SAFFIRE LITHOGRAPHERS AND ADARSH Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) M /s. Saffire Lithographers Limited, (henceforth also referred to as assessee, importer or appellant) Chennai, appellant in appeal No. C/191/2006 had imported a new "SHINOHARA 52 IV" heavy duty sheet fed four colour straight printing offset press with console cooling system and accessories through the Tuticorin Port and filed Bill of Entry dated 6.2.2006 declaring its value (FOB) as Japanese Yen 6000000 (Rs. 23.28 lakhs). The value declared did not appear to be genuine and proceedings were initiated to determine the correct value. On conclusion of the adjudication proceedings, the Commissioner of Customs rejected the declared value as transaction value in terms of Rule 4(2) and 10A of the Customs Valuation Rules, 1988 (CVR). He determined the FOB value of the impugned goods as Rs. 139.68 lakhs and confiscated the goods under Section 111(m) for misdeclaration of value with a view to evade payment of duty to the tune of Rs. 40 lakhs. An option was offered to redeem the goods on payment of a fine of Rs. 5 lakhs. A penalty of Rs. 2 lakhs was imposed on the importer under Section 112(a) of the Act. A penalty of Rs. 50,000/ was imposed under Section 112(a) of the Act on the CHA, M/s Adarsh Shipping and Services.

(2.) THE captioned appeals are directed against the above order. Facts of the case in brief are that on intelligence of gross undervaluation, the four colour offset press imported by M/s. Saffire Lithographers was seized on the reasonable belief that the same was liable for confiscation. A Show Cause Notice was issued to reject the transaction value in terms of Rule 4(2)(a), (b), (c), (f) and (h) and 10(A) of the Customs Valuation Rules, 1988 (hence forth, CVR), proposing to fix the value at Rs. 164.512 lakhs in terms of Rule 8 of the CVR, to confiscate the machinery and to impose penalty on the importer and the CHA. Vide their letter dated 7.2.06 the importer had informed that they were the sole distributor of SHINOHARA machines, that the value declared was applicable only to them (distributor price) and offered to pay duty on based on FOB value of Rs. 38 lakhs. After unsuccessful efforts to stall the proceedings through Hon'ble High Court failed, they did not substantiate the declared value with supporting documents or a reply to the Show Cause Notice. Their representative appeared for hearing, when he denied allegation of undervaluation. He argued that enhancing the value on the basis of internet price was not proper in the absence of price of contemporaneous import. The importer was a distributor of the imported machine. The importer did not fit into the description given in Rule 2(2) of the CVR to become a related person. Six million Janpanese Yen was distributor's price and was a favourable inaugural offer to introduce the product in the Indian market. These factors had not been taken into account by the Chartered Engineer, who had estimated the FOB value at 36 million Japanese Yen. The vendors had the prerogative to allow any discount to the buyer and the counsel for the importer cited judgment of the apex Court in the case of Eicher Tractors 2000 (122) ELT 321 (SC) in support. The supplier himself was manufacturer and his invoice was adequate evidence and non -production of manufacturer's invoice could not be a ground to reject the transaction value (invoice value). There was nothing on record to reject transaction value as proposed in the Show Cause Notice. Commercial reasons justified the discount allowed. As the transaction could not be held as attracting special circumstances enumerated in Rule 4(2) of the CVR, the declared value had to be accepted. The Chartered Engineer had not inspected the machine in operation. The SGS, Japan had communicated the domestic price of the machine in Japan. Rule 8(2)(iii) of the CVR prohibited adoption of domestic price in the country of export for valuation.

(3.) THE Commissioner found that the declared value was not for sale of the equipment in the ordinary course of international trade under fully competitive conditions. The internet data indicated the price of the imported machine as Rs. 174.79 lakhs (copy furnished to the importer). The importer did not furnish the normal sale price of the machine and the introductory discount. A similar machine of "Mitsubishi" brand was imported in March 2006 at a value of Rs. 275 lakhs (Bill of Entry copy furnished to the importer). There was a contemporaneous import on 10.2.2006 of a second hand four colour off set printing press with accessories which was more than 20 years old at a CIF value of Rs. 23.50 lakhs. The importer was furnished a copy of the Chartered Engineer's report on valuation of the imported machine. The Commissioner found that generally a machine more than 10 years old was valued at 1/10th of its original value by Chartered Engineers. The importer did not seek to cross -examine the SGS Engineer who had estimated the value of the machine and did not produce the load port Engineer's Certificate. The importer offered to pay duty on a value of Rs. 38 lakhs as against the declared value of Rs. 23.28 lakhs. Thus the Commissioner found adequate grounds to reject the declared value. A discount of 12.5% was allowed on the assessed value of Rs. 164.512 and FOB value of the impugned goods fixed at Rs. 139.68 lakhs under Rule 8 of CVR based on the certificate of the Chartered Engineer. As the importer was in the business of distribution of off set printing machines for several years, they had misdeclared the value with intent to evade customs duty to the tune of Rs. 40 lakhs and rendered it liable for confiscation under Section 111(m) of the Customs Act and themselves liable for penalty under Section 112(a).