P.G. Chacko, Member (J)

1. This appeal is against the following order of the Commissioner of Customs:

"1. I order confiscation of 96 numbers of Toner Cartridges valued at Rs. 1,06,022 (Rupees one lakh six thousand and twenty-two only) under Section 111(f) and 111(m) of the Customs Act, 1962. However, I give an option to redeem the same on payment of redemption fine of Rs. 25,000 (Rupees twenty-five thousand only) under Section 125 of the Customs Act, 1962. I also demand differential Customs. Duty of Rs. 60,254 (Rupees sixty thousand two hundred and fifty four only) under the first proviso to Section 28(1) of Customs Act, 1962 and interest on the said Customs Duty at the appropriate rates under Section 28AB of the said Customs Act which shall be paid at the time of redeeming the Toner. This option should be exercised within 30 days of receipt of this order.

2. I hold that the electronic goods which have been disposed of by the department, viz., Rechargeable battery of Mobiles, Mobile Chargers, Mobiles, Sony Digital camera 355 E, Sony Digital camera 218 E and 12 numbers of Cyber shot, for which a value of Rs. 35,55,550 (Rupees thirty five lakhs fifty five thousand five hundred and fifty only) has been realised on disposal, are liable for confiscation under Section 111(f), 111(i) and 111(m) of Customs Act, 1962.

3. I order confiscation of the electronic goods which are not disposed of, valued at Rs. 1,38,92,291 under Section 111(f), 111(i) and 111(m) of Customs Act, 1962. However, I give an option to M/s. Sri Sivam Enterprises, Chennai to redeem the same under Section 125 of the Customs Act, 1962, on payment of redemption fine of Rs. 35,00,000 (Rupees thirty five lakhs only) subject to payment of Customs Duty of Rs. 22,68,803 (Rupees twenty two lakhs sixty eight thousand eight hundred and three only) under the first proviso to Section 28 (1) of Customs Act, 1962 and interest on the said Customs Duty at the appropriate rates under Section 28 AB of the said Customs Act which shall be paid at the time of redeeming the said electronic goods. This option should be exercised within 30 days of receipt of this order.

4. I impose a penalty of Rs. 39,90,332 (Rupees thirty nine lakhs ninety thousand three hundred and thirty two only) on Sri Narendra Babu, Proprietor of M/s. Sri Sivam Enterprises, Chennai, alongwith interest payable on the Customs Duty demanded at Sl. Nos. 1 & 3 above as provided in Section 28 AB, in terms of the provisions of Section 114A of the Customs Act, 1962.

5. I order appropriation of Rs. 11,231 (Rupees eleven thousand two hundred and thirty one only) already paid by the importer vide TR 6 challan No. 98230368 dated 27.3.2003 towards the adjudication levies.

6. I order appropriation of Rs. 16,61,275 (Rupees sixteen lakhs sixty one thousand two hundred and seventy five only out of Rs. 35,55,550 realised on account of disposal of goods towards the appropriate Customs Duty leviable on the goods disposed.

7. I order appropriation of the balance amount of Rs. 18,94,275 (Rupees eighteen lakhs ninety four thousand two hundred and seventy five only) out of Rs. 35,55,550 realised on disposal of goods as mentioned at para 107 above, towards the aforementioned adjudication levies.

8.....................................

9.....................................

10.....................................

11....................................."

2. The facts of the case are briefly as follows;

3. M/s. Sri Sivam Entrprises, Proprietorship of Shri K. Narendra Babu (Appellant), filed Bill of Entry No. 422647 dated 26.2.2003 for clearance of a consignment of goods declared as 348 units of Toner Cartridges with a declared weight of 983 kg. and a declared value of Singapore Dollar 2.00 per unit. The total assessable value declared in the Bill of Entry was Rs. 19,762.47 as per invoice No. 3099 dated 25.2.2003 raised by the supplier, M/s. Alltek Technology Pte Ltd., Singapore. The amount of duty payable on this value was Rs. 11,231 which was paid by the importer on 27.2.2003. However, any "out of charge" order was not given as the Customs authorities suspected misdeclaration of the goods and its value. The consignment consisted of 29 cartons and a visual examination thereof revealed that 8 cartons were serially numbered from 1 to 8 and the rest of the cartons were not numbered.

The goods were taken up for a thorough re-examination (the Customs authorities in the Air Cargo Complex having initially examined three cartons which were found to contain only Toner Cartridges). It was found on re-examination that the serially numbered eight cartons contained 12 "Canon" brand Toners each. Barring these 8 x 12 = 96 Toners, there was no Toner in the entire consignment as the remaining 21 cartons contained only various goods of foreign origin other than Toners. The goods contained in these 21 cartons included Mobile Phones, Digital Cameras, LCD Projectors, SD RAMs/DD RAMs and other electronic components. The contents of each of the 29 cartons were inventorised and detained (for further investigation) in Mahazar proceedings on 27/28.2.2003 in the presence of independent witnesses. After estimating the value of the goods, the Customs authorities seized the detained goods under a Mahazar dated 6.3.2003. The total value so estimated was Rs. 2,18,25,411 as against the value of Rs. 19,762.47 declared by the importer. The premises of M/s. Sri Sivam Enterprises were subsequently searched, but no incriminating documents relating to the import were available. Further investigations revealed that one Shri K.S. Nagaraju, one Shri G.V. Seshadri Reddy, both employees of M/s. Supreme Freight Services, Bangalore (Customs House Agent) had assisted Shri Narendra Babu in documentation and other customs formalities in relation to the subject import. Statements of these persons were recorded and their residential premises were searched. Both of them stated that they had rendered assistance to Shri Narendra Babu for clearance of the consignment. The office premises of M/s. Geologistics Private Limited (Console Agent), who had sent the Cargo Arrival Notice to the appellant, were also searched and certain documents such as cargo arrival notice-cum-invoice, House Airway Bill etc. were recovered under a Mahazar. Statement of one Shri R. Rahul, Deputy Manager in the office of M/s. Geologistics Pte Ltd. was also recorded. Statements of certain other persons were also recorded. The investigators received a letter dated 20.3.03 from M/s. Alltek Technology Pte. Ltd., Singapore, stating that they were regularly supplying Toners to M/s. Sri Sivam Enterprises, that they had planned to send 348 Toners packed in 29 boxes to them on 25.2.2003 and that, due to mix up, certain other electronic goods like Digital camera, Mobile Phone etc. were wrongly sent alongwith 8 boxes of Toners. The letter further stated that they were willing to take back the materials wrongly sent. Meanwhile, the appellants moved the Principal Sessions Judges Court, Bangalore for anticipatory bail and the department opposed the bail application.

The Court allowed the bail application as per order dated 18.3.03 on certain conditions, which were to the effect that Shri Narendra Babu should co-operate with the Customs investigations. Subsequently, Narendra Babus statements were recorded. In one of these statements he stated, inter alia, that all his imports were from M/s. Alltek Technology Pte. Ltd., M/s. Tonerindo Mitra-Jaya (S) Pte Ltd. and M/s. TLS International, Singapore. Statements were also recorded from the partners of the CHA firm (Supreme Freight Services) and also from the driver of a Tempo which used to be hired by the CHA for transportation of cargo. Enquiries were also made through Indian Embassy, Singapore to ascertain the genuineness of the consignment and the nature of business of the supplier. A report dated 5.5.03 received from the Indian High Commissioner, Singapore stated that M/s. Alltek Technology Pte. Limited (Singapore) and M/s. Tonerindo Mitra-Jaya (S) Pte. Ltd., Singapore were in existence. It further stated that M/s. Alltek Technology Pte. Limited were an importer/exporter/distributor/dealer of copier parts while M/s. Tonerindo Mitra-Jaya (S) Pte Limited, Singapore was a wholesaler. It also reported that M/s. Alltek Technology Pte. Ltd seemed to be operating from a residential premises while M/s. Tonerindo Mitra-Jaya (S) P. Ltd. were operating from the office premises of a legal firm. The bail application was eventually dismissed by the Sessions Court and consequently the appellant was arrested on 12.8.03 and produced before the Court of Economic Offences, Bangalore, which granted him bail.

3. From the results of investigations, it appeared to the department that the appellant had misdeclared the contents of the import consignment and grossly under-valued the Toners with intent to evade duty. It was felt that the appellants commissions and omissions rendered the goods liable for confiscation under various clauses of Section 111 of the Customs Act and that the appellant had rendered himself liable for penalty under Section 114A of the. A show cause notice was, therefore, issued to the appellants proposing to confiscate the goods and to penalize him, apart from seeking to recover appropriate duty on the goods. These proposals were contested. It was in adjudication of this dispute that the impugned order was passed by the Commissioner.

4. We have examined the records and heard both sides. This appeal challenges the entire order as extracted in the opening para of this order. However, Ld. Counsel for the appellant has not pressed the challenge against the Commissioners finding of undervaluation. But he has made an endeavor to show that the appellant did not misdeclare the goods. In this connection, Ld. Counsel referred to three letters of the supplier, one dated 20.3.2003, addressed to the Commissioner of Customs, and the second and third dated 26.2.03 and 28.2.03 addressed to the appellant. The letter dated 20.3.03 signed by one Shri Daniel of M/s. Alltek Technology Pte. Ltd., Singapore and addressed to the Commissioner of Customs, Bangalore, stated that, on 25.2.03, they had planned to send 348 Toners in 29 boxes to M/s. Sri Sivam Enterprises but, due to mix up, only 8 boxes of Toners were consigned. The letter also listed the various electronic items contained in the other 21 boxes which were wrongly sent to the Indian importer. It also mentioned that they were willing to take back these goods. The second letter dated 26.2.2003 of Shri Daniel, addressed to M/s. Sri Sivam Enterprises also stated that a mix-up of boxes had occurred at their end while sending the consignment and that 21 boxes of Toners which were not sent to M/s. Sri Sivam Enterprises due to this mistake were lying with them. This letter, further, requested the appellant to advise as to what to do with these 21 boxes of Toners. The third letter dated 28.2.03 of Shri Daniel, addressed to the appellant requested the latter to make arrangements for re-export. Ld. Counsel argued that the appellant had not misdeclared the goods or its value inasmuch as they were not aware of the above mix-up of goods which occurred at the suppliers end. It was only at the time of re-examination of the consignment in India that the appellant came to know that only 8 cartons out of the 29 cartons contained Toners and that the rest of the cartons were containing other goods. According to Ld. Counsel, it was apparent from the above letters that the appellant was not, earlier, aware of the wrong despatch of un-declared goods. It was also submitted by the Counsel that the bona fides of the supplier was clear from the facts recorded in paragraphs 35 and 36 of the impugned order. The department, on enquiries made through Indian High Commissioner in Singapore, found that M/s. Alltek Technology Private Ltd., Singapore was in existence as exporter/importer/dealer/distributor of copier parts and were operating from a residential premises. Therefore, it was not correct to doubt the genuineness of export of the subject consignment by M/s. Alltek Technology P. Ltd. to the appellant. Ld. SDR contested these submissions by pointing out that the undeclared electronic goods had been purchased by the appellant from M/s. Fast Track Pvt. Ltd., Singapore under invoices No. 1599 dated 24.2.2003 and 1604 dated 25.2.2003 and not from M/s. Alltek Technology P. Ltd. She submitted that the said invoices, which were obtained in the name of M/s. Kamakshi Enterprises, Chennai (of which the appellant himself was the Proprietor) had described the goods as electronic goods. It was further submitted by Ld. SDR that these facts were not disputed by the appellant who, on the other hand, admitted, in his statement dated 3.4.2003, that the goods were intentionally misdeclared to smuggle the same alongwith 96 Toner cartridges at the instance of Shri Daniel of M/s. Alltek Technology Pvt. Ltd. The appellant also admitted that the 96 Toners were given to him free of cost as part of consideration for the smuggling of the undeclared electronic goods.

Again, Ld. SDR referred to the statement dated 8.3.03 of Shri R. Rahul of M/s. Geologistics Pvt. Ltd. (Consol Agent), wherein he had clearly stated that mixing-up of different consignments was not possible. Ld. SDR therefore, argued that the suppliers plea of "mix-up", contained in their letters addressed to the Commissioner and the appellant was not reliable. According to her, it was clear from the confessional statement of the appellant as well as the corroborative statements of others that the subject goods contained in 21 out of 29 boxes were misdeclared as Toners by the appellant for the purpose of smuggling of these goods alongwith 8 boxes of Toners. After assessing the evidence in this case, we are in complete agreement with the submissions of the Ld. SDR. The appellant can hardly feign innocence in this case. As a matter of fact, he admitted misdeclaration in his own statements, which were not validly retracted and were corroborated by other witnesses in their statements. The statements of the Consol Agent and the results of overseas enquiries conducted by the department also support the Commissioners finding of misdeclaration against the appellant. However, the 96 Toner Cartridges in 8 boxes cannot be considered to have been misdeclared inasmuch as these goods were correctly declared in the Bill of Entry. Consequently, these 96 Toners are not liable for confiscation, though, in the absence of challenge to the valuation of the goods, the demand of differential duty on these goods is sustainable.

6. For the reasons already recorded, the electronic goods in 21 boxes are liable for confiscation under Section 111 of the Customs Act. Some of these goods were disposed of by the department before adjudication of the case and the same are covered by Annexure II of the "work sheet" annexed to the impugned order. The remaining electronic goods which were not disposed of and were available for confiscation are covered by the Annexure I to the said work sheet. In respect of the latter, the adjudicating authority has imposed a redemption fine of Rs. 35 lakhs in lieu of confiscation and has also demanded customs duty of Rs. 22,68,803 with interest thereon. There is no challenge against this demand of duty. However, the quantum of fine is under serious challenge. In this connection, Ld. Counsel submitted that the goods were grossly over-valued for the purpose of redemption fine, by the Commissioner, under Section 125 of the Customs Act. The Commissioner, apparently, determined the quantum of redemption fine having regard to Mahazar value (Rs. 1,38,92,291) of the goods and the duty (Rs. 22,68,803) payable thereon. The Commissioner worked out the quantum of fine as a percentage of the sum of (Rs. 1,38,92,291 - 22,68,803 =) Rs. 1,61,61,094. According to Ld. Counsel, the undeclared goods covered by Annexure I were not worth this amount of Rs. 1.62 lakhs in the market. In his terminology, they were "junk" goods, which might be worth only 1 /5th of the above value, amounting to about Rs. 30 lakhs. Thus, Counsel would estimate redemption fine on these goods at Rs. 7 lakhs (Rs. 30 lakhs less the above duty) in terms of Section 125 ibid. His appreciation of the value of Annexure I goods is relative to the value of Annexure II goods estimated by the Commissioner. With reference to the entries in Annexure II of the work-sheet, Counsel submitted that the goods viz. Mobile Phones etc. which, according to him, were "prime" goods fetching high value in the market, were auctioned by the department at prices which were approximately 1 /3rd of the market value. The market value of Annexure II goods as estimated by the Counsel was Rs. 75,49,120 (Mahazar value) + 16,61,275 (duty) = Rs. 92,10,395. These goods were sold for Rs. 35,55,550 which was roughly 1/3rd of the market value. When the "prime" goods were actually sold at l/3rd its market value, the "junk" goods should have been valued at around 1 /5th its market value and redemption fine should have been determined accordingly. These arithmetics of Ld. Counsel have not been successfully rebutted. We, on our part, also find that the redemption fine of Rs. 35 lakhs imposed by the Commissioner is exorbitant. The price at which the mobile phones etc. were actually auctioned by the department should have been borne in mind by the adjudicating authority while estimating the value of goods apparently less attractive in the market. In the above facts and circumstances of the case, we are of the view that the redemption fine on Annexure II goods (undeclared) is liable to be reduced to about 1/5th.

7. Contentious arguments were also made in respect of the penalty imposed on the appellant under Section 114A of the Customs Act. This penalty is equal to the total demand of duty on the entire consignment consisting of correctly declared goods (Toners) and misdeclared goods viz. electronic items. Any penalty on the importer under Section 114A as applicable to the facts of this case should be on the ground of "short-levy of duty by reason of wilful mistatement or suppression of facts" by the importer. The wilful misdeclaration, by the appellant, of the contents of 21 out of the 29 boxes in the import consignment is a proven fact in this case. His misdeclaration of value of the goods imported is also an admitted fact. The valuation done by the Commissioner and the demand of duty on that basis stand accepted in this case. Thus, the short-levy of duty is attributable to the wilful misdeclaration of the goods and its value by the appellant, which attracts penalty under the above provision of law. But, we find, in determining the quantum of penalty, Ld. Commissioner fell into the error of taking into account the antecedents of the importer as well as certain commissions of the latter which rendered the subject goods liable for confiscation vide para 122 of the impugned order. These consideration, which were not relevant to Section 114A ibid, seem to have influenced the quantum of penalty. We have no doubt, the penalty amount fixed by the Commissioner is not justifiable and the same requires to be reduced.

8. In the result, it is ordered as under:-

1. The confiscation and redemption fine ordered in para (1) of the impugned order are set aside, but the duty demand therein is upheld.

2. Para 2 of the impugned order is upheld.

3. The duty demanded (with interest) on the electronic goods mentioned at SI. Nos. 2 to 6 of Annexure I to the worksheet annexed to the impugned order is upheld. But the redemption fine on these goods is reduced to Rupees seven and a half lakhs.

4. The penalty on the appellant under Section 114A of the Customs Act is reduced to Rupees five lakhs.

5. The impugned order is upheld subject to the above modifications.

The appeal is disposed of in the above terms.