By TIOL News Service

MUMBAI, DEC 29, 2015: CUSTOMS duty demands were confirmed on allegations of mis-declaration of value & description of imported goods by the Appellants M/s Shreenath Enterprises, a proprietorship firm of Mrs. Tejas Venkatraman and M/s GNG & Co., a partnership firm of partners Shri. Prakashchandra Pandya and Shri. Nandgopal Govindswamy Naidu and aiding and abetting therein by Shri Prakash Pandya, Shri Hitesh Israni and Telebrands India Pvt. Ltd.

The investigation revealed that-

++ The appellants had imported various goods including AB King Pro (Exercise Bench), 5 in 1 Air O Space Sofa (Inflatable Sofa Bed), Slim N Lift (Female Shorts), Sauna belt (Fat Reduce Belt), Tool Kits, Magic Bullet (Food Processors), Drill M/c and Diamond Blades from China and supplied it to Telebrand and these goods were mainly imported from/through M/s China 5 Star Products and M/s Creative Nations International.

++ During the search of the office of the appellants, various documents were seized. Page no 124 and 125 of the seized file contain a statement of account containing details of the goods imported by M/s GNG and Company and M/s Shreenath Enterprises and also the details of payment. The chart also shows the value of the goods declared to Customs and also the details of payment made separately in addition to value shown in the invoice.

In the statements recorded it was admitted that in the statement of account seized, in col. No. 6 the value as declared in the invoices submitted for Customs is mentioned whereas the actual invoice amount i.e. the actual value of the goods imported is mentioned in Col No. 8 and the balance amount (i.e. the difference between the actual invoice value and the value shown in the bank invoice) is shown in col. No. 10. The appellants had made the remittance to the supplier i.e. China 5 Star Products Co. Ltd. as per the bank invoice through Bank of India, Mulund (West) Branch and the balance amounts were arranged through unauthorized channel to the supplier.

Report received from Custom authorities at Hong Kong confirm the misdeclaration of the value of Air Sofa imported by the appellant M/s. Shreenath Enterprises from M/s CNI, China. Similar modus operandi was also allegedly adopted by M/s GNG & Co.

Appellants were issued show cause notices for recovery of duty short paid and imposition of penalties under Section 114A, 114AA and 112 of the Customs Act, 1962.

The said SCNs have been adjudicated, demand of duty has been confirmed and RF and PP has been imposed vide the impugned Orders-in-Original dated 27.11.2012 and 03.12.2012.

After considering the elaborate submissions made by both sides, the Bench observed -

+ The department heavily relied upon the statements of Shri Prakashchandra Pandya and Shri Nandgopal Govindwamy Naidu. Both the persons have retracted their so called confessional statements vide letter dated 31.07.2006. Therefore, the said statements cannot be considered as confessional statements.Moreover, if at all there is any objection of the department on the said retraction, nothing prevented the departmental officers to reject the same with cogent reason or to record a counter statement in context with the retraction. We have seen that no such effort was shown by the department. In such situation, the retraction letter cannot be discarded. We are, therefore, of the view that statements which were retracted cannot be accepted as evidence.

+ It is seen that the prices at which the Appellants sold the imported goods to Telebrands India P. Ltd. is not disputed by the Department in the show cause notice, and is the actual local sale price paid to the Appellants by Telebrands India P. Ltd.

+ Although the Show Cause Notice and the impugned Order heavily rely on pages 124 & 125 from the seized file No. A1, and the values mentioned therein, however, it is seen that in the case of 5-in-1 Sofa Bed /Air Lounge the value mentioned in these seized documents has not been accepted for the purpose of valuation in the show cause notice itself, as evident from 2nd row of table at Page 30 of the Show Cause Notice itself. Therefore, the contents of these seized documents are doubted by the Department in the show cause notice itself.

+ Moreover, Tejas, who is the Proprietor of Shreenath Enterprises, is the wife of Venkatraman, brother of Nandgopal Naidu. The demand of duty is confirmed against Tejas on the basis of the said two pages allegedly recovered from Prakash Pandya and his retracted confessions. These two pages are not signed by any person nor do they bear the stamp of any company. The name of the foreign supplier is not mentioned on the said two pages. The currency is also not indicated. The descriptions of the goods in the invoices are different from the descriptions mentioned on the said pages 124 & 125. The descriptions do not tally and it is impossible to correlate the descriptions.

+ As per the ratio laid down by the Hon'ble Supreme Court in Bussa Overseas Properties Ltd., - 2007-TIOL-185-SC-CUS, such documents cannot be treated as evidence to prove undervaluation. Moreover, Shri Prakash Pandya immediately retracted by letters dated 31.7.2006 the confessions recorded from 19.4.2006 upto 29.6.2006. No rebuttal to these retractions were served on him by the department. No further statements of Shri Prakash Pandya after his retraction were recorded. No two parallel invoices were recovered in any search operations. Enquiry was not conducted on alleged remittance of foreign exchange abroad. In the circumstances, the learned Commissioner ought to have examined Prakash Pandya before considering his statement as relevant as required under Section 138B of the Customs Act in the course of the adjudication proceedings.

+ There is no evidence of remittance of differential amounts (as mentioned in the said pages 124 & 125) to the foreign suppliers. It is a trite law that undervaluation cannot be established unless remittance is proved as held by the Tribunal in Dee Kay Exports - 2013-TIOL-51-CESTAT-DEL.

+ The source of the alleged emails correspondence with the suppliers is not disclosed. Such email correspondence from undisclosed sources was shown to Prakash on 3 rd May 2006 and his confessions were recorded. However, para 5.3 of the notice records that on 29.6.2006 the seal of the computer was broken for the first time and printouts were obtained. Even for the computer printouts allegedly recovered from Prakash Pandya's computer, requirements of Section 138C were not fulfilled. The authenticity of the documents, therefore, is not beyond doubt for accepting the same as substantive evidence.

+ A lot of emphasis was given by the Commissioner on letter dated 14th May 2007 of Deputy Head, Trade Investigation, Hong Kong addressed to the Consulate General India, Hong Kong contending that in the case of imports of Inflatable Sofa Beds from CNI - Creative International (HK) Ltd there were corresponding invoices issued by Creative Nations International Limited, Philippines on the Indian buyers which showed a higher price than that appearing in the invoices of CNI-Creative International (HK) Ltd. We find that name of the appellant M/s GNG& CO. do not even figure in this report. The Annexure to the Report is not even signed, the authenticated copies of the alleged Invoices of Creative Nations International Ltd in Philippines referred to in the said Annexure have not been provided. It neither indicated description, quantity and unit price of the goods nor any dates of such alleged invoices indicated. The invoice numbers mentioned on the same for comparison are not even tallying.

+ Prakash Pandya was never interrogated with respect to the report received from abroad while recording his statements. The said letter also bears a Caveat to the effect that the said document is not to be shown/copied to a third party or used in any proceeding. In fact the covering letter of the Consulate General of India, Hong Kong to the DRI makes it clear that the said letter bears the caveat and if a caveat free report has to be obtained, the procedure under Mutual Legal Assistance ordinance, Hong Kong SAR ought to be followed by DRI. Obviously the said procedure has not been followed in this case and the letter which is received with the said caveat cannot be used in the present proceedings.

+ Moreover, no authenticated copies of the alleged invoices of Creative Nations International Limited, Philippines have been forwarded with the said Letter/report of Hong Kong Trade Investigation Bureau. In the absence of such authenticated copies being supplied, no reliance can be placed on the said report.

+ Thirdly, no imports in the present case were made by the Appellants from the Philippines Company and hence the alleged invoices of the Philippines company are irrelevant. The Ld. Commissioner erred in not appreciating that no authenticated copies of the invoices of Creative Nations International Limited, Philippines referred to in the letter of 14th May 2007 of Deputy Head, Trade Investigation, Hong Kong have been received and hence Section 139 is not applicable.

+ There is no tangible proof of any payment to the foreign supplier by the Appellants or by Mr. Hitesh Israni of Telebrands India P. Ltd., of any amount over and above the prices mentioned in the foreign suppliers invoices. There is no cogent material whatsoever in the Notice issued to the Appellants for proposing enhancement of the value of the said goods.

+ It is not in dispute that at the time of import itself, the customs authorities had enhanced the values of the similar goods imported by other importer such as M/s Rico Gems based on the available prices for contemporaneous imports of identical goods by other importers. Once it is undisputed fact that the declared value was not accepted and for the purpose of assessment valuation was done on the basis of contemporaneous price of identical or similar goods, we find substantial force in the contention on behalf of the appellants that further enhancement of value was not permissible in the facts of the instant case.

Holding that undervaluation of imported goods is not established and the demand of differential duty and penal action cannot sustain, all the appeals were allowed with consequential relief.

(See 2015-TIOL-2809-CESTAT-MUM)