TaxTMI 
TaxTMI 
2010 (8) TMI 685
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....SPL for short) is a major importer of Styrene Monomer (SM) from M/s. SABIC, Saudi Arabia and M/s. Shell Corporation, Singapore through Mumbai port. Most of the SM imported (93%) by SPL is consumed by it in manufacture of Polystyrene. 50% of the balance quantity is sold to various actual users (listed above) in small parcels on high seas sales (HSS). On receipt of intelligence that these high seas sale buyers (HSBs) undervalued the consignments and evaded import duty, officers of DRI searched the premises of the HSBs, SPL and M/s. SABIC India Pvt. Ltd. They gathered evidence in the form of statements from employees of these firm and recovered documents from these premises. Investigation revealed that the HSBs (except M/s. Visen Industries Ltd. and M/s. Pidilite Industries Ltd.) had entered into long term contract (usually valid for an year) with SPL for purchase of Styrene Monomer (SM) on HSS basis. As per this contract called Yearly Weighted Price Contract (YWPC), the HSBs would pay SPL, for purchase of consignments of SM, at a weighted average CIF price (WAP being average international price of SM for import in the previous month by SPL) plus service charges. The contracts stipula....
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....high sea sales basis. The Commissioner found that the assessable value in each case was the value declared in the Bill of Entry (HSS price) - 2% commission + value recovered against debit notes. Duty on this difference was payable by the HSBs. 3.1 Though M/s. Ion Exchange India Ltd. and M/s. Pidilite India Ltd. had not entered into YWPC like the other HSBs, they were also guilty of undervaluation as they had paid part of the price for purchase of consignments of SM as service charges against debit notes raised on them. He found close nexus and collusion between SPL and the other eight HSBs in evolving the arrangement for payment of duty on the basis of false HSS contracts. In cases where the weighted average price worked out to a lower amount compared to the original invoice price, SPL recovered differential value and customs duty thereon from the HSBs. The Commissioner found that SPL was liable to pay this amount collected in the guise of customs duty and not paid to the Government under Section 28B of the Act. 3.2 The subject case was one of clear conspiracy to evade customs duty by mis-declaration, suppression and collusion. The show cause notice issued in July, 2005 ....
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....4576 127097262 2819029 63.55 lacs 2819029 4. Styric- Chem Pvt. Ltd. 100758897 108090535 2771312 54.05 lacs 2771312 5. Visen Inds. Ltd. 40134733 43039569 1081941 21.52 lacs 1081941 6. Morex Petrochem Ltd. 31089893 33350485 957576 16.68 lacs 957576 7. Satyen Polymers Ltd. 37553740 40264182 987662 20.13 lacs 987662 8. Annu Inds. Pvt. Ltd. 18257713 18910063 332492 9.46 lacs 332492 9. Ion Exchange I. Ltd. 3575884 3895163 106407 1.95 lacs 50000 10. Pidilite Inds. Ltd. 2673630 2798725 48248 1.40 lacs 25000 11. Supreme Petrochem Ltd. 300 lacs 12. Shri V.T. Nandkumar, 50 lacs 13. Shri N. Gopal 50 lacs 14. Shri Dilip Shrigondekar Shri. 25 lacs 15. S.M. Dabeer 5 lacs 16. Shri S.K. Lahiri 25....
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.... by its representative Shri V.T. Nandkumar during the proceedings. Section 28B applied only when any amount was collected as representing duty of customs by the importer from the buyer and such amount was not deposited with the Government. These conditions were not satisfied in the present case. 4.2 S/Shri V.T. Nandakumar, DGM, SPL and N. Gopal, Executive Director, SPL have filed appeals seeking to vacate penalty of Rs. 50 lakhs each imposed on them u/s 112(a) on the charge of abetting the HSBs rendering the goods imported by them liable to confiscation. They have denied the charge on the ground that HSBs had paid duty due on the consignments and goods had not been rendered liable for confiscation. They are not liable for penalty ordered. 4.3 HSBs and their employees involved have filed separate appeals impugning the demand of duty and penalty imposed on them. All HSBs have taken identical grounds; their employees also have also taken similar grounds. We examine the appeal filed by M/s. Apcotex Industires Ltd. as a representative case for facts and grounds common to all HSBs. In the case of this appellant, differential duty of Rs. 1,42,09,176/- was demanded, equal a....
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....5 Even if it was assumed that appellants were liable to pay duty on the total amount paid to SPL, charges paid for post importation facilities were required to be deducted to arrive at the correct assessable value. In the circumstances, valuation under Section 14 read with Rule 4 of CVR was not possible in the subject case. SPL had sold goods for consumption by the appellants. Condition of actual use by the appellants was a restriction envisaged under proviso (e) to Rule 4(2) of CVR. Therefore, such a sale by SPL to the appellants could not form basis for valuation under Rule 4. Service charges were held to be a condition of sale in the impugned order. Services included post importation services like transportation, storage, insurance etc. Therefore, sale was subject to condition for which money value could not be determined. In the circumstances, in terms of proviso (f) to Rule 4(2) also total amount paid to SPL could not be value stipulated in Rule 4(1). Appellants had paid duty correctly on the basis of HSS price + 2% margin. If transaction value between SPL and the appellants could not be determined as per Rule 3(i) of CVR, the value had to be determined by proceeding sequ....
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....use for computing value for assessment of HSS purchases as adding 2% HSS commission to the CIF value charged by the foreign supplier. 4.6 The impugned order was a consequence of a change in the basis of assessment. Therefore, short levy was not due to any suppression. Therefore, the demand was barred by limitation. 4.7 The Commissioner wrongly relied on the Apex court's judgment in the case of Hyderabad Industries Ltd. v. UOI [2000 (115) E.L.T. 593]. The Commissioner relied on the above judgment solely due to the terminology "service charges" used in the said judgment. In the said case, the importer had paid duty on raw asbestos purchased on HSS basis from MMTC discharging duty on the basic charges paid to MMTC. Duty was not paid on the service charges paid to MMTC. The appellant therein had argued before the Hon'ble Supreme Court that service charges paid to MMTC were nothing but buying commission. The Hon'ble Supreme Court negated the said contention. Thus, Hon'ble Supreme Court was concerned only with the question as to whether MMTC was an agent of HSB and the commission paid to MMTC was buying commission, addable to the value. The Court had not considered whethe....
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.... of importation' as transaction involving actual international transfer of goods which could be used in valuing merchandise under the transaction value method. The impugned order had therefore incorrectly valued the impugned goods in terms of Rule 4 of the CVR. 4.10 The Commissioner wrongly found that SPL had not incurred cost towards storing the goods imported by the HSBs which occupied a very small portion of the storage tank hired by SPL. The appellants had paid proportionate storage charges to SPL. When appellants paid storage charges, the same constituted paid importation charges which could not form part of the assessable value. There was no dispute that SPL had provided services to the appellants. Commissioner rejected the submission finding that the debit notes were vaguely worded in as much as they only referred to 'business auxiliary service charges' without specifying the services. 5. All the buyers and the representatives of SPL had deposed that they had followed the industry practice. The clarification issued in the Circulars of the CBEC indicated that there was confusion on the issue in dispute among the importers. Therefore, extended period could not ....
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....h seas seller from the high seas buyers. This decision upheld similar view taken by the Tribunal in Godavari Fertilisers & Chemicals v. Collector [1996 (81) E.L.T. 535 (Tri.)]. In Tata Power Company Ltd. v. CC [2009 (240) E.L.T. 742 (Tri.)] case, the Tribunal held that service charges recovered by the high seas seller from the HSBs were payable as condition of sale of the goods and were hence part of the transaction value of the goods sold on HSS. In Tata Yodogawa Ltd. v. CC, Bhubaneswar [2001 (135) E.L.T. 960 (Tri. - Kol)] case, the Tribunal rejected the argument that decision of the Apex Court in the Hyderabad Industries Ltd. case had not considered the question whether HSS was a sale in the course of international trade for export into India. 5.4 SPL or the individual importers could not give break up of the service charges to show that the same pertained to post-importation expenses of storage, transport, barge charges and demurrage charges etc. The debit notes themselves did not show that amounts represented such charges. The contracts between SPL and importers do not indicate that such charges were being paid as is normal in the case of such transactions. As per interpreta....
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....refore liable to form part of the transaction value under Rule 9(e) of the CVR. This was the ratio of the Tata Power Co. Ltd. case where the Tribunal held that facilitation charges, demurrage, bank charges, wharfage, infrastructure charge, storage etc. were paid by HSBs as condition of said of the goods and therefore liable to form part of the transaction value. 5.8 The argument of the appellants that the price charged by the high seas seller is not the transaction value of the goods purchased on HSS basis and that the correct value was the price charged by the foreign supplier from the high seas seller was not tenable in view of the following judicial authorities. (a) Hyderabad Industries Ltd. v. UOI [2000 (115) E.L.T. 593 (S.C.) (b) Eternit Everest Ltd. v. CC [2000 (119) E.L.T. 716 (Tri. - LB) (c) Godavri Fertilisers & Chemicals v. CC [1996 (81) E.L.T. 535] (d) Tata Power Co. Ltd. v CC [2009 (240) E.L.T. 742] (e) Tata Yodogawa Ltd. v CC [2001 (135) E.L.T. 960] 5.9 As regards the decisions of the Hon'ble Supreme Court relied on by the ld.....
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....Bs. (iv) Sustainability of penalty imposed on SPL u/s 112. (v) Sustainability of penalty imposed on employees of SPL and HSBs u/s 112/114A. 6.1 The case of the revenue is that HSBs paid consideration on HSS of SM by SPL as per contracts not disclosed to the department. A false HSS contract was submitted whenever a HSB bought SM on HSS basis from SPL. As per the supply contract (YWPC), SPL recovered a basic price being monthly average CIF price for SM plus service charges/handling charges comprising barge charges, demurrage, cost of transport by pipeline, storage and warehousing charges, interest for credit enjoyed by HSBs etc. In cases where average price was lower than the invoice price paid by SPL, SPL recovered the difference and the duty paid on it from HSBs. HSS contracts were not operated. HSBs suggested that initial assessments were made on the correct value and were in accordance with the practice in vogue in the Bombay Custom House at the material time. This was obvious from the SCN issued dated 26-2-2001 to M/s. Hotline Glass Ltd. by the Bombay Customs House seeking to reject the higher value declared by the importer and t....
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....for export to India. All the case laws relied on by the ld. Counsel referred to the sale, taking place in India prior to sale for export, and held that such sales were not in the course of export and attracted sales tax. These cases are different from the case on hand on material facts and had read the provisions relating to Sales Tax Act. These are not relevant to the subject issue. 6.4 In this connection we note that in the Godavari Fertilisers and Chemicals Ltd. [1996 (81) E.L.T. 535 (T)] case, the Tribunal had considered a similar plea by the high sea buyer and rejected it as the appellant had filed Bill of Entry and the invoices drawn on the high sea buyer. The Tribunal held the high sea buyer as the importer and the consideration exchanged as the transaction value relevant for assessment. This was the unit price paid by the high sea seller plus the service charges recovered by the high sea seller. This decision was upheld by the Tribunal in the case of Eternit Everest Ltd. v. CC [2000 (119) E.L.T. 716 (Tri. - LB)]. The Larger Bench of the Tribunal held that the high sea sale transaction was the one which led to the import and upheld the findings of the Division Bench ....
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....ncerned was endorsed in its favour. At the time of sale, title vested with SPL and at the time of presentation of the Bill of Entry title vested with the HSB. Facts of the instant case are similar to those of Godavari Fertilisers and Chemicals Ltd. [1996 (81) E.L.T. 535 (T)] and the above decision applies to the subject case. 6.5 We find that the consignments involved were delivered to HSBs on sale by SPL ex-Aegis warehouse under ex-bond Bills of Entry. As rightly argued by the Revenue, in the case of warehoused goods, the process of import is complete only when the goods cross the customs barrier viz. when the goods are cleared for home consumption from the warehouse on payment of duty. The service charges which comprise profit of the high seas seller and various other expenditure claimed to be incurred post-importation, are incurred before clearance of the goods for home consumption from the warehouse at Aegis, Chembur. In the Kiran Spinning Mills case, the Apex Court held that 'import' is complete, in the case of warehoused goods, when the goods are cleared for home consumption when they join the land mass of India. The court observed as follows :- "It has now been held by....
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....red liable to confiscation under Section 111(m) of the Act by the HSBs. SPL had recovered additional amounts towards sale of the impugned consignments by raising debit notes. This enabled evasion by the HSBs by mis-declaration. SPL was thus justifiably found to have abetted evasion of duty by the HSBs. We find that the HSBs and SPL are liable to penalty as found by the Commissioner. However, as the goods had already been released without any undertaking or bond executed by the HSBs, we find that the fine ordered was not in accordance with settled law. We observe that the Hon'ble High Court of Bombay held vide CC (Import), Mumbai v. Finesse Creation Inc. [2009 (248) E.L.T. 122 (Bom.)] that when goods are not available for confiscation, fine could not be ordered. 6.9 In the view we have taken of 'import' and the includibility of the entire amount recovered from HSBs as service charges in the assessable value, we find that the argument that service charges comprised elements that did not constitute part of the price of the imported goods paid or payable, or some elements recovered were distinguishable from price actually paid or payable, is academic. Therefore, we reject the p....
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....s duty due had been paid. Individuals were not liable to penalty u/s 114A as they were not found liable to pay any duty. Since the appellants operated through their employees/executives, we do not consider it necessary to impose separate penalty under Section 112(a) of the Act on the executives of HSBs and SPL. There is no finding in the order on the role of the employees of the HSBs or SPL in the offending transactions. These are imposed apparently considering their position in the organization they are working in. As rightly argued, penalties could not be imposed on them u/s 114A as the provision is for imposing equal penalty as the duty on a person from whom duty is demanded u/s 28 (2) of the Act; there is no such demand on them. We vacate these penalties. In view of the fact that the goods found liable for confiscation had been released unconditionally the fines ordered are set aside. 7. As regards the demand of Rs. 62,50,241/- (Rupees Sixty two lakhs fifty thousand two hundred and forty one only) confirmed against SPL under Section 28B of the Act, we find that during the material time pertinent part of the Section reads as follows :- "SECTION 28B. Duties collected f....