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2024 (12) TMI 1413
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....f gold and silver without payment of duty under the erstwhile incremental Export Promotion Scheme. developed by the officers of DRI that various companies had overvalued their exports of CD ROMS with the intention of fraudulently obtaining excess DEBP/DEEC Credits, which were subsequently utilized for duty free import thereby causing loss of the Customs Duty. Based on the said intelligence, investigations were initiated into the exports of CD ROMS and goods exported by respondents and other exporters. The Investigations revealed that exports had been overvalued to claim undue export benefits. 1.2 Based on the above intelligence, a consignment of 250 Gold bars (250 pieces of gold bars of 1Kg. each) imported by M/s AEL under Air Way Bill and Bill of Entry, without payment of duty claiming exemption under Notification No. 53/2003-Cus, dated 01.04.2003 against the DFCE License dated 08.01.2008 issued by DGFT was detained on 19.02.2010, for further investigation. On request of M/s AEL, Commissioner of Customs, Ahmedabad ordered for provisional release of seized goods. 1.3 In 2003-04 DGFT introduced a scheme titled 'Incremental Export Promotion Scheme" for the benefit of the Star T....
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.... imports as replenishment for exports of Cut and Polished Diamonds ['CPD for Short] exported by M/s AEL. The investigation conducted revealed that M/s. AEL had during the year 2003-2004 imported CPD from various overseas buyers and exported the same in the same form as CPD, which cannot be counted towards incremental export benefits provided under DFCE scheme. As per Note 1 inserted after sub-paragraphs (vii) in para 3.7.2.1 under Chapter 3, vide Notification No. 28/(RE2003)/2002-2007 dated 28.01.2004, the re-export of imported goods shall not be taken into account for the purpose of calculating the value of exports. As per the revenue, it is revealed from the investigation conducted, statements recorded and scrutiny of documents submitted by M/s AEL that they have imported CPD from various overseas suppliers under Bond and exported the same set of CPD in the same form from the private bonded premises. 1.5 The above investigation culminated into the issuance of show cause notice dated 19.12.2012 and demanding customs duty under Section 28 of the Customs Act, 1962 along with interest. The said Show Cause Notices also proposed to confiscation of goods and impose Penalties under th....
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.... letter dtd. 09.10.2023 to the DGFT, HQ., New Delhi, requesting to review the order F.No. 08/F-3/04/AM13/ECA dtd. 26.07.2023 passed by the Additional Director General of Foreign Trade, Ahmedabad, under the provisions of Section 16 of the Foreign Trade (Development and Regulation) Act, 1992. The said proposal of DRI/Customs department is pending at the level of DGFT, HQ., New Delhi. Therefore he prayed to adjourn the proceedings in the matter till the Review Order is passed by the Director General of Foreign Trade, HQ., New Delhi in the interest of natural justice. 3. Shri Hardik Modh, Learned Counsel appearing on behalf of the respondents submits that the present show cause notice refers to the earlier show cause notice dated 30.03.2007 which alleged circular trading of CPD and the present show cause notice refers and relies on the same investigations based on which the earlier show cause notice dated 30.03.2007 was issued. The allegations of circular trading have been set aside and transactions were held to be genuine by the CESTAT by its decision CC Vs. Samir Vora-2015(330)ELT 609, duly affirmed by Hon'ble Supreme Court by dismissing the revenue's appeal reported in Commission....
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.... was interrelationship between the overseas seller/buyer with AEL and it was alleged that M/s PNJ Trading, Hong Kong and M/s Little Hearts Creations, Hong Kong were either controlled by M/s AEL or were acting at the behest of M/s AEL. The word "interrelationship' has been judicially interpreted and means 'mutuality of interest'. The expression 'mutuality of interest' is found to Section 14 of the said Act, which contains the expression "interest in the business of each other". In the present case, no mutuality of interest is proved by the mere fact of buying and selling of goods and therefore, the fact that the overseas company sold CPD to AEL or other bought CPD in its transactions with AEL and others does not establish any form or kind of "interrelationship'. Further, there is no common shareholding or directors or any other factors which shall establish control of any form or degree by AEL over the overseas companies and the department has failed to establish that M/s AEL had the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by vir....
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....rt of gold and silver bars were permitted against export of cut and polished diamond. M/s AEL imported gold & silver Bars in terms of DFCE Scrips issued to them under the Exim Policy RE 2003 for status holders scheme (under para 3.7.2.1 (VI) of Exim Policy RE 2003) on incremental exports under various products groups. Further in terms of para 3 (b)of DGFT's Policy Circular No. 27(RE-2005)/2004-2009 dtd. 05.10.2005 with respect to Gems and Jewellery sector falling under Miscellaneous products group, import permissibility is allowed under chapter 4A of the Policy /procedures Vol.1, for the sector. Accordingly, respondent has rightly imported Gold & Silver Bars under the miscellaneous product group in conformity with the Exim Policy. In such case, since both items which has been exported as well as imported fall under the same "product group', the test of broad nexus as provided in para 3.4.5 of the Handbook of Procedures (HBP) has been satisfied. 3.11 He also submits that DGFT, Policy interpretation Committee (PIC) in its Minutes of Meeting No. 01/AM 11 dated 30.04.2010 specifically clarified that while utilizing the benefit under the scheme, inputs that have nexus with the produc....
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....We find that earlier department has also issued show cause notice bearing F.No. DRI/AZU/INQ-15/2005 dated 30.03.2007 in relation to similar disputed transactions in imports of unassorted CPD & Export of processed and sorted CPD for subsequent period i.e. during 2004-05 to 2005-06 under Target Plus Scheme. We find that the allegations and charges levelled under the said show cause notice dated 30.03.2007 as well as in the present disputed show cause notice dtd.19.12.2012 are similar in nature. The adjudication order passed in respect of the SCN dated 30.03.2008 was carried in Appeal to the CESTAT and decided in respondent's favour vide Final order No. A/2733-2744/2015-WZB/CB dated 26.08.2015 by holding that there was neither any mis-declaration of value /product nor there was circular trading. The CESTAT inter-alia held that all the transaction of Cut and Polished Diamonds (CPD) were genuine and there was no circular trading. The CESTAT in the said matter observed as under :- "17. We have considered the lengthy arguments made by both sides and gone through the detailed written submissions filed by them. We have also perused the record and find that essentially the issues ra....
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....duce 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 the import packets. Then he will start the process of actual assortment. Assortment would therefore include sieving, boiling and segregation. The process of sieving on a sieve, which is a round apparatus which consists of perforated metal sheet of various sizes. The process of sieving for an average lot would normally take around 30 minutes. However, according to my experience, in the bonded warehouse activity, only about 25% consignments were put for sieving. The rest of the consignments did not go through this process at all. The process of boiling involves boiling of the diamonds in a small glass like see through beaker (machine) which operates on electricity. The diamonds are normally boiled for about 20 minutes to remove dust/impurities. Again according to my experience of bonded warehouse, only 50% consignments were subjected to boiling. After the process of sieving and boiling, if at all done, the next process was assortmen....
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....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 and polished diamonds were exported without carrying out any process except sieving, boiling and segregation." E. On this issue of whether processing at all was carried out or not, Kamaraj Bodal, who reported to Lumesh Sanghavi in his statement dated 30-1-2006 stated as under : "Qn. 7 : Who used to physically receive the diamonds and what activities were carried out in the office of M/s. Adani Exports Ltd. after receiving the diamonds? Ans. 7 : I used to physically receive the diamonds brought by our Security Agency and I used make an entry of the same in bond register. Shri Lumesh Sanghavi used to bring assorters along with him and they used to assort the diamonds by sieving and boiling. They used to segregate the diamonds as per quality and they used to pack the same for exports. I have never participated in said assorting of diamonds. As per the instructions....
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.... 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 of Lumesh Sanghavi but two others who were also involved in the activities of import and export of diamonds from bonded warehouse. After careful consideration we find that there is no manner of doubt that processes such as sieving, boiling and sorting were carried out by the Indian companies in the bonded warehouse. It is therefore not possible to hold no process at all was carried out by the Indian companies in the bonded warehouse. 18.1 This takes us to the next question as to whether processes of boiling, sieving and sorting carried out in the bonded warehouse resulted in value addition of 5% or more in the years 2004-05 and 2005-06. These percentages of value addition flow from provisions of Para 4A.18 of FTP which was amended in 2005-06 to increase the value addition from 5% to 10%. Para 4A.18 as it stood in 2004-05 reads as under : ....
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....e 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 cut & polished coloured gemstones in the private/public bonded warehouses set up under paragraph 8.13 of the Exim Policy. However, the activities of mixing, sieving, assortment and cleaning would be restricted to individual consignment only and mixing of different consignments for the purpose of carrying out the activities of assortment, sieving and cleaning shall not be permitted." 18.4 Besides, we find that the Commissioner has not relied upon any evidence to show that minimum value addition of 5% or more cannot be achieved by such processes. The show cause notice also does not refer to any evidence on this point. The question whether these simple processes can result in value addition of 5% or more is a matter of fact. If the Commissioner wants to read such a condition in para 4A.18, even though the sam....
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....B 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 importation or exportation as the case may be in the course of international trade. There is no dispute about the CIF value declared by the Indian companies in the bills of entry. Rather such CIF value has been adopted by the Commissioner, to be the correct FOB value. We shall deal with this aspect later in detail when dealing with circular trading. Value addition is a concept under the Foreign Trade Policy (FTP). The formula for determining value addition is given in para 4A.6 of the FTP for 2004-09 which is reproduced herein : "4A.6 The value addition for the purpose of gem and jewellery sector shall be as per paragraph 4A.2.1 of Handbook (Vol. 1) V.A. (A - B) x 100, where &n....
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....arket 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 required under Section 14, to show that the price of such or like goods for delivery at the time and place of exportation is lower. On the other hand the appellant companies have shown that the contemporaneous imports are at comparable prices, something which the Commissioner does not accept, because according to the Commissioner "in case of diamonds, it is not possible to have evidence of identical or similar goods since each lot of diamonds varies from the other and valuation of diamonds, which is based on carat, colour, cut and clarity cannot be compared." May be the Commissioner is right. But that be so....
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....gnments. 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 find that the sole ground of the Commissioner to reject the FOB value, is that the value addition of 5% or more cannot be achieved only by carrying out simple processes, is not sustainable. We therefore, hold that the FOB value declared is correct. 18.10 On the question of valuation, the Commissioner also records that evidences disclosed in the show cause notice, there is an allegation that the FOB value declared is not genuine on account of control by AEL over all the overseas parties involved in the transactions as buyers or sellers of diamonds. Having recorded this objection, the Comm....
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....: (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. Chang Chung Ling - a Director of Gudami is shareholder/Director of M/s. Adani Global Mauritius and Adani Global Pte Ltd., Singapore; (e) Rajendra Prasad Nair, Manoj Chandrasekharan Nair and Sudhkar Kannadiga who are Managers/Partners/Directors of Gold Star FZE, Shine Jewellery and Queen Jewellery, all UAE entities, respectively are employees of Adani Global FZE, while Vinod Shantilal Shah who is Director of Adani Global FZE and GA International is the brother in law of the Chairman and Managing Director of AEL. 18.13 The fact th....
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....ies. 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 related parties, but the total exports to them in 2004-05 constitutes only about 22.45% which means that the remaining 77.55% of exports at or about the same price has been made to independent buyers. In 2005-06, exports to independent buyers is about 28.21% assuming all the buyers in Singapore are related. We have arrived at this finding based on the information given on page 46 of the show cause notice. As long as price of exports to independent parties in respect of whom there is no allegation of relationship is available, t....
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....r-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 in the present case were for the warehousing under Section 58 of the Act. These Bonds have been cancelled by the Bond Officer. In any case we have held the declared value to be correct. Hence, the question of confiscation does not arise at all. 18.19 The issue involved in the judgment in Euresian Equipment and Chemicals Ltd. and Others v. CC, 1980 (6) E.L.T. 38 (Cal.) does not arise for consideration in the facts of the instant case, as it is not the claim of the appellants that liability if....
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....at 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 of cut and polished diamonds it is seen that each consignment consists of various lots of different descriptions, weight, value and quality. It is not the case of the department that all the lots referred to at pages 81 to 83 have been imported under one invoice. We have found each invoice to cover number of lots ranging from 8 to 23 in number. Identifying one or two lots from a consignment consisting of 8 to 23 different lots being the sa....
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.... 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 and the time involved in transporting the goods from India to Singapore or Hong Kong and from there to Dubai and Dubai to India, suggesting thereby the whole theory of circular trading is bogus and impossible. We find no answers to this point in the contentions raised by the department. 19.4 To prove circular trading show cause notice also relies upon the statement of Lumesh Sanghavi. In his statement dated 28-2-2006, he ....
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.... 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 support the allegation of circular trading are the 3 charts reproduced on Pages 86 to 88. These charts have been recovered from the desktop (computer) of Vipul Desai who in his statement dated 19-2-2007 said that these were prepared by Sudhakar Nair, Junior Assistant in the Banking department. No statement of Sudhakar Nair has been recorded. We have however, independently considered these charts without the benefit of the s....
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....bal 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 through DRI or otherwise to ascertain the genuineness of the said MOU. After all, as an adjudicating authority, the Commissioner must undertake fact finding especially when it is not as if AEL had adverted to business relationship with Daboul for the first time in its reply to show cause notice. We cannot help but noticing that the reply disclosing the MOU with Daboul was filed on 29-10-2007 and the adjudication ord....
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....ch 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 parties who is acceptable to all the parties." For want of better explanation from the department, we have no option but to accept that the reason why Ms. Mary Joseph wrote e-mails was because of the understanding recorded in the said MOU. 21.1 We have independently gone through the set of e-mails which have been extracted in the show cause notice on the pages referred to above. We ob....
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....t 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 and correct value, meaning thereby each consignment is a fresh and a new transaction, independent of each other and not of the same goods repeatedly circulated. We do see force in this argument. We find the stand of the department in the show cause notice to be self-contradictory. If the same lot is circulated into India a number of time....
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....h 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 actions being in breach of the law in the show cause notice or any finding to this effect in the impugned order. Besides, the payment of commission would be relevant for calculating the value addition if and when the pending applications for grant of duty free scrip under TPS is taken up by the competent authority. ....
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....er is well settled in favour of the respondents by the above decisions. Since the issue is no longer res integra, the instant demand cannot be sustained. 4.3 We also find that based on the same investigations, the show cause notice F.No. DRI/AZU/INV-04/2010 dated 19.12.2012 was issued by DRI to respondent and other wherein referring to the SCN dated 30.03.2007 it was alleged that the respondent was engaged in Circular Trading of Cut and Polished Diamonds (CPD) and thereby they mis-used the DFCE Scheme by way of wrongly obtaining the DFCE scrips. It was also alleged that the CPD were re-exported without subjecting the same to any processes. Based on show cause notice dated 19.12.2012 Additional DGFT, Ahmedabad also issued show cause notice dated 08.10.2021 proposing to cancel the DFCE Scrips. However, Additional DGFT, Ahmedabad after considering the facts of the case and evidences on record vide Order dated 26.07.2023 dropped the preceding initiated vide SCN dated 08.10.2021. By the said order of Licence issuing authority it was confirmed that the respondent has not obtained the DFCE Licenses fraudulently. 4.4 We also find that in the present matter the department's appeal doe....