By TIOL News Service

MUMBAI, MAY 27, 2013: THE appellant is an importer of automobile parts. Acting on intelligence that there is ‘heavy' undervaluation of automobile parts imported, a bill of Entry dated 17/06/2010 filed by the appellant was taken up for investigation by the Special Investigation and Intelligence Branch (Export), Mumbai. A panchnama was drawn and it was observed that the consignment contained several automobile parts, most of which were unbranded and of Chinese origin and a few parts were branded and were of Korean, German and Japanese and Poland origin. It was also observed that the CIF value as well as the Retail Sale Price (RSP) declared were very low.

Search was carried at three premises of Chadha Auto Industries and incriminating documents and laptop computer in which data was stored relating to import transactions was recovered. Statements were recorded of Shri J.S.Chada, Proprietor of M/s. Chadha Auto Industries, Shri Suresh Babu of M/s. Auto Start Enterprises and Shri Ketan Vora of M/s. Auto Vision, Inc. Mumbai. Shri J.S. Chadha admitted that he had asked Shri Gurvinder Singh Kochaar alias Gullu of M/s. Auto Stores (India) to import automobile parts on his behalf and the prices of these parts were negotiated by him with the foreign supplier and Proforma invoices were obtained for the various automobile parts, which were handed over to Shri Kochhar. Shri Kochhar used to undertake imports by declaring a very low value and sold the same to Chadha. Print out of proforma invoices were taken out from the computer maintained by Shri Chadha. A similar admission was made by the Shri Ketan Vora and Shri Suresh Babu. In his statements, Shri G.S. Kochhar admitted that he had been importing automobile parts from various suppliers in Dubai and Taiwan and mostly through Envoy International (LLC), Dubai and he had negotiated the prices with the overseas suppliers and after negotiation, he placed orders for the goods selected and the value declared in the Bills of Entry were very low.

Inquiries were also made with various authorized service centres, who were dealing in branded automobile parts, similar to those imported by Shri Kochhar vide the aforesaid bills of entry and it was found that the MRP declared by Shri Kochhar in respect of automobile parts was less than 10% of the MRP at which these goods were sold by the authorized service centres.

Based on the investigation, a SCN was issued proposing to re-determine the value of imports declared by Shri Kochhar in respect of nine Bills of Entry filed by him and proposing to re-determine the value on the basis of MRP declared by the authorized service centres and proposing to demand differential duty.

The case was adjudicated by the Commissioner of Customs wherein all above duty demands were confirmed. Apart from confiscation, penalty on Rs. 10 lakh each was imposed on the appellant and various persons who were made co-noticees to the case.

The appellant is before the CESTAT and for seeking stay in the matter submits -

+ that the re-determination of the value has been done by the adjudicating authority on the basis of the prices (MRP) at which authorized service centres were selling various automobile parts of well known brands.

+ In the case under consideration most of the items are unbranded and they are of Chinese origin. It is a well known fact that duplicate parts of well known brands of auto parts are available in the market at cheaper price and Shri G.S. Kochhar has imported duplicate parts of well known brands and most of them did not bear any brand name even though the part number indicated on the parts would match with those of well known brands.

+ The representatives of various service centres who were cross examined before the adjudicating authority have also admitted that they have not seen the automobile parts imported by the appellants so as to confirm that the goods, which the appellants imported and the goods which the authorized service centres sold, are identical or similar.

+ The basis for enhancement of value adopted by the adjudicating authority does not take into account the duplicate nature or parts under importation and the fact that most of them do not bear a brand name and they are of Chinese origin. If these differences in quality are taken into account, then there cannot be any comparison between the retail price on which the goods under importation are sold and retail price at which the goods (automobile Parts) of well known brands are sold by various service centres.

The Revenue representative submitted that the investigation had unearthed the modus operandi adopted by the appellant importer and in view of the findings narrated, the order is required to be upheld.

The Bench observed -

"6. From the records, it is seen that the basis for re-determination of assessable value adopted by the adjudicating authority is the RSP at which the automobile parts of well known brands are sold by the various authorized service centres. It is seen that the parts imported by the appellant do not have brand name in many cases and have been imported from China and are duplicate in nature. Therefore, the prices of these two items i.e., the one imported by the appellants and the other sold by the various authorized service centres do not appear to be comparable, since it does not take into account, the difference in quality, brand name value and other relevant factors.

6.1 We further find that the representative of the authorized service centres who were closely examined by the learned Counsel for the appellants before the adjudicating authority have admitted that they have not seen automobile parts imported by the appellants so as to confirm whether the authorized service centres sold are identical or similar goods. Therefore, enhancement of value declared price is not admissible in the absence of any reliable evidence.

6.2 We have gone through the following Bills of Entries:-

x x x

6.2 The Bills of Entries were finally assessed after loading the value on the basis of comparable NIDB data. As per the data, the value loading was between 10% to 63.42%. Therefore, when NIDB data of comparable goods are available, value is to be adopted on the basis of NIDB data, not from the retail sale price of authorized service centre as discussed above. In the remaining two Bills of Entry where the goods have been provisionally released, the adjudicating authority is directed to assess both the Bills of Entry No. 953653 dated 17.06.2010 and 936753 dated 25.02.2011 finally. The assessable value of the imported goods shall be adopted on the basis of NIDB data of comparable goods. If the NIDB data are not available, the same will be assessed on the transaction value.

7. As discussed above when enhancement of assessable value of the impugned goods is based on the evidences which are not reliable therefore, penalties on the appellants are not imposable. In these terms, the penalties on the co-appellants are set aside."

In fine, the order was set aside and the appeals were partly allowed and partly remanded for re-assessment.

(See 2013-TIOL-791-CESTAT-MUM)