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TMI Blog2003 (3) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... g in bogus exports to avail undue entitlement of drawback by filing bogus Bills of Lading. Their premises were searched and their statements were recorded. The details of the above-mentioned shipments were revealed to the investigating authorities. The officers of the SIIB then recalled the said container which arrived in March, 1998. On examination the goods were valued at Rs. 11,91,705/-. M/s. SGS India Ltd., a reputed investigation agency were also consulted. SGS after examination opined that the various items of clothing would fetch between US$ 3.52 to US$ 6.25 respectively. In the investigation the assistance of one Punjabi was also taken who had supplied some of the goods to the exporters. The valuation given by him was adopted by the department for the valuation. 3. The container along with the contents were seized by the officers of the Customs on 10-3-1998 under the powers vested in them vide Section 110 of the Customs Act, 1962. The ground for seizure as given in the Panchnama was that whereas the declared was approximately Rs. 80 lacs, the ascertained value was Rs. 13,54,250/-. 4. Show Cause Notice was issued on 8-9-1998 seeking to confiscate the goods, impose penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment was clearly the same as in the challan. On examination of the Challan the Customs Officers thought that it was bogus and on this ground claimed that reasonable belief that the goods were liable to seizure arose in their mind. The Court examined the previous case law including the case of Pukhraj v. D.R. Kohili [1983 (13) E.L.T. 1360 (S.C.)] and M.G. Abroland Anr. v. Amichand Vallamji and Ors. [2002 (149) E.L.T. 32 (Bom) = AIR 1961 Bombay 227] as also in the case of Bapalal Khushaldas Gosalia v. R. Prasad [AIR 1965 Gujarat 135]. The Court observed that there cannot be constant measure for determining as to whether or not at the time of seizing the goods the seizure had been made under a reasonable belief that the goods were liable to confiscation. It all depended upon the facts and circumstances of the case. The Court in para 11 of the Judgment after quoting the provision of Section 110 of the Customs Act observed as under :- The seizure of the goods must follow only if the proper officer has reason to believe that the goods were liable to confiscation, not otherwise. The view expressed by the Bombay High Court in M.G. Abrol s case is a salubrious view. A reasonable belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms Act, and when they handed over the seizure list to the petitioners, seizing the silver goods and the car, has been interpolated. I have already referred to the decision of the Bombay case in M.G. Abrol and Another's case in which it has been held - That reasonable belief must exist in the mind of the officer seizing the goods at the time of the seizure itself. Subsequent acquisition of such belief could be of no avail . In the instant case if transfer of the goods from the petitioners' car to the jeep is taken as the seizure of the goods, clearly the respondents did not have the reasonable belief at that time that the goods which they were transferring into their jeep was liable to confiscation and when they handed over the seizure list to the petitioners, they had no further materials before them. Even at that time, as the facts discussed above indicate, they did not have the reasonable belief. 13. The judgment was concurred with by the second Judge. 14. The adequacy of belief before making a seizure came before the Patna High Court in another case, namely Angou Golmei v. Vizovolie Chakha Sang [1996 (81) E.L.T. 440 (Pat.)]. In this case on receipt of information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2-12-1997. The Search List shows seizure of share certificates, photographs, etc. but it does not show anything relevant to the case although the documents are described in Show Cause Notice as incriminating . Therefore no reason to believe could exist on the basis of the search in the minds of the Customs Officers. 19. Panchnama does not show where any search was made of the premises of Ram Avtar Mittal. Ram Avtar Mittal s statement was recorded on 2-12-1997. In this statement he claimed to be associated with both units. Their job was to buy garments in stock lots, subject these to ironing etc. processes and to export them. He claimed to have done exports for over 8 years. He admitted to buying clothes from Punjabi. In this statement he gave the reference to the shipment exported in these proceedings. There is no admission in his statement of over-invoicing for sake of getting extra drawback. In fact there is a clear admission to the effect that he has no knowledge of drawback procedures at all. Para 3 of the Show Cause Notice reproduces the reference to 30 shipping bills. He referred to one Manisha who was the go-between the buyers and the sellers. There is no admission in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re received back. The Show Cause Notice in para 6 says the following : The goods were valued at Rs. 11,91,705/- by the panel of examining officers on the basis of values given by the said Shri Vijay D. Punjabi, the supplier of the goods and on the basis of the admissions made by Shri Ram Avtar Mittal in his statement. 26. As we have observed above the gist of the statement of Ram Avtar Mittal disclosed in para 3 of the Show Cause Notice, contains no such admission. He was not on the present exports consignment but was narrating how his office used to acquire garments. As per para 5 of the Show Cause Notice, Punjabi had supplied 10,000 pieces of garments at the value of Rs. 2.5 lacs. If he was right in his first statement then there is no reason why later at the time of physical inspection he should give a much higher valuation of about Rs. 12 lacs. 27. The Panchnama reveals one more curious fact. Page 2 thereof shows that Punjabi identified 16 cartons as containing goods supplied by him. These 16 cartons contained 718 pieces of garments. The total cartons numbered 468 and the total garments were 17,054/- and yet the Customs have relied upon the statement of Punjabi who init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, following the above judgment of the Hon ble Patna High Court, we must hold that the seizure was invalid and therefore the subsequent actions also become without basis of law. 33. In spite of this, we proceed to examine the legality of the Order passed by the learned Commissioner. 34. We have shown above that the valuation made by Shri Punjabi, the undisclosed others as also by M/s. SGS could not be called to be accurate or complete. The Commissioner adopts an entirely different valuation, recalculate the drawback from Rs. 13,95,466/- and directs recovery of Rs. 8,37,795/-. 35. Para 8 of the Show Cause Notice is required to be reproduced here: In the light of what has been stated above, it clearly appears that the correct market value of the goods under reference is Rs. 11,91,705/- as against declared value of Rs. 78,05,851/-. It is observed that the exporters have claimed drawback to the tune of Rs. 13,95,466/-. Thus, it is evident that the drawback claimed by the importer is more than the market price of the goods in terms of Section 76(1)(b) of the Customs Act 1962, no drawback is payable in respect of any goods, the market price of which is less than the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value addition between the manufacturing costs to the brand name price is some time over 400%. If one is to go by the cost of material and cost of manufacture plus a reasonable margin of profit then the value of every commodity would be much lower than the actual value in the market. In the case of readymade garments the profit margins are tremendous and the margin would depend upon many causes including on the skill of the seller and the gullibility of the buyer. 39. What is the effect of the over-valuation? The Government on one hand may have to give a higher quantum of drawback but at the same time the country is getting a significant amount of foreign exchange. Where the exports are suggestive of being intended for the purpose of hawala transactions, where the goods are not physically present or in cases where the sales proceeds are not realized penal action on the exporter would be justifiable. But merely by turning a blind eye on the capacity of the exporters in generating high profits on exports, it is the Government which is ultimately going to lose. 40. On the face of the above analysis we make the following order: - (1) That the seizure made by officers of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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