Legal principle

Where higher-value parallel documents are recovered from the importer's own possession and corroborated by voluntary Section 108 admissions and extra-commercial payments, declared transaction value may be rejected, the extended period under the proviso to Section 28(4) invoked despite prior self-assessment, and mandatory penalties under Sections 114A/114AA imposed, since fraud and suppression vitiate self-assessment.

Court decision

The Tribunal dismissed all three appeals and upheld the impugned Order-in-Original in toto: rejection of declared transaction value and re-determined assessable value under Section 14 read with the CVR 2007; differential duty under Section 28(4) with interest under Sections 28AA/28AB; invocation of the extended period under the proviso to Section 28(4); penalty under Section 114A on the importer; personal penalties of ₹25,00,000 each on the partners under Section 114AA; confiscation under Section 111(m) (sustained only to the extent permissible as goods were unavailable, with seizure/confiscation of goods valued at ₹27,92,020 and redemption fine under Section 125 affirmed). The decision was in favour of the Revenue.

Facts

M/s. Sleek Corporation, a partnership firm importing industrial sewing machines, parts/accessories and rotary hooks through Chennai Seaport (01.06.2010–30.11.2014), was investigated by DRI on intelligence of large-scale undervaluation; searches on 01.12.2014 yielded proforma invoices, emails, blank signed supplier letterheads, a price diary and electronic records. The partners, Shri Mahesh Agarwal and Shri Viresh Kothari, admitted in Section 108 statements that imports were systematically undervalued, dual invoices were prepared, and differential amounts were paid through non-banking channels. A SCN dated 28.05.2015 proposed rejection of transaction value under Rule 12 of the CVR 2007, re-determined assessable value of ₹22,06,28,290 against declared ₹11,20,05,936, differential duty of ₹1,71,26,244, confiscation under Sections 111(d)/111(m) and penalties under Sections 114A/114AA. The Commissioner of Customs-II, Chennai confirmed these proposals in Order-in-Original No. 45540/2016, and the importer and both partners appealed to CESTAT Chennai.

Key provisions

• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 14, Customs Act, 1962 — Valuation of goods
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Rule 3(2), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of the method of valuation
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Rule 9, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation