- (1.) The appellant-company herein had imported two machines used for chip placing in the manufacture of memory modules viz. 'Amistar Chip Placer Machine' from M/s. SMART Modular Technologies, Malaysia and declared a value of US $ 39,000 CIF (Rs. 18.06 lakhs) and filed bill of entry No. 650719, dated 19th July, 2004 along with invoice No. 040709-001, dated 7th July, 2004. The consignment was detained and the matter was investigated, on the basis of which according to the Department the machines were grossly undervalued. Examination of the two machines revealed that the said machines were used and refurbished. A registered Chartered Engineer Shri H.V. Krishnaswamy valued the machines at $ 1,21,875. Detailed investigations were carried out. It was revealed that the appellants are manufacturing "Memory Modules" with the brand name "SMART" and "Hynix". The technical know-how and necessary equipment and training to the appellant was provided by M/s. SMART. The capital goods required were also supplied to them free of cost. M/s. SMART continued to remain the owners of the capital goods and the appellant is not allowed to sell or lease the same. During investigations, the CIU recovered a document titled "Agreement between Smart Modular Technologies and M/s. Sun Electronics Technologies Ltd." Though the agreement is unsigned, it confirmed the existence of a relationship between the supplier M/s. Smart and receiver M/s. Sun Electronics Technologies Ltd. (appellants). Earlier also, the appellant had imported four similar Chip Placer Machines along with Laser Microscope and Sigma tester vide Bills of entry dated 20-11-2000, 20-12-2000 and 16-12-2003. According to the Department the value of the aforesaid machines were also declared less. On the basis of this investigation the department issued show cause notice as to why the demand of Rs. 22,278,742/- in respect of bill of entry dated 19-7-2004 be not made and a proposal was also made for confiscation of these machines. So far as the earlier imports are concerned in the show cause notice reassessment was proposed demanding the differential duty of Rs. 62,65,657/-. The action for penalty was also proposed therein. The matter was adjudicated upon, which resulted in passing of order dated 4-5-2006 by the Commissioner of Customs, Bangalore. In this order the Commissioner confirmed the duty of Rs. 22,78,742/- on the two machines for which bill of entry 650719, dated 19-7-2004 was lodged in respect of earlier machines but duty was enhanced from Rs. 18,06,031/- to Rs. 56,43,848/- in terms of Section 14 of the Customs Act read with Rule 8 of the Customs Valuation Rules, 1988. The order of confiscation was also passed and penalty was imposed as well. The appellants challenged this order by filing an appeal before the CESTAT. The CESTAT had affirmed the order and dismissed the appeal vide impugned judgment dated 15-4-2008 [2008 (231) E.L.T. 334 (Tri. - Bang.)]. It is this judgment the veracity thereof is questioned by the appellant in the instant appeal.
(2.) Various arguments are raised by the learned senior counsel appearing for the appellant but it is not necessary to deal with all those arguments inasmuch as after hearing learned counsel for the parties, we are proposing to refer the matter back to the CESTAT for fresh consideration. Because of this reason we are taking note of the principal submission which is made by the learned counsel.
(3.) It is submitted that the Commissioner wrongly applied Rule 8 of the Valuation Rules which pertains to the "best judgment assessment" inasmuch as in this case transaction value could be arrived at on the basis of material that was produced before the Commissioner and, therefore, the Commissioner should have taken recourse to Rule 4 of the Transaction Valuation Rules. In support of this submission, the learned counsel has argued that there was no sale consideration given by the appellants to M/s. 'SMART' at the time of import of these machines, there was a fair understanding between the parties that as soon as the appellant starts making profit it will pay the price of the said machines. According to the appellant in the year 2004, the appellant-company started earning profits and in that year the appellant had made payment of US $ 1,03,000 towards the cost of these machines to M/s. 'SMART' in December, 2004. Our attention was drawn to the reply to show cause which was filed by the Commissioner wherein specific averment to this effect has been made in the following manner : "As already stated the capital goods have been purchased from M/s. Smart. The payment facility was extended as business was a major diversification and the noticee company wanted to have an option of returning the machines if the business did not pick up. Further the noticee company was a loss making company and did not have the funds to pay for the machines immediately. The capital goods are not the properties of M/s. Smart. However, until the noticee pays for the machines M/s. Smart wanted to have the flexibility of asking the noticee to return the same if eventually the noticee was unable to pay for the same. However, the documentary proof of payment made in December, 2004 clearly proves that the machines were in fact purchased by the noticee and not transferred as alleged in the show cause notice." ;