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TaxTMI 
2017 (3) TMI 583
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.... Customs Act, 1962. The said penalties stand imposed upon the appellants on the allegations and findings that the drawings / designs, specifications, imported by the appellant vide 7 Bills of Entries, on the declared value, in fact, have no intrinsic value and value declared by the appellant is grossly over-valued in contravention of section 111 (m) of the Customs Act and Rule 11 & 14 of Foreign Trade (Regulation) Rules, 1993, and as such, the same are liable to confiscation under section 111(d) and 111(m) of the Customs Act and the appellants are liable to penalty under section 112 (a)(iii) of the said Act. Further penalties stand imposed upon the Director on the findings that as he was running day-todays affairs of the company and was fully in charge of the financial and other activities of the Company. He was instrumental in inflating the import value by mis-declaring the same and thus fraudulently remitting the foreign exchange outside India. 2. Before going into the legal submissions made by both the sides, duly represented by Shri C Harishankar, Senior Advocate, Shri Krishna Kant, Shri Sanjeev Kr Singh, Shri R K Handoo,....
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....nancial aspects of power plants. Recommendations about usage of technology as well a financial model are given in DPR. Based on such DPR only, the lenders have appraised and approved the project for its financing. ii. Pre- Contract award- engineering services of packages (BTG & BOP Packages) it includes: (a) Basic engineering and preparation of enquiry specifications for selection of vendors/contractors for the enquiry of all packages, (b) Issue of clarifications to prospective bidders as per their requirements, (c) Assisting owner in discussion with the prospective bidders, (d) Preparation of bid valuation report, and (e) Assistance to owner in the placement of Letter of Awards on the selected bidders, review and finalization of contract documents to be signed with each selected bidders. iii. Preparation of L1 network detailing various activities and sub-activities for timely execution of project. iv. Basic engineering of civil and structural work of the main plant area and general civil work of balance of plant area. v. Review of post - contract award engineering services and ....
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....ntract for BPO Package, General Condition for Erection Work and the Technical Specification for the Works. b. Pursuant to the said Tender for BPO, bids were received from five parties including the Carbery Infrastructure Pvt. Ltd. ("CIPL"). The CIPL, vide its two separate letters dated 18.02.2011 submitted its techno commercial and the price implication Bid "offer" for the Works as per the tender. c. Out of five bids, only three parties were fulfilling the requirements of bids, and amongst them, the offer of CIPL for BPO package was technically and commercially evaluated as the lowest with the back up support of the technical expertise from its Israeli Collaborators, namely, the Israel Electric Corporation Ltd (in short IEC). IEC is a state owned undertaking of the government of Israel and is engaged in Israel in electricity utility and has got Know-how and experience in engineering, procurement, constructing and operating of energy generation, transmission and distribution facilities and all related activities of power and has got proven experience in implementation of such engineering, procurement and construction projects in power sector. Based on the afo....
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....00 crores towards "Engineering Information, Designs and Drawings" (as per Para 3.1.4 of the Schedule 1 of the contract), and v) Rs. 225 crores towards the "Project Management & Supervision" (as per Para 3.1.5 of Schedule 1 of the contract). Relevant details and break up provided under clause 1.1 of the Schedule 1 of the contract are mentioned below- Component Price (INR in Crore) Remarks, if any Procurement and Supply of all equipments under BOP Package (as per Clause 3.1.1) 1015 Inclusive of on-scale as well as off-shore supplies, ocean freight & marine insurance charges, local transportation charges, loading/unloading & price of mandatory spares. Civil Construction and Structural works (as per Clause 3.1.2) 1260 Erection, installation and Commissioning (as per Para 3.1.3) 197 Engineering Information, Designs and Drawing (as per Para 3.1.4) 300 Project Management (as per Para 3.1.5) 225 Total INR 2997 h. It may be mentioned that all the payments were subject to stage linked plan and as per the pro....
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....te enabling work. The reason is that (a) BOP comprises of large number of package and sub-packages, (b) BOP requires integration of such diversified large number of packages, (c) BOP execution and installation covers a large area within the plant (90% of plant area is used by BOP), (d) Each package and sub package of BOP is critical for efficient and safe running of plant. 11. The BOP work is performed by a number of contractors of each sub-package but management of such large number of contractors is quite Himalayan task and synchronization and integration of their activities at execution stage is not an easy task. Therefore in order to ensure proper co-ordination of supplies and schedules, these packages are clubbed together and ordered as a single package called BOP package to one contractor. This has been an industry practice as owner can avoid hassles of coordination and integration of various packages and there is a single point responsibility of successful and execution of BOP package on one organization. Thus BOP contractor‟s work is more difficult and BOP engineering know how is more valuable than BTG, which has straight technology. 12. The sc....
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....r system excluding external water intake system up to plant all BOP foundations, plant buildings, regular plant water reservoir etc.; (d) Complete procedure manuals, designing and drawings, as may be required for erection, installation, start up and commissioning of complete BOP plant including trial operation, successful performance testing and handling over of the BOP package; (e) Preparing necessary design calculations and drawings as required for submission to Indian Statutory authorities. However, all approvals, sanctions and permits as may be required under such regulations shall be obtained by the Owner under its own cost; (f) The Engineering Information shall be prepared in the English language and using the metric system; (g) The contractor shall perform Engineering Services relating to design and engineering of BOP Package at its Home Office or at its Affiliate Offices outside India. Accordingly, engineering services rendered in Home Office or Affiliate Offices shall be treated as Off-shore Services". Similarly, the contract provides the following Scope of works under the head of Project management and Supervision a....
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....he performance of BOP package, these drawing are got prepared by BOP Contractor and/or by various package suppliers under the guidelines and specification stipulated by BOP contractor. BOP contractor evaluates and finalizes these drawings and makes the comments, with necessary corrections and submit the same to owner also for their comment and approval. After that BOP contractor integrates all the comments and forward it to sub-contractor for incorporation and resubmission of these drawings/data sheet/documents for final approval by the BOP Contractor subsequently sends these drawings to owner for their approval and finally releases for commencing the process of setting up of the project. Erection Drawings:- These drawings are also prepared initially by the contractor providing the details as to how their equipment shall be erected for the project. As Built Drawings:- These are prepared by the BOP contractor after the plant is constructed & provides the details about "As Built" of project/equipment system, these are required for the purposes of future maintenance, rectification or the modification which may be required at later stage. 16. It is ment....
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....anagement Services. CIPL as part of its obligations under the scope of work was able to submit the specifications for; (a) General Civil Works, (b) Chimney for the Thermal Power Plant, (c) Coal Handling Plant, (d) Ash Handling Plant, (e) Cooling Plant; and (f) Water Treatment Plant. Simultaneously, the Project Execution Schedule under the head of the Project Management Services was also submitted by CIPL to the appellants. 19. For rendering the services in terms of the contract, on the instructions of CIPL, the engineers and technical experts of Israel Electric Corporation Ltd. visited the appellant‟s plant from time to time. The team of the IEC has reviewed the designs, drawings and assisted in other allied services including the preparation of technical documents and manual etc. 20. Upon reaching the stages contemplated and provided for in the contract, CIPL raised invoices on the appellant. All the invoices were raised by CIPL in terms of the stage linked payment identified in terms of Schedule No. 1 of the Contract dated 08.05.2011 between the appellants and CIPL. Invoice No. 1,2,4 to 7 were ....
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....tract dt. 08.05.2011 04/CIP L/2011 dt. 04.07.2011 (Payment (5% of the amount of INR 300 Cr for Engineering, Desing and Drawings in terms of schedule no. 1 of our contrctdt. 08.05.2011 read with your letter no. LPGCL/ CPIL/June 11 dt. 16.06.2011, due upon finalization/ submission of complete technical specification, schedules and drawings for suppliers, civil works, erection, installation and commissioning etc. of general civil work - main plant for LPGCL (Final specification submitted vide letter no. CIPL/ LPGCL/Specs/01 dt. 20.05.2011) (being 5% of INR 300 Cr=INR 15 Cr @ 1 USD=INR 44.3616 rounded off) sum. 33,81,300 15 cr. As per clause 1 of Para "D" of schedule 1 of the contract dt. 08.05.2011 05/CIP L/2011 dt. 13.07.2011 Payment (2.50% of the amount of INR 300 Cr. for Engineering, desing, and Drawings) in terms of schedule No.1 of our contract dt. 08.05.2011 read with your letter no. LPGCL/CIPL/June11 dt. 18.06.2011, due upon finalization/ submission of complete technical specification, schedules and drawings for civil works, erection, , installation and commissioning etc. of chimney for LPGCL (Finalized specification submitted v....
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....011 & on 31.03.2012 04/CIPL/2011 dt. 04.07.2011 3,381,300 150,000,000 Rs. 15,450,000 paid on 04.10.2011 & on 31.03.2012 05/CIPL/2011 dt.13.07.2011 1,692,595 75,000,000 Rs. 7,725, 000 paid on 04.10.2011 & on 31.03.2012 06/CIPL/2011 Dt. 08.08.2011 1,690,850 75,000,000 Rs. 7,725, 000 paid on 04.10.2011 & on 31.03.2012 07/CIPL/2011 dt. 15.08.2011 1,657,760 75,000,000 Rs. 7,725, 000 paid on 04.10.2011 & on 31.03.2012 24. The appellant also duly informed the income tax authorities about the said contract dated 08.05.2011 with CIPL and forwarded a copy thereof to the Deputy Director of Income Tax (International Taxation) along with letter dated 25.05.2011. In the said letter the appellant also mentioned the scope of work under the contract including the aforesaid engineering information, design and drawings as per para 3.1.4 of the contract. The appellant mentioned breakup of the amounts as well as stage wise payments envisaged during the financial year 2011-12 towards the engineering information, design and drawings as well as towards other items. The said ....
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.... and upon reaching the relevant stage. This position was also made clear in each of the invoices as mentioned above. The said drawings and designs were even otherwise liable to nil rate of duty. 28. The appellant‟s bank however informed the appellant that for the purpose of remitting the payment, bank would bills of entry. The said design/drawings were already sent by CIPL through DHL courier. However upon the aforesaid view being taken by the authorized dealer bank, the appellant asked CIPL to resend the documents through customs route so that the requisite payments in terms of the contract may be remitted to the contractor. Thus there was no double import of any such information involving any intention to cause any loss to the revenue. 29. CIPL started sending the requisite set of documents through customs channel starting from February, 2012. All these sets were being cleared and received through Delhi Customs and no objection was ever raised by the authorities while clearing the consignments during the period from 24.02.2012 to 04.09.2012. The said consignments were cleared by the Delhi Customs by proper verification a....
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....f the Customs Act and that the Appellant and its said Director were liable to penalties under Section 112(iii) of the Customs Act. It was also alleged that provision in the contract dated 08.05.2011 for import of drawings/ designs at a consideration of Rs. 300 crore was meant to unlawfully transfer foreign exchange of CIPL in the guise of the said imports. It was alleged that the imported drawings/ designs were made for bidding purposes and the dates of the bidding were prior to the dates of the Bills of Entry and that these were prepared by TCEL and were available with the Appellant even before the importation and imported drawings/ designs had no true worth/ value. 32. The Appellant duly filed its reply to the said Notice and in the said reply the Appellant denied and disputed the allegations in the Show Cause Notice and made its submissions. All relevant facts relating to the matter as mentioned above were briefly stated in the reply. It was further stated that along with each Bill of Entry, the Appellant had filed copy of the connected invoice and from the invoice itself it was quite clear that it related to the amount payable in terms of the contract....
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....ries and ancillary work. 5. 5% ( Five Percent) On successful completion of Final Acceptance Certificate (PAC) of each of 660 MW unit including all associated auxiliaries and ancillary work and OWNER issued completed certificate against submission of Bank Guarantee for equal value valid till the completion of the warranty period. He has further drawn our attention to the other clauses of the contract which give details of engineering information, design and drawings of the contract. The consideration of Rs. 300 crores gives further break up falling under heading like preparation of complete engineering information for all areas of the project using the basic engineering package and technical specifications as provided by the Consulting Engineer and approved by the owner, as detailed below:- a) Detailed engineering information, specifications, network schedules, tender documentation, designing, drawings for the complete BOP package comprising inter alia, of Coal handling plant, ash handling plant, water system, water treatment plant, fuel oil system, compressed air system, complete fire protection system, air conditioning....
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....th CIPL as per the agreement dated 16.12.2010, between IEL and CIPL. This facts demolishes the finding and the revenue‟s case that CIPL was not having requisite expertise to modify the drawings prepared by TCEL. Such modified drawings were exported by CIPL to the appellant, towards the requirement to that effect in the contract. In such a scenario, it cannot be held that CIPL did not supply the drawings and designs for which, they raised the invoices for various parts of the total amount of Rs. 300 crores in terms of schedule 1 of the contract. 36. Learned Senior Advocate further submitted that as drawings and designs on their import are exempted from duty under notification No. 12/12 Cus dated 7.3.2012. Inasmuch as the drawings were exempted from payment of customs duty, the Revenue was not authorized to adjudge the value of the same and consequently to impose penalty on them. For the above proposition, he relied upon Tribunal‟s decision in the case of Sahil Diamonds Pvt. Ltd. vs. Commissioner of Customs [2010 (250) ELT 310] wherein it was held that "inasmuch the import of rough diamonds were exempted....
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....ought. It is the contention of the appellant that when the department itself has treated the procurement of designs and drawings as services and has accepted the Service tax from the appellant without contesting the value of said services, there was no reason for the Revenue to treat the said designs and drawings as import of the goods. Accordingly, they submitted that inasmuch as there was no requirement of filing Bills of Entry, there was no need to assess the value of the same and consequently, to arrive at a finding that the said drawings and designs and specifications were overvalued with a view to remit the foreign exchange to CIPL. 38. He concludes his arguments by submitting that inasmuch as the payment of Rs. 300 crores to M/s. CIPL was not a stand alone payment and was a part of entire contract representing the total work required to be done by CIPL, the Revenue cannot pick up the same from the contract without first contesting the legality of the contract itself. The revenue having not disputed about the correctness of the contract cannot allege that payment of Rs. 300 crores was an attempt to siphon out the foreign exch....
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....o. Ltd. (BIDCO). During investigations, it was found that M/s. BIDCO was a group company of M/s. Bajaj Hindustan Ltd. (BHL) and the appellant was also a subsidiary company of BHL. He submits that provisions of import of drawing designs worth Rs. 300 crores in contract was primarily for unlawfully transferring foreign exchange to M/s. CIPL, Singapore in the guise of import of drawing and designs. The fact that the value of designs and drawings imported by the appellant was on the higher side has been repeatedly admitted by Shri Govind Sharan Aggarwal, Shri Naval Kishore Kashyap, Shri G S Mahal and Dr. Sanjeev Kumar in their statements. Prior to the present import, the drawings were earlier prepared by M/s. Tata Consultancy Engineering Ltd. Bangalore (TCEL) and was already in the possession of appellant. He submits that mis-declaration of value invites an action under the Customs law inasmuch as the same amounts violation of provisions of section 111(m) of Customs Act, 1962. He further submits that as per Rule 2(2) (vi) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, persons sha....
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....evenue has no jurisdiction to examine such a contract and to pick up a small part of the contract reflecting the value of various services like drawing, designs and technical engineering services to be availed by them from M/s. CIPL. 41. We have gone through the said contract and find that same consists of two parts and we find that the same is for about Rs. 2997 Crores for 1980 Mg Thermal Project. Global tenders issued by M/s. BHL, in accordance with the International Competitive Bidding Guidelines, inviting bids for the contract of setting up the power plant in two packages, namely (a) the Boiler Turbine and Generator (BTG) package comprising generators and auxiliaries, constituting the main generation equipments for the plant; and (b) the Balance of Plant (BOP) package comprising the entire balance of plants and auxiliaries, including civil and structural work, For the he BOP package, global tenders were published on 17.12.2010 and various bids were received by the appellant. M/s. Carbery Infrastructure Pvt Ltd. vide letter dated 18.2.2011, submitted its technical and price bids, w....
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....ovisions of FEMA. The appellants have taken a categorical stand that FEMA authority are already of the matter for more than one year and no show cause notice had been issued to them so far, it was not open to the Customs authority to take action under the Customs Act for an allegation /offence committed under FEMA. The said plea of the appellant stand dealt with by the adjudicating authority by observing that since the matter involved contravention of the provisions of Customs Act, 1962 also, the same falls within the purview of the Customs Department. At this stage, we note that the appellants have taken a stand that there was no requirement of filing any Bill of Entry inasmuch as the goods being imported by them were not taxable item. The Bills of Entry were filed inadvertently inasmuch as the while the Bank declaration, they attached Form 1 whereas the declaration were required to be filed in F 2. Inasmuch as the F 1 form is for import of goods, the Bank insisted on filing Bill of Entry and it was in these circumstances Bill of Entries were filed. When the said plea was taken up by the appellant before the Commission....
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....ce on record. They have not sought the opinion of any technical expert in the field, in support of the allegations and findings. 43. It is also seen that the Revenue‟s case is that these drawings are already available with the appellant having been prepared by M/s. Tata Consulting Engineers Ltd. As such, awarding of the contract to M/s. CIPL was only a SHAM. As per the Revenue, there was no value addition made by M/s. CIPL to the drawings earlier prepared by M/s. TCEL which were already in possession of the noticee. The adjudicating authority has rejected the assessee‟s stand that the said drawings were required to be improved and rectified by M/s. CIPL and after having done so, they have sent back the same to the assessee and the same, stands sidelined by the adjudicating authority on the short ground that for Customs purpose, the value declared in the Bill of Entry is that of goods themselves in terms of provision of Valuation Rules. The adjudicating authority has also relied upon various statements of the appellants representatives. However, on going through the above stateme....
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....s is exempted in terms of notification No. 12/2012 Cus dated 17.3.2012 and no Customs duty is required to be paid on the same even if the said import is treated to be import of goods. The Tribunal in the case of Sahil Diamonds Pvt. Ltd. vs. CC[ 2010 (250) ELT 310] has held that inasmuch as the import of rough diamond were exempted from payment of duty, no penalty can be imposed upon the importer in terms of the provisions of Section 112 of the Customs Act. The said decision of the Tribunal stand confirmed by the Hon‟ble Supreme Court reported as CC vs. Sahil Diamonds Pvt Ltd. [2010 (257) ELT A 22 (SC)]. Identical situation is available in the present case also when the import of design and drawings is exempted in terms of notification No. 12/12-Cus, dated 17.3.2012, the charge of over-valuation of the same cannot be sustained inasmuch no valuation is required to be arrived at by the Customs. We are of the view that in such circumstances neither the goods can be confiscated nor any penalty can be imposed upon the appellants. In view of the above, it is seen that the receipt....