ORDER
S.V. Maruthi, Member (J)
1. This is an appeal against the order of the Collector enhancing the value of ‘Synthetic Polycarbonate’ from US $ 2500 per MT CIF to US $ 3200 per MT CIF.
2. The case of the appellants is that they are a partnership firm. The suppliers of the imported goods is a limited company registered in Singapore. The Managing Director of the supplier company is the brother of the partner of the appellant firm. By a telex dated 12-2-1990, the supplier offered to supply ‘Synthetic Polycarbonate mix’ at US $ 2700 per MT CIF Bombay. The appellants by a return telex offered to purchase at US $ 2400 per MT CIF. In reply, the supplier offered by a telex No. 445 to supply “job lot quantity of 45 to 50 MT” in a single lot at the value of US $ 2500 per MT CIF. On 12-2-1990 by telex the appellants accepted the job lot offer of US $ 2500 per MT CIF. On 13-2-1990, the appellants changed the destination from Bombay to Kandla. On 31-3-1990, the goods were shipped by 3 bills of lading and goods arrived in 3 containers bearing No. MERU 260087/1, MERU 742698/9, MERU 260090/6. On 9-4-1990, the appellants sold the goods on high seas to M/s. New Plastomer India Ltd. (hereinafter called as the high seas buyer). The high seas buyer filed a declaration before the Customs on 9-5-1990. The high seas buyer filed the Bill of Entry declaring the value at US $ 36,812.50, US $ 37,500 and US $ 37,500 in respect of each container containing 14,725 MT, 15000 MT and 15000 MT of Polycarbonate Synthetic resin mixed. The appellants’ further case is that they informed the customs by their letter dated 20-6-1990 that though the goods are prime virgin material they are capable of being used only as black colour and unfit for use as any other colour.
3. On 21-6-1990, the Customs Officer examined the goods and drew samples for chemical test. The Customs Officer recorded that the goods in container No. MERU 260087/1 were of the types i.e. coloured and colourless variety.
4. On 12-10-1990 a show cause notice was issued alleging misdeclaration of description of goods as “Synthetic resin Polycarbonate mixed”. It was proposed to enhance the value of goods on the basis of imports made by M/s. Ram Exports from M/s. Bayer at the rate of US $ 3350 per MT CIF. It was also alleged that the price of goods is influenced by the relationship between the appellant and the supplier and therefore, it does not represent the price under Section 14(1) of the Act.
4A. The appellants filed a reply denying all the allegations. The Collector after reconsideration of the reply enhanced the value from US $ 2500 to US $ 3200 and confiscated the goods under Section 111(m) of the Customs Act and gave option to redeem the goods on payment of fine of Rs. 5 lakhs. He imposed a penalty of Rs. 1 lakh under Section 112(a). Hence, this appeal before us against the order of the Collector.
5. The Collector held that the Managing Director of the supplier company and the partner of the appellant company are members of the same family and if their nature of relationship is taken into account they fall within the purview of “related persons”, and therefore, the price was influenced. He observed that since appellants stated that they are not related to the supplier, there is a misdeclaration of status. According to the Collector, the appellants have not disclosed the existence of the telex messages during investigation and since all the telexes were made during the course of one day and since the original offer was for virgin material and the price was reduced to US $ 2500 with an explanation that the goods available are “job lot”, there is a suppression of facts.
6. As regards the description of goods, he observed that neither the invoice nor the sale confirmation letter described the goods as job lots. He found on the basis of the examination report that the goods were properly segregated as the goods covered by two bills of entry are of same type of white material while the 3rd lot of the goods were coloured variety. He also observed that none of the documents indicate the specific grade of the goods. He disbelieved the telex messages indicating the goods as job lot as fabricated and held that the description of the goods as “Polycarbonate Synthetic Resin Mixes” is a mis-declaration.
7. The Collector having held as above, enhanced the value on the basis of the appellants’ own import in Nov. 1989 at US $ 3200 per MT CIF. Challenging the above order, Shri Sunderajan appearing for the appellants contended that the finding of the Collector that the appellant and the supplier are related persons within the meaning of Rule 2 sub-rule 2 is contrary to the definition of related persons under the said rules. The next contention of Shri Sunderajan is that the Collector while enhancing the value of the goods relied on the imports made by M/s. Ram Exports. The said imports are neither similar goods nor identical goods as Ram Imports are specific grade and of a particular colour. Neither Rule 5(3) nor Rule 6 is applicable to the impugned goods’ imports. He also submitted that the appellants have imported similar type of goods from M/s. Greaves Cotton & Co. Ltd., which according to them, are relevant imports for determining the assessable value and the Collector has ignored the said imports without giving any reasons. He also submitted the rejection by the Collector of the telex messages is based on no reason as the transaction can,be finalised within course of 24 hours and that cannot be a ground for discarding the transaction value. He further submitted that the fact that the Managing Director of the supplier company is the brother of one of the partners of the appellant firm cannot make the supplier and the appellant a related person as brother is not one of the persons indicated as a member of the same family and cannot be treated as a member of the same family. He also submitted that the Collector having discarded the basis indicated in the show cause notice for enhancement of the value ought not to have enhanced the same.
8. Shri Prabhat Kumar appearing for the respondents explained at length the interpretation of transaction value under Section 14(1) of the Customs Act read with Customs Valuation'(Determination of Price of Imported Goods) Rules, 1988. (We do not propose to express any view on the interpretation of Section 14(1) read with rules having regard to the view which we are expressing on the facts and circumstances on the case). Shri Prabhat Kumar submitted that the Collector has relied on the importers’ price as well as the price of imports made by M/s. Ram Exports. Therefore, the view expressed by the Collector is based on evidence. He also submitted that each coloured material should be assessed independently. According to Shri Prabhat Kumar each bill of entry should be made a separate assessment. In support of this, he relied on an order of this Tribunal in Basant Industries v. C.C. – 1987 (29) E.L.T. 155. He also submitted that in view of the imports made by the appellants on the basis of which enhancement was made, the fact that those imports were not mentioned in the show cause notice may not in any way affect the enhancement of value. He further submitted that the value can be enhanced on the basis of the evidence produced by the importers themselves. In support of this contention he relied on an order in the case of Basant Industries (supra). His further contention is that out of the goods covered by one of the bills of entry only part is mixed whereas the other two bills of entry under which the goods were imported are colourless variety. Hence this is not a case where white colour goods were mixed with other coloured goods.
9. As regards the relationship, he relied on an order of this Tribunal in Pilcofarma v. C.C.E. – 1987 (29) E.L.T. 523 and submitted that a brother is a related person within the meaning of the Companies Act. Therefore, the Collector is justified in holding that the appellants and the supplier are related persons. He also brought to our notice an order of this Tribunal in Rakesh Bulb Industries v. C.C.E. – 1987 (31) E.L.T. 756.
10. Taking up the first contention of the appellants that the appellant and the supplier are not related persons, we may at this stage refer to Rule 2 sub-rule 2 of the Customs Valuation Rules, 1988. It gives a list of persons who shall be deemed to be related. It reads as follows:
“Rule 2 sub-rule 2
For the purpose of these rules, persons shall be deemed to be “related” only if –
(i) they are officers or directors of one another’s business;
(ii) they are legally recognised partners in business;
(iii) they are employer and employee;
(iv) any person directly or indirectly owns, controls or holds 5 per cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family.
Explanation I. – The term “person” also includes legal persons.
Explanation II. – Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, however, described, of the other shall be deemed to be related for the purpose of these rules, if they fall within the criteria of the sub-rule.”
11. Admittedly the appellants and the supplier do not fall within any one of the categories of the persons mentioned therein. The question of piercing the veil of the company need not be gone into in this case having regard to the facts and circumstances of the case. The order of this Tribunal relied upon by Shri Prabhat Kumar in the case of Basant Industries (supra) is a case which dealt with the definition of the related persons as defined under the Companies Act. The Customs Valuation Rules itself define “related persons” for the purpose of the Rules and having regard to the definition of “family” that it includes those descended or claiming descent from a common ancestor. It is difficult to hold that a brother is a related person within the meaning of Rule 2 subrule (2). Therefore, we agree with Shri Sunderajan that the appellant and the supplier are not related persons.
12. The next question to be considered is whether there is a misdescription of goods. The appellants’ case is that they have imported job lot whereas the Department’s case is that they are not job lot goods. At this stage, we may refer to the description of goods in the correspondences, invoices, and the bills of entries. The earliest telex message is dated 12-2-1990 which was issued by the supplier stating:
“AVAILABLE POLYCARBONATE POWDER NATURAL OR MIX COLOUR ALL VIRGIN MATERIAL 25 KGS PACKING OF W. GERMAN ORIGIN AT VERY GOOD PRICE OF USD 2700/- GIF BOMBAY. TOTAL QNTY ARND. 50 MT PLS LET US KNOW YR INTEREST BY RETURN TELEX.”
In reply to the above telex, the appellant by telex message of the same date i.e. 12-2-1990 stated:
“JAPANESE MATERIAL AVAILABLE AROUND USD 2800 LVL SO BEST WE CAN DO IS USD 2400 CIF BOMBAY. PLS INFORM EXACT QUANTITY N CONFIRM SHIPMENT IS PROMPT.”
“YKBAL ETC WENT TO KANDLA TDAY. IF AIR FRANCE ENDORSEMENT PSSBLE THEY WILL FLY ON 14/2 TO BKK OTHERWISE 15/2 CATHAY.”
In reply to the above, the suppliers sent the following message on 12-2-1990, i.e. on the very same date and stated:
“RECVD YR TLS. WE ARE READY TO GIVE U TOTAL QNTY OF 45 TO 50 MT IN SINGLE LOT ONLY AT USD 2500/- CIF BBAY. THE MATERIAL WILL BE SHPD IMMDTLY ON CFMTN FRM YR END. THIS IS THE FINAL PRICE N REST ASSURED THIS TYPE OF PRICE WE WILL NEVER BE ABLE TO GET FRM INTNL MRKT. WA CAN ALSO OFFER U OTHER MATERIAL AT USD 2700/- OF JAPANESE ORIGIN. THE ADV MATERIAL IS AVAILABLE BECAUSE OF JOB LOT. PLS CFM BY RETURN TLX”.
In reply to the above, the appellants sent their telex on 12-2-1990, i.e on the very same date replying:
“RYTLX 445 TDAY. ACCEPTING JOB LOT 45 TO 50 MT AT USD. 2500 CIF BOMBAY PROMPT SHIPMNT. SHIPMNT IN CONTAINERS WITH SEPARATE BL FOR EACH CONTAINER. PLS SEND YR CONTRACT ASAP.
13. In pursuance of the said acceptances the supplier by their letter dated 13-2-1990 sent a confirmation of Sales Letter in which the commodity is described as Polycarbonate Synthetic Resin. The next document is the Invoice No. 109/90 and 108/90 and Invoice No. 107/90. All the 3 invoices give the description of goods as Polycarbonate Synthetic Resin. The certificate of country of origin also described the goods as Polycarbonate Synthetic Resin. The bills of entry described the goods as Synthetic Resin Polycarbonate Mixed.
14. From the above, it follows that it is only the reply telex offering 45 to 50 MT in single lot referred to the material as ‘job lot’ and in reply to that it was accepted. While accepting they referred to the material as job lot. The Confirmation Letter, the invoice and the certificate of origin nowhere refer to the goods as “job lot”. Noting that the mixed word has been used in all these important documents, it is no doubt true that the bill of lading referred to the goods as Synthetic Resin Polycarbonate Mixed. Similarly, the Bills of entry also referred to the goods as ‘Synthetic Resin Polycarbonate Mixed’. In this context, we may refer to the observations made by the Collector who had occasion to physically examine the goods. According to the Collector, “on examination of the goods, it was found that out of the goods covered by one Bill of Entry, part of the goods was in mixed colours while the rest of the goods was white or colourless. The goods covered by other two Bills of Entry also were colourless variety.” The physical examination corresponds the description made in the Confirmation Letter, invoices and certificate of origin. For an importer, description of goods is most important and if really the goods were Mixed Lot or a Job Lot, it would certainly have been mentioned in the Confirmation Letter which is the first document of import and the invoices, followed by the Certificate of Origin. In view of the physical examination of the goods supported by these 3 documents, we are of the view that the goods imported under two bills of entry are not mixed lot whereas the goods imported by one bill of entry, are mixed lot. From the above, it follows that there is a mis-declaration of goods in respect of two bills of entry. As regards the valuation, the Collector relying upon the imports made by the appellants themselves enhanced the value of the goods. In this connection, we may refer to the allegations made in the show cause notice and the reply of the appellants. The allegations are as follows:
“The said importers vide their letter dated 20-7-1990 produced copies of certain documents pertaining to CIF prices of Polycarbonates. Scrutiny of these documents revealed that the said importers have imported four consignments of Polycarbonates during November, 1989 from M/s. Surice Trading Private Ltd., Singapore under Invoice No. 186/89 dated 11-11-1989 and the same were assessed at Bombay Port under Bill of Entry No. 8870 to 8873 (all dated 27-11-1989); that these four bills of entry have been assessed by C.H. Bombay taking CIF price @ US $ 3200/- per MT as indicated in the relative invoices; that Indents No. JC-21532 dated 4-4-1989 and JC-21705 dated 13-6-1989 placed by M/s. Jagat Chemicals Pvt. Ltd., Bombay for various Makrolon grades (both coloured & colourless of Polycarbonates indicated CIF prices of the goods @ US $ 3000/- per MT; that letter of credit No. FLC 0203022190 dated 23-1-1990 opened by M/s. New Plastomers Ltd., Daman from Canara Bank, Bombay in connection with import of Polycarbonates (Makrolon grades) showing CIF price of the goods @ US $ 3000/-per MT. From the documents submitted by the importers as discussed above, it appears that CIF price of Polycarbonate of different grades (both coloured & colourless) were at the rate of US $ 3000/- to 3200/- per MT between April, 1989 to Jan. 1990.”
15. The appellants no doubt in their reply refer to an import by M/s. Greaves Cotton & Co. at Bombay at the rate of US $ 2650/- per MT CIF but no particulars as to quality, the date of import, the country of origin is not made available. Whereas in respect of their own imports in Nov. 1989, they merely say that it was not influenced by the relationship since the said imports are in Nov. 1989 and the impugned imports in Feb. 1990, they are not relevant. It is not the case of the appellants that the prices of the impugned goods are falling. On the other hand, they have admitted having paid US $ 3200 per MT CIF in Nov. 1989. In their reply, they have not stated that the said imports are not relevant because of quantity or quality or country of origin. Therefore, the said import is relevant for determining the assessable value. The reason being that the appellants themselves paid US $ 3200 in Nov. 1989 for similar imports and there is no evidence that the prices have fallen down in Feb. 1990. Therefore, the Collector is justified in determining the assessable value on the basis of the appellants’ own imports in Nov. 1989. We, therefore, agree with the Collector and confirm the order in so far as the valuation in respect of two bills of entry.
16. As regards the 3rd bill of entry, the Collector himself on physical examination found that the part of the goods are coloured variety. There is no evidence produced by the Department as to the value of “Mixed” variety. Therefore, the transaction value is to be accepted at US $ 2500.
17. As regards the penalty, since we are accepting the invoice value in respect of the one Bill of Entry, we reduce the penalty to Rs. 25,000/-. The question now is confiscation. We found that in respect of two bills of entry there is mis-declaration and we have also confirmed higher valuation. However, we reduce the redemption fine to Rs. 1 lakh. The appeal is, therefore, partly allowed.