TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 529
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved 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 the department that since huge amount of ineligible drawback and other export incenti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ulk 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 contentions. Submissions on behalf of Sh. Kishin Loungani & Kamal The Appellants have contended, by relying upon the judgment of the Hon'ble Supreme Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sdiction. 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 made of Polyurethane ('PU'). Hence, the purported findings that exported goods were re-imported and again exported repeatedly, and thereby indulged in circular trading, is not established and devoid of merits. 16.3 It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om 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 198 * Reco Industries Vs CC, 2001 (131) ELT 694 (T) * Kohli Auto Vs CC, 2002 (139) ELT 137 (T) * K.K. Exports Vs CC, 2001 (132) ELT 296 (T) * Akshay Exports & Industries Vs CC, 2003 (156) ELT 268 (c) The examination report regarding the expo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 much higher than the amount of drawback claimed by the 1stAppellant and hence the same are not covered under the provisions of Section 76(1)(b) of the Customs Act. There was a cap on the maximum drawback per piece in respect of footballs. 16.18 It was submitted that even from the rate of drawback, it is evident tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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.) * Jindal Drugs Pvt. Ltd. Vs Union of India, 2016 (340) ELT 67 (P&H) * Additional Director General (Adjudication) Vs Its My Name Pvt. Ltd., 2021 (375) ELT 545 (Del.) * Gaurav Mungad Vs CCE, Bhopal, 2021 (376) ELT 0069 (Tri - Del.) 17. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Sukhwant Singh Vs State of Punjab, (1995) 3 SCC 367, wherein by relying upon Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding 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 2nd 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 documents and the export documents is substantially different as both are made of different constituent materials viz. imported goods manufactured out of PVC and the exported goods manufactured out of PU. 22. The average weight of footballs exported by the 1st Appellant which was made out of PU was 429 Grams and the average weight of footballs imported by the 3rd and 4th Appellants was 250 Grams and 344 Grams respectively. 23. Further, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lied 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 sports goods between Cochin- Dubai; Nhavasheva-Cochin. In several judgments, it has been held that statements of co-accused can be taken as evidence. 31. When the 1st Appellant was arrested and produced before the Honourable 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. The allegations of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 variety of goods. Similarly, the export consignment is also different both the times and hence, there is a possibility that what is exported is imported next time in cyclical manner. 39. The test reports clearly show that the samples A and C belong to the goods seized from the godown of the 3rd Appellant. Sample A drawn from godown of 3rd Appellant was made of PU, while Sample C also drawn from godown of 3rd Appellant was made of PVC. This clearly shows that 3rd Appellant does not import similar type of goods at all the times. Similarly, Sample B and sample D both from export consign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urces. 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 have specifically brought to our notice certain deficiencies in the investigation and the Revenue in its written submissions admits that there is deficiency in the investigation, but according to revenue that is not fatal to its case. We find that the most crucial element in any case of circular trading is to establish the money trail to substantiate compensatory payment. We find that in the present case no material, much less credible material is produced to substantiate compensatory payment to the overseas buyer. 46. Except for the statement of the 1stAppellant, no other material and/or conclusive evidence is on record to show that money is transferred o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 and other sports goods exported were subsequently imported back and again exported the same. The footballs exported by the 1st Appellant from India were of Indian origin, manufactured from Polyurethane. Further, the exports were under the claim for drawback. The officer who passed order under Section 51 of the Customs Act was satisfied after examination of the exports, that they are as declared in the shipping bill. The goods imported by the 3rd and 4th Appellant were of Chinese origin and made from PVC, as declared in the Bills of Entry filed by the said importers. The Chinese origin of the goods is certified by the Dubai Chamber of Commerce. No inquiry appears to have been made from....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 3rd 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. This is also contradictory to the claim of the Revenue that footballs made of both PVC and PU are exported. In our considered view, the Revenue failed to examine Shri Jacob in the adjudication proceedings to justify his expert opinion. 53. We further find that the Revenue has not undertaken any investigation against the claim of the 3rd and 4th Appellant that they have disposed the imported goods by way of sale in the local market. 54. At this juncture we would like to reproduce the submission made by the Ld. Authorized Representative for the revenue at paragraph F3 of the written arguments: "..... it is submitted that Ambe Traders do not deal with same kind of goods all the time, they deal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....termined 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 reliable. The complete text of the said report dated 25.08.2015 is reproduced below: "To The Assistant Director DRI, Cochin Sir, Sub: Market Survey of Footballs, Football Goal Keeper Gloves, Golfballs and Winter Sport gloves - Reg As directed a market survey was conducted by me to ascertain the market price of Footballs, Football Golf keeper Gloves, Golf Balls and Winter Sport gloves, similar to specimen samples of the Footballs, Football Goal Keeper Gloves, Golf balls and Winter Sports gloves taken from the export/ import consignments of M/s R. Kishin & Company, Mumbai, M/s Ambe Traders Mumbai. The prices of the above said goods as per the prevailing market price are tabulated below: Sr. no. Name of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 statement by the Appellant cannot be ignored and brushed aside merely as an after-thought especially when the documentary evidence proves otherwise. 68. We are of the view that ratio of the judgments cited by revenue are not applicable having regard to the fact in the present case, the statements are not supported or corroborated with other material evidence, which are in fact contradictory to the statements, the said judgments will not advance the case of the Respondent Revenue. The Appellants have disputed the correctness of the statements before us. 69. We also find considerable force in the argument of the Appellants that the authorities below have committed an error of law in admitting the statements of various persons in evidence, without complying with the mandatory requirement of Section 138B of the Customs Act. 70. We....