ORDER
T.K. Jayaraman, Member (T)
1. These two appeals have been filed against the Order-in-Appeal No. 63/2005(H-III)Cus dated 22.08.2005 and Order-in-Appeal No. 64/2005(H-III)Cus dated 23.08.2005 passed by the Commissioner of Customs & Central Excise (Appeals-II), Hyderabad. Since the issues involved in both the orders are one and the same, we are taking up the appeals for decision.
2. The appellants M/s. New Techno Graphics imported Used Photocopiers 26 in numbers and Used Monitors 176 in numbers. The appellants were in possession of invoice to indicate the Transaction Value of the above mentioned goods. Before clearance, the goods were examined and it was found that there was mis-declaration with regard to certain brands. For example, on opening the consignment, it was found that certain undeclared models like Olivetti 8041, 8045, 8040 and Selex GR3100 were available in the consignment. Apart from the photocopiers, 176 Monitors also were imported. In all these goods, the year of manufacture was not mentioned. Prima facie, the Customs Officers doubted the value of the imported goods. There was also licensing violation. It was felt that the second hand Photocopiers and the second hand Monitors required licences under the EXIM Policy for their import. The licences were also not produced. The Customs authorities wanted the manufacturer’s invoice from the appellants. The appellants were not in a position to produce the same. They were also not in a position to indicate the year of the manufacture of the second hand photocopiers and monitors.
3. In the second appeal, which is similar to the first one, the goods imported were 85 numbers of Used Canon Photocopiers. In this case also, after examination, it was found that there was some discrepancy with regard to the models declared and the models, which were available in the consignment. The discrepancy is that they had actually declared 11 Canon models MP 4050. However, what was available on opening the packages was Canon MP 4150. In view of these discrepancies and also due to the non-submission of the manufacturer’s invoice and the particulars regarding the year of manufacture, the Customs authorities proceeded against the appellants. It is seen that at the request of the appellants, the Chartered Engineers were requested to appraise the value of the second hand imported goods.
4. In the first appeal, the declared price in respect of the second hand photocopiers was Rs. 3,01,633/- whereas the Chartered Engineer appraised them at Rs. 5,25,600/-. The Adjudicating Authority rejected the Transaction Value declared by the appellants under Rule 10A of the Customs Valuation Rules. While the Chartered Engineer allowed a depreciation of 60%, the Original Authority, in terms of the Board’s Circulars dated 19.11.87 and 04.01.1988, allowed a maximum depreciation of 70% and arrived at the assessable value of Second Hand Photocopiers at Rs. 4,39,842/-. Further, the Original Authority relied on the decision of the Larger Bench of the Tribunal in the case of CC v. Motor Industries Co. . The above decision has relied on the Apex Court decisions in the case of Gajra Bevel Gears v. Cc . In the Supreme Court decision, the valuation of the second hand machinery, in terms of the Board’s Circular, was approved. After re-fixation of the assessable value of the second hand photocopiers, the Adjudicating Authority passed an order holding that the goods brought by the appellants are liable for confiscation. A redemption fine of Rs. 1,00,000/- and a penalty of Rs. 35,000/- was imposed.
5. In respect of the 176 nos. of used Monitors, the Chartered Engineer appraised them at Rs. 750/- per piece and the total value arrived at by the Chartered Engineer was Rs. 1,32,000/-. In view of the above the original authority re-determined the assessable value.
6. In respect of the second hand Monitors, it was held that the licences are required and as the appellants did not produce any licences, the monitors were held liable for confiscation. A Redemption Fine of Rs. 30,000/- was imposed and a penalty of 12,000/- was imposed.
7. As regards the Photocopiers, even though the proceedings were initiated for mis-declaration of the brands and non production of licences, on the basis of the decision of the Hon’ble Tribunal in the case of M/s Atul Commodities P. Ltd. v. CC, Cochin and Hyderabad , it was held that the used Photocopiers are ‘Capital Goods’ and in terms of the EXIM Policy, there was no need for producing any licence. However, both the Photocopiers and the Monitors were held liable for confiscation on account of the mis-declaration of the description and value. Hence, they were held liable for confiscation. A redemption fine of Rs. 1,00,000/- was imposed and penalty of Rs. 35,000/- under Section 112 was imposed in respect of photocopiers. In respect of monitors, a Redemption Fine of Rs. 30,000/- was imposed and penalty of Rs. 12,000/- under Section 112 was imposed. The appellants approached the Commissioner (Appeals) who upheld the valuation adopted by the lower authority. It was held by the Commissioner (Appeals) that the mis-declaration of certain models is only a technical lapse and there is no evidence on record that it was done with an intention to evade duty. Therefore, the redemption fine of Rs. 1,00,000/- was reduced to Rs. 20,000/- only. In view of the Atul Commodities decision, the redemption fine and penalty imposed in respect of the photocopiers were set aside.
8. In the second appeal, which is against the Order-in-Appeal No. 64/2005, the impugned goods are 85 used Canon photocopiers of various models. The appellants declared a value of Rs. 9,43,230/-. The goods were actually imported from Singapore and the appellants produced some Chartered Engineer’s Certificate from the place of export. But due to certain discrepancies between the declared models and those found on examination and also in view of the fact that the appellants did not produce the manufacturer’s invoice and did not give information regarding the date of manufacture of the impugned goods. Revenue proceeded against the appellants in a similar manner as in the case of the first appeal. In this case also, the Chartered Engineer examined the goods and arrived at a value, which was slightly higher than the declared value. While the declared value of the 85 used Canon Photocopiers was Rs. 9,43,230/-. The Chartered Engineer appraised the value at Rs. 13,79,350/-. Based on the Board’s Circulars, the Original Authority allowed maximum depreciation upto 70% and re-fixed the assessable value at Rs. 12,25,333/-. After re-fixation of the assessable value, he imposed a redemption fine of Rs. 3,00,000/- and a penalty of Rs. 1,00,000/- on the appellant. The appellants approached the Commissioner (Appeals). He upheld the valuation adopted by the lower authority, however, the penalty was set aside.
9. The appellants strongly challenge both the impugned orders of the Commissioner (Appeals). Shri G.M. Rao, the learned Advocate appeared on behalf of the appellants and Shri Sumit Kumar, the learned SDR, for the Revenue.
10. We heard both sides. The learned Advocate explained that all these goods namely the Second hand Photocopiers and also the Monitors, were obtained from traders. Therefore, it was not possible for the appellants to obtain manufacturer’s invoice in respect of different models of used Photocopiers and also the used Monitors. He took us through the Orders-in-Original wherein the only reason for rejection of the Transaction Value given by the lower authority was as follows. The importer has not submitted manufacturer’s invoice, details of year of manufacture machine-wise, prices in the year of manufacture, etc. as required under Rule 10 and 10A of the Customs Valuation (DOPIG) Rules, 1988. The import was from a trader and not from a manufacture. In view of the above and since the importer did not produce any other evidence, there is a reasonable doubt about the correct declared value. Accordingly, the invoice values could not be accepted as representing transaction value and the same merit rejection in terms of Rule 10A of the Customs Valuation Rules, 1988. Rule 5, Rule 6 or Rule 7 of the Customs Valuation Rules, 1988 would not be applicable as the goods are not similar or identical in nature and the extent of their usage etc., date of manufacturing were not known, hence, not comparable. It was urged that in terms of the settled case-laws, the burden is on the Revenue to show the reasons for rejecting the Transaction Value. It was emphasized that in terms of the Customs Act and also the Customs Valuation Rules, the normal practice is to accept the Transaction Value and if the Transaction Value is rejected, then, it should be rejected in terms of the Valuation Rules, especially Rule 4(2). It should be shown that the case falls under any one of the exceptions enumerated in Rule 4(2) of the Valuation Rules. In the present cases, the Revenue has not discharged this burden. Moreover, the learned Advocate emphasized the point that the issue is not the correctness of the valuation method adopted by the department by engaging a Chartered Engineer and giving maximum depreciation in accordance with the Board’s Circular. The point is, first of all, the Transaction Value has to be rejected on legal grounds mentioned in Customs Valuation Rules, 1988. This has not been done. Therefore, the Transaction Value has to be accepted and the department cannot enhance the value on the basis of the method adopted by them.
11. The learned advocate relied on a very large number of case-laws, which are given below:
(i) Radhey Shyam Ratanlal v. CC, Sheva, Raigad
(ii) Omex International v. CC (Import), Chennai Final Order No. 437/07 dated 19.04.2007
(iii) Balaji Office Equipment and Ors. v. CC, Chennai Final Order Nos. 647 to 658/2007 dated 28.05.2007
(iv) Mirah Exports Pvt. Ltd. v. CC
(v) Gajra Bevel Gears v. CC, Bombay
(vi) CC, Chennai v. Motor Industries Co.
(vii) Continental Construction Co. Ltd. v. CC, Bombay
(viii) Continental Construction Ltd. v. CC, Bombay
(ix) Venus Insulation Products MFG. Co. v. CC, Goa
(x) Fearless Pack Ltd. v. CC, New Delhi
Further, at the time of hearing, the learned Advocate relied on the following case-laws:
(i) Rabindra Chandra Paul v. CC, (Prv.), Shillong
(ii) Eicher Tractors Ltd. v. CC, Mumbai
(iii) Tolin Rubbers Pvt. Ltd. v. CC, Cochin
(iv) Valdilal Dairy International Ltd. v. CC, Bombay 2005 (180) ELT 436 (SC)
(v) CC, Mumbai v. Bureau Veritas
(vi) H.T. Co. v. CC (Appeals-II), Hyderabad
(vii) H.T. Co. v. CC, Hyderabad 2007 (208) ELT 507 (Tri.-Bang.)
(viii) CC Kandla v. Nirma Ltd.
The learned Advocate also drew our attention to another order passed by the same Commissioner (Appeals) in their own case. The said Order-in-Appeal No. 24/2005(H-II)Cus. was passed on 31.03.2005. The subject matter of the particular OIA dated 31.3.2005 was also the second hand photocopying machine. In respect of the valuation of the machines, the Commissioner (Appeals) has discussed the matter elaborately referring the decision of the Hon’ble Supreme Court in the case of Eicher Tractors Ltd. and some other cases and had come to the conclusion that Revenue has not given proper grounds under Rule 4(2) in order to reject the Transaction Value. In that case, the Commissioner (Appeals) had accepted the Transaction Value declared by the appellants and passed the order in favour of them whereas in the present case, it was pointed out that the Appellate Authority has not given any reasoned order and he has simply upheld the order of the original authority.
12. The learned Departmental Representative pointed out that the appellants had actually mis-declared the description of the goods. He said the brand names declared by them were not the same when they were examined. As the appellants had not made a proper declaration, according to the learned Departmental Representative, the Revenue is not bound to accept the Transaction Value. Moreover, he took us through Rule 10 and 10A and urged that in respect of the goods, which are second hand in nature, it was not possible to arrive at the correct value in the absence of manufacturer’s invoice and the year of manufacture of the impugned goods. Therefore, he argued forcefully that the Customs authorities are not bound to accept the Transaction Value declared especially when there was mis-declaration of the description of the goods. According to him, the mis-declaration of the models of the photocopiers had been done with an intention to evade payment of Customs duty. He pointed out that the lower authorities have rejected the Transaction Values and have sequentially proceeded from Rule 5 to Rule 8. He also drew our attention to the decision of the Supreme Court in the case of Gajra Bevel Gears v. CC and stated that the methodology of determination of value of second hand goods after allowing depreciation in terms of Board’s Circular has been upheld by the Supreme Court. He pointed out that in fact, a very lenient treatment has been meted out to the appellant by allowing a maximum depreciation of 70% and he strongly urged to uphold the impugned orders of the Commissioner (Appeals). The learned Departmental Representative cited the following decision of the Hon’ble Apex Court.
Grauer & Weil (India) Ltd. v. CCE, Baroda wherein it is held that penalty is imposable when a person acts in conscious disregard of his statutory obligations and deliberately suppress material facts.
13. On a very careful consideration of the facts on record, we find that the appellants had purchased various models of second hand photocopiers and also computer monitors. The monitors are also used. As the Customs had a doubt regarding the declared value, at the request of the appellants, the Chartered Engineer inspected the goods and gave their Certificates. It is recorded in the OIO No. 30/2005 dated 25.07.2005 relating to 26 numbers of used Photocopiers and also 176 numbers of used monitors that the age of the second hand photocopier is around 7 to 8 year old; and the age of the used monitor comes to 2 to 12 years. It is stated that some of the used monitors; have only salvage value and some of them can be used for limited application. One thing is clear that the appellants have purchased only used second hand goods. The point is that there is no standard value for the used second hand goods. The second hand market for used goods is very volatile and it is possible for the appellants to bargain and obtain the best price possible. Further, the rejection of the Transaction Value for the only reason that the appellants did not produce the manufacturer’s invoice and the year of manufacture is not very fair in the absence of other evidences. When different models of second hand goods are obtained from a trader, it would be very difficult for the importer to obtain the manufacturer’s invoice. It is by now well settled that in order to reject Transaction Value, the Revenue has to give proper reasons, which are enumerated in Rule 4(2) of the Customs Valuation Rules. In other words, the Transaction Value is normally to be accepted and when it is rejected, it should be rejected for reasons stated in the exceptions enumerated in Rule 4(2) of the Valuation Rules. This has not been done in both these appeals. The appellants have relied on a large number of case-laws.
14. The Hon’ble Supreme Court, in the Tolin Rubbers P. Ld. v. CC, Cochin case, has dealt with the rejection of the Transaction Value in respect of second hand machinery. In that case, the assessing officer determined the Transaction Value of the second hand machinery in terms of Rule 8 of the Customs Valuation Rules on the basis of the Chartered Engineer’s certificate giving maximum depreciation of 70%. The Supreme Court held that none of the lower authorities have adverted to Rule 4(2) or to say for what reasons as provided under the said Rules, the Transaction Value was rejected. In that case, the impugned order was set aside. The Tolin Rubber case has actually relied on the well known Eicher Tractors Ltd. case decided by the Hon’ble Supreme Court.
15. Similar decision was taken by the Supreme Court in the case of Valdilal Diary International Ltd. v. CC, Bombay 2005 (180) ELT 436 (SC).
16. Our attention was also invited to the decision of the Chennai bench on a similar issue in the case of Sri Venkatesh Enterprises v. CC, Chennai . In that case also, the Transaction Value was rejected for the reasons that (a) the goods were imported by a trader and not by a manufacturer; (b) the goods, being used/second hand, cannot be said to have been imported under fully competitive conditions due to its maintenance, upkeeping, etc.; (c) the importer did not produce any evidence to substantiate the declared value; and (d) an independent Chartered Engineer in India appraised the value of the goods at US$ 48,855 as against the declared value of US$ 39,550 after inspecting the goods. In that case, the tribunal observed, we find that none of these reasons constitutes any of the exceptions laid down under the proviso to Rule 4(2) of the Customs Valuation Rules. Therefore, as rightly submitted by the learned Counsel, rejection of the Transaction Value is against the mandate of law embodied in the judgment of the apex court. In the case of Eicher Tractors Ltd., the value of the goods declared in the Bill of Entry was accepted under Section 14 of the Customs Act by the Apex Court after noting that none of the exceptions under Rule 4(2) was found to exist in that case. Their lordships applied the same ruling to a case of import of second hand machinery in the case of Tolin Rubbers. It is also pertinent to note that in the latter case, the Chartered Engineer’s valuation was the basis adopted by the Customs Authorities for rejecting the declared value of the imported goods. The declared value was accepted by the Court, as there was no exceptional circumstance as laid down under Rule 4(2) in the said case for justifying the rejection of such value. In the case of Shri Venkatesh Enterprise, this bench followed the above decisions of the apex court and accepted the Transaction Value of the goods imported by the assessee. In the result, the valuation done by the Commissioner is set aside and it is directed that the declared value of the goods be accepted for the purpose of levy of duty thereon.
17. Therefore, in the present case also, we find that no proper grounds have been made out for rejection of the Transaction Value in terms of Rule 4(2) of the Customs Valuation Rules. In these circumstances, the Transaction Value, as declared by the appellants, have to be accepted. Further, the learned Departmental Representative was at pains to show that the mis-declaration of the brands was done only with a view to evade Customs duty. So he was very emphatic that on this ground alone, the Transaction Value is liable to be rejected. However, we find that as regards the mis-declaration of brands, the Commissioner (Appeals), in the impugned OIA 63/2005-Cus, has stated as follows:
However, in so far as mis-declaration in regard to certain models being not declared, it is definitely a technical lapse. There is no evidence on record that it was done with an intention to evade duty.
18. In respect of the above finding of the Commissioner (Appeals), Revenue has not filed any appeal. Therefore, it is clear that Revenue has not established that the mis-declaration of brands was done with a view to evade Customs duty. The contention of the Revenue that merely because there were some discrepancies between the brand declared and the brand which were found on examination, would not be a reason for rejecting the Transaction Value. In view of the above discussion, we do not find any merit in enhancement of the value of the impugned goods on the basis of the Certificate of the Chartered Engineer. Therefore, we allow the appeals of the appellant as regards the valuation of the impugned goods in both the appeals.
19. As regards the imposition of fine and penalty in respect of the imported monitors, it is seen that the monitors were held confiscable not only on account of mis-declaration of the value but also on account of the fact that they required licence for import and the importers did not produce any licence. For this reason, the Commissioner (Appeals) has upheld the imposition of fine and penalty in respect of the Monitors. For the same reason, we also do not want to interfere with regard to the imposition of fine and penalty in respect of the monitors. However, as regards the value of the used monitors and the second hand photocopiers in respect of both these appeals, the transaction value should be accepted.
20. Summing up,
(1) OIA 63/2005 is disposed of by setting aside the refixation of assessable value of the impugned goods. The declared value is accepted. However the fine and penalty imposed in respect of the used monitors is upheld. The Appeal C/388/2005 is partially allowed.
(2) OIA 64/2005 is set aside. The declared value is accepted. The Appeal C/389/2005 is allowed with consequential relief.
(Pronounced in open Court on 14/9/07)