9911796707
TMI Blog1990 (2) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.80 3. Invoice No. Y-33580 dt. 15-10-1986 for US $37925.90 In respect of 86 packages the net and gross weight of the goods declared in the Bill of Entry was 4,085 pounds (1853. 45 kgs) and 3884.2 kgs. respectively. For the number of packages declared in the Bill of Entry was 98. The number of packages as covered by the invoices filed with the Bill of Entry and their net/gross weight was as under :- Gross weight Net weight No. of packages 5167.79 4085 pounds 86 Since the number of packages in respect of which the invoices were filed by the importers and their net/gross weight differed from the number of packages and their net/gross weight declared in the Bill of Entry the importers were to explain the reasons for the variation. The importers thereupon submitted invoice No. Y-33759 dated 15th October, I 1986 covering goods of additional value of US $12,443.05 which had been imported in 12 packages covered by the consignment. Thus by not filing the said invoice alongwith Bill of Entry. It appeared that the importers had attempted to evade payment of duty amounting to Rs. 3,40,456/-. 3. On the basis of the intelligence that the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplements were issued, and in the show cause notice it was stated that it appeared that :- (1) By suppressing and not filing Invoice No. Y-33759 dated 15-10-1986 covering goods valued at Rs. 1,93,441/-, the importers had knowingly misdeclared the value and goods/net weight of the imported goods and had thus attempted to evade duty amounting to Rs. 3,40,456/-. (ii) The importers had deliberately misdeclared on the reverse of the Bill of Entry that they were not connected with the suppliers of the goods. (iii) They had been instructing the foreign suppliers to make incorrect declarations in the documents in respect of imported goods in order to evade customs duty. (iv) Under an arrangement between M/s. Raychem Corporation Menlo Park, U.S.A. and the importers, the suppliers in Munich were to supply goods at a previously agreed low price. The Munich Suppliers were to be compensated and difference between the special low price and the standard price was to be paid by the Raychem Corporation, USA to Munich and the goods were to be invoiced to M/s. Radiation Technologies (I) Pvt. Ltd. at a lower price to enable them to evade duty. On basis of the printed price lists issued by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not determinable under Section 14(l)(a) of the Customs Act, 1962. For this reason it was stated that it was proposed to determine the value of the imported goods in terms of Section 14(l)(b) of the Customs Act, 1962 read with Rule 3(b) of the Customs Rules, 1963. 1. Vide their letter dated 16-12-1986 the importers sought permission to take copies of seized documents. 2. Subsequently vide their letter dt. 8-1-87 the importers sought extension of time limit upto 23-1-87 for submitting reply to show cause memo. 3. Again vide their letter dated 21-1-1987 the importers requested for further extension of time limit till 15-2-1987. By this office letter dated 29-1-1987 the importers were asked to appear for personal hearing on 4-2-1987." 5. In their letter dated 7th February, 1987, M/s. Radiation Technologies (India) Pvt. Ltd. submitted a reply to the show cause notice and supplements thereto. The importers denied all the allegations contained therein and stated that: 1. Declaration on Reverse of Bills of Entry: While admitting that the appellants are FERA company and 74% of their capital is being held by Raychem Radiation Technologies Inc. (RRTI) and RRTI is a wholly owned su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Bill of Entry three invoices bearing Nos. Y-33607, 25680 and Y-33580 were filed. The total number of packages and gross weight were clearly mentioned in the invoices. Total of the invoices worked out to 86 packages. There could be no intention to evade duty since the Bill of Entry prepared by the Clearing Agent referred to 98 packages and gross weight of 5167 Ibs as per airway bill. The fourth invoice was not erroneously submitted and there was no reason to interpret malafide intention. The dis.c.repancy in the supporting documents as rectified and intention to pay applicable duty has been confirmed. 5. Manufacturing: In regard to the allegation that the items which were the subject matter of the show cause notice were neither raw materials nor components and did not enter into any manufacturing processes it has been stated that the goods were raw materials, and components which enter into the manufacturing processes for the manufacture of the finished systems and kits as authorised under the Industrial Licence No. CIL 213(85) dated 1st July, 1985 issued by the Department of Industries and Company Affairs. The Industrial Licence permits them to manufacture low and high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price was not the sole consideration and the transaction was not at arms length and there was some underhand compensation. If the department relied on certain price lists, it must establish that the goods were ordinarily sold at those prices. Raychem Corporation sell finished products (and not raw materials and components) to retail trade customers and distributors. In addition to this, they sell raw materials, and components as opposed to finished products to original equipment manufacturing companies or OEM. These manufacturing companies produce kits from such raw materials and components. The seized price lists on which the department was relying were totally irrelevant for the purpose of determining the price at which goods were ordinarily sold, since in almost all cases printed price lists were for different products than those which had been supplied. The following items referred to in the show cause notice do not appear in the price list: S.C.TM-SPLD 1910: S.C.TM 42/19-1420-B : HVTM-SPLD 19/10 : HVTM 60/26- 1410-B : S.C.TM 32/1450-BMD : HVTM 42/19-1420-B : BBIT 65/25-PAC-A/U. These were raw materials which require further processing for use in systems and kits. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . were related to suppliers M/s. Raychem Corporation for the purposes of Section 14 of the Customs Act, 1962 and had further observed that from the price lists which were seized from the importers premises it was evident that the prices at which the imported goods were being supplied by M/s. Raychem Corporation to Radiation Technologies (India) Pvt. Ltd. were vastly different from the prices at which the goods were sold and offered for sale by M/s. Raychem Corporation to unconnected buyers in different parts of the world. The Collector held that the value of the imported goods under Section 14(l)(b) read with the Customs Valuation Rules, 1963 shall be Rs. 74,78,870/-. He had further ordered the confis.c.ation of the goods covered by invoice No. Y-33759 dated 15-10-1986 under Section 111(1) and (m) of the Customs Act, 1962. However, he had given an option to redeem the goods on payment of fine of Rs. 13,00,000/- (Rs. thirteen lacs only). He had also ordered the confis.c.ation of the imported goods of declared value of Rs. 6,84,554/- and had as.c.ertained the value at Rs. 74,78,870.00 whose value was misdeclared by the importers under Section 111(m) of the Customs Act, 1962. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o specified process temperatures. It is then transferred at this temperature to an expansion machine. The expansion cycle enables the tubing to exhibit its heat shrinkable characteristics. The tubing cannot exhibit this characteristic in the form in which it is imported. Without this conversion the imported raw material is unusable for its intended application. The expanded tubing is now fed to a pneumatic sheer whose output is sized per batch to produce the full range of sizes for their cable connection systems. For tubing layers exposed directly to the environment, the expanded tubing is coated with irradiated, non-tracking sealants to enable total sealing against moisture ingress, contaminants and direct splash water at extreme ranges of temperatures. The tubing, now in a finished form are ready for system assembly together with all other moulded parts, proprietary accessories and other standard earthing components. Shri Ravinder Narain has referred to page 24 of the order-in-original which deals with the goods des.c.ribed in the bill of entry. Shri Ravinder Narain has pleaded that the revenue has compared the price of processed material with the price of raw material. Shri Ravi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reliance can be placed on the same and the price is only for Brazil and it is specially mentioned on page 5 that in Brazil duty rates are very high and the shipments are sent at corporate price only. He has also referred to the affidavit of Mr. Anthony Nicholas Gooden dated 6th March, 1987. The revenue has mainly relied on the telexes and these telexes relate to Raychem Corporation and not to the appellant and no reliance can be placed on them. He has also referred to page 71 of annexure C of the paper book which relates to OEM price comparison. Shri Ravinder Narain, the learned advocate, has pleaded that the goods imported by the appellant are raw materials and are permissible under OGL in the AM 1985-88 Policy. There is no under-valuation. Provisions of Section 14(i)(b) of the Customs Act, 1962 cannot be resorted to by the revenue authorities. The invoice price under Section 14(1) (a) of the Customs Act, 1962 has to be accepted. He has pleaded that the value as declared may be accepted. The fines and penalties must be quashed. Shri Ravinder Narain has referred to the examination report and pleaded that in the first four items there was no explanation. Items 5 and 6 viz. BBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri V.M. Doiphode has again pleaded that Raychem has relation with the appellant. The importer is a subsidiary company of the foreign company and an inter company is one division of the other company. He has referred to the telexes. He has referred to para 21 of the reply to the show cause notice. He has referred to telexes which appear on pages J-4 and J-5 of the paper book and he has also referred to the affidavits of Subroto Chakravorty and Mr. Nicholas Godden. He has pleaded that Shri Chakravorty does not controvert the telexes. He has also referred to the telexes appearing on page C-29 and C-32 where it is mentioned that: It is essential that the paper work for the shipment from Munich indicate only the low price otherwise you will be hit for excess duty, and also page 32 of the telex to Harry Ganzhorn where it is also mentioned that the appellant wants to save duty. It is mentioned in the telex that: This is essential to ensure minimum duty. Invoice held at regular list price as agreed. 10A. Shri Doiphode, the learned SDR, pleaded that on the facts of the present case, Section 14(l)(a) is not applicable and the provisions of Section 14(l)(b) have to be resorted to. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of being an equity holder. In that matter, the appellants had maintained that the expression Collaborators , Associates etc. used in the documents or the annual reports of the company had been loosely applied and for all practical purposes they were two separate bodies, deal with each other as principal to principal and the prices charged by OAK from the appellants were correct prices within the purview of Section 14(1) of the Customs Act, 1962. He pleaded that in para No. 13 of the said judgment, the Tribunal had given its finding. The Tribunal had observed that Chairman of both the companies was common for many years and OAK were entitled to an over-riding commission of 7 % on imports of goods by independent buyers in India from OAK. The right to get over-riding commission was generally enjoyed by a sole selling agent. The sole selling agent, in turn, is recognised as a special relationship in trade and commercial world. The Tribunal had held that OEN (India) Ltd. and OAK had common commercial interests other than those arising from the OAK having a portion of the equity in the appellant company. In view of the factors stated above, the Tribunal had agreed with the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial licence appears on pages C-36 and C-37 of the paper book and in the industrial licence there are complete details of the items to be manufactured by the appellants. Shri Doiphode has referred to page B-20 of the paper book which is the pricing extrusions S.C.TM-Tubing. Shri Doiphode has also referred to pages 40 and 41 of the appeal memo and has pleaded that there was violation of provisions of Section 111(d) of the Customs Act that as per list attested by DGTD vide letter dated 24th June, 1986 the appellants were permitted the imports of components and the list indicated the maximum and minimum sizes of the heat shrinkable tubings/sleeves which could be imported, the quantity permitted to be imported and its CIF value. He further argued that such a list could be only in respect of components and not raw materials. He has pleaded that the price list duly tallies with the DGTD list. Shri Doiphode during the course of arguments has also filed written arguments and has again argued that the price is the sole consideration. The printed price has to be accepted and the supplier is a related person. He has referred to the particulars and the des.c.riptions given in the invoice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. The appellant has only filed three invoices declaring 86 packages, whereas in the bill of entry total packages were declared to be 98. He has referred to internal pages 26 and 37 of the order-in-original and has argued-that the appellant had intentionally filed three invoices No. Y 33607, 025680 and Y 33580 and bad omitted invoice No. Y 33579 dated 15th October, 1986 which covered goods valued at US $ 12,443.05 (fob) equivalent to Rs. 1,93,441.00 (c.i.f.). Shri Doiphode has argued that the Collector had confis.c.ated the goods mentioned in the 4th invoice. However, he had given an option of redeeming the same on payment of Rs. 13,00,000.00 (Rs. thirteen lacs). Shri Doiphode also argued that it is not the duty of the customs authorities to as.c.ertain whether the goods imported by the appellant were to result in profit or loss. The customs authorities are only concerned with the customs duty in accordance with law which works out on the imported goods. 11. Shri Ravinder Narain, the learned advocate, in reply has referred to page C-68 of the paper book which is the list of items to be imported under OGL. He has laid special emphasis on the word irradiation . He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14(l)(a) of the Customs Act, 1962 or have to be assessed in terms of provisions of Section 14(l)(b) of the Customs Act read with Customs Valuation Rules, 1963? 4. Whether there was justification of fine in lieu of confis.c.ation and penalties under the Act? 13. We proceed to decide issue No. 1 i.e. whether the goods imported are raw materials/components or finished products and whether they qualify importation under OGL. Vide Mis.c.. Order No. 41/88-A dated 3rd June, 1988 the Tribunal had ordered the physical examination of the goods that had been imported and which were lying in the customs control. The Tribunal had ordered joint inspection. Para Nos. 2 and 3 of the mis.c.ellaneous order are reproduced below :- 2. Since there is a dispute between the parties as to whether the goods imported are really expanded or unexpanded and since this dispute can be resolved only by a physical examination of the goods that have been imported and which are lying in Customs Control, we order that joint inspection of the full consignment relevant to appeal No. C/3014/87-A should be carried out and a report submitted, in 5 sets, by the Asstt. Collector of Customs, Air Cargo Complex, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g processes in our factory for each item listed in the Show Cause Memos. All tubing listed as raw materials which undergo expansion are first subjected to a cutting process. They are matched to the sizes of mandrils selected for each expanded diameter (32mm, 42mm, 60mm and 65mm). During this process, it is necessary to ensure burr-free ends in order to obtain a high yield during the next step. The tubing, at their original diameter (14mm, 19mm, 26mm, 25mm respectively) is then loaded into a Heating Chamber for elevation to specified process temperatures. It is then transferred at this temperature to an Expansion machine. The Expansion cycle enables the tubing to exhibit its heat shrinkable characteristics (shape memory). The tubing cannot exhibit this characteristic in the form in which it is imported. Without this conversion the imported raw material is unusable for its intended application. The Expanded tubing is now fed to a pneumatic sheer whose output is sized per batch to produce the full range of sizes for our cable connection systems. For tubing layers exposed directly to the environment, the expanded tubing in coated with irradiated, non-tracking sealants to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 86 packages and in the bill of entry 98 packages and the gross weight of 5167.79 Ibs was mentioned. We confirm the findings of the Collector in this regard. However, we feel that the quantum of fine his highly excessive. To meet the ends of justice, we uphold the confis.c.ation of the goods covered by invoice No.Y-33759 dated 15th October, 1986 under Section 111(1) and (m) of the Customs Act, 1962. However, we reduce the redemption fine from Rs. 13,00,000.00 (Rs. thirteen lacs) to Rs. 3,50,000.00 (Rs. three lacs and fifty thousand only). 15. Now coming on the valuation aspect, we would like to observe that 74% of the equity shares of M/s. Radiation Technologies (India) Pvt. Ltd. are held by M/s. Raychem Radiation Technologies Inc. and M/s. Raychem Radiation Technologies Inc. is fully owned subsidiary of M/s. Raychem Corporation who are the suppliers of the goods in this case. Shri Ravinder Narain, the learned advocate, had referred to a judgment of the Supreme Court in the case of Collector of Customs, Bombay v. Maruti Udyog Ltd., Gurgaon in Civil Appeal Nos. 542-44 of 1988 order dated 26th April, 1989 where the revenue s appeal was dismissed and they had confirmed the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated in this telex that: Harry can potentially supply your needs with WCSM, XCSM or MWTH. Please telex application details to him. Especially use range (installation diameter), wall thickness requirements, etc. He will look at the most suitable material that can be made available. I think these actions may solve the problem. Thank you for your help and understanding in this situation. Telex No. Bom. 0032 dated 3rd July, 1986 was for the supply of 5000 pieces of goods of des.c.ription Raygel . The suppliers were instructed to supply goods with elastomer and polyolefin loading but not to use the words elastomer or polyolefin in any of the documents. A number of price lists covering various types of goods were also seized. These price lists mostly marked as Trade price lists and Distributor Price List showed the prices at which goods listed therein were being offered for sale to buyers in all parts of the world. Shri Ravinder Narain, the learned advocate, pleaded that the price lists seized by the department pertained to the finished products. The word B which stands for Beamed and BMD is not there in the price list, whereas in the invoice the word B /beamed is there. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent man s estimate as to the probabilities of the case." The Tribunal had followed the judgment of the Supreme Court in the case of Collector of Customs, Madras and others v. D. Bhoormull reported in AIR 1974 S.C. 859 = 1983 (13) E.L.T. 1546, in the case of Macneill Magor Ltd. v. CC reported in 1987 (28) E.L.T. 318. Relevant extract from para No. 4 from the said judgment is reproduced below :- Reverting to the quantum of proof required, if in an abstract case, it could be shown that a published list price of the goods was available, that the importers in general were importing the said goods at that listed price and that one particular importer declared on importation a price which was more than 100% lower than the listed price, there would indeed appear to be a very heavy onus shifted to that importer to explain how he got such a low price. While minor variations would not call for imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal and the prices charged by OAK from the appellants are correct prices within the purview of Section 14(1) of the Act." 13. We have given our deep thought to the various arguments advanced on behalf of the parties and have also gone through the voluminous record, including the additional evidence produced before us. We find that the most vital issue requiring our determination is about the exact nature of relationship between the appellants and OAK. The appellants contention in this behalf is that their dealings with OAK are as principal to principal and they buy goods from them in the normal course of business on strictly commercial considerations. The case of the respondent, on the other hand, is that the appellants have special relationship with OAK and such relationship is reflected in financial and other spheres. In fact, Shri Nair went to the extent of stating that the appellants virtually belong to OAK . We observe that the Collector has dealt with this issue in a very lucid manner in his order. It is seen that apart from the fact that OAK hold 45% of equity in the appellant company, there are other features which are a pointer that the two companies have interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce asking that Chance deal with them on a preferential basis." 21. This brings us to consider the price at which the tubing was offered for sale. Mr. Talyarkhan submitted that the appropriate price in this regard was the price of 0.34 per Kg. that was quoted to the appellants by Chance. The appellants reply dated 10th July, 1973 to the first show cause notice issued to them is relevant in this regard. The appellants there stated that they were in technical collaboration with" Kupfer who were manufacturers of starter switches for fluores.c.ent tubes. Kupfer had supplied to the appellants and would continue to supply to them technical knowhow and information for the manufacture of such switches. Under the collaboration agreement with Kupfer the appellants were committed to Kupfer for importing raw material from them alone for the manufacture of starter switches. Kupfer had written to Chance asking Chance to deal with the appellants with preference . Because of their collaboration with Kupfer, Kupfer and other manufacturers in the United Kingdom protected the appellants interests. It is clear from this letter that a price quoted to the appellants by Kupfer or Chance or any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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