2020 (9) TMI 714 - AT - Customs

Valuation of imported goods - Batteries - rejection of declared value - suppression and misdeclaration of import price of goods - HELD THAT - So far as the batteries imported from M/s Power ROC Company Ltd. vide three bills of entries dated 24.1.2007 is concerned, the bill of entries were assessed provisionally and were pending finalisation. Accordingly, the impugned order is bad under Section 28 of the Customs Act, as the provisional assessment is still not finalised. Accordingly, the demand in respect of three bills of entry nos. 101168, 101169 and 101167 is set aside. In the present case, the appellant has imported VRLA batteries 6-V/4.5 GLA/4.2 AH/4.5 A.H. We also find that the show cause notice was issued by relying upon the data from seized hard disc and pen drive. However, the appellant was informed later on that the said pen drive and hard disc are not traceable for the purpose of adjudication. The Dy. Commissioner of Customs, SIIB (I), JNCH, in his communication dated 4.11.2016 has categorically stated that the original file of seized documents, hard disc and pen drive seized under Panchnama are not traceable. We further find that the appellant was not noticed before opening of the hard disc/pen drive by the Department. One hard disc and pen drive was opened in the presence of Shri Sanjay A. Chothani, employee of the CHA firm and at the time of opening of another hard disc on the other date, nobody was present in absence of notice to the appellant to witness the retrieval of data. Thus, the whole exercise of the retrieval of data is vitiated rendering it unreliable - Further, as required by Section 138 C of the Customs Act, Revenue failed to bring on record the details of the computer or machine, on which the data was prepared or compiled. Further, it is found that there is no specific correlation with the bills of entry under dispute with the alleged evidence of wire transfer. Further, there is no investigation or confirmation from the persons, whose names have appeared from the email for wire transfer. The conclusion has been drawn by the Revenue from the cost sheet on the basis of assumption and presumption. The cost sheet reflects the invoice value, which has been remitted through normal banking channel along with other expenses. The suppression of transaction value would also have been reflected in the said cost sheet, which is not the case. The NIDB data is in respect of the import of 12 V batteries by other importers, whereas in the present case, the appellant has imported 6 V batteries. Hence, the NIDB data cannot be relied upon. Further, in respect of the batteries imported from M/s.Shenzhen Leoch Battery Technology, China, we find that the demand of differential duty is based upon the allegation that the appellant has under-valued the other consignments. Hence, they must have suppressed the value in respect of these bills of entries also. The documents /data retrieved from the hard disc/pen drive, in absence of the authorised person of the appellant, as admittedly no notice was issued to them, cannot be relied upon - further, there has been mis-carriage of justice by neither examining the persons, whose statements have been relied upon in the course of adjudication proceedings, nor they have been offered for cross examination by the appellant. The issue as regards the transaction value of batteries imported from M/s.Shenzhen Leoch Battery Technology, China, requires re-consideration by the Court Below - the matter as regards the three bills of entries for the batteries imported from M/s.Suqian Yongda Import Export Co. Ltd. China is remanded and the demand of differential duty and penalty with respect to the import from Power ROC Co. Ltd. is set aside - the penalty in respect of the appeal of the Director of the appellant company, Shri Kapil Garg is set aside. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:

1. Rejection of declared value for VRLA batteries.
2. Allegations of value suppression and mis-declaration.
3. Demand for differential customs duty.
4. Imposition of penalties on the importer and its director.
5. Procedural irregularities in handling evidence.
6. Validity of provisional assessment and invocation of Section 28.
7. Reliability of electronic evidence and market surveys.
8. Correlation between wire transfers and import transactions.
9. Revaluation of imported goods under Customs Valuation Rules.
10. Admissibility of statements and cross-examination rights.

Issue-wise Detailed Analysis:

1. Rejection of Declared Value for VRLA Batteries:
The appellate tribunal upheld the rejection of the declared value for VRLA batteries imported by the appellant, citing significant discrepancies between the declared unit value and contemporaneous import prices. The declared unit value was ?55.97, whereas the contemporaneous import unit price ranged from ?247 to ?259.

2. Allegations of Value Suppression and Mis-declaration:
The tribunal confirmed the allegations of value suppression and mis-declaration. The importer was found to have submitted false, manipulated invoices showing a unit value of USD 1.17 per piece against the actual value of USD 5.75 per piece. This mis-declaration led to the suppression of the true and correct value of the goods.

3. Demand for Differential Customs Duty:
The tribunal upheld the demand for differential customs duty amounting to ?30,17,330 along with interest and an equal amount of penalty under Section 114 A of the Customs Act. The re-determined value of the imported goods was based on the actual invoice recovered during the investigation.

4. Imposition of Penalties on the Importer and Its Director:
Penalties were imposed on the importer and its director, Mr. Kapil Garg, under Sections 112(a) and 114 AA of the Customs Act. The director admitted to manipulating the unit value to evade customs duty and stated that the company had adopted the practice of under-valuation to sustain in the competitive market.

5. Procedural Irregularities in Handling Evidence:
The tribunal noted procedural irregularities in handling the seized electronic evidence. The retrieval of data from the hard disk and pen drive was conducted without notifying the appellant, rendering the evidence unreliable. The tribunal held that the representative of the CHA was not competent to witness the retrieval of data.

6. Validity of Provisional Assessment and Invocation of Section 28:
The tribunal found that the provisional assessment of three bills of entry was still pending, making the invocation of Section 28 of the Customs Act invalid. The demand for differential duty in respect of these three bills of entry was set aside.

7. Reliability of Electronic Evidence and Market Surveys:
The tribunal questioned the reliability of electronic evidence retrieved from the hard disk and pen drive, as the appellant was not notified to witness the retrieval process. The market survey conducted by the department was also disputed by the importer, who claimed that the survey was not conducted in a proper manner.

8. Correlation Between Wire Transfers and Import Transactions:
The tribunal found no specific correlation between the wire transfers and the import transactions under dispute. The wire transfers were not linked to any particular bills of entry, invoice, or container number, making the evidence inconclusive.

9. Revaluation of Imported Goods Under Customs Valuation Rules:
The tribunal remanded the matter for revaluation of the imported goods under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The revaluation was to be conducted in accordance with the tribunal's findings and observations.

10. Admissibility of Statements and Cross-examination Rights:
The tribunal noted that the statements relied upon during the adjudication proceedings were not cross-examined, leading to a miscarriage of justice. The tribunal emphasized the need for re-consideration of the transaction value, taking into account the appellant's right to cross-examine the witnesses.

Conclusion:
The tribunal allowed the appeal in part, setting aside the demand for differential duty and penalties in respect of the import from Power ROC Co. Ltd. The matter was remanded for re-determination in accordance with the tribunal's findings and observations. The penalties imposed on the director, Mr. Kapil Garg, were also set aside.