ORDER
Harish Chander, Member (J)
1. M/s. Silfer Enterprises, Ahmedabad and Shri H.D. Silva, Prop. M/s. Silfer Enterprises have filed two appeals being aggrieved from orders in original Nos. 3/85 and 4/85 dated 15th November, 1985 both passed by the Collector of Customs, Rajkot. Shri Nitin Kanta-wala and Shri M.A. Rangaswamy, Advocates have appeared on behalf of the appellants and Shri S. Krishnamurthy, S.D.R. has appeared on behalf of the respondent. Both the sides have put forth the common arguments for both the appeals and as such the same are being disposed of by this consolidated order.
Appeal No. 240/86-A
Briefly the facts of the case are that a consignment of 1513 cases of Ball bearings arrived at Kandla port in the month of March, 85 by C.V. Silver Star from the port of Rotterdam. M/s. Silfer Enterprises filed four Bills of Entry namely F-308, F-309, F-310and F-311 dated 15.3.1985 and had declared the value at Rs. 8,90,026.10. M/s. Silfer Enterprises had claimed to be the Agents of M/s. Elecon Engineering, Vallabh Vidyanagar in terms of Para 383 of the Hand Book of Import and Export Procedures AM 1983-84 seeking clearances of the aforesaid consignment under cover of Import Licence bearing No. P/D/1959500/C/XX/88/A/83 dated 30.9.1983 revalidated upto 31.3.1985 issued in favour of M/s. Elecon Engineering Co., Vallabh Vidyanagar. That licence carried the following endorsement :
Spares needed for the purpose of providing warranty coverage of after sales service/whether free of cost or at a price for their customers which shall be permitted as were/are used by them as components of the said items at the time of manufacture as per para 60 of AM-84 subject to the condition as per para-44(2) of AM 1984 Hand Book.
The licence also contains the condition “End product wagon Tipplers and Dust Trapping Equipment” and “Automatic Licence AU industrial DGTD existing unit”. Fur ‘licence is a non-transferable.’ Since the aforesaid importation was considered to be invalid in terms of the aforesaid import licence and also since the value declared by M/s. Silfer Enterprises as the value of the impugned goods fell far short of the true value of goods consequently the face value of the licence also did not apparently cover the value of the consignment. To the revenue authorities it appeared that not only was the licence invalid but that M/s. Silfer Enterprises, Ahmedabad had also grossly under-valued the consignment. In view of the above a Show Cause Notice was issued by the Deputy Collector, Custom House, Kandla under No. VIII/lO-2/85-Appg. dated 8.8.1985 to M/s. Elecon Engineering Co., Vallabh Vidyanagar and M/s. Silfer Enterprises as to why the aforesaid consignment should not be confiscated under Section 111(d) of the Indian Customs Act, 1962 and also why the impugned goods should not be confiscated under Section 111(m) of the Customs Act 1962 for under-valuing the consignment since this was also in contravention of Section 11 of the Customs Act, 1962 and also as to why a penalty should not be imposed on M/s. Silfer Enterprises and M/s. Elecon Engineering Co. Ltd. under the provisions of Section 112 of the Customs Act, 1962 for the aforesaid contravention. In short the main allegations in the show cause notice were “(i) ball bearings in question fall under Sr. No. 86 of Appendix 4 of Import Policy AM 1983-84 which is the governing policy for the import licence produced and are banned for import; (ii) the importation is sought under endorsement of para 60 on the import licence in question but it is alleged that para 60 covers only permissible spares and not non-permissible spares (banned spares) as is clear from the plain reading of chapter 9 of Import Policy AM 1983-84. In this chapter a clear distinction has been made between permissible and non-permissible spares and as per para 59 non-permissible spares can only be imported in respect of capital goods within the overall limitations laid down in the said para and non-permissible can not be imported as spares for warranty coverage under para 60; (iii) without prejudice to the above it is alleged that M/s. Silfer Enterprises had not produced sufficient evidence to prove that M/s. Elecon Engineering Co. Limited on whose behalf they were purportedly acting had imported the same ball bearings at an earlier date in equal quantity or more for being used in the manufacture of wagon tripplers and dust trapping equipment, thereby permitting them to re-import the same as spares for warranty coverage and, therefore, it is alleged that the huge quantity of ball bearings being imported was not for warranty coverage but for clandestine disposal; (iv) it is further alleged that the licence in question covers all types of spares used by the importers in the manufacture of their end product and not merely ball bearings and the importer is not permitted to import only ball bearings especially those which fall specifically in the non-permissible category; (v) without prejudice to the above it is further alleged that whereas M/s. Silfer Enterprises had declared the values of the ball bearings bill of entry wise as shown in column 2 of the table below, the true value in terms of price lists issued by the exporting country were as shown in column 3 of the table below :
TABLE
_______________________________________________________________
Sr. No. B/E No. & date Declared value Value as arrived
at in the show
cause notice.
_______________________________________________________________
(1) (2) (3) (4)
_______________________________________________________________
1. F. 308/15.3.1985 1,81,664.92 15,22,626.90
2. F. 309/15.3.1985 1,81,664.92 23,38,187.38
3. F. 310/15.3.1985 3,30,399.75 48,70,471.95
4. F. 311/15.3.1985 1,96,296.51 19,56,167.81
_______________________________________________________________
8,90,026.10 1,06,87,454.04
__________________________________
and (vi) it also alleged that because of this under-valuation the goods are liable for confiscation under Section 11(m) apart from the fact that they are also liable for confiscation under Section 111(d) of the Customs Act, 1962. M/s. Silfer Enterprises in reply to the Show Cause Notice on 19.8.1985 stated that they had imported ball bearings of Bulgarian and Hungarian makes having SKF numbers 6201 to 6208, 6302 to 6308, 6004 and 6005 and their equivalents. They stated that they had purchased the said goods from ‘Shipping Agency’ M/s. S.K.D Trading Limited and the invoices reflected the real value of the goods showing the international market price prevalent at the time of importation. They had produced price lists approved by the Consulate General/Chamber of Commerce of the concerned countries. They submitted that there was no substance in the allegation of under-invoicing. The price list relied in the show cause notice were outdated and already withdrawn by the concerned countries and that they were irrelevant. They submitted that the Ball bearings imported by them fall under Appendix 4 of Import Policy of AM-84 and Appendix 2 part ‘B’ of AM-85. They had further contended that those were restricted items and can be imported under para 60 of the Import Policy and the ball bearings could be imported without any value or quantity limits against import licence. The goods were spares against the warranty spares licence, and use of such spares should be ascertained objectively with reference to manufacturer’s catalogues/Chartered Engineer’s Certificate/drawings. They had also submitted chartered engineers drawings/certificate to show the use of spares hi the end products, in respect of M/s, Elecon Engineers Co. Ltd. to the Assistant Collector of Customs, Kandla on 2.7.1985 and as such the goods can be imported under para 60 without any value limit under the licence granted under para 60. They placed the orders to M/s. S.K.D. Trading Ltd., due to availability of immediate booking and facility of sight draft. The port of Rotterdam was the nearest and convenient for Bulgaria and Hungary, and therefore, there was no doubt about authenticity of the invoices. They had also requested to refer minutes of Joint meeting of the Joint Chief Controller of Imports and Exports Bombay and the customs permitting import of items shown in Appendix 3 & 4 of Import Policy AM-84, without any restriction in value or quantity. The Chartered Engineer’s certificate produced by them to show that the ball bearings were used in the manufacture of the end product viz. Wagon Tripplers and dust Trapping Equipments. Para 57 and para 59(2) of the Import Policy of AM-84 were not relevant. The Customs authority of Kandla have passed a Bill of Entry No. F. 1030 dated 31.10.1984 for similar items and against the same licence. M/s. Silfer Enterprises had also denied the mis-declaration or under-valuation of goods in the Bill of Entry and had further alleged that the invoices produced by them were according to international market price. M/s. Elecon vide their letter dated 22.8.1985 stated that they received the show cause notice on 21.8.1985 delivered through the Superintendent of Central Excise, Anand. They wanted time to file the reply to the show cause notice and certain documents. In their further letter dated 29.8.1985 M/s. Elecon Engg. produced oral order of Hon’ble High Court of Gujarat at Ahmedabad in Misc. Civil application No. 65 of 1985 granting a further week time for adjudication of the case for 30.8.1985. M/s. Elecon Engineering Co. Ltd. in their reply dated 28.8.1985 to the show cause notice had stated that they have no records of any dealings with M/’s. Silfer Enterprises, Ahmedabad. They had not entered into any negotiations with M/s. S.K.D. Trading Ltd., Hong-Kong for import of ball bearings. They had also not authorised Shri Satish Babubhai Shah, Manager of M/s. Silfer Enterprises to enter into any negotiations with M/s. S.K.D. Trading Ltd., Hong Kong for import of the ball bearing referred to in the show cause notice on their behalf. They had also not authorised Shri Satish Babubhui Shah of M/s. Silfer Enterprises to file any papers relating to the import of ball bearings to the customs. They stated that they had no knowledge regarding import of ball bearings referred to in the show cause notice. They had also not authorised any person to file Bill of Entry in their behalf. They had also no knowledge of S.C.A. No. 3283 of 1985 filed by M/s. Silfer Enterprises. They had also not authorised them to file such petitions on their behalf to the High Court of Gujarat at Ahtnedabad and they had also not filed such civil application nor authorised M/s. Silfer Enterprises to present such application on their behalf. M/s. Elecon Engineering Co. Ltd. had stated that they do have import licence bearing No. P/D/1959500/C/XX/88/A/83 dated 30.9.1983. They had not transferred or sold the said import licence to M/s. Silfer Enterprises or to any other person. They had never applied for revalidation of the said licence and they do not know who got revalidated the said licence on their behalf. The said licence was never utilised by them for importing any articles from outside. They stated that the said licence has been unauthorisedly removed or has been stolen by person unknown to them. They have got several unutilised import licences with them and they have no knowledge about the firm named M/s. Pratibha Industries referred to in the statement dated 6.8.1985 of Shri Satish B. Shah. They had no relation with the United Commercial Bank, Ahmedabad. They had not arranged remittance against the sight draft to overseas to any party through the United Commercial Bunk, Ahmedabad. Shri Satish B. Shah acting as Agents of M/s. Section IMPEX, Ahmedabad used to help in receiving duty drawback, export entitlement excise duty refunds and replacement import licence to M/s. Elecon Engineering Co. Ltd. He also used to visit their office at Vallabh Vidyanagar tor their work. Shri Satish B. Shah might have come into possession of certain documents or even blank papers signed by the Chairman and Managing Director Shri Bhunubhai I. Patel or some other authorised officer of the company. They stated that he might have used those documents acting as company’s authorised Agent for certain imports on their behalf. M/s. Elecon Engineering Co. Ltd. have never entrusted any import work either to Shri Satish B. Shah or to M/s. Section Impex i.e. the firm to which he belongs. After inspection of the records of this case in the office of the Collector of Customs and Central Excise, Rajkot one document which purports to be a letter of authority which has been signed by the Chairman and Managing Director, Shri B.I. Patel, appointing M/s. Silfer Enterprises, Ahmedabad as their Agents for import licence obtained by the company was an absolute forgery. They also stated that another letter having the signature of the Director had not been signed by any of the Directors of the company, therefore, the said letter was a clear and outright forgery. The transaction of import of goods against the said import licence were fraudulent. They had proposed to cross-examine certain witnesses and they requested that they might be given personal hearing. They had further requested that the original documents signed by Shri B.I. Patel, the Managing Director authorising M/s. Silfer Enterprises, and the documents signed by the Directors of the company which might be lying with the office of the Assistant Collector of Customs, Kandla may be made available to them. M/s. Elecon Engineering Co. Ltd. under their letter dated 15.9.1985 requested that they have handed over certain documents which have been found to be forged, to the baud writing expert for opinion. In their further letter dated 15.9.1985 M/s. Elecon Engineering Co. Ltd., have stated that they have made thorough inquiry with their Directors and persons who are dealing with imports and have found that none of them have given any authority to M/s. Silfer Enterprises to act as their Agents in this behalf, The aforesaid import licence had be”n used without their knowledge and they had not made any import and that the Chairman of the company might have signed the authority letter when it was blank, in order to establish that it was signed by the Chairman in full knowledge. They were not m a position to either make an affidavit or to cross examine the representative of M/s. Silfer Enterprises. The appellants had contended before the adjudicating authority that para 59(2) of Import Policy AM-85 was not applicable in this case because the endorsement required as provided under para 59(2) is independent and has no nexus with para 60. Therefore, the provisions of para 59 is misinterpreted. Para 60 does not restrict the imports of spares. Para 60 is an independent para and does not clarify that the goods imported thereunder are restricted goods or restricted spares. Therefore, the ball bearings imported were fully covered under the licences produced. On the point of valuation it was contended that in terms of the provisions of Section 14(1)(a) the port of shipment is not taken into consideration, and the prices which were to be taken were the international prices at which the goods were sold at arms length and in the appellant’s case the customs have not produced any evidence that these goods are not offered to any other buyer nor documentary evidence for sale of same goods. Also the Customs have also produced no evidence to prove that similar goods were imported at higher prices from Hungary, Bulgaria or Rotterdam. It was also submitted that valuation Rule 3 read with Section 14(1)(b) cannot be made applicable in that case. Shri H.G. Shah, Advocate of M/s. Elecon Engineering Co., Ltd., had requested that it was necessary for the Company to cross examine the Proprietor and/or Partner and/or representative of M/s Silfer Enterprises, as the letter of authority was a forged document. He requested that the summons may be issued to the Proprietor and/or Partner and/or representative of M/s. Silfer Enterprises. They further stated that M/s. Silfer Enterprises had described themselves as importers of the goods in question and not M/s. Elecon Engineering Co., Ltd: and they had deposited Rs. 5 lakhs to show their bona fides in respect of importation of goods. From the various civil applications filed by M/s. Silfer Enterprises, it transpired that M/s. Silfer Enterprises were the importers of the goods in question. M/s. Elecon Engineering Co. Ltd. had nothing to do with the goods and the Company had no objection if the goods are confiscated. They also stated that they do not import any goods and they also did not authorise the importation of the goods and also did not appoint Silfer Enterprises as their agents and they also did not take any step for the revalidation of the licence for extending its validity upto 31.3.1985. Summons were issued to Shri H.D. Silva, proprietor and Satish Shah, Manager of M/s. Silfer Enterprises, Ahmedabad and Joint Chief Controller of Imports and Exports, Ahmedabad on request of M/s. Elecon Engineering Co., Ltd. to remain present on 6.11.1985 for cross examination but M/s. Silfer Enterprises vide their Telex dated 6.11.1985 informed that summons can not be issued for cross examination of a witness. No one had appeared on behalf of M/s. Silfer Enterprises as well as from Joint Chief Controller of imports and Exports, Ahmedabad though the summons were issued. Shri J.G. Shah’s request was considered and examination in chief of Shri B.I. Patel, Chairman and Managing Director of M/s. Elecon Engineering Co. Ltd. was allowed. Shri B.I. Patel was examined by Shri J.G. Shah, Advocate, wherein he had stated that he was the Managing Director since 1968, and the Chairman for the last six years. There were 15 members in the Board of Directors of the company. He said that be knows the handwriting as well as signatures of all the Directors and he can identify their signatures and that no Director other than the whole time Director can execute any document. He was shown a document at page No. 25 in a file of the Deputy Collector of Customs, Kandla bearing No. VIII/6(a)-30/85-Apprg. and after carefully seeing the document he had stated that signature on the document was not of any of the person who had worked as Director with the company at any time. Shri J.C. Patel was the Administrative Manager who was dealing with imports in their company, and those were not the signatures of Shri J.C. Patel and the document at page No. 25 was not genuine. He stated that the licence referred to in the said document was a warranty spares licence which can only be utilised by the manufacturers only. His company had not authorised any person to import any goods covered by that licence. He said that the company had not authorised M/s. Silfer Enterprises to submit the reply to the show cause notice. He was shown a letter of authority and on seeing that document he said that he had never executed any such document in favour of M/s. Silfer Enterprises but the signature on the document resembles his signature. He was also shown some drawings and after looking at the same he stated that he did not know Shri P.G. Joshi and no instructions were given to him for making the drawings on their behalf. The Hon’ble Gujarat High Court vide order dated 7.11.1985 had directed the adjudicating authority to complete adjudication proceedings by 18th November, 85 and the disposing of adjudication proceedings shall apply only to the question of deciding liability of the goods in question to confiscation and not to the question of liability of imposition of personal penalty. It was further directed that the Collector of Customs, Rajkot shall first decide the question as to whether the goods in question can be cleared or not on the basis of observations made in their order dated 25.10.85. The question of personal penalty may be decided at a later stage after affording reasonable opportunity to the parties. The learned Collector was of the view that the impugned goods in question appear in Appendix 2 Part B of Import Policy AM 84-85 which was the governing policy on the date of importation and were, therefore, restricted items for import, whose importation can only be permitted under cover of a valid import licence produced before the Customs authorities at the time of filing the Bills of Entry. Since no such licence had been produced at the time of importation the goods were liable to confiscation. The learned adjudicating authority had observed that at the time of importation M/s. Silfer Enterprises had submitted the import licence No. P/D/1959500/C/XX/88/A/83 dated 30.9.1983 issued in favour of M/s. Elecon Engineering Co. Ltd., revalidated upto 31.3.1985 seeking importation of those goods as ‘spares for warranty coverage’ since the licence was endorsed for para 60 of Import Policy AM 83-84 which was the governing policy of the licence so produced. Para 60 specifically provided for import of spares for warranty coverage but can not be read isolation as it forms a part of Chapter 9 of Import Policy AM 83-84. This chapter deals with importation of all types of spares under all types of licence. M/s. Elecon Engineering Co. Ltd. had contended that they manufacture Wagon Tripplers and Dust Trapping Equipment but they do not use imported ball bearings in their end product, therefore, the ball bearings in question have not been used by them at the time of original manufacture and, therefore, it is evident that the ball bearings in question which had been imported in huge quantities were not meant for use as spares for warranty coverage by M/s. Elecon Engineering Co. Ltd. The learned adjudicating authority was of the view that the goods were liable for confiscation under the provisions of Section 111(d) of the Customs Act, 1962, even if the importation is considered to have been made under cover of the licence produced by M/s. Silfer Enterprises at the time of importation. On the point of valuation the learned adjudicating authority had observed that the ball beatings were of Bulgarian and Hungarian origin but had been shipped from the port of Rotterdam and the invoices had been raised by one M/s. S.K.D. Trading limited, Hong Kong. He further observed that the goods manufactured in Bulgaria and Hungary are to be sold to Indian buyers on payment to be made in Indian Rupees. However, in the instant case the invoice had been raised in Hong Kong and payment made in hard currency and this fact alone made the invoices produced by M/S. Silfer Enterprises invalid for the purposes of determining the assessable value, more so because the goods had been manufactured in Bulgaria and Hungary and the invoices had not been raised by such manufacturers. The appellants had relied on photocopies of price lists purported to have been issued in 1983 by the Bulgarian and Hungarian Trade Commissioners. The revenue relied on the price list of M/s. Machinoexport for the same year viz. 1983 which was available with the customs and copy of which had been enclosed in the show cause notice. The learned adjudicating authority did not rely on the photocopy of the price list of Hungarian ball bearings as though the goods were manufactured in Hungary the invoices had been raised in Hong Kong for hard currency and had observed that there was a massive difference between the prices available in the price lists which the customs authorities and in the price lists produced by M/s. Silfer Enterprises in support of their case and the value cannot be determined under provisions of Section 14(1)(a) of the Customs Act, 1962 and recourse would have to be taken to Valuation Rules 1963. As per Rule 3(a) of the aforesaid Rules, the assessable value of imported goods is to be determined on the basis of the prices at which “such goods or comparable goods produced or manufactured by the person who has produced or manufactured the goods to be assessed are ordinarily sold or offered for sale to buyers at competitive prices in countries outside India.” In the instant case the assessable value as determined in the show cause notice had been based on the prices at which ball bearings of the same types and numbers manufactured in Bulgaria and Hungary are sold or offered for sale under competitive conditions to buyers in countries outside India. On the basis of this assessable value the total value of the imported ball bearings covered by the four bills of entry worked out to Rs. 1,06,87,454.04 whereas the import licence was for the value of Rs. 5,39,497.70. He observed that there was gross under-valuation and as such the goods were liable for confiscation under the provisions of Section 111(m) of the Customs Act, 1962. The learned Collector of Customs had confiscated the goods under the provisions of Sections 111(d) and 111(m) of the Customs Act read with Section 3 of the Imports and Exports (Control) Act, 1947. Being aggrieved from the aforesaid order the appellants have come in appeal before the Tribunal.
2. Shri Nitin Kantawala and Shri M.A. Rangaswamy, Advocates have appeared on behalf of the appellants and Shri Nitin Kantawala, the learned Advocate has reiterated the facts. He has argued that the licences were issued to M/s. Elecon Engineering Co. Limited. He first argued on the licencing aspect and states that it is to be examined whether the licence produced by the appellants for the clearance of the goods is a proper licence, He has referred to para 60 of the Import Policy AM 83-84 and has argued that it is also to be examined whether the letter of authority issued in favour of the appellants is a legal and proper letter of authority. He has referred to the order-in-original’s internal page 9 which appears on page 51 of the paper book and states that M/s. Elecon Engineering Co. Ltd. had not filed any criminal Complaint in a court of law for forgery. They also have not lodged any complaint with the police for forgery and the onus of proving forgery is on M/s. Elecon Engg. Co. Ltd. and they have not discharged the onus & has argued that even in his statement B.I. Patel, Chairman and M.D. of the company has stated that the signatures on the document resembles his signatures Sh. Kantawala states that the words “resembles my signatures” are very important. Shri Kantawala states that the appellants learned about this fact only after the receipt of the adjudication order and the opinion of the handwriting expert was very relevant. He has referred to letter of authority which appears on page 88 of the paper book and has laid special attention to the typing of the letter of authority and says that the same has been typed on two different typewriters. Shri Kantawaia has argued that the appellant’s importation is covered by 83-84 AM Policy and 84-85 Import Policy is not applicable in this case. He has argued that the Collector had issued summons under Section 108 of the Customs Act for the cross-examination of Shri H.D. Silva and Shri Satish Shah. He has argued that M/s. Elecon Engineering Co. Ltd. itself is an accused and the provisions of Section 108 of the Customs Act, 1962 cannot be used for the cross examination of a ca-accused. On the issue of valuation he has stated that the Collector has based his decision on the argument that no original price lists have been produced by the appellants. The price lists produced by the appellants were neither signed nor authenticated by Bulgarian government or Bulgarian Trade Commissioner. He has referred to bottom para on internal page 29 of the order-in-original. Shri Kantawaia has argued that the foremost issue to be decided in the case is whether the licence produced by the appellants was a proper licence to cover the goods, In support of his argument he has referred to Chapter 9 page 16 of the Import Trade Control red book 1983-84 and has argued that Sub-paras (1) and (2) of para 57(1) relate to permissible spares and non-permissible spares. He has also referred to para 60 of the said policy which relates to import of spares for after sale service, lie has argued that the finding of the Collector that the licence produced does not allow the importation of non-permissible spares in appendix 4 of the banned list is not correct in Law. Shri Kantawsila has argued that the appellants were not aware of the reply of M/s. Elecon Engineering Co. Ltd. and the basis of the order. He learnt the same only on the receipt of the adjudication order and there was complete non-application of mind. In support of his argument he has referred to a judgment of the Hon’ble Bombay High Court in the case of Lokash Chemicals Works v. C.C. (preventive) Bombay reported in 1981 ELT 235 where the Hon’ble Bombay High Court had held that the validity of the licence for importation of goods cannot be questioned by the customs authorities nor customs authorities can sit in appeal oh the licensing authority as it has no right to go beyond the terms of licence because it would amount of cancellation of licence which was not permissible under the provisions of Clause 10(c) of the Import (Control) order 1955. He has argued that there is no violation of ITC regulations. On the issue of valuation Shri Kantawaia has argued that there is no under-viluation by the appellants in any way. He has referred to the minutes of the Joint Weekly Meeting held on 10th October, 1984 in the office of the Joint C.C I. & E., Bombay where it was clarified whether bearings appearing in Appendixes 3 & 4 of AM-84 Policy Book could be permitted without any value/quantity limit against licences issued for warranty spares and whether samples read with drawings could be accepted in lieu of manufacturers catalogue for verification of use thereof in the original equipment. The Committee decided that :
(i) The import licence against which clearance of the bearings is sought for is issued under the provisions of para 60-Chapter 9 of AM 84 Policy Book and the said para does not rule out import of items figuring in Appendices 3 & 4 of AM 84 Policy Book. As such if the conditions specified in the said para are otherwise fulfilled the fact that the items imported figure in the Appendices Nos. 3 & 4 of AM 84 Policy Book would not come in the way of release of the goods against the warranty spares licence.
(ii) The provisions of para 60 Chapter 9 of AM 84 Policy Book do not lay down the value or quantity limits of items permitted to be imported as spares against the warranty spares licence.
(iii) Whether the goods imported as warranty spares are capable of finding use in the original equipment should be ascertained objectively (and not subjectively) with reference to the manufacturers’ catalogue/Chartered Engineers’ certificate/Drawing/visit to the factory etc. or with reference to any other dependable and verifiable evidence. The weightiness of such individual evidence could be assessed depending upon the circumstances obtaining in each case such as worthiness and reputation of the manufacturing concern etc. and objectively appraisal subject to verification of the technical fact. Hence the committee felt that it is beyond the pale of their jurisdiction or competence to prescribe to the Custom Authorities the nature of evidence to be relied upon for verifying the capability of use of the imported goods as warranty spares in the original equipment.
Shri Kantawala has argued that the price lists have been accepted by the customs authorities. He has referred to an order of Shri S. Mukhopadhayay, Collector of Customs, Bombay where the Bombay customs had accepted the invoice price which was reflected in the manufacturers price list and had argued that the Collector of Customs had accepted the valuation and had dropped the charges under Section 111(d) and 111(m) of the Customs Act, 1962. He has argued that the goods were shipped from Rotterdam. He has also referred to a judgment of the Tribunal in the case of Jayafamdass Kanshi Ram, Bombay v. Collr. of Customs, Bombay in appeal No. 133/84-A vide order No. 302/84-A dated 14th May, 1984. He has also referred to the provisions of Section 108 and Section 138B of the Customs Act, 1962 and has also referred to the provisions of Section 47 of the Indian Evidence Act. Shri Kantawala has argued that his arguments in respect of appeal No. C 241 of Shri H.D. Silva are the same. He has argued that in the said appeal too the value as declared by the appellant should be accepted and there was no justification for the personal penalty.
3. Shri S. Krishnamurty, the learned S.D.R who has appeared on behalf of the respondent relies on the findings and observations made in the order-in-original and has stated that M/s. Elecon Engineering Co. Ltd. did not employ M/s. Silfer Enterprises as its agents. He has further argued that the genuineness of the letter of authority in favour of M/s. Silfer Enterprises is doubted and that even M/s. Elecon Engineering Co. have stated that they did not execute any letter of authority in their favour and they had also given up the title of the imported goods and the goods were imported by M/s. Silfer Enterprises. He has argued that para No. 59 AM 83-84 deals with the import of non-permissible spares. M/s. Elecon Engineering did not use the imported ball bearings in the goods manufactured by them and as such the same cannot be considered as spares for covering the warranty. He has further argued that import licence furnished by the appellants is for warranty spares since the importation was not for covering the warranty, the same is unauthorised importation. On the point of valuation Shri Krishnamurthy states that the value adopted by the revenue authorities is very correct in Law. He has argued that the invoice was raised from Hong Kong and the price lists which have been relied by the revenue is very much authenticated and the adjudicating authority’s order for absolute confiscation of the goods is correct in law. In respect of appeal No. 241/86 Shri Krishnamurthy has argued that Pratibha Industries does not exist and further states that the Bench may look into the reasonableness of the quantum of penalty. He has pleaded for the dismissal of the appeals.
4. Shri Nitin Kantawala, the learned advocate in reply to the arguments of Shri S. Krishnamurthy, the learned S.D.R. pleads for the acceptance of the appeal and in the alternative he pleads that the appellants are ready to redeem the goods if an option to redeem the same is given to the appellants after payment of a fine of 50% of the c.i.f. value.
5. We have heard both the sides and have gone through the facts and circumstances of the case. The appellants have imported the consignments of ball bearings. The Revenue’s contention is :
(1) that the ball bearings imported by the appellants fall under S. No. 86 of Appendix 4 of Import Policy for AM 83-84, which is the governing policy for the import licence produced and are banned for import;
(2) The importation is sought under endorsement of para 60 of import licence in question but it is alleged that para 60 covers only permissible spares as was clear from the plain reading of Chapter IX of Import Policy AM 83-84 and there was clear distinction between permissible and non-permissible spares and as per para 59, non-permissible spares could only be imported in respect of capital goods within the overall limitations laid down in the said para and not permissible could not be imported as spares for warranty coverage under para 60.
6. The appellants had claimed that they had produced a proper licence. The appellants had sought the clearance of the goods against the import licence as letter of authority holder against the import licence of M/s. Elecon Engineering Co. Ltd. M/s. Elecon Engineering Co. Ltd. have all along denied executing any letter of authority in favour of the present appellants. Shri B.I. Patel, Chairman and Managing Director of the said company had stated in his statement that signature on the document resembles his signatures but he did not sign it. M/s. Elecon Engineering Co. Ltd. had made a request for the examination of Shri H.D. Silva of M/s. Silfer Enterprises and Shri S.B. Shah. Neither Shri H.D. Silva nor Shri S.B. Shah appeared for the cross examination. Rather they disputed the right of M/s. Elecon Engineering Co. Ltd. for their right to cross-examine them on the ground that they were co-accused. M/s. Elecon Engineering Co. Ltd. had stated that they had never entrusted any import work either to Shri S.B. Shah or to M/s. S. Impex i.e. the firm to which he belongs and stated that the licence obtained was an absolute forgery. They had no knowledge regarding import of ball bearings referred to in the show cause notice and they had stated that they do not have import licence No. P/D/ 195950O/C/XX/88/A/83 dated 30.9.1983 and they had not transferred or sold the said licence to M/s. Silfer Enterprises or to any other person. They also did not apply for revalidation of the said licence and had no connection with United Commercial Bank, Ahmedabad and the licence of M/s. Elecon Engineering Company was a warranty spares licence which could only be utilised by the manufacturers only and their company had not authorised any person covered by that licence and they had manufactured Wagon Trippiers and Dust Trapping Equipment but they did not use imported ball bearings in their end-product and as such the ball bearings in question have not been used by them at the time of original manufacture and therefore the ball bearings imported by Silfer Enterprises in huge quantities were not meant for use as spares for warranty coverage by M/s. Elecon Engineering Co. Ltd. The appellants have sought the importation under endorsement of para 60 of the Import Licence in question. para 60 relates to import of spares for after sale services. In terms of para 60 actual users (Individual) will be eligible to get licences calculated at one per cent of the sale value of production during the last three financial years for import of spares needed for the purpose of providing warranty coverage or after-sales service (whether free of cost or at a price) to their customers. Only such spares shall be permitted as were/are used by them as components of the said items at the time of manufacture. Mr. B.I. Patel, Chairman-cum-Managing Director of M/s. Elecon Engineering Co. Ltd. in his statement has clearly stated that M/s. Elecon Engineering works did not use imported ball-bearings in the Wagon Tripplers and dust trapping equipment manufactured by them as original equipment and as such the question of replacement of parts in terms of para 60 does not arise at all M/s. Elecon Engineering Works had asked for the cross-examination of Shri H.D. Silva Prop. M/s. Silfer Enterprises and a date of hearing was fixed and the appellant was duly intimated about the same. The appellant chose not to appear on the date of hearing rather he intimated that the appellant could not be cross-examined as a co-accused. Undoubtedly in all the proceedings the principles of natural justice have to be followed. In the present matter before us, the appellant was duly intimated that Shri B.I. Patel, Chairman-cum-Managing Director of M/s. Elecon Engineering Co. will be coming. He has duly stated before the adjudicating authority that if the appellant had any desire he could have cross-examined Mr. Patel on the date of hearing, whose presence was very well known to the appellant. Since the appellant had chosen not to attend on the date of hearing so the statement of Shri Patel has to be relied upon. The adjudicating authority had duly complied with the principles of natural justice. Keeping in view the totality of the circumstances we hold that the importation was unauthorised in terms of the ITC regulations. Accordingly we uphold the findings of the lower authorities in this regard. Since we are upholding the unauthorised importation of the ball-bearings in terms of ITC regulations we do not feel it necessary that the Tribunal should give a finding as to the genuineness of the letter of authority of M/s. Elecon Engineering Works in favour of M/s. Silfer Enterprises.
7. On the issue of valuation we would like to observe that the appellant had filed four Bills of Entries and declared the value at Rs. 8,90,26.10 whereas the revenue had calculated the same at Rs. 1,06,97,454.04. in the instant case the ball bearings imported by the appellants are of Bulgarian and Hungarian makes whereas the appellants had chosen to buy the same from M/s. S.K.D. Trading Ltd., Hongkong and the payment was made in dollars. The revenue has based the value in terms of the price lists issued by the exporting country whereas the appellant had claimed that the invoices produced by them were according to the international market price. The appellant had contended that in terms of provisions of Section 14(1)(a) the port of shipment is not to be taken into consideration and the prices which were to be taken were the international prices at which the goods were sold at arms length and the revenue has not produced any evidence that the goods were not offered to any other buyer and there is also no evidence to prove that similar goods were imported at higher prices from Hungary, Bulgaria or Rotterdam and us such the valuation Rule 3 read with Section 14(1)(b) of the Customs Act was not applicable in this case. The appellant had filed a copy of the order dated 20th May, 87 passed by the Collector of Customs. Bombay in the ease of M/s. Nipon Bearings Pvt. Ltd., Nariman Point, Bombay and the goods imported were bearings of Hungarian origin. The Collector of Customs, Bombay had accepted the invoice price and had dropped the charge of confiscation under Section 111(d) and 111(m) of the Customs Act, 1962 We have perused the said order passed by the Collector of Customs, Bombay. In revenue matters the valuation adopted (in one case does not have the binding effect of adopting the value in the other case. Each and every case has to be seen on its own merits and demerits. Accordingly we are of the view that the adjudicating authority (should re-examine the appellants case on its own merits. Accordingly we set aside the impugned order and remand the matter to the Collector of Customs and Central Excise, Rajkot to re-adjudicate the same after giving an opportunity of hearing. The learned Collector had confiscated the goods absolutely. During the course of arguments Shri Kantawala the learned advocate had made an offer that the appellants are ready to redeem the goods on payment of fine in lieu of confiscation @ 50% of C.I.F. value. Since we are remanding the matter on the issue of valuation, the learned Collector of Customs will also re-examine the issue of absolute confiscation and whether an option to redeem the same should be given to the appellants or not on merits in accordance with Law. Since the goods are under confiscation we shall appreciate if the Collector re-adjudicates the matter within three months from the date of receipt of the order.
Appeal No. 241/86-A
The facts of this appeal are similar to the appeal No. 240/86-A, The appellants had imported ball-bearings and had declared the C1F value at Rs. 3,33,716.89 whereas the revenue had assessed the same at Rs. 23,58,759/-and as per evidence on record there was no firm/concern under the name and style of M/s. Pratibha Industries. The ball-bearings were sought to be imported against Import Licences issued in favour of M/s. Pratibha Industries and the licence related to warranty spares and end product, machine tools only. The licence in question was suspended vide Joint Chief Controller of Import and Export’s suspension order issued from 3/16/8i/ECA/ BANG dated 27th April, 1988. In view of the detailed observations in appeal No. 240 we uphold the absolute confiscation of the goods imported. On the issue of valuation in view of our detailed observations we remand the matter to the Collector of Customs and Central Excise, Rajkot for de novo adjudication in accordance with Law for granting an opportunity of personal hearing. We shall appreciate if the learned Collector re-adjudicates the matter within three months from the date of receipt of this order. Keeping in view the totality of the facts and circumstances of the case we do not find any justification in deletion or reduction of personal penalty of Rs. 5 lakhs imposed on Shri H.D. Silva Prop, of M/s. Silfer Enterprises. The order as to the imposition of personal penalty of Rs. 5 lakhs is confirmed. In the result both the appeals are partly allowed by way of remand.