ORDER
S.S. Sekhon, Member (T)
1. On gathering specific intelligence that M/s. R.N. International, the appellant (hereinafter referred to as M/s. RN) and their sister concerns had imported fabrics and were attempting to clear the same through Vizag and Kakinada ports by furnishing false/fake addresses and by grossly mis-declaring the description, weight, country of origin and value of the goods, the officers of the Directorate General of Revenue Intelligence (DRI) Regional Unit, Hyderabad commenced a detailed investigation.
2. Pursuant to the above, the officers located cargo imported by M/s. RN vide bills of entry Nos. 622, 623 and 624 all dated 24-10-2000 being examined by the officers, Kakinada Customs House. At the time of visit, the cargo covered under Bill of Entry No. 624/2000 was already examined by the Customs Kakinada and was being loaded into 3 lorries viz., HR 38 B-2427 (already loaded), DR 1 GA-6099 and DL 1 GA 6005 (to be loaded), which were destined to Delhi. The other bills of entry Nos. 622 and 623 dated 24-10-2000 were provisionally assessed by the Customs, Kakinada. Duties of Customs for the above three bills were already paid by the importer. The loaded lorry was destuffed and the entire cargoes placed in the godown for a detailed examination. The officers took inventory of the cargo and found that 201, 245 and 235 cartons as against the declared number 194, 245 and 235 were available in the consignments covered under Bills of Entry Nos. 622, 623 & 624 respectively.
3. The officers examined the goods in detail under panchanama, took note of the quantity of fabric physically present and the markings on the fabrics and packing materials, It was observed that the country of origin of the imported fabrics was either ‘Korea’ or Taiwan’. But, was declared by the importer as ‘China’ in the bills of entry. Quantities of fabrics were physically present in respect of each bill of entry i.e., B.E. No. 622/24-10-2000 – 47,189 yds.; 623/24-10-2000 – 43,449.7 yds., & 624/24-10-2000 – 43,834.8 yds. found to be of different varieties and makes but declared as only one variety and the value was declared at a uniform rate of 0.40 US-$/metre. As the description, quantity, country of origin and the local address declared were found to be incorrect, the imported fabric with declared assessable value of Rs. 23,76,010/- was placed under seizure on 27-10-2000 on a reasonable belief that the said fabric is liable for confiscation under the provisions of Customs Act, 1962. Samples of the fabric from each consignment representing each variety, make and packing in all 15 representative samples were drawn for testing.
4. The details of the fabric such as gross and net weights, quantity in metres declared in the bills of entry and found on examination are given in the table below :
Bill of Entry No. Gross Weight Net Weight (Kg) Length(Meters)
(Kg)
622/24-10-2000 11980 13623 9030 12828 42858 43150
623/24-10-2000 12230 14806 9210 13608 43980 44302
624/24-10-2000 11610 13891 8640 12693 40049 40083
Total 35820 42320 26880 39129 126887 127535
5. From the scrutiny of the documents .filed by the importer, steamer agent and the CHA to the Customs at Visakhapatnam, it is observed that the subject cargo in three 40′ containers was imported by M/s R.N. International, 202, 2nd Floor, Sajjid Yasin, Chamber No. 2, Mumbai-1 showing Branch Office at 27-4-24, Temple Street, Kakinada. The consignor is M/s. Newton Engineering Building, 2nd Floor, Room No. 1, Sharjah Road, Dubai. The cargo had arrived at Visakhapatnam by Vessel M.V. Tiger Ocean, V-451 and the steamer agent M/s. APL (India) Pvt. Ltd., addressed to the Manager (Importers), M/s. APL (India) Pvt. Ltd., Visakhapatnam requested to get the relevant bills of lading amended showing Kakinada as place of delivery to facilitate transhipments of the imported shipments from Visakhapatnam to Kakinada by road. It is stated in the letter that there is no public bonded warehouse at Visakhapatnam. The importer also addressed a letter dated 21-9-2000 signed by authorized signatory (identified as Mr. K.K. Kaura @ K. Kumar) to the Deputy Commissioner of Customs, Visakhapatnam requesting permission to tranship the containers from Visakhapatnam to Kakinada by road under Customs Preventive supervision.
6. The I.G.M. was accordingly amended by the Customs, Visakhapatnam showing Kakinada as “Place of delivery.” Subsequently, the Customs, Visakhapatnam vide their letter dated 26-09-2000 refused the above request of the importer for transhipment of the containers to Kakinada and directed them to file the bill of entry and clear the goods through Vizag Customs House. M/s. RN vide their letter dated 28-9-2000 to the Deputy Commissioner of Customs, Visakhapatnam reiterated the request for transhipment and pressed for the same. The steamer agent M/s. APL (India) also requested for transhipment of the goods to Kakinada on behalf of the importer. The Customs, Vizag after reconsidering the request ‘vide letter dated 12-10-2000 permitted transhipment.
7. The transhipment cargo in three 40′ containers arrived at Kakinada on 22-10-2000. Necessary documents and bill of entry No. 622, 623 & 624 all dated 24-10-2000 were filed with the Customs, Kakinada. The bills of entry were assessed provisionally under Section 18 of the Customs Act, 1962 by the Customs, Kakinada. Copy of Bond executed for provisional assessment of the three BEs was forwarded by DC Customs Division Port Area Kakinada vide his letter No. 32/2000-Cus. dated 15-11-2002. The total duty is calculated at Rs. 16,08,292/- and 10% of the duty amount i.e. Rs. 1,61,000/-was deposited by the importer as bank guarantee in the form of fixed deposit.
8. The 15 representative samples drawn under panchanama dated 27-10-2000 were tested at Textiles Committee of Ministry of Textiles, Government of India, Hyderabad. They have reported that the description of the samples is “knitted velvet dyed pile fabric”, that for all the samples, fibers used for knitting and pile are of 100% polyester. The type of knitting if ‘weft knit’ and the nature of pile is ‘cut pile’ and stretch of the fabric is one way stretch. Basing on these test reports furnished by the Textiles Committee, the net weight of the fabric in respect of each consignment is calculated as shown below:
Bill of Entry No. Net weight of the Fabric 622/24-10-2000 9030 13003 623/24-10-2000 9210 13472 624/24-10-2000 8640 12248 Total 26880 38723
The total net weight of the 3 consignments as per the test reports works out to 38,723 Kgs., whereas the total net weight as per physical verification is calculated at 39,129 Kgs. Hence, the net weight as per the test report, being lesser, was adopted for the purpose of calculation of duties of Customs.
9. As the fabrics in question are ‘knitted pile fabric’ they were held as classifiable under Customs Tariff heading 60.01 of the Customs Tariff, not under Tariff heading No. 60.02,
10. The transaction value furnished by the importer to Customs did not appear to be true, in view of the discrepancy between the invoices furnished and the goods imported. As there were no imports of identical goods or similar goods through Visakhapatnam & Kakinada Ports, the value could not be arrived at. Further, for the subject goods deductive value/computed value in terms of Rule 7A ibid could be resorted to since similar goods are normally not available in India. Therefore, the assessable value for the subject
goods was arrived at as per Rule 8 of the Customs Valuation Rules, 1988, after making adjustments towards freight and insurance. Values of 10% polyester knitted dyed velvet pile fabric imported at Mumbai port in the relevant period were ascertained. The invoice prices vary from US $ 2.00 to US $ 2.40. Copies of contemporary invoices/bills of entry were enclosed to the note. Value of US $ 2.00 per metre being the least was to be adopted for the purpose of arriving at assessable value of the subject consignments.
11. From the foregoing, it appeared that –
(a) M/s. RN, in which name the goods have been imported appeared to be a firm floated to facilitate evasion of Customs duty on the imported goods as the firm exists only on paper without any office, employees etc. The addresses of the firm at Mumbai & Kakinada declared in the import documents were found to be incorrect and the correspondence sent to the said addresses was returned by the postal authorities. Mr. Vijay Kumar Gandhi @ Vijay Kumar said to be the proprietor of M/s. R.N. International appears to be not a bona fide importer. He has not financed the imports. He is a man of ordinary means having no past record of imports and exports.
(b) It appeared that Vijay Kumar Gandhi with the connivance of Mr. Vishal Bahri, Admn. Manager of M/s. Newton Engineering & Construction, Dubai, the supplier of the goods, Sri Gurmeet Singh Sehgal and Shri K.K. Kaura @ K. Kumar fabricated the invoices, packing lists, certification of country of origin and deliberately mis-declared the description, weight value and country of origin of the goods with an intention to evade payment of Customs duties.
12. The Commissioner after hearing the notices passed the following order:
“1. I, under the powers vested in me under Section 5(2) of the Customs Act, 1962, herewith finalise the assessments in respect of Bills of Entry No. 622, 623 & 624 all dated 24-10-2000.
2. The goods in question, namely, 100% polyester warp knitted velvet cut pile fabrics covered by B/E Nos. 622, 623 & 624 all dated 24-10-2000 imported in the name of M/s. RN International shall be classified under sub-heading 6001.92 of the Customs Tariff and charged to duty at the following rates: Basic Customs duty = Rs 100/- per Kg; CVD @ 8%; AED @ 8% and Cess @ 0.05%.
3. The declared unit price of US $ 0.40/mtr., in the Bills of Entry Nos. 622, 623 and 624, all dtd 24-10-2000 is rejected and the unit price of the fabrics in question shall be taken as US $ 1.00 per Meter CIF for the purpose of calculation of duty.
4. For calculation of the assessable value of the goods in question, the length of the fabrics shall be taken as 43,150 meters, 44,302 Metres and 40,083 Metres in respect of B/E Nos. 622, 623 and 624 all dated 24-10-. 2000 respectively.
5. For calculation of the amount of duty payable, the net weight of the goods in question shall be taken as 12,828 Kgs., 13,608 Kgs and 12,693 Kgs in respect of B/E Nos. 622, 623 and 624 all dated 24-10-2000 respectively.
6. Accordingly, demand of differential import duty of Rs. 38,90,235/-(rupees thirty eight lakhs ninety thousand two hundred and thirty five only) (BE No. 622/24-10-2000 – Rs. 12,69,460/-; BE No. 623/24-10-2000 – Rs. 13,54,408/- and BE No. 624/24-10-2000 – Rs. 12,66,367/-) payable on the goods in question, under Section 28 of the Customs Act, 1962.
7. Confiscation of the seized goods in question under Section 111(1) and 111(m) of the Customs Act, 1962. However, I give an option to the importers to redeem the goods on payment of fine as follows :-
B/E No.and date Revised Assessable Amount of redemption fine imposed
value
622, dated 24-10-2000 Rs. 20,00,002.50 Rs. 8,00,000/- Rs Eight lakhs only
623, dated 24-10-2000 Rs. 20,73,931.70 Rs. 8,00,000/- Rs. Eight lakhs only
624 dated 24-10-2000 Rs. 18,76,425.05 Rs. 8,00,000/- Rs. Eight lakhs only
Total Rs. 59,50,359.25 Rs. 24,00,000 (Rs. Twenty four lakhs only)
8. I also impose penalty as under on Shri Vijay Kumar Gandhi, Proprie
tor of RN International as follows under Section 112 (a) of the Customs
Act, 1962.
B/E No. 8 & Dated Penalty on Shri Vijay Kumar Gandhi
622, dated 24-10-2000 Rs. 5,00,000/- (Rs. Five lakhs only)
623, dated 24-10-2000 Rs. 5,00, 000/ (Rs. Five lakhs only)
624, dated 24-10-2000 Rs. 5,00,000/- (Rs. Five lakhs only)
Total Rs. 15,00,000/- (Rs. Fifteen lakhs only)"
13. After hearing both sides and considering the material it is found :
(a) No ground as regards the classification arrived at/or the subject goods under heading 6001.92 by the Commissioner, as against 6002.43 as declared by the appellant has been taken in the appeal before us. Therefore, the classification under 6001.92 is not under challenge.
(b) The goods falling under 6001.92 as per show-cause notice attract duty at Rs. 100/- per kg. Therefore, declaration of the correct weight, on which the duty is levied, is required and inaccuracy as regards the same is a misdeclaration. The plea of the appellant that the length has been declared and found to be ‘almost’ correctly declared is therefore not considered to be relevant to assess bonafides, no other explanation is forthcoming as regards the misdeclaration of the weight arrived at. Adjudicator has determined the weight by following the test reports. From para 46 of the Order impugned, it is apparent that for bill of entry No. 622 dated 24-10-2000, the weight per metre taken by M/s. RN for calculation of 279.52 gms per metre while as per the relevant test report the weight was ascertained as 335.5 Gms per metre and the test report weight is taken. It is also found that number of cartons declared on Bill of Entry No. 622 were 194 whereas the actual number of cartons found was 201. The goods covered by this BE were out of Customs Charge. Therefore as regards goods of Bill of Entry No. 622, there is no doubt that infringement of Section 111(m) exists. We rely upon the decision of Delhi High Court in the case of Navin Jain v. CC – 2001 (134) E.L.T. 32 (Del.) which is based on a Supreme Court decision in the case of Pine Chemicals Suppliers v. CC [1993 (67) E.L.T. 2 (S.C.)I to confirm the same. It is found that in the case of Supreme ‘Court (supra), there was no challenge to test reports. In this case also, the test reports are found to be not under challenge. Therefore liability for confiscation under Section 111(m) in the case of imports by Bill of Entry 622 is established.
(c) As regards the Bill of Entries No. 623 & 624, the number of cartons have been found as declared. The ascertained weight were found to be incorrect when compared to declared weight. Since in these two Bills of Entries viz. 623 and 624, the goods were not out of Customs Charge the position of mis-declaration and consequence have to be considered vis-a-vis the provisional assessment ordered.
(d) As regards misdeclaration of value, it is an admitted position that while the Country of Origin as declared was not found to be country of manufacture mentioned on the goods, when they were physically examined. The goods are admittedly found to be a mixed lot. Mixed lots are normally Stock Lots, FOB Lots, and Clearance Goods. Valuations of comparative prices resorted to by the Commissioner as regards raising the values is therefore not upheld, since Mixed-Lots and Stock-Lots, cannot be compared with the Prime uniform goods. As per the material values available for comparison to the Commissioner, it is not known, whether those comparable Bills of Entries and other documents were for prime-goods or mixed-lot goods. The mixed-lot goods cannot be compared with prime-lot goods and in this view of the matter we find no reason to consider the rejection of declared values and raising the same and final misdeclaration. It is relevant here to observe that when duties were to be charged by weight, goods being classified under 6001.92, there would be no incentive for appellants to misdeclare the values. In this view, the valuation arrived at by the Commissioner cannot be upheld.
(e) Considering the plea made by the appellant that the assessments were provisional, we find that the order of the Commissioner itself admits that this is an order of confirmation of provisional assessments. The appellants were directed to produce copy of the P.D. bond executed by them, at the time of provisional assessment, as per their request the copy of the Bond with the fixed deposit receipt, as executed by them was forwarded by the Deputy Commissioner (Customs) Kakinada. This would confirm the position that the assessments in all these cases were provisional.
(f) When on facts it is found that Bills of Entries 623, 624 provisionally assessed were under the process of examination by the proper officers, we cannot find any reason to invoke the penalty clause as regards these two bills of entry. The goods which are ordered to be provisionally assessed and which are still being examined by the proper officers cannot be ordered to be confiscated merely because the classification declared and the quantities ascertained are not correct. Therefore, the liability of confiscation of the goods under Bills of Entry 623 and 624 and penalties thereafter cannot be upheld. We rely upon the case law, as submitted by the appellants, viz. S. Patnaik v. CC [2000 (118) E.L.T. 502 (T)]. The classification and weights as determined in these two Bills are confirmed. They have to discharge duty under 6002.92 on weights as ascertained.
(g) As regards Bill of Entry No. ‘622 we find that the goods in that case were cleared out of charge. The number of cartons on that Bill of Entry were found to be 201 in place of 194 declared i.e. excess number of cartons declared. The goods have also been found to be physically misdeclared. Therefore, the case of S. Patnaik (supra) can not come to the rescue of the Appellants for this Bill. We would find, that even though in this case provisional assessment was ordered, excess unaccounted goods were got cleared after examination and obtaining out of Customs Charge orders. They were found being loaded on truck for removal. They should, therefore suffer the liability of confiscation under Section 111(m) for the misdeclaration of weight. Redemption fine and penalties have to be restricted for the goods of this Bill of Entry.
(h) Since no margin of profit has been found and determined by the adjudicator, the redemption fine and penalties as determined in the case of Bill of Entry Nos. 622 cannot be upheld. We would therefore set aside the order as regards the confiscation, penalty and redemption fine in all these three bills of entry and remand the matter. As regards imports made vide bill of entry Nos. 622 a remand is ordered for redetermination of fine and penalty after placing the importer on notice as regards the margin of profit keeping in mind their plea of deduction and demurrage and other expenses as per law.
(i) Since a bond has been executed and accepted by the Proper Officer of Customs for provisional assessment, we find no merits in the allegation and the findings as regards the fictitious nature of the importers in this case. Goods on BE 623 and 624 have to be cleared after assessment as per the orders herein.
(j) The valuation in all the three Bill of Entries as declared is not found to be impugned in any manner by the material on record. 14. Appeal is disposed of in the above terms.