M/S SAFE EXPORTS PRIVATE LIMITED v. THE COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, COCHIN

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR** **THURSDAY, THE 6TH DAY OF DECEMBER 2012/15TH AGRAHAYANA 1934** **WP(C).No. 23399 of 2012 (Y)** **-------------------------------------** ## **PETITIONER(S):** **------------------------** **M/S. SAFE EXPORTS PRIVATE LIMITED III LEVEL, MATHEWSONS TRADE CENTRE OPP. JAWAHARLAL NEHRU INTERNATIONAL STADIUM KALOOR COCHIN 682017** **BY ADVS.SRI.P.RADHAKRISHNAN (1) SRI.MADHU RADHAKRISHNAN SRI.NELSON JOSEPH** ## **RESPONDENT(S):** **--------------------------** **THE COMMISSIONER OF CUSTOMS CUSTOMS HOUSE COCHIN 682009** **BY ADV. SRI. JOHN VARGHESE, SC, CENTRAL BOARD OF EXCISE BY ADV. SRI. THOMAS MATHEW NELLIMOOTTIL, SC, CENTRAL BOARD OF EXCISE** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14-11-2012, THE COURT ON 06.12.2012 DELIVERED THE FOLLOWING:** **DCS** **WP(C).No. 23399 of 2012 (Y)** **APPENDIX** **PETITIONER(S) EXHIBITS :-** **EXT.P1 COPY OF THE SHOW CAUSE NOTICE ISSUED BY THE RESPONDENT ON 2-4-2008 EXT.P2 COPY OF REPLY TO THE SHOW CAUSE NOTICE EXT.P3 COPY OF THE NOTARIZED AFFIDAVIT EXECUTED BY THE MOHAMMED FAROOK EXT.P4 UN TRANSLATED DOCUMENT IN MALAY ALONG WITH THE UNSIGNED DATA ANNEXED TO THE SHOW CAUSE NOTICE EXT.P5 COPY OF THE LETTER WITH COVERING LETTER DATED 04-06-2007 RECEIVED FROM THE CHINESE CUSTOMS EXT.P6 COPY OF THE LIST OF DOCUMENTS SUBMITTED ON 13-04-2010 BY THE PETITIONER EXT.P7 COPY OF THE ORDER IN ORIGINAL NO 27/2008 PASSED BY THE RESPONDENTS EXT.P8 COPY OF THE ORDER OF THE CESTAT 1075-1077/2009 DATED 27-08-2009 EXT.P9 COPY OF THE ORDER IN ORIGINAL 4/2011 DATED 6-05-2011 EXT.P10 COPY OF THE APPEAL FILED BY THE PETITIONER. EXT.P11 COPY OF THE APPLICATION FILED FOR WAIVER EXT.P12(a) & (b) COPY OF THE BALANCE SHEETS FOR THE ASSESSMENT YEAR 2011-12 AND 2012-2013 EXT.P13 COPY OF THE ORDER DATED 19-07-2012 PASSED BY THE CESTAT** ## **RESPONDENTS' EXHIBITS :- NIL** ## **/TRUE COPY/** ## **P.A TO JUDGE** **DCS** ## **T.R.RAMACHANDRAN NAIR, J.** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C).No. 23399 of 2012** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **DATED THIS THE 6[th] DAY OF DECEMBER, 2012** ## **JUDGMENT** The petitioner's application for waiver of pre-deposit of duty of Rs.1,20,79,765/- with interest, with equal amount of penalty, has been disposed of by the Customs, Excise and Service Tax Appellate Tribunal by Ext.P13 order, directing the petitioner to pre-deposit an amount of Rs.60 lakhs within six weeks. It is also directed that subject to deposit of the above amount, there shall be waiver of pre-deposit of the balance of the dues as per the impugned order and stay of recovery thereof till the disposal of the appeal. Waiver of pre-deposit of penalties imposed on the two appellants has been granted and stay of recovery has also been ordered. It is mainly contended that the order has been passed by the Appellate Tribunal without considering the undue hardship caused to the petitioner and without considering the pleas on the merits. It is submitted that none of the questions have been considered in the real perspective. 2. The petitioner herein is a company engaged in the imported furniture business which was mostly being done from Malaysia and China. After importing, the same used to be sold in India. The present proceedings W.P.(C).No.23399/2012 -2- started after the Department, on the basis of some intelligence report suggesting under-invoicing, carried out a search in the premises of the petitioner including their showrooms and residence of their directors on 3.10.2006. They collected some documents including proforma invoices, files and registers and issued a show cause notice as per Ext.P1. After completing the investigation and other steps in the matter, an order was passed by the authority as per Ext.P7 finding that the petitioner is liable for under-invoicing in regard to 129 consignments which were already cleared. The same was set aside by the Tribunal by Ext.P8 order on the finding that there is non application of mind and on other findings. Fresh adjudication order has been passed as per Ext.P9 and the finding therein is confined to 86 out of 129 consignments which was appealed by the petitioner under Section 129 of the Customs Act Ext.P11 is the application submitted as per Section 129E of the Act for waiver of pre-deposit. In support of the plea that there will be undue hardship, the petitioner relies upon Ext.P12 (a) and P12(b) balance sheets. 3. The petitioner's contentions mainly are that the proceedings have been initiated at the instance of one Superintendent of Customs, Mr. Joyce Mathew. It is also stated that the show cause notice was issued on the basis W.P.(C).No.23399/2012 -3- of the deposition given by one Shri Mohammed Farook who was alleged to be a money changer based in Malaysia who was also one of the friends of the Director. A statement was obtained by him, but the same was retracted later. 4. A total number of 129 consignments were taken up for investigation, out of which, 89 are from Malaysia. The Department relied upon the investigation conducted abroad whereby they have received some documents from the Malaysian Royal Customs about the declaration filed by the exporters which shows different declared values in that country. It is pointed out that the untranslated document in Malay, along with the unsigned data, which are photo copies of the copies filed by the exporters with the Malaysian Royal Customs was annexed to the show cause notice. The same is produced as Ext.P4. With regard to the imports from China also, the Department relied upon a similar report received from Chinese Customs. The petitioner mainly points out in the writ petition that in the light of the decision of the Apex Court in **Commissioner of Customs, Calcutta v. South India Television (P) Lt** d. {2007 (214) E.L.T. 3), the entire proceedings will have to be set aside. The Department has not relied upon any contemporaneous records to prove the price and the burden of W.P.(C).No.23399/2012 -4- proof in that regard has not been discharged. The petitioner has produced contemporaneous records as evident from Ext.P6 list of documents which were never considered. It is pointed out that the Tribunal has passed the order Ext.P13 mechanically and without assessing the reasonableness of the findings whether they are supportable on the materials relied upon by the department. It is also pointed out that the element of undue hardship is important to be considered in such cases. The petitioner had to curtail the business from 2008 also. 5. As far as the pleas on the merits of the matter are concerned, it is submitted that merely because of the alleged declaration made by the exporters who have declared higher value for export, the conclusions ought not have been arrived at by the authority concerned. It is submitted that this aspect was not considered by the Tribunal. 6. Heard learned counsel for the petitioner Shri Madhu Radhakrishnan and learned Standing Counsel for the Department, Shri John Varghese. 7. Learned counsel for the petitioner submitted that Ext.P13 cannot survive for a moment. A reading of the same will show that the approach is totally mechanical. My attention was invited to the observations made in W.P.(C).No.23399/2012 -5- para 6.3 to show that there is total non application of mind. It is submitted that the documents produced by the petitioner in 48 volumes have been discarded in a one single line. Various decisions of the Apex Court relied upon by the petitioner will show that the entire order cannot be supported. Placing reliance upon the materials as well as the findings rendered in Ext.P9, learned counsel submitted that the results of the investigation alone have been put against the petitioner which cannot hold good in the light of the principles governing the matter. 8. In the statement filed by the respondents, it is pointed out that Ext.P13 has been passed legally and validly and there is no scope for interference under Article 226 of the Constitution of India. It is also submitted that the petitioner has got an effective remedy under Section 130 of the Act by filing appeal before this Court itself and therefore the writ petition is not maintainable. The matter was considered in detail. After remand, a detailed order has been passed as per Ext.P9. 9. Learned counsel for the petitioner submitted that in the light of the decision of the Apex Court in **South India Television (P) Ltd.'s case** {2007 (214) E.L.T.3} in a case of under-invoicing, it cannot depend upon the invoice produced by the exporter. It should be proved only by materials W.P.(C).No.23399/2012 -6- relating to comparable imports which is totally absent here. The findings rendered by the Apex Court in para 6 has been fully relied upon by the learned counsel for the petitioner. Therein, the Apex Court after considering Section 14(1) of the Act, was of the view that “the invoice price is not sacrosanct. However, before rejecting the invoice price the Department has to give cogent reasons for such rejection. This is because the invoice price forms the basis of the transaction value. Therefore, before rejecting the transaction value as incorrect or unacceptable, the Department has to find out whether there are any imports of identical goods or similar goods at a higher price at around the same time.” The major emphasis made by the learned counsel for the petitioner is on contemporaneous records produced as per Ext.P6 list of documents and the error said to have been committed is not considering the same. 10. Before considering the contentions of the parties, it may be profitable to refer to the order passed by the Tribunal as per Ext.P13. After referring to the contentions, the Tribunal entered findings from para 6.1 onwards. In para 6.2 the Tribunal considered the sample findings in Ext.P9 in respect of one of the invoices. It is found that the same clearly refers the veracity of the details in the proforma invoices duly corroborated by W.P.(C).No.23399/2012 -7- amounts mentioned in the L.C. And T.T. and further corroborated by details collected from Malaysian Customs authorities. Therefore, the Tribunal was of the view that all these taken together, prima facie the appellants have resorted to gross undervaluation of the imported goods by adopting dubious methods. It is also found in para 6.2 as follows: “In the light of the several details in proforma invoices tallying with L.C. and T.T. and documents recovered from Malaysian Customs authorities, the Commissioner adopting the value declared to the Malaysian Customs authorities in respect of all the consignments cannot be held to be erroneous. Prima facie, the appellants have not made out a case on merits for waiver of predeposit of the duty demanded.” In para 6.4 it was therefore held that the decisions relied upon by the appellants are not prima facie applicable to the facts of the present case where there is clear evidence of extra payments made by the appellantassessee to the suppliers of furniture based in Malaysia. In para 6.5 it was observed that when the appellants have indulged in transferring money illegally for the purpose of importing furniture, the balance sheets which are relied upon by the appellant-assessee to claim financial hardship may not reflect true picture. After considering the submission that the assessee has closed the business in 2008, the direction is given to pre-deposit a sum of W.P.(C).No.23399/2012 -8- Rs.60 lakhs. The rest of the same has been waived. In Ext.P9, the total penalty ordered is Rs.1,20,79,765/- together with interest. Apart from the same, a penalty of Rs.10 lakhs each have been imposed against two of the Directors, but the same has also been waived. 11. The decisions relied upon by the parties are noted below: T **itaghur Paper Mills Co. Ltd. And another v. State of Orissa and others** {(1983) 2 SCC 433}, **Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others** (AIR 1999 SC 22), **Ruby Rubber Industries v. Commissioner of C.Ex. Calcutta** {1998 (104) E.L.T. 330}, **Sanjana M. Wig (Ms) v. Hindustan Petroleum Corpn. Ltd.** {(2005) 8 SCC 242}, **Benara Valves Ltd. v. Commissioner of Central Excise** {2006 (204) E.L.T. 513 -SC}, **Commissioner of Customs, Calcutta v. South India Television (P) Ltd.** {2007 (214) E.L.T. 3 - SC}, **Promising Exports Ltd. v. Union of India** {2009 (243) E.L.T. 3}, **Raj Kumar Shivhare v. Asst. Director, Directorate of Enforcement and another** {(2010) 4 SCC 772}, **Hindustan Petroleum Corporation Ltd. v. Commissioner of Customs, Mangalore** {2012 (279) E.L.T. 358} and **Givaudan India Pvt. Ltd. v. Commissioner of Customs, Bangalore** {2012 (279) E.L.T. 207 (Kar.}. W.P.(C).No.23399/2012 -9- 12. Evidently, what is involved is consideration of a prima facie case and the undue hardship if the pre-deposit is not waived. A reading of Ext.P13 will show that the Tribunal found a prima facie case in favour of the Department. The hardship was also considered even though it has not been elaborated in so much words and the amount has been fixed as Rs.60 lakhs. Therefore, the question is whether the Tribunal's order need any modification or the matter requires a fresh consideration by it as contended by the learned counsel for the petitioner. 13. The order Ext.P9 narrates the background and has rendered findings on each of the bill of entries. Various aspects have been discussed under each item. The findings on each items are reflected from internal pages 4 to 23. With regard to the question whether the evidence is acceptable, it was found at internal page 24 of the order that the details pertaining to value of goods abroad were obtained from customs formations in Malaysia, China, and Brazil through proper manner observing the necessary formalities mandated for such enquiries and the authority does not find any reason to disbelieve the facts arrived at from such enquiries. It is also found that the proforma invoices and other documents recovered from the premises have inherent evidentiary value towards the goal of W.P.(C).No.23399/2012 -10- arriving at the actual transaction value of the goods under import. The question therefore is whether, by finding that prima facie the appellants have resorted to show undervaluation of imported goods by dubious methods, the Tribunal has erred any manner in arriving at a conclusion warranting interference by this Court under Article 226 of the Constitution of India. 14. Evidently, this Court is not exercising an appellate jurisdiction. What is of importance is only to notice whether the contentions have been considered at least prima facie and whether the order is too mechanical. A reading of the order will show that the Tribunal has considered the findings and has arrived at a prima facie conclusion that the appellants have resorted to under valuation of the imported goods after adopting dubious methods. The Tribunal has referred to the details collected under the investigation. Of course, detailed discussion on each items are not there in the order, but as rightly pointed by the learned Standing Counsel for the Department, the same is not warranted at this stage since all those matters will be for consideration in the appeal. 15. The question to be considered is whether the petitioner was entitled for waiver of pre deposit of the entire amount of duty and penalty. W.P.(C).No.23399/2012 -11- As far as the documents relied upon by the petitioner in 48 volumes also are concerned, it can be seen that in para 6.3 of Ext.P13 wherein it is held that the relevance of the documents have not demonstrated before the Tribunal. True that other supportive reasons are not stated therein, but can it be said that for the said sole reason it should be sent back to the Tribunal again? Evidently, all those matters will have to be considered by the Tribunal in the appeal. Beyond that, the petitioner cannot contend that each of the materials relied upon should be discussed while considering the application for waiver of pre deposit. It cannot be said therefore that there is failure on the part of the Tribunal in not considering those materials at that stage. 16. Therefore, even though learned counsel for the petitioner vehemently submitted that the matter should be sent back for fresh consideration, I am not satisfied that this is a fit case for issuing a direction to reconsider the matter. 17. One of the points raised by the learned Standing Counsel for the Department is that Section 130 of the Customs Act provides for an appeal and on a substantial question of law and hence the writ petition is not maintainable. Learned counsel for the petitioner submits that the same may W.P.(C).No.23399/2012 -12- not apply here. A reference to Section 130 will show that an appeal to this Court is provided from every order passed in appeal by the Appellate Tribunal (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. The contention raised by the learned counsel for the petitioner is by relying upon the judgment of the Karnataka High Court in **Givaudan India Pvt. Ltd.'s case** {2012 (279) E.L.T. 207} to show that a writ petition was entertained against a similar order. Of course, the remedy of appeal is provided under the Act which is evident from a reading of Section 130 itself, on a substantial question law. It is therefore clear that an efficacious remedy of appeal is guaranteed under the Act. For all these reasons, the writ petition fails and the same is dismissed. The petitioner is granted six weeks from today to comply with the order of the Tribunal. No costs. **(T.R.RAMACHANDRAN NAIR, JUDGE)** **kav/**