COMMISSIONER OF CUSTOMS, NEW DELHI versus M/S PHOENIX INTERNATIONAL LTD. & ANR.

Citation: [2007] 10 S.C.R. 126 · Decided: 20-09-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
COMMISSIONER OF CUSTOMS, NEW DELHI 
~ 
v. 
MIS. PHOENIX INTERNATIONAL LTD. & ANR. 
SEPTEMBER 20, 2007 
B 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.) 
Customs Tariff Act, 1962-Tariff Heading 64. 04-Customs duty, 
evasion of-Company P IL importing synthetic shoe uppers and 
c Company PIND importing soles, insoles and sock liners as 
components/parts-Department's case that PIL owner of PIND and 
items imported constituted synthetic shoes in semi knocked down form, 
thus, duty evaded-Correctness of-Held: PIL carried out the entire 
manufacturing activity of finished products-synthetic shoes for 
D domestic and export markets and was the real importer of all the items, 
thus Department rightly clubbed the items-Items imported constituted 
complete shoe in SKD condition, thus, to be assessed as complete 
....... 
finished goods under Tariff Heading 64.04 and exemption under 
Notification not applicable-Bifurcation by importation of items by 
E two companies was subterfuge to evade duty, thus, para l 56(A) 
violated-Hence, importers liable to pay customs duty at 50% plus 
CVD at 15% ad valorem-However, issue regarding re-quantification 
of differential duty, redemption fine and penalties payable by importer 
remitted back-Exim Policy 1992-97-Para 156 (A)-NotificationNo. 
i 
45194 Cus dated 1.3.94-Customs Act, 1962. 
-""'i 
F 
Mis. PIL imported synthetic shoe uppers and M/s. PIND 
imported soles and insoles as components/parts. Appellant-
Department found that the two companies evaded customs duty. It 
issued show cause notices to the respondents-two companies alleging 
G that M/s. PIL were the owners of Mis. PIND; that Mis. PIND was 
a dummy unit of Mis. PIL; that the goods imported were not parts/ 
~ 
components but were semi knocked down (SKD) goods, liable to be 
assessed as complete finished goods under tariff Heading 6404.19 
of the First Schedule of the Customs Tariff Act, 1975 and liable to 
H 
126 
J_ 
COMMISSIONER OF CUSTOMS, NEW DELHI v. 
127 
MIS.PHOENIXINTERNATIONALLTD. 
basic customs duty at 50% ad valorem and countervailing duty at A 
15% ad valorem; that synthetic shoes were imported without specific 
import licence; that Mis. PIL resorted to subterfuge of importing , 
uppers of "Reebok" shoes in their own name and the remaining 
three components in the name of Mis. PIND to bypass restriction 
imposed by para 156(A) of the EXIM Policy 1992-97 and claim the B 
benefit of Notification No. 45194-Cus dated 1.3.94; that the value 
given in the import invoices did not represent the correct transaction 
value since a single consignment meant for one importer-Mis. PIL 
was deliberately split up into two parts and, valuation had to be done 
by invoking rule 8 of the Customs Valuation (Determination of Price t 
oflmported Goods) Rules, 1988, and thus the consignment of two 
companies should be clubbed for the assessment under EXIM Policy 
1992-97 and Customs Act, 1962. The Commissioner held that the 
imports made by Mis. PIND of soles, insoles and sock liners should 
be treated as imports by Mis. PIL, however, in view of elaborate 
manufacturing process of support shoes, the clubbed items did not I'.) 
constitute synthetic shoes in SKD condition so as to contravene para 
156(A) of the EXIM Policy 1992-97; that all imports attracted duty 
·at the rate applicable to the footwear and not at the rate applicable 
to components/parts; that no duty was demandable in respect of 
synthetic uppers, imported by Mis. PIL, however, all the components E 
imported by Mis. PIND attracted duty at the rate applicable to fully-
finished footwear, and as such the exemption under notification 451 
94-Cus dated 1.3.94 was not applicable, thus the respondent was 
liable to pay duty. Respondent-importers filed appeals. Tribunal 
allowed the same. Hence the present appeals. 
F 
Allowing the appeals, the Court 
HELD: 1. The respondents were guilty of violating para 156(A) 
of the EXIM Policy 1992-97; that they were liable to be assessed 
under tariff Heading 64.04 and, thus, were liable to pay duty of G 
customs at 50% + CVD at 15% ad valorem; that the respondents 
were not entitled to the benefit of concessional rate of duty under 
Notification No. 45/94-Cus dated 1.3.94 and that the Department 
was right in invoking rule 8 of the Customs Valuation Rules. The 
question ofre-quantification of differential duty, redemption fine and H 
128 
SUPREME COURT REPORTS 
[2007] 10 S.C.R. 
A penalties, payable by the respondents, is remitted to the 
Co

Excerpt shown. Read the full judgment & AI analysis in Lexace.