Customs authorities must prove undervaluation with substantial evidence, including contemporaneous import prices, rather than relying solely on unattested initial export declarations.

JUDGMENT :

UJJAL BHUYAN, J.

Since both the appeals arise out of the common judgment and final 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 filed by the Commissioner of Customs (Imports), Mumbai under Section 130-E of the CUSTOMS ACT , 1962 against the common judgment and final order dated 27.06.2008 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (briefly 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 justified in holding that enhancement of value of the imported goods and the penalties imposed by the Commissioner of Customs (Adjudication-1), 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 firm 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 filters 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 filters to M/s Ganpati Overseas through his firm M/s Arise Enterprises from Hong