Full Judgment Text
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CASE NO.:
Appeal (civil) 5415-5417 of 2002
PETITIONER:
Commissioner of Customs Kolkata
RESPONDENT:
M/s. Peerless Consultancy Services Pvt. Ltd.
DATE OF JUDGMENT: 24/05/2007
BENCH:
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
Dr. ARIJIT PASAYAT, J.
1. Challenge in these appeals is to the orders passed by the
Customs Excise and Gold (Control) Appellate Tribunal, EZB
Kolkata (in short the ’CEGAT’) allowing the appeals filed by the
respondent holding that the guidelines contained in circular
No.69/97-CUS dated 8.12.1997 issued by the Government of
India, Ministry of Finance, Department of Revenue, New
Delhi, as it has not succeeded in making out a case against
respondent as the Present Market Value (in short the
’PMV’)declared is not more than 150% of the AR 4 value.
Accordingly the order passed by the Commissioner of Customs
(Post) Kolkatta was set aside.
2. Background facts in a nutshell are as follows:
3. The Respondent Company which is engaged in the
business of computerized printing exported for the first time
consignments of steel balls of a total declared value at
Rs.14.63 crores to one M/s. Ria Multiple Enterprises of
Malaysia under Duty Entitlement Pass Book (in short the
’DEPB’) Scheme. Incidentally, the consignee is also a dealer of
computer and information technology based products who
also acts as General Insurance Agent. Exports were made
under DEPB scheme and a claim of Rs.3.20 crores was made.
4. In the light of information received by DRI of gross over-
invoicing of the goods to avail higher DEPB credit, it
conducted investigation which revealed inter-alia that:
(i) the declared P.M.V. varies between 98.35% to 124% of
the declared Export Price (described as ’FOB’).
(ii) the shipments were effected between 11.06.99 and
25.08.99 as per Bill of Lading date and as per the contract, the
terms of payments is DA 60 days’.
(iii) Till 31.5.2000, the assessee received payment for 3
consignments only and further till 11 .10.2000 they received
payment of only 5 consignments out of 16.
(iv) the declared FOB value for different size Steel Balls
comes as under:
Steel Balls 3.17mm size Rs.0.70per pc.
Steel Balls 6.35mm size Rs.l.30 per pc.
(v) it has been claimed that the PMV was declared on the
basis of price quoted by the local suppliers and the variation
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in the declared PMV is due rejection on quality check.
(vi) The FOB value of the consignment was fixed on the
basis of price agreed upon by the foreign buyer.
(vii) The FOB value declared is highly inflated only to
avail greater amount of DEPB Credit.
(viii) The explanation offered to substantiate highly
declared FOB vis-‘-vis the PMV has no basis in as much the
agreement of precision quality, quality control checking by an
expert, are all after thought having no consistency and no
evidence whatsoever could be produced in this regard.
(ix) Neither the export nor the foreign buyer or even the
local suppliers are regular dealers of Steel balls in as much
neither the exporter nor the local suppliers could produce any
piece of evidence of sale of such Steel Balls to any other party
in India or abroad excepting the production of evidence of sale
by M/s. S.F. Forging to one M/s. Arlun Automobile, that too
for the purpose of export under DEPB scheme.
(x) Surprisingly the suppliers had received only about
1/4th or 1/3rd of the so called sale value amount but did not
receive huge sum of money which was due as balance of
payment towards supply of goods for over an year.
(xi) Based on the aforesaid revelation, the declared PMV
as well as the FOB value seems to be very high compared to
the actual market value of the goods.
(xii) It appears that the entire deal had taken place in a
manner which is not consistence with normal trade practice
and the declared FOB value as well as the PMV had been
highly inflated with intent to wrongly avail export benefit
under DEPB Scheme.
5. Accordingly, alleging gross misdeclaration of material
facts and the value of the steel balls and willful misstatement
and suppression and violation of Section 113(d) of Customs
Act, 1962 (in short the ’Act’) read with Rule 11 of Foreign
Trade (Regulation) Rules 1993 (in short the ’Foreign Trade
Rules’) and for penal action under Section 114 of the Customs
Act, a Show Cause Notice was issued asking to show cause as
to why \027
(i) the PMV and FOB value should not be taken as
Rs.2,80,52,027/- and Rs.2,73,60,806/- respectively.
(ii) The permissible DEPB credit against the goods
exported should not be taken as Rs.60,19,377/-.
(iii) The goods exported cover 16 Nos. of Shipping bills
having total declared FOB value of Rs.14,91,89,854.00 shall
not be held liable for confiscation under 113(d) of the Act.
(iv) Penal action shall not be taken against the exporter
and its Director Sri Parasmal Lodha and Sri N.R. Bachhawat
authorized signatory under Section 114 of the Act.
6. In support of the appeal learned counsel for the appellant
submitted that Sri Parasmal Lodha who was the Director of
the respondent\026Company had clearly admitted about the
following aspects:
(i) The Company’s main line of business is computerized
printing.
(ii) The benefit of DEPB scheme attracted to venture into
steel balls export and also took the risk of exporting to the
party on credit which is a big risk
(iii) The payment was to be made within 60 days and the
payments were delayed by over 6-18 months.
(iv) 90% of the payment was already received and the
balance was to be cleared by 15.4.01 i.e. after the enquiry
started in the year 2000.
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(v) He does not have any idea about the international
price of steel balls.
(vi) He received major payments from buyer only after
September 2000 and he cleared the claimed outstandings of
local suppliers.
(vii) He was aware of the process or method used for
checking the quality of the steel balls. But he had engaged an
expert.
7. On the basis of the aforesaid materials the Commissioner
recorded the following findings:
"(1) Background facts clearly indicate that the whole
exercise was not done in the usual course of business and
there was definitely something wrong.
(2) The exporter does not know the international price of
his exported products, cannot produce any evidence regarding
the quality of his goods, can submit quotations of only those
companies from whom he purchased the goods and above all,
exports goods worth Rs.14.91 crore were without the cover of
any letter of credit and it sat tight when remittance of
Rs.14.91 crores did not come within the stipulated time.
8. All these clearly show that the shipping bills and the
export invoices do not reflect the correct transaction value. He
was therefore, inclined to hold that the subject goods were
over invoiced with an intent to wrongly avail higher DEPB
credit and the PMV indicated on the shipping bills was also
inflated. He rejected the FOB value as well as the declared
PMV. He held that the FOB value and the PMV of the subject
goods need to be ascertained on the basis of the findings of the
market enquiry.
9. With regard to PMV, the Commissioner held as under:
"I find that the guidelines for verification of the PMV and
the FOB Value have been suitably followed by DRI. Nowhere in
the above mentioned 3 circulars issued by the Board, it is
stated that the PMV would be challenged/rejected/modified on
the basis of evidence of contemporaneous export. It is to be
done on the basis of the findings of the market enquiry only. I,
therefore, accept the proposal of ascertaining the PMV and the
FOB value as given in the show cause notice."
10. The Commissioner accordingly inter alia held as follows:
"The subject goods exported under claim of DEPB credit
did not correspond to the declaration made regarding the
same on the shipping bills in respect of the value and DEPB
benefit, since it was declared on the shipping bills that the
benefit under the DEPB scheme would not exceed 50% of the
present market value. The same should be deemed to be
prohibited in terms of Rule 11 and 14 of the Foreign Trade
(Regulation) Rules, 1993 read with Section 3(3) of the Foreign
Trade (Development & Regulation) Act, 1992 and Section 11 of
the Customs Act, 1962 and, therefore, should be held liable
for confiscation under Section 113(d) of The Customs Act."
11. He accordingly confirmed the demand made in the Show
Cause Notice.
12. Aggrieved by the orders passed by the Commissioner, the
respondent filed appeal before the CEGAT.
13. Allowing respondents’ appeals, CEGAT accepted the
stand of the assessee. Its conclusions were essentially as
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follows:
"The PMV, in our view, cannot be challenged by going
into the cost of manufacture. Market enquiry into the prices of
the steel balls of size 6.3mm and 3.17 conforming to AISI:316
Grade should have been ascertained from the market which
has not been done. The burden to prove that PMV is inflated
one is on the Department which has not been discharged. It is
mentioned in the show cause notice itself that the local
suppliers had supplied the exported goods at price ranging
from Re.l to Rs.1.25 per piece of 6.35 mm and Re.0.56p to
Re0.70p per piece of 3.17 mm. There is no allegation in the
show cause notice against the local suppliers nor there is any
mention that the payment made to local suppliers
subsequently flowed back to the Appellants."
"In view of these guidelines, the Revenue has not
succeeded in making out a case against the Appellants as the
PMV declared is not more than 150% of AR4 value.
Accordingly, we set aside the impugned order and allow all the
appeals".
14. According to appellant, the Tribunal has failed to note
that the findings recorded by the Commissioner were based on
the evidence tendered by the company from which it can be
clearly inferred that there has been a mis-declaration and
misstatement only with the object to boost the value to get
higher DEPB benefit. The entire transaction is vitiated by
misstatement, mis-declaration and suppression of material
facts which has not been considered by the Tribunal."
15. It is pointed out by the learned counsel for the appellant
that absolutely no reason has been indicated by the Tribunal
to set aside the elaborate order passed by the Commissioner.
There were clear findings of over invoicing. So far as Circular
No.69/97 is concerned, it only delineates the general
principles. The fraudulent transaction was clearly established.
Approach of the Tribunal is relevant from the abrupt
conclusions arrived at.
16. In response, learned counsel for the respondent
submitted that the issues involved in the appeal relate to the
DEPB credit allowable to the respondent under the Export
and Import Policy, 1997-2002 (in short the ’EXIM Policy’).
With reference to para 7.25 of the EXIM Policy, DEPB was
allowable as a percentage of FOB value of exports. In para
7.36 of the Handbook of Procedures, 1997-2002 (in short the
’Handbook’), if the rate of credit entitlement was 15% or more,
the credit shall not exceed 50% of the PMP of the export
product.
17. In the present case, the foreign buyer purchased the
goods for agreed FOB and made full payment. Entire export
proceeds have been realized in foreign currency and copies of
bank remittances/FIRC were filed. There is no allegation or
finding that the foreign buyer was a related person. FOB was
fully supported by all export documents such as invoices and
shipping bills and by the documents as regards its realization
such as BRC/FIRC.
18. It is stated that the expressions "FOB’ and ’PMV’ were not
defined in the EXIM Policy. However, the method of
determination was laid down by the Ministry of Finance in the
Circular No.69/97.
19. It is submitted in almost identical case in Commissioner
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of Custom, New Custom House, Mumbai v. Vishal Exports
Overseas Ltd. [2007 9309) E.L.T. 331 (S.C.)], this Court has
dismissed the appeal filed by the Revenue.
19. We find that the Commissioner had in detail referred to
various aspects to conclude about over-invoicing. The
applicability of Circular No.69/97 would depend upon the
factual scenario of a particular case.
20. In the instant case, what the Tribunal appears to have
done is to refer to the arguments of parties and then came to
abrupt conclusions without discussing in detail as to how the
conclusions of the Commissioner were erroneous. That having
not been done the order is vulnerable. Accordingly, we set
aside the order of the CEGAT and remit the same to it for fresh
adjudication. It is to be noted that present CEGAT is known
as Customs Excise and Service Tax Appellate Tribunal (in
short ’CEGAT’).
The appeals are allowed to the aforesaid extent. We
express no opinion on the merits of the case.