TaxTMI 
TaxTMI 
2025 (1) TMI 1451
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....earing no T-3/26-Goa/2016 dated 25.10.2018 against M/s Mine scape Minerals Pvt Ltd. (Respondent no.1), having it office at Minescape, M. G. Road, Panaji, Goa-403001; M/s Dinar Tar car Resources (India) Pvt Ltd. (Respondent no.2) having its office at Mine scape, M.G. Road, Panaji, Goa-403001; and Shri Dinar Tar car, resident of Altinho, Panaji, Goa-403001 (Respondent no.3) alleging violation of Sections 7 and 8 of FEMA, 1999 read with Regulations 3, 9 and 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, and Section 42(1) of FEMA, 1999 to the extent of Rs.3,11,68,167/- (by Respondent no.1); Rs.20,00,96,301/- (by Respondent no.2); and Rs. 23,12,64,468/- (by Respondent no. 3), in all, amounting to a total Rs. 46,25,28,936/- 3. The investigation in this case was initiated based on the Show Cause Notice (SCN) bearing no. DRI/MZU/GRU/INV/01/2012 dated 18.08.2015 issued by Directorate of Revenue Intelligence (DRI), Mumbai to M/s Mine scape Minerals Pvt. Ltd and M/s Dinar Tar car Resources (India) Pvt Ltd, Goa (Respondents no. 1 & 2 herein), for evasion of Customs Duty in respect of the export of iron ore to their overseas buyers, viz, M/s Dragon Commodit....
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....xported by Respondent no. 2 in vessel named MV Vina lines Brave. In this instance, M/s Dinar Tar car Resources (India) Pvt Ltd had entered into a contract bearing no. DTRIPL/DRAGON/11-12/01 dated 03.05.2011 with M/s Dragon Commodities (HK) Ltd for supply of 50,000 MT of iron ore fines having 55% of Fe content at a price of US$ 130 per Dry Metric Ton (DMT) CIF one main port, China. The said contract, dated 03.05.2011, specified that the base price would be increased by US$ 2.36 per DMT for each 1% Fe content above 55.00%, fraction pro-rata. Accordingly, M/s Dinar Tarcar Resources (India) Pvt Ltd exported 46,644 DMT of iron ore fines by vessel MV Vinalines Brave to M/s Dragon Commodities (HK) Ltd and raised commercial invoice dated 19.05.2011 for an amount of US$ 6182605.28. Certificate of quality dated 18.05.2011 issued by Quality Services and Solutions, Goa certified that the iron fines exported in vessel MV Vinalines Brave was having Fe content of 55.90%. Accordingly, price of the iron ore exported was raised by US$ 2.12 and the price per DMT became US$ 132.12 CIF instead of US$ 130 PDMT CIF. 7. With respect to the aforesaid cargo exported by Respondent No. 2, M/s Dragon Commodit....
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....e knowledge that the cargo exported by the Indian company has Fe content of at least 56%. Since, the ultimate buyer, i.e., M/s Swiss Singapore Overseas Enterprises Pte Ltd., Singapore, was issued the commercial invoice showing the Fe content of 56.63%, it was concluded that the Indian Company M/s Dinar Tar car Resources (India) Pvt Ltd deliberately mis-declared the Fe content of the cargo to suppress the actual transaction value/correct value of the export proceeds. It was also noted that the first contract between the related parties was entered on 03.05.2011 whereas the contract between the overseas party and the ultimate buyer was entered on 09.05.2011, which was within a week of signing the first contract, thus showing there could not have been any significant difference in the price of the iron ore cargo exported by the Indian company. However, in this case, the difference was to the extent US$ 6.50 per DMT. This, coupled with the alleged misdeclaration in the Fe content of the iron ore cargo and the fact that the first contract was entered between two related parties, both controlled by Shri Dinar Tar car, were sufficient evidence according to the directorate to prove that th....
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....mmodities (HK) Ltd being controlled by Shri Dinar Tar car, there should not have been any difference in the pricing of the iron ore fines as well regarding the Fe content of the iron fines in the first and the second contracts. However, the contract contained different percentage of content of Fe as well as the price per DMT. The Indian company showed the iron exported to be having Fe content of 55.50% whereas its overseas counterpart showed the Fe content to be 56.67%. 13. The Respondent No. 2 entered into contract for supply of iron ore having 55% of Fe content whereas its related overseas company entered into contract for further sale of the same cargo but declaring the Fe content to be of 57%. The Directorate was of the view that this definitely presupposes knowledge on the part of the Respondent No. 2 and Respondent no. 3 that Fe content of the iron ore exported by the Respondent No. 2 was more than 55%. Therefore, stating Fe content to be of 55% was a deliberate mis-declaration by the Respondents Company no.2 in order to lower the actual and full value of the goods exported by them. Since, the ultimate buyer i.e. M/s Swiss Singapore Overseas Enterprises Pte Ltd, Singapore wa....
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....respect of the remaining transactions are not being dismissed here. The details in respect of the export proceeds not repatriated to India were computed as below: Table No. 2 Sl. No. Name of the Vessel Declared Invoice amount (US &) Actual Invoice amount (US &) Differential Amount (US &) Differential amount (Rs.) 1 MV Vinalise Brave 6162605.28 6474628.16 312022.88 1,37,75,810 2 MV APJ Kais 4588818.56 6243910.93 1655090.37 7,40,65,383 3 MV Port Mouton 3347771.25 3979832.25 632061 2,82,84,729 4 MV Lorentzos 5806655.50 6964898.24 1158242.74 5,13,10,153 5 MV Jin Bi 2814542.10 3517668.61 7033126.51 3,26,60,226 Total 44,60,545.5 20,00,96,301 15. Based on the above analysis, the Directorate concluded that M/s Dinar Tar car Resources (India) Pvt Ltd had not repatriated the amounts totalling US $ 44,60,545.50/- equivalent to Rs. 20,00,96,301/- till date. The Directorate was of the view that the said foreign exchange equivalent to 20,00,96,301/-, is part of the full value of the export of iron ore made by the Respondent no. 2. The Directorate noted that Regulation 3(1) of Foreign Exchange Management (Export of Goods and Services) Regu....
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....onable steps to realize and repatriate the full export value of the goods, the Respondent No. 2 had violated the provisions of Section 8 of FEMA, 1999. 16. From the above, it was seen that the Respondent No. 2 had violated the provisions of Section 7 and Section 8 read with Regulations 3, 9 and 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 to the extent of US$ 44,60,545.50/- equivalent to Rs. 20,00,96,301/-. 17. With regard to Respondent No.1, M/s Mine scape Minerals Pvt. Ltd., It was noted that the company deals in export of iron ore from the state of Goa. Shri Dinar Purushottam Tar car and his wife Smt. Manisha Dinar Tar car were the two Directors of M/s Mine scape Minerals Pvt Ltd and Shri Dinar Tar car was the Director since the incorporation of the said company. M/s Mine scape Minerals Pvt Ltd exported two consignments of iron ore to its related overseas entities namely M/s Orient Express Commodities Pte Ltd and M/s Dragon Commodities Ltd, Hong Kong wherein they have not received the full and correct value of the goods exported. Details of the said export consignments are as given in the table below: Table No. 3 Sl. No. Invoice No. an....
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....overseas company M/s Dragon Commodities (HK) Ltd are controlled by Shri Dinar Tar car. Further, as both the companies were being controlled by the Respondent no.3, there should not have been any difference in the pricing of the iron ore fines as well as Fe content of the cargo in the contracts signed by the Indian Party and its related overseas party. But the contracts contained different prices for the cargo as well as different percentage of Fe content of the cargo of iron ore fines exported by the Respondent's Company. It was noted that in the contract signed between Respondent's Company and overseas party the Fe content was shown to be 55% while the contract signed between the overseas entities showed the Fe content to be 56%. Moreover, the first contract between the related parties was entered on 01.02.2011 whereas the contract between the overseas party and the ultimate buyer was entered on 28.02.2011 which was within a month of signing the first contract, thus showing there could not have been any significant difference in the price of the iron ore cargo exported by the Indian company. However, in this case the difference was to the extent US$ 5 per DMT. This coupled....
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.... 31,72,285.40. In the said final invoice dated 30.09.2010, actual Fe content was shown to be 54.53% and hence the price of the iron ore was reduced from US$ 88.50 per DMT CIF to US$ 86.9866 per DMT CIF. 23. It was noted that the Indian company i.e. M/s Mine scape Minerals Pvt Ltd as well as the overseas companies, M/s Dragon Commodities (HK) Ltd and M/s Orient Express Commodities Pte Ltd are controlled by Shri Dinar Tar car. Further, as both the companies were being controlled by Respondent no. 3, there should not have been any difference in the pricing of the iron ore fines as well as Fe content of the cargo in the contracts signed by the Indian Party and its related overseas party. But the contracts contained different prices for the cargo as well as different percentage of Fe content of the cargo of iron ore fines exported by the Respondents Company. It was noted that in the contract signed between Respondent Company and overseas party, the Fe content was shown to be 55% while the contract signed between the overseas entities showed the Fe content to be 56%. It was noted that the first contract between the related parties was entered on 29.07.2010, whereas the contract between ....
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....Management (Export of Goods and Services) Regulations, 2000. Regulation 9 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 stipulates that the amount representing the full export value of goods exported should be realized and repatriated to India within twelve months from the date of export. In the matter of export consignments detailed in Table No.3, the full export value is the sale price of the cargo by its related overseas entities. The differential amounts between the final invoice amounts and initial invoice amount, as detailed in Table No. 4, had not been repatriated by the Respondent No. 1, within the stipulated time period thus violating Regulation 9 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000. Regulation 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 mandates that no person shall do or refrain from doing anything or take or refrain from taking any action which has the effect of securing that proceeds of sale of the goods exported do not represent the full export value of the goods. It is seen that the Respondent No. 1 had not taken any steps to realize and repatriate the....
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....- equivalent to Rs. 20,00,96,301/-. 27. In furtherance of the investigation, Assistant Director, Directorate of Enforcement, Panaji Zonal Office, Goa filed a complaint bearing No T-3/26- Goa/2016 dated 25/10/18 before the Ld. Adjudicating Authority (Additional Directorate of Enforcement, Mumbai). Based on the said complaint, the Ld. Adjudicating Authority issued a Show Cause Notice (SCN) bearing no T-4/22- B/ADE/WR/2018 dated 31/12/18 to the Respondents. 28. In response to the SCN dated 31.12.2018 issued to the Respondents tendered their replies before the learned adjudicating authority on behalf of Respondent No.1 & 3 and Respondent No. 2 & 3 wherein they gave detailed explanations regarding the business of export of iron ore cargo in huge quantities, the method of fixing the value/price of iron ore cargo etc. It was inter alia explained that the contracts in question were for sale of certain weight of ore in Metric Tons (MTs). The ore is naturally found in moist condition and is weighed in Wet Metric tons. This weight is the weight of ore in natural moist condition. The contract is, however, based on Dry Metric Ton (DMT) basis, which is determined by ascertaining the moisture c....
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....s) submitted that the variation in the Fe content could also be due to the difference in testing technology, testing kits, testing chemicals testing process etc. The difference in Fe content could be due to the evaporation of the water content from the ore during the long sea voyage. In the statement given by the Notice no. 3 on 30.08.2017, he stated that the difference in the Fe content in the sale contract between the Indian party and the overseas buyers and the sale contract between the overseas buyer and the ultimate buyer that the same parcel of iron ore when analysed would be giving different grade analysis at different time due to iron ore due to the nature of the commodity being that the acceptable allowance between two times or different times of analysis is 0.5 and that normally the vessel which is 50000 tonnes in size is loaded by a contribution plan i.e. loading is done from different jetties in different barges at different times and the due to this nature of loading and random sampling, sometimes the grade i.e. Fe content vary. 34. Further, the notices submitted that it can be seen from the said contract bearing no. MMPL/DRAGON/10-11/01 initially stipulated the Fe co....
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....complaint was silent about the reports of the Deputy Chief Chemist. Further the notices submitted that the increase in the Fe content at the Discharge Port is a consistent phenomenon and the variation could also be due to difference in testing technology, testing skills, testing chemicals, testing process; evaporation of the water content from the ore during the long sea voyage; in a sale contract between the related buyer and the overseas buyer and the overseas buyer and the ultimate buyer, the same parcel of iron ore when analysed would be given different grade analysis at different times due to the nature of the commodity being in bulk, that the acceptable allowance between two times or between different times of analysis is 0.5 and that normally the vessel which is 50,000 tonnes in size is loaded by a contribution plan i.e. loading is done from different jetties in different barges at different time. It was also submitted that the Notices (Respondents before us) had no role in ascertaining the Fe content in any of the shipments of iron ore, which lends credence to the submission that there is in fact no mis- declaration of Fe content as alleged in the notice. 37. Having consid....
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....ave upheld the charges levelled against the respondent on merits and imposed reasonable penalty for the contraventions. The findings of the Authority were perverse, contrary to the facts and the evidence on record and, therefore, deserve to be quashed. The Authority has transgressed its power of discretion in dropping the charges in this case. Based on the above contentions, it is prayed by the respondents that the appeal be allowed and reasonable penalty be imposed upon the respondents. Arguments on Behalf of the Respondent 40. The respondents have strongly opposed the arguments advanced on behalf of the appellant Directorate. It is submitted that the respondents exported iron ore to entities based in Hong Kong/Singapore. These entities further exported the said ore to the final buyers. The ED's case is that there is a discrepancy in the Fe grade/content and the prices declared by the Respondents while exporting from India, and that of their buyers when further exporting the said ore. This differential value, it contends, is liable to be repatriated, since it considers the Respondents and the first buyers as being one and the same. 41. In this regard, it is firstly conten....
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....basis of few documents sent by DRI issued a show cause notice to the appellants for alleged under-valuation of furniture imported thereby alleging violation of the provisions of section 3(b),Exchange Management Act, 1999...read with Section 42(1) of the Act. 16. The show cause notice relied solely on the DRI case which had been settled and closed by the Settlement Commission in 2009 itself. Initiation of proceedings is incorrect when the issue has already been settled by the Settlement Commission... 17. In the light of above, both the appeals are allowed. The impugned order dated 06.01.2014 for imposing penalty is accordingly set aside." It is submitted that in this appeal, the ED has conceded that its entire case rests on the DRI's case alone as is evident from para 2 of the appeal wherein it has stated that its investigation was initiated based on the show cause notice of the DRI, while also citing the enquiries made by the DRI. 45. Further, in the Grounds of appeal (oo), (vv), (xx), it has been contended that a dismissal of this appeal would impact the DRI proceedings. Since the Reply filed by the respondent contends that the DRI SCN has been discharged, the Appella....
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....r tables in the ED's Complaint and Appeal, the real picture is as follows: i. The ED has only shown 2 out of 7 transactions in respect of Respondent No. 1. while concealing that the other transactions could not be faulted with ii. The ED has only shown 5 out of 42 transactions in respect of Respondent No.2, while concealing that the other transactions could not be faulted with iii. Lastly, the ED has conveniently failed to disclose that in many cases, the Fe content declared by the foreign entity at the time of further sale, is lower than that which the Respondents had declared at the time of export. This also shows that Fe content is genuinely a factor of testing technology and its moisture content varying during voyage iv. Similarly, the price of iron ore is a factor of international market dynamics and also the certainties associated with a transaction involving entities that are physically proximate. This had been elaborately explained in the statement tendered by the Respondent No. 3 on 30.08.2017 before the ED and has been reproduced in the Rejoinder at para 15 (Pg. 10 of Rejoinder). 49. Secondly, the law does not permit onward sales to determine the transaction ....
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....ontract and the values declared in the shipping bills with the Customs at the time of export. Iron ore is naturally found in moist condition and is weighed in Wet Metric Ton (WMT) and the same is the weight of ore in natural moist condition. The contract entered between the parties is based on Dry Metric Ton basis (DMT) which is determined by ascertaining the moisture content and treating is as an impurity. The contract amongst others specifies the grade and the quantity (on DMT basis) of the iron ore to be supplied. 51. It is also reiterated that certification of the grade is done by an independent GAL recognised under Sec. 7 of the Export (Quality Control and Inspection) Act, 1963 after drawing random samples from random locations from each of the shipments, as found appropriate by such third party certification agency. The Customs, having examined both the contract value of Fe content and the Fe content as determined by the GAL certificates, finalised the shipping bills since the variation between the two values was marginal, and within tolerable limits. 52. It is submitted that the respondents do not have any control on the sample used for testing, since the samples are drawn....
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.... buyers are related parties does not, ipso facto, indicate any wrongdoing by the Respondents. Firstly, the Respondents had duly informed the customs at the time of export that the same was between related-parties. The Customs Valuation Rules themselves provide that in cases of related-parties, the price declared by the exporter would be accepted unless the relationship is found to impact the price. The Customs, after finalising their assessment, found no such thing. Secondly, the Respondents had also duly reported their transactions as being between related parties, and the Transfer Pricing Officer of the Income-Tax Department did not find that there was any requirement for adjustment of prices in relation to these transactions in terms of the Transfer Pricing Rules. 58. Pertinently, under the Customs Act, the Union can only raise a demand alleging short- payment of duties in respect of transactions dating back 3 to 5 years of the demand. The allegations of the ED, though one of non-repatriation of foreign exchange, are made by contending that there was under-invoicing and mis-declaration by the Respondents before the Customs at the time of exporting. In this respect it is contend....
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....ice dated 18.08.2015 issued by the DRI under the Customs Act, 1962. In fact, it is expressly stated so in Para-2 of the appeal memo filed by the appellant Directorate. Notably, since the passing of the impugned order on 30.12.2019, the Ld. Commissioner of Customs, Panjim has passed an order on 31.12.2020 dropping all the charges against the appellant companies herein under the Customs Act, 1962. The relevant part of the said order of the Ld. Commissioner of Customs which are relevant to the present case against the appellants under FEMA, 1999, are extracted below: "64.5 I find that both the exporters M/s MMPL and M/s DTRIPL have declared in the shipping documents that they are exporting iron ore to their related group companies M/s DCL and M/s OECPL. Export consignments sent to M/s M/s OECPL were sold to M/s DCL and finally M/s DCL had exported to ultimate overseas buyers. It has been alleged in the Show cause notice that the related overseas group companies, simply acted as layers for facilitating value and Fe content suppression. For the same reason exports made overseas group companies have been considered as not worth considering for custom valuation purposes and the transact....
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....he discharge port analysis of Fe contents of consignments supplied by related foreign group parties to ultimate buyers. I agree with the contention of the noticee that such a suggestion was not legally possible without nullifying the test reports of the CRCL. In order to appreciate the stand of the exporters it is necessary that the provisions of Section 14 of the Customs Act, 1962 needs to be reproduced: "SECTION 14. Valuation of goods (1) For the purposes of the Custom Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf: Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesai....
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....ds were presented for export and the taxable event is the point when the export goods are cleared for placing on board at the port of loading. It is also to be seen that the provisions of Section 14 specifically mandate for value paid or payable at the time of export. In the present case, the exporters had entered into contracts with related purchasers in Hong Kong and Singapore for the export of the goods of specified Fe content as per specifications agreed by them. These are relevant for assessment in India as per Section 14 of the Customs Act, 1962. Subsequently related purchasers sold the goods to some other foreign purchasers, wherein Fe content was found mentioned higher in the shipping documents and analysis report at the discharge port, but such documents are not relevant for assessment in India at the time of export. In this regard, I am fortified in my view by the following judicial pronouncements made by various courts The Hon'ble CESTAT, Mumbai in its decision in the case of Commissioner of Customs and Central Excise, Goa V. M/s Dream Logistics Company India Pvt. Ltd. held that issue is settled in the case of Hira Steel Limited-2016-TIOL-1692-CESTAT-MUM wherein i....
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....ushed aside on the basis of opinion of some private persons obtained by the assessee (Para 17)." 64.7 The Export Valuation Rules, i.e, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 made under the provisions of section 14 of the Customs Act, 1962, came into force with effect from 10-10-2007 vide notification 95/2007 Customs (NT) dated 13.09.2007. Rule 3 of the said rules also stipulates that the Transaction Value for export goods shall be accepted even where buyer and seller are related, provided that the relationship did not influence the price of the goods. Where the relationship is found to influence the price, as determined by the proper officer on receipt of further information from the exporter, the value of the export goods shall be determined by proceeding sequentially through rules 4 to 6 of the said Valuation Rules. The persons who shall be deemed to be 'related have been specified in Rule 2(2) of the said Valuation Rules, and this provision has been adopted from the Custom Valuation (Determination of Value of Imported Goods) Rules, 2007. Thus transaction value is the primary basis for valuation of export goods and the method specified sande....
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....luation Rules. A different kind of approach was adopted for the same which is impermissible and improper. I have duly considered the same and find that redetermination of value as suggested in not as per the procedure prescribed is the Valuation rules but rather it has adopted a strange method of valuation which as per my considered opinion arises out of suspicion and zest and hence does not pass the test of law. 65. I do not find on record any corroborative evidence which can help prove the allegations in the show cause notice and also find that show cause notice has been issued by an authority which has no jurisdiction hence in view of my discussions and findings as above I proceed to order as under-: ORDER (i) I drop the charges against M/s Mine scape Minerals Pvt. Ltd., M. G. Road, Panaji, Goa 403001. (ii) I drop the charges against Shri Dinar. P. Tarcar, the Managing Director of M/s Minescape Minerals Pvt. Ltd, Goa, residing at 'Manglsh', Near Chief Minister's Bungalow, Father Agnelo Road, Altinho, Panaji, Goa-403001. (iii) I drop the charges against M/s Dinar Tarcar Resources (India) Pvt. Ltd., Minescape M.G. Road, Panaji, Goa-403001. (iv) I drop the....
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....he call of legality and propriety in this case demanded that the facts unearthed during the course of investigation like mis-declaration and suppressing of the actual value of the goods exported by the Respondents should have been accepted by the Adjudicating Authority in this case." "(xx) The Adjudicating Authority therefore, appears to have thrown caution to the winds while ignoring the nuances of the principles of natural justice. It is trite law that the rules of evidence are strictly speaking, not applicable in the adjudication proceedings under FEMA. The dropping of charge in this case is bad in law and may prove to be a further alibi for the respondent to claim innocence and twisting of facts in the proceedings against the respondents by the DRI." 65. I also find merit the respondent's reliance on the decisions in Khazana v. Special Director of Enforcement, 2018 SCC Online ATFEMA 22 and Suresh M. Jumani v. Special Director, Directorate of Enforcement, 2018 SCC Online ATFEMA 40 insofar it has been upheld in these cases that where the FEMA case was initiated on the basis of the case under the Customs Act, the outcome of the Customs Act would have a bearing and can be ....
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....he proper officer in terms of the provision of Section 14 and the Customs Valuation (Determination of Value of export goods) Rules, 2007 and the Shipping Bills are provisionally assessed under section 18 of the Customs Act. In case of the transaction being declared to be between related parties proceedings governing related party transactions are followed. (c) Upon receipt or the load port test report and discharge port test report, the proper officer compares the two reports with the terms set out in the contract. If the contract contemplates test report at discharge port to be relevant, it is taken into account but when contract contemplates valuation as per test report at load port, it is taken into account Where variation in the two test reports are within tolerance limits provided in the contract and do not impinge upon the declared price, the proper officer proceed to finalize the provisionally assessed shipping bill in terms or the provisions of Section 14 of the Customs Act read with the Customs Valuation (Determination of Value or Export Goods) Rules, 2007. (d) In cases where the load port test report and discharge port test report show a variation, so as to impinge ....