ORDER
C.N.B. Nair, Member (T)
1. Appellant Sidhartha Polymers Ltd. has been engaged inter-alia in the import and sale of polycarbonate sheets. It imported 52 consignments of polycarbonate sheets during the period 1998 to 2001.
2. Its offices and connected premises were searched by the Directorate of Revenue Intelligence on 5-6/10/01. This was part of an investigation pursuant to information that importers of polycarbonate sheets have been mis-declaring the description and value of imported polycarbonate sheets and evading customs duty.
3. Appellants imports were of Korean origin goods, though the purchase were from traders in Singapore. The investigation covered appellant’s sales agents, Indian producers of similar goods etc. As a part of the investigation, samples of similar goods were obtained from Dubai and comparative testing was carried out of the samples seized during the search as well as the similar samples obtained.
4. Show cause notice dated 31.3.2003 was issued alleging that the imported consignments had been mis-declared both in regard to description and value, the allegation being that prime quality goods were claimed as re-generated/recycled and that the goods had been under valued at around U.S. $1055 per M.T. as against the normal value of over U.S. $ 3500. The notice proposed to recover short levied duty of around Rs. 10 crores under Section 28 of the Customs Act 1962 and to impose penalty under Section 112 of the same Act “for deliberate mis-declaration of value and willful suppression of other material facts”. Confiscation of goods seized during investigation was also proposed.
5. The appellant contested the allegations; but failed. Under an adjudication order dated 31st July 2006, the Commissioner (Adjudication), New Delhi held as under in regard to the charge of mis-description:
74. From the above statements of S/Shri Vinay K. Patel, Subhash Baburao Joshi, Rakesh Jain, Mayank Jain and Vinay Kumar, it has abundantly been proved that as per trade and industry practice, only prime quality PC sheets were used in the advertising/signage industry and the PC sheets manufactured out of recycled/regenerated polycarbonate did not find any use in the said advertising/signage industry as the recycled/regenerated PC sheets were only of dark and opaque colours and also had specs/spots and other impurities visible in the sheets. Therefore, the opal white PC sheets of M/s Siddhartha Polymer Ltd. (Korean origin) imported by the notice-companies, which in turn were used in the advertising/signage industries, were not the recycled/regenerated polycarbonate sheets as claimed and declared by the notices in their import documents. This fact was also proved from the statement dated 27.6.2002 of Shri Anand Bhandari (dealer of the notice-companies), who had stated that M/s Siddhartha Polymer Ltd. Had sent him the Korean origin ‘Hi-Tech’ brand polycarbonate sheets of opal white colour for sale, which, in turn, were used in the advertising/signage industry and the manufacturer certificate of M/s Siddhartha Polymer Ltd. (placed on record) clearly certified that the ‘Hi-Tech’ brand polycarbonate sheets of opal white colour manufactured by M/s Siddhartha Polymer Ltd. Were the prime quality sheets. Therefore, the above evidences coupled with the test reports relied upon in the show cause notice, leave no doubt that the ‘Hi-Tech’ brand opal white polycarbonate sheets manufactured by M/s Sehwa Polytech Korea which were imported by the notices for further use in the advertising/signage industries, were in fact the prime grade polycarbonate sheets and not the regenerated/recycled sheets, as declared and accordingly, I have no hesitation in holding that the polycarbonate sheets of M/s Bayer’s make, imported by the notice-companies were the prime quality sheets and the notice-companies mis-declared the same as regenerated/recycled polycarbonate sheets in connivance with the manufacturers/suppliers with the ulterior motive to undervalue the said sheets and to evade payment of appropriate customs duty.
6. As regards valuation, the Commissioner found that the “lowest average export price” from Korea to India of polycarbonate sheets during the period 2000-2001 was U.S. $ 3580 per M.T. and that value should constitute the correct assessable value for all the goods imported by the appellant during the period 1998 to September 2001. Consequently, the Commissioner computed the assessable value at over Rs. 18 crores against the originally assessed value of about Rs. 4.4 crores. As the result of the re-determination of assessable value, the Commissioner ordered recovery of about Rs. 9 crores as short levied duty. The order also imposed penalty of an amount equal to the differential duty on the appellant importer and a penalty of Rs. 1.5 crores on Shri Dinesh Agarwal, Director of the appellant’s importer (the second appellant in these appeals). The order also confiscated goods originally cleared provisionally and imposed a redemption fine of Rs. 1.4 lakhs. The present appeals are directed against the aforesaid duty demands, confiscation and penalties.
7. The submission of the learned Counsel for the appellants is that the entire order is the result of erroneous noting of facts as regards the allegation of mis-description of goods. The submission of the learned Counsel is that the imported consignment were never described in any of the customs documents as recycled or regenerated. The goods were always described only as polycarbonate sheets in import documents. The same was the description in the Bill of Entry filed before customs for the clearance of the goods. The counsel would therefore, submit that the allegation and the finding that the goods were mis-declared or mis-described has no factual basis. He would also point out that the appellant had not made any incorrect or false mis-declaration about the nature or use of the imported goods. It is being pointed out that all the consignments had been examined before customs clearance and found to be only polycarbonate sheets, as declared. The learned Counsel would further point out that three consignments were provisionally assessed at the time of clearance and those assessments were subsequently finalized after getting samples tested. The learned Counsel would emphasise that the investigations, including seized records, had not disclosed any suppression of facts or mis-declaration by the importer. It is his submission that entirely erroneous and irrelevant conclusions have been reached by the Commissioner, presumably because the investigations were directed against many importers and facts about other importers were mis-applied to the appellant’s imports.
8. The learned Counsel has taken us extensively through the evidence and submitted that the on record only supports a view that the consignments imported by the appellant were defective, produced from scrap, though the appellant had made no such statement or claim at the time of the import of the consignment. Reliance in this connection is placed on complaint of the appellant to the Korean manufacturer about quality and the reply of the supplier that black spots and other problems are because of the use of scrap material.
9. The learned Counsel would also contend that the material obtained during investigation was not reliable or support the finding. It is being pointed out that the comparative testing is not reliable at all. While the investigation had contended that it had obtained sample of comparable goods from Dubai, upon verification with the foreign supplier, (M/s Sehwa Polytech) they had stated that they had not supplied any such material and the alleged supplier of the material was not a dealer of the Korean party and that the alleged certificate about the material was not given by the Korean supplier, and that Sehwa Polytech had also informed that they did not have an export Director called Mr. Tal Yong Park who is seen to have signed the certificate. It is also being pointed out that the revenue is relying on the test report of IIT, Madras and Cipet Chennai, while test results from Cipet Amritsar and Ahmedabad of samples sent by the appellant had revealed that the material seized from the appellant was re-generated material.
10. As regards the valuation, the contention of the learned Counsel is that the basis adopted by the Commissioner is entirely impermissible in law and in the facts of the case. It is being pointed out that the Commissioner had adopted a purported “lowest average value” of polycarbonate sheets supplies from Korea for 2001 to determine the assessable value of imports made during four years. The submission is that comparable values can be taken only in regard to time. That too in regard to identical/similar goods. According to the learned Counsel, an average price for all polycarbonate sheets for an year would fail these requirements. Further, Commissioner’s decision has also been influenced by export prices noticed from other countries like Israel and Taiwan and manufacturing costs in India. According to the learned Counsel both these criteria are impermissible.
11. Learned Counsel would also submit that the so called price information furnished by the Indian High Commission at Hong Kong about Korean export prices does not constitute a reliable basis and the same was required to be rejected. The submission of the learned Counsel is that the table enclosed with the letter of the Consul (Economic) only gives value and weight of exports to India, Hong Kong, U.S.A. for polycarbonate sheets for the year 2001. It does not indicate the variety of the goods, their use or any other relevant particulars. The learned Counsel would point out in this connection that polycarbonate sheets vary vastly in quality and use, from materials for use in lighting and sinages to materials for use in bulletproof products and ophthalmic products. The submission of the learned Counsel is that given the vide range of qualities and uses, there would be no average price and the price for each variety and consignment would be different.
12. According to the learned Counsel, instead of going by entirely un-reliable criterion like average price, the revenue authorities were required to go by specific imports of particular varieties. Therefore, the learned Counsel would point out that the revenue should have gone by the specific import prices for particular varieties noticed in the course of imports to India. This information in the normal course would also be available with the revenue from their computerized data base. Learned Counsel would point out that no such meaningful analysis has been made by the revenue, despite the same being pointed out by the appellant. It had in particular been pointed out that other importers were also importing polycarbonate sheets at the same price.
13. The learned Counsel would point out that the procedure followed by the revenue also is not right. According to him, rejection of a transaction value or directing an importer to produce materials in support of an import price is required to be done at the time of assessment of the imported goods. In the present case, no such course was followed. Instead, assessments were made at the transaction values, upon being satisfied, on examination of the goods, that the value was fair. Many years thereafter, assessments are being re-opened based on some general data or information.
14. Learned SDR would point out that the comparison of the samples drawn at the time of search from the appellant and the samples obtained from Dubai and the chemical test thereof had shown that the goods under import were also prime quality material. He would also point out that chemical test by the IIT and Cipet Madras had confirmed this position. Further, during investigation, the appellant’s Director, appellant’s dealers had all stated the sheets under import were opal white prime quality sheets used in sinages/advertisement. The learned SDR would point out that investigation has shown conclusively that white sheets for sinages are not produced from scrap but are produced only from prime material. According to the learned SDR, this evidence clearly establish the identity of the goods as prime quality sheets produced from granules and not from scrap. The learned SDR would also point out that even though the appellant had not specifically declared the goods as re-generated/re-cycled material, the effort to pass off all the goods as re-generated/recycled material is clear from the fact that correspondence describing the goods was found during the search of the appellant’s premises. He would, therefore, submit that the finding regarding mis-declaration is required to be upheld in these circumstances. According to the learned SDR, once the finding regarding mis-declaration of description is accepted, the charge of undervaluation will follow, as prime materials and goods produced from scrap vary vastly in value.
15. As regards the value, the submission of the learned SDR is that the order has examined the value of prime quality polycarbonate sheets from all aspects like prices of imported sheets, cost of production based on the price of main raw material, the re-sale price of imported sheets in India and all those data support the finding that the price of about U.S. $ 1000 per M.T. declared by the appellant was a gross under valuation. He would point out that even the re-generated material was found to be very much more expensive than the declared price by the appellant. In such a situation, Commissioner could not be faulted for rejecting the transaction value and re-determining the assessable value. As regards, the rejection of test certificates produced by the appellant, the contention of the learned SDR is that these reports obtained and produced by the appellant cannot find acceptance in the face of authentic test reports obtained through legal process by Government agencies.
16. The re-assessment of the goods in this case is based on a finding that the description of the consignments imported from 1998-2001 under 52 Bills of Entry were mis-declared. The specific finding is that these consignments have been mis-declared as re-generated/re-cycled polycarbonate sheets, while they were actually produced from virgin/prime material. The consignments were cleared under 52 bills of entry over a long period of four years. Declaration of imported goods is made in Bills of Entry required to be filed under Section 46 of the Customs Act. A perusal of the clearance Bills of entry (and invoice) shows that the goods had not been described in any of the documents as re-cycled or re-generated materials. Those documents described the items as polycarbonate sheets or rolls. They were not stated to be recycled/regenerated material. Therefore, the finding of mis-declaration or mis-description is not supported by the Customs documents. In fact, the declaration are contrary to the observations and findings. Therefore, even if the goods were prime material as held in adjudication, a case of mis-declaration does not arise.
17. Having noted the correct factual position about the declarations, we may now consider the evidence on record about the nature of the goods. The appellant is relying on its contemporaneous business correspondence to support its contention that the imported goods were sub-standard/not of prime quality. Following materials are specifically high lighted.
a). Minute of the Board of Directors meeting held on 15/6/2000 deal with defect of materials. Item No. 2 reads as under:
ITEM NO. 2
AUTHORISE TO INTIMATE REGARDING DEFECTING MATERIAL
The Chairman informed the Board about the repeated complaints being received for the defects in the Polycarbonate sheets from the Buyer. After due deliberation following resolution was passed unanimously.
Resolved to take up the matter strongly with M/s Sehwa Polytech Co. Ltd., for the repeated complaints being received and thanking them for their immediate response to the complainants and visit therefrom.
Minutes of the earlier meeting held on 28.4.2000 also deals with complaints of customers about the imported polycarbonate sheets.
(b). The appellant sent several letters to Sehwa Polytech Co. Ltd. from March 2000 complaining about “black spots, broken rolls, cracks, variation in thickness, length and width”. Samples of defective goods were also forwarded. Appellant’s complaint dated June 20, 2000 merits being reproduced in full
Ref: Claim Polycarbonate Sheets seen and verified by your Co-representative and Production Manager Mr. Kaby Cho & Mr. J.H. Kim
Dear Sir.
We are constraint and sorry to write that your material supplied since December has landed up us in to a big problem. People are claiming huge damages from us and we have to settle the claim immediately to gain trust and for future business in the Indian Market. We have to expedite at the earliest. We estimate minimum of 125 Rolls to be supplied approximately 20 tons material to settle and cool the buyers.
As seen by Mr. Kaby Cho & Mr. Kim we noticed following problems in the materials.
1. Color (Big and major problem and if we consider the same it will be more than 2500 rolls.)
2. Shrinkage (Which is not expected in extrusion material)
3. Black spots
4. Broken Rolls (All 2 mm and 3 mm rolls received in last 2rd container having 90 rolls in total performed broken which can not be accepted in PC sheets.
Please understand our situation and we request your goodself to expedite the claim immediately without any delay otherwise we will spoil our own market and we have to heavy financial loss.
We also appreciate and thank your company for sending Mr. Kaby Cho, Manager Export and Mr. Kim Manager Production immediately.
We are also pleased to place a new order for 1000 rolls approximately 100 tons with a guaranty that the above said problem won’t be repeated in future and color will be as per the samples given to your representative Mr. Kim and Mr. Cho.
Also pleased to inform our changed telephone and fax no as mentioned below. Any future correspondence may please be made on said changed no’s.
Telephone No. : 5714875, 5714885, 5744060, 3744061, 5754668, 5754669
Fax No. : 5714898, 5714928, 7195822
Communication dated June 5, 2000 of Sehwa Polytech Co. Ltd. Accepts the complaints and explain the reasons as under:
SEHWA Polytech Co., Ltd.
4F KWANGIK BLDG, 122-8, YANGJAE-DONG, SEOCHO-GU
SEOUL, 137-130, KOREA
TEL : 822 573 3384 FAX 822 573 3460 E-MAIL : gblessy@hunmail.net
TO : SIDDHARTHA POLYMERS LTD.
ATTN : MR. DINESH AGGARWAL FROM : KABY CHO / OVERSEA SALES MANAGER JONG HYO KIM / PRODUCTION MANGER DATE : JUNE. 5, 2000 Dear, Mr. Aggarwal !!! If you place us another order in the future, we promise you that we will make perfect products for you. Anyhow we are sorry a lot about our claimed products which is BROKEN/ SHRINKAGE/ BLACK SPOT/ UNEVEN SURFACE DEFECTS. As you knew that because we should use PC scraps and remains, the products are not good at the moment. so, when you firstly placed us your esteemed order, we asked you the Usage of PC sheets. You told us that The usage of PC was only Lighting Purpose. Is it right ? If The sheet is used only lighting industry, We should use Scrap and remains. Pls understand our hard situation. Your sincerely Kaby cho The above mentioned materials fully support the appellant's version. And all these exchanges are much before the investigations of October 2001.
18. As against the above evidence which have a direct bearing on the imports in question, revenue’s evidence is that sample of same goods were obtained from Dubai during investigations and upon test, that sample was found to match the sample of the material seized from the appellant in October 2001, Indian manufacturers have stated that only sheets produced from prime materials are suitable for signages/quality that appellant’s distributors have stated that primate materials only are used in signage making, that prime quality sheets are much more expensive than polycarbonate sheets produced from scrap.
19. We have already noted appellant’s contentions on the above evidence. It is to be noted that the evidence of the revenue is general and theoretical in character. No direct evidence about the mis-declaration of description of any of the consignments has come up in the investigation. Evidence specific to the transactions have to prevail over general evidence. And the materials relating to the transactions like the correspondence between the appellant and the Korean supplier noted in para ’17’ of this order support only the appellant’s version. In the result, we hold that the finding that the consignments were mis-declared as regards their description is not sustainable.
20. The finding regarding mis-declaration of value is the off-shoot of the finding regarding mis-declaration of description. Otherwise, there is no material indicative of the fact that purchases were at a higher price or payments in excess at a higher price or payments in excess of invoice prices have taken place. Therefore, the finding regarding undervaluation is also not sustainable.
21. In the light of our findings above, demand of duty, confiscation and penalties imposed on the appellants are set aside and the appeals are allowed with consequential relief, if any, to the appellants.
(Pronounced in the open court on 19.6.07)
