2005 (7) TMI 262 - AT - Customs

Demand - Suppression of facts - Concealment in EPZ - Evidence - Statement - Valuation (Customs) - Smuggling

Summary

Issues Involved:
1. Diversion of imported components and substitution by old and used ones.
2. Under-valuation of goods at the time of import.
3. Smuggling of computer components into India by concealing them inside cabinets.
4. Exporting incomplete systems and over-invoicing exports.
5. Inflated and false value addition under the Exim Policy resulting in excess DTA sales.
6. Non-repatriation of foreign exchange for certain export consignments.

Detailed Analysis:

1. Diversion of Imported Components and Substitution by Old and Used Ones:
The adjudicating authority found that the appellants had removed some motherboards, PSUs, etc., from the VEPZ and sold them in the local market, replacing them with defective parts. This conclusion was based on the inculpatory statements of the Managing Director and other directors. The stock verification also revealed defective components in the outhouse. The conditions of Notification 133/94 were violated, making the goods liable for confiscation under Section 111(d) and (o) of the Customs Act, 1962. The Tribunal upheld this finding.

2. Under-valuation of Goods at the Time of Import:
The adjudicating authority relied on contemporaneous imports and the statement of the Managing Director, who admitted to under-valuing the goods by 20% below the international market price as per an understanding with the supplier. The profit from these under-valued imports was shared between the Managing Director and the supplier. The Tribunal upheld the enhancement of the value of the remaining components by 25% of the declared value, based on the voluntary statement of the Managing Director.

3. Smuggling of Computer Components by Concealing Them Inside Cabinets:
This allegation was supported by the statement of the Managing Director and corroborative evidence. The Managing Director admitted that certain consignments included undeclared CPU chips concealed inside cabinets. The adjudicating authority noted discrepancies in the weights of similar consignments, suggesting concealed components. The Tribunal upheld the finding of smuggling.

4. Exporting Incomplete Systems and Over-invoicing Exports:
The Tribunal found insufficient evidence to support the allegation of exporting incomplete systems and over-invoicing exports. The goods were not available for verification, and the documents alone were deemed inadequate. Consequently, the charge of over-invoicing and false value addition under the Exim Policy was dropped.

5. Inflated and False Value Addition Under the Exim Policy:
This issue was linked to the over-invoicing of exports, which the Tribunal did not find substantiated. Therefore, the charge of inflated and false value addition was also dropped.

6. Non-repatriation of Foreign Exchange:
The Tribunal agreed with the appellants that the customs officer is not competent to adjudicate cases of non-realization of export proceeds, as per the decision in Chinku Exports v. CC, Calcutta. The duty demanded for non-repatriation of foreign exchange was set aside.

Judgment Summary:
- The imported goods were liable for confiscation under Section 111(d)(l), (m), and (o) of the Customs Act.
- The redemption fine was reduced from Rs. 5 lakhs to Rs. 2 lakhs.
- The duty demand was restricted to Rs. 38,65,588/-.
- The penalty on M/s. HCPL was reduced to Rs. 4,00,000/- under Section 112(a) of the Customs Act, and the penalty under Section 114(i) was set aside.
- The penalty on the Managing Director was reduced to Rs. 1,00,000/-, and the penalties on the other directors were reduced to Rs. 50,000/- each. Penalties under Section 114(i) on all individuals were set aside.
- The issue of non-achievement of value addition was remanded to the jurisdictional commissioner for necessary action in consultation with the Development Commissioner or Commerce Ministry.

Disposition:
The appeals were disposed of in the above manner, with the judgment pronounced in open court on 14-7-2005.