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TMI Blog2008 (4) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The appellants imported two Chip Placer Machines vide bill of entry dated 19-7-2004 from M/s. SMART Modular Technologies, Malaysia. The declared value was US $ 39,000 CIF (Rs. 18.06 lakhs). The CIU investigated and it was found that the machines were grossly undervalued. Examination of the two machines revealed that the said machines were used and refurbished. A registered Chartered Engineer Shri H.V. Krishnaswamy valued the machines at $ 1,21,875. Detailed investigations were carried out. It was revealed that the appellants are manufacturing "Memory Modules" with the brand name "SMART" and "Hynix". The technical know-how and necessary equipment and training to the appellant was provided by M/s. SMART. The capital goods required were also supplied to them free of cost. M/s. SMART continued to remain the owners of the capital goods and the appellant is not allowed to sell or lease the same. During investigations, the CIU recovered a document titled "Agreement between Smart Modular Technologies and M/s. Sun electronics Technologies Ltd. Though the agreement is unsigned, it confirmed the existence of a relationship between the supplier M/s. Smart and receiver M/s. Sun Electronics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion was drawn that there is no sale involved and the appellant-company and M/s. Smart are related person. The Commissioner has not taken into account the submission of the appellant that though the machineries were supplied by M/s. Smart and initially they were not capitalized, the mutual agreement was that the appellant should make payment for machineries once they start making profits. The appellants during December 2004 made a payment of US $ 1,03,000 towards the cost of the machine. (ii) The Commissioner admits in Para 84.01 that unsigned agreement has no evidentiary value but has concluded that the said agreement is a valid document for the purpose of valuation. There is no evidence to show mutuality of interest, flow back, etc. The Memory Modules manufactured by the appellants in India are sold to M/s. IBM, M/s. HP and M/s. WIPRO and they also undertake job work for M/s. HCL, M/s. ABB and M/s. BPL. (iii) The appellants are registered with Central Excise and they are paying substantial revenue to the government. The Excise department has not alleged any relationship between the appellant and M/s. Smart. The transaction between the appellant-company and M/s. Smart are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yderabad - 2002 (139) E.L.T. 399. (c) Adani Exports Ltd. v. CC, Visakhapatnam - 2000 (116) E.L.T. 715. (d) Biva Enterprises v. CC, Ahmedabad - 2002 (144) E.L.T. 691. (e) Eicher Tractors Ltd. v. CC, Mumbai - 2000 (122) E.L.T. 321 (S.C.) (f) Saudagar Exports v. CC, Chennai - 2002 (145) E.L.T. 543. (g) GRML Exports and Anr. v. CCE (P) Mumbai - 2002 (140) E.L.T. 416 (T) = 2001 (47) RLT 843. (h) Sheraton Overseas Anr. v. CC, Chennai - 2002 (144) E.L.T. 432 (T) = 2002 (49) RLT 77. (i) Plama Laboratories Ltd. v. CC, Chennai - 2002 (145) E.L.T. 722 = 2002 (49) RLT 198. (j) Iron Master India Pvt. Ltd. - 2002 (150) E.L.T. 599. (k) Forte Garments v. CC, Chennai - 2002 (150) E.L.T. 622. (xii) For deciding valuation under Rule 8, the department had placed reliance on three documents. They are (a) the Agreement; (b) a printout from website www.smtinline.com; and (c) the Chartered Engineer's report dated 23-9-2004. The appellants furnished detailed counter to all the three documents. During the cross-examination of the Chartered Engineer, it was clearly brought out that the valuation was done only on high estimate basis and reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the demand for duty on previous three consignment is illegal and without any basis. (xviii) The Bills of Entry were assessed in November 2000, December 2000 and December 2003 and the said Bills of Entry had not been challenged and in terms of Apex Court's decision in the case of Priya Blue Industries as reported in 2004 (172) E.L.T. 145 (S.C.) = 2004 (64) RLT 321 (SC), the assessments cannot be reopened without challenging the bills of entry. (xix) The demand is barred by limitation. No investigation is conducted with the exporter of the machinery and no certificate from Chartered Engineer is obtained and hence, the allegation of suppression with an intention to evade duty is not correct. Hence, demand in respect of three previous imports is barred by limitation. The following case laws were relied on. (a) Champhor Drugs Liniments - 1989 (40) E.L.T. 276 (S.C.) (b) Cosmic Dye Chem - 1995 (75) E.L.T. 721 (S.C.) (c) Pushpam Pharmaceuticals - 1995 (78) E.L.T. 401 (S.C.) (d) Singareni Collieries - 1988 (37) E.L.T. 361 SRB (e) Padmini Products - 1989 (43) E.L.T. 195 (S.C.) (f) Cadilla Lab. Pvt. Ltd. - 2003 (152) E.L.T. 262 (S.C.) = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be set aside. (h) The penalty of Rs. 25 lakh under Section 112(a) of Customs Act cannot be sustained. (i) Assessments of Bills of Entry cannot be reopened without challenging the Bills of Entry. (j) The impugned order has been passed without jurisdiction as the learned Commissioner has no jurisdiction to decide the valuation of final products manufactured by appellant and cleared on payment of duty as the same falls under the jurisdiction of concerned Central Excise Commissionerate. (k) To set aside the impugned order with consequential relief, if any, as per law. 6. The learned departmental representative stated that the appellants had not paid any amount towards the import of the two machines and also the machines imported previously. This is very clear from the investigations. Even though, the agreement recovered from the appellants is unsigned, in Appendix A of the said agreement there is clear indication of the value of the impugned items. In any case, as the transaction does not involve any sale, the value given in the invoice cannot be accepted for duty purposes. In other words, the so-called value given in the invoice is not at all the correct transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions between the appellant and the foreign company do not appear to be at arms' length. Therefore, the department is justified in rejecting the transaction value in the absence of sale of the impugned goods. 7.1 Once the so-called transaction value is not acceptable, the Revenue has to go by the Valuation Rules to determine the value for customs purposes. The Commissioner in Para 85.3 has clearly given the reasons for resorting to Rule 8 of the Customs Valuation Rules, 1988. We are reproducing the said Para below. 85.3 I now move on to the next step of arriving at the correct assessable value in terms of the above valuation Rules for the purpose of charging import duty. As per Rule 5 of the said Valuation Rules, value of identical goods sold for export to India and imported at or about the same time as the goods being valued is to be considered. In this case, I find that the machines imported vide B/E No. 650719 dated 19-7-2004 were second-hand machines which were refurbished. As the actual contemporaneous import of identical or similar goods are not available. Rule 5 and 6 of the said Valuation Rules cannot be applied. As regards Rule 7 of the said Valuation Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The value given in the Appendix A and the value adopted by the Chartered Engineer may be very close. This does not mean that the Commissioner has relied on the unsigned agreement to decide the value of the impugned goods. Even if we assume that the unsigned agreement has no evidentiary value, the fact remains that there was no sale transaction. This is clear from the statements of Shri Sanjay Soni and Shri H. A. Udaya, Vice-President. When there is no sale, the method adopted by the Commissioner for valuation is the most appropriate one and is also in accordance with the Valuation Rules. Moreover, the cross-examination of the Chartered Engineer reveals that the said Engineer had done valuation for number of IT companies like Hewlett Packard, Intel, Global Symphony, Accenture, etc., and he had checked with his friends in those companies for the value of such machines. There is nothing wrong in ascertaining information from knowledgeable persons in the field. In any case, the appellant has no proper explanation with regard to the value of the impugned goods indicated in Appendix A. The Commissioner has also stated that the appellants had not produced the pricelists of identical g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Customs Act. It has been clearly established that there was suppression of facts with regard to the transaction between the appellant and the suppliers which has bearing on the valuation of the impugned goods. Further, Shri V.P. Soni, Director has been denying any knowledge about most of the activities of the unit. Shri Sanjay Soni was the former Managing Director of the appellant-unit. He is also the Director of M/s. Logix Microsystems and as the son of Shri V.P. Soni, he is the advisor to the appellant's unit on matters of international dealings. As he is responsible for the commissions and omissions of the appellant-unit, hence, he is also liable for penalty. 7.5 The Commissioner has rejected the request of the appellant for re-export of the capital goods. His conclusion that the appellant-unit have resorted to the option of re-exporting the machines so as to escape the clutches of law cannot be faulted in the light of the various facts revealed in the investigation. Already the importers had imported four machines and cleared them by resorting to undervaluation. Therefore, on commencement of the investigation the appellant had requested the Commissioner to re-export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the fact remains that there was no sale of goods and he has correctly relied on the decision of the Tribunal with regard to the valuation of goods supplied free of cost. In other words, when the goods are supplied free of cost, there is no question of transaction value. The appellants have contended that the invoice value cannot be rejected in the absence of any findings regarding mutuality of interest, financial flow back, etc. Even though the agreement is not signed, it has been stated that the transactions between the appellant and the foreign supplier were only in terms of the agreement. When one goes through the agreement, it appears that everything has been dictated by the foreign supplier. The foreign supplier not only supplies the machineries but also bears the customs duty burden. In any case, the appellant had not given any evidence to show that the value shown in the invoice had been paid to the foreign suppliers either directly or indirectly. The case laws relied on by the appellants in Para 15 of the grounds of appeal are applicable to situations where there is an existence of transaction value. In the present case, there is no transaction of sale at all in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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