TaxTMI 
TaxTMI 
2024 (7) TMI 936
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.... of DRI to the effect that M/s Adani Exports 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 in....
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....on of penalty under Section 112 (a) and 114 (iii) of the Act; (viii) Enforcement of bond executed 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 t....
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....ign. This is how normally studded Jewellery is manufactured. 6. He also argued that as revealed by the Job workers, 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 suppl....
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.... of by the Adjudication authority. The Adjudicating authority failed to appreciate that the UAE based importers of studded 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 report....
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.... AEL and its consortium companies, in coterie with the overseas exports of Gold & import of studded Jewellery, by importing Gold & 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 AE....
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....appeal filed by revenue is also liable to dismissed. 15. He also submits that the Show Cause Notice does not dispute that goods in fact 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....
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....ld bars. Since, the goods exported are different from the goods alleged to be imported, the basic premise of Circular trading fails. 19. He also 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 t....
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....ax has been sent on 27th October, 2004. Once again, this document has not been shown to the persons whose statements were recorded during investigation. While this fax is purportedly marked to Shri Gautam Adani, the author thereof is not known. A plain 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....
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....overed during the common investigation and, this aspect has also been considered and dealt with by the Hon'ble Tribunal in the aforesaid Order. 21. He also submits that the Department has relied upon the copies of so called "Cost Sheet of Jewellery" said to have been recovered from a file titled "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 ....
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....es levelled under the Show Cause Notice was subsequently dropped and therefore, any reference to the same evidence is totally irrelevant. Further, the inquiry with regard to 5 consignments cannot be extrapolated to the entire quantity of 59,502 KGS of studded gold jewellery exported by M/s AEL. For similar 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 ap....
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....ugh her was controlling the various overseas companies. Keeping track and informing of the position of the payments from time to time can by no stretch of imagination mean that Mary Joseph was controlling the various overseas companies. It is also to be noted that the statement of Mary Joseph was not recorded 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 th....
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....o allegation at all in the Show Cause Notice that the price declared by AEL in the Shipping Bills is not the value and/or the deemed value of the said goods under Section 14 of the said Act. The Notice proceeds on an erroneous assumption that there was circular trading of gold without any manufacturing process 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....
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....ded Jewellery was inflated. Rendering assistance in the business does not mean that all these firms / companies ceased to be in existence. All the entities are and continue to be independent companies having their own business, in addition to the business of Gold studded Jewellery undertaken with assistance from 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 re....
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....n a premise that the manufacturing activity was stage managed. The allegations were based on conjectures and without any basis. On the other hand there is enough evidence available to support AELs stand on manufacture, including the assertion in paragraph 10 of the SCN itself. That being the case AEL has completed 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 tim....
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....have different concepts and practices as to what constitute jewellery'. It is well known that tribal jewellery in India and Africa is considerably heavier in weight than jewellery worn in urban areas (and amongst non-tribal populace). Similarly, while in the western world, the emphasis is more on fineness/art/craft involved 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 not....
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....(SC); • Zuari Industries Ltd. vs. Commissioner of C. Ex. & Customs, 2007 (210) E.L.T. 648 (S.C.); • Vadilal Chemicals Ltd. vs. State of Andhra Pradesh, 2005 (192) E.L.T. 33 (S.C.) 39. Without prejudice to the aforesaid, he also submits that in any view of the matter, assuming whilst denying and for the sake of arguments, if the allegations 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 th....
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....ls or on the charge of circular trading referred to above? (IV) Whether the export goods can be held liable for confiscation under Section 113 (i) of the Act and consequently whether the amounts of penalties imposed by the Commissioner are justified or are the same to be increased? 18. We shall now deal with each of the above issues - Issue No. I A. There are two parts to this issue. 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....
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....For carrying out the process of sieving, the diamonds have to be placed on different sizes of metal sheets having perforations/holes and when the diamonds are placed on said metal sheets they pass through the holes and diamonds of one particular size gets eliminated from the lot. Thus, diamonds of different size are assorted by the process of sieving. Sometimes, the quality is assessed for ascertaining the impurity and thereby value of the CPD. This process is also not carried out 100%." 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 pack....
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....td. Sometimes, when Lumesh Sanghavi could not come to the office Aditya Corpex Pvt. Ltd., he used to tell me on phone to take out packets of certain lots from the parcels (Aluminum Box) of imported diamonds and give them for sorting. On being asked I state that assorters used to separate the size of the different lot of imported diamonds with the help sieve of different size, as per instruction of Lumesh Sanghavi and this activity was supervised by myself. Upon sorting the imported diamonds into different sizes, two to four lots of different 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 whi....
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....of export, different from the goods at the time of import. The sole objective is to earn foreign exchange by value addition, and subject to achieving this object, import and re-export out of bonded warehouse of the same item, namely; cut and polished diamonds is permitted. The ld. Senior Advocates submitted that there is no bar in achieving value addition to satisfy the condition of 4A.18 simply as a result of trading, i.e. buying and selling cut and polished diamonds from the bonded warehouse. While this may appear to be the intention because para 4A.18 does not 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....
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....he various schemes in the Policy affecting the business of gem and jewellery including diamond industry. We are informed that the Customs Officers in charge of the bonded warehouse on being satisfied, have also cancelled the bonds, which aspect has been completely overlooked by the Commissioner. 18.5 It is true that Lumesh Sanghavi has not been able to say which of these processes were carried out in respect of how many consignments of imported diamonds before export, which (we are informed) aggregate to about 3000 consignments or whether all the processes were carried out for all 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 ....
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....g bills which is within the jurisdiction of the Customs officer and for that the powers are derived from Section 14 of Act, which deals with determination of assessable value read with Section 17 of the Act which confer the power of assessment on consignments of exports, in respect of which shipping bills are filed under Section 50 of the Act. We shall first examine the law on this point. (a) In Frost International v. Commissioner, 2006 (206) E.L.T. 451 (Tri.) the selling price of the manufacturer of garments was taken to be the correct Present Market Value (PMV) and on that basis, the Commissioner rejected the higher FOB value declared by the exporter. This 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. ....
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....nies, was any doubt raised as to the truth or accuracy of the declared FOB value. The confirmation by the Customs officers, and the admission by the Commissioner that they verified inter alia the value of the goods, is direct evidence of the correctness of the value on physical examination of the goods. In these circumstances, we do not see how the Commissioner can reject the declared FOB value. 18.9 Yet the Commissioner did so. And the only reason for the Commissioner to do so is because neither the Customs officers who examined the goods nor the appellant companies have been able to show how simple process of boiling, sieving and assortment can result in value addition of 5% or more. 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....
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....ant for the purposes of Section 14. The show cause notice dwells on this issue only to show that AEL connived with the 5 other Indian entities to take advantage of benefits under TPS by showing higher incremental exports to derive maximum benefit under TPS. We do not see the relevance of the issue in this case. At the risk of repetition, we hold that since the application for grant of duty free scrips made by the Indian companies including AEL for the year 2004-05 is pending before the Licensing authority, it is for the licensing authority to consider whether the export turnover of each individual Indian company is to be reckoned or whether export turnover of all Indian companies to be clubbed for the purposes 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 co....
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....he Chairman and Managing Director of AEL, it does not establish the relationship particularly when it is now shown that the Vinod Shantilal Shah is also Director in AEL or holds significant shares to exercise control over AEL and vice versa AEL has any shareholding or common Directors in GA International. Section 14 of the Act requires the interest of the buyer and the seller in the business of each other. There is no allegation of common shareholding except for the subsidiaries. It is also not shown that AEL has the power to appoint Directors or control the composition of Board of Directors of companies in which its employees or its Directors are also partners or Directors. It is not shown that AEL holds sufficient shares or voting power to control the decisions 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....
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....ading is not sustainable. Considering the overall facts and circumstances, this part of the statement of Lumesh Sanghvi cannot be seen as conclusive to the charge of, either over-valuation or circular trading. 18.16 In the above factual backdrop, we shall now deal with the case-law cited by the department. In the case of Omprakash Bhatia v. CC, 2003 (155) E.L.T. 423 (S.C.), the exporter did not lead any evidence to show that the export value mentioned in the shipping bill was the true sale consideration, and accepted the lower value ascertained on market inquiry even at the time of hearing, while giving up the claim of drawback. It is in these facts that the Court was called upon to decide whether Section 113(d) was applicable or not. In the instant case neither any 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 enqu....
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....e prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice." 18.21 In the present case, we find that the department has failed in discharging the burden cast upon it to produce any tangible evidence in respect of the charge of over-valuation or circular trading. For the same reason, the judgment in Steel India Company v. CCE, 2014 (310) E.L.T. 184 (Tri.) is of no assistance to the department. 18.22 For reasons aforesaid, the declared FOB value is accepted to be the correct FOB value under Section 14 of the Act and to that extent the order of the Commissioner is set aside. 19. Issue No. II 19.1 The allegations relating to circular trading are essentially set out in paras 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 i....
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....ed in weight and clarity. It however describes such variation to be marginal or slight variations. We are not impressed by the use of such adjectives particularly when the Commissioner also admits the value of each lot varies on account of variation in the 4 Cs. Whether such variation is marginal so as not to affect price is not for us to say. This perhaps required expert evidence who can only do so after examining each lot. We find this is missing. We cannot indulge in conjecture whether the variation in weight or clarity is marginal so as not to affect the value or identity of the lots. Weight is directly related to the size of diamonds. If the size of the diamonds is small, a small variation in weight can substantially increase the pieces of diamonds and similarly, if the size of the diamonds is bigger, the price thereof may increase manifold even 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....
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....rary to documents has no value since documentary evidence shall prevail over oral statements. At the time of hearing before us the ld. Counsels also produced a typed statement analysing the transactions of July, 2005 shown to Lumesh Sanghavi as recorded in his statement dated 28-2-2006, to illustrate that on facts, the allegation of circular trading cannot be maintained. From the typed statements, it is seen that while exporting D-Cut white diamonds under invoice dated 21-7-2005, the weight of PK 4 variety was 486.57 carats and that of PK 5 variety was 733.67 carats and if the same set (lot) of diamonds were allegedly imported on 26-7-2005 from Spectrum Trading, UAE, then the weight of each variety at the time of second export ought to have been the same, but as seen from the export invoice dated 28-7-2005, the weight of PK 4 variety was 725.63 carats which is much 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 ....
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....diary agreed to arrange for and organise processing of unassorted diamonds in India through AEL or its nominees and Daboul agreed to procure unassorted diamonds directly or through its nominees for export to India and thereafter, purchase the same after processing in India through its intermediaries in Hongkong or Singapore for its European buyers. Shri Singh, ld. Special Counsel, as has the Commissioner strongly objected to the reliance on this MOU. He submits that this MOU was never produced during investigations. On the other hand, AEL submits that, although a copy of this MOU was not produced during investigations there are enough references to the arrangement and understanding mentioned in the MOU in the statements of various persons recorded during investigations. Our attention has been drawn to the statement dated 24-1-2006 of Samir Vora in which he has, inter alia, stated 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 t....
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....Director of Adani Global Pte Ltd., Singapore and these e-mails are sent internally to all persons connected with AEL based in either India or Singapore or Dubai. It is alleged that if AEL does not control overseas entities there was no reasons for Ms. Mary to pass on information relating to bank accounts and its details including password to other persons within the Adani group and likewise there was no need for Ms. Mary to report the transfer of funds with reference to certain specified transaction from one overseas entity to another or from Indian company to overseas entity or by an overseas entity to an Indian company. We find that except for agreeing to what has been stated in these e-mails, none of the persons like Bhavik Shah, Vipul Desai or C.E. Mahadevan have admitted to these e-mails being evidence of either control by AEL of the overseas entities or to circular trading. Unfortunately, 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 tha....
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.... polished diamonds. (d) None of the e-mails show fund flow corresponding to the circular trading of the lots as alleged in the show cause notice, meaning thereby the allegation of circular trading is unsupported by evidence of corresponding financial trail. 21.2 As has been stated in the show cause notice, the e-mails referred to in Annexure-M to the show cause notice show control by AEL of the overseas entities. We have already held what tests and conditions needs to be satisfied in law to establish "control". It seems Ms. Mary Joseph has merely collated the information into e-mails which is otherwise available from the documents relating to the respective transaction which documents show the name of the buyer, name of the seller, serial number and date of the invoice, the amount and the bank in which the payment is to be remitted. These e-mails do not reveal the possibility of these e-mails being sent as a result of said 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 sus....
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....h mechanisms such as buyers credit or LC discounting are connected to the charge of circular trading and to support the allegation of control by AEL. We have for reasons recorded above, found both these charges to be unsustainable. On behalf of the Indian companies it was submitted that payment of commission in fact proves that the transactions of import and export of diamonds were genuine and on principal-to-principal basis since otherwise there was no need for them to pay commission if the transactions were bogus or involved mere circular trading. So also in relation to LC discount and buyers credit, it is submitted that these transactions were entered into because of interest arbitrage, since there is wide variation in the rates of interest between international markets and India. It is submitted that they have acted like any other prudent business men would do in the like circumstances. The department however, contends that AEL was strictly monitoring the number of days 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....
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....ves to act at the behest of AEL and have performed acts which have rendered the export goods liable to confiscation. .........." without ascribing acts of omission or commission under the Act to levy penalty on them. Section 114 of the Act does not create vicarious liability. It is an action in personam. It is therefore necessary to show how each of these individuals acted in a manner which resulted in misdeclaration of FOB value to render the goods liable to confiscation under Section 113 (i). We find no justification has been provided by the Commissioner in the order. The statement of these individuals are exculpatory, besides not being adversely implicated by others. In any case, we have set aside penalties on all concerned as aforesaid. 24. In the circumstances, we set aside the impugned order passed by the Commissioner and allow the appeals filed by all the parties and dismiss the appeals filed by the Department. Consequential reliefs if any are allowed. 41. We also find that for similar 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....
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....to consideration to find out the outflow of foreign exchange in the gold content. The petitioner believe in view of the aforesaid definitions when the value of the gold contend locally procured in manufacturing the jewellery could be taken into consideration to calculate the value addition of the exported jewellery. Accordingly they have acted on that understanding. They have performed their export obligation completely. It is after completing the aforesaid export obligation the impugned circular is issued clarifying the position. If the clarification given is applied to the exports of the petitioner the interest of the petitioner would seriously be affected and in fact they may be exposed to penal consequences under the Customs Act. In the absence of any indication in the definition contained in the policy and the handbook, when the petitioner bona fide understood in the aforesaid manner and have performed his export obligations as required under the policy the petitioner is entitled to redemption of the license. Now by virtue 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....
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....h. 8.3 The next issue for disposal is whether the impugned order needs to be set aside and the matter should be remanded back to the Adjudicating Authority only on the ground that the Commissioner should have awaited the outcome of the Writ Appeal filed by revenue. In our considered opinion, this proposition does not contain any merit. On perusal of the impugned order, we find that being a speaking order, does not require any remand. 9.1 We take up the challenge of the impugned order, by the revenue on merits. We find that the grounds on which revenue has filed appeals are as under : "The Review Committee, comprising of the Chief Commissioner of Customs, Bangalore Zone and Chief Commissioner of Central Excise, Bangalore Zone on reviewing the said OIO, found that the Commissioner appears to have erred in passing the order in view of the following : (i) The Commissioner of Customs failed to appreciate the fact that the issue relating to value addition was still pending before the Hon'ble Division Bench of the High Court of Karnataka which has clearly been brought out at para 28 of the Show Cause Notice wherein it has been highlighted that since the....
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....the Ministry of Foreign Affairs, Sharjah, (b) description of goods did not match, and (c) seal nos. were absent in the documents submitted by the party, further verification was called for. The Commissioner's argument that the declarations made before the Customs of the importing country and the documents produced therein have no evidentiary value is also incorrect in view of the Harmonized System of classification and the WCO agreements as per which the classification of an item will remain the same in any country of import (i.e., it cannot be jewellery in India and gold scrap in Sharjah). (iv) The Commissioner failed to take into consideration the Business information report given by M/s. Dun and Bradstreet India Pvt. Ltd., citing the existence of relationship between M/s. Radhakrishna Jewellers, Dubai, one of the importers at Dubai and M/s. Rajesh Exports as Shri Mahesh Mehta, brother of Mr. Rajesh Mehta was also one of the Directors of M/s. Radhakrishna Jewellers and the fact that M/s. Excel Goldsmith one of the importers in Dubai was one of the affiliates of M/s. Radhakrishna Jewellers. It can be seen from the above reproduced grounds of appeal that the reven....
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....ring or necklace) made of precious metal and set with gems (or imitation gems)'. Thus, to be categorized as jewellery', the weight or purity of the bracelet/bangles exported is not relevant. The weight/purity and nature/fineness etc. of a particular jewellery item or jewellery in general, depends on the taste, culture, customs and other consideration. Different Regions, Continents and Countries have different concepts and practices as to what constitute jewellery'. It is well known that tribal jewellery in India and Africa is considerably heavier in weight than jewellery worn in urban areas (and amongst non-tribal populace). Similarly, while in the western world, the emphasis is more on fineness/art/craft involved 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 ladie....
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....Ltd. v. Commissioner - 2005 (186) E.L.T. 583 would be applicable. The decision rendered in Surendranath Nundi v. Asst. Collr of Customs - 1987 (27) E.L.T. 428 would also be applicable. I also rely on CESTAT decision in case of Truwood Pvt. Ltd. - 2006 (204) E.L.T. 288 and CEGAT decision in case of South India Television (P) Ltd. v. Commissioner, Customs Calcutta - 2001 (130) E.L.T. 243 and CESTAT judgment in case of Taito Watch Manufacturing Inds. v Commissioner - 2004 (173) E.L.T. 17. It would also be required to follow the decision rendered by the Hon'ble Supreme Court in UOI v. Garware Nylon Ltd. - 1996 (87) E.L.T. 12 (S.C.) = 1996 (10) SCC 413 that the Department was required to establish mis-declaration. The Show Cause Notice has not established mis-declaration at the time of export. The opinion of the goldsmiths relied upon in the SCN has also been examined carefully by me. The opinion of the goldsmith does not state that the item exported was not studded gold jewellery. It is to note that, although the charge of mis-declaration of gold product exported by the Exporter has been leveled on the basis of the opinion of two goldsmiths (para 18 of the SCN refers), no cognizance ha....
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....rlooked and reliance and conclusion reached merely on basis of how the goods were declared or at time of import in a foreign country. It is to be noticed that such declaration of goods in foreign country is by the Importer and not be the two Exporters. Therefore, mis-declaration at hand of two Exporters at time of export cannot be held." It can be seen from the above reproduced portion of Order-in-Original that the gold jewellery was exported by the respondents, after the same was put to 100% examination by the customs authorities and the examination was conducted by the authorises by requisitioning a representative of local Jewellery Association recognized by the department. It is not disputed by the revenue that the above findings of facts are incorrect, as can be seen from the grounds of appeal. If it is so, then it is not open to the revenue, now to say that the respondents have not exported gold jewellery as indicated by them in the declarations made, while filing documents for export, more so, when representative of the recognized Jewellers Association has given a certificate of purity of the gold jewellery exported. 9.2 The next contention of the revenue is....
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....r than the above information provided by the Consulate, no other detail has been furnished. It may please be noted that the contents of the Consulate's letter are not relevant to the present case. It is only the information furnished by the Consulate in the form of 8 Bills of Entry that had been relied upon to frame the charges in the SCN and the same were annexed to the subject SCN. The subject SCN draws attention to the Consulate's letter merely to indicate the source of getting from Sharjah Customs, the Bills of Entry filed by the importer. 2.2 Copies of the relevant pages of the UAE Customs Tariff. UGCC list. U.S Code : As regards the UAE Customs Tariff, the same is a public document and relevant portion which have been mentioned in the SCN have already been provided to you. So also the copy of the UGCC list was already provided to you along with the SCN. 2.3 The documents referred to in para 19 of the Show Cause Notice : The same has already been furnished at para 2.1 above. 2.4 The basis for calling documents at Annexures E5 to E12 'Bills of Entry' and if the same are not Bills of entry, "what is the true and correct nature of these documents": The documents provided....
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....ustoms has no powers to question the legality of such clearance. It is reiterated that the documents for the declaration of the import filed before the Sharjah Customs has been relied upon in the SCN only to substantiate the allegation that the exporter had mis-declared the export items declared in their Shipping Bills. 3. In view of the above, you are requested to file your additional reply if any to the SCN within 15 days from the date of receipt of this letter. Yours faithfully. It can be noticed from Paragraph 2.1 of the above reproduced letter, it was informed that the contents of the letter from Indian Consulate are not relevant to the present case and it is only the information furnished by Consulate in form of 8 Bills of Entry which annexed to Show Cause Notice. This would mean that the Pills of Entry annexed to Show Cause Notice are the only document relied upon by the authorities to allege misdeclaration. The said Bills of Entry are annexed to the Show Cause Notice as annexures E5 to E12. On a careful perusal of the said documents, we find that they are photocopies of declarations made by the purchasers to Dubai customs. It is noticed that these documents a....
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....06, Shri Vikram Nankali, Advocate for M/s. Adani Exports Ltd., also submitted a comparative chart in respect of Annexure E8 TO E12 as referred in the Show Cause Notice. The said comparative Chart was in respect of the Bill of Entry referred to SCN, the relevant Invoice No. and date, the corresponding Shipping bill No. and date (as referred to in para 19 of the SCN) well as, the Airway bill and date including the name of the buyer which was, Excel Goldsmith in respect of all these five cases (E8 TO E12 of SCN) refers. He submitted the original copies of invoice and landing certificate, the bill of entry of Sharjah Customs. The said documents i.e., the invoice, the landing certificate and the bill of entry where, have been attested by the Tika Ram, Vice Consulate General of India Dubai (U.A.E). These, three documents also bear the seal/stamp of the United Arab Emirates. The documents have been certified to be true copies by Notary S.R. Pandya. As per, the scrutiny of above bill of entry, the declaration the goods, description is as indicated below : (i) DEC/Bill of Entry No. 569, dt. 12-1-2005 - studded gold jewellery E8 of SCN refers (ii) DEC/Bill of Entry....
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.... finding of the Ld. Commissioner in the present disputed orders and find that each and every allegations of the revenue was discussed by him in detail and thereafter he passed a detailed speaking orders. We do not find any reason to interfere with the orders. 44. We have also gone through the Order dtd. 27.12.2013 passed by the Joint Director General of Foreign Trade in the matter of M/s AEL. We find the in the said order he accepted the fact that there was no Circular trading, and that all the exports were to be accepted towards the discharge of the obligation under the Advance Licenses, and accordingly, redeemed all the Advance Licenses. The Order dated 27.12.2013 of the Joint DGFT covers the very same Advance Licenses, which are the subject matter of the present Show Cause Notices. Since the Licensing Authority, having accepted that the M/s AEL has discharged the export obligation under Advance Licenses, in accordance with law, there is and can be no breach of Condition (v) of Notification 93/2004-Cus dated 10.09.2004 and/or the bond issued in terms thereof. We also notice that the department's appeal does not allege that the licences had been cancelled by the Additional Dire....