Thangaiah v. The State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 30.4.2009CORAM:THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAOANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHHabeas Corpus Petition No.1552 of 2008Thangaiah... PetitionerVs.1.The State of Tamil Nadu, rep.by the Secretary to the Government, Public (SC) Department, Fort St.George, Chennai-600009.2.The Union of India, rep.by the Secretary to the Government, Ministry of Finance, Department of Revenue (COFEPOSA UNIT) New Delhi.3.The Superintendent of Central Prison, Central Prison, Trichy.... Respondents* * *Habeas Corpus Petition filed under Article 226 of theConstitution of India, praying to call for the records relating tothe detention order inG.O.No.S.R.1/512-5/2008, dated 9.9.2008, passedby the first respondent and quash the same and direct the respondentsto produce the body of the person of the detenu namelyT.Thiyagarajan, aged about 37 years, son of Thangaiah, before thisCourt, now detained under Section 3(1)(i) of the COFEPOSA Act in theCentral Prison, Trichy and set him at liberty.* * *For petitioner: Mr.B.Kumar, Senior Counsel for Mr.R.K.ChandramohanFor R.1 & R.3: Mr.N.R.Elango, Addl.P.P.For R.2: Mr.K.Ravi Ananthapadmanabhan* * * https://hcservices.ecourts.gov.in/hcservices/ O R D E RELIPE DHARMA RAO, J.The father of the detenu is the petitioner. He filed thispetition challenging the impugned order of detention which wasslapped on the detenu under Section 3(1) of the Conservation ofForeign Exchange and Prevention of Smuggling Activities Act (in shortCOFEPOSA). 2. The detenu is the proprietor of M/s.T.T.Enterprises, Trichy,engaged in the trade of apples. It is alleged that based on thespecific intelligence, the officials of the Directorate of RevenueIntelligence have initiated investigation with regard to under-valuation in the import of apples from various countries mainly fromM/s.Evan Fruit Company, USA and on investigation, they came to knowthat the detenu has committed the offence of under-valuation in theimport of apples and the total customs duty evasion is to the tune ofRs.1.75 crores and thus he has consciously evolved a modus operandito evade payment of appropriate customs duty by producing two sets ofinvoices, one showing lesser value for customs and another withactual value, which is the final loading invoice and therefore it isnecessary to detain him under the provisions of COFEPOSA with a viewto prevent him from indulging in smuggling of goods in future,further ordering confiscation of apples so imported under Section 111(m) of the Customs Act, 1962. The said order of detention has beenchallenged on various grounds in this Habeas Corpus Petition.3. Mr.B.Kumar, the learned senior counsel appearing for thepetitioner would submit that the documents mentioned in the index atPage Nos.42 and 43, which were relied upon by the Detaining Authoritywhile clamping the impugned order of detention, were not supplied tothe detenu. He has further submitted that the detenu, by hisrepresentation dated 2.12.2008, has specifically requested to furnishthe legible copies of documents at page Nos.298, 300-303, 335-338,347, 348, 358, 362, 403, 404, 411, 412, 414, 415 and 424, since theyare illegible, but no such documents were furnished to the detenu andtherefore, it has caused much prejudice to the detenu in makingeffective representation to the authorities concerned and therefore,on this sole ground itself, the impugned order of detention is liableto be quashed.4. In support of his arguments that non-supply of relied ondocuments would vitiate the order of detention, the learned seniorcounsel for the petitioner would rely on a judgment of the HonourableApex Court in ADISHWAR JAIN vs. UNION OF INDIA AND ANOTHER [(2007) 2MLJ (Crl.) 529 (SC)], wherein it has been held as follows: https://hcservices.ecourts.gov.in/hcservices/ "Non-supply of relevant documents, which are materialdocuments, to the detenu would affect the detenu's right tomake an effective representation which is his fundamentalright under Article 22(5) of the Constitution of India.Right to make an effective representation is also astatutory right."5. On the contrary, the learned Additional Public Prosecutorappearing for the respondents 1 and 3 would submit that the documentssaid to have been relied upon by the Detaining Authority are thedocuments produced by the detenu himself at the time of investigationand the so-called illegible documents are also nothing but the billsand other documents either seized or produced by the detenu himselfat the time of investigation. The learned Additional PublicProsecutor has strenuously submitted that the documents referred toabove by the detenu are very well legible and this stand has beeninvented by the detenu for the purpose of this petition, which shouldnot be entertained. The learned Additional Public Prosecutor wouldfurther submit that since all the above said documents regardingwhich arguments have been advanced on the part of the detenu areemanated from the detenu himself, either the non-supply of thedocuments themselves or the legible copies of the documents wouldnot, in any way, vitiate the impugned order of detention.6. On a perusal of the materials placed on record, we are ableto see that the documents mentioned in the index at page Nos.42 and43 and the documents at page Nos. 298, 300-303, 335-338, 347, 348,358, 362, 403, 404, 411, 412, 414, 415 and 424 are forming part ofbills of entry filed by the detenu himself for the import of applesand they were submitted by the detenu himself during the course ofinvestigation. Therefore, in our considered opinion, either the non-supply of very such documents or even the legible copies of the same,would not, in any way, have the effect of branding the impugned orderof detention 'illegal'. While arriving at this conclusion, we garnersupport from the judgment of the Honourable Apex Court in USHAAGARWAL vs. UNION OF INDIA AND OTHERS [(2007) 1 SCC (Cri) 342],wherein the Honourable Apex Court has held that 'copies of thedocuments supplied to the detenu, which are alleged to be illegible,were the documents sent by the detenu himself to the Departmentconcerned and therefore, illegibility of copies of portion of thedocuments is not a ground on which detention can be said to bevitiated'. In this view of the matter, the judgment of theHonourable Apex Court in ADISHWAR JAIN vs. UNION OF INDIA AND ANOTHER[(2007) 2 MLJ (Crl.) 529 (SC)] relied on by the learned seniorcounsel for the petitioner has no application to the facts of thecase on hand. This submission made on the part of the learned seniorcounsel for the petitioner, is, accordingly, rejected. https://hcservices.ecourts.gov.in/hcservices/

7. The learned senior counsel for the petitioner has strenuouslyargued that the sole allegation of the respondents against the detenuis that he has committed the offence of under-valuation in the importof apples and thus he has evaded the duty to the tune of Rs.1.75crores, but the respondents have nowhere stated as to how theydoubted the veracity of the valuation offered by the detenu in hisbusiness transaction and mere suspicion is not sufficient to arriveat a conclusion that the detenu has committed the offence of under-valuation and the procedure contemplated under the Customs Act, 1962and the Rules framed thereunder have not been followed by therespondents, leading to their arriving at an erroneous conclusion.The learned senior counsel for the petitioner would further arguethat the alleged under-valuation can be rectified by assessing thevalue of the goods by following the procedure contemplated under theCustoms Act and the Rules framed thereunder and if aggrieved of thesame, the detenu could invoke the appeal remedy available to himunder the Customs Act and without assessing the alleged under-valuation and without affording the opportunity of appeal remedy tothe detenu, which is very well available to him, on the allegedsolitary incident, the detenu was detained under COFEPOSA, which isbad in law and therefore, the same has to be quashed.8. To deal with this aspect of the case, we must analyse thelegal aspects covering the subject.9. The Customs Act, 1962 provides for the levy of duties ofcustoms, which is the issue on hand. Chapter V of the Customs Act,1962 deals with 'levy of, and exemption from, customs duties'.Section 14 deals with 'valuation of goods'. For the sake ofconvenience and better understanding, Section 14 of the Customs Act,1962 is extracted hereunder:"14. Valuation of goods -(1) For the purposes of the Customs Tariff Act, 1975 (51 of1975), or any other law for the time being in force, thevalue of the imported goods and export goods shall be thetransaction value of such goods, that is to say, the priceactually paid or payable for the goods when sold for exportto India for delivery at the time and place of importation,or as the case may be, for export from India for deliveryat the time and place of exportation, where the buyer andseller of the goods are not related and price is the soleconsideration for the sale subject to such other conditionsas may be specified in the rules made in this behalf:Provided that such transaction value in the case ofimported goods shall include, in addition to the price asaforesaid, any amount paid or payable for costs and https://hcservices.ecourts.gov.in/hcservices/ services, including commissions and brokerage, engineering,design work, royalties and licence fees, costs oftransportation to the place of importation, insurance,loading, unloading and handling charges to the extent andin the manner specified in the rules made in this behalf:Provided further that the rules made in this behalfmay provide for, -(i)the circumstances in which the buyer and the sellershall be deemed to be related;(ii)the manner of determination of value in respect ofgoods when there is no sale, or the buyer and theseller are related, or price is not the soleconsideration for the sale or in any other case;(iii)the manner of acceptance or rejection of valuedeclared by the importer or exporter, as the case maybe, where the proper officer has reason to doubt thetruth or accuracy of such value, and determination ofvalue for the purposes of this section:Provided also that such price shall be calculated withreference to the rate of exchange as in force on the dateon which a bill of entry is presented under Section 46, ora shipping bill of export, as the case may be, is presentedunder Section 50.(2) Notwithstanding anything contained in sub-section(1), if the Board is satisfied that it is necessary orexpedient so to do, it may, by notification in the OfficialGazette, fix tariff values for any class of imported goodsor export goods, having regard to the trend of value ofsuch or like goods, and where any such tariff values arefixed, the duty shall be chargeable with reference to suchtariff value." 10. Thus, as per this Section, the value of the imported goodsshall be the transaction value of such goods, i.e. the price actuallypaid or payable for the goods and where the Proper Officer has thereason to doubt the truth or accuracy of such value, he shall adhereto the procedure contemplated in the Customs Valuation (Determinationof Value of Imported Goods) Rules, 2007 to arrive at the correctvalue of the goods and thereafter proceed in accordance with law. 11. In exercise of the powers conferred by Section 156 read withthe above extracted Section 14 of the Customs Act, 1962, the CentralGovernment has framed the 'Customs Valuation (Determination of Value https://hcservices.ecourts.gov.in/hcservices/ of Imported Goods) Rules, 2007 (hereinafter referred to as theRules). Rule 3 of the said Rules deals with 'determination of themethod of valuation' and the same reads as follows:"RULE 3. Determination of the method of valuation -(1)Subject to rule 12, the value of imported goods shall bethe transaction value adjusted in accordance withprovisions of rule 10;(2)Value of imported goods under sub-rule (1) shall beaccepted: Provided that -(a) there are no restrictions as to the disposition or useof the goods by the buyer other than restrictions which -(i)are imposed or required by law or by the publicauthorities in India; or(ii)limit the geographical area in which the goods maybe resold; or(iii)do not substantially affect the value of thegoods;(b) the sale or price is not subject to some condition orconsideration for which a value cannot be determined inrespect of the goods being valued;(c) no part of the proceeds of any subsequent resale,disposal or use of the goods by the buyer will accruedirectly or indirectly to the seller, unless an appropriateadjustment can be made in accordance with the provisions ofrule 10 of these rules; and(d) the buyer and seller are not related, or where thebuyer and seller are related, that transaction value isacceptable for customs purposes under the provisions ofsub-rule (3) below.(3) (a) Where the buyer and seller are related, thetransaction value shall be accepted provided that theexamination of the circumstances of the sale of theimported goods indicate that the relationship did notinfluence the price. https://hcservices.ecourts.gov.in/hcservices/ (b) In a sale between related persons, the transactionvalue shall be accepted, whenever the importer demonstratesthat the declared value of the goods being valued, closelyapproximates to one of the following values ascertained ator about the same time.(i)the transaction value of identical goods, or ofsimilar goods, in sales to unrelated buyers in India;(ii)the deductive value for identical goods or similargoods;(iii)the computed value for identical goods or similargoods; Provided that in applying the values used forcomparison, due account shall be taken of demonstrateddifference in commercial levels, quantity levels,adjustments in accordance with the provisions of rule 10and cost incurred by the seller in sales in which he andthe buyer are not related;(c) substitute values shall not be established under theprovisions of clause (b) of this sub-rule.(4) If the value cannot be determined under the provisionsof sub-rule (1), the value shall be determined byproceeding sequentially through rule 4 to 9."12. Thus, a thorough procedure has been contemplated under Rule3 as to how the value of the goods has to be determined in the eventthe Proper Officer has reason to doubt the truth or accuracy of valueof the goods furnished by the importer, further making it clear thatif the value of the goods cannot be determined under the provisionsof this rule, the value shall be determined by proceedingsequentially through rules 4 to 9. Rule 4 deals with 'transactionvalue of identical goods and Rule 5 deals with 'Transaction value ofsimilar goods' and Rule 6 makes it clear that 'if the value ofimported goods cannot be determined under the provisions of Rules 3,4and 5, the value shall be determined under the provisions of rule 7or, when the value cannot be determined under that rule, under rule8'. It has been provided under Rule 6 that 'at the request of theimporter, and with the approval of the proper officer, the order ofapplication of rules 7 and 8 shall be reversed.' Rule 7 deals with'Deductive value'; Rule 8 deals with 'computed value'; Rule 9 dealswith 'Residual method'; Rule 10 deals with 'cost and services'.13. Under Rule 11, the importer or his agent shall furnish adeclaration disclosing full and accurate details relating to the https://hcservices.ecourts.gov.in/hcservices/ value of imported goods; and any other statement, information ordocument including an invoice for determination of the value ofimported goods by the proper officer and under Rule 12, when theproper officer has reason to doubt the truth or accuracy of the valuedeclared in relation to any imported goods, after seeking theexplanation from the importer and if the explanation is notsatisfactory, the proper officer can reject the declared value and atthe request of an importer, the proper officer, shall intimate theimporter in wring the grounds for doubting the truth or accuracy ofthe value declared in relation to goods imported.14. Thus, a thorough procedure to determine the value of thegoods has been contemplated by law under these Rules. The Act andthe Rules also mandates the Proper Officer to pass a speaking order,giving the reasons as to how he is not satisfied with the valuationoffered by the importer. As per Section 28 of the Customs Act, whenany duty has not been levied or has been short-levied or erroneouslyrefunded or when any interest payable has not been paid, part paid orerroneously refunded, the proper officer may serve notice on theperson chargeable with the duty within the time limit prescribedtherein. Section 128 of the Customs Act provides for appeal toCommissioner against any decision or order passed under the CustomsAct by an officer of customs within sixty days from the date of thecommunication to him of such decision or order. 15. When such safeguards and procedures have been contemplatedunder the Customs Act and the Rules framed therein, we are unable tofind anything from the bulky material submitted before us by therespondents, that they have followed the procedure contemplated underthe Customs Valuation (Determination of Value of Imported Goods)Rules, 2007 for assessing the value of the imported goods, so as tosay that the detenu has under-valued the same and is thus liable tobe punished. No reasons, much less appreciable ones, have beenoffered by the Department as to how they have arrived at theconclusion that the detenu had under-valued the goods imported. Evenif there is any such under-valuation, the respondents are duty boundto follow the above explained procedure contemplated under the Actand the Rules, whereupon the aggrieved party, the detenu in the caseon hand, will have the appeal remedy to the Commissioner, as providedunder Section 128 of the Customs Act. The burden, to prove that thedetenu has committed the offence of under-valuation and theDepartment has found out the same after scrupulously following thelegal procedure mandated under the Act and the Rules, lies on therespondents and once the respondents discharge their burden of proofby producing evidence, then, the onus shifts to the importer toestablish that the value offered by him is valid. But, in the caseon hand, the respondents have utterly failed to prove that they havescrupulously followed the procedure contemplated under the Act andthe Rules and arrived at the conclusion that the detenu has committed https://hcservices.ecourts.gov.in/hcservices/ the offence of under-valuation. Mere suspicion of the respondentsthat the detenu might have committed the offence of under-valuationis not sufficient to invoke the preventive laws. When even the non-payment of duty on such under-valuation can be recovered from theimporter by issuing him with the notice under Section 28 of theCustoms Act, 1962, we are unable to approve the action of therespondents in slapping the impugned order of detention on the detenu.16. At this juncture, we feel it apt to quote a judgment of theHonourable Apex Court in COMR.OF CUSTOMS, CALCUTTA vs. SOUTH INDIATELEVISION (P) LTD. [(2007) 6 SCC 373]. In this matter before theHonourable Apex Court also, the issue was under-valuation of sixconsignments of ceramic capacitors and one consignment of diodeswhile importing them from Hong Kong by the detenu. In thosecircumstances, the Honourable Apex Court has held as follows:"Value is derived from the price. Value is the function ofthe price. This is the conceptual meaning of value.Section 14 of the Customs Act, 1962 is the sole repositoryof law governing valuation of goods. In the present case,the Department has charged the respondent importer allegingmis-declaration regarding the price. There is noallegation of mis-declaration in the context of thedescription of the goods. The allegation is of under-invoicing. The charge of under-invoicing has to besupported by evidence of prices of contemporaneous importsof like goods. It is for the Department to prove that theapparent is not the real. The value to be declared in thebill of entry is the value determined in accordance withthe provisions of Section 14(1) and not merely the invoiceprice.""Sections 14(1) and 14(1-A) envisage that the value of anygoods chargeable to ad valorem duty has to be the deemedprice as referred to in Section 14(1). Therefore,determination of such price has to be in accordance withthe relevant rules and subject to the provisions of Section14(1). Section 14(1) and Section 14(1-A) are not mutuallyexclusive. Therefore, the transaction value under Rule 4must be the price paid or payable on such goods at the timeand place of importation in the course of internationaltrade. Section 14 is the deeming provision. It talks ofdeemed value. Therefore, what has to be seen by theDepartment is the value or cost of the imported goods atthe time of importation i.e. at the time when the goodsreach the customs barrier. Therefore, the invoice price isnot sacrosanct." https://hcservices.ecourts.gov.in/hcservices/ "However, before rejecting the invoice price the Departmenthas to give cogent reasons for such rejection. This isbecause the invoice price forms the basis of thetransaction value. Therefore, before rejecting thetransaction value as incorrect or unacceptable, theDepartment has to find out whether there were any importsof identical goods or similar goods at a higher price ataround the same time. Unless the evidence is gathered inthat regard, the question of importing Section 14(1-A) doesnot arise and the invoice price has to be accepted as thetransaction value. Invoice is the evidence of value.Casting suspicion on invoice produced by the importer isnot sufficient to reject it as evidence of value ofimported goods. Under-valuation has to be proved. If thecharge of under-valuation cannot be supported either byevidence or information about comparable imports, thebenefit of doubt must go to the importer. For provingunder-valuation, if the Department relies on declarationmade in the exporting country, it has to show how suchdeclaration was procured. Although strict rules ofevidence do not apply to adjudication proceedings and applystrictly to the courts' proceedings, even in adjudicationproceedings, the AO has to examine the probative value ofthe documents on which reliance is placed by the Departmentin support of its allegation of under-valuation. Once theDepartment discharges the burden of proof to the aboveextent by producing evidence of contemporaneous imports athigher price, the onus shifts to the importer to establishthat the invoice relied on by him is valid."17. The above judgment of the Honourable Apex Court squarelyapplies to the case on hand since in the case on hand also, theDepartment has failed to prove as to how they have arrived at theconclusion that there is under-valuation since there is no materialon record to show that the Department has followed the procedurecontemplated under the Act and Rules to arrive at the conclusionregarding the valuation. Surprisingly, the respondents have placedmuch reliance on the alleged confession statement given by the detenubefore the respondents at the time of investigation, though it isinadmissible in evidence, as per the Evidence Act, except to theextent of recovery under Section 27 of the Evidence Act. 18. Further more, there is a lot of delay in slapping theimpugned order of detention on the detenu. For the alleged incidentsaid to have taken place during the year 2005, the impugned order ofdetention came to be passed on 9.9.2008, for which no explanation,worth considering and appreciating, is coming forth from therespondents. Thus, we have no hesitation to hold that the respondentshave committed a legal error in slapping the impugned order of https://hcservices.ecourts.gov.in/hcservices/ detention on the detenu. On this ground, this Habeas Corpus Petitionis allowed.19. The other argument advanced on the part of the learnedAdditional Public Prosecutor that money was deposited into theaccount of the detenu from various sources and in one incident it wasfrom Hongkong International Bank, which proves the offence committedon the part of the detenu also cannot be appreciated since we find nowrong in such deposit as the detenu is doing international businessand therefore, he has to make payments through various banks. It isalso seen from the records and has also been submitted on the part ofthe detenu that the detenu is having customers all over the world andtherefore, he can get deposits from the customers in other countriesand therefore, we find nothing wrong in it.For all the above reasons and discussions, this Habeas CorpusPetition is allowed and the impugned order of detention is set aside.The detenu is ordered to be set at liberty forthwith, if hisdetention is not required in any other case. Sd/- Asst.Registrar/true copy/ Sub Asst.RegistrarRaoTo1.The Secretary to the Government of Tamil Nadu, Public (SC) Department, Fort St.George, Chennai-600009.2.The Secretary to the Government of India, Ministry of Finance, Department of Revenue (COFEPOSA UNIT) New Delhi.3.The Superintendent of Central Prison, Central Prison, Trichy. https://hcservices.ecourts.gov.in/hcservices/

4. The Joint Secretary to Government, Public (Law & Order) Department, Fort Saint George, Chennai-9.5. The Public Prosecutor, High Court, Madras-104.+1 cc to Mr.K.Ravi Anantha Padmanaban, Advocate, SR.No.20315+1 cc to Mr.R.K.Chandra Mohan, Advocate, SR.No.19937 Order in H.C.P.No.1552 of 2008VSV {CO}TP/20.7.2009.