TaxTMI 
TaxTMI 
2023 (1) TMI 155
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.... being taken up together for discussion and disposal. Appeals No. Order-in-Original No. & date (Impugned Order) Period of Dispute Demand (Rs.) C/11133/2015 (M/s IFFCO) KDL/COMMR/26/2014-15 dated 30.03.2015 Urea - 30.08.2012 to 03.07.2013 Ammonia - 06.09.2012 to 02.04.2013 Rs. 45,78,35,036/- on Urea Rs. 12,96,74,539/- on Ammonia Total duty of Rs. 58,75,09,575/- Rs. 5,00,00,000/- Penalty Under Section 112(a) C/11971/2015 (M/s IFFCO) KDL/COMMR/11/2015- 16 dated 31.08.22015 Urea - 29.01.2014 to 08.09.2014 Rs. 12,14,22,750/- duty on Urea Rs. 2,50,00,000/- as Penalty Under Section 112(a) C/11463/2016 (M/s IFFCO) 05/COMMR/2016 dated 19.04.2016 Urea- 21.05.2010 to 18.02.2014 Rs. 53,76,02,720/- duty on Urea Rs. 53,76,02,720/- Penalty under Section 114A C/11529/2016 C/EH/10256/2021 C/CO/10665/2016 (Commissioner of Customs (PRV.), Jamnagar....
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....and proposing penalty under Section 112 (a) & 114A ibid. 4. The said Show cause notices were adjudicated vide respective adjudication orders as mentioned in above table. In impugned orders the demand of customs duty relates to imports of Urea and Ammonia confirmed alongwith interest and imposing penalty on the Appellants on following grounds. (i) There is huge difference between the prices of the same goods imported in terms of UOTA and AOTA and international price of said goods. Therefore, the price at which urea and ammonia imported into India was not representing the true and correct value of said goods; (ii) Government of India (GOI) is obligated to buy the entire production of Urea and M/s IFFCO is obliged to buy entire production of ammonia at a predetermined price from the supplier, OMIFCO; (iii) The Appellants/ Government of India are related to OMIFCO in terms of Rule 2(2)(i), (ii) and (vi) of the Customs Valuation Rules, 2007 read with Explanation II thereof. (iv) The prices at which urea and ammonia are imported from OMIFCO appears clearly influenced by the relationship between GOI, OMIFCO and the Appellants and hence the transactio....
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....areholding in each other. In order for parties to be considered as related they should fall under one of the eight categories listed in Rule 2 (2) of the Customs valuation Rules. He placed reliance on the decisions of Commissioner of Customs, (Import), Mumbai Vs. Bayer Crop Science - 2015(324)ELT 17 (SC). 6.1. He also submits that, this is also evident from Explanation II to Rule 2(2) which provides that if a person is a sole agent of the other he shall be treated as related only if he falls within one of the eight categories mentioned in Rule 2(2). Therefore, in the present matter Ld. Commissioner has totally failed in establishing the relationship between IFFCO /KRIBHCO and Government of India in terms of Rule 2(2) (i),(ii) and (iv) of CVR, 2007. Further even if for the sake of argument the GOI and IFFCO are treated as related persons for import of Urea because of the shareholding of GOI in IFFCO, the said relationship is of no relevance as IFFCO is not paying duty on the price at which it purchases Urea from GOI but pays duty on the price at which GOI imported from OMIFCO. 6.2 Without prejudice, he also submits that relation has not influenced the price. Rule 3(2) (d) prov....
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....ombay -1996(81) ELT 195 (SC)  CC, Maharashtra Vs. Galaxy Entertainment (I) Pvt. Ltd - 2007 (214) ELT 14 (SC) • CC.Ex Vs. Indian Turpentine & Resin Co. Ltd. - 1989(41) ELT 678 (Tribunal ) • Mark Auto Industries Ltd. Vs. CC., New Delhi 2003 (162) ELT 261 (Tri. Del) • Mosaic India Pvt .Ltd. Vs. CC.- Jamnagar (Prev) 2020 (6) TMI 285 - CESTAT, Ahmedabad. • Indian Farmer Fertilizer Co-Operative Ltd. Vs. Pr. CC Jamnagar -2020 (373) ELT 530 (Tri. Ahmd.) • (v) Pr. CC, Jamnagar Vs. Indian Farmer Fertilizer Co-Operative Ltd. 2021 (S.C.) order dtd. 08.01.2021 • Hyderabad Industries Ltd. Vs. Union of India 2000 (115) ELT 593 (SC) • Eternist Everest Ltd. Vs. CC., Bombay 2000(119)ELT 716 (Tri. LB) • CC, Tuticorin Vs. Krishak Bharti Co-Operative Ltd. Final Order No. 41756/2020 dtd. 09.12.2019 7. Shri. B K. Singh, learned Counsel appearing for the Appellant M/s KRIBHCO submits that the only issue to be decided in these cases is whether the price at which the Urea was imported could be rejected under provisions of Customs valuation Rules, 2007 and the value can be redetermined consideri....
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....ested in developing long term strategic market for the GAS. The obligation of GOI was limited to "facilitate approval by reserve bank of India, and other applicable governmental authorities for all financial obligations of KRIBHCO/ IFFCO including payment of fees and expenses relating to preparation of DFR (Detailed Feasibility Report). Further, it is clear from the MOU,it was to be signed by KRIBHCO and IFFCO and Oman Oil Company either as limited company or Joint Stock Company. Even financing was to be met by KRIBHCO/IFFCO and Oman Oil. Therefore, OMIFCO and GOI cannot be considered to be related under clause (ii) of Rule 2. 7.2 He also submits that it is also quite apparent that OMIFCO does not employ GOI and neither does GOI employ OMIFCO. Thus, they cannot be termed as employer nor employee as required under clause (iii) of Rule2. Further, clause (iv) to be applicable, it must be shown that a third party (beside OMIFCO and GOI) controls or holds five per cent or more of the outstanding voting stock or share of both OMIFCO and GOI, whether directly or indirectly. This clause cannot be applicable for the simple reason that the GOI is not a company limited by shares to enable ....
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....was forced to reduce production due to default in lifting by KRIBHCO or GOI, it had to be compensated for the loss of margins. The price has been charged for the Urea imported in this case under a Long Term Agreement that too for bulk quantity. Further there is no incidence or evidence to show that the relationship of the GOI and OMIFCO as buyer and seller has influenced the price of Urea imported. As per the MOU dated 30.07.1994, it is ensured that Oman Oil Company Ltd. would exclusively provide natural gas to the proposed fertilizer plant under long term gas supply agreement at the price determined and stated in the said MOU; that KRIBHCO and IFFCO would be committed to purchase on FOB Oman basis under a long term take or pay contract, on the term and conditions to be agreed upon, 100% of Urea Production of the Fertilizer plant at the price equal to the defined calculated floor price or the market price of urea at FOB Oman, whichever is greater; that the calculated floor price (CFP) of urea was defined to mean a price necessary to yield a 10% internal rate of return (IRR) on the equity investment in the fertilizer project. Thus, it is found that the selling price has been fixed i....
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....by the Sultanate of Oman in pursuance of the said MOU a further MOU was signed on 30.07.1994 between the GOI, Appellant on one hand and Sultanate of Oman and the Oman Oil Company Ltd. on other. As per the said MOU dated 30.07.1994 the obligations of the GOI were to be performed through Appellants while the Sultanate of Oman would perform its obligations through Oman Oil Company Ltd. As per the said MOU the equity participation in the new JV company was 25% of KRIBHCO, 25% of IFFCO and 50% Oman Oil Company. Oman Oil company Ltd. were expected exclusive to provide natural gas to be proposed fertilizer plant under a long term supply agreement at a price determined and stated in the said MOU. Both the Appellants would be committed to purchase on FOB oman basis under a long term take-or-pay contract, on terms and conditions to be agreed upon, 100% of urea production of the fertilizer plant at price equal to defined calculated floor price or the market price of urea at FOB Oman, whichever is greater. The calculated floor price (CFP) of urea was defined to mean a price necessary to yield a 10% internal rate of return (IRR) on the equity investment in the fertilizer project. Appellants wou....
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....inety five percent of the market price prevailing on the date of applicable bill of lading. Clearly, GOI had agreed to purchase 100% of rated production on the basis of a fixed Long Term Pricing (LTP) for 15 years. These facts would evident that there was a long term agreement as regard production and sale of urea by OMIFCO and purchase of the same by GOI. We also observed that in terms of JV agreement dated 20.02.2000 an Ammonia offtake Agreement was signed on 29.05.2002 between the IFFCO and OMIFCO. As per the said agreement IFFCO had agreed to enter into the agreement in pursuance of the JV agreement dated 20.10.2000, for purchase of the surplus Ammonia produced or to be produced at Fertilizer Plant over and the above that required for urea production. In terms of said AOTA , OMIFCO shall offer to sell to IFFCO, FOB, the loading terminal, all of the Ammonia produced from and after the date of Commencement of production. The price at which the Amonia was to be sold to IFFCO was stated in clause 5 of the said agreement. 11. The above facts not disputed in the present matter. We find in the present matter adjudicating authority held that IFFCO/KRIBHCO as the importer and the Gov....
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....ity of OMIFCO and that there are two representatives of IFFCO/KRIBHCO on the Board of Directors of OMIFCO while another Director on the Board of OMIFCO represents the GOI. We find that a company and shareholder cannot be termed as partner in the business carried on by the company. In partnership Act, 1932 "partnership' has been defined as relationship between two persons who have agreed to share profit of business carried on by all or any of them acting for all. Partnership is formed through an agreement. In the present matter there is no partnership agreement between the Appellants and OMIFCO, so they cannot be treated as legally recognized partners only because the Appellants hold 50% share in OMIFCO. 13. Further, Rule 2 (2)(vi) of CVR, 2007 states that person shall be deemed to be related only if both of them are directly or indirectly controlled by a third person. In the present matter revenue failed to show that who is the third person who controls Appellants. From the facts of the case it is also clear that none of the party involved in the present transactions controlled each other. Accordingly, based on the undisputed facts of this case the appellants and the GOI and OMI....
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....ket price trends have been taken into account while negotiating the LTP with OMIFCO. Market price has been defined in the agreement (UOTA) as the average of low and high end of FOB Middle East prices as quoted in the specified international journals. We also find that Government has issued Notification No. 4/2015 dated 16.02.2015 exempting Urea when imported into India from OMIFCO under the UOTA agreement dated 29.05.2002 from the customs duty and additional customs duty leviable under sub-section 1 of Section 3 of the Customs Tariff Act subject to condition that the importer produce the certificate to effect that the declared value is in the terms of agreed price under UOTA. The important aspect is not the exemption but the acceptance by the Government about the correctness of the price under UOTA. The goods imported in this matter have followed the said LTP price only. In the present matter impugned orders and department had not established that the price of the goods imported by the Appellants was influenced by the relationship between OMIFCO. 15.2 We also observe that in the matter of Commissioner of Customs, New Delhi vs. Prodelin India (P) Ltd. 2006 (202) E.L.T. 13 (S.C.) ....