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TMI Blog2012 (4) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... it, there would have been evasion of customs duty on that score - Held that: the export value is available in respect of both the consignments in terms of FOB value in both the cases the value is indicated as USD 1,71,300 Whether any amount would have to be added to the value towards insurance and freight charges as the import value is required to be computed on CIF basis - Held that: addition of actual freight and insurance charges or the addition of usual 20% when such amounts are not available may not be necessary as the FOB value in India can be taken as it is as the CIF value in India in respect of these cases for the purpose of determining customs value and customs - it is clear that the fraudulent transactions involved in these cases were not so much intended to defraud the customs department or cause customs duty evasion as was for obtaining inadmissible benefits violating provisions of other enactments such as the Income Tax Act and the Foreign Exchange Management Act etc In the eyes of the customs law, being owners, they were importers and under the income tax law being owners, they alone were eligible for claiming depreciation in respect of the impugned imported mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-Original No. 206/2006 dated 28.9.2006 was earlier dismissed by the Tribunal on 25.7.2008 on the ground of non-compliance with the provisions of Section 129E of the Customs Act, 1962. Under the impugned two orders, the adjudicating Commissioner has:- (i) confirmed duty demand of Rs.18,24,17,893/- against M/s. SFL and M/s. ETK Softech jointly and severally; (ii) has imposed redemption fine of Rs. 1 lakh on the impugned goods covered under Order-in-Original No. 206/2006 dated 28.9.2006; (iii) has imposed a penalty of Rs.5 crores each on M/s. SFL and M/s. ETK Softech; (iv) has imposed a penalty of Rs. 1 crore on late N.M. Parthasarathy under Order No. 206/2006 dated 28.9.2006; (v) has imposed a penalty of Rs. 5 lakhs each on Shri S. Kannan and Shri R. Raghavan respectively Director and Managing Director of M/s. ETK Softech; (vi) has confirmed duty demand of Rs.12,86,61,198/- on M/s. ICICI Bank Ltd. and M/s. ORJ jointly and severally; (vii) has imposed redemption fine of Rs. 1 lakh on the impugned goods covered under Order-in-Original No. 205/2006 dated 28.9.2006; (viii) has imposed a penalty of Rs. 5 crore each on M/s. ICICI Bank Ltd. and M/s. ORJ; (ix) has imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs: 24 Nos. totally valued at USD 7,200,000 (CIF). The goods were said to have been imported from M/s. International Product Technology USA (IPTE for short) without payment of customs duty as per permission given by Development Commissioner MEPZ vide letter No. 19/26/96-EOU-TN dated 12.2.1997. The declared value of USD 7,200,000 as per Invoice No. 1450 dated 16.2.97 was paid on behalf of M/s. ORJ (lessee) by their bankers viz. Bank of Madurai Ltd. (now ICICI) (lessor). The goods were cleared to bonded warehouse without payment of duty under Notification No. 13/81-Cus. Dated 9.2.81 as amended. (3) Investigations conducted by the DRI officers in August 1999 revealed that the capital goods imported by M/s. ETK Softech from Singapore and cleared under Bill of Entry No. 109 dated 5.11.98 through Tuticorin Port had been manufactured by M/s. ETK International Ferrites Ltd. (ETKIF, for short), Ranipet, and were not of US origin as declared by the importers and further that the goods did not conform to the permission granted by the Development Commissioner. It was found that the same container stuffed with the goods manufactured by M/s. ETKIF and affixed with the one-time seal No. 1778 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve suppressed this fact while filing Bill of Entry No. 109 along with the false certificate of origin issued by N.M. Parthasarathy. They were also found to have misdeclared that the goods conformed to the specifications of goods permitted for import by the Development Commissioner and were to be used for the manufacture of electronic grade iron oxide. The conclusion reached by the DRI in respect of M/s. Bank of Madurai (now ICICI) and M/s. ORJ were similar to those noted against M/s. SFL and M/s. ETK Softech. Based on the result of detailed investigation, the impugned show-cause notices were issued which have culminated in the orders of adjudication passed, whereby the adjudicating authority has confiscated the goods imported, confirmed duty and imposed penalties as noted above. VALUATION AND DUTY DETERMINATION 4. These appeals were found to have been adjourned several times on the request of both sides and finally these have been heard on two consecutive days declining request from both sides for further adjournment. We also find that the learned senior counsels and the learned counsels for the appellants and the learned special counsel for the Department have pitched the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is, the inflated value declared to customs at the time of importation and the amount remitted against such importation. When it is admitted that the goods are mis-declared with reference to the quality, country of origin and value, it is clear that the invoice produced does not represent the actual transaction but a manipulated one. Section 14 of the Customs Act, 1962 and the Customs Valuation Rules framed thereunder following the WTO Agreement on Customs Valuation, to which India is a signatory, provide for different methods of valuation in a hierarchical manner. No doubt, the first method prescribed thereunder is the transaction value method but when the transaction itself is not genuine, there is no warrant in law to take recourse to the transaction value method of valuation. Necessarily, in such cases, the customs officers are enjoined upon and required to follow another method of valuation based on comparable value of identical goods, similar goods etc. In the case of Collector of Customs, Calcutta Vs. Sanjay Chandiram 1995 (77) ELT 241 (SC) a question was raised whether transaction value method should be applied in a case where there was mis-declaration of the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined as per the Notification No. 53/97-Cus. dated 3.6.1997 meant for EOU imports. If any goods were imported for EOU purpose and the same were not so used, diverted or used otherwise, one could say that there is a case of customs duty evasion with reference to the import of goods for EOU purposes. These goods were not at all suitable for use in the EOU and hence there is no question of demanding duty applying the Notification No. 53/97-Cus. dated 3.6.1997 or in terms of the bond executed. In fact the entire manipulation, as brought out by the learned special counsel himself in his written submission, was intended to defraud the Income Tax Department by way of claiming inadmissible depreciation. There is also a case for violation of the foreign exchange law for remitting much more foreign exchange than the actual value of the goods. From the facts of the case, we find that there is no case of evasion of customs duty by way of mis-use of the EOU scheme. In fact, if proper goods of the declared value were actually imported and the same was either mis-used or diverted for home consumption, and not used in an EOU unit, there would have been evasion of customs duty on that score. All tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of duty, since the impugned goods have been manufactured in an EOU, the excise duty would also have been equal to the customs duty under the proviso to Section 3(1) of the Central Excise Act, 1944). Since, import duty on the impugned goods would be leviable as on goods of like value under Section 20, the actual value at which the goods were initially exported is a good measure of like value, being the value of the very same goods. We find that the export value is available in respect of both the consignments in terms of FOB value in both the cases the value is indicated as USD 1,71,300 (though the value in rupees was different being Rs.72.45 lakhs in one case and Rs.61.17 lakhs in the other case, perhaps on account of exchange rate fluctuation). We, therefore, direct that the export value of USD 1,71,300 be adopted for both the consignments as import value and applying the respective exchange rates as applicable on the relevant date, the duty amount be re-computed by the original authority. 9. We have also given our thought to the question as to whether any amount would have to be added to the value towards insurance and freight charges as the import value is required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate and the same do not validate the impugned show-cause notices. It was, further, stated that the review petition filed in the case of Sayed Ali (supra) by the Department has been dismissed by the Hon'ble Supreme Court. It was argued in this regard by the learned Special Counsel for the department that the Hon'ble Supreme Court in para 16 of its order in Sayed Ali (supra) has observed as follows:- "Nothing has been brought on record to show that the Collector of Customs (Preventive) who had issued the show-cause notice was assigned the functions under Section 28 of the Act, as proper officer' either by the Board or the Collector / Commissioner of Customs". He states that as far as ADG, DRI is concerned, Board's Circular No. 4/99-Cus. dated 15.2.1999 specifically authorizes the DRI officers to issue show-cause notices in the cases investigated by them. He also refers to the Constitution Bench judgment of the Hon'ble Supreme Court in the case of Durga Prasad Vs. H.R. Gomes, Superintendent (Prevention) Central Excise, Nagpur Another 1983 (13) ELT 1501 (SC) , where it is held that since the Collector of Customs is the proper officer for performing the functions unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), the ADG, DRI can discharge the duties of a proper officer in terms of Section 5(2) of the Customs Act, 1962. (v) The Hon'ble Five Judges Bench of the Hon'ble Supreme Court in the case of Durga Prasad (supra) has specifically held, "We are of the view that, in any event, the Collector of Customs would be a proper officer in relation to the functions to be performed by the Act because as a matter of principle the Collector of Customs who had assigned the power of a proper officer to the subordinate officer must himself be deemed to have the powers of a proper officer". (vi) The Bombay High Court in the case of Mahesh India (supra) specifically holds DRI officer to be having jurisdiction to issue show-cause notices. (vii) The Customs (Amendment and Validation) Act, 2011 has been enacted specifically to validate show-cause notices for the past period. In this context, we also take note of the submissions made by the learned counsel Shri Lakshmi Kumaran on the second day of hearing, that he is not pressing the arguments regarding the inadequacy of the Customs (Amendment and Validation) Act, 2011 and that he would raise the same at a proper legal forum, if necessary. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the person holding himself out to be importer. This decision of the Hon'ble Bombay High Court has been approved by the Hon'ble Supreme Court vide 1992 (58) ELT 163 (SC). (iii) The financing institution and the bank had ownership over the impugned goods and as owners they have to be treated also as importers under the Customs Act apart from the fact that the Bills of Entry have been filed by them also. (iv) M/s. ETK Softech and M/s. ORJ have also held themselves out to be importers and have filed the Bills of Entry and therefore they are also required to be treated as importers. 15. In view of our finding as above, we hold that the duty liability as imposed by the adjudicating Commissioner jointly and severally on the bank and the financing institution on the one hand and M/s. ORJ and M/s. ETK Softech on the other is legal and proper and the same does not require any interference. We have already held that the impugned goods were mis-declared and not as per the approval of Development Commissioner and not meant for the EOU and hence the question of recovery of the duty demand in terms of Notification No. 53/97-Cus. dated 3.6.97 or under bond or under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that the impugned orders cannot be called vague in terms of fixing the duty liability in respect of both the importers in each case. Further, we find nothing wrong in fixing the duty liability jointly and severally on two persons, who are jointly the importers in the eyes of the customs law. M/s.SFL and M/s. ICICI Bank have to be considered as importers and liable to pay duty as they were the owners of the goods having retained such ownership during import as well as afterwards till repayment of such amounts. In the eyes of the customs law, being owners, they were importers and under the income tax law being owners, they alone were eligible for claiming depreciation in respect of the impugned imported machinery. They cannot be considered as owners only when it comes to getting some benefits and they cannot be held to have given up the ownership when it comes to discharging the duty liability. It makes no difference to the legal position that in respect of one Bill of Entry, the financing institution had signed the Bill of Entry and in the other case, the bank had not signed it, since in both the cases, the Bills of Entry were filed in the joint name, the ownership was retained w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The machinery was also not run or tested and the valuation report was issued entirely on the basis of documents produced by M/s. ETK Softech. M/s. SFL had also appointed the valuer at the behest of late N.M. Parthasarathy instead of appointing an independent valuer. 21. The learned special counsel has pointed out that the bank was also fully aware of the entire modus operandi and the software cleared through air-cargo for use by M/s. ORJ was found in the bank premises and that if it was a genuine one, the bank ought to have handed over the same to M/s. ORJ instead of retaining the same with them. The learned special counsel's submission that both M/s. SFL and bank had secured the lease amount given by them and also stood to benefit by receiving specifically depreciation from the Income Tax Department is borne out from the case records and the same has to have a bearing on the penal liability of M/s. SFL and the bank. It does not make a difference that due to detection of the case, M/s. SFL and the bank could not take and retain the depreciation benefit from the Income Tax Department to the extent of 25% of the inflated value of the fraudulent imported machines in the first year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners. 22. However, before concluding, I must notice a technical legal issue raised by the petitioner. Learned Counsel refers to Sec. 113D in the matter of confiscation of goods attempted to be improperly exported. He refers to Sec. 114(i) and (ii) in support of his contentions. He says that in the light of Sec. 113D r/w. Sec. 114(i) and (ii) the maximum penalty leviable is five times the value of the goods. 23. Per contra, Shri Dinesh Kumar, learned Sr. Central Government Standing Counsel says that any such interpretation would be unreasonable in the light of the object of arresting improper export of goods by the parties. 24. The argument of the petitioner, at the outset is very attractive. However, on opening the veils of this attractive argument, it could be seen that the said attraction is not warranted on the facts of this case. The value has been defined u/s. 2(41) to mean the value thereof determined in accordance with the provisions of sub-section (1) of Sec. 14. Section 14 provides for valuation of goods for the purpose of assessment. In the case on hand, the wordings used in Sec. 114 are the duty sought to be evaded on such goods or Rs. 1,000/- whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the value of the goods was considered to be inadequate to take care of cases of gross over-valuation of export goods, and hence the Parliament in its wisdom has amended the same to insert a reference to the declared value, and after the amendment, the present Section 114 (iii) reads as under:- " Penalty for attempt to export goods improperly etc. Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such act, shall be liable, - xxxxxxx xxxxxxx (iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is greater." Thus, it is clear that the declared value can be different from the value determined under Section 14 of the Act and the amended provision authorizes imposition of penalty with reference to whichever value is greater with effect from 14.5.2003. 23. As regards imports, we, however, agree with the submission by the learned Special Counsel that there cannot be two values one for the purpose of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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