ORDER
U.L. Bhat, President
1. These appeals arise out of the order passed by the Collector of Central Excise, Chandigarh rejecting the transaction value or the declared value and confirming the value proposed in the show cause notice and confiscating the imported goods under Clauses (d), (f), (1) and (m) of Section 111 of the Customs Act, 1962 (for short, the Act) and allowing redemption on payment of fine of Rs. 25,00,000.00 and imposing penalty of Rs. 50,000.00 on each of the importing concerns and Rs. 5,00,000.00 on the proprietor under Section 112 (d) of the Act.
2. The appellants in two appeals, M/s. Sahitya Sales and M/s. Supreme Trading Corporation are proprietary concerns belonging to the appellant in the third appeal, namely, Shri Gurcharan Singh. Two consignments of old and used diesel engines of Japanese origin were imported in the name of the two proprietary concerns allegedly through a supplier in Singapore. Two Bills of Entry dated 22-12-1993 and 1-1-1994 were submitted respectively along with the related import documents, the first in regard to 339 pieces and the second relating to 265 pieces of engines. The consignments consisted of engines with brand names Isuzu, Toyota, Nissan, Mazda and Daihatsu for which the declared values were Singapore $ 400, 300, 370, 400 and 250 per piece respectively. All engines were of 1800CC. Officers of the Directorate of Revenue Intelligence searched the premises of the proprietor of the importing concerns and seized several documents. The consignments in the Custom House were also seized and the proprietor of the concerns was questioned. Enquiries were pursued with the supplier and other persons. It became known that the supplier whose invoice was submitted did not supply the goods and the proprietor of the importer himself had collected the goods and the supplier merely shipped them. The DRI also wrote to another supplier and obtained quotation. It was found the price of similar second-hand diesel engines was about 100% more than the prices declared by the appellant. It was also found that since the goods were second-hand engines and not scrap, import could not be made under OGL as claimed by the importer and specific licence was necessary and the importer had no licence. Consequently, a notice was issued to the three appellants indicating the aforesaid facts and requiring them to show cause against determination of value based on the quotation received by the DRI, confiscation of goods and imposition of penalty. The appellants resisted the notice contending that the engines were in “as is where is” condition and had ceased to be of any utility as such and could be regarded only as scrap and scrap could be imported under OGL. On the aspect of valuation, the appellants supported the declared value and contended that the quotation could not be accepted. The Collector passed the adjudication order overruling the contentions of the appellants and confirming the assessable value proposed in the notice, confiscating the goods, allowing redemption on payment of fine of Rs. 25,00,000.00 and imposing penalties on the appellants. This order is now challenged.
3. Learned counsel for the appellants addressed arguments on the ITC angle as well as on valuation. He reiterated the contention that the goods imported could be regarded only as scrap in which case under the 1992-97 Policy, the same could be imported under OGL and specific licence was not necessary. He relied on the following definition of “scrap” given in Webster’s Third New International Dictionary and quoted with approval by the High Court of Kerala in Goods Agro Chemicals and Ors. v. Assistant Collector of Customs, Cochin – 1987 (32) E.L.T. 565 :
“Small pieces, cuttings, or chips of stock removed in the process of making any product; manufactured articles or parts rejected for imperfection or discarded because of excessive wear or lack of demand and useful only as raw material for reprocessing (metal scrap – rubber Scrap).”
4. The invoice, the Bill of Entry and other import documents refer to the consignments as consisting of used diesel engines. This would certainly indicate that the supplier at the time of shipping and the importer at the time of presenting the import documents accepted the goods to be used engines that is, engines which could be used as such. If what the importer bargained for and received was scrap, the import documents would not have described the goods as old engines, but would have described them as scrap. The inspection by the Customs authorities also showed that the goods were used engines and not scrap. In these circumstances, it was for the importer to place sufficient materials before the authorities to show that the imported engines had completely outlived their utility and had become scrap. No such materials were placed before the authorities. In these circumstances, it is futile for the appellants now to contend that the Customs authorities should have treated the imported goods as scrap which could be imported under OGL. We agree with the finding of the Collector that the goods being used diesel engines, specific licence was necessary for the import and import without licence warranted confiscation under Section 111(d) of the Act and also action under Section 112 of the Act.
5. The next aspect relates to valuation. All the engines were of 1800CC. The brand names of the engines were Isuzu, Toyota, Nissan, Mazda and Daihatsu. The values declared in Singapore dollars were 400,300,370,400 and 250 per piece respectively. In view of the definite evidence that these goods were really not supplied by the supplier and were collected by the importer himself and only shipped by the supplier, the prices shown in the invoice can have no value at all; that is because the prices were not the supplier’s prices but were prices paid by the importer to the parties from whom the engines were actually collected and the supplier was not one of them. Therefore, the “transaction value” in these cases shown in the invoice has no sanctity at all.
6. The further question is what should be the correct assessable value of the goods. The department relied entirely on the quotation obtained from a supplier in Japan by the Department in the name of a concern set up by the Department. We have been taken through a copy of the quotation. The quotation gives prices which are around 100% more than the prices declared by the importer in the present cases. But the quotation itself makes it clear that it was only an offer and the supplier wanted counter offers from the addressee, evidently with a view to negotiate and arrive at agreed prices. While the goods imported by the appellants were branded goods, the relied on quotation does not refer to any brand. The third circumstance is that the quotation is for very small quantities varying from 4 to 10 pieces, while the two subject consignments were together of more than 600 pieces. In these circumstances, the above quotation could not be accepted without suitable adjustment. The Collector did not consider what adjustment, if any, should be granted.
7. According to the learned Counsel for the appellants, in the course of personal hearing, a copy of the Order-in-Original No. 13/94, dated 30-3-1994 passed by the Collector of Customs, Bangalore in S59/5/B ICD and a copy of Bill of Entry relating to import by another importer were placed before the Collector. The impugned order refers to the order passed by the Collector of Customs, Bangalore as having been produced in this case, but the Collector did not offer any comment regarding that order. That order came to be passed in connection with the import of 170 pieces of used diesel engines with or without gear boxes of 1000 and 1800CC along with cylinder block assemblies. That order states that “record” price for 1800CC with gear box was Rs. 7922.00 which was higher than the transaction value in that case. The Collector determined the value of used 1800CC diesel engines with gear box as Rs. 7922.00 per piece. It is not clear whether the price referred was FOB or CIF. The adjudicating authority in this case ought to have considered the order placed before him of the Collector of Customs, Bangalore before deciding to accept the quotation. The impugned order does not indicate production of Bill of Entry a copy of which is produced before use. The Bill of Entry dated 7-2-1994 shows the consignment contained 171 pieces of used diesel engines imported from Singapore and that 112 pieces of 1800CC engines with gear box were valued by the customs at Rs. 8,96,137.00 i.e. Rs. 8001.00 per piece CIF. In the above circumstances, we are of the opinion that though the Collector was justified in rejecting the so-called transaction value, he was in error in quantifying the assessable value without considering the document or documents produced by the importer. The aspect of valuation requires further consideration and for this purpose we propose to remand the cases.
8. We confirm the direction for confiscation of the goods under Clause (d) of Section 111 of the Act. The appellants shall redeem the goods on payment of redemption fine, but the quantum of redemption fine shall be fixed afresh after determining the correct assessable value. The confiscation under Clause (m) and other clauses of Section 111 of the Act is set aside. The confiscability on this ground shall be determined afresh. We confirm the finding of the Collector that the circumstances warrant imposition of penalty on the importer, but set aside the quantification made by him and direct him to quantify the penalty afresh. We set aside the penalty imposed in the name of the two concerns since they are proprietary concerns. It will be sufficient if penalty is imposed on the proprietor after taking into consideration his entire conduct in regard to import of both the consignments. The appeals are accordingly disposed of remanding the cases to the jurisdictional Commissioner in accordance with law and the observations contained in this order.
