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TMI Blog2024 (10) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... by Nitin in respect of three Bills of Entry - He further recorded that in respect of 16 Bills of Entry no values were found in the excel sheets but the goods which were imported were similar to the goods which were found in the three Bills of Entry in respect of which the excel sheets were found. The Commissioner was not only correct in adopting the Valuation Rule 9 after examining and excluding the applicability of Valuation Rules 4 to 8 but he has also accepted the declared value in majority of the items and only enhanced the value in such cases where it was warranted. In the absence of any evidence either in the excel sheet or in the statements that values in the excel sheet were on FOB basis, it cannot be concluded that they were FOB values and freight and insurance have to be added as per Valuation Rule 10(2). In his statement, Nitin had stated that they were CIF values. Transaction both in FOB and CIF are common in international transactions. When the value is being re-determined based on excel sheet, the benefit of doubt should go to the importer and these values should be taken as CIF values - the addition of 20% towards freight and 1.125% insurance by the Commissioner und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods imported by it and consequential confirmation of demand under section 28 (4) of the Customs Act, 1962 [Act] along with interest under section 28AA. It also assails the imposition of penalty under section 114A and 114AA. 3. Customs Appeal No. 51198 of 2022 is filed by Shri Nitin Khandelwal [Nitin], Partner of KLM overseas to assail the penalties under section 112 (a)(ii) and Section 114AA imposed on him. 4. Customs Appeal No. 51199 of 2022 is filed by Anshul Khandelwal [Anshul], the partner of M/s KLM to assail the penalty imposed upon him under Section 112(a)(ii) and Section 114 AA imposed on him. The operative part of this order is reproduced as under: ORDER (i) I hereby reject the declared transaction value of Rs. 1,81,89,778/-(One Crore Eighty-One Lakhs Eighty-Nine Thousand Seven Hundred Seventy Eight only) of goods entered and declared in the Bills of Entry, as detailed in Table-1 II of the Show Cause Notice, under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962. (ii) I determine the collective amount of Rs. 5,47,66,445/-(Rupees Five Crores Forty Seven Lakhs Sixty Six Thousand Four Hundred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lwal, Partner of M/s KLM Overseas. 5. KLM is a partnership firm of which Nitin and Anshul are partners. It imported goods which appeared to the department to have been undervalued on the basis of the pieces of evidence unearthed during another investigation against M/s Wide Impex, New Delhi. M/s Wide Impex is the partnership firm of Shri Mayank Khandelwal and Nitin. Another SCN was issued to the proprietor of another firm called M/s Royal Blanket. Shri Mayank Khandelwal, brother of Nitin is the proprietor of Royal Blanket and he had appointed Nitin as a manager who was a fully competent and authorized to represent the firm. During investigation against M/s Wide Impex, Nitin gave a statement on 09.01.2018 on the strength of the authorization letter dated 08.01.2018 given by Shri Mayank Khandelwal, the owner of Wide Impex, who could not join to the investigation as he was ill. In this statement, Nitin explained that he used to visit China to place orders for goods on behalf of Wide Impex which were then sold to three persons in which Shri Prateek Jain, Rajnish Maurya and Shri Piyush; he would undervalue the goods by submitting fake invoices for the sake of customs clearance and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 1 and 2 of the SCN. It was also proposed to recover the differential duty under section 28(4) along with interest, hold the imported goods liable for confiscation and impose penalties on KLM, Nitin and Anshul. The show cause notice sought reply within 30 days but no reply was sent by any of the three noticees even after six months. The Principal Commissioner fixed personal hearing on 07.11.2019, 27.11.2019, 07.12.2019 and 07.01.2020 but nobody appeared. In all cases, letters were sent from the counsel of KLM, Nitin and Anshul that he was out of station. As sufficient opportunity was granted, the Commissioner proceeded to decide the matter. He framed the following four questions for decision: (i) Whether the allegation that importer has undervalued the goods imported vide impugned Bills of entries filed is sustainable; and if so, whether re-determination of the transaction value based on the evidences in the show cause notice is legal and correct? (ii) Whether the differential duty is liable to be recovered from the importer on account of alleged undervaluation under section 28(4) of the Customs Act, 1962 along with interest under Section 28AA of the Act ibid? (iii) Whether the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of value using reasonable means consistent with the principles and general provisions of these rules. 13. In order to determine the value under this Valuation Rule, he adopted the values of similar goods imported from the same supplier through parallel invoices recovered in the form of excel sheets in respect of 3 Bills of Entry. In other words, parallel invoices were found in 3 cases and in respect of these 16 Bills of Entry he adopted the same valuation as was found in the parallel invoices in respect of the remaining three Bills of Entry. 14. The prices indicated in the excel sheets were taken by the Commissioner as FOB prices and not as CIF prices. Since the actual cost of freight and transit insurance were not available he added 20 % of FOB as a freight and 1.125 % of FOB as the transit insurance under Valuation Rule 10(2)(b). Thus, the Commissioner confirmed demand of differential customs duty of Rs. 1,16,44,412/- 15. Since the goods were found to not correspond in value, the Commissioner held them liable for confiscation under section 111(m) but refrained from imposing any redemption fine because the goods were not available for confiscation. In other words, he held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tin stated that their agent used to issue invoices in US dollars in their name and the payment was made through banking channels. Even when the Proprietor requested to send invoices with inflated value he used to refuse; (j) The demand made on basis of excel sheets is untenable. The enhancement of value is contrary to the Valuation Rules and, therefore, needs to be set aside. The excel sheets were not found in electronic device of the proprietor firm or during investigation conducted with regard to KLM and, therefore, it cannot be relied upon to re-calculate the value; (k) The Commissioner presumed in paragraph 39 with the values in the excel sheets were FOB values without any basis and, therefore, added freight of 20% and insurance of 1.125%. There is neither any documentary evidence or statement what so ever on record to support this contention. In table 1 where duties were calculated with respect to principal invoice, the dates of the invoices were wrongly mentioned including dates which have not yet come such as 02.08.2033 and 12.07.2038; (l) Of the 476 items which were imported against the Bills of Entry, Commissioner accepted declared value in respect of 373 items which is 78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M to recover the differential duty and impose penalties on KLM, Nitin and Anshul which culminated in the impugned order; (e) The Commissioner was correct in confirming demand and imposing penalties that order required no interference. 21. We have considered the submissions on both sides and perused the records. 22. The issues to be decided by us are: (i) Whether the Commissioner was correct in rejecting the transaction value under rule 12 of Valuation Rules and re-determining it under Rule 3 and 9 read with rule 10(2) of the Valuation Rules and confirming recovery of differential duty; (ii) Whether the Commissioner was correct in holding the allegedly undervalued goods was liable for confiscation under section 111(m) but refraining from imposing any redemption fine. (iii) Whether the Commissioner was correct in imposing penalty on KLM under section 114A and 114AA. (iv) Whether the Commissioner was correct in imposing penalties under section 112 (a)(ii) and section 114AA on the Nitin and Anshul. 23. Investigation in this case is an offshoot of the investigation in Wide Impex and Nitin is the main operator in both. When Nitin was summoned in connection with the investigation to Wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation.- (1) For the removal of doubts, it is hereby declared that:- (i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9. (ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers. (iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include (a) the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed; (b) the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price; (c) the sale involves special discounts limited to exclusive agents; (d) the misdeclaration of goods in parameters suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... margins, transport insurance customs duties and other taxes payable in India. In other words, we should reckon the domestic price of the goods in India and work backwards allowing deductions to determine the value for customs purposes. 32. Valuation Rule 8 provides for determination of the value on the basis of the cost of manufacture, reasonable profit, expenses etc. 33. Valuation Rule 9 provides that if the value cannot be determined under any of the provisions, rules there shall be determined using reasonable means consistent with the general principles of general provisions and on the basis of data available in India. 34. The Commissioner has followed Valuation Rule 9 after recording that the deductive method under Valuation Rule 7 or the computed value under Valuation Rule 8 were not feasible in the case of these goods. Consistent with the principles laid down in these rules, the Commissioner adopted the actual value of goods found in the excel sheet produced by Nitin in respect of three Bills of Entry. 35. He further recorded that in respect of 16 Bills of Entry no values were found in the excel sheets but the goods which were imported were similar to the goods which were fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption. As we have already recorded, the Commissioner was correct in rejecting the transaction value under Valuation Rule 12 because he had reasonable doubt about the truth and accuracy of the declared values. Duty has been re-assessed as per Valuation Rule 9 and in majority of the cases (373 out of 476), the declared value has been accepted by the Commissioner and only where there is evidence of a parallel invoice and values, did he re-determine the value. 41. Learned counsel also submitted that Nitin had retracted his statement dated 09.01.2018 when he was arrested on 20.02.2018 and produced before the learned CMM on 22.02.2018̣. It is his contention that, therefore, his statement cannot be relied upon. We have gone through the statement recorded on 09.01.2018 and the retraction of 21.02.2018. There are several details in his statement dated 09.01.2018 which can be only within the exclusive knowledge of Nitin such as his personal details, how his business was done, his email accounts, the name of his counterpart Anuj Gupta, email id s of Anuj Gupta, the email id on which he would receive invoices and other documents, the email ids to Anuj Gupta from which the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of this Act, shall be liable to a penalty not exceeding five times the value of goods. 45. A plain reading of the above shows that the person who knowingly making any false declaration statement or produce a document which is false or incorrect in any material particular in the transaction of any business for the purposes of this Act, shall be liable to a penalty under Section 114AA. Bills of Entry are certainly documents meant for transaction under the Customs Act. There is nothing in the text of section 114AA which shows that it is confined only to export and does not apply to imports. Learned counsel relied on the 27th Report of the Standing Committee of the Finance in support. We have examined it. The Committee had expressed concerns about the introduction of an additional section 114AA as it was considered harsh. In response, the Ministry explained that this has been introduced consequent upon several cases of fraudulent exports for which no goods were being exported or papers being created claiming benefits under the scheme. After the Ministry s response, the Committee felt that the proposal to introduce Section 114AA was in the right direction but advised the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined: Provided that where such duty or interest, as the case may be, as determined under sub-section (4) of section 28, and the interest payable thereon under section 28-AB, is paid within thirty days from the date of the communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the duty or interest, as the case may be, so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available subject to the condition that the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso: Provided also that where the duty or interest determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty or interest as reduced of increased, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 111, or abets the doing or omission of such an act, or (b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable,- (i) . (ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater. 51. The value of the goods liable for confiscation is Rs. 5,47,66,445/- and, therefore, we find that the penalty of Rs. 9 lakhs imposed on Nitin under section 112 is fair and calls for no interference. Penalty of Rs. 20 lakhs was also imposed on Nitin under section 114AA. We find that this penalty needs to be set aside because there was no separate mis-declaration by the Nitin apart from a mis-declaration in the Bills of Entry filed on behalf of KLM and an penalty has already been imposed on KLM for that mis-declaration. 52. Penalty of Rs. 2 lakhs was imposed on Anshul under section 112. It is true that he was the non-active par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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