SRI VENKATESH ENTERPRISES Vs. CC

JUDGEMENT

(1.) THE appellants imported from Singapore what was declared as "old and used incomplete HEAVY DUTY photocopier - CLC 700" of Japanese origin and filed Bill of Entry No. 1545 dt. 30.9.2004 alongwith invoice dt. 11.9.2004 of M/s. Techno Trading Services Pvt. Ltd., Singapore, for clearance of the goods at Customs House, Pondicherry. The value of the goods declared in the Bill of Entry was S $ 73800 = US$ 43169 - Rs. 20,07,360 (C &F) based on the invoice. The importer also submitted a Chartered Engineer's certificate dt. 13.9.04 from the supplier for the declared value and year of manufacture of the goods. They also produced proforma invoice dt. 18.8.04, purchase order dt. 1.9.04, packing list, Bill of Lading and Bill of Exchange alongwith Cargo Clearance Permit dt. 16.9.04 issued by Singapore Customs. They requested for clearance of the goods on the basis of the B/E declarations. The respondent, however, directed inspection of the goods by local Chartered Engineers (M/s. Moody International (India) Pvt. Ltd.) who, after inspection of the goods, appraised the value of the goods at Rs. 42.84 lakhs (FOB). From the Inspection Report of the local Chartered Engineers, it appeared to the respondent that the declared value of the goods did not reflect the real transaction value. The goods being second -hand, it was also felt that its value could not be determined under Rules 5 to 7 of the Customs Valuation Rules (CVR, for short) and the same required to be determined under Rule 8 of the said Rules on the basis of "available objective and quantifiable data", like contemporary import price. It, further, appeared to the respondent that the imported goods were not covered under the definition of "capital goods" under the relevant EXIM Policy and attracted the restriction for import under Para 2.17 of the Foreign Trade Policy 2004 -2009 read with DGFT's Policy Circulars No. 16/2003 dt. 29.9.03 and 19/03 dt. 11.11.03. The respondent, therefore, took the view that the subject import without specific licence was in contravention of Foreign Trade Policy and hence the goods were liable for confiscation under Section 111 of the Customs Act read with Section 3(3) of the Foreign Trade (D and R) Act, 1992. Further, the importer was suspected to have deliberately undervalued the goods apart from having imported them in contravention of law, thereby attracting the penal liability under Section 112(a) of the Customs Act.

(2.) ON the above basis, a show -cause notice was issued to the appellants for (i) rejecting the transaction value of the goods and determining their value as US $ 1,03,730 - Rs. 48,23,445 (CIF) on the basis of contemporary import price (US$ 576 (CIF) per unit) of "CANON Heavy Duty colour photocopier CLC 700" imported through Kolkata port in August 2004 (ii) confiscating the goods under Section 111(d) and (m) of the Customs Act read with Section 3(3) of the FT (D & R) Act, 1992 and (iii) imposing penalty on the appellants under Section 112(a) of the Customs Act. The appellants contested the proposals in the SCN, on the strength of documentary evidence (of value of the goods) produced with the Bill of Entry as well as on the strength of judgments of the Supreme Court and the Tribunal. The Commissioner rejected their contentions and proceeded to determine the assessable value of the goods under Rule 8 of the CVR, after noting that the importer had not contested the proposal for enhancement of value on the basis of contemporary import price at Kolkata port. Accordingly, after allowing 10% abatement for missing parts of the imported photocopiers, the Commissioner, under Rule 8, determined the C &F value of the subject goods as US $ 101750 = Rs. 47,31,375, wherefrom the CIF value of the goods was computed as US $ 1,03,730 = Rs. 48,23,445. He also held that the second -hand photocopying machines were only office equipments and not capital goods freely importable under the relevant EXIM Policy. As the machines had been imported without licence, he confiscated them, with option for redemption on payment of a fine of Rs. 7,09,000 being 15% of the C & F value determined under Rule 8. The Commissioner also imposed on the importer a penalty of Rs. 3,30,000, being 7% of the C & F value determined under Rule 8. The present appeal is against this decision of the adjudicating authority. Heard both sides. Ld. Counsel for the appellants submitted that the declared value, which was supported by the supplier's invoice and other documentary evidence produced by them, was liable to be accepted as the respondent had no case that there had been any clandestine remittance by them in excess of the invoice value or that there was mutuality of interest between the importer and the supplier. No valid reason with reference to Rule 4(2) was stated by the Commissioner to reject the declared value. It was argued that, without rejecting the declared value on valid grounds under Rule 4(2), it was not open to the Commissioner to proceed to determine the assessable value of the goods through sequential application of Rules 5 to 7 of Customs Valuation Rules.

(3.) AFTER hearing both sides, we directed the SDR to produce copies of the contemporaneous Bill of Entry and Invoice and the appellants to furnish details of the goods. Both sides have produced certain documents/details and we have perused the same. Bill of Entry No. 201363 dt. 23.8.04 (copy produced by SDR) covers a good number of old and used photocopiers, which include "old and used photocopier CANON CLC -700". This document is accompanied by a copy of Invoice No. 4321 dt 15.6.04 issued by Seam's International (supplier). These documents show that the goods covered thereunder were imported through Kolkata port by one M/s. Atul Commodities (P) Ltd., Kolkata. The invoice indicates the CIF value (at Kolkata) of "one used CANON photocopier CLC -700" as US $ 250 whereas the Bill of Entry mentions it as US $ 640. The country of origin shown in the Bill of Entry for all items covered thereunder is LLSiAi and that shown in the invoice for all items covered thereunder is U.S.A/Japan without item wise mention of country of origin. The goods imported by the appellants are all of Japanese origin. It thus appears that the subject goods of Japanese origin have been compared with goods of American or doubtful origin. The subject goods were manufactured during 1995 -2001 as per data produced by both the DR and the advocate. But no information is available as to the year of manufacture of the second -hand photocopier taken for comparison. The show -cause notice issued to the appellants admitted that the extent of usage would influence the price. However, it did not attempt any comparison of the subject machines with the machine imported through Kolkata port, with reference to year of manufacture or extent of usage. Such comparison is not forthcoming in the impugned order either.