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Knowledge Infrastructure Systems Private Limited and Others VS Additional Director General, Directorate of Revenue Intelligence, Mumbai

    Appeal Nos. C/85234 to 85236/2017 (Arising out of Order-in-Original No. 05/KVSS(05)ADG (ADJ)/DRI/MUMBAI/2016-17 dated 23rd December 2016 passed by the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai) and Order Nos. A/86617-86619/2018

    Decided On, 31 May 2018

    At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Mumbai

    By, MEMBER

    For Petitioner: Mukul Rohatgi, Atul Nanda, Vikram S. Nankani, Senior. Advocates, Prakash Shah, Saurabh Kripal, Manali Singhal and Prasad Paranjape, Advocates And For Respondents: P.R.V. Ramanan, Special Counsel (AR)

Judgment Text

1. On a superficial perusal of the dispute, the facts are simple enough: the appellant, M/s. Knowledge Infrastructure Systems Private Limited, having entered into two contracts with M/s. Mahagenco Ltd., an energy producer, for supply of 21,04,500 metric tons of 'coal' to be sourced from Indonesia between September 2013 and June 2014, effected the imports for the Bhusaval plant at Mumbai port and for the Chandrapur facility through Kakinada port. The contracts stipulated that the coal, totaling 11,48,000 metric tons and 9,56,500 metric tons, conform to agreed-upon specifications, including 'gross calorific value' (on 'as received' basis) of over 4000 kcal/kg and total moisture (on 'as received' basis) of less than 30% at an agreed upon price of US$ 70.20 and US$ 65.55 per metric ton and, in the event of being 'off spec', the consideration was to be limited to inland freight and value of coal computed at Re 1 per metric ton. The corresponding supply contract with M/s. Spring Traders Ltd., Hongkong for supply of coal priced at US$ 53.50 per metric ton prescribed total moisture content (on 'as received basis) of 26% and 'gross calorific value' (on 'as received' basis) of 4600 kcal/kg. Details of the contract with M/s. Rescom Mineral Trading Ltd., Hongkong are not available on record.

2. The allegations leading to the impugned order-in-original No. 05/KVSS(05) ADG (ADJ)/DRI/MUMBAI/2016-17 dated 23rd December 2016 are no less simple: a parallel transaction on the same goods operated entirely outside the country between M/s. IMR Metallurgical Resources AG and the Singapore-based subsidiary of the appellant-importer, M/s. Knowledge International Strategy Systems Pte Limited, involved procurement from mines of coal that did not meet the threshold specifications and for consideration far less than that declared at the time of import.

3. The proceedings leading to this appeal and the rival arguments during the hearing have discarded all pretensions to that superficial simplicity posited supra. To start with, the chasm between the two allegedly parallel transactions - the unbeknownst one entirely outside the country and the overt one straddling Hongkong and India - was sought to be conjoined with evidence considered in the impugned order to suffice and which the appellants describe as fabricated and unsubstantiated. A perlustration of the impugned order manifests the concatenation of facts and unanswered abnormalities to complete the picture in the jigsaw puzzle. The counter disparaged the authenticity of the relied upon documents, steadfastly disclaimed any transaction save the one with the Hongkong entities and asserts that the 'certificates of sampling and analysis' furnished at the time of import and all subsequent tests discredit the investigation.

4. The thrust of the allegations that were held as established in the impugned order, and reiterated on behalf of Revenue in the proceedings before us, is that M/s. Mahagenco Ltd. was short-changed in the quality of coal that was supplied and that the excess consideration derived therefrom was remitted outside the country. Indubitably, the first of the allegations - a civil dispute, if at all - does not concern us as creatures of Customs Act, 1962. Neither does the second as the creator-statute was enacted to control cross-border movement of goods which remittances of foreign exchange are not.

5. Territorial limits of national jurisdiction obscures the supply chain in international trade save for the last one pertaining to arrival of the goods. That is as it should be and the customs laws have evolved by universal consensus to lay down common rules of engagement. Undervaluation of imports to evade duty is easily comprehensible and the evolved law offers sufficient and universally accepted means - the metaphorical drawbridge for getting across the metaphorical moat - the limbo that isolates the visible cross-border transaction from its preceding unknown external transactions. The rules for valuation notified under section 14 of Customs Act, 1962 are designed to offer acceptable substitutes - legal fiction, as it were - for the recorded value. Here, most of such potential substitutes may not have been of avail to Revenue, and indeed were not, rendering the last resort to be the first and only option. Once the portcullis is down and the drawbridge up, all too often natation and escalading are susceptible to repelling. Fifth columns may destroy in war but are of little use in the world of law; the success of the Trojan horse was not its acceptance by the enemy but the subsequent access to the besiegers from within. That appeared to be the dilemma before the investigation.

6. Notwithstanding the manifest disconnect with the two principal causes of cavil, the statutory requirement under section 46 of Customs Act, 1962 to declare the correct value of imported goods was invoked in the show cause notice to claim jurisdiction and overvaluation of the imported goods was confirmed in the impugned order-in-original of Additional Director General (Adjudication), Mumbai for which the importer was subject to penalties under section 112 and section 114AA of Customs Act, 1944 attendant upon liability to confiscation of the imported cool under section 111 (m) of Customs Act, 1962 and for submission of false documents respectively along with penalties imposed under section 112 on Shri Rahul Bhandari and on Shri Vipin Mahajan.

7. The investigations and subsequent proceedings hinged substantially on the quality of coal that was imported. The only use that coal has for man is its capacity to heat and it is, therefore, but natural that the measure of its quality be adjudged by parameters such as 'gross calorific value.' Being a naturally occurring mineral, uniformity or consistency of 'gross calorific value', even from the same source, is hardly to be expected and testing of representative samples is a necessary consequence. Coal is normally transported in dry bulk vessels. For ensuring stability of the carriers, the hold is segregated and, being exposed to the elements during voyage, may absorb, or be layered with, moisture and other extraneous material. The testing of samples, to be purposeful, would have to follow appropriate protocols to be considered representative.

8. In the present dispute, there is the declared transaction of Indonesian coal procured by Hongkong sellers for export to India and, alleged by the investigation, there is another chronologically proximate transaction between a Swiss supplier and a Singapore buyer unearthed by them. The Swiss supplier in the unearthed transactions and the Indian buyer in the declared transaction find themselves as shipper and notify party respectively in the bills of lading that were furnished by the importers. The Singapore entity in the unearthed transaction is, admittedly, a subsidiary of the Indian importer. The parameters of coal contracted by M/s. Mahagenco Ltd. were specified. Tests of this vital determinant, reported in 'certificate of sampling and analysis' claimed to have been carried out at load port were appended to the bills of entry by the appellant-importer for assisting in assessment.

9. The quantities, subject to excess or shortage within tolerance parameters, in the bills of lading, acknowledging M/s. IMR Metallurgical Resource AG as shipper and the appellant-importer, as well as the Hongkong based suppliers, M/s. Spring Traders Ltd. in five of the consignments and M/s. Rescom Mineral Trading Ltd. in the other, as the 'notify party', matched that contracted for supply to M/s. Mahagenco Ltd. by the importer-appellant. With this as the fulcrum, the investigators obtained copies of contract of M/s. IMR Metallurgical Resource AG, that revealed the buyer as the Singapore subsidiary of importer-appellant, the pertinent invoices and the 'certificates of sampling and analysis' and the 'certificates of origin' that the supplier was contractually obliged to furnish. All of these, according to the show cause notice and the impugned order, sufficed to connect the parallel transactions.

10. The adjudicating authority is convinced that the coal involved in the Swiss-Singapore transaction is the same as the coal presented for assessment in the Hongkong-India transaction and adopted the consideration in the former for coal of unacceptable quality, established by deduction of the adjudicating authority from the report of the Deputy Chief Chemist, Central Revenue Control Laboratory, as the benchmark values. According to him, the corroborative evidence are the similarity of quantities contracted for and the vessels that carried the coal; the red flags are the foregoing of duty exemption to obviate the production of certificate of origin, assumption of responsibility for marine insurance coverage despite the supplier being obligated to, the intrusion of suppliers from Hongkong instead of the Singapore subsidiary of the importer and mismatch of load-port analysis furnished by the Swiss entity and by the importer; the culpability is evinced by the readiness to transact directly, on a separate occasion, with the Swiss supplier where the quality of coal matched the contract terms, the unwillingness of the importer to set the records straight through their Singapore subsidiary and the lack of response from the bankers of the Hongkong entities; all with intent to foist cheaper coal of poor quality on the energy producer in India who was the ultimate buyer. The elaborate layering of transactions was thus found by the adjudicating authority to be the vehicle for obfuscation of the Swiss-Singapore deal for supply of 'off spec' coal. The metaphorical drawbridge in the impugned order is the integrity certificate accorded to M/s. IMR Metallurgical Resource AG and the conformity of the 'gross calorific value' of the coal as certified by customs laboratory with that of the independent inspecting agency in 'certificate of sampling and analysis' furnished from Switzerland. Thus the impugned order held the identity of the coal to have been established and, sanctified by the documents furnished by M/s. IMR Metallurgical Resources AG, the transaction value isolated and adjusted by a minor factor of 3.5% for profitability, to invoke statutory detriment.

11. We observe that the structure of the Singapore subsidiary, the connection with the Hongkong parties, the pattern of the two sets of transactions, the insurance coverage, the superfluity of intermediaries for the supply to M/s. Mahagenco Ltd., the institutional repute of M/s. IMR Metallurgical Resource AG and the factual proximity of the official test reports to the 'certificate of sampling and analysis' received from Switzerland convinced the adjudicating authority lend credence to the documents procured by the investigators and to attribute motives for the layering of that which should have been a direct transaction with M/s. IMR Metallurgical Resource AG or, at best, with the Singapore subsidiary and the consequent obfuscation of the true price. The denouement was the loading of declared value by 16.83% to enable confiscation under section 111 of Customs Act, 1962 with attendant penalties under section 112 and separately under section 114AA of Customs Act, 1962.

12. The conviction on the part of the adjudicating authority that this constructed jigsaw is complete has drawn sustenance from the decision of the Tribunal in Samsung India Electronics Ltd. v. Commissioner of Customs, New Delhi : 2014 (307) ELT 160 (Tri-Del)] on the sufficiency of preponderance of probability and circumstantial evidence in quasi-judicial proceedings. The assailing of the documents obtained by the investigators, the 'black hole' transaction of the Singapore subsidiary and the challenge of conformance of quality in the tests carried out after landing were all sought to be overcome with the authority of this decision.

13. Some sidelined aspects must be brought to the fore here. The penal consequence of 'off spec' supply did not appear to concern both sides during the hearing. The consignments imported for supply to M/s. Mahagenco Ltd. were cleared, initially on provisional assessment in accordance with the practice then prevailing arising from a longstanding dispute on the classification of coal as 'bituminous' or 'steam' - that classification clearly without any bearing on the present dispute - between 4th November 2013 and 26th May 2014, and finalized under section 18 of Customs Act, 1962 before the imports came under the scanner of Directorate of Revenue Intelligence. It is those tests carried out for the finalization of assessment that were considered to be of consequence in the adjudication order, of the many consignments that had been imported, it is common ground that only six, involving shipment of 3,36,487 metric tons landed during the period and representing 16% of the total contracted quantity, were covered by the investigation.

14. According to the appellants, other than the contracts, invoices, certificate of sampling and analysis and certificate of origin (Form A-1) purported to relate to the transaction of M/s. Knowledge International Strategy Systems Pte Ltd., Singapore furnished by M/s. IMR Metallurgical Resource AG, no other document is on record; no statement other than that of the two individual appellants has been referred to. It is also contended by them that no effort has been made to investigate the overseas entities and that, in the absence of such investigation, documents relied upon are suspect and appeared intended to fabricate a case of humungous proportions merely for public consumption. The adjudication order is assailed for having accepted the vague allegations merely by transferring the onus on to the noticees to disprove that which has never existed.

15. On behalf of appellant, the credibility of the documents in whose favour the ones furnished at the time of import were discarded was questioned by Learned Senior Counsel with reference to provenance, connection and contents and, instead, placed emphasis on the acceptance of coal without demur by the buyers. According to them, tests had also been carried out at port of discharge, on the direction of assessing officers at the subordinate formations of the Central Revenue Control Laboratory, and by M/s. Mahagenco Limited on delivery; it is their assertion that all three were in conformity with the threshold prescribed as specifications in the contract of supply. They further contend that the 'certificate of sampling and analysis' furnished by them, the official test reports and the acceptance of consignments by M/s. Mahagenco Ltd. should suffice to exonerate them of the charge of supply of 'off spec' coal. The jurisdiction to take recourse to Customs Act, 1962 to redetermine the value and to penalize was challenged.

16. Learned Special Counsel for Revenue did defend the inferences drawn from the documents relied upon; he was more categorical in laying out the legal framework that mandated action by customs authorities for overvaluation of imported goods even in the absence of any duty implication. We propose to deal with these legal aspects before taking up evaluation of the facts. However, of necessity, we must record certain preliminaries that require clarification first.

17. It is on record that the Hon'ble High Court of Bombay, on application of the appellants here, had directed an early disposal of the matter. Accordingly, their application for early hearing having been allowed, the matter was placed before a regular bench and reserved for orders after arguments for the rival sides were heard at length. Before the order could be pronounced, the superannuation of one of the constituents of the erstwhile bench intervened to preclude that consummation. The detailed submissions made then are on record as notes of proceedings; both sides were at liberty to take copies and acquiescence deemed to be acceptance of veracity of the contents. It would appear that this opportunity had not been availed of by both sides though, on a subsequent occasion, Mr. Mukul Rohtagi, Learned Senior Counsel, did highlight a few discrepancies in the record and stated that a detailed submission of incongruities therein would be filed.

18. Thus the appeal came to be listed before this bench. Regretfully, the several hearings thereafter would not go down as a model of harmony in the courtroom and certainly noteworthy for lack of that decorousness expected in appellate proceedings; a plea for adjournment of proceedings on the first day, actuated by personal compulsions of Learned Special Counsel for Revenue, was made through a miscellaneous application purportedly filed by officials of the respondent on record, and contrary to the convention of disengagement of respondent/appellant once the representative is before the Tribunal requiring such request to be preferred by Learned Special Counsel either directly in person or indirectly through communication. In the circumstances, the bench recorded detailed observations while granting adjournment, albeit not to the extent sought for, and ordered the matter to be heard afresh notwithstanding the lengthy narrative made on behalf of the appellants. On the adjourned date of hearing, the appeal was not taken up as the bench was strangely confronted with miscellaneous applications of the adjudicating authority who, despite being functus officio, sought transfer of the appeals. Disposing off those applications by a detailed order, the proceedings were ordered to be adjourned to a date that would not inconvenience Learned Special Counsel for Revenue. These proceedings, it must be noted, took place in the absence of representative of Revenue and it would appear from subsequent events that the official record of the court was ignored by Revenue in favour of hearsay reporting by persons unknown.

19. Aggrieved by this delay in concluding the proceeding, the appellant disputed the aforesaid order before the Hon'ble Supreme Court who was pleased to direct that hearing, to be held day-to-day, should concluded forthwith. It was in these circumstances that, on the date scheduled for the hearing, the oral plea of Mr. PRV Ramanan, Learned Special Counsel for Revenue, seeking adjournment to enable applying for review of the order of the Hon'ble Supreme Court was held by us to be tantamount to defiance of those directions; more particularly, in the absence of any recorded advice on the part of the Additional Solicitor General of India which was claimed to be the prompting for this plea to defer. Revenue was, in consequence, adjured to continue the proceedings without further adjournment. At that stage, Mr. Ramanan requested the bench to clarify its objections to the locus standi of the respondent in making submissions to the Tribunal, the refusal of which was asserted by him to be nothing short of disregard of the principles of natural justice. It was clarified to him that, while a named respondent, as a creation of the appeal, is competent to make pleadings, Shri KVSS Singh had not been, either by name or by designation, so designated and his attempt to insinuate, without provocation and bereft of post-adjudication existence, was gross impropriety. Though the statute enables jurisdiction to adjudicate, the genesis of, and vestment to, exercise that jurisdiction in a particular proceeding lies in the show cause notice and the jurisdiction stands alienated with concluding of the adjudication order. Had he been directed to appeal against his own order by the competent review authority, it is as an executive subordinate and not as independent adjudicating authority. It is the appellant who creates a respondent and we have not come across any approved alteration of cause title to entail even a mistaken foray by the adjudicating authority in the present proceedings.

20. Mr. Ramanan then chose to ask for the recusal of one of the constituents of the bench and placed the miscellaneous application with that prayer of Revenue before us. We took note that these had been filed only on the previous day and hence not listed with the appeal. Mindful of the directions of the Hon'ble Supreme Court, we took his oral averments on record. We do not propose to dignify this bizarre pitch made through an instrument prescribed for seeking interlocutory orders by recording the contents here. Acceding to that plea would, indirectly, have stultified the directions of the Hon'ble Supreme Court. The grounds for seeking recusal, to us, appeared to be puerile and reflective of inadequate comprehension of the law. The inventory of grievances against the constituent was his presence in three benches that dealt with various miscellaneous applications and the final hearing that remained inconclusive. We are, by the peculiar characteristic of judicial conventions, unable to visit the mind of our predecessor bench to justify the inconclusiveness of that proceeding. At least, the interlocutory orders were not beyond challenge if found wanting in legality and, not having done so, the demand for recusal is akin to a childish tantrum for the moon that is beyond reach. In the circumstances, we forbear to speculate on the motive for this plea. We merely hearkened to the provisions in the statute prescribing disposal of appeals preferred before the Tribunal and the empowerment to constitute benches with the composition thereof, in the interest of judicial autonomy, not being subject to the pleasure or demand of either of the litigants. Having reassured Learned Special Counsel of the transparency of our mechanism and our commitment to a fair hearing, we, with acquiescence of both sides, continued the proceedings. We do hope that this distasteful episode is consigned to the place that it rightfully belongs. As far as we are concerned, it never occurred.

21. Laying the ground for the appeals, Mr. Mukul Rohatgi, Senior Counsel appearing for appellant-importer, contends that the coal that was imported for supply to M/s. Mahagenco Ltd., sourced from Indonesia through entities in Hongkong, was in conformity with the specifications in the contract. According to him, the 'certificate of sampling analysis' at load port issued by M/s. Pt Artha Buana Inspecktindo and M/s. Proteknika Jasapratama, as well as that which had been undertaken at the behest of Indian Customs at the port of import and of the multiple samples drawn by independent agencies for M/s. Mahagenco Ltd., are in congruity. He challenged the documents, relied upon in the show cause notice and impugned order, for the lack of authenticity, their questionable provenance, and absence of any linkage to the contracted supply. It is also his contention that the quantity involved in the dispute was but a very negligible portion of that contracted thus belying the projection by the Directorate of Revenue Intelligence of a deep-rooted conspiracy to supply inferior coal in the guise of coal of a superior quality.

22. According to Mr. Rohatgi, the documents had been obtained through a suspect channel and that the process of summons under section 108 of Customs Act, 1962, issued to M/s. IMR Metallurgical Resources India, had been contrived to lend credence to documents that were covertly secured by the investigators without the stamp of internationally accepted covenants that spoke for its provenance.

23. Mr. Rohatgi asserts that the allegation of parallel transactions is but a chimera to claim credibility for the unsubstantiated allegation of transgression from the terms of the contract of supply. That M/s. Mahagenco Ltd., the party to the agreement and user of the coal, had no grievance about its quality was sufficient, according to him, for dismissing this feebly constructed case of short-changing. Pointing out to the perversion of the test report in the impugned order by resort to an untried and untested formula, culled out from a webpage article, as demonstrative of fabricated depiction of disjointed facts to suit the allegations invented by the investigators, he sought quashing of the impugned order.

24. Shri Atul Nanda and Shri Vikram Nankani. Learned Senior Counsels appearing for Shri Rahul Bhandare and Shri Vipin Mahajan, supported the submissions of Mr. Rohatgi and, drawing attention to the lack of any evidence to substantiate the allegation of over-invoicing, sought the setting aside of the penalties imposed on the appellants. On behalf of the appellants, the confiscation and penalty has been challenged for lack of competence to invoke section 111(m) in relation goods cleared after completion of statutory pre-requisites and for the lack of coverage of section 114AA in relation to documents that are genuine and reflective of the transactions. According to them, Shri Rahul Bhandare is not an executive functionary of the importing entity and that Shri Vipin Mahajan was not concerned with filing of any documents or declarations before customs authorities. Drawing attentions to the various conjectures in the impugned order, it is their contention that settled law does not permit penalties that are founded on erroneous and unauthorized confiscation.

25. Justifying the finding in the impugned order that the goods are liable for confiscation, and the consequential penalties, Mr. Ramanan narrated the course of the investigation and the progression of evidence which, according to him, sufficed as proof of allegations in quasi-judicial proceedings. He asserted that the documents, purportedly evincing the procurement of coal from the mines in Indonesia by M/s. IMR Metallurgical Resources AG, had been received in response to a request made to their Indian arm for information pertaining to coal procured for dispatch to India and that no flaw could be ascribed to such communication sought under a legal process. No further certificate of authenticity was required, according to him, than the imprint in the impugned order of the cover in which these were delivered. He argued that the legality of the process by which the documents had been secured was secondary to the greater good of unravelling of the conspiracy to defraud and the deployment of these documents to bring the offenders to book. Decrying the attempt to trivialize the scale of the conspiracy, he asserted that the investigation leading to the present proceedings was but a tip of the iceberg and that clean bill of health cannot be assumed to have been accorded to the other consignments imported in fulfillment of the contract.

26. Enumerating the transactions, as unearthed by the Directorate of Revenue Intelligence, Mr. Ramanan contends that M/s. Spring Traders Ltd. and M/s. Rescom Mineral Trading Ltd., both based in Hongkong and suppliers on record of the impugned consignments, were merely ornamental intermediaries for obscuring the actual transaction in which M/s. IMR Metallurgical Resources AG and M/s. Knowledge International Strategy Systems Pte Ltd., the Singapore-based subsidiary of the importer-appellant, are the seller and buyer of coal of unacceptable calorific value with M/s. Mahagenco Ltd. having to foot the inflated bill. Furthermore, he contends that the importer eschewed their eligibility for exemption from all duties under notification No. 46/2011-Cus dated 1st June 2011 because it was predicated upon presentation of evidence of origin which would have entailed disclosure of the first transaction of M/s. IMR Metallurgical Resources AG with the Indonesian supplier and the undeniability of the first 'certificate of sampling and analysis' withheld from the authorities, thus burdening M/s. Mahagenco Ltd. with unwarranted levies also; that, even if the burden was borne by the appellants, the resultant duty liability, and at the overvalued price, was, according to Mr. Ramanan, but a minor sacrifice for the major benefit derived therefrom - transfer of funds outside the country through overt channels - at the cost of consumers of energy who were destined to bear the burden in the 'cost-plus' regime of tariff determination under the Electricity Act, 2003.

27. Turning to the applicability of the Customs Act, 1962, Mr. Ramanan disclaimed any attempt to invoke the provisions of section 28 of Customs Act, 1962 pertaining to misdeclaration, suppression et al or to reopen a finalized assessment. He contends that confiscation of goods was authorized in the circumstances unique to section 111(m) of Customs Act, 1962 as consequence of misdeclaration of value; according to him, the legislative deployment of 'value' in the confiscation provision enabled resort to the definition in section 2 of Customs Act, 1962 which, by reference to section 14 of Customs Act, 1962 empowered application of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for re-determination of value even if assessment to duty was not in dispute. By this, he posits that appraisal of value is not restricted to determination of liability to duty - whether final or provisional - under section 17 or 18 of Customs Act, 1962 or, under section 28 of Customs Act, 1962, for recovery of duty not levied or short-levied at the time of clearance of goods; the empowerment to confiscate and, according to him, the legislative intent in amending of section 111(m) of Customs Act, 1962 by Act No. 36 of 1973, could be made operable only by such an interpretation of 'value' in section 2(41) of Customs Act, 1962. He went on to argue that the adjudicating authority, even without resort to the various sequentially applicable alternatives in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, would have been justified in rejecting the declared value as unrepresentative of the transaction value and substituting with a more credible transaction value. We do not have to subject this far-fetched proposition on behalf Revenue to the test of legislative intent as the impugned order did resort to sequential application of the rules which we are bound to scrutinize.

28. While the several decisions adduced on behalf of Revenue and of the three appellants shall, to the extent of relevancy, be examined in the course of our findings on the issues to be determined in this proceeding, Mr. Ramanan has given us cause to pause and consider this novel proposition of his that traverses unchartered waters, markedly lacking illuminating comfort of judicial precedents - the beacons that guide navigation in the watery wastes outside the main. More than five and a half decades have lapsed since the enactment of Customs Act, 1962 and about four and a half decades since the inclusion of 'value' in section 111(m) of Customs Act, 1962; that this proposition, novel even now and untried therefore, is before us prompts us to tread with caution. The proposition pivots on the legislative intent in inserting 'value' in section 111(m). The scope of interpreting the definitions, as enacted by the legislative organ, has been the subject of numerous rulings emphasizing the context of enforcement of statute, or practical law, and distinguishing judicial interpretation from intellectual speculation, or jurisprudential interpretation, which an untested proposition is; courts have had to fall back on the seminal work of Hans Kelsen in Pure Theory of Law. In Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court, Chandigarh : 1990 (SCR) (3) 11], the Hon'ble Supreme Court, while deciding whether 'retrenchment' has to be understood in its narrow, natural and contextual meaning in the definition clause or its wider literal meaning with reference to its deployment in the operational provisions, approved of the distinction drawn by Kelsen thus

'The court has to interpret a statute and apply it to the facts. Hans Kelsen in his Pure Theory of Law (p. 355) makes a distinction between interpretation by the science of law or jurisprudence on the one hand and interpretation by a law-applying organ (especially the court) on the other. According to him "jurisprudential interpretation is purely cognitive ascertainment of the meaning of legal norms. In contradistinction to the interpretation by legal organs, jurisprudential interpretation does not create law". "The purely cognitive interpretation by jurisprudence is therefore unable to fill alleged gaps in the law. The filling of a so-called gap in the law is a law-creating function that can only be performed by a law-applying organ; and the function of creating law is not performed by jurisprudence interpreting law. Jurisprudential interpretation can do no more than exhibit all possible meanings of a legal norm. Jurisprudence as cognition of law cannot decide between the possibilities exhibited by it, but must leave the decision to the legal organ who, according to the legal order, is authorised to apply the law". According to the author if law is to be applied by a legal organ, he must determine the meaning of the norms to be applied: he must 'interpret' those norms (p. 348). Interpretation therefore is an intellectual activity which accompanies the process of law application in its advance from a higher level to a lower level. According to him, the law to be applied is a frame. "There are cases of intended or unintended indefiniteness at the lower level and several possibilities are open to the application of law".....In all these cases, the law to be applied constitutes only a frame within which several applications are possible, whereby every act is legal that stays within the frame". Again in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. : (2012) 9 SCC 552, held that it is not the function of the court to supply the supposed omission, which can only be done by Parliament. In our opinion, legislative surgery is not a judicial option, nor a compulsion, whilst interpreting an Act or a provision in the Act.'
29. From this, it is clear that when the court is called upon to interpret, and definitions in particular, it should be in accord with accepted doctrines and such interpretation should not fill gaps in law that the tax authority may like to direct in a manner most suited to it. The acceptability of the proposition of Mr. Ramanan, canvassed as justification for resort to confiscation in the adjudication order though the adjudicating authority is not so categorical, is critical for upon it hinges an empowerment that may never have been intended to be invoked or usurped, as the case may be, and has not been despite the elapse of four and a half decades since the amendment in Customs Act, 1962 till now. This proposition premises that any goods that are sourced from abroad can be subjected to the detriments envisaged in Customs Act, 1962, with no restraint whatsoever, when section 111 is invoked. To put it differently, Revenue claims perpetual and eternal jurisdiction over goods after landing in India and for confiscation to be an autonomous provision. In the recovery of duties, section 28 of Customs Act, 1962 prescribes its own limitation and even the judicially approved recovery through section 125 of Customs Act, 1962 is limited to recovery of duty that, though assessed upon import, was foregone then. It would, therefore, appear that legislative intent did not empower unlimited jurisdiction even in such an essential facet of governance as tax collection. Parliament has prescribed a normal limitation and, in specific circumstances, an extended period. Judicial ruling has lifted the bar of limitation if duty, already assessed upon import, has been foregone subject to compliance with post-importation conditions and the goods concerned are, on being found to have violated those conditions, available for confiscation. In Commissioner of Customs (Import), Mumbai v. Finesse Creation [2009 (248) ELT 122 (Bom)], the Hon'ble High Court of Bombay settled the law that confiscation, which may be erased by redemption, can be invoked only if goods are available and the Hon'ble Supreme Court in Weston Components Ltd. v. Commissioner of Customs, New Delhi : 2000 (1) SCR 26] extended the scope for redemption, and thereby confiscation, to goods which, though not available, were cleared against customs bond. The scope for recovery of duty and for confiscation is thus circumscribed.

30. For a few years after the Constitution of India came into force, the vires of legislative acts of states to tax sales even where actual sale was outside the state concerned was regularly disputed before the Hon'ble Supreme Court; while nexus with the expressions in Article 286 was considered sine qua non, the degree thereof was cause of discord in the decisions. That judicial interpretation of degree of nexus, premised on the constitutional intent not to restrict, had to be rectified by the Sixth Amendment. We are, therefore, inclined to extract from the judgment delivered by Hon'ble Justice Vivian Bose, who, in his inimitable penchant for linguistic artistry, while recording his dissent in the matter of The Tata Iron & Steel Co. Ltd. v. The State of Bihar : 1958 AIR 452] before the Hon'ble Supreme Court, observed

'My point is simple. If you are allowed to tax a dog it must be within the territorial limits of your taxable jurisdiction. You cannot tax it if it is born elsewhere and remains there simply because its mother was with you at some point of time during the period of gestation. Equally after birth, you cannot tax it simply because its tail is cut off (as is often done in the case of certain breeds) and sent back to the fond owner, who lives in your jurisdiction, in a bottle of spirits, or clippings of its hair. There is a nexus of sorts in both cases but the fallacy lies in thinking that the entity is with you just because a part that is quite different from the whole was once there. So with a sale of a motor car started and concluded exclusively in New York or London or Timbuctoo. You cannot tax that sale just because the vendor lives in Madras, even assuming that the motor car is brought there and even assuming there is no bar on international sales, for the simple reason that what you are entitled to tax is the sale, and neither the owner nor the car, therefore unless the sale is situated in your territory, there is no real nexus.'
Considering the reins on the legislative organ, it is improbable that strict nexus with the intention of the parent statute can be ignored in the claim of an agency of the executive organ. Without any pretension to recovery of duty, either deliberately foregone at the time of import or unknowingly failed to have been assessed at the time of import, or to deal with prohibited goods, jurisdiction is sought to be arrogated on two counts: that confiscation under section 111(m) was specifically tailored, by the amending act of 1973, to counter the ills of overvaluation and that section 111 is not controlled by any other provision of Customs Act, 1962.

31. Taking up the latter first, a straightforward reading of section 111 makes it abundantly clear that confiscation is not an end in itself but for specified breach in relation to, barring a few exceptions, dutiable or prohibited goods which are not applicable to the impugned imports. Even among the honoured exceptions, it is a breach that invites confiscation as a consequence. The scheme of the Customs Act, 1962 revolves around section 12, the charging provision flowing from Article 265 of the Constitution and Entry 83 of List I of the Seventh Schedule, and its subsidiary provisions for assessment of duty, in section 14, 17 and 18 of Customs Act, 1962, and for recoveries in section 28 of Customs Act, 1962. Being the enforcement agency at the border against ingress of goods, the empowering statute entrusts the authority to bar the entry of prohibited goods. As the breach thereof constitutes 'smuggling', machinery provisions are enacted to ensure that the arrival of goods, by any means of conveyance, pass the narrow neck of customs control and monitoring. It is the breach of these machinery provisions that, having impacted levies or veiled the prohibitions from oversight, invite liability to confiscate. To the extent that goods are not available and hence is beyond vestment prescribed in section 126 of Customs Act, 1962 the confiscation remains an unenforceable outcome.

32. Having thus sketched the mandate of law, we now take up the proposition that goods brought into India can, at least for section 111(m) of Customs Act, 1962, be held liable for confiscation for enabling imposition of penalties under section 112 of Customs Act, 1962, sans nexus with collection of duty and enforcement of prohibitions or without breach of the machinery provisions for safeguard of revenue and prevention of smuggling. There is, as yet, no judicial approval of this proposition and the adjudicating authority has, to his credit, not articulated his claim to such empowerment. It is a justification pleaded on behalf of Revenue to assail the challenge mounted on behalf the appellants. Hence, at this stage, this, in the Kelsen categorization, is jurisprudential interpretation.

33. Undoubtedly, for the purposes of Customs Act, 1962, 'value' in section 2(41)

'in relation to any goods, means the value thereof determined in accordance with the provisions of sub-section (1) of section 14'
and section

'111. Confiscation of improperly exported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation:


(m) any goods which do not correspond in respect of value or any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transshipment, with the declaration for transshipment referred to in proviso to sub-section (1) of section 54;'

envisages detriment for misdeclaration of value in bills of entry filed under section 46 of Customs Act, 1962 and, as pointed out by Mr. Ramanan, misdeclaration in either direction will activate this provision. The title of section 111 refers to confiscation of improperly imported goods. According to section 2(25) of Customs Act, 1962, "imported goods"

'means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;'
It is also relevant to note, though not submitted by either side, that the culmination of the process is

'SECTION 47. Clearance of goods for home consumption. .......any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable payable under this Act in respect of the same, the proper officer may make an order permitting clearance of goods for home consumption:'
34. A harmonious construction of section 46, requiring all goods imported into India to be covered by correct entry, which includes specified particulars, and of section 47, entitling goods to be cleared for home consumption, is that such goods, as are prohibited or have not discharged the duty liability as assessed, should remain in custody without being cleared for home consumption. Goods that are cleared for home consumption carry with them the presumption of duty liability having been discharged in full and the goods are not prohibited for import under any law. It is only these two aspects of the goods that can deny clearance for home consumption. Once the goods have been cleared, they cease to be imported goods within the meaning assigned in section 2 of Customs Act, 1962 thus ending jurisdiction over the goods under Customs Act, 1962. Revival of the jurisdiction is contingent upon establishing that duty has not been paid in full or that the goods are prohibited foe import. Assessment of duty is empowered under section 17 as final, or as provisional for subsequent finalization, under section 18 of Customs Act, 1962. To the extent that that the assessment has not realized the duty that is leviable by law the provisions of section 28 of Customs Act, 1962 can be invoked for recovery of duties. The entitlement of goods on which duties have been short-levied or not levied on clearance for home consumption for clearance for home consumption stands jeopardized ab initio and, if available, can be subject to confiscation. Goods cleared for home consumption by concealment, physical or otherwise, of being prohibited by law, have their clearance for home consumption jeopardized similarly.

35. In Bussa Overseas and Properties Pvt. Ltd. v. CL Mahar, Asst Collector of Customs : 2004 (163) ELT 304 (Bom)], the decision of Hon'ble High Court of Bombay that

'The first submission of the learned counsel is that the goods imported under 45 consignments were cleared for home consumption on the petitioners executing ITC bonds as required under Sub-section (1) of Section 143 of the Act. The learned counsel urged that once the goods are cleared for home consumption, then the goods covered by the consignments cease to be imported goods in accordance with the definition of expression 'imported goods' under Section 2 of the Act and consequently such goods are not liable for confiscation. There is considerable merit in the submission of learned counsel. The goods lose its character of imported goods on being granted clearance for home consumption and thereafter the power to confiscate can only be invoked where the order of clearance is revoked or cancelled.'
was affirmed by the Hon'ble Supreme Court. Though the Hon'ble High Court was unable to agree with the appellant that physical confiscation must precede imposition of penalty and that the goods being liable to confiscation would suffice for proceeding with section 112, it would appear that this finding was made in the context of section 111(o) of Customs Act, 1962 which has the peculiarity, along with section 111(m), of being pertinent to goods that are not qualified by the expression 'dutiable or prohibited'- the scope of which we have analyzed supra - but we also note that the similarity ends there. The issue under consideration of the Hon'ble High Court of Bombay was the confiscability of goods that had been cleared for home consumption by availing exemption from duty subject to compliance with conditions of import which can be conclusively established only after goods have been cleared. We have noted supra that less than complete discharge of duty liability taints the clearance for home consumption granted under section 47 of Customs Act, 1962 and such clearance is deemed to have been revoked with a finding of further recovery being due. Where the determination of conformity with the with the pre-requisites is completed before clearance envisaged in section 47 of Customs Act, 1962 and the definition of 'imported goods' having ceased to describe such goods, the liability for confiscation stands erased by legislative sanction unless revoked or cancelled in accordance with law. Thus goods have to be available, or be obliged to be surrendered as per conditions of bond for release, and clearance for home consumption under section 47 of Customs Act, 1962 should have been withheld, either in the first instance or by subsequent deemed revocation, for the liability under section 111 to be invoked with consequent resort to penalties in section 112 of Customs Act, 1962. For this conclusion, we draw sustenance from the act of the sovereign legislature in supplying the remedy, for the impediment of the absence of such imported goods on which duty liability is recoverable after clearance, with the incorporation of section 114A of Customs Act, 1962. Any remedy for perceived gaps in the enforcement of the penal provisions should be, and is always, supplied by legislative enactment. The intent of the legislature in preserving rigour in resorting to section 111 and section 112 of Customs Act, 1962 as a bulwark against executive excess is thus abundantly clear and we cannot allow ourselves to tamper with that integrity.

36. The impugned goods had been provisionally assessed to duty under section 18 of Customs Act, 1962 which, upon subsequent finalization, rendering a closure to the assessment and implied freezing of duty liability. It is not the case of Revenue that duty has been short-levied thus foreclosing the invoking of section 28 of Customs Act, 1962. Mr. Ramanan concedes that in his pleadings. Indeed, it is the submission of Mr. Rohatgi, Mr. Nanda and Mr. Nankani that the case of Revenue has been founded on the non-availment of exemption from duties which should, therefore, be consummated by refund of the duties paid. Neither is it the contention of Revenue that the impugned goods are prohibited. Hence, the goods have been cleared for home consumption in the most legally undeniable manner - one that does not admit of recall under the provisions relating to imported goods which prescribes only two inherent and inextricable pre-requisites - duty and prohibition - for such clearance. A conjoint reading of the definition and the authority to proceed with confiscation supra would lend credence to the inference that goods that have been properly cleared for home consumption, as provided in section 47 of Customs Act, 1962, cannot be subjected to confiscation.

37. The second leg in the novel proposition of Revenue is the resort to the scheme for valuation provisions under Customs Act, 1962 without having to revoke the assessment effected upon finalization of the provisional. Traditional wisdom and judicial rulings have clearly mapped out the scheme of valuation of dutiable goods for enhancement in accordance with the law as enacted or rules as notified. The scope has, since then, been enlarged to extend over export goods that are not dutiable and even on goods in general. The common thread in all these decisions is the strict adherence to the scheme of valuation. Valuation is, of necessity, a mechanism and, at best, an exercise in approximation for discard of a declared value to further the constitutional mandate of collecting only such tax - the product of rate and value - as intended by law. It is a piece of legal fiction justifiable in the face of the ugly alternative of unfettered discretion in the hands of the tax collector. Hence, the injunction by law to adhere to the restrictive framework in undertaking that exercise. The decision of the Hon'ble Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai : 2000 (122) ELT 321 (SC)] interpreting the mechanism notified in the valuation provisions, i.e.,

'8. Reading Rule 3(i) and Rule 4(1) together, it is clear that a mandate has been cast on the authorities to accept the price actually paid or payable for the goods in respect of the goods under assessment as the transaction value. But the mandate is not invariable and is subject to certain exceptions specified in Rule 4(2)


9. These exceptions are in expansion and explicatory of the special circumstances in Section 14(1) quoted earlier. It follows that unless the price actually paid for the particular transaction falls within the exceptions, the customs authorities are bound to assess the duty on the transaction value.

10. The respondent's submission is that the phrase "the transaction value" read in conjunction with the word "payable" in Rule 4(1) allows determination of the ordinary international value of the goods to be ascertained on the basis of data other than the price actually paid for the goods. This, according to the respondent, would be in keeping with the overriding effect of Section 14(1). We cannot agree.

11. It is true that the Rules are framed under Section 14(1A) and are subject to the conditions in Section 14(1). Rule 4 is in fact directly relatable to Section 14(1). Both Sections 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularized in rule 4(2).

12. Rule 4(1) speaks of the transaction value. Utilization of the definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction, unless of course the price is unacceptable for the reasons set out in Rule 4(2). "Payable" in the context of the language of Rule 4(1) must, therefore, be read as referring to "the particular transaction" and payability in respect of the transaction envisages a situation where payment of price may be deferred.

13. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other Rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at the same time as the subject goods. Where there are no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule 7A. When value of the imported goods cannot be determined under any of these provisions, the value is required to be determined under Rule 8 "using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 14 of the Customs Act, 1962 and on the basis of data available in India." If the phrase 'the transaction value' used in Rule 4 were not limited to the particular transaction then the other Rules which refer to other transactions and data would become redundant.

14. It is only when the transaction value under Rule 4 is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules.'

is the foundation of that structure. Though section 14 of Customs Act, 1962 has undergone a change since then, as has the relevant rules framed thereunder, the principle remains with the added rigour that the price paid or payable is itself the transaction value instead of being the deemed assessable value. The scope for additions to this value is enumerated in rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and the empowerment to reject is in rule 12 of the said Rules. Rule 3 limits any adaptation to the extent specified and rule 12 must, as evident from the Explanation therein, be followed by re-determination of value in the manner and sequence prescribed. The commercial consideration, declared under section 46 of Customs Act, 1962, is tested for conformity with the qualification prescribed in section 14 of Customs Act, 1962 and the relevant provision of the valuation rules in vogue. Should that declaration be rejected, the sequential application of the other rules is mandated. That which is privy only to the parties in a commercial transaction and evidenced by their agreed upon documentation cannot be substituted by a public authority save with explicit sanction of law. Neither section 14 nor the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 affords such sanction to an assessing officer or an adjudicating authority. This is a natural corollary of the territorial limit of jurisdiction - in enactment and by interpretation - to international transactions and the repugnancy in rule of law to intervention in a commercial supply chain. In commercial intercourse, there can be no limit to the rungs on the ladder or links in the chain; to prescribe such - by executive decree or legislative enactment - would be anathema in a civilized world and to rule of law save where public interest is affected. Public interest is not the fantasy of an individual authority or an institution but must be subservient to sanction of law. In matters of customs imposts, the law is concerned with, and is limited to, the transaction that has brought the goods within the jurisdiction of the customs authorities.

38. Furthermore, the entirety of the Customs Valuation (Determination of Valuation of Imported Goods) Rules, 2007, appears to relate to 'imported goods' - restricted for applicability only to such as are not prohibited or have not discharged the liability to duty in full - and to the manner in which any enhancement of assessable value is acceptable as legal. From the decision in re Eicher Tractors Ltd. and from a conjoint reading of rule 3 and rule 12 of the said Rules, it can be inferred that the transaction value may be added to or be rejected for being supplanted by an assessable value; it can never be transposed by any other value determined or ascertained by customs authorities as purporting to be the 'transaction value' within the meaning of rule 3.

39. The impugned order has, with a peremptory dismissal of legitimacy owing to pending investigations into all of those, refused to consider the import prices of other consignees as a substitute for transaction value. It is tantamount to discarding all of those declarations without jurisdiction and, even worse, without the prerequisite of placing of those importers on notice. It is moot to speculate on the quality of justice that those importers can expect if, and when, proceedings are initiated against them as they would be, according to the adjudicating authority.

40. This casual dismissal of application of rule 5 and 6 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is contrary to the provisions of law. The adjudicating authority is not in compliance with the mechanism prescribed in law, and as approved by the Hon'ble Supreme Court in re Eicher Tractors Ltd., for arriving at an alternative valuation. He probably is oblivious to the irony of refusing to acknowledge the veracity of transactions by the coal industry while accepting the purported average profit of 3.5% said to have been gleaned from the same industry for application of a subsequent rule. The adjudicating authority appears disinclined to explain the conclusion that this is all that befits addition for determination of misdeclaration. Clairvoyance, as a talent, is not acknowledged in adjudication proceedings. The impugned order has relied upon his rejection of the documentation furnished with import declaration and upon the relationship between the importer and its overseas subsidiary to discard the declared value under rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

41. The relationship that may, by law, shift the burden of responsibility to the importer is the one between it and the supplier. There is no allegation of any legally recognized relationship between the Hongkong entities and the importer and the passing over of the supplier on record to reach back to a missing link, in a transaction that is yet to be established as having occurred, has not been supported by legal authority to do so. The investigation is bereft of any confirmation, circumstantial or otherwise, of transaction by the Singapore subsidiary with M/s. International Metallurgical Resource AG and of any inquiry with the agencies that tested the samples at load port; neither does there appear to be any record of ascertainment of the circumstances of the issue of certificate of origin by the competent authority. Or with the Hongkong suppliers. It would appear that the adjudicating authority was content with the report of the investigators that the failure of the importer to persuade the participation of its Singapore subsidiary in the proceedings sufficed to cast aspersions on the documentation submitted by the importer while sanctifying the documents obtained by the investigators. These are unexplained gaps in the investigation that have been overlooked by the adjudicating authority and have been bridged by a leap that fails the test of reason. The reliance by him on the decision of the Tribunal in re Samsung India Electronics Ltd. for justifying preponderance of probability as the touchstone does not appear to us to be correct for that which to inferences from documents may not be stretched to the documents themselves. The justifications offered by the appellants for the deviations, such as insurance coverage and complications in claiming exemption from duty, are not controverted in the impugned order. Even if these were, the adjudicating authority is not absolved of the responsibility to arrive at an alternative value in accordance with law. The determination of a value without sequential application of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 with valid justification for by-passing rule 5 and 6 of the said Rules is not tenable. On the correctness of the rule that was resorted to for determination of value, we shall address ourselves when resolving the challenge to the finding on facts in the impugned order.

42. This, then, is the context in which the transitive logic has been applied and the appropriateness claiming legitimacy from the definition of 'value' in section 2 of Customs Act, 1962. The scope of interpretation of definitions has been unequivocally placed in the context of the law by the Hon'ble Supreme Court in Reserve Bank of India v. Peerless General Finance : [1987] 2 SCR 1] thus

'Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression 'Prize Chit' in Srinivasa and we find no reason to depart from the Court's construction.'
and we look no further to find the authority for our conclusion supra that the inveigling of the definition does not advance the jurisdiction of Revenue in the absence of specific legislative empowerment. That Parliament chose not to disturb the robustness of section 111 to impose penalty when duty was sought to be recovered by recourse to the special provision in section 28 is amply evinced by the insertion of section 114A in Customs Act, 1962. Had it been the intent that the penal consequence should be visited upon alleged overvaluation of goods that had ceased to be imported, Parliament would have legislated so. Obviously, the existence of alternatives precluded such specific inclusion. And that which has not been enacted cannot be extended by us to the tax collector. Parliament can enact safeguards which we cannot and, hence, cannot, responsibly, approve the arrogation of extended jurisdiction by the adjudicating authority.

43. Learned Special Counsel for Revenue was at pains to submit that section 111(m) of Customs Act, 1962 had been amended to overcome the impediment in the expression 'dutiable or prohibited' to proceed against overvalued goods that did not entail recovery of duty and, not coincidentally, with the enactment of Foreign Exchange Regulation Act, 1973. Judicial interpretation does not support this proposition; in Rib Tapes (India) Pvt. Ltd. v. Union of India & others : 1986 AIR 2014], the Hon'ble Supreme Court examined the original and amended versions of section 111(m) of Customs Act, 1962 before holding that misdeclaration of value was not intended to be visited with the confiscation envisaged in section 111(m) prior to its amendment section. It would, therefore, appear that the sovereign legislature was sufficiently concerned with misdeclaration of value itself, and not overvaluation, per se, as to warrant the detriment incorporated in 1973. We have no doubt that overvaluation is also a breach that leads to confiscation after the amendment. For the record, despite the pre-amended section 111

'(m) any dutiable or prohibited goods which do not correspond in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77'
and the notes on clauses of the bill for enactment of Act 36 of 1973 explicitly referring to over-invoiced imports, their Lordships did not forbear to decide that

'It is not in dispute that a penal provision has to be strictly construed and reading Sec. 111(m) before the amendment it is not possible to draw an inference that any difference in material particulars may be referable to 'value'. This argument therefore cannot be accepted. The scheme of Sec. 111(m) as it stood then nowhere referred to the difference in value as one of the ingredients which may attract this provision. In such a situation therefore if it is not the specific intention of the provision, a difference in respect of value therefore could not be said to attract this provision and on that basis no penalty could be imposed.'
Therefore, section 111(m) of Customs Act, 1962 is not to be considered as a special law to deal with over-invoicing and the amendment enlarged the scope for confiscation in the event of any misdeclaration, including value, and even on goods under transshipment; the obliteration of 'dutiable or prohibited goods' is merely an extension of that intent. That is not an angle to be pursued. In the absence of validly determined value, the breach for invoking section 111(m) of Customs Act, 1962 is not established. In the absence of goods that are yet to be cleared for home consumption, there is no scope for invoking jurisdiction to hold the goods liable for confiscation.

44. The State does not crusade. Its legislative arm enacts laws that criminalize and, to secure the State from the consequences of such crime, vests the authority to bring transgressors to book under that law in an official or agency while laying down the boundaries of such executive authority. So it is with officers of Customs. If the State has determined that the official or agency should retain perpetual jurisdiction, such express conferment of such determination cannot be called in question; a claim for such stands on a different footing and must be subject to interpretation of nexus and intent. If such jurisdiction appears to be circumscribed by the context of that law or is supplanted by another law, such unfettered wherewithal to enforce is repugnant to rule of law. Moral outrage is not the way of the law. Encroachment upon the boundaries of another agency is not the way of the law. The scope of the enactment determines the extent of criminality. If the law chooses not to criminalize, the tax collector can do so only at the cost of being an outlaw.

45. The liability to confiscation and the imposition of penalties rest upon the finding that the chain of transactions, prior to that declared for assessment, had incorporated the intermediaries to enable concealment of the quality, and thereby the value, of the coal sourced by M/s. IMR Metallurgical Resource AG. The chronological proximity of the contracts of M/s. IMR Metallurgical Resource AG with M/s. Knowledge International Strategic Systems Pte Ltd. and of M/s. Spring Traders Ltd. with the importer pivoting around the bill of lading submitted at the time of import in conjunction with opting to pay duty despite being eligible for exemption and the assumption of responsibility for insurance coverage that was to be borne by M/s. International Metallurgical Resource AG sufficed as circumstances to render the finding. The adjudicating authority has, unabashedly, placed a premium on the integrity, reliability and reputation of M/s. International Metallurgical Resource AG; however, no background narrative has been offered for this encomium - other than the furnishing of the documents relied so heavily upon to the investigation agency. The final nail, according to the impugned order, was the conformity of the test results conducted by the Deputy Chief Chemist on the samples drawn at the time of import with the 'certificate of sampling and analysis' obtained from M/s. IMR Metallurgical Resource AG once the conversion factor elicited from the internet had been utilized. Constituting, as it did, the fulcrum

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of the detrimental consequence, Learned Special Counsel for Revenue defended the conversion factor, notwithstanding its source, for the unassailability of its mathematical logic. 46. The adjudicating authority, in his voluminous order, found it convenient thereby to adopt the price purportedly contracted, and paid over with appropriate adjustment, by M/s. Knowledge International Strategic Systems Pte Ltd. to M/s. International Metallurgical Resource AG for the coal said to have been supplied for eventual consumption in India and enhanced by what he considered to be a reasonable return by industry standards. This computation presumes that the coal was indeed procured through these parallel transactions, that credence should be placed on the internationally acclaimed renown of M/s. IMR Metallurgical Resource AG and that there exists a verifiable average industry. Our findings on the contravention of the mandates of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 that discredits the adoption of the base price for computation is on record. We find no justification for the deployment of return of 3.5% as the enhancement factor in the absence of any verifiable source of that revelation; a revelation that suffers from the ignominy of mendacity that the same industry has been tarred with for discarding value of contemporaneous imports. The base price and margin of profit fail the test of law and veracity. The conversion of the 'gross calorific value' undertaken in the adjudication order is claimed to be nothing other than the loading of mineral content and moisture content on the 'mineral moisture free' results of the sampling tested by the Deputy Chief Chemist. The logic, as Learned Special Counsel avers, presents a perfect fit. However, what we have here is not an arithmetical computation but an algebraic operation. In algebra, with all variables, save one, being known, the unknown variable in the equation is derived by conversion. In the context of a chemical formula, the conversion will work if one calorific value is convertible to another standard from the same test. There the adjudicating authority faced an obstacle of Himalayan proportion: the absence of values of total moisture content and mineral content in the test result of the Deputy Chief Chemist. Here too we see a leap, not of faith but over scientific reason, in the deployment of those two values from another test said to have been conducted at load port. This a classical example of circular reasoning - the premise of inferior coal having been supplied can be evinced with test results and the only unquestioned test is that of the Deputy Chief Chemist which required conversion to 'as received basis' but could not in the absence of two values which were providentially made available in the very 'certificate of sampling and analysis' that was the basis of the premise. The conversion is faulty and the conclusion flawed. 47. We also note that the 'gross calorific value' in the 'certificate of sampling and analysis' obtained by the investigators and the one derived by the adjudicating authority differ by about 10-12%. That is no conformity. The adjudicating authority was content with the derived value being below the 'off spec' threshold without any thought to the discredit that it brings to the reputation of M/s. IMR Metallurgical Resources AG which is, time and again, reiterated in the impugned order. From the derived 'gross calorific value', it would appear that the internationally renowned supplier, whose integrity is beyond question, overcharged the Singapore entity by about 10 to 12% thereby rendering the voluntarily furnished information to be suspect. That would be to accept only one side of the picture and to conclude that, as long as the documents of the appellant were shown to be false, the legal consequence shall follow. That would be tantamount to acceptance of the documents produced by investigations, whose provenance being suspect, are also tainted by the lack of credibility in its contents. Credibility is not a matter of degrees: it is absolute. No amount of dissembling can lead to acceptance that this amenable to measurement and a higher measure should receive judicial sanction for the credibility of one suspect report over another. The jigsaw does not fit anymore. On facts too, the impugned order fails. 48. In the absence of controverting, the reality of the documents presented at port of import cannot be wished away. It is not in dispute that coal was sourced in Indonesia. The resort to a new marine insurance policy has been attributed to the terms of the contract with M/s. Mahagenco Ltd. requiring a coverage that the shipper was not concerned with. While contending that availment of exemption cannot be imposed on the unwilling, a justification was offered that the consequential ascertainment of eligibility for exemption was fraught with attendant costs which may not be compensated by the magnitude of exemption. The adjudicating authority has ignored the minimal loading in the supply made by M/s. Rescom Mineral Trading Ltd. - that should have passed muster even by his rigid standards. The consequent gap in the other five consignments is about 19%; even if the controller of M/s. Spring Traders Ltd. was an acquaintance, it could scarcely be expected to enter into a transaction out of pure altruism. There has been no effort undertaken to examine the extent of profit that would be leached in every transaction in the sequence. 49. That the investigators failed to obtain seal of authenticity for their documents in the manner provided for official sourcing is not in doubt and the documents have been accorded sanctity merely by the corroboration of the 'gross calorific value' as declared by the adjudicating authority. We are, therefore, not inclined to accept the documents relied upon in the impugned order as being conclusively reflective of the transaction between the appellant-importer and the exporters on record. 50. Though efforts were not lacking to adorn the investigation with the mantle of national interest and our responsibility to respond to that noble cause - which seemed to be the thrust of the argument made by Revenue - we, as a tax tribunal cannot be swayed by those sentiments to overlook the inadequacy of evidence to accept the documentation on which the impugned order has placed reliance on and the surmises emanating from unfilled gaps in the tale. Circumstantial evidence has limited acceptability and preponderance of probability must be preceded by established probability. It is surprising that M/s. Mahagenco Ltd. who were allegedly the victims of short-changing in the supply of inferior coal were not put to the test of the energy generated from the coal. More coal would have been required for energy levels sought with use of the coal contracted for import if calorific value was 'off spec.' The consumption of coal and the energy generated appears to have been overlooked. That would have been the surest test, the easiest determinant, and most discrediting to claimed 'gross calorific value.' The lack cannot be filled up by the call to patriotism and public service. Crusades are best left to crusaders; for us rule of law and the supremacy of the constitutional mandate must prevail. 51. In view of our extensive findings on the scope of actionability on goods cleared for home consumption, the compliance with the valuation scheme of Customs Act, 1962 and the erroneous finding on facts, we do not propose to examine the grounds of appeal that were not pressed during the hearing. For the above reasons, we are unable to sustain the findings in the impugned order which we set aside to allow the appeals