AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 1516
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....ived the plan to install "H" blast furnace and "I" blast furnace of 2.5 million capacity each. For the purpose of setting and commissioning the aforementioned blast furnaces, the Appellant invited tenders from prospective bidders through Enquiry Specification No. TSGP-05-PRJ-001 dated December, 2003. 2. The SCN was issued alleging that the Appellant had entered into sham agreements with a view to split the consideration for supply of imported equipments under FOB Agreement into designs & drawings and other post importation activities so as to evade customs duty. Accordingly, Show Cause Notice sought to add the consideration paid to agreement holders under the above four Agreements, to the assessable value of equipments/goods imported under FOB Agreement by re-assessing 77 Bills of Entry under FOB Agreement, for import of goods by PWIT. 3. SCN dated 21.8.2012 had also sought to deny benefit of EPCG scheme under Notification No. 97/2004-Cus dated 17.9.2004 in respect of 19 BsOE for following reasons: • Location of HBF was not mentioned in EPCG Authorization No. 0230001781 & 0230001782 and • Location of HBF was mentioned in EPCG Author....
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....assemblies, components, sub-components has been allowed as spares in Foreign Trade Policy under Para 9.57. Reference is also made paragraph 6 of 5.1 of FTP, which defines the capital goods to include spares. It means that the spares can be imported for preproduction purposes also. e. Further, Para 5.3.4(i) of the Handbook of Procedures of the Foreign Trade Procedures, 2006-07 allows import of spares for installation and maintenance of capital goods imported / to be imported under EPCG scheme. f. In view of the foregoing, it is submitted that demand of Rs.9,76,71,819 is required to be set aside on merits. 6 In respect of the differential Customs Duty demand the following submission are made : a) Pursuant to Enquiry Specification floated by the Appellant, 'Pre-First Offer' dated 15.1.2003 was submitted by SMS Demag SpA [later on renamed as M/s. Paul Wurth Italia SpA (PWIT)] and L&T. In the 'Pre-First Offer', civil and structural design work for HBF was indicated separately under the scope of work. Furthermore, the offer also contained price break up for imported supplies, imported services, indigenous supplies and indigenous services. [Copy of 'Pre....
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....igenous supply and services and supply of spare parts. f) Vide letter dated 1.8.2005, the Appellant issued offer acceptance letters ('Letters of Intent') to concerned parties viz., PWIT, L&T and PWIN, which was subsequently accepted by the respective parties. Pursuant to acceptance of the Letter of Intent, the Appellant signed six agreements with PWIT, based on the Technical Specification dated July 2005 and Fourth Offer. [Copy of three Letters of Intent are enclosed as Exhibit E-1, E-2 and E3, Vol-1, pages 700-702]. g) The appellant has provided the details of the six agreements along with price break up is mentioned herein below: Table-A Sr. No. Agreement No./date & Purchase Order No. Agreement Title Consideration (Amt in Euro) Hereafter referred as Exhibit 1 TATA STEEL/HBF/ FOB dated 1.8.2005 & P.O. No.2400000254 Agreement for Design,Manufacture and Supply of imported plant machinery & equipment with auxiliaries for "H" Blast Furnace at Tata Steel. Agreement: 34,900,000 Amended to: 34,693,600 FOB Agreement K, Vol-11, Pages....
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....n paid to PWIT under aforementioned four agreements. Instead, Service Tax was discharged on consideration received in respect of said four agreements for supply of designs and drawings, on reverse charge basis. i) Apart from the above, the Appellant also formed two agreements with PWIN and four agreements with L&T, which was approved by the Managing Director on 6.9.2005 and signed by Mr. R. P. Singh on behalf of the Appellant on a date between 7th and 9th September 2005. However, the date of signing/witnessing of these agreements was inadvertently indicated as 1.8.2005 by a handwritten entry made by Mrs. P. Jayaram of the Appellant-company on the Agreements. 7. The Adjudicating authority while confirming the demand, has given following findings : i) The Appellant has entered into four different agreements (viz. FDR- CIVERC, FDR-EQP, SUP & TAS) which were fraudulently executed with a malafide intention to split the consideration for supply of imported equipments under FOB Agreement and divert it towards four such Agreements. All the goods & services imported under the above four agreements were pre-importation activity and consideration paid for the ....
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....rt a fixed sum form cost of equipment imported under FOB Agreement vii) In terms of Technical Specification, supervision of activity was bifurcated under two separate heads viz. 'Supervision for erection' & 'Supervision for commissioning' and PWIT & L&T were to share the said responsibility. However, the Appellant have not placed any evidence to show that the responsibility was shared by both or whether any payment has been made to L&T for the same viii) The Appellant has not submitted the actual scope & division of work & responsibility between the consortium partners. Supervision services received under SUP Agreement was for total supervision and nature of supervision was not clearly defined. Hence, entire scheme of contract for supervision services is fraudulently conceived and executed by diverting the consideration towards value of equipments ix) The Appellant has deliberately and intentionally under declared the value of goods imported for setting up of HBF, with sole intention of evading payment of duties. Due to arbitrarily splitting the lumpsum offer amount suppression of relevant facts, & willful mis-declaration, the Appellant has evaded payment....
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....arties always bargained and negotiated for post importation services and costs. Significantly, the show cause notice does not recognize pre-First offer even though duly submitted during investigation. In any case, undisputedly, Fourth and Final offer dated 29.7.2005 did contain the breakup. 11. Therefore, the Adjudicating authority is in error to hold that the initial lumpsum consideration was later bifurcated to gain any undue Customs Duty advantage. In view of the foregoing, the confirmed demand of Rs.32,76,67,821 is required to be set aside on merits. 12. The learned counsel appearing on behalf of the appellant TISCO submits that the Show Cause Notice has been issued on 21.8.2012, for the imports carried out under 77 Bills of Entry during the period 22.11.2006 to 22.11.2007. The demand pertaining to Bills of Entry prior to 21.8.2007 are beyond the maximum permissible period of five years. As per the appellant Rs.31.89 crores out of the total confirmed demand of Rs.42.54 crores falls under this category. 13. It is submitted that since the confirmed demand is not sustainable both on merits as well as on account of limitation, it is submitted that the Confiscat....
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....(a) That the EPCG Licenses do not carry the 'H Blast' as the loction. (b) Spares have been imported under EPCG which are required only subsequent to the installation of the capital goods. 19. It is observed from the documentary evidence placed before us, the appellants have sought necessary amendment for the EPCG License to include the name of 'H Blast' therein. These requests were entertained by the DGFT and on examination of the amendment letters issued by them, it clear this issue has been properly addressed by the appellant. Therefore, we hold that the confirmed demand on this account does not survive and we set aside the same. 20. In respect of the spares imported by them under EPCG, the imported assemblies, sub-assemblies, components, sub-components are held as allowed as spares under the Foreign Trade Policy at Para 9.57. Apart from this, Paragraph 6 of 5.1 of FTP, which defines the capital goods to include spares, meaning that the spares can be imported for pre-production purposes also. In order to obtain the Discharge Certificate for the EPCG License issued by the DGFT, the appellants have provided the details of spares imported by them and DGFT ....
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....y, we hold that the confirmed demand on this account is required to be set aside and we do so. 22. In view of the foregoing, the confirmed demand of Rs.9,76,71,819 stands set aside on merits. 23. In respect of the balance confirmed demand, the main allegation of the Dept. is based on the assumption that the appellants have initially envisaged a single contract for the entire project, but in order to evade the Customs Duty payment, the contract has been divided into several sham contracts. On going through the documentary evidence, the factual matrix emerges as under : a) Pursuant to Enquiry Specification floated by the Appellant, 'Pre-First Offer' dated 15.1.2003 was submitted. In the 'Pre-First Offer', civil and structural design work for HBF was indicated separately under the scope of work. This offer contained price break up for imported supplies, imported services, indigenous supplies and indigenous services. [Copy of 'Pre-first Offer' dated 15.1.2003 is enclosed as Exhibit-A1 in Vol-9, pages 1-4]. b) Subsequently, PWIT vide their letter dated 30.6.2005 submitted its 'First Offer'.Copy of First Offer is enclosed as Exhibit B-1, Vol-9, pages 6....
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....tailed discussions and planning undertaken during the period 15.1.2003 till 1.8.2005. 25. It is on record that in respect of 4 Agreements, since the same pertained to supply of designs and drawings, the appellant has paid the Service Tax on the consideration paid for them. When Service Tax has been discharged on such designs and drawings and the same has been accepted by the Revenue without questioning the Service Tax being paid by the appellant, the Revenue cannot term the same contract items as goods so as to demand the Customs Duty, as has been done in this case. 26. The six Agreements were approved by the Managing Director on 6.9.2005 and signed by Mr. R. P. Singh on behalf of the Appellant on a date between 7th and 9th September 2005. However, the date of signing/witnessing of these agreements was inadvertently indicated as 1.8.2005 by a handwritten entry made by Mr. P. Jayaram of the Appellant-company on the Agreements. The Revenue is trying to make a big issue out this, which at the most would be some kind of clerical error, when the entire pre-first offer to the Fourth Offer details are carefully viewed. 27. In view of the foregoing, we conclude that the Revenue ha....