K.S. Venkataramani, Member (T)

1. This appeal is directed against the order dated 31-5-1988 passed by the Additional Collector of Customs, Mangalore by which he had ordered assessment of the second hand stone edge cutting machine imported by the appellants herein for purposes of assessment of Customs duty at enhanced value under Section 14(1)(b) of the Customs Act, 1962 and also further held that the import against the licence produced was unauthorised, ordering confiscation of the goods imported under Section 111(d) and 111(m) of the Customs Act, 1962 levying a fine in lieu of confiscation of Rs. 1,00,000/-. A penalty of Rs. 25,000/- was also imposed on the appellants under Section 112 of the Customs Act, 1962. The facts in brief are that the appellants imported in September, 1987, one unit second hand stone edge cutting machine for which they declared CIF value of Rs. 35,000/- and also produced a Customs Clearance Permit over the same amount. They also made a further declaration that the machine had been supplied to them from Japan for use by the appellants and the granite stones after edge cutting and sculpturing were to be exported to Japan to the very same suppliers of the second hand machine to the appellants. The appellants were doing the job work for the foreign suppliers of the machine. The department, however, found on enquiry with regard to the valuation of similar machines from Japan that the price for similar goods were for Japan 9,108,000/-. The department also considered that the transaction for the import of the machine by the appellants was not at arm's length and held the suppliers of the appellants to be related persons. The department thereafter added the value of certain accessories giving depreciation @ 4% per quarter for the first year, 3% per quarter for the second year, 2.5% per quarter for the third year and 2% per quarter for subsequent years. The price of the machine imported was determined in this manner by the department as Rs. 4,07,873/- but they found that the appellants had declared only Rs. 35,165/- in the Bill of Entry. Therefore, there was a differential value of Rs. 3,72,873/- indicating undervaluation. Proceedings were instituted for such under-valuation and mis-declaration against the appellants which resulted in the impugned order of the Additional Collector, against which the present appeal has been filed.

2. Shri V. Sridharan, the learned counsel appeared for the appellants alongwith Shri A.R. Madhav Rao, the learned counsel. He submitted that the department has gone wrong in comparing the second hand edge cutting machine imported by them with a circular saw machine with sophisticated electric control system produced by a different manufacturer of Japan. He also questioned the mode of allowing depreciation. He further pointed out that no expert opinion of any technician has been obtained to say that the machines whose values have been by the department have, in fact, comparable. He further submitted that the appellants have furnished evidence of the first sale of the machine by the original manufacturer to a stone factory in Japan and also documentary evidence of the purchase of this second hand machine by the present suppliers, namely, TSUBOSAKA DERA Temple, Japan. They had further furnished a Chartered Engineer's certificate certifying the re-conditioning of the machine and giving its CIF value if imported new. The learned counsel further contended that the department had ignored the evidence of the amount of freight paid in the Bill of Lading while determining the assessable value. In fact, this amount has been recognised in the Show Cause Notice and yet the impugned order adopts a total different amount, which is illegal. The learned counsel further submitted that the suppliers of the machine were a famous temple authorities in Japan and there were no mala fides in the import of the machine by the appellants because the temple authorities have made it abundantly clear that they