TaxTMI 
TaxTMI 
2025 (5) TMI 1042
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....al customs duty and an amount of Rs. 54,52,09,459/- deposited by the appellant on account of interest. The order also imposes a penalty of Rs. 164,75,70,456/- upon the appellant under section 114A of the Customs Act. 2. The appellant asserts that it is engaged in gold and silver refining and minting facilities and for performing these functions in India, the appellant imports gold/silver dore bars under an actual user license (import authorization) issued by the Directorate General of Foreign Trade [DGFT]. The said dore bars are imported by the appellant from various foreign suppliers, including International Bullion Banks, across the world and for this purpose the appellant entered into separate contracts with each of its supplier. 3. The list of suppliers and the contracts, as stated by the appellant, is tabulated below: S. No. Foreign Supplier Details of Agreements 1. M/s MKS, SA [MKS] Dore Sourcing Agreement [DSA] dated 02.02.2012 read with six supplementary Agreements along with supplemental Agreements 2. Standard Chartered Bank [SCB] Consignment, Safe keeping, Production and Purchase Agreement for Precious Metal dated 20.07.2012 [SCB Agreement....
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....e consumption, after granting benefit under the Exemption Notifications. (v) Appellant's Assay: The imported gold dore bars are taken to the factory of the appellant, wherein they are weighed and melted to form a homogenized solution. It is from such a solution that multiple samples are drawn and sealed in the presence of a representative appointed by individual mining companies. One sample is assayed by a refinery and another sample is sent to an overseas laboratory nominated by the supplier. The two assay reports are reconciled to agree on a final assay of gold/silver content on the basis of which the final quantity of gold/silver is determined. The settlement document called as "final settlement report" becomes the final quantity. The quantity mentioned in the aforementioned document is one of the factors, basis which MKS or International Bullion Banks issue the final supplier invoice capturing the final quantity of gold and silver content in the dore bars. (vi) Refining: At the same time refining and manufacture of gold/ silver alloys and gold/silver products as per the market requirements are undertaken at the factory of the appellant. The o....
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....tions that the gold dore bars contained gold less than 95% was satisfied; (ii) It was on 15.10.2020 that the importer submitted three letters addressed to Deputy Commissioner stating therein that during their internal review exercise, they noticed certain inconsistencies in respect of the Bills of Entry which had been finalized in the past. The importer pointed out that the value declared in the invoices submitted at the time of import was not the transaction value of import and that it was finalized on the basis of invoices issued at a later date by the supplier. It was further stated that inconsistency took place as the Bills of Entry were finalized on the basis of the provisional invoice instead of the final invoice issued later by the supplier and further that freight and Dore Procurement Charges [DPC] were also paid based on provisional invoice as against the final invoices; (iii) At the time of commencement of import operations in the year 2012 as well as at the time of reply to the questionnaire in the year 2017, the appellant informed the Customs that the declared value in the Bill of Entry was the transaction value whereas it was provisional only subject ....
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....wise was not informed to the customs on 24.01.2012 when they first informed their pricing mechanism nor during filing of Bills of Entry or during finalization of the Bills of Entry or in their submission during the investigation by DRI or in their submission during the related party enquiry by the Assessing Group. The Agreement mentioned about an internal Agreement which was never disclosed to the customs and by way of misrepresentation of facts about the said internal arrangement or about mutually accepted mechanism with their sellers, the importer created a picture that mutually accepted mechanism / internal arrangement was that the price was computed on the basis of London Bullion Market Association [LBMA] price a day before the handing over the goods for import. The upward finalization of price at a later date resulted in short payment of duty and huge loss to the exchequer which needed to be demanded; and (ix) It appeared that extended period of limitation provided under sub-section (4) of section 28 of the Customs Act was invokable for raising the demand against the importer and, accordingly, the importer appeared to be liable to pay the differential duty amounting t....
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....e Annexures to the show cause notice should be computed in terms of final invoices submitted by them and after addition of metal lease charges and insurance premium in order to arrive at the true transaction value in terms of Section 14 of the Customs Act, 1962; ii. Whether the imported goods valued at Rs. 54563,18,86,790/- (Rupees Fifty Four Thousand Five Hundred and Sixty Three Crores Eighteen Lakhs Eighty Six Thousand and Seven Hundred Ninety only) were liable for confiscation under Section 111(m) of the Customs Act, 1962; iii. Whether the differential Customs duty amounting to Rs. 164,75,70,456/- ( Rupees One Hundred Sixty Four Crores Seventy Five Lakhs Seventy Thousand Four Hundred Fifty Six Only) evaded/short paid by them was liable to be demanded and recovered from the importer by invoking the extended period of limitation as per provisions of Section 28(4) of the Customs Act, 1962; iv. Whether interest was liable to be demanded and recovered from the importer on the aforesaid evaded/short paid Customs duty in terms of section 28 AA of the Customs Act, 1962; v. Whether importer was liable to face penal consequences under Section 112(a)(ii)....
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.... invoking the extended period of limitation; (ii) The appellant is not justified in contenting that the show cause notice could not have been issued to the appellant in view of the provisions of section 28(2) of the Customs Act as the appellant had deposited the amount prior to the issuance of the show cause notice and informed the department; (iii) The Principal Commissioner was justified in imposing penalty under section 114A of the Customs Act; and (iv) The Principal Commissioner was justified in ordering for inclusion of the metal lease charges and insurance premium with the transaction value. 16. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered. 17. The transaction value of the gold/silver dore bars imported by the appellant has been rejected for the following reasons: (i) The difference in value, basis the final invoice has to be included in the assessable value; (ii) Metal lease charges have to be included in the assessable value; and (iii) Post-import insurance premium has to be included in the assessable value. 18....
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....paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; Provided that before issuing notice, the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest in such manner as may be prescribed; (b) the person chargeable with the duty or interest, may pay before service of notice under clause (a) on the basis of,- (i) his own ascertainment of such duty; or (ii) the duty ascertained by the proper officer, the amount of duty along with the interest payable thereon under section 28AA or the amount of interest which has not been so paid or part-paid. Provided that the proper officer shall not serve such show cause notice, where the amount involved is less than rupees one hundred. ***** (4) Where any duty has not been 10[levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,- (a) collusion; or (b) any wilful mis-stateme....
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.... enacted with the intention as a deterrent measure to suppress the evil of defrauding revenue, to curb the evasion and un-lawful acts. The important distinguishing aspect of the penal provisions stated under Section 112 and 114A is that if it is proved beyond doubt that the noticees act of omission and commission by reason of collusion or any willful mis-statement or suppression of facts had resulted in the short levy/non-levy of the duty, in such cases penalty under Section 114A of the Customs Act, 1962 becomes imposable. 61.2 It has already been discussed above that the importer was aware that the value was not final and for the said omission to truthfully disclose the value at the time of filing of Bill of entry, the importer have rendered the said goods liable for confiscation and themselves liable for penalty Further, for the act of short payment of duty by way of willful misstatement and suppression of facts and for which the duty has been demanded by invoking the provisions of sub section 4 of Section 28 of the Customs Act, the importer had rendered themselves liable to pay a penalty equal to the duty under Section 114A of the said Act. 61.3 The noticees ha....
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....ld/silver content in the dore bars. 29. The contention of the appellant is that final quantity of gold/silver in the dore bars may either be more than that mentioned in the finalized Bills of Entry or equal to or less than that mentioned in them. The demand that has been confirmed is in cases where the gold content has been found to be more in the final supplier invoice as against the finalized Bills of Entry. 30. It is a fact that the gold content may vary in the final invoice and in cases where gold content is found to be more, the appellant would have short paid customs duty but in cases where the gold content has been found to be less, the appellant would have paid more customs duty. It is for this reason the appellant has claimed refund of the excess customs duty, which is clear from the following chart: Details of differential duty refundable Period Total Differential duty in Rs. Normal period of limitation i.e. Bill of Entry finalized on or after 22.10.2019 - 10,72,09,917 Extended period of limitation i.e. Bills of Entry finalized before 22.10.2019 but on or after 22.10.2016 - 1,16,13,19,835 Total finalized Bill of Entries - 1,26,85,29,752 ....
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....voice because the appellant has paid more customs duty than what was actually required to be paid in cases where the gold content is found to be lower than that mentioned in the finalized Bills of Entry. It cannot, therefore, be urged that the appellant had short paid duty on account of any wilful statement or suppression of facts. The extended period of limitation contemplated under section 28(4) of the Customs Act could not, therefore, have been invoked. 34. The appellant has provided a chart which indicates that the total duty confirmed for normal period of limitation is Rs. 60,33,73,436/- and for the extended period is Rs. 91,89,07,078/-. The chart is reproduced below: Details of differential duty payable (as per customs department) Period Total different duty in Rs. Normal period of limitation i.e. Bill of Entry finalized on or after 22.10.2019 60,33,73,436 Extended period of limitation i.e. Bills of Entry finalized before 22.10.2019 but on or after 22.10.2016 91,89,07,708 Total finalized Bill of Entries 1,52,22,81,144 35. Penalty under section 114A of the Customs Act could not have also been imposed upon the appellant because the grounds for i....
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.... in all their subsequent communications with SBI at the time of seeking approval for making remittances beyond the permissible limits and in the cases where the declared value in the Bill of Entry was in variance with the actual remittance. The importer has admitted that no interest was paid as a result of deferred payment but before the Customs in the present proceedings was referring the same as the charges for deferred payment. As discussed above, from the agreement between the importer and their foreign suppliers and their response to RBI, it is evident that the payment of metal lease charges was a condition to sale in the agreement and not in the nature of interest on deferred payment. There is a clear cut difference between a situation of deferred payment and situation of deferred pricing and the importer cannot use these terms as per their choice as I find being tried in this case. Once the invoice price was provisional and finalized on the settlement date much later than the date of importation, there was no rationale to notify such charges as post importation specially when their status till the settlement of invoice was of a bailee. ***** In the present ....