# CASE DETAILS COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI OVERSEAS THROUGH ITS PROPRIETOR SHRI YASHPAL SHARMA & ANR

- **Citation:** 2023 INSC 881
- **Court:** Supreme Court of India
- **Decided:** 2023-10-06
- **Case number:** Civil Appeal Nos. 4735-4736 of 2009
- **Bench:** B. V. Nagarathna, Ujjal Bhuyan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-commissioner-of-customs-imports-mumbai-v-m-s-ganpati-overseas-36621
- **Pages:** 38

## Headnote

Issue for consideration: Whether the tribunal was justifi ed in holding
that enhancement of value of the imported goods and the penalties imposed
by the Commissioner of Customs on the noticee-respondents could not be
sustained and consequently in setting aside the same.
Customs Act, 1962 - 14 - Customs Valuation (Determination of
Price of Imported Goods) Rules, 1988 - r. 4, 8, 5, 6 and 7 - Transaction
value of imported goods - Determination of - Allegations of underinvoicing of price and thereby evasion of customs duty by the
respondents - Initiation of proceedings on the basis of the price declared
by the foreign supplier in the fi rst set of export declarations fi led before
the Hong Kong customs authority - Discrepancies noticed in the price
mentioned in the export declarations and the price of the goods as per
the import invoices - Filing of second set of export declarations albeit
imposition of penalty for mis-declaration of price at the initial stage,
which stood paid by the foreign supplier - Department after rejecting
the price declared as per the import invoices, invoked r. 8 straightaway
instead of going through rr. 5, 6 and 7 thereof sequentially - Correctness:
Held: If transaction value of imported goods cannot be determined,
the value shall be determined by proceeding sequentially through rr. 5 to
8 - Where the value of imported goods cannot be determined under the
provisions of any of the rr 5 to 7A, the value shall be determined using
reasonable means as provided in r. 8-the residual method - Furthermore,
transaction value can be rejected if the invoice price is not found to be correct
173
but it is for the department to prove that the invoice price is incorrect - On
facts, both the department as well as the adjudicating authority were not
justifi ed in rejecting the import invoice price of the goods as not correct
and enhancing the price by straightaway invoking r. 8 when there was no
evidence before them to do so - Thus, the tribunal was justifi ed in setting
aside the order passed by the adjudicating authority - No error or infi rmity
in the impugned judgment of passed by the tribunal. [Paras 34.1, 37, 40.2,
41,42]
Customs Act, 1962 - Initiation of proceeding alleging underinvoicing of price of goods imported from foreign country and thereby
evading customs duty by the noticee - Reliance upon the unattested
photocopies of the fi rst set of export declarations fi led by the foreign
supplier before the customs authority showing great discrepancy in the
price mentioned in the export declarations and the price of the goods
as per the import invoices - Justifi cation:
Held: Export declarations relied upon by the Department and earlier
by the Directorate of Revenue Intelligence were unattested photocopies
- Since those documents were used as a piece of evidence against the
noticee, it was necessary that those documents were required to have been
proved - Unattested photocopies of the relied upon documents without
anyone proving or owning up the veracity of the same would not have any
evidentiary value - Very substratum of these documents was subsequently
removed when the foreign supplier fi led a second set of export declarations
before the Hong Kong customs authority showing lower price matching
the price of the goods declared in the import invoices - Foreign supplier
had paid the penalty for mis declaration of price at the initial stage - There
can be no justifi able reason for the department to harp upon the price of
the goods as per the initial export declarations by placing reliance on the
unattested photocopies of the fi rst set of export declarations to prove underinvoicing for the purpose of evading customs duty - Tribunal rightly held
that the value shown in the fi rst set of export declarations could not form
any reliable basis for enhancement of the value. [Paras 16, 17]
Customs Act, 1962 - s. 108 - Power to summon persons to give
evidence and produce documents - Admissibility in evidence of the
stateme

## Text

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[2023] 13 S.C.R. 172 : 2023 INSC 881
172
CASE DETAILS
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI
v.
M/S GANPATI OVERSEAS THROUGH ITS PROPRIETOR SHRI
YASHPAL SHARMA & ANR.
(Civil Appeal Nos. 4735-4736 of 2009)
OCTOBER 06, 2023
[B. V. NAGARATHNA AND UJJAL BHUYAN, JJ.]
HEADNOTES
Issue for consideration: Whether the tribunal was justifi ed in holding
that enhancement of value of the imported goods and the penalties imposed
by the Commissioner of Customs on the noticee-respondents could not be
sustained and consequently in setting aside the same.
Customs Act, 1962 - 14 - Customs Valuation (Determination of
Price of Imported Goods) Rules, 1988 - r. 4, 8, 5, 6 and 7 - Transaction
value of imported goods - Determination of - Allegations of underinvoicing of price and thereby evasion of customs duty by the
respondents - Initiation of proceedings on the basis of the price declared
by the foreign supplier in the fi rst set of export declarations fi led before
the Hong Kong customs authority - Discrepancies noticed in the price
mentioned in the export declarations and the price of the goods as per
the import invoices - Filing of second set of export declarations albeit
imposition of penalty for mis-declaration of price at the initial stage,
which stood paid by the foreign supplier - Department after rejecting
the price declared as per the import invoices, invoked r. 8 straightaway
instead of going through rr. 5, 6 and 7 thereof sequentially - Correctness:
Held: If transaction value of imported goods cannot be determined,
the value shall be determined by proceeding sequentially through rr. 5 to
8 - Where the value of imported goods cannot be determined under the
provisions of any of the rr 5 to 7A, the value shall be determined using
reasonable means as provided in r. 8-the residual method - Furthermore,
transaction value can be rejected if the invoice price is not found to be correct
173
but it is for the department to prove that the invoice price is incorrect - On
facts, both the department as well as the adjudicating authority were not
justifi ed in rejecting the import invoice price of the goods as not correct
and enhancing the price by straightaway invoking r. 8 when there was no
evidence before them to do so - Thus, the tribunal was justifi ed in setting
aside the order passed by the adjudicating authority - No error or infi rmity
in the impugned judgment of passed by the tribunal. [Paras 34.1, 37, 40.2,
41,42]
Customs Act, 1962 - Initiation of proceeding alleging underinvoicing of price of goods imported from foreign country and thereby
evading customs duty by the noticee - Reliance upon the unattested
photocopies of the fi rst set of export declarations fi led by the foreign
supplier before the customs authority showing great discrepancy in the
price mentioned in the export declarations and the price of the goods
as per the import invoices - Justifi cation:
Held: Export declarations relied upon by the Department and earlier
by the Directorate of Revenue Intelligence were unattested photocopies
- Since those documents were used as a piece of evidence against the
noticee, it was necessary that those documents were required to have been
proved - Unattested photocopies of the relied upon documents without
anyone proving or owning up the veracity of the same would not have any
evidentiary value - Very substratum of these documents was subsequently
removed when the foreign supplier fi led a second set of export declarations
before the Hong Kong customs authority showing lower price matching
the price of the goods declared in the import invoices - Foreign supplier
had paid the penalty for mis declaration of price at the initial stage - There
can be no justifi able reason for the department to harp upon the price of
the goods as per the initial export declarations by placing reliance on the
unattested photocopies of the fi rst set of export declarations to prove underinvoicing for the purpose of evading customs duty - Tribunal rightly held
that the value shown in the fi rst set of export declarations could not form
any reliable basis for enhancement of the value. [Paras 16, 17]
Customs Act, 1962 - s. 108 - Power to summon persons to give
evidence and produce documents - Admissibility in evidence of the
statement recorded u/s. 108:
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA
SUPREME COURT REPORTS
[2023] 13 S.C.R.
174
Held: Customs officer is not a police officer, and the person
summoned and who makes a statement u/s. 108 is not an accused -
However, a statement made by a person u/s.108 before the concerned
customs offi cer is admissible in evidence and can be used against such
a person - Object underlying s. 108 is to elicit the truth from the person
who is being examined regarding the incident of customs infringement,
thus customs offi cer must ensure the truthfulness of the statement so
recorded - If the statement recorded is not correct, then, the very utility
of recording such a statement would get lost - It is axiomatic that when
a statement is admissible as a piece of evidence, the same has to conform
to minimum judicial standards - Statement recorded under duress or
coercion cannot be used against the person making the statement and
the adjudicating authority is to fi nd the same - On facts, statement of
director of the supplier fi rm and proprietor of the importer, recorded u/s.
108 wherein both admitted under valuation - Tribunal noted the factum
of retraction of the statement and thus, refused to give credence to such
statement - Approach of the tribunal is justifi ed. [Paras 18, 20, 28]
LIST OF CITATIONS AND OTHER REFERENCES
Commissioner of Customs, Calcutta v. South India Television (P)
Ltd. (2007) 6 SCC 373 : [2007] 8 SCR 95; Rabindra Chandra Paul v.
Commissioner of Customs, (2007) 3 SCC 93 : [2007] 3 SCR 319 - relied
on.
Surjit Singh Chhabra v. Union of India, 1997 (89) ELT-646; K.I.
Pavunny v. Assistant Collector (1997) 3 SCC 721 : [1997] 1 SCR 797;
State of Punjab v. Barkat Ram [1962] 3 SCR 338; Ramesh Chandra Mehta
v. State of West Bengal, AIR 1970 SC 940 : [1969] SCR 461; Collector
of Customs, Madras v. D. Bhoormall (1974) 2 SCC 544 : [1974] 3 SCR
833; Naresh J. Sukhawani v. Union of India AIR 1996 SC 522 : [1995] 4
Suppl. SCR 778; K.I. Pavunny v. Assistant Collector (1997) 3 SCC 721 :
[1997] 1 SCR 797; Union of India v. Padam Narain Aggarwal, AIR 2009
SC 254 : [2008] 14 SCR 179; Eicher Tractors Limited v. Commissioner
of Customs (2001) 1 SCC 315 : [2000] 4 Suppl. SCR 597 - referred to.
175
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4735-4736
of 2009.
From the Judgment and Order dated 27.06.2008 of the Customs, Excise
& Service Tax Appellate Tribunal, West Zonal Bench at Mumbai in Appeal
No.C/1347 & 1374 of 2002.
Appearances:
Balbir Singh, ASG, Arijit Prasad, Sr. Adv., Rupesh Kumar, Mukesh
Kumar Maroria, Ms. Rukmini Bobde, Aniruddh Sharma II, Ishaan Sharma,
Advs. for the Appellant.
V. Lakshmikumaran, Ms. Apeksha Mehta, Ms. Neha Choudhary, Ms.
Charanya Lakshmikumaran, Ms. Falguni Gupta, Ms. Umang Motiyani, M.
P. Devanath, Advs. for the Respondents.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
UJJAL BHUYAN, J.
1. Since both the appeals arise out of the common judgment and fi nal
order dated 27.06.2008 passed by the Customs, Excise and Service Tax
Appellate Tribunal, West Zonal Bench at Mumbai with parties also being
the same, the two appeals were heard together and are being disposed of
by this common judgment and order.
2. The appeals have been fi led by the Commissioner of Customs
(Imports), Mumbai under Section 130-E of the Customs Act, 1962 against
the common judgment and fi nal order dated 27.06.2008 passed by the
Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench
at Mumbai (briefl y the 'CESTAT' or 'the Tribunal' hereinafter) in Appeal
Nos. C/1347 and 1374 of 2002.
3. The issue that arises in the two appeals is whether the CESTAT was
justifi ed in holding that enhancement of value of the imported goods and
the penalties imposed by the Commissioner of Customs (Adjudication-1),
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA
SUPREME COURT REPORTS
[2023] 13 S.C.R.
176
Mumbai on the respondents could not be sustained and consequently in
setting aside the same?
4. A brief recital of facts would be in order.
4.1. Show cause notice dated 17.12.1999 was issued to the respondents
by the Additional Director General, Directorate of Revenue Intelligence,
New Delhi. It was mentioned therein that secret information was received
by the Directorate of Revenue Intelligence that M/s Ganpati Overseas had
imported tuners from Hong Kong at grossly under invoiced prices, thereby
evading huge customs duty. The information revealed that the fi rm M/s
Ganpati Overseas was owned by one Mr. Yashpal Sharma; the Hong Kong
based supplier M/s Arise Enterprises was owned by his relative Mr. Suresh
Chandra Sharma; the imported goods were cleared from Air Cargo Complex,
Sahar, Mumbai and that M/s National Shipping Agency, Mumbai had acted
as the Customs House Agent.
4.2. Upon receipt of such information, Directorate of Revenue
Intelligence carried out investigation wherefrom it could be gathered that
M/s Ganpati Overseas had imported twenty consignments during the years
1997-98 and 1998-99. It was found that M/s Ganpati Overseas had imported
mainly tuners from M/s Arise Enterprises, Hong Kong and had also imported
about three-four consignments of saw fi lters alongwith the tuners. Directorate
of Revenue Intelligence obtained information from the Consulate General
of India at Hong Kong that M/s Arise Enterprises, Hong Kong belonged
to one Mr. Suresh Chandra Sharma who alongwith his wife Mrs. Kusum
Sharma were the directors. When Mr. Suresh Chandra Sharma visited India
in March, 1999, his statement was recorded on 08.03.1999 under Section 108
of the Customs Act, 1962 (referred to as the 'Customs Act' hereinafter). In
his statement, Mr. Suresh Chandra Sharma stated that M/s Ganpati Overseas
belonged to Mr. Yashpal Sharma who was his co-brother. He stated that M/s
Ganpati Overseas was in the business of importing electronic goods since
1997-98. He had supplied tuners and saw fi lters to M/s Ganpati Overseas
through his fi rm M/s Arise Enterprises from Hong Kong.
4.3. Mr. Suresh Chandra Sharma admitted that the rate of tuners per
piece as shown in the invoices by M/s Arise Enterprises did not refl ect the
actual price. He had deliberately mentioned lower price with the intention
of saving customs duty in respect of the goods imported by his co-brother,
177
Mr. Yashpal Sharma. The actual price of the tuners was quite high. The
diff erential amount i.e. the diff erence between the actual price and the
declared price was retained in India which he used to collect from Mr.
Yashpal Sharma.
4.4. Mr. Yashpal Sharma was also summoned whereafter his statement
was recorded under Section 108 of the Customs Act on 15.03.1999. Apart
from narrating the factum of importing the goods by showing prices much
lesser than the actual price meant to evade customs duty, he stated that the
amount of payment disclosed in the import documents were sent by him
to Mr. Suresh Chandra Sharma through the banking channel, whereas, the
balance diff erential amount used to be handed over to Mr. Suresh Chandra
Sharma on his visits to India.
4.5. It was mentioned that price of tuners so imported as per the sales
vouchers was in the range of Rs. 40-60 per piece but the actual market value
of these tuners was in the range of Rs. 200-325 per piece. In this manner,
the respondents had evaded customs duty amounting to a total of around
rupees twenty fi ve to thirty lakhs approximately.
4.6. Mr. Yashpal Sharma was arrested on 15.03.1999 under Section 135
of the Customs Act. He was enlarged on bail on 30.03.1999 by the Additional
Sessions Judge, Patiala House, New Delhi subject to the condition that a
sum of rupees ten lakhs should be deposited in the offi ce of the Directorate
of Revenue Intelligence on 30.03.1999 and a further sum of rupees twenty
lakhs should be so deposited within a period of forty-fi ve days. Both the
amounts were accordingly deposited.
4.7. From a scrutiny of the relevant materials including export
declarations, it was found that the price of tuner as per the export declarations
fi led by the exporter before the Hong Kong Customs and Excise Department
was Hong Kong $67.67 per piece which was much higher as compared to
the price declared in the invoice by M/s Ganpati Overseas before the Indian
customs authority at the time of importation of the goods. In this connection,
the Directorate of Revenue Intelligence prepared two charts; as per chart-I,
M/s Ganpati Overseas had evaded customs duty to the extent of Rs.
1,07,41,419.00 on import of nineteen consignments. Likewise, Directorate
of Revenue Intelligence prepared chart-II which dealt with importation of
3200 pieces of tuners which were made in Taiwan. It was noted that the
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
178
value of the goods declared before the customs authority was Hong Kong
$19200 whereas the actual value was Hong Kong $211468.07 as per export
declaration before the Hong Kong Customs and Excise Department. Thus,
according to the Directorate of Revenue Intelligence, M/s Ganpati Overseas
had evaded customs duty to the tune of Rs. 8,67,762.00. The price of goods
as shown in the import documents by M/s Ganpati Overseas was found to
be much less than the real price of the goods, i.e., at the price at which
those were supplied from Hong Kong. Therefore, the import valuation
was rejected in terms of Section 14 of the Customs Act and the Customs
Valuation (Determination of Price of Imported Goods) Rules, 1988 (briefl y,
the 'Customs Valuation Rules' hereinafter).
4.8. The show cause notice proposed that the value of imported goods
should be determined under Rule 8 of the Customs Valuation Rules on the
basis of the value given in the export declarations obtained from the Hong
Kong Customs and Excise Department. Alleging that respondents had
wilfully misdeclared and suppressed the correct value of the imported goods
with an intent to evade duties of customs, Directorate of Revenue Intelligence
invoked the extended period of limitation as per the proviso to Section
28(1) of the Customs Act. It was mentioned that M/s Ganpati Overseas was
liable to pay the diff erential customs duty of Rs. 1,07,41,419.00 leviable on
the import of tuners, saw fi lters etc. as per chart-I and Rs. 8,67,762.00 as
per chart-II, the total amount being Rs. 1,16,09,181.00. Respondents were
therefore called upon to show cause as to why the aforesaid amount of
customs duty should not be demanded and recovered from them and also as
to why the imported goods should not be confi scated under Sections 111(d)
and 111(m) of the Customs Act, besides appropriation of the amount of Rs.
30 lakhs already deposited. Respondents were further called upon to show
cause as to why penalty under Section 112(a) of the Customs Act should
not be imposed upon them and as to why interest should not be levied on
the evaded customs duty.
4.9. The noticees were directed to submit their reply to the
Commissioner of Customs, Air Cargo Complex, Sahar Airport, Mumbai
within the stipulated time. It was mentioned that the show cause notice
was issued under Section 124 of the Customs Act read with the proviso to
Section 28(1) of the aforesaid Act.
179
5. M/s Ganpati Overseas through its lawyer replied to the aforesaid
show cause notice on 20.05.2000. While denying all the allegations in
totality, it was mentioned that the Commissioner of Customs vide his letter
dated 07.04.2000 had rejected the request of M/s Ganpati Overseas for
supply of certain documents sought for, on the ground that those documents
were not relied upon. It was submitted that those documents might have
relevance while preparing the defence and that absence of those documents
would handicap the noticees in putting forth a proper defence. While
reiterating the request for such documents, the noticees submitted what
they called an interim reply.
5.1. It was mentioned that Mr. Yashpal Sharma was the proprietor of
the noticee fi rm which was engaged in the business of import of tuners etc.
during the years 1997-98 and 1998-99. The imports were made from M/s.
Arise Enterprises, Hong Kong. At the time of clearance, the bills of entry
were fi led through the Customs House Agent and the imported goods were
cleared after proper assessment by the customs authority on payment of due
customs duty. Those goods were subsequently sold in the local market. In
all, twenty consignments were imported. The noticees thereafter described
and furnished the details of two types of tuners which were imported over
a period of about nine months consisting of twenty consignments.
5.2. The noticees adverted to the allegations made in the show cause
notice that the price declared by the noticees was not correct and was on
the lower side, as proved by the statements of Mr. Suresh Chandra Sharma
and Mr. Yashpal Sharma recorded under Section 108 of the Customs Act
as well as by the export declarations fi led by M/s Arise Enterprises before
the Hong Kong Customs and Excise Department. It was pointed out
that the two statements of Mr. Suresh Chandra Sharma and Mr. Yashpal
Sharma could not be termed as voluntary under any circumstances. Those
inculpatory statements were obtained through coercion and under duress. It
was pointed out that the statement of Mr. Yashpal Sharma was structured in
such a manner as to tally entirely with the statement of Mr. Suresh Chandra
Sharma. That apart, statement of Mr. Yashpal Sharma was contradictory to
his own statement made before the Additional Sessions Judge where he had
stated that there was no under valuation or under invoicing of the goods
imported. Therefore, it was contended that both the statements were not at
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
180
all reliable. Further, Mr. Yashpal Sharma vide letter dated 25.08.1999 had
retracted the statement made by him under Section 108 of the Customs Act.
5.3. Regarding the export declarations fi led by M/s Arise Enterprises
before the Hong Kong customs authority, it was submitted that it was not
known as to when these declarations were forwarded by the Consulate
General of India, Hong Kong to the Directorate of Revenue Intelligence,
New Delhi. The copies relied upon by the department were unattested and
photocopies, thus unreliable. That apart, when the noticees contacted M/s
Arise Enterprises, Hong Kong, it was acknowledged that due to error on
the part of the staff , value of the goods was incorrectly shown in the export
declarations. The mistake was subsequently rectifi ed whereafter M/s Arise
Enterprises lodged a second set of declarations before the Hong Kong
customs authority and paid the penalty which was levied.
5.4. It was stated that the noticees were informed by the Hong Kong
supplier that the tuners, saw fi lters etc. were being off ered to them on stock
clearance basis at lower prices. It was for this reason that the goods were
sold to the noticees at lower prices, details of which were mentioned in
paragraph 11 of the reply.
5.5. After saying so, it was pointed out that diff erent prices in export
declarations and in import invoices did not necessarily mean that the price
shown in the export declarations was correct and that the one declared in
the import invoices was incorrect.
5.6. The reply also touched upon the method of valuation as well as
the valuation of the goods by the customs authority in India. After adverting
to various provisions of the Customs Valuation Rules, it was asserted that
the price at which the goods of the respondents were assessed and cleared
was more or less correct. It was pointed out that the department could not
adduce any single piece of evidence to arrive at the so called correct value
of the goods. No value of identical or similar goods could be produced. No
evidence of market value was adduced. No attempt to fi nd out the price per
unit was made for a comparison. That apart, no incriminating document or
material was produced to establish under valuation. There was no evidence
as to how remittances over and above the invoice price were made. One
and only 'evidence' relied upon by the department was the initial value
shown in the export declarations which was declared to be incorrect by the
181
supplier itself and later on rectifi ed. Thus, there was no mis-declaration either
in respect of description of the goods or value of the goods. No question
of confi scation under Sections 111(d) and 111(m) of the Customs Act was
made out. That apart, the goods were not prohibited ones, the import of
which would warrant confi scation. In any view of the matter, the goods
on being cleared by the customs authority were sold by the noticees much
before the issuance of the show cause notice. Therefore, there cannot be any
confi scation of such goods. In so far deposit of Rs. 30 lakhs by Mr. Yashpal
Sharma is concerned, the same was to fulfi l the bail condition imposed by
the Additional Sessions Judge. Since there was no short payment of customs
duty, question of appropriation of the aforesaid amount did not arise; neither
any penalty was imposable nor interest leviable. M/s Ganpati Overseas,
therefore, requested the Commissioner to drop the proceedings.
6. Reply of the respondents was found to be not acceptable. Therefore,
the case was taken up for adjudication. Accordingly, the case was transferred
to Commissioner of Customs (Adjudication-1), New Customs House,
Mumbai for the purpose of adjudication. During the adjudication process,
personal hearing was aff orded to the respondents.
6.1. Adjudicating authority noted that the customs department had
alleged under valuation of the goods in question resulting in evasion of
customs duty to the tune of Rs. 1,16,09,181.00. To prove under valuation,
the department had relied upon the price mentioned in the export declarations
fi led by the supplier before the Hong Kong customs authority in respect
of nineteen consignments. The price so declared was considered as the
correct transaction value. In respect of one more consignment where export
declaration was not available, department had proposed enhancement of the
price of the goods on the basis of the other export declarations. Adjudicating
authority did not accept the contention of the respondents that the price
mentioned in the export declarations fi led before the Hong Kong customs
authority could not be accepted. Distinguishing the facts of the two cases
relied upon by the respondents, the adjudicating authority took the view that
even if the copies of the export declarations available with the Directorate
of Revenue Intelligence were not attested or were xerox copies, it would
not make those copies unreliable or unauthentic. Therefore, taking into
account the fact that the supplier M/s Arise Enterprises had acknowledged
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
182
that those declarations were fi led by them, which was not denied by the
respondents, the adjudicating authority held that there was no reason to
doubt the veracity of the export declarations even if those were unattested
and were mainly xerox copies. Accordingly, the adjudicating authority held
that the information obtained was correct and genuine.
6.2. On the contention that statements of Mr. Yashpal Sharma and
Mr. Suresh Chandra Sharma were not voluntary and therefore could not be
relied upon, adjudicating authority held that both of them in their statements
recorded under Section 108 of the Customs Act had admitted to having
under-invoiced the price of the goods and had voluntarily paid Rs. 30 lakhs
towards payment of evaded customs duty during the investigation. They had
also explained in their statements the modus operandi adopted by them and
the manner of transfer of the diff erential amount. Therefore, the adjudicating
authority opined that he had no reason to accept the plea of the respondents
that the statements of Mr. Yashpal Sharma and Mr. Suresh Chandra Sharma
were not voluntary and should not be relied upon. This plea was taken only
as an afterthought.
6.3. Contention of the respondents that the declared price was correct
when compared with contemporaneous imports was also not accepted by
the adjudicating authority as the invoices of the contemporaneous imports
did not reveal the specifi cation, quality etc., of the products.
6.4. Adjudicating authority also rejected the contention of the
respondents that the supplier M/s Arise Enterprises had purchased the goods
in question on stock clearance basis at a lower price and for this reason it
could sell the goods to M/s Ganpati Overseas at a lower price. According
to the adjudicating authority, this was again an afterthought and an invented
argument as the noticees had not declared that the goods were purchased
in stock lot. Neither invoices nor export declarations as well as the bills of
entry or any other document on record suggested that the subject goods
were purchased in stock lot at a price lower than the normal one. Rather,
such a plea would support the allegation of the department that the invoice
price was not a normal price and coupled with the fact that the parties were
relatives, had rendered the invoice price unacceptable for assessment in terms
of Section 14(1) of the Customs Act read with Rule 2(2) of the Customs
Valuation Rules. Since neither the transaction value of similar goods nor
183
contemporary prices etc. were available, resort to Rules 5, 6 and 7 for
determining the assessable value of the goods was not possible. Therefore,
Rule 8 of the Customs Valuation Rules was correctly applied.
6.5. Holding that the export declarations refl ected the true transaction
value which was misdeclared by the importer to evade customs duty, the
adjudicating authority vide the order-in-original dated 17.06.2002 held that
the proviso to Section 28(1) of the Customs Act was applicable. Consequently,
M/s Ganpati Overseas was held liable to pay the diff erential customs duty
of Rs. 1,16,09,181.00 alongwith interest forthwith. For misdeclaration and
under valuation, the goods in question were held liable for confi scation
under Sections 111(d) and 111(m) of the Customs Act. However, as the
said goods were not available having been cleared no order for confi scation
was passed. Further, equivalent amount of diff erential customs duty was
imposed on M/s Ganpati Overseas as a penalty under Section 114A of the
Customs Act and in addition, penalty of rupees fi ve lakhs was imposed on
Mr. Yashpal Sharma under Section 112(a) of the Customs Act.
7. Aggrieved by the aforesaid order-in-original of the adjudicating
authority, respondents preferred appeals before the CESTAT which were
registered as Appeal Nos. C/1347 and 1374 of 2002.
7.1. CESTAT opined that export declarations fi led by the foreign
supplier before the Hong Kong customs authority could not be relied upon
for the purpose of enhancement of value. This was for more than one reason.
Firstly, those declarations were unattested photocopies. Secondly, the
supplier had fi led another set of declarations indicating the price as shown
in the invoices of the imports. Thirdly, for fi ling incorrect declarations which
had to be subsequently replaced by another set of declarations, the foreign
supplier had paid penalty before the Hong Kong customs authority. Fourthly,
no investigation was carried out by the customs authority with the Hong
Kong customs authority revealing anything to the contrary. On that basis,
CESTAT held that the price shown in the initial export declarations could
not form the basis for enhancing the value of the goods.
7.2. CESTAT noted that nothing incriminating was recovered from
the importers in the form of text messages etc. CESTAT also recorded that
there was no evidence of contemporary imports which had higher value.
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
184
The foreign supplier had given explanation in respect of the price initially
declared in the export declarations, which explanation was not discarded.
7.3. According to CESTAT, value in the export declaration may
be relied upon for ascertainment of assessable value under the Customs
Valuation Rules and not for determining the price at which the goods are
ordinarily sold at the time and place of importation. CESTAT referred to
and relied upon the decision of this Court in Commissioner of Customs,
Calcutta Vs. South India Television (P) Ltd., (2007) 6 SCC 373 wherein this
court held that the burden lies upon the department to prove under valuation
by evidence or information about comparable imports and if the charge
of under valuation is not supported by such evidence or information, the
benefi t of doubt has to be given to the importer. On the basis of the aforesaid
decision, CESTAT recorded that there was not only no contrary evidence
of contemporaneous import but even the foreign supplier had satisfactorily
explained that the price initially shown in the export declarations was
incorrect which was subsequently amended and accepted by the Hong Kong
customs authority.
7.4. As regards the statements of Mr. Yashpal Sharma and Mr. Suresh
Chandra Sharma, the Tribunal observed that these statements were retracted
at the earliest available opportunity. Decisions relied upon by the appellant,
viz., Surjit Singh Chhabra Vs. Union of India, 1997 (89) ELT-646 and in K.I.
Pavunny Vs. Assistant Collector, (1997) 3 SCC 721 did not advance the case
of the department. Tribunal observed that in the said decisions, this court
has held that the inculpatory portion of confessional statement of accused,
even if retracted, could be relied upon to base conviction if it is found to be
voluntary and truthful; however, this Court sounded a note of caution that
prudence and practice would require that such confessional statement should
be corroborated by other evidence adduced by the prosecution. Statement
of Mr. Yashpal Sharma that the actual market value of the tuners was in the
range of Rs.200.00 and Rs.325.00 per piece which would make the market
price thereof in excess of Rs.700.00 after adding normal profi t could not
be taken to be voluntary and true for the reason that tuners were supplied
to the respondents at negotiated price of four diff erent rates i.e. HK$ 4.00,
4.50, 5.50 and 6.00. In that view of the matter, Tribunal was of the view that
the loaded value proposed by the department would not be correct since the
185
proposed Free on Board (FoB) price would be about Rs.372.00 per piece and
CIF (Cost, Insurance and Freight) value would be Rs. 454.00 per piece and
the landing cost would be Rs.660.00 per piece after adding customs duty.
7.5. CESTAT also noted that the importers i.e. respondents had
produced invoices of contemporaneous imports by M/s Bharat Electronics
and M/s K.S. International to show price comparable with the price declared
by them in respect of the goods in question.
7.6. In the above backdrop, CESTAT vide the judgment and order
dated 27.06.2008 held that enhancement of the value of the imported goods
as well as the penalties imposed could not be sustained. Accordingly, those
were set aside and appeals fi led by the respondents were allowed.
8. It is this order of CESTAT which has been impugned in the two
appeals before us.
9. This court vide the order dated 24.07.2009 had issued notice.
Thereafter, the appeals were admitted on 10.12.2010.
10. Respondents have fi led counter affi davit through Mr. Yashpal
Sharma. After narrating the facts, respondents have supported the judgment
and order passed by the CESTAT while controverting all the contentions
raised by the appellant. Respondents have, therefore, sought for dismissal
of the appeals.
11. Mr. Rupesh Kumar, learned counsel for the appellant has assailed
the judgment and order of CESTAT. He has asserted that the appellant
was justifi ed in determining the value of the imported goods under Rule 8
of the Customs Valuation Rules on the basis of the declared value of the
goods mentioned in the export declarations fi led by the supplier which were
obtained from the Hong Kong customs authority. The invoices presented
by the respondents before the customs authority did not represent genuine
and actual transaction.
11.1. The price declared in the invoice was much lower than the value
declared in the export declarations fi led in Hong Kong. Since it did not refl ect
the correct transaction value, the value appearing in the import invoices did
not fulfi l the criteria of Section 14(1) of the Customs Act and Rule 4 of the
Customs Valuation Rules as per which the transaction value of the imported
goods is the price actually paid or payable when sold for export to India.
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
186
11.2. He submits that the export declarations fi led by the foreign
supplier before the Hong Kong customs authority was not the sole basis for
increasing the value of the subject goods. There were suffi cient materials on
record to prove under valuation. Both Mr. Suresh Chandra Sharma, director
of the supplier fi rm and Mr. Yashpal Sharma, proprietor of the importer, in
their statements under Section 108 of the Customs Act had admitted under
valuation. In his statement, Mr. Yashpal Sharma had stated that the supplier
M/s Arise Enterprises, Hong Kong belonged to his co-brother Mr. Suresh
Chandra Sharma. Mr. Suresh Chandra Sharma used to send the goods on
his own and that he had never sent any written or oral order for supply.
As and when M/s Arise Enterprises would dispatch the goods, Mr. Suresh
Chandra Sharma would inform Mr. Yashpal Sharma over telephone to whom
the goods were to be sold, in what quantity and at what price. Thereafter,
he used to sell the goods at the settled price and receive the payments. He
had stated that he was not aware of the actual price of the goods imported
from Hong Kong. The amount of payment as per the import documents
were sent by him to Mr. Suresh Chandra Sharma through banking channel
and the balance amount he used to handover to Mr. Suresh Chandra Sharma
whenever he visited India.
11.3. Learned counsel has highlighted the fact that the supplier in Hong
Kong and the importer in India were related parties. Therefore, the contention
that the foreign supplier had fi led another set of export declarations wherein
the price shown in the invoices matched with that shown in the import
documents in India was an afterthought to frustrate the proceedings initiated
by the customs authority.
11.4. He further submits that where the importer like the respondents
had not laid any basis for acceptance of the invoice price as transaction
value, then the authorities would be legally justifi ed to initiate fi xation of
price under Rule 5 onwards under the Customs Valuation Rules. According
to him, the department had to take recourse to Rule 8 of the aforesaid Rules
straightaway instead of proceeding through Rules 5, 6 and 7 as neither
transaction value of similar goods nor contemporary prices were available.
Therefore, the adjudicating authority had rightly invoked Rule 8 while
assessing the transaction value to determine the short levy of customs duty
and for imposing penalty. CESTAT was not at all justifi ed in interfering with
187
such a reasoned order of the adjudicating authority. In these circumstances,
he seeks setting aside of the order of the CESTAT dated 27.06.2008.
12. Per contra, Mr. V. Lakshmikumaran, learned counsel for the
respondents has supported the order of CESTAT and submits that the appeals
of the department wholly lacks merit and therefore should be dismissed.
12.1. He submits that the Tribunal was fully justifi ed in holding that the
price declared in the import invoice was correct. The foreign supplier had
withdrawn the original export declarations earlier submitted before the Hong
Kong customs authority and thereafter had fi led another set of declarations
where the declared price matched the price shown by the respondents in the
import invoices. The subsequent declarations were accepted by the Hong
Kong customs authority following which penalty was levied which was
paid by the supplier.
12.2. Mr. Lakshmikumaran, learned counsel submits that the export
declarations relied upon by the appellant were only photocopies which were
neither signed nor attested. As such, those export declarations did not have
any evidentiary value. He has asserted that the price refl ected in the import
invoices was the sole consideration for sale which satisfi ed the defi nition of
transaction value as per Rule 4 of the Customs Valuation Rules.
12.3. According to Mr. V. Lakshmikumaran, there were no evidence
before the customs authority to prove under valuation. Statements of Mr.
Suresh Chandra Sharma and Mr. Yashpal Sharma could not be relied upon
to prove under valuation for more than one reason. Firstly, when the two
statements were recorded there was no evidence available with the customs
department to prove under valuation. Secondly, both the statements were
almost identical and matched each other which would indicate that those
were dictated ones. Therefore, it is clearly evident that those were obtained
under coercion and undue pressure. Thirdly, the two statements were
retracted at the fi rst available opportunity. Fourthly, the Additional Sessions
Judge, New Delhi while granting bail to Mr. Yashpal Sharma had recorded
in his order dated 26.05.1999 that the statement made was under coercion
and pressure and therefore, the same could not be termed as a voluntary
statement. In the circumstances, Tribunal was fully justifi ed in not giving
any credence to the above two statements.
COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI v. M/S GANPATI
OVERSEAS THR. ITS PROP. SHRI YASHPAL SHARMA [UJJAL BHUYAN, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
188
12.4. He further submits that though the appellant had placed much
emphasis on the fact that the parties are related and that fi ling of the second
set of export declarations was an afterthought, the same is totally irrelevant.
On the contrary, it is on record that the second set of export declarations
were accepted by the Hong Kong customs authority by imposing penalty
which was paid by the Hong Kong supplier.
12.5. Asserting that there was no under valuation of the imported goods,
learned counsel submits that valuation of imported goods is governed by the
Customs Valuation Rules and not by price declaration made by the supplier
in another country. Appellant was not justifi ed in by-passing Rules 5, 6 and
7 of the Customs Valuation Rules while determining the transaction value
and straightaway invoking Rule 8. Customs department had not made any
eff ort to gather evidence to determine transaction value of identical or similar
goods imported contemporaneously. In this connection, learned counsel
has relied upon the decision of this court in Rabindra Chandra Paul Vs.
Commissioner of Customs, (2007) 3 SCC 93 and in the case of South India
Television (P) Ltd. (supra). He, therefore, submits that there was no error
or infi rmity in the view taken by CESTAT.