By TIOL News Service

MUMBAI, AUG 01, 2014: BASED on intelligence that there was a huge undervaluation in imports of White and Yellow Poppy Seeds from Turkey, the DRI conducted search of the office premises of the appellant along with residential premises and incriminating documents were recovered and statements were recorded.

The investigation revealed that the appellant is a proprietary firm of MadhuKapoor and day-to-day operations of the said firm were undertaken by ArunKapoor, husband of MadhuKapoor. It was further revealed by ArunKapoorthat the appellant firm had submitted forged/fabricated documents to the Customs resulting in evasion of customs duty; that the undervaluation done by them at the time of import was to the extent of 30 to 40% of the actual price; that the differential amount i.e. difference in the contract price and the value declared to the Indian Customs was paid to the overseas suppliers through unofficial channels i.e., Hawala and the modus operandi was to give the money to the person appointed by the overseas suppliers for collection from their shop.

Based on the aforesaid investigation, a SCN dated 3.12.2008 was issued to the appellant proposing to re-determine the import prices in terms of Rule 8 of the Customs Valuation Rules, 1998& recovery of differential duty of Rs.3,31,08,998/- for the imports undertaken during the period May, 2004 to September, 2006. The said notice was adjudicated and the duty demand was confirmed along with interest thereon and by also imposing a penalty of Rs.35 lakhs on the appellant firm and a penalty of Rs.15 lakhs on ArunKapoor u/s 112 of the Customs Act, 1962.

Aggrieved of the same, the appellant is before the CESTAT.

After hearing the submissions made by both sides the Member (Technical) directed the appellant to make a pre-deposit of Rs.1 crore in addition to the amount already paid within a period of eight weeks and report compliance for obtaining Stay.

The Member (Judicial) disagreed with the view taken by the Member (T) and held that there is a strong prima facie case in favour of the appellants. He, therefore, directed the appellant to make a further deposit of Rs.15 lakhs as offered by them, in addition to the payment already made, for the purpose of stay.

Resultantly, the difference of opinion was referred to the Third Member.

This order was pronounced on 21/03/2014 after hearing the appellant on 17/12/2013.

The Third Member (Judicial) has recently passed an order on the reference made.

After hearing the submissions made by both sides, at the outset the third Member observed that the order of the Member (J) seemed to be correct in the facts and circumstances of the case, for more than one reason, which are -

++ Both sides have relied upon various case laws in support of their case. Since the difference of opinion in this case is regarding the disposal of stay petition, in my view referring to and reproducing the relevant portion, in the said case laws, may not have much consequence, as it has to be decided whether the appellant herein has prima facie strong case or not.

++ The investigating authorities have not recorded any statement of any individual who had been a conduit through whom the Hawala transaction took place.

++ In the letter of retraction, ArunKapoor has specifically stated that he was never engaged in undervaluation and Hawala payment and that said statement was forced on for mentioning under valuation and hawala payment.

++ The said letter has been addressed by the appellant to ADG, DRI, Zonal Office, New Delhi and sent by Registered Post. I fail to understand the logic (of DR) to file the retraction with the same officer, who has recorded the statement, inasmuch as, the higher officer is informed about the statement being not voluntary and that also on the very next date when appellant was released from office of the DRI. Only on this ground that retraction was not filed before the officer who recorded the statement and to hold that the said retraction is incorrect, would be, least to say is travesty.

++ A statement was recorded on 8.2.2008, wherein ArunKapoorhad categorically denied the allegation of undervaluation of imported consignment. Surprisingly, in the said statement dated 8.2.2008, the investigation authority has not recorded anything about the Hawala transaction having taken place between the supplier and buyer of the goods. In my considered view statement recorded on 7 & 8.2.2006 has been retracted and the subsequent statement does not indicate any undervaluation which would lead to a prima facie conclusion that there is no statement which is incriminating.

++ Besides the said statement there is no much corroborative evidence which has been recovered from the appellant's premises so as to indicate that there was an undervaluation.

++ The invoice and the document which has been shown to me by learned AR did not instill any confidence to hold that those are values of contemporaneous import which were higher; for the reason that the said invoices are not authenticated by any authorities as being genuine. The specimen copy of the said document, which has been relied upon by Revenue does not bear any signature nor does it match with the invoices recovered from the appellant's premises. The address of the importer on the documents which were recovered from ShriArunKapoor did not match with the address on documents procured by DRI from their own sources. Besides these documents, there seems to be no cogent evidence to hold that there was a case of under-valuation.

++ Though, I have held that prima facie there is a strong case for the appellant, since I am disposing the issue as a referred member, I have no other option as a third Member, but either to agree with one of the differing views.

In fine, the Third Member on reference concurred with the views of the Member (J).

And, therefore, the Majority order is that the appellant was directed to pre-deposit an amount of Rs.15 lakhs for obtaining stay.

(See 2014-TIOL-1388-CESTAT-MUM )