TaxTMI 
TaxTMI 
2022 (4) TMI 529
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....ent that based on specific intelligence received and developed by the Directorate of Revenue Intelligence ('DRI'), Cochin, which indicated that the Appellant Shri Kishin Loungani (Prop. R. Kishin & Co.) was exporting inflatable footballs made of PU, Winter Sport Gloves/ Football Goalkeeper Gloves and Golf Balls to Kamal international trading, Dubai. UAE (proprietor- Kamal Loughani), through port of Cochin wherein he was indulging in circular trading of footballs and other sports items under the claim for drawback and also availing other benefits under Chapter 3 of the Foreign Trade Policy. For ease of reference the appellants shall be referred to as- 1st Appellant - Kishin Loungani 2nd Appellant - Kamal Kishin Loungani 3rd Appellant - Sudhir Pujara 4th Appellant - Anil Parmar 5th Appellant - Mansukh M. Jagda 4. It is further case of the department that the export goods were highly overvalued and were also being re-imported in the name of two importers viz. Shri Anil Parmar (Prop. Ambe Traders) and Shri Sudhir Pujara (Prop. Muktidaya Exports) at a very low value, declaring the same to be of Chinese origin. 5. It is further case of t....
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....i Kamal Loungani, who is the son of the Appellant - Kishin Loungani. (iv) The said goods were imported in Mumbai in bulk in the name of Appellant - Shri Anil Parmar (Prop. Ambe Traders) and Appellant - Shri Sudhir Pujara (Prop. Muktidaya Exports), at much lower value. (v) The goods imported were again re-packed and exported from Cochin Port. (vi) The goods exported were of inferior quality and were overvalued to claim higher drawback. (vii) No FIRC was produced by the Appellant - Kishin Loungani. 13. We have heard Shri Prakash Shah, Advocate for Appellants - Sh. Kishin Loungani; Shri Sarthak Sachdeva, Advocate for Appellants - Anil Parmar & Sudhir Pujara - Appellant - Mansukh Jagda was not represented but filed written submissions. We have heard Ms. D. S. Sangeetha, Additional Commissioner (AR) on behalf of the Revenue. 14. We have examined the records and the written submissions filed by the Appellants including the 5th Appellant - Shri Mansukh Jagda (Prop. First Campaign). 15. We have also carefully examined the written submissions filed on behalf of the Revenue. 15.1 The Appellants and the Revenue, have raised following main conten....
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....ment the same is illegal and without jurisdiction. 16. The Ld. Counsel further contended that once the seizure itself is illegal and untenable in law, the entire proceedings are without jurisdiction. 16.1 It was submitted that though the above grounds on jurisdiction were not taken in the earlier adjudication/ appellate proceedings, it is well settled position in law that the question of jurisdiction can be raised at any stage. In support of this proposition, reliance was placed on the following judgments: (a) Commissioner of Sales Tax Vs Sarjoo Prasad Ram Kumar, 1976 (37) STR 533. (b) Jam Shri Ranjit Singhji Spg. and Wvg Mills Limited, 1991 (52) ELT 365 (c) Nylex Traders Vs Commissioner of Customs (Preventive), Mumbai 2011 (274) ELT 71 16.2 It was submitted that the allegation of circular trading is completely baseless and based on assumptions and presumptions as the goods exported and imported were made of completely different material. The goods imported by other persons/ appellants at Nhava Sheva are footballs of Chinese Origin made of PVC, whereas the footballs exported by the Appellant - Kishin Loungani from Cochin are of Indian Origin and ....
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....baller Shri M. M. Jacob appeared to be unreliable and inconclusive. Shri Jacob had given his purported opinion based on visual examination of two samples and according to him both the footballs were of same quality and were made from low quality material. 16.9 It was submitted that the investigation of the department is incomplete and inconclusive and is lacking in many aspects and does not substantiate the allegation of over valuation and circular trading as there are no allegations/findings/investigation with regard to the following crucial aspects: (a) No cogent material as per law is produced to substantiate compensatory payment to the overseas buyer. (b) Except for the statement of the Appellant, who was not even examined under Section 138B of the Customs Act, no corroborative, cogent and conclusive material is on record to demonstrate that money is transferred overseas through hawala channels. Reliance in this regard, is placed on the judgment of the Hon'ble Supreme Court in the case of Commissioner of Customs, Mumbai Vs Tex-age, 2016 (340) ELT 3 (S.C.).Further, reliance was also placed on the following judgments: • Sanjay Kapoor Vs CC, 2004 (173) ELT 19....
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....le Supreme Court in the case of Siddachalam Exports Pvt. Ltd. Vs CCE, Del - III, 2011 (267) ELT 3 (S.C.). 16.14 It was submitted that, in any event, the market survey undertaken by Shri Jozy Joseph, Senior Intelligence Officer is inconclusive and cannot be relied upon as it does not provide any basis for arriving at the market value of the goods. No corresponding documents/ basis for determination of the market value have been provided. 16.15 It was submitted that in absence of any cogent evidence to establish that the son of the 1stAppellant i.e. the 2nd Appellant was an active partner of all the firms to which the goods were exported from India and the firms from which the goods were allegedly reimported into India, the declared transaction value for export goods cannot be rejected. 16.16 It was further submitted that the purported finding that the transaction is between the Appellant and his son is incorrect, and is merely based on the statement of person/s not examined under Section 138B and hence not relevant. 16.17 It was submitted that the market value of the footballs and other sports goods as determined by the department on the basis of the market survey is muc....
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....ts were relied upon in the SCN, before the adjudicating authority, they are to be excluded from the evidence. Once these statements are excluded, there is no evidence on record to establish the allegation of circular exports/trading. 16.24 It was submitted that a statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under the Customs Act shall be relevant, for the purpose of proving, in any proceedings under the Customs Act, the truth of the facts which it contains only when the person who made the statement is examined in the case before the adjudicating authority and the adjudicating authority is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. None of the exceptions contained in Section 138B(1)(a) are recorded as reason to dispense with the mandatory examination. Reliance in this regard, was placed on the following judgments: • CCE, Meerut-I Vs Parmarth Iron Pvt. Ltd., 2010 (260) ELT 0514 (All.) • Krishna Brothers vs Commissioner of Customs, Cochin, 2017 (356) ELT 222 (Ker.) • Jin....
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....d 114AA cannot be imposed on the 1st and 2^nd Appellants. 19.1 For the 2nd Appellant(resident of Dubai), an additional point was argued that period under dispute in the above appeal is prior to the amendment of Section 1(2) of the Customs Act vide Section 57 of the Finance Act, 2018 with effect from 29.03.2018. In terms of unamended Section 1(2) of the Customs Act, no action can be initiated against the 2ndAppellant (residing outside the territory of India). It is not the case of the department that amendment to Section 1(2) of the Customs Act vide Section 57 of the Finance Act, 2018 applies retrospectively. Submissions on behalf of 3rd and 4 th Appellants (Mr. Sudhir Pujara and Anil Parmar) 20. The Ld. Counsel for the 3rd and 4th Appellant substantially adopted the arguments made by the Ld. Counsel for the 1st and 2^nd Appellant on jurisdiction, merits, non-observation of the procedure prescribed under Section 138B of the Customs Act, etc. 21. In addition to the arguments as stated above, to corroborate that the goods imported and exported are different, the 3rd and 4th Appellant submitted that the average weight of the footballs as declared in the import d....
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....ra) deals with the demand under the provisions of Section 28 of Customs Act, which is different from the exercise of powers under Rule 8 of Valuation Rules. Hence the ratio of Canon Judgement cannot be applied in the present case. 27. The facts of the case in the CMR Chiho Industries Pvt Ltd Vs Union of India 2021 (5) TMI 327 is totally different from the present issue at hand and hence the said judgment cannot be relied upon. 28. The lower authorities have relied upon the statements made by various persons during the course of investigation which provides clear cut evidence of the role of each Appellant in the transaction and that has not been controverted by the Appellants. 29. In his statement, the 1st Appellant has admitted that the exports to different companies were only for namesake and that all the goods were being received by his son Shri Kamal Loungani who then used to remove the goods from the packages and send them back to India. 30. Similarly, statement of driver - Shri Narendra Deoram, statement of Shri Kamlesh Parmar - supervisor, and all others are corroborated and it appears that the 1st Appellant has indulged in circular trading of footballs and other ....
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....nded and the goods were transported to different godowns, in the light of the admission of the act of circular trading by the 1st Appellant himself, the contentions raised by the Appellants appear to be mere afterthought. 36. It was submitted that no evidence has been brought forward by the 1st and 2nd Appellant to prove that the relationship between them has not influenced the price, which now cannot be considered as transaction value. 37. Though there are certain deficiencies in the investigation by the Revenue, in the case of undervaluation like in the present case, it is difficult to attain mathematical precision. In a quasi-judicial proceedings like this, the adjudicating/ lower appellate authorities are concerned more with the pre-ponderance of probability, rather than proof beyond reasonable doubt, as held by various judicial precedents. Reliance is placed on the following judgments: • Carpenter Classic Exim Pvt. Ltd. Vs CC, Bangalore, 2006 (200) ELT 593 (Tri. - Bang.). • CC, Madras and Ors. Vs D. Bhoormull, 1974 (4) TMI 33 -Supreme Court. 38. The 3rd and 4th Appellants do not deal with the same kind of goods all the time. They deal with va....
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....deration to the aforesaid issue, we are of the view that the statements dated 25-10-1989 and 26-10-1989 can under no circumstances constitute the sole basis for recording the finding of guilt against the appellant. If findings could be returned by exclusively relying on such oral statements, such statements could easily be thrust upon the persons who were being proceeded against on account of their actions in conflict with the provisions of the 1973 Act. Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements, through independent sources. The nature of the corroboration required, would depend on the facts of each case......................................." 44. Similar view is taken by the Hon'ble Supreme Court against excessive reliance merely on oral statements, in the following cases: • Vinod Solanki v. UOI - 2009 (233) E.L.T. 157 (S.C.), • Shafeek P.K. v . Commissioner of Customs, Cochin - 2015 (325) E.L.T. 199 (S.C.), • Haricharan Kurmi v. State of Bihar - (1964) 6 SCR 623 45 During the course of the hearing, Learned Counsel for the Appellants h....
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....ent that the allegations of flow back of the remittances by way of Hawala could not be proved by the Department. It is further recorded by the CESTAT that the invoices etc. which were raised of particular amounts were duly checked by the Department at the time when the exports were being made. However, the entire amount as reflected in the said invoices was received by the respondents. 4. In view of the aforesaid finding of fact and in the absence of any evidence to show that the money was remitted by way of Hawala, we are of the opinion that the case of over-invoicing has not been established by the Department. We do not find any infirmity in the order of the CESTAT. The finding recorded is a pure question of fact and no question of law arises for consideration." 48. In the present case, the trail of flow back of money to the overseas buyer from the 1st Appellant, due to the alleged over-invoicing, is not established in the investigation. Further, the Respondent revenue has failed to establish the said money trail even during the hearing before this Tribunal. 49. We further find from records that the Revenue has failed to prove even by probability that the footballs....
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..... It appears to us that contradictory results are achieved in respect of both the samples drawn. The manner of drawing of the samples appears to be questionable and prone to error. The samples drawn during the investigation from the seized export consignment at Cochin and from the godowns of the 3rd Appellant at Maharashtra have been referred to as 'A' and 'B' rather than providing the complete details of the source from where it is drawn. Mentioning of alphabets against sample drawn is not fool proof and it raises substantial doubt especially in case when the results of the tests undertaken are contradictory. However, we find that the 2nd test report advances the case of the Appellant. 52. The expert opinion of international footballer Shri M. M. Jacob is based on the visual inspection of samples drawn from the seized export consignment at Cochin and from the godowns of the 3^rd Appellant at Maharashtra. Shri Jacob stated that "on physical examination, it is seen that the footballs from both the set of samples are of same quality and are made from low quality material". It appears that both the samples shown to Shri Jacob are the footballs made out of PVC and not made of PU. Th....
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....oving its case are overlooked and ignored by the Revenue. We find that the vital links to establish the case of the revenue are completely missing. We find that in the peculiar facts of the present case, the case of the revenue is not proved even on pre-ponderance. 60. We further find considerable force in the argument that the goods exported by the 1st Appellant are common sports goods such as footballs manufactured with PU and other sports articles, for which the details of identical or similar contemporaneous goods are always available. Both the authorities below have grossly erred in holding that there were no records to determine the value under Rules 4 and 5 of the Valuation Rules and hence, the value is determined under Rule 6 of the Valuation Rules by resorting to market survey. 61. Even assuming that resorting to Rule 6 of Valuation Rules and determination of assessable value by market survey are correct, even then upon the perusal of report of market survey dated 25.08.2015 issued by Shri Joji Joseph, Senior Intelligence Officer, we find that the same is vague and devoid of any particulars or corresponding details/ documents and find ourselves unable to accept it as....
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....t hit by Section 76(1)(b) of the Customs Act. Accordingly, we hold that the revenue has failed to prove that the export goods are over-valued by the 1st Appellant. 66. The Ld. Authorized Representative for the Revenue has contended that when the 1st Appellant was arrested and produced before the Ld. Additional Chief Judicial Magistrate, Ernakulam, he neither retracted the statements given by him under Section 108 of the Customs Act nor made any complaint against the DRI officials before the magistrate at the time of remand. Hence, the retraction of statement is an afterthought by relying upon various judgments as stated above. It is further contended that statements recorded under Section 108 of the Customs Act are material piece of evidence and voluntary statements can be relied upon inspite of the retraction. 67. We find that the aforesaid contention is factually incorrect as the 1st Appellant has specifically submitted that the statements were retracted in a writ petition filed before the Hon'ble Kerala High Court challenging the detention and arrest of the Appellant, much prior to the issuance of both the above show cause notices. We find that the retraction of the statem....
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....ion is not a violation of principles of natural justice. Upon the perusal of the said judgments, it appears to us that the same are on a different proposition of law. The said judgments do not refer to Section 138B of the Customs Act. We find that none of the said judgments have held that statements can be admitted in evidence without complying with the mandatory requirement of Section 138B of the Customs Act. In view of the aforesaid, we hold that the judgments cited by the Ld. Authorized Representative for the Revenue do not advance the case of the Revenue. 74. In light of the above findings, since the statements are the basis on which the entire case has been set up by the Revenue against the Appellants, cannot be relied upon for the want of following the procedure prescribed under Section 138B of the Customs Act. Thus the entire proceedings initiated by the Respondent Revenue fails, due to insufficient evidence. 75. In light of incomplete and inconclusive investigation on many of the crucial aspects and in absence of any material evidence corroborating and supplementing the allegations and/or the statements relied upon, and for the want of following the procedure prescrib....