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2024 (7) TMI 936
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....Ltd., (Now Adani Enterprises Ltd.) have formed a consortium with various companies and thereby indulged in mis-declaration of FOB value and circular trading of Cut and Polished Diamonds (CPD) and Gold Jewellery exported by them, with an intent to artificially inflate their export turnover and to fraudulently avail the benefit of Target Plus Scheme. Further investigation into the export of studded Gold Jewellery by M/s Adani Enterprises Ltd. and its group/associated companies, during the year 2004-05 carried out by DRI, also revealed existence of circular trading and over invoicing of their exports of studded Gold Jewellery to avail benefits of Target Plus Scheme. 2. On the misuse of the Scheme being brought to its notice, the DGFT vide Notification No. 27/2004-09 dtd. 23.02.2005 excluded the export of studded Gold Jewellery from the purview of Target Plus Scheme. Further, vide Notification No. 48/2005 dtd. 20.02.2006, the exports of diamonds and other precious, semi precious stones were also removed from the list of export items entitled for Target Plus Scheme. Surprisingly, the export volume declined for all the Companies when the incentive scheme for cut and polished diamonds an....
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....ted by them at the time of import towards recovery of duty liability and interest thereof; (ix) Imposition of penalty under Section 112 (a) and 114 (iii) of the Act. 3. In adjudication, Ld. Adjudicating authority vide impugned orders dropped the proceedings initiated against respondents. Aggrieved by the said orders, revenue preferred these appeals. 4. Shri R.R. Kurup, Ld. Superintendent appearing on behalf the revenue reiterated the grounds of appeals and submits that the Adjudicating authority has failed to notice the fact that from the statements of various supporting manufacturers who had manufactured the studded Gold Jewellery, coupled with the statements of the regular exporters of studded Gold Jewellery, it was amply brought out in the SCN that what was exported was not even Jewellery, to say least, let alone the same being called studded Jewellery. This was born out from the statement of various supporting manufacturers/job workers who manufactured the studded Gold Jewellery for M/s AEL & its consortium companies. The statements as enumerated at para 18 of the Show Cause Notice clearly brings out the facts that the studded Gold Jewellery manufactured & exported was most....
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.... the studded Jewellery, mostly bangles were just manufactured by rolling raw Gold of 995 purity into strips with some designs embossed in them. The said strips were given a round shape like a bangle and soldered at the end. Thereafter collects of Gold wire were soldered on them and some cheap stones were glued in the collets so as to make them appears to fall within the purview of studded Jewellery. Various Job Workers have also explained as to how studded jewellery is actually made and have also elaborated the process of manufacturing of studded Jewellery by making mountings in which finally precious/semi precious stones are fixed. The studded Jewellery exported by M/s AEL & Others was not made in the regular fashion and only stone were glued into the collets to give it a look alike of studded Jewellery. The job workers have also confirmed that they charged M/s AEL and others only at the rate of 2.50 to Rs. 3.50 per gram as they did not insist on any design or finish. In fact, in the case of studded Jewellery manufactured by M/s Rajesh Exports, Bangalore, and supplied to M/s AEL, M/s Rajesh Exports had charged Rs. 21.70 crores less than the actual price of Gold used in the manufac....
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.... Gold Jewellery and the UAE based exporter of Gold bars were all conduits in this case of fraudulent export of studded Gold Jewellery, inasmuch as, they had acted as dummies and had merely lent their name for a price/ consideration. The entire trade of import of Gold Jewellery into UAE and the export of Gold Bars from UAE, including the receipt of funds for the exports of Gold bars in the accounts of the said dummy exports and making payments from the accounts of the dummy importers for their imports studded Jewellery, was all controlled and stage managed by the employees of M/s. Adani Global FZE, Dubai, a subsidiary of M/s. AEL and M/s G.A. International, a company owned and managed by Shri Vinod Shantilal Shah, the elder brother of the Director of M/s AEL. Investigation have also revealed that the Bank accounts of many of the UAE based importers and exporters were opened in the same Banks so as to facilitate easy transfer of funds from one account to the other for to and fro remittance in the name of these companies. 9. He also submits that the mails reported at para 8.8 & 8.11 of the SCN, apart from establishing the fact of control and management of M/s AEL over the Dubai based....
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.... & exporting the studded Jewellery in a cyclic manner to reap undue benefits under the Target Plus scheme (TPS). The Adjudicating authority absolutely failed to pay heed to the explicit evidences as elaborated in the SCN and without discussing & dealing with the same, simply relying on the submission of the respondents & dealing with some extraneous definitions and judgments, erroneously came to a conclusion that the charge levelled in the show cause notice do not survive. 12. He also argued that adjudicating authority has erred in not appreciating that the case of the department is substantiated with elaborate evidence that increase in export of studded jewellery during 2004-05, by AEL and other consortium companies, has been achieved by mis-declaration of FOB value and circular trading with intention to avail the benefit of export incentive schemes (Target Plus). That the other consortium companies were controlled by AEL and even the overseas companies who exported Gold bars & imported studded Jewellery, were inter-related and in fact controlled by AEL through its associates companies. The department is not required to prove the charges with mathematical precision and charges ar....
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....ct were exported, but contends that the same were Gold and not Gold Studded Jewellery. The Commissioner has in Paras 67.1 to 67.3 of the Order-in-Original examined the evidence on record and arrived at the finding that the goods exported were in fact gold studded jewellery. The Commissioner has considered the Statements of the Job-workers who undertook the manufacture of the Gold-Studded jewellery on behalf of the Respondent, in which the job-workers have set out the manufacturing process undertaken. The process of manufacture is stated thus: Gold bars were fed into rolling press and drawn into strips. The strips are passed through another press having design mould so that the design gets embossed on it. Thereafter the strips were cut into desired length and given round shape of Bangle and soldered at the end. Thereafter, the Bengals were polished. After polishing round collets made of wire were soldered on the bangles to affix stones. The stones were affixed and final polishing was done. Based on the aforesaid evidence the Commissioner has rightly held that the goods exported cannot be said to be mere Gold Bars. The imported Gold bars were subjected to the aforesaid process of man....
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....lso submits that the Show Cause Notice relies on the following documents to support the aforesaid allegation of Circular trading: (i) Comparative Cost Sheets of Studded Gold Jewellery v. Gold Medallions (RUD 25); (ii) Statement showing expenses at Dubai (RUD 27); (iii) Fax dated 27th October, 2004 (RUD 28); (iv) Email dated 13.07.2005 from /Tejal Desai (RUD 29); (v) Flow Chart (RUD 30); (vi) Number of emails set out at pages 54 to 81 of the Show Cause Notice and collectively referred to in Annexure-C thereto. 20. None of the aforesaid documents prove the allegation of Circular trading. The reasons are as under: (a) The comparative Cost Sheets at RUD 25 is an unsigned document. Who prepared this document, and for what purpose is not known. None of the person whose statement was recorded during investigation under Section 108 of the Customs Act, 1962 were confronted with this Comparative Cost Sheet. Assuming that this Cost Sheet was seized form the Office of the Respondent at the time of search, that by itself does not make the document admissible or reliable; Besides, on the face of it, this document does not make any reference to melting or re-melting of the jeweller....
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....n reading of the contents of this fax shows that it refers to some purportedly transaction to be undertaken in India as it refers to "import/buy from local bank". The "cost" set out therein therefore obviously refers to the costs involved in India for the transaction. Accordingly, melting charges are shown as "Rs. 700/- Kilo". The fact that melting charges have been indicated in Indian rupees confirms the document relates to purported transaction in India. Consequently, this document has no relevance to support the allegation that jewellery exported from India was re-melted in Dubai, and the gold bars obtained therefrom, were imported back into India. (iv) Re: RUD 29: a) This is a copy of an email found in the seized file. There is no evidence of it being printed form the Inbox of the recipient or Sent box of the sender thereof. There is no proof of transmission of this email or the receipt thereof. As such, mere copy of what purports to be an email has no evidentiary value. Apart from the aforesaid, the contents of this document shows that it refers to some transaction in Platinum, and gold bars or gold jewellery, which will be undertaken in future. Hence, the subject matter o....
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....tled "Gold Costing" listed at Sr. No. 32 of Annexure-IV to panchanama dated 25.01.2006 drawn at the premises of M/s AEL situated at Shikhar Building, Navrangpura, Ahmedabad. M/s AEL denies that the said documents were ever recovered from any of the premises belonging to M/s AEL. As is evident from a bare perusal of the said documents, they are computer printouts not bearing any signatures and/or evidence to show the same were made by anyone in M/s AEL. In fact, a bare perusal of the said panchanama dated 25.01.2006 would show that there is no document/file named "Gold Costing" recovered by the department at all. The file listed at Sr. No. 32 of the said panchanama is titled "Folders Containing - Misc. Papers (First page Adani Exports Ltd.-Precious Metal)" and, therefore, the assertion of the Department in the show cause notice is entirely incorrect, false and motivated. The whole file titled "gold costing", at referred to in the notices, therefore was not recovered from the premises of M/s AEL. 22 He argued that it is relevant to point out herein that despite the fact that these documents are the most important piece of evidence with the Department to allege circular trading, not ....
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....imilar transactions during 2004-05, Commissioner of Custom, Bangalore issued a Show Cause Notice to M/s. Rajesh Exports Ltd. & M/s AEL alleging mis-declaration of description of Gold studded Jewellery and value of the goods and proposed disallowance for fulfillment of the export of Gold studded Jewellery towards export obligation against the Advance Licences. The SCN dated 18.11.2005 proposed to demand Customs duty along with interest and penalty. It is pertinent to note that the Ld. Commissioner of Custom, Bangalore vide Order No. 01/2007 dated 31.1.2007 dropped the charges of mis-declaration of value addition & description of the Gold studded Jewellery and dropped proposal for demanding duty, interest and penalty and ordered to finalise the Shipping Bills. The said Order of the Commissioner has been upheld by the Hon'ble CESTAT, Bangalore vide Order dated 10.2.2009 by rejecting the appeal filed by the department which is reported in CC Vs. Adani Exports Ltd. 2009 (243) ELT 115. Further, the Hon'ble Karnataka High Court vide Order dated 30.10.2014 dismissed the appeal preferred by the Revenue against the order of CESTAT which is reported in Commissioner Vs. Rajesh Exports Ltd. rep....
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....orded and it is left to imagination as to why she was writing such emails and on whose instructions. In view of the aforesaid facts and circumstances, the allegation of Circular trading has no foundation and is wholly misconceived and baseless. 27. He further submits that None of the tests or conditions as provided under Section 14 applicable as per settled law has been found to exist in the present case. Accordingly, no case whatsoever has, therefore, been made out to justify the rejection of the declared value of the said goods exported by M/s AEL. None of the principles of valuation, as settled, are based on the origin of the goods or whether any value addition was undertaken in India or not, or whether the goods are exported in the same or substantially the same form or whether there has been value addition or not. The basis of Section 14, plainly speaking, is the price of the goods in the international trade. If such a price has been realized, and none of the factors provided under law/rule on the basis of which the declared value can be rejected, are found to exist, the rejection of the declared value cannot be justified on any other basis, which would, per se be outside and....
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....ss having been carried out on the same and without any value addition and, therefore, the value of the said goods exported must be re-determined on the basis of the CIF value of gold when imported into India. This approach is fallacious as it overlooks the vital distinction between value addition and valuation. After carrying out the processes on the imported gold bars - the export consignments were presented to the Jewellery appraiser for examination, assessment and valuation of the goods. It is only after such examination and valuation that the goods were allowed to be exported. In fact, in respect of each of the exports made by M/s AEL, the Exchange Control Declaration (G.R.) Form No. A was submitted which bears the export value verification of the customs appraiser. Each such verification made and endorsed on the said declaration by the customs appraiser establishes that the export value declared in the shipping bills had been verified and found to be correct by the customs appraiser. 29. He also submits that the Show Cause Notice proceeded on the footing that the activity carried out to convert the gold into Gold studded Jewellery cannot result in value addition to the extent....
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.... AEL. It is denied that AEL controlled and/or managed the entities. These entities are not dummies or bogus. The undisputed fact is that the gold bars imported by each of the said firms/companies had been subjected to the processes of manufacture resulted in value addition of the exported Gold studded Jewellery. In each of the cases of export by the said firms the export consignments have been appraised and valued by expert appraiser of customs and such appraiser found the declared value to be correct and at no time the declared export value had been disputed by the appraiser. When that is the case, it does not matter that the imports and exports of the said firms had been arranged by AEL. Further, M/s AEL had obtained 88 Advance licenses, from the Joint DGFT, Ahmedabad. The said 88 Advance Licences were issued allowing import of Gold Bars of .995 purity. The said licence required M/s AEL to complete its export obligation by exporting Studded Gold Jewellery (SGJ) of .995 purity made out of imported gold. It is a matter of record that the entire quantity of imported Gold Bars were utilized in the manufacture of SGJ. This entire quantity of SGJ was manufactured through various job wo....
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.... its obligation cast under the said Advance Licenses. While carrying out the exports AEL filed shipping bills wherein they made all declarations which are true and correct. The declarations in respect of material particulars in the Shipping Bills i.e. the description, quantity, quality etc. are absolutely in order. There is no doubt that AEL exported SGJ of .995 purity, the value declared in the Shipping Bills is the transaction value of the same under the provisions of Section 14 of the Customs Act read with the Rules. 32. He further submits that once the Shipping Bill is filed, the same is scrutinized by the Customs to verify whether the same are corresponding to description made therein. If the Shipping Bill is filed in Electronic Data Interchange System, the System directs the nature of examination as well as the specific number of package to be examined. At the time of examination, an expert duly nominated by the Customs Department was also called to check and verify the purity of gold jewellery being exported. All the Documents i.e. Shipping Bill, Invoice, Packing List are also examined by the Departmental officers along with physical examination of the exported product and ....
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....ed in making of a jewellery item and not so much on purity of gold content, in India and other countries including many Arabian countries (including UAE) etc. people prefer jewellery with higher purity/fineness. It is also to be accepted that jewellery gifted/bestowed at time of marriage and other ceremonies, not only in India but as per customs in almost all countries is considerably heavier in weight and of much higher purity/fineness, than jewellery ordinary worn by ladies (often in form of bangles) daily. 36. He further submits that the Circular No. 18/2004-09 dated 11.02.2005 issued by DGFT runs contrary to the said Policy and the Handbook of Procedures inasmuch as it ignores part of para 4.56.1(a) thereof. In para 4.56.1 (a) of the said Policy uses the word "studded" and the same is not used in para 4.56.1(b). It is on this basis it is contended in the notices that all studded jewellery falls within para 4.56.1(a), and that only plain jewellery is covered under para 4.56.1 (b). This interpretation is contrary to the description given in para 4.56.1(a). In para 4.56.1 (a) of the Policy it is clearly stated that the items of export in respect of which 15% value addition is req....
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....ations that what AEL imported was admittedly Gold and what AEL exported was also allegedly Gold and not Gold Jewellery, AEL would be entitled to drawback under Section 74 of the Customs Act. In the event, duty is held to be payable on the Gold. All terms and conditions of Section 74 have been satisfied and in such event, AEL would be entitled to 98% drawback of the duty paid / payable. He rely upon the judgment of the Hon'ble Bombay High Court in Cipla Limited versus Union of India reported in 1995 (80) E.L.T. 17 (Bom.). 40. We have carefully considered the submissions made at length by both the sides and perused the records of the case. We find that the case of the revenue in the present matter is that M/s AEL alongwith other respondents had indulged in mis-use of the Target Plus Scheme. The main allegation is against the M/s AEL is that they entered into conspiracy with certain entities/persons and colluded with them to cause of dubious import of gold and exports of so called studded Jewellery, to take undue benefits of the Target Plus Scheme. We also find that the identical allegations were raised by the department in Show Cause Notice F. No. DRI/AZU/INQ-15/2005 dated 30.3.2007....
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.... We have to see whether, firstly, any processing activity at all was carried out by the Indian companies in the bonded warehouse, and if so, to what extent and secondly, the relationship between such processing activity and the value addition, on one hand, and the relationship between the FOB value and the value addition, on the other hand. B. The Commissioner finds that no processing was carried out by any of the six Indian companies to achieve value addition of 5% or 10%. He finds, the fact that no processing was undertaken is evident from the fact that invariably all exports took place within 3-4 days of their imports and sometimes, on the 2nd or 3rd day itself. The fact that some processing activity was carried out in the bonded warehouse cannot be denied as even Lumesh Sanghavi, whose statements have been heavily relied upon by the department, has also admitted to the processing activity being conducted in the bonded warehouse. It would be useful to reproduce the portions from the statements of Lumesh Sanghavi. In his statement dated 7-2-2006, Lumesh Sanghavi has stated as under : "(vi) The assorter first checks the correctness of the lot wise weight declared in each of th....
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.... D. In his statement dated 28-2-2006, Lumesh Sanghavi once again deposed as under : "On receipt of the imported consignment in the bonded warehouse, the process of assortment which included sieving, boiling and segregation would be undertaken for each lot (packet) separately, as detailed in reply to question No. 3 of my statement dated 7-2-2006. As stated in my statement dated 7-2-2006, all the above processes of sieving, boiling and segregation would not be undertaken on all the consignments. Sometimes, only sieving and boiling would be undertaken and no segregation would be done. Similarly, some consignment would not be subjected to boiling. Thereafter, the diamonds would be packed in different lots for export and lot Nos. and weight in carats would be marked on each packet as was done in import consignments. The entire process of assortment would take 3 to 4 hours and the imported diamonds would be exported within 3 to 4 days of their imports. Sometimes the exports would also takes place on the second or third day of imports. On being asked, I state that the imported diamonds and the exported diamonds were in the same form i.e. cut and polished diamonds were imported and cut....
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....ferent size group were made from the one lot and these lots were packed separately in plastic bags which were weighed in our presence, I tallied the total weight of the imported diamonds after separating into different sizes, with the total weight of diamonds imported lot wise. Thereafter, myself and mostly Rahul kept the diamonds in transparent plastic bags and wrapped these diamonds in a plain white paper and put lot No. and carats with pencil as per the details shown for these diamonds in the export invoice." G. It is contended that Lumesh Sanghavi retracted his statements but the DRI denies having received the affidavits of retraction which are claimed to have been sent by Lumesh Sanghavi vide 'UCP'. No acknowledgement of receipt of affidavit of retraction have been produced before us to uphold such a contention. Be that as it may, it is not as if retracted statements cannot be looked into at all in law. The Hon'ble Supreme Court in Vinod Solanki v. Union of India, Laws (SC)-2008-12-139 = 2009 (233) E.L.T. 157 (S.C.) = 2009 (13) S.T.R. 337 (S.C.), has administered a word of caution in evaluating retracted statements. We have therefore closely examined not only the statements ....
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.... prescribe any conditions as to how to achieve the value addition, we need not test the scope of para 4A.18 by this argument alone, having accepted the first contention that processes of sieving, boiling and sorting were carried out. 18.3 Having regard to the plain language of para 4A.18 we are not persuaded to agree with the Commissioner that the simple processes carried out by the Indian companies cannot result in the value addition of 5% or more. No such co-relation between value addition and processing activity in the bonded warehouse is required under para 4A.18. Sieving, boiling and assorting of diamonds is a recognised activity of the diamond industry, as can be seen from the clarification contained in Circular No. 40/1999, dated 28-6-1999 issued by C.B.E. & C. which was issued in the context of para 8.13 of the Import and Export Policy 1997-2002, which is pari materia to para 4A.18 of FTP 2004-09, para 2 thereof is reproduced herein : "2. The issue has been examined in consultation with the Ministry of Commerce and they have clarified that the activities of mixing, sieving, assortment and cleaning, etc. are allowed in respect of imported cut and polished diamonds and cu....
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....the consignments, except making a general statement on 7-2-2006 which has been referred to above. It is equally true that Lumesh Sanghavi in each of his statements mentioned that the FOB value, in the invoices prepared by them for export, was shown as instructed by Samir Vora or Saurin Shah. But the question is, does such FOB value become liable for rejection merely because these two persons superior to Lumesh Sanghavi in the organisation instructed him to do so. Once we hold that there is no basis to support the finding of the Commissioner, that minimum value addition under para 4A.18 cannot be achieved by simple process, both as a point of law on interpretation of para 4A.18 and as a question of fact, in the absence of any expert evidence holding the same, we go back to the question whether the FOB value as declared in the shipping bill is correct. 18.6 For this purpose, we have to bear in mind the distinction between FOB value and the value addition. Section 14 of the Act provides that where duty is chargeable on ad valorem basis, the value shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of ....
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....s Tribunal held that the concept of PMV cannot be equated with the FOB value of the goods which represents the price in the international market. The same view was also taken in the second case of Frost International v. Commissioner. The Tribunal also did not accept the evidence of clearance by the foreign buyer at a lower price received on overseas inquiry. Both these decisions in Frost International were upheld by Apex Court and appeals filed by the department were dismissed as reported at 2007 (216) E.L.T. A55. (b) In Akshay Exports v. Collector [2003 (156) E.L.T. 268], the Tribunal held that in the absence of market inquiry of goods exported from India, the FOB value cannot be discarded. (c) In Siddachalam Exports Pvt. Ltd. v. CC [2011 (267) E.L.T. 3], the Hon'ble Supreme Court observed that although the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 applied only to goods imported into India, the principles thereof were also applicable to goods exported from India. 18.8 The 'transaction value' in the present case is established by the fact that sale proceeds in foreign exchange have been fully realised. There is also no evidence on record as requ....
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..... This is a fundamental fallacy, which the order of the Commissioner suffers from in not maintaining the distinction between FOB value, which is required to be determined under Section 14 and various tests laid down in the many precedents, and value addition, of which FOB value is only one of the components and which need not arise only out of processing and indeed may have nothing to do with the processing under para 4A.18 of FTP. It would be unfair to reject the FOB value on a criteria which is not prescribed by law. As we have held, processing has been undertaken in respect of the export consignments. When neither Section 14 of the Act nor para 4A.18 of FTP requires the exporter to establish a relationship between processing and the FOB value declared in the shipping bill, which is to be independently determined, applying the tests under Section 14, the question of verification of the value addition, by the Customs officers at the time of export does not arise at all. This is more so since determination of value addition is within the jurisdiction of licensing authorities and not the Customs authorities under the provisions of FTP to which we have already adverted. We therefore ....
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....ses of calculating the benefits under TPS. We say no more than this so as not to prejudice the disposal of the application pending before the licensing authority. We remind ourselves that there is a concept and definition of "group company" in the FTP which we are sure shall be considered by the Licensing authority in determining the benefits under the TPS scheme. 18.12 As far as inter relationship between AEL and overseas entities is concerned, it is alleged that AEL controls the overseas entities. The basis for this allegation, as found in the impugned order, is as under : (a) As per report received from Indian High Commission, Singapore, several entities in Hongkong and Singapore were incorporated or started business in or around the period when TPS was announced and stopped the business soon after the TPS was over; (b) Registered office of some of the entities in Singapore like M/s. Planica Exports Pte Ltd. and M/s. Emperor Exports Pte Ltd. is common; (c) The registered address in some cases is residence of individual Directors; (d) Ms. Mary Joseph who is an employee of Adani Global Pte Ltd. has also signed all contracts as Director of M/s. Gudami International and Mr....
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....ecisions of the entities in which its Directors are also Directors or in which its employees are also Directors or Partners. Mutuality of interest must be proved both ways. It is interest in the business of each other which proves that the parties are related. The inquiries made through the Indian High Commission, Singapore or Indian Consulate in Dubai have not brought out any such factual position on either shareholding pattern or control over the composition of the Board of Directors of the overseas entities except the two subsidiaries. 18.14 Assuming that the relationship is established in those limited cases where the Directors or partners of overseas entities are also Directors or employees in AEL's subsidiaries, as per the details set out on Pages 49 to 52 of the show cause notice, that by itself cannot be a ground to reject the declared FOB value. If the relationship has not influenced the price, then such export price must be accepted. Out of all the overseas buyers to whom the cut and polished diamonds were exported from bonded warehouse by Indian companies, only two such buyers namely; GA International and Gudami International, Singapore are part of the list of alleged ....
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....market inquiry has been conducted, nor the appellant has accepted the value suggested by the department. 18.17 In CC v. Pankaj V. Sheth, 1997 (90) E.L.T. 31 (Cal.), the question was whether pending inquiry, the Court could direct the Customs Authorities to endorse the fact of exports in the DEEC book issued under the Advance Licensing Scheme. The Customs Authorities resisted on the ground that the enquiry in respect of export of plastic flat jet nozzles was pending since the goods were suspected to be over-invoiced and had been provisionally allowed exports. The High Court held that the Customs Authorities had the power to examine the correctness of the value of the goods under the DEEC scheme. Firstly, this case is not at the interim stage, and secondly, in the present case investigations have been completed and detailed show cause notice issued relying on the documents & statements, which we have examined as above. 18.18 The judgment in Bussa Overseas v. C.L. Mahar, 2004 (163) E.L.T. 304 (Bom.) deals with a case where the goods were cleared under a Bond and therefore the argument that the proceedings could not have been commenced under Section 112 was not accepted. The Bonds ....
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....aras 9.1 to 9.13 of the show cause notice. The Commissioner, as stated, did not confirm the allegation of circular trading and held that the defence to show that circular trading is not possible appears to be plausible. The department is aggrieved by this finding and has come in appeal. 19.2 Before examining the material marshalled in the show cause notice to show circular trading, we must record that it is admitted by the department that consignments of diamonds physically came into India and were also sent outside India, and further it is also admitted by the department that in all cases the FOB value as shown in the export invoices have been duly realised. In other words, it is not alleged that these were paper transactions. We find that the allegation of circular trading of diamond is based on same lot of diamonds being imported and exported over a number of times during different periods as detailed in the two tables on pages 81 to 83 of the show cause notice. We have therefore looked at import and export invoices to see how the individual lots referred to at pages 81 to 83 have been imported and exported. On examination of the invoices relating to import as well as export o....
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....with a small variation in weight. 19.3 Based on the details of the lots allegedly involved in circular trading, Annexure-H & I to the show-cause notice, contain details of these lots, bill of entry wise, and shipping bill wise, to allege circular trading. AEL in its reply to the show cause notice sought to demolish Annexures-H & I by reference to Exhibit-D to the reply. We have perused the Annexures-H & I to the show cause notice and Exhibit-D to the reply. In Exhibit-D we find that AEL has given several examples where the export of the lot on first import has taken place after the second import of the same alleged lot, which belies the allegation of circular trading, which if true, means that the export of the lot on first import should have taken place before the second import of the same alleged lot and not thereafter. These several examples establish that the sequence in the movement of same alleged lot to prove circular trading does not exist. AEL also submits with reference to Exhibit-D, there is no explanation how the same alleged lot exported to Singapore or Hong Kong has been re-imported from Dubai the next day keeping in mind the locational difference in three countries....
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.... more than 486.57 carats in the previous exports and so also in case of PK 5, the weight in the second export was significantly lower at 512.61 carats as compared 733.67 carats. This difference in the weight (carats) of the two different variety of diamonds - PK4 and PK 5 show that there is no circular trading, otherwise in the two export consignments of two similar variety of diamonds, weight should have been identical. The fact that the weight in carats of PK4 was much more in the second export and that of PK5 was substantially lower, it is evident that there is no circular trading. The second illustration in the typed statement, not only shows variation in carats but also sizes between the first and second round of diamonds which as submitted by the ld. Senior Counsels fortifies their case that there is no circular trading, even if we go by the statement of Lumesh Sanghavi, who did not correctly appreciate the facts as flowing from the same documents which were shown to him. We find force in these submissions and hold that not only is the defence to circular trading plausible but incontrovertible. 19.5 The third piece of evidence referred to in the show cause notice, to suppor....
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....d that AEL's overseas agents Daboul sent them proposal for unassorted diamonds and Daboul gives them the range of existing international value and after discussions, AEL sends its own proposal and that the value is decided after negotiation, if necessary. Bhavik Shah is the other person who makes reference to Daboul in his statement recorded on 31-1-2006 wherein he refers to Rakesh Shah an employee of Adani Global FZE to be the coordinator for import and export of gold, gold jewellery and articles and cut and polished diamonds with Daboul. No doubt, there is no specific reference to MOU in these statements, but nonetheless these statements prove the existence of business relationship with Daboul which is dealing in cut and polished diamonds. Moreover, AEL had disclosed a copy of the said MOU along with its reply to the show cause notice filed on 29-10-2007, against which DRI had ample opportunity to ascertain the veracity of the documents before filing its written comments to reply filed by AEL. The DRI made general and sweeping remarks about the genuineness of said MOU in its written comments filed before the Commissioner. The Commissioner could have caused necessary inquiry throu....
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....tunately, hereto the statement of Ms. Mary Joseph, author of almost all these mails have not been recorded, we are left to imagination why she was writing such mails and on whose instructions. These gaps are extremely vital to the issues at hand and fatal to the case of the department. AEL submits that she was doing so on account of the agreement between the parties as recorded in Clause 6 of the MOU which is reproduced herein : "In order to facilitate the movement of goods, Adani Global FZE has identified its business associate, M/s. Gudami International Pte Ltd. as one of the parties who may be nominated as an intermediary where Daboul requires the transaction to be routed through an intermediary. Gudami shall arrange for funds wherever necessary to finance such imports, but Daboul shall assure AGFZE that funds will be available for the onward import from Gudami and for this purpose Gudami shall be entitled to call for and maintain and monitor financial information and records. In order to coordinate the working of these transactions, including movement of funds wherever necessary, Daboul, AGFZE and Gudami may nominate a common person to act as a representative of all the parti....
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.... MOU cannot be ruled out. We find nothing incriminating in these e-mails or anything to draw an inference of control of overseas entities by AEL. 21.3 Even if we were not to consider the said MOU, the e-mails can at best give rise to suspicion that AEL controlled the overseas entities. This, however, will remain a suspicion because statement of Ms. Mary has not been recorded. Suspicion howsoever strong cannot take the place of evidence. 21.4 On behalf of the Indian companies, it was also submitted that the allegation of circular trading is absurd and illogical because the CIF value of all the imported consignments has been accepted and in fact, proposed to be adopted as the correct value of the goods exported instead of the declared FOB value as stated in para 21.1(viii) and corresponding para in respect of each Indian company in the show cause notice. The argument is that, if it is alleged that the same lot was circulated number of times as tabulated from pages 81 to 83 of the show cause notice, then the CIF value of the lots repeatedly circulated ought not to have been accepted, whereas the CIF value of all the consignments of imported diamonds has been accepted to be true an....
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....involved in the fund flow and its banking team in India took all decisions in relation to payments for all imports and exports. Suffice for us to state that when we have held the declared FOB value to be correct and there is no circular trading, we need not go into these issues, more so, when in query from the Bench whether the payment of commission or LC discounts or availing buyers credit violated any law of India, both sides submitted that none of these actions are in breach of any of the laws for the time being force in India. The ld. Senior Counsels submitted that on the contrary the Circular No. 12, dated 9-9-2000 issued by RBI and relied upon in the show cause notice supports the case of Indian companies that payment of commission is permissible and that it is not mandatory to disclose the same in the shipping bill as long as the agreement for payment thereof is produced to the authorised dealer at the time of remittance, which they have duly done so. There is according to them, no violation of the provisions of Foreign Exchange Management Act in the payment of commission or discounting of LC or availing buyers credit. We are unable to find any such allegation about these ac....
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.... disputed transactions during 2004-05, Commissioner of Custom, Bangalore also issued a Show Cause Notice to M/s. Rajesh Exports Ltd. & AEL alleging mis-declaration of description of Gold Jewellery and value of the goods and proposed disallowance for fulfillment of the export of Gold Jewellery towards export obligation against the Advance Licences. The said SCN also proposed to demand of Customs duty along with interest and penalty. In the said matter the Ld. Commissioner of Custom, Bangalore vide Order No. 01/2007 dated 31.1.2007 dropped the charges of mis-declaration of value addition & description of the GSJ and dropped proposal for demanding duty, interest and penalty and ordered to finalise the Shipping Bills. The said Order of the Commissioner has been upheld by the CESTAT, Bangalore vide Order dated 10.2.2009 by rejecting the appeal filed by the department which is reported in CC Vs. Adani Exports Ltd. 2009 (243) ELT 115. The CESTAT, Bangalore in this matter held as under : "8.1 We have considered the submissions made at length by both sides and perused records. 8.2 We would first deal with the issue of the revenue as to whether the Adjudicating Authority was in error to ....
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....tue of the impugned circular, by way of clarification when what has been said is not found in the aforesaid two definitions the said benefit cannot be denied to the petitioner in so far as the exports which they have already effected. The question whether the impugned circular only clarifies the aforesaid provisions or it would have the effect of amending the aforesaid provisions, whether the second respondent has power to amend those provisions by issue of circular and whether the said circular is contrary to Sections-5 and 6 of the policy are all matters which can be agitated and gone into by this court if and when the same is challenged as coming in the way of having the benefit of export policy before carrying out an export. It is always open to the exporters not to export the goods hereafter in view of Annexure-'B', when the authorities have clarified the policy, if it is not beneficial to them. Still if they want to challenge the circular it is open to them to do so. Suffice it to say, the said circular cannot be construed at this stage as denying the benefit of the policy to the petitioner. Therefore keeping open the aforesaid questions to be agitated in future it is held th....
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....arly been brought out at para 28 of the Show Cause Notice wherein it has been highlighted that since the matter was sub judice, the Department reserves the right to add/to amend/modify the SCN subject to the outcome of the said judicial proceedings, in so far as the aspect of Value addition was concerned. Thus, it is clear that the Commissioner while passing the above order, without awaiting for the outcome of the said judicial proceedings, has clearly gone beyond the scope of the Show Cause Notice. (ii) Further, as the said matter was pending before the Division Bench of the High Court, it was not legal and proper for the Commissioner to have taken a final decision with regard to the Value addition or other matters in the light of the executive instructions issued by the Central Board of Excise and Customs (the Board) in their Circular No. 162/731/95-CX.3, dated 14-12-1995 warranting such categories of cases to be transferred to the Call Book pending decision in the proceedings before the Court. The Commissioner was bound to follow the Board's instructions directing that cases in which the department had gone in Appeal to the appropriate authority to be transferred to Call Book ....
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.... It can be seen from the above reproduced grounds of appeal that the revenue's challenge is only on the ground that the Adjudicating Authority has not considered the evidence produced by the revenue in form of report received from Consul (Economics), Consulate General of India, Dubai, UAE. The importers at Dubai have cleared the consignment as 'gold scrap'. Misdeclaration charges were dropped based on the documents submitted by the respondents without causing any verification, and the importers were related to respondents. We gave anxious considerations to the oral and written submissions made by the learned Special Counsel for revenue. We find that the Adjudicating Authority, on the facts that exports were of gold jewellery manufactured/made out of imported gold, has held as under. "63. The Parties have imported 21428.693 kgs. of gold under various Shipping Bills. Before examination of this issue relating to export of gold product from Bangalore Customs, it would also be relevant to enumerate in brief the procedure followed right from time of filing of Shipping Bill to issue of Let Export Order. The Shipping Bills in respect of goods to be exported is filed either by the Expor....
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.... higher purity/fineness, than jewellery ordinary worn by ladies (often in form of bangles) daily. However, only on such grounds of plainness of jewellery and of jewellery Bangles, it cannot be construed to signify that all such heavy marriage jewellery, is 'not jewellery as such', merely on ground of its weight or purity. It is also to be accepted that jewellery has traditional been used as form of investment and to provide a source of saving to ladies in case of distress/emergency. Jewellery, even if purchased purely as an investment does not go out of ambit of definition of 'jewellery', merely on this ground. The allegation in the SCN not to treat heavier jewellery or jewellery having higher purity and/or jewellery purchased/brought/sold more in form of investment than for casual/daily wear is, therefore, completely devoid of merit and is based on no rational or valid or practical consideration and/or on ground realities as prevailing, not only within India but also as prevailing outside the country including in the country of export. Thus the allegations and arguments as levelled in the SCN, that the gold Bangles/products exported cannot be termed as gold jewellery or studded go....
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....oldsmiths (para 18 of the SCN refers), no cognizance had been taken of the examination and certification of gold jewellery by the Representative of the Jewellers Association at the time of export. Such contrary and conflicting stand cannot be sustained. At the time of export of gold product, no officer of the Customs Department had raised any doubt or query that the exported product did not fulfil the description of goods, meant to be exported as per the Advance Licence and/or in fulfilment of Notification No. 93/04-Cus., dated 10-9-04. Even in respect of the gold consignment exported under Shipping Bill No. 145798, dated 20-1-05 in respect of which samples were drawn for examination (Para 9 of the SCN refers), the said gold consignment was allowed for export. Had the Dept. felt that the description of the product being exported was not proper and not as per the description in the Advance Licence or if the condition of the Notification No. 93/04-Cus., dated 10-9-04 or the surety Bond executed were being violated, the concerned Customs Officers should not have allowed 'Let Export Order'. No such action was taken. In this connection, I have also taken note of the Bombay High Court Ju....
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.... next contention of the revenue is that the Adjudicating Authority has not properly considered the evidences adduced by the revenue in form of report received from the Indian Consulate, Dubai, UAE. It is noticed that the respondents, on receipt of the show cause notice, approached the authorities to provide copy of the full report from the Indian Consulate, Dubai, UAE. In response to such a request, the office of the Commissioner of Customs, Bangalore vide letter No. C. No. VIII/10/56/2005-Cus. Adjn./10874, dated 28-2-2006/1-3-2006 replied as under :- OFFICE OF THE COMMISSIONER OF CUSTOMS C.R. Building, P.B. No. 5400, Queen's Road, Bangalore - 560 001. Phone : 080 - 22864751, Fax : 080 - 22860680 C.No. VIII/10/56/205 Cus. Adjn. /10874, dated 28-2-2006/1-3-06 To M/s. Adani Exports Ltd., 'Adani House', Shrimali Society, Navrangpura, Ashram Road, Ahmedabad, Gujarat - 380 009 Gentleman, Sub: - SCN C.No.VIII/10/56/2005, dated 18-11-05 - request made by M/s. Adani Exports Ltd. - reg. ****************** Please refer to your reply dated 3-1-2006 filed in connection with the above mentioned Show Cause Notice, wherein you have requested for certain documents for the purpose of d....
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....by the Indian Consulate at Dubai pertaining to the 8 consignments imported by M/s Excel Goldsmith, Sharjah are import declaration documents made by the importer to the proper authority at the port of import. The term Bill of entry is the common nomenclature given to such declaration of import and it is not to be confused with the documents filed in India in terms of Section 46 of the Customs Act, which is a document for assessment based on the entry made by the importer. As can be seen the documents give all relevant details pertaining to the import of goods into Sharjah such as the description and value of the items imported, the classification of the items as per the H.T. Code, the origin of the goods, the duty payable, etc. and hence in this case they have been referred as 'Bills of entry' in the subject SCN. Further, your argument relying upon the judgments of the Hon'ble Tribunal that the documents of a foreign buyer used by you for the purpose of clearance of the goods in the country of importation is unreliable and cannot be the basis of making any allegation against the exporter in India. This line of defence adopted by you is not tenable for the reason that the judgments o....
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.... or signed by the customs authorities in Dubai. There is no rebuttal from the revenue to this fact even today. We find that in an identical situation, in case of imports, the Apex Court in the case of East Punjab Traders (supra) in paragraph 5 has held as under. "The presumption to be raised under Section 139 (ii) of the Customs Act could not be raised because the document did not bear any signature, did not come from proper custody and it is difficult to understand why the Indian Customs did not interact with the Japan Customs and obtain authentic copies of the document from the latter. Merely because the Department offered cross-examination of the steamer agent from whom the export declaration had been obtained and the respondents chose not to avail of that opportunity is no ground for holding that the requirements of Section 139 are satisfied for the purpose of raising the presumption. In order to raise the presumption under the said provision, the basic facts had to be laid. Even though they bear a serial number and stamp of Japan Customs, the fact remains that they are copies of copies and indisputably bear no signature of the exporter, the forwarding agent, the stevedore or....
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....CN refers (iii) DEC/Bill of Entry No. 95, dt. 3-1-2005 - studded gold jewellery E10 of SCN refers (iv) DEC/Bill of Entry No. 19972, dt. 24-12-2004 - studded gold jewellery E11 of SCN refers (v) DEC/Bill of Entry No. 1142, dt. 23-1-2005 - studded gold jewellery E12 of SCN refers Rajesh Export Ltd., have enclosed certified copies of documents filed by the importer at the time of clearance of shipment as annexure 'A' to their reply dated 30-6-06. A further comparative chart correlating the above DEC/BE/E with shipping bill/date as referred in para 19 of the SCN was also submitted by Rajesh Export Ltd, on 29-11-06. As per these details, the goods have been described as indicated below : (i) DEC/Bill of Entry No. 18704, dt. 3-12-2004 studded gold jewellery E5 of SCN refers (ii) ----------do--------18295, dt. 26-11-2004 gold jewellery studded E6 of SCN refers (iii) -----------do-------------/8573, dt. 3-12-2004 ----- studded gold jewellery E7 of SCN refers." It is to be noted that the relevant documents produced by the respondents to support their case were attested by an officer from Indian Consulate, Dubai, UAE while the very same documents produced by the revenue throu....
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....facts are on record that the DGFT has not taken any action against the respondent related to the disputed transactions and same were valid in the eyes of law. So it is clear that DGFT does not agree with the contention of the department. We are unable to agree with the allegation of the revenue that the exports/imports have been mis-declared and benefit of exports/imports have been obtained fraudulently. We also notice that the Hon'ble Bombay High Court in the case of Pradip Polyfils Pvt. Ltd. 2004 (173) E.L.T. 3 (Bom.) considered the scope of jurisdiction of the customs authorities to question the validity of DEPB licences and held as under : "We have heard Counsel on both the sides. In this case, it is not in dispute that pursuant to the application made by the petitioners seeking benefit of DEPB Schemes in respect of exports of filter plates and accessories made of polypropylene, two DEPB licences were issued by the DGFT in favour of the petitioners. The endorsement made on the licences clearly show that the DEPB licences have been issued against the export of Polypropylene filters Plates and accessories as contained in the shipping bills furnished by the petitioners. The said....