AI Drafter 
TaxTMI 
TaxTMI 
2024 (3) TMI 138
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....of provisional order dt.15.11.2021 and the bond executed, if any, shall be cancelled. 2. The brief facts are that based on the intelligence gathered, it appeared to DRI, Hyderabad Zonal Unit that Respondent - PVE (EC No. 1111004595), having registered office at Indore (M.P.) are importing 'Nutritional Supplements' i.e., DYM Glutamine, DYM Creatine, GAT Nitraflex, Insane Psychotic, DYM Whey Protein Elite, DYM Whey Protein ISO, MTECH Whey Protein Nitrotech 4lbs/ 10lbs etc., by way of undervaluation to evade Customs duty. It further appeared that Mr. Hitesh Nagwani - Proprietor of PVE, along with Mr. Sanjay Punjabi, have floated companies/concerns by the name (i) M/s Rax Trading Ltd., Hong Kong (Director - Mr. Sanjay Punjabi) and (ii) M/s Rudra Overseas, Indore (Proprietor - Mr. Sanjay Punjabi), for import of 'Nutritional Supplements' from Dubai by grossly undervaluing the goods. That on comparison of the transaction values of 8 items of the Bill of Entry No. 8216469 dt.20.07.2020 with the values declared by other importers at other ports, it appeared that Respondent - PVE has undervalued the imported goods. On a reasonable belief of undervaluation and mis-declaration in the Bill o....
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....ni and Mr. Sanjay Punjabi are the directors in Rax Trading Ltd, Hong Kong. Further, in the statement recorded, Mr. Hitesh Nagwani and Mr. Sanjay Punjabi had stated that they share equal profits from the business of these firms. It appeared that they have hatched a conspiracy by creating the firms/companies and generated/prepared documents such as purchase orders, proforma invoices, Invoices at their own premises in Indore by deliberately declaring lesser values/prices, for declaring to Customs at the time of import of goods to evade Customs duty. Some items so imported have been in turn sold to Rudra Overseas, Indore. As Mr. Sanjay Punjabi is the director of Rax Trading Ltd and proprietor of Rudra Overseas, Indore, it makes the transaction related and does not pass the test of arms length transaction. 8. It further appeared that Mr. Hitesh Nagwani is actively involved in the business transactions of Rax Trading and Rudra Overseas. Thus, it appeared that they are related parties and the transaction value declared in the Bill of Entry do not represent the actual transaction value in terms of Sec 14(1) of the Customs Act read with Rule 2(2)(v) and Rule 3 of the Customs Valuation Ru....
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....t S.No.9, the quantity mentioned as 3 pieces (25Kgs) and the price declared is 12.50 USD, whereas on physical examination of the same, it was found that physical quantities are not in tune with the declared quantities. Thus, the consignment was seized. 13. Follow up searches were conducted as aforementioned and there was seizure of (i) cash of Rs.34,82,000/- (ii) one Vivo 1811 model mobile with two sims of different IMEIs. 14. Statement of Mr. Hitesh Nagwani - Proprietor of PVE was recorded on 31.07.2020 and 14.06.2021, wherein, he, inter alia, stated that he was importing Nutritional Supplements along with Mr. Sanjay Punjabi up to November 2019. Thereafter, as the case was booked by the Customs against Rudra Overseas, he started to import through is own firm - PVE. He along with Mr. Sanjay Punjabi had imported 12 consignments in the name of Rudra Overseas and 4 consignments in the name of PVE. They were sharing the profits equally. He had sold the goods imported vide 4 Bills of Entry by PVE to (i) Rudra Overseas, Indore, (ii) Life Care Agencies, Indore, (iii) BDG, Delhi, (iv) The Nutrition Planet, Ghaziabad and (v) Hips and Shoulders, Bangalore; that other than Rudra Oversea....
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....is prima facie suspicion but it is a matter of record that the legal status of Mr. Hitesh Nagwani - Proprietor of PVE cannot be considered as co-owner of Rax Trading Ltd, Hong Kong, which is owned by Mr. Sanjay Punjabi, merely because they travelled together or they had made certain mis-representations allegedly in visiting cards or for securing free accommodation or entry at certain events. Further, he urges that evidence on record indicates that Mr. Hitesh Nagwani - Proprietor of PVE is related to Mr. Sanjay Punjabi having interest in each other businesses. Learned Commissioner has erred in dropping the proposal of rejection of declared value and re-determination, demanding differential duty along with penalty etc. Accordingly, he prays for setting aside the Impugned Order and for confirming the proposal in SCN and/or remanding the matter to the Adjudicating Authority for re-determination. 18. Opposing the Appeal, learned Consultant for the Respondent - Mr. T. Chakrapani submitted that the Impugned Order is based on appropriate evidence, on examination of the allegations and evidence laid by Revenue and on correct application of the legal provisions. The Impugned Order is well....
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....sessment of the Bill of Entry by way of issuance of SCN. We note that the technical issues have gained the status of academic discussions and therefore, we shall deal with the same after discussions on merits. 21. On merits, we find that the Ld. Adjudicating Authority had evaluated the evidences on record vis-à-vis the allegations, by examining the issues as reproduced below: - "a. Whether there is sufficient material on record of the proceedings to prove that the parties involved are 'related persons' within the purport of Customs Act and the rules made thereunder. b. Whether, in the event of the enquiry in respect of the above point being in the affirmative, there is evidence on record to prove that such relation had influenced the price of the goods in question. c. Whether, there are sufficient evidences on record to conclusively establish that the transaction values declared are influenced by their mutual relationship & thus liable to be rejected before resorting to the provisions of Rule 5 of customs valuation rules, adopting values of similar goods. d. Whether the goods belonging to other importers, whose values had been consi....
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.... M/s Rax Trading Ltd. ix. Shri. Hitesh Nagwani, Respondent, in his deposition dated 31.07.2020 before the DRI officers, inter-alia, admitted that he along with Sri. Sanjay Punjabi had imported 12 consignments in the name of firm M/s Rudras Overseas and four consignments in the name of M/s P.V Enterprises and the profit earned, was shared equally between him and Sri. Sanjay Punjabi who owned M/s Rudras Overseas and M/s Rax Trading, Hong Kong. 23. Based on the above evidences, the Ld. Adjudicating Authority had concluded as reproduced below: - "28.9. In this regard, I find that the investigative outcomes cited at (a) to (c) above, can in no way constitute legal grounds for bringing home the allegation of related party transactions conclusively influencing the transaction values in the imports made, while the same may at best prima facie arouse suspicion in that regard which would necessitate further investigation. It is also a matter on record that the legal status of Sri. Hitesh Nagwani, the proprietor of the noticee firm cannot be considered as a coowner of M/s Rax Trading Hong Kong owned by Shri. Sanjay Punjabi, merely because they travelled together or they h....
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....elated Persons also. Rule 2(2)(v) whether one of them directly or indirectly controls the other? There has nothing been conclusively brought on record that one of them was directly or indirectly controls the other. However, this clause need to be further examined in detail, given the insinuations that Sanjay Punjabi is the sole Director of M/s. Rax Trading & also he is the sole proprietor of M/s. Rudras overseas Indore (buyer of PV Enterprises). 28.11. From the foregoing, it is clear that for the deeming fiction of being related to come into play, the material on record of the proceedings should invariably support existence of one of the situations enumerated at 2(i) to (viii). As already stated herein above, the investigative outcomes enlisted above herein, do not support any such inference for reasons elucidated herein, in the preceding paragraphs. ............................................... 28.16. Had the show cause notice based it's allegations on the basis of availability of real invoices, if any, having the correct/higher value etc. or financial records/documents or some other evidence proving financial flow back of the undervalued cons....
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....ata pertaining to other importers during the relevant period, has been considered for arriving at redetermined transaction value of the subject goods. He concludes by submitting that the issue of fabricated invoices is thus, no longer resintegra as the Department itself have not considered the same as evidence against the Respondent for the purposes of arriving at the valuation of the subject goods apart from the fact the issue of alleged fabrication of invoices was related to the investigations by the DRI, Indore in the case of M/s Rudras Overseas and not related to M/s P.V Enterprises. We observe that the case of M/s Rudras Overseas was pertaining to the period prior to the subject imports of M/s P.V Enterprises/ Respondent and therefore the allegations fabricated invoices is not a matter of relevance in the instant case. In this regard, the Ld. AR also agrees to the fact that though such fabricated invoices had been relied upon to allege under-valuation of the said goods but re-determination of value of imported goods has not been made on the basis of such invoices but based upon the contemporaneous imports. In fact, it is a now matter on record that no fabricated invoice or no ....
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....attention to para 29.4 to 29.11 of the subject OIO in asserting that the observations of the Ld. Adjudicating Authority are not tenable - that the subject SCN failed to bring out the comparison of values of similar goods, rationally. It is their case that para 2.2, 15.4 and 15.6.1 of the subject SCN provides adequate information, documentary evidence to prove the contra. He further argues that comparison of transaction values as shown in the SCN reveal that the values declared at other ports by the other importers for similar goods are much higher than the transaction value declared by M/s P.V. Enterprises, which clearly established under-valuation of imported goods; that the value of similar goods- nutritional supplements imported by other importers at or about the same time, with same brand, same manufacturer, same country of origin and similar description, comparable commercial quantities etc was taken for purpose of re-determination of transaction value in terms of provisions of Rule 5 of CVR, 2007; that the same stands supported with the images of corresponding Bills of Entry pertaining to such similar goods as reproduced in the SCN; that the value has been re-determined corre....
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....gned show cause notice in respect of goods in respect of the Four Bills of entry are under the aegis of the allegation that the goods imported under the above Bills of entry are 'Similar goods' and recourse had been taken to Rule 5 of the Customs Valuation Rules, 2007. I find that the phrase 'similar goods' is defined at Rule 2(f) in the said Rules, which reads as under "Similar goods" means imported goods (i) which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark; (ii) produced in the country in which the goods being valued were produced; and (iii) produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person, but shall not include imported goods where engineering, development work, art work, design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charg....
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....; (iii) the goods imported by the noticee had been described as 'Nutrition supp on Gold Standard 100% Whey Protein 5 LB'. The same has been compared to goods whose description has been given as 'on 100% Whey Gold 5 lbs. (Nutritional supplements). Thus, the goods imported by the noticee is based on Gold Standard 100% whey protein and the goods have been compared to goods based on 100% Whey Gold; and (iv) the goods imported by the noticee had been described as 'Nutrition supp DYM Glutamine 300 Gms. The same has been compared to goods whose description has been given as Health Supplements- Glutamine 60S 300G - 60 Servings. The goods imported by the noticee is based on Nutrition Supplement DYM Glutamine and the goods have been compared to goods based on Health Supplements-Glutamine 60 Servings; Thus, one can cogently conclude that the goods whose values are proposed to be adopted for the purpose of adopting the value as similar goods U/R 5 are actually not the similar goods at all. 29.9. There is no material in the impugned Show cause notice in respect of the goods being compared to as regards the statutory essentials like Brand of the goods, details of manufacture an....
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....of undervaluation of the imported goods. The Ld. Consultant, referred to para 14(iii) of SCN, which is reproduced below, in support of his claim that the issue of after sales was brought out in the SCN itself in order to prove the transactions to be "related" and does not pass the test of an arm's length transactions: - "14. Rejection of Value declared : ..................... iii. Some items so imported by PVE from M/s Rax Trading Ltd, have been in turn sold to M/s Rudras Overseas, Indore. M/s Rax Trading Ltd, and M/s Rudras Overseas are owned by the same person i.e., Sri Sanjay Punjabi, which makes the transaction related and does not pass the test of arms length transaction." 35. Moreover, we note that the seizure of cash at the residence of Shri Sanjay Punjabi vide Panchnama dated 31.07.2020 has been made out, as if it is the sale proceeds of food supplements, imported by M/s P.V Enterprises/ Respondent and therefore, apparently, it is the case of the Department that the sales of the imported goods by M/s P.V Enterprises had direct connection with the seized cash as well as to prove the transactions to be "related". Hence, we do not find any infirmi....
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....OIO is upheld in toto. 38. Having observed so, we would dwell upon certain technical issues, raised in the subject appeal. 39. The Ld. AR contested about the order for release of seized cash from the residence of Shri Sanjay Punjabi. As already observed above, the issue of Shri Sanjay Punjabi is no longer res-integra in the present appeal, as Shri Sanjay Punjabi was not made a respondent in the entirety of the case. Hence, by merely stating or contesting about the role of Shri Sanjay Punjabi in the present appeal, will not survive, as no appeal has been preferred by the Department against the OIO with reference to the role of the Shri Sanjay Punjabi, as a Respondent individually or even jointly. It would not be out of context to mention here that since, Shri Sanjay Punjabi has not been made a Respondent, he is denied of natural justice in offering his defense submissions. Hence, we refrain from any discussions on the contentions raised with reference to the Order related to Shri Sanjay Punjabi/ Co-Noticee. In other words, it is now deemed that the findings, with reference to Shri Sanjay Punjabi, as Co-Noticee have attained finality, as rightly claimed by the Ld. Consultant fo....
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....dicating Authority on this issue, at the same time, we also note that the Ld. Consultant appearing for the Respondent had submitted that he had not filed any counter arguments with reference to the said decisions. Hence, the matter of the applicability of the said judgement of Canon India, is no longer a matter of contention in the instant case on the part of the Appellant. 42. The dispute regarding "related party" transactions, have also been alleged, even in the case of direct import from M/s Five Stone General Trading LLC, Dubai in the case of live consignment, the Ld. AR argued that as per the investigations, it was noted that the said company was not dealing in any nutritional supplements as was evident from the website of the said company; that the logo of the said company printed on the invoice of M/s P.V Enterprises, Indore and the logo as per the website are different; that one Mr. Jawad and M/s Five Stone General Trading LLC, Dubai appeared to be related to M/s Rax Trading Limited, Hong Kong and therefore, the earlier consignments routed through M/s Five Stone General Trading LLC, Dubai, as shipper, and M/s Rax Trading Limited, Hong Kong as supplier to be considered as....