MORGAN INDUSTRIES LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) BOTH these appeals arise from Order -in -Original No. 166/97, dated 27 -10 -97 passed by the Commissioner of Customs, Chennai confirming the charges to the extent indicated in his order and imposing fine and penalty on appellant's company and penalty on the Managing Director. The same is under challenge in these appeals.

(2.) THE appellants filed Bill of Entry No. 24023, dated 10 -6 -94 for warehousing of cargo declared as "Second Hand Environment and Pollution Control System/Equipment in dismantled condition" of U.K. origin. The value was also declared on the basis of invoice. They sought clearance against the licence produced by them. The said goods were assessed to customs duty and the entire consignment was warehoused at Central Warehousing Corporation, Virugambakkam.

(3.) SUBSEQUENTLY , they had filed an ex -bond Bill of Entry for assessment at concessional rate of duty @ 25% under Notification No. 68/89 -Cus., dated 1 -3 -89 and produced certificate dated 12 -4 -94 issued by the Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India, New Delhi and the Chartered Engineer's certificate. The goods were provisionally assessed to duty extending the benefit of the said notification. However, the records were scrutinized by DRI and it was found that there was fraudulent and intentional mis -declaration as to the age of the plant, manufacturers' name, description, value etc., of the dismantled solvent recovery equipment brought from U.K. and that the importer had smuggled into India huge quantity of Pelletised Activated Carbon by stuffing and concealing the same into the absorber vessels of the second hand dismantled plant. It was believed that there was manipulation of labels, name plates and Chartered Engineer's Certificate by the importer in collusion with others abroad for facilitating customs clearance. After detailed investigation and recording of statements and scrutiny of documents, the appellants were issued with a show cause notice alleging that the imported item is not a "Pollution Control System/Equipment but a Solvent Recovery Plant. The value was also enhanced and further allegation was also brought out that they had separately imported pelletised activated carbon and attempted to clear the same without payment of duty. The appellants denied the allegation and contended that the item was a pollution control system and had been certified by the Ministry of Chemicals and Fertilizers and that they had given the certificate and annexures there to giving details of the machinery to be imported and it tallied with the notification in question. They had also contended that the proforma invoices, invoices and all documents filed with the department clearly indicated that the activated carbon was also a part of the main equipment and without it the main equipment cannot function. It was contended that there was clear declaration with regard to this item in all the documents and there was no attempt to smuggle the same. It was pointed out that when the equipment was examined by them, they had found that the activated carbon was not in the equipment, though the supplier had mentioned in the documents. Therefore, they wrote to the supplier stating that they would not clear the same unless it was supplied. It was submitted that the said activated carbon was supplied by the supplier in terms of the contract and, therefore, there was no mis -declaration or attempt to clear the same without payment of duty. They also contended that they were not liable to be penalised as there was no mis -declaration or an attempt to take a wrongful benefit of concessional notification in question. They also submitted that the fee paid to Shri Kesavan Chakravarthy was not includible in the assessable value as claimed by the department and in this regard, they relied on certain rulings which laid down that such fee did not form part of the assessable value, including the ruling of the Apex Court rendered in the case of Apollo Tyres v. Commissioner - 1997 (89) E.L.T. 7 (S.C.) wherein the Apex Court held that procurement charges paid to the purchasing agent does not enhance the value of the imported items and the equipment and hence not includible in the assessable value.