TaxTMI 
TaxTMI 
2022 (9) TMI 23
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....legation of over-valuation of the goods that were imported for the purpose of setting up Transmission Lines and Substations in the State of Maharashtra. 3. The two main respondents in this appeal are Maharashtra Eastern Grid Power Transmission Company Ltd. [MEGPTCL], which has been arrayed as respondent no. 1 and M/s. PMC Projects (India) Pvt. Ltd. [PMC], which has been arrayed as respondent no. 2. FACTS 4. The State of Maharashtra was facing acute power shortage with a deficit of approximately 17.5% and a peak deficit of 4700 MW. In order to overcome this deficit and to meet the future requirements, the Government of Maharashtra encouraged private sector participation in power generation, transmission and distribution. Number of private players came forward and began setting up Thermal Power Generation Plants in the State of Maharashtra. Adani Power Maharashtra Limited [APML] was in the process of setting up a coal based power project at Tiroda in the State of Maharashtra with a generation capacity of 3300 MW. Taking into consideration the huge transmission network requirement for evacuation of power from the power stations, and to implement the setting up of the power st....
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....was entered between the three on 16.08.2010. Similarly, PMC, EIF and Gammon formed a consortium to bid for the transmission project and an agreement was entered between the three on 17.08.2010. 7. In the meantime, MEGPTCL was granted the Transmission License by order dated 14.09.2010 issued by MERC for the development of 765 KV Intra-State Transmission Network in the State of Maharashtra. 8. PMC along with its Consortium Partners emerged as the successful bidder for both the Transmission Line and the Substation project on 21.09.2010, based on the technical evaluation carried out by Price Waterhouse Coopers Pvt. Ltd. 9. Thereafter, MEGPTCL issued a Letter of Intent dated 23.09.2010 to the Consortium comprising PMC, EIF and Gammon India Ltd. for the Supply, Erection and Testing and Commissioning of Tiroda-Koradi-III-Akola II-Aurangabad Transmission Lines. A letter of Intent dated 23.09.2010 was also issued to the Consortium comprising PMC, EIF and Hyundai Heavy Industries for Design, Supply, Erection and Testing and Commissioning of the Substations, including Auto Transformers and Shunt Reactors associated with the Substations at Tiroda, Koradi, Akola and Aurangabad. 10. ....
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....toms duty benefit was available for the 765 KV Auto Transformers, Shunt Reactors, Isolators and Surge Arrestors. In order to obtain the benefit of concessional rate of customs duty for the goods to be imported under the aforesaid Notification, MEGPTCL, based on the request made by PMC, submitted applications to the Principal Secretary, Energy Department, Maharashtra. In its applications, MEGPTCL, inter alia stated that PMC would be importing transformers with accessories and shunt reactors on behalf of MEGPTCL, as an EPC contractor, from EIF and would avail the exemption contemplated under the Notification. The details of some of the applications are as follows: Date Particulars 04.09.2011 Application by MEGPTCL to the Energy Department, Government of Maharashtra for issuance of Essentiality Certificate for Import of Transformers with accessories and Shunt reactors with accessories for Tiroda Substation for 2 nos. 765 KV Transmission Network from Tiroda, Koradi, Akola and Aurangabad. 24.09.2011 Application by MEGPTCL to the Energy Department, Government of Maharashtra for issuance of Essentiality Certificate for Import of Transformers with accessories and Shunt re....
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....were imported through Nhava Sheva Port, while the balance 55 consignments were cleared through Mundra Sea Port. All the Bills of Entry relating to 31 consignments, where benefit under PIR was claimed, were assessed provisionally and subject to reconciliation under PIR. 17. It also needs to be noted that there were 4 Original Equipment Manufactures who had shipped the 57 consignments. The names of these four Original Equipment Manufactures, as mentioned in the show cause notice, are (i) Hyundai Heavy Industries Co. Ltd., South Korea (Hyundai), (ii) Dalian Insulator Group Co. Ltd., China (Dalian), (iii) Sediver Insulator (Shanghai) Co. Ltd., China (Sediver) and (iv) Suzhou Furukawa Power Optic Cable Co. Ltd., China (Suzhou). 18. The break-up of the shipments, as mentioned in the show cause notice, is as follows: Sr. No. Name of the OEM (shipper) Brief Description of goods No. of shipments (B/Es) Port of Import Clearance Type of clearance (Project Imp. 98.01 or merit) 1. Hyundai Auto Transformers, Shunt reactors & mandatory spares 31 Mundra (30) N. Sheva (1) Concessional rate under Heading 98.01 2. Dalian Disc Insulators 9 Mu....
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.... of the Customs Act should not be confiscated under section 111(d) and section 111(m) of the Customs Act; iii) Penalty under section 112(a) and (b) of the Customs Act should not be imposed on each one of them in relation to the above goods; and iv) Penalty under section 114AA of the Customs Act should not be imposed on them. (II) EIF, Vinod Shantilal Adani, Jatin Shah, Mitesh Dani and Mehul Jani should show cause as to why penalty under section 112 (a) and (b) and section 114 AA of the Customs Act should not be imposed on each one of them in relation to the goods imported under the 55 Bills of Entry. (III) Jaydev Mishra, Associate General Manager, and Dharmesh Parekh, Senior Manager, both employees of PMC, should show cause as to why penalty under section 112 (a) and (b) and section 114AA of the Customs Act should not be imposed on each one of them in relation to goods imported under the 55 Bills of Entry. B Goods imported through Nhava Sheva Port (2 consignments) (I) PMC, the importer on record (as per Bills of Entry) and MEGPTCL (who are the owner of imported goods) should show cause as to why :- (i) The declared value i....
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.... MEGPTCL, acted as an intermediary invoicing agent to inflate the invoice value in procurement of equipment and machinery required for installation in the transmission line system from respective South Korean and Chinese Original Equipment Manufactures; (iv) Though the goods were shipped directly to PMC/MEGPTCL in India by the overseas suppliers who were Original Equipment Manufactures, but for enabling inflation of invoices, it was made to appear on paper as if the goods were being supplied by EIF; (v) Accordingly, back-to-back contracts were signed between PMC (the contractor for MEGPTCL) and EIF on the one hand, and EIF and the 4 Original Equipment Manufactures on the other; (vi) Back-to-back contracts executed by EIF with the Original Equipment Manufactures were signed in India by Dharmesh Parekh (an employee of PMC). This clearly shows that the said supply contracts were planned, conceived and executed in India by the same set of persons. Thus, the entire transaction was a sham transaction; (vii) EIF proceeded to raise inflated invoices from time to time on PMC under the contract dated 01.10.2010 and the inflation was to the tune of about 40....
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....d, therefore, the same are not admissible as evidence; (iii) Section 138C(4) of the Customs Act lays down the requirement of producing a Certificate authenticating the source and other relevant particulars of the said documents received from outside India if the same are required to be taken as evidence. Since, in the present case the documents obtained from the banks were computer print outs/photocopies, the Department should have followed the provisions of the section 138 C (4) of the Customs Act, but having failed to do so, the said documents received from unverified channels cannot be admissible as evidence; (iv) The Department committed a grave error in considering the assessment of Bills of Entry consignment wise in as much as the entire contract was registered with the Kandla Customs under PIR read with Heading 98.01 of the Tariff Act; (v) The bid cost of PMC led Consortium is at par with the cost of Transmission Line and Substation packages of 765KV project executed by a leading public sector company namely M/s Power Grid Corporation of India Limited [PGCIL] in the year 2009-10 i.e. during the same time for similar scope of work; (v....
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....t for Sasan-Satna. Transmission Line (Circuit-II) and Agra-Meerut Transmission Line, worked out to be Rs. 2.52 crores and Rs. 1.78 crores respectively, as against the cost quoted by PMC of Rs.1.70 crores. Similarly, the cost quoted for the PGCIL Substation worked out to be 16% higher than the cost quoted by PMC; (vii) The allegation that PMC is related to MEGPTCL is devoid of merits as none of the clauses of rule 2(2) of the Valuation Rules could have been invoked; (viii) PMC was not a front and intermediary invoicing agent as PMC had entered into various contracts with various suppliers / contractors both in India and abroad for executing the contract awarded by MEGPTCL; (ix) PMC had a comprehensive role to pay in the execution of the contract awarded to the Consortium, which not only included procurement of equipments from EIF but also included the responsibility of entering into EPC contracts for procurement of equipments and services from local vendors; (x) The redetermination of valuation sought to be done is without any basis in as much as the price of identical goods in terms of rule 4 of Valuation Rules is not available with the Departmen....
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....he show cause notice itself mentioned that PMC had filed the Bills of Entry and cleared the goods. Further, the duty on 26 consignments was paid by PMC and, therefore, it cannot be said that MEGPTCL was the actual importer and not PMC. Also, PMC had in their reply given details of the projects handled by it in the past and their credential in this field. This would demonstrate that MEGPTCL in not the defacto importer; (iv) The allegation made in the show cause notice that PMC had sought financial assistance from MEGPTCL and requested MEGPTCL to open Letters of Credit in favour of the Original Equipment Manufactures would show that MEGPTCL was not the de-facto importer. The explanation offered by PMC that the Letters of Credit were opened as payment to PMC was delayed by MEGPTCL due to which the working capital of PMC was getting blocked leading to severe cash crunch and the supplier was insisting for payment at site, deserves to be accepted. Further, the opening of Letters of Credit by MEGPTCL was to ensure timely project completion; (v) Reliance was placed by the adjudicating authority on the order passed by Deputy Commissioner of Income Tax, for the Assessment y....
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....d finding, the adjudicating authority dropped the proceedings initiated by the show cause notice. SUMISSIONS 29. Shri P.R.V. Ramanan, learned special counsel for the Department made the following submissions: (i) The adjudicating authority failed to comprehend that while the contract between MEGPTCL and PMC may have been an EPC contract as claimed, there is nothing in the contract between PMC and EIF to suggest that it was an EPC contract; (ii) The finding of the adjudicating authority that the value of the goods invoiced by the EIF was arrived on the basis of ICB, is contrary to the facts on record; (iii) The adjudicating authority erred in holding that the show cause notice had not challenged the validity of invoices issued by EIF and so also the contract between EIF and PMC as the said findings run contrary to the allegations made in the show cause notice wherein it has been alleged that the transaction between EIF and PMC were sham transaction and EIF was only a front of Adani Group, which acted merely as an intermediary invoicing agent for inflation of the value; (iv) The adjudicating authority erred in holding that MEGPTCL, EIF ....
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....s employee of PMC, but in his individual capacity upon being authorized by EIF to sign on its behalf; (iv) In any event, even if it is assumed that PMC and EIF are related, the price of the transaction has not been influenced by the said relationship in as much as the entire contract was awarded by MEGPTCL to PMC led Consortium after following the ICB process; (v) In paragraphs 5.1.3.25 and 5.1.3.25.1 of the order, the adjudicating authority, after considering the contemporaneous data submitted by PMC in the form of project cost of similar project of Power Grid Corporation of India Limited, held that the said cost is comparable to the cost of the present project. This finding does not suffer from any infirmity; (vi) The proposal of the department to compare the price charged by the Original Equipment Manufactures to EIF with the value of imported goods is incorrect as it fails to consider that the two contracts are entirely different having different obligations, financial exposure, risk undertaken, extended warranty, etc.; (vii) The submission of the department that EIF was only required to supply the equipments manufactured by the Original Equi....
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....or home consumption by them. Further, the customs duty on 26 consignments was paid by PMC. Therefore, the submission of the Department that MEGPTCL is the owner and hence the importer is without any basis. To support this contention reliance has been placed on the following decisions: (a) Bimal Kumar Mehta vs. CC, Mumbai [2011 (270) E.L.T. 280]; (b) Proprietor, Carmel Exports & Imports vs. CC, Cochin [2012 (276) E.L.T. 505 (Ker.)]; and (c) Brij Mohan Sood vs. C.C., Kandla [2007 (217) E.L.T. 570 (Tri.-Ahmd.)]. (ii) The definition of term 'import' was amended w.e.f. 31.03.2017. Post amendment, the term 'importer' includes a beneficial owner of the goods. The term beneficial owner is defined under section 2(3A) of the Customs Act to mean any person on whose behalf the goods are being imported or exported or who exercises control over the goods imported. MEGPTCL cannot be considered as 'importer', as the goods were imported prior to the amendment. 33. The submissions advanced by the learned special counsel appearing for the Department and the learned counsel for the respondents have been considered. DISCUSSION 34. The issues that arise for c....
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....arashtra and transferable Letters of Credit were also opened by it for the imported goods, it would mean that PMC was merely a contractor and cannot be treated as importer. 40. This submission of the Department cannot be accepted. MEGPTCL had declared itself to be the owner of imported goods as the entire project was owned by MEGPTCL. However, this would not mean that for each and every equipment imported for setting up the project, the importer would be the owner of the project. As noticed above, the contract to set up the project was awarded to a Consortium led by PMC and it is, therefore, the responsibility of PMC to execute the said project. Filing of the Bill of Entry and the act of holding itself to be the importer of the said goods is enough to hold that PMC can only be treated as the importer and not MEGPTCL. 41. The fact that a person who files the Bill of Entry is the importer has been settled by the Tribunal in Nalin Z Mehta vs. CC, Ahmedabad [2014 (303) E.L.T. 267 (Tri.-Ahmd.)] and the relevant paragraph of the said decision is reproduced below: "11. In view of the above reproduced ratio of various judgments, it has to be concluded that an importer under ....
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....l Centre (DIFC) Branch. 47. All the documents were requisitioned and received from the above Banks during investigation and against issuance of summons under section 108 of the Customs At. It is the case of the Department that each document was authenticated and attested under the seal of Bank and was received under the letter head of the Bank. 48. Brief details of the documents resumed from the banks and relied upon in the show cause notice are as under: Sr. No. Source of Information Details of information 1. Customs, Kandla-EDI Data 26 Consignments cleared at Merit Rate - 31 consignments cleared at concessional rate under Heading 98.01 2. Axis Bank, Mumbai and DIFC, Dubai Documents received included Bank attested photocopies of Bills of Lading along with corresponding invoices of Original Equipments Manufactures and packing lists, copies of Letters of Credit opened in the name of EIF, Agreement between EIF and Hyundai. Agreements between three other Original Equipments Manufactures namely, Dalian, Sediver and Suzhou and EIF. Back-to-back invoices-one raised by Hyundai on EIF and another raised by EIF on PMC for the same Bill of Lading were noticed....
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....) deals with cases where any document is required to be produced as an evidence in proceedings under the Customs Act and the Rules framed thereunder. It specifically mandates production of a certificate containing the following: (i) Identifying the document containing the statement and describing the manner in which it was produced; (ii) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer, (iii) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, to be provided by a person occupying a responsible position in relation to the operation of the device in question or the management of the relevant activities shall be evidence of any matter which is stated therein. 52. The Customs Act contains a specific provision that describes the manner in which the admissibility of computer print outs will be accepted as evidence in proceedings initiated under the Customs Act. When law requires a thing to be done in a particular manner it should be done in that manner alone. The Directorate of Revenu....
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.... control and direction over PMC through EIF in as much as EIF had directed PMC through authorization to sign the contract with the Original Equipment Manufactures on behalf of EIF. It is on this basis that it was submitted that the contract between MEGPTCL and PMC for offshore supplies of goods on one hand and PMC and EIF for supply of the same goods on the other hand were dubious paper work. 58. In this connection it needs to be noted that Dharmesh Parekh, an employee of PMC, in his individual capacity and on being authorized by EIF, signed the contracts entered into between EIF and Original Equipment Manufactures as authorized signatory of EIF. While PMC is a legal entity incorporated in India, EIF is a separate independent entity incorporated under the laws of UAE and there is no commonality of shareholders and Directors between the said two entities. The said two entities have, therefore, to be treated as distinct legal entities. 59. Under the provisions of Customs Act, two parties can be termed and treated as related if they fall within any of the eight clauses of rule 2(2) of the Valuation Rules. It is no doubt true that Dharmesh Parekh was an employee of PMC and that P....
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....l Mine Project etc. 65. While one of the role of PMC was to obtain imported equipments from EIF, PMC was also required to play a comprehensive role in execution of contract awarded to the Consortium. It not only included procurement of equipment from EIF, but also included the responsibility of entering into various EPC contracts for equipments and services from various local parties. Similarly, equipment was procured by PMC on high sea sale basis from ABB Ltd. 66. It has been found that PMC has to be treated as the importer. The infrastructure landmark achieved by PMC is clear from the literature submitted by PMC in the Paper Book which gives detail of the various projects which were executed by PMC. The same are reproduced below: PMC Projects - An Overview 3.1 Project Reference Sr. No. Type of Project Project Status Est. Project cost in INR Cr Est. Project cost in Million USD Project completion time in month - Construction Phase 1. Multipurpose terminals 1.1 Multipurpose terminal T-3 at Mundra Operational since 2012 500 100 18 1.2 Multipurpose terminal T-3 at Hazira Op....
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.... 2.2 Coal Terminals 2.2.1 Coal Terminal at West Basin, Mundra Operational West Basin Coal terminal is World's largest coal Import Terminal 2.2.2 Coal Terminal at Mormugao Port Trust Operational 1) BWSR boom length of 51m which is one of the largest in port terminals in India. Erection is under progress. 2) 2 nos. of tunnel conveyors of 110m. Each commissioned (no load). Each conveyor gets the feed from 4 nos. of vibrating feeders (750 TPH) located at the top of the tunnel. This is also unique feature in prots. 3) Stacking of coal through travelling trippers which is at 15m height. Necessary DSS is also provided. (although this is not a good idea) 2.2.3 Coal Terminal at Visakhapatnam Port Trust Operational 1st 54m C frame Stacker-Reclaimer machine in India and project is likely to be completed within contractual date. 2.3 Agro 2.3.1 Fertilizer Cargo Complext and Agri Park at Mundra Operational 3 Liquid Bulk 3.1 Multi Commodity 3.1.1. Liquid Bulk terminal at Mundra Operational 3.1.2 Liquid Bulk terminal at Hazira Operational Terminal started comme....
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....Engineering for river crossing / special towers, if any, Manufacture, Procurement, Assembly and Testing at Works, Proto assembly of Tower materials and Type Testing of other material's, as required, Packing & Forwarding for Supply on CIF/Ex-works Basis, Port Handling and Clearance, Reconciliation with Custom authorities, for the Imported Goods, Inland Transportation and Transit Insurance, Transportation up to Site, Unloading, Storage, Handling at Site, Survey, Soil Investigation, Arranging Right of Way (RoW), Tower Foundation including Design and Engineering for river crossing / special towers, if any, Pile Foundation complete in all respect wherever required, Erection of Towers along with Extensions with all Fittings, Hangers, Step Bolts D-shackles, Pack Washer etc including Tack Welding, Protection of Tower footing, Stringing, Installation / Earthing of Towers, Installation of Tower accessories, Painting, Testing and Commissioning of 2 Nos. 765KV S/C Tiroda-Koradi III- Akola II- Aurangabad Transmission Lines Package and 400KV D/C Akola I - Akola II Transmission Line complete in all respect with all fittings and accessories as per Technical Specifications. Line I ....
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....pare unit) • 4 nos. of 765KV Line Bays (for Tiroda - Koradi III and Koradi III- Akola II, 2xS/C 765KV lines) • 4 nos. of 400KV Line Bays (for Koradi III- Koradi II and Koradi III-Khaperkheda D/C 400KV lines) • Space for 2 nos. 765KV Bay (for future use) • Space for 2 number 400KV Line Bays (for future use) 3. Establishment of 765/400KV Substation at Akola II. • 1x1500 MVA, 765/400KV Transformer with bays on 765KV and 400KV side (4x500 MVA I ph unites providing 1x1500 MVA bank with one spare unit) • 2x240 MVAR, 765KV fixed Line Reactors (7x80 MVAR I ph units providing 2x240 MVAR banks with one spare unit) (for Koradi III - Akola II, 2xS/C 765KV Lines) • 2x240 MVAR, 765KV switchable Line Reactors (7x80 MVAR I ph units providing 2x240 MVAR banks with one spare unit) (for Akola II- Aurangabad, 2xS/C 765KV lines) • 1x240 MVAR, 765KV switchable Bus Reactors (4x80 MVAR I ph units providing 1x240 MVAR banks with one spare unit) • 4 nos. of 765KV Line Bays (for Koradi III - Akola II and Akola II- Auran....
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....ubstation structures etc. normally allowed by other utilities for execution of such works. MEGPTCL asked PMC to quote price for entire Supply and Service Scope on 'Firm Price' basis. However, PMC informed MEGPTCL that this shall have huge price implication in their price bid. 2. Payment Terms: PMC requested MEGPTCL to keep the standard payment terms of 10% Advance, 80% pro-rata upon delivery for supplies and against monthly Running Bill for Services and 10% upon completion/ commissioning, Section wise/ Substation wise, instead of payment terms as per the Tender document, i.e for supply contract: 10% advance, 5% upon drawing approval, 40% pro-rata upon delivery of supplies, 35% upon mechanical completion and balance 10% upon completion of supplies Section wise/ Substation wise and for service contract: 10% advance, 40% pro-rata upon against monthly Running Bill for Services, 40% upon mechanical completion and balance 10% upon taking over of work/facilities. PMC informed that the above payment terms would help in their cash flow. MEGPTCL informed that deviation in the payment terms cannot be accepted. 3. Stringent Delivery Schedule: PMC requested MEGPTCL to ....
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....ts from the OEM's to supervise the work during execution and MEGPTCL also informed PMC that MEGPTCL would depute 2/3 specialized persons from their end to PMC to do the effective project management and these people would work in close association with PMC during the entire execution of the works. PMC agreed to provide free access to their premises and project documentation to these deputed people for close monitoring." 75. Thereafter, a meeting took place between PMC and EIF and the minutes of the meeting are reproduced below: "PMC briefed EGI regarding the salient terms & conditions of MEGPTCL Tender for Transmission Line and Substation package. • Is mutually agreed between PMC and EGI that in case the consortium becomes successful bidder, EGI shall be responsible for supply of offshore items for Transmission Line and Substation package on CIF Indian port basis. In such an event detail scope of work shall be mutually decided between PMC and EGI. • PMC informed EGI that project completion period shall be as per MEGPTCL bid documents i.e. 17 months for Substation package and 18 & 21 months for 765 KV Line-1 along with 400 KV D/C Line & Line-....
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....fulfill the said conditions, as can be seen from the minutes of meeting between PMC and EIF. The respondents are, therefore, correct in their submission that the contract between PMC and EIF cannot be compared with contract executed between EIF and Original Equipment Manufactures. The submission advanced by the learned special counsel for the revenue that this was an afterthought cannot be accepted. The letter issued by the Engineering Firms states that the extended warranty of 10 years for critical equipment such as Transformers and Shunt Reactors would be somewhere in the range of 8% to 9% per annum and 80% to 90% for 10 years. This apart, other factors such as liquidated damages, type testing charges, stringent delivery schedule cannot also be overlooked. Due to a default on the part of EIF, PMC could charge liquidated damages to the extent of INR 700 Millions from EIF. 77. There is, therefore, no hesitation in holding that the contract between PMC and EIF and EIF and the Original Equipment Manufactures cannot be compared as there is a clear difference. The contract executed between PMC and EIF is, therefore, an EPL contract. VALUATION 78. What is now required to be exa....
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.... MSETCL proposing the Joint Venture for development of Transmission Line. The relevant paragraphs are reproduced below: "The Technical Validation session of MERC was held on 17th April 2010. All other directives/data gaps pointed out by MERC has been complied with except the approval of Govt. of Maharashtra (GoM) for participation of MSETCL in JV Company. MSETCL has also requested GoM for approval to join as Joint Venture partner with AEL for development of 765 KV transmission project. However, GoM approval to MSETCL proposal is pending. In absence of GoM approval, neither MERC is in a position to admit our application for grant of transmission license nor is MEGPTCL is a position to undertake project development activities such as ICB bidding for finalization of supply and erection contracts for transmission lines and substations. As mentioned above synchronization schedule of Tiroda Power Project only 21 months time period is left to complete the 765 KV transmission project. You will appreciate that it can be completed in above time frame only if the project development activities are undertaken without a loss of day and license is granted by MERC within a month....
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.... (c) JSK Industries Private Limited (d) Sterlite Technologies Limited (e) Gammon India Limited (iii) For Hardware Fitting and Accessories Supplies (a) Asbesco (India) Private Limited (b) Tag Corporation (iv) For GS Earthwire supplies (a) UIC Udyog Limited (v) Offshore supplies : 765KV Insulators and OPGW (a) Electrogen Infra FZE, UAE Transmission Line : Service Contract (i) Transmission Line Services (a) Gammon India Limited (b) Jyoti Structures Limited (c) Kalpataru Power Transmission Limited (ii) OPGW Installation (a) Sree Krishna Power Engineering & Consultancy Private Limited Substation : Supply Contract (i) Substation Equipment Package w/o ATs & SRs (a) ABB Limited (ii) Onshore Supplies (ATs & SRs Accessories) (a) A2Z Maintenance and Engineering Service Limited (iii) Offshore Supplies - (ATs & SRs) (a) Electrogen Infra FZE, UAE Substation : Service Contract (i) Substation Equipment Package w/o ATs & SRs (a) ABB Limited (ii) ETC &....
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....d list. 88. The show cause notice proposes redetermination of the value for the reason that the goods imported by PMC from EIF are over-valued with the sole intention to siphon off money outside India. To support this allegation, the Department alleges that EIF was a front created by Adani Group and has been used as an intermediary invoicing agent and that the contracts between MEGPTCL and PMC for offshore supply of goods on one hand and PMC and EIF on the other for the same supplies were dubious paper work created to provide a cover. 89. There are 57 consignments imported by PMC for the purpose of setting up the Transmission Line and Substation Project. The said imports were made by PMC from EIF, which was a Consortium member. Out of the 57 consignments, 26 consignments were cleared on the appropriate rate of customs duty that was paid at the time of import, but the balance 31 consignments were cleared at concessional rate of duty under Heading 98.01 of the Tariff Act. The case of the Department is that the value declared by PMC for the imported goods, basis the invoices issued by EIF was grossly over-valued as the goods were directly shipped by the Original Equipment Manufa....
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....111(m) of the Customs Act. 92. Learned special counsel for the Revenue, however, submitted that section 111(m) of the Customs Act is applicable to any goods and not to imported goods only and, therefore, even if the goods have been cleared for home consumption after determination of value, the assessment of the same can still be reopened under section 111(m) of the Customs Act. Further submission is that the matter with respect to the 31 Bills of Entry was provisional in nature and, therefore, section 18 of the Customs Act would apply. Learned special counsel, therefore, also submitted that in view of the magnitude of over-valuation, which was detected after extensive investigation, there cannot be any restriction with regards to redetermination of value as fraud overrides all considerations. 93. It is true that fraud would vitiate everything, but then fraud has not only to be alleged but also proved. In the present case, the documents that form the basis of the allegation of overvaluation cannot be relied upon by the Department as the same cannot be admitted as evidence under the Customs Act. The allegation of fraud, therefore, has not been proved. 94. Be that as it may, ....
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....f the scheme contained in the Act as well as in the Rules to arrive at the valuation of the goods, it becomes clear that wherever actual cost of the goods or the services is available, that would be the determinative factor. Only in the absence of actual cost, fictionalised cost is to be adopted. Here again, the scheme gives an ample message that an attempt is to arrive at value of goods or services as well as costs and services which bear almost near resemblance to the actual price of the goods or actual price of costs and services. That is why the sequence goes from the price of identical goods to similar goods and then to deductive value and the best judgment assessment, as a last resort. 27) In the present case, we are concerned with the amount payable for costs and services. Rule 9 which is incorporated in the Valuation Rules and pertains to costs and services also contains the underlying principle which runs though in the length and breadth of the scheme so eloquently. It categorically mentions the exact nature of those costs and services which have to be included like commission and brokerage, costs of containers, cost of packing for labour or material etc. Signific....
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....* 34) In the present case before us, the only justification for stipulating 1% of the F.O.B. value as the cost of loading, unloading and handling charges is that it would help customs authorities to apply the aforesaid rate uniformly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with the reason given by the authorities to have such a provision and are of the opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority. ***** 36) We are, therefore, of the opinion that impugned amendment, namely, proviso (ii) to sub-rule (2) of Rule 9 introduced vide Notification dated 05.07.1990 is unsustainable and bad in law as it exist....
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....e price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 also makes it clear that the price actually paid or payable for the goods will not be treated as "transactional value‟ where the buyer and the seller are related to each other. As per the first proviso to the amended section 14 (1), certain charges are to be added in the transaction value of the imported goods. 99. It would now be appropriate to examine the relevant provisions of the Valuation Rules. In terms of rule 3, the valuation of the imported goods should be the transaction value adjusted in accordance with provisions of rule 10. Rule 3 further provides for certain cases where the transaction value declared by the importer should not be accepted. Rule 4 states that the transaction value of the imported goods is the value of identical goods. Rule 5 provides that the value of imported goods shall be the transaction value of the similar goods. Rule 6 states that when the value cannot be determined under rules 3, 4 and 5, the value should be determined under rule 7. Rule 7 provides for deductive method of valuatio....
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....es and erection of sub-stations was comparable with the similar project executed by the leading public sector company Mis Power Grid Corporation of India Limited (PGCIL) in the year 2009-10 i.e. during the same time frame for similar scope of work at Sasan-Satna Transmission Line (Circuit-II) and Agro-Meerut Transmission Line Projects. Furthermore, the bid cost made by PMC (through consortium), was at par with cost of transmission line and substation package of 765KV project executed by the leading public sector company M/s Power Grid Corporation of India Limited (PGCIL) in the year 2009-10. 5.1.3.25.1 The noticee has further submitted that the cost worked out for the PGCIL substation (as per petition filed by PGCIL to Central Electricity Regulatory Commission) was 16% higher than the cost quoted by PMC. A comparative chart of the cost incurred by MEGPTCL and PGCIL is reproduced below: 102. The comparative chart submitted by PMC, also makes it clear that the price declared by MEGPTCL, when compared to that of PGCIL project, was in fact lesser. 103. Learned special counsel for the Department submitted that the cost of auto transformer and shunt reactor, as declared by....
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....aking, to form a Joint Venture for development of Transmission System, pursuant to which a Joint Venture was formed between AEL and MSETCL where AEL held 74% of share and MSETCL held balance 26%. The notice inviting tender, awarding of the bid, filing of applications seeking registration of contract under PIR were also done while the said Joint Venture was existing. It was only on 27.12.2012 that MSETCL expressed its inability to form the Joint Venture. In the event MSETCL would not have backed out, they would have been 26% shareholders in MEGPTCL. 106. It was, accordingly, submitted by learned counsel for the respondent that the State Government Undertaking itself was involved in the process and it may not be correct to allege that the State Government Undertaking was a part of the alleged over-valuation. In this connection, it would be appropriate to reproduce paragraph 5.1.3.30 of the order of the adjudicating authority and it is as follow: "5.1.3.30 I also find that MEGPTCL was a Special Purpose Vehicle formed through a joint venture between Adani Enterprises Ltd. (AEL) holding 74% of the share holding and Maharashtra State Electricity Transmission Company Ltd. (a G....
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.... "A conjoint reading the aforesaid provisions makes it is clear that Heading 98.01 of the Tariff Act shall be available to the goods which are imported under a specific contract registered with the appropriate Customs House under PIR. What is evident from the provisions and requirements of PIR is that it recognises contracts of the nature that APML/APRL had executed with EIF and the other consortium members. Infact, PIR ensures that large infrastructure projects benefit from the duty exemption. As such, it is clear that what is registered is the contract as a whole. When considered in this light, the goods imported for the project become a subject matter of assessment as whole and individual consignments are not required to be separately assessed. It is, therefore, clear that PIR does not deal with import of individual consignment and the assessment of the goods imported for the project have to be dealt with together." 113. In view of the detailed discussions on this issue in Adani Power Maharashtra Ltd., there is no difficulty in holding that the contract as a whole was required to be assessed and not individual consignment. CONFISCATION 114. Another important issue tha....