELD THAT - A bare reading of the definition implies that the term importer includes any person holding himself out to be the importer. However it is important to note that such a person holding himself out to be the importer would be considered an importer any time between the importation of the goods and the clearance of the same for home consumption. In the instant case it is not in dispute that the entire case is about the goods which have been imported and cleared for home consumption after due assessment. It is evident that Shri Satish Luthra has not been held to be an importer before the clearance of goods for home consumption and as such he cannot be held to be an importer after the clearance of the goods for home consumption - for the purpose of Section 2 of the Customs Act 1962 Shri Satish Luthra cannot be held to be an importer and as such cannot be a person referred to in Section 28 of Customs Act 1962. Therefore neither the demanded duty nor the imposed penalty can be held to be devolved on Shri Satish Luthra. Under-valuation of goods - HELD THAT - The entire allegations in the show cause notice and consequently the impugned order are based on statements of different persons. Some of them have been since retracted. All the impugned goods imported by or imported in the name of nine importers have been cleared for home consumption by the proper officers. The Department has sought to re-determine the value of such goods which have been already cleared for home consumption without filing appeals against the respective assessments in the Bills of Entry. We find that Learned Commissioner has been categorical in holding that there is considerable difference between price of branded goods and un-branded goods of the same specification. The investigation has not made any efforts to cross-link the seized goods to the goods imported under the Bills of Entry filed by the nine importers. In the instant case Commissioner has on the one hand found that there is no co-relation between the impugned seized goods and the Bills of Entry. He has set out a new ground of some of the goods being branded by looking into the portion of the Bills of Entry which is normally not visible on the printed copy. He has not supplied the copies of Bills of Entry showing that the goods are branded. In doing so Learned Commissioner has not only travelled beyond the scope of the SCN but also has contravened the principles of natural justice - The evidence that commissioner seeks to rely during the course of adjudication is not supplied to the appellants and thereby an opportunity to defend themselves has been denied to them. Under the circumstances such an order is not maintainable and is liable to be set aside. Moreover OIO failed to give proper grounds to establish that the transaction value declared by the appellants is liable to be rejected. The OIO does not rely upon any contemporaneous imports of identical or similar goods to establish that the goods are mis-declared - the entire case of the Department is built upon the statements of different persons involved and most of the statements have been retracted. Once the statements have been retracted the onus lies on the Department to prove that the statements are correct. The same has not been discharged - further other than statements no evidence documentary or otherwise has been put forth by the Revenue to substantiate the allegation of under-valuation. No samples were drawn and no enquires were made. Thus there are no reasons for rejection of the assessable value of the goods more so looking in to the fact that the goods have been once cleared by Customs after due process of examination and assessment as declared by the importers have been given. The impugned order suffers from various lacunae and thus is liable to be set aside. When the charge of under-valuation is not established no case is made out for imposition of redemption fine penalties and demand of duty from any of the appellants involved - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether Shri Satish Luthra can be held to be the importer in respect of various imports for which the bills of entry have been filed in various names and thus, whether Shri Satish Luthra is liable to pay duty, interest penalty, etc. in respect of the impugned imports.
2. Whether the department could establish the charge of undervaluation in respect of the impugned imports and if so, whether the redetermination of value was correctly made.
3. Whether the appellants, S/Shri Sushil Goel, Vijay Chand Baid, Kanchan Kumar Kora (M/s Radhe International), Jagveer Singh (Universal Electronics), Vinod Kumar Sharma (Air Sea Trade Links), Narendra Singh, KimtiLal (M/s Communication Trade Links), and D.K. Chopra (M/s Shiv Enterprises) are liable to pay penalties.
4. Whether the respondent, Shri Harish Luthra, is liable to pay a penalty.

Detailed Analysis:

1. Shri Satish Luthra's Status as Importer:
- The SCN alleged that Shri Satish Luthra controlled M/s RECPL and set up nine other firms with proxy owners to evade customs duty by under-declaring the value of imported goods and remitting the difference through Hawala.
- The Commissioner concluded that the nine firms were proxies, with import documents found at RECPL’s premises and other irregularities.
- The definition of "importer" under Section 2(26) of the Customs Act was examined, which includes any person holding himself out to be the importer between importation and clearance for home consumption.
- It was found that Shri Satish Luthra was not held to be an importer before the clearance of goods for home consumption, and thus cannot be held as such after clearance.
- The amendment including "the beneficial owner" as an importer in the Customs Act came into effect only in 2017, post the impugned imports.
- Therefore, Shri Satish Luthra cannot be held to be an importer under Section 2 of the Customs Act 1962, and neither the demanded duty nor the imposed penalty can be devolved on him.

2. Charge of Undervaluation and Redetermination of Value:
- The allegations and the impugned order were based on statements, many of which were retracted.
- The goods were cleared for home consumption by proper officers, and the department sought to re-determine the value without appealing against the respective assessments in the Bills of Entry.
- The Commissioner found no co-relation between the seized goods and the imported goods under the Bills of Entry.
- The Commissioner introduced a new ground that some goods were branded, which was not discussed in the SCN, traveling beyond the scope of the SCN and contravening principles of natural justice.
- The OIO failed to establish that the transaction value declared by the appellants was liable to be rejected, and no contemporaneous imports of identical or similar goods were cited.
- The impugned order did not provide reasons for rejecting the declared value and relied on price lists of manufacturers rather than traders.
- The SCN and impugned order did not establish the alleged differential remitted through Hawala.
- The assessment orders on the Bills of Entry attained finality as no appeal was preferred by the department.

3. Liability of Appellants for Penalties:
- The charge of undervaluation was not established, and therefore, no case was made for imposing penalties on the appellants involved.
- The impugned order was found to suffer from various lacunae, including the lack of evidence, reliance on retracted statements, and failure to establish the rejection of declared values.
- The SCN was barred by limitation as the extended period of time was not invoked or substantiated.

4. Liability of Shri Harish Luthra for Penalty:
- The departmental appeal for imposing a penalty on Shri Harish Luthra was found to lack merit as the charge of undervaluation was not established.
- The impugned order did not provide concrete evidence to substantiate the imposition of penalties.

Conclusion:
- The appeals filed by the Revenue were rejected, and all other appeals were allowed with consequential relief.
- The judgment emphasized the importance of adhering to principles of natural justice and providing concrete evidence to substantiate allegations of undervaluation and penalties.