TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 924
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....he Customs Act] and also imposed penalties upon the appellant under sections 114 and 114AA of the Customs Act. 2. The appellant was engaged in the business of manufacture and export of heavy engineering goods, including boilers and sugar plants [the goods]. These goods were manufactured by utilizing inputs and components manufactured by the appellant or domestically procured from supporting manufacturers. 3. The appellant entered various contracts with foreign buyers for supply of the goods. These contracts provided for payment of a lumpsum price by the foreign buyers for the supply of the goods. According to the appellant, the individual component cost or cost of inputs required for the manufacture of the goods was not agreed upon between the appellant and the foreign buyers. After the contract was entered, broad billing breakup of the goods was prepared by the appellant, as per the terms of the contract, which was approved by the foreign buyer. This broad billing break-up of the lumpsum amount of the boiler and sugar plants only provides the value of broad categories of parts of the boilers and sugar plants and does not provide value of individual items or component to be e....
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.... Kampangpetch Bio Energy Co. Ltd. 20150000 2. M/s Kakira Sugar Limited 21555000 3. M/s. Compania Agricola Industrial Ingenio Palo Gordo S.A 12555000 On scrutiny of contract agreement between the party and their overseas buyers, the value of consignment can not be ascertained as the party has declared only contract prices in the said agreement. There is no discussion about item wise or consignment wise value in the said agreements. The exporter has submitted that he had filed Shipping Bills other than these 16 Shipping Bills to export goods in respect of the above said agreement with their overseas buyer and to reconcile the above said contract prices, he had loaded value in current 16 shipping Bills on pro-rata basis. There is no provision in the Customs Act, 1962 under which value of one consignment can be loaded on pro-rata basis to reconcile the value of other consignment. 11. Whereas, the goods have been exported by M/s. ISGEC Heavy Engineering Ltd. as per contract entered into by them with their overseas buyers i.e. M/s Kampangpetch Bio Energy Co. Ltd. M/s. Kakira Sugar Limited and M/s Compania Agricola Indutrial Ingenio Palo Gordo S.A. T....
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....dditional Commissioner (Export Shed), ICD, Tughlakabad, New Delhi within 30 days from the date of receipt of this notice as to why:- (a) The declared value Rs. 6,90,25,291/- of the goods exported vide Shipping Bills No. ***** should not be rejected under Rule 8 of the Customs Valuation (Determination of Value of Exported Goods), Rules, 2007 and be reassessed to Rs. 3,42,39,898/- (as per Annexure 'A') under Rule 5 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007. (b) The drawback amount of Rs. 16,07,372/- claimed in the Shipping Bill No. ***** should not reduced to Rs. 777335.99 (as per Annexure 'A') based on the value worked out in terms of under Rule 5 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 (c) The goods being exported under the Shipping Bills No. ***** and seized vide Panchnama dated 09.05.2012 should not be confiscated under Section 113(d) and section 113(i) of the Customs Act, 1962. However, as the goods were released provisionally and are not physically available for confiscation, why fine in lieu of confiscation should not be imposed on the same under Section 125 of Customs Act, 196....
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....rom various supporting manufactured by the noticee in India or procured by the noticee from various supporting manufacturers in India. Such third party components were supplied directly by the supporting manufacturer to the port of export under ARE-1. Shipping bills for export of such components were filed by the noticee. Invoices in respect of such individual components were raised by the noticee, at the time of export, on proportionate basis (i.e., proportionate to the lump sum price agreed between the noticee and the foreign buyer). 5. All such shipments were covered under irrevocable letter of credit (herein after referred to as "LC"). Payment for such individual component of the boiler/sugar plant was made to the noticee based on the invoice generated by the noticee for such individual component on proportionate basis. Representative Copies of Bank Realization Certificates (herein after referred to as "BRC") along with the corresponding invoices have been annexed as Annexure-3." (emphasis supplied) 8. The appellant also explained in the reasons for the difference in the value declared in the shipping bills and ARE-1 in paragraphs A.16, A.17 and A.....
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.... that in the present case the noticee is entitled to duty drawback at FOB value of exports made. The same cannot be restricted to the value declared in the ARE-1 in terms of Note 4 of the Drawback Notification. Therefore, in the present case the duty drawback benefit to the noticee cannot be restricted to the ARE-1 value and the same should be made available to the noticee on FOB value of the export goods as declared in the subject shipping bills." 10. The appellant also pointed out that the goods were not liable to confiscation and penalty could not be imposed under section 114 of the Customs Act. 11. The Joint Commissioner passed an order dated 24.11.2015 confirming the proposals made in the show cause notice on the ground that the appellant had intentionally overvalued the goods that were exported with an intent to avail higher duty drawback benefit. The total declared value of Rs. 6,90,25,291/- was rejected under rule 8 of the 2007 Customs Valuation Rules and re-determined as Rs. 3,42,39,898/- under rule 5 of the 2007 Customs Valuation Rules. Consequently, the duty drawback benefit of Rs. 16,07,372/- accruing the appellant was reduced to Rs. 7,77,336/-. 12. The appe....
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....50(2) of the Customs Act, 1962 as to the truth of the contents mentioned in the shipping bills. However, value was found to be wrongly mentioned and the exporter by willfilly and knowingly made the declaration in violation of the provisions of Section 50(2) ibid and as such have rendered themselves liable to penalty under Section 114AA of the Customs Act, 1962." (emphasis supplied) 13. This appeal has been filed by the appellant to challenge the aforesaid order of the Commissioner (Appeals). 14. Shri B.L. Narasimhan, learned counsel for the appellant assisted by Shri Anurag Kapur, Ms. Osheeba Basir and Ms. Rubel Bareja made the following submissions: (i) The appellant is entitled to avail duty drawback on the FOB value of the goods declared in the shipping bills. Thus, the appellant had rightly availed duty drawback on the FOB value of the subject goods; (ii) The customs authorities have no power under law to change or re-determine the FOB value of the goods. The FOB value of the individual components declared by the appellant, therefore, could not have been rejected. In this connection, reliance has been placed on the following decisions of the Tri....
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....n 110 of the Customs Act on suspicion of overvaluation and potential excess duty drawback claim; (iii) The appellant accepted the mistake of over-valuation by a letter dated 15.04.2013 and asked for the determination of drawback on the All-Industry Rate value as the FOB value; (iv) The appellant, by letter dated 02.12.2013, also confirmed that the valuation was done on pro rata basis against partial shipments and residual value of other consignments; (v) The declared value was correctly rejected under rule 8 of the 2007 Customs Valuation Rules read with section 14 of the Customs Act and re-determined under rule 5 of the Customs Valuation Rules read with section 14 of the Customs Act; (vi) The seized goods were liable to confiscation under section 113 of the Customs Act; and (vii) The duty drawback claimed by the appellant was rejected for all the 16 shipping bills as an attempt was made by the appellant to improperly export the goods. 16. The submissions made by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 17. The issue that arises for considerati....
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....ever, in case the Delivery Date is delayed because of suspension being ordered by the OWNER or for other reasons attributable to the OWNER for more than 30 days, the Contract Price shall be subject to revision for the escalation to be mutually discussed and agreed between the OWNER and the SUPPLIER. 4.0 TERMS OF PAYMENT 4.1 The OWNER shall pay the Contract Price of US $20,150,000.-(US Dollar Twenty Million One Hundred Fifty Thousand Only) as under :- (i) 10% of the Contract Price shall be paid by direct transfer to SUPPLIER's Bank, as advance payment against submission of Proforma Invoice by the SUPPLIER along with Advance Payment Bank Guarantee for equivalent value as detailed in clause 5.1(i). (ii) Balance 90% of the Contract Price on prorata basis through an irrevocable Letter of Credit (as per the text agreed by both Parties), permitting payments at sight in New Delhi against CIF Bangkok/Laem Chabang Port (INCOTERMS 2000) shipment of Machinery & Equipment against submission of following documents:- (a) Signed Commercial Invoices (5 copies) (b) 2/3 set of clean original Bill of Lading (c) Certificate of Country of Or....
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....as buyers. c) As soon as the goods forming a container load are ready, export invoice is raised on approx pro-rata value basis in accordance with such split export order sale price break-up. d) Shipments to all above overseas buyers are covered by irrevocable LCs. Copies of each of following export LC and export order sale prices break-up settled with the overseas buyers are enclosed. Name of Overseas Buyers LC No. LC Amount (in USD) M/s. Kakira Sugar Ltd. 779-01-0100016-I 15,930,000 M/s. Thip Kamphaenghet Bio Energy Co. Ltd. 8587IL10003555 18,135,000 M/s. Compania Agricola Industrial Ingenio Palo Gordo MBI-2010/00460 10,671,750 e) Each LC permits partial shipments and payments on pro-rata basis against shipping documents from time to time. 3. Our export sale price (FOB) is higher than our purchase price (ARE-1 Value) inter-alia due to following main reasons:- a) Our Export price includes following costs and expenses in addition to the purchase price of goods:- i) Marketing Expenses. ii) Overseas agent's commission iii) Inland transportation cost iv) Pre-shipment (FO....
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....any specific reference to the 2007 Customs Valuation Rules for determining the quantum of drawback. The drawback is disbursed on account of export of goods and realization of export proceeds. Therefore, the 2007 Customs Valuation Rules for redetermination of value of subject goods cannot be applied and the appellant would be eligible to avail duty drawback on the FOB value indicated on the shipping bills. 25. The FOB value, internationally known as INCOTERM, is an accepted commercial term which determines the rights and liabilities of the buyer and seller in a transaction. In pursuance of the terms of the contract, if it is agreed upon between the parties to the contract that the goods shall be exported on the basis of the FOB value, then the liability of the exporter is limited to the point where the goods are put on board and thereafter it is on account of the importer who undertakes all costs and risks till the goods are transported to the destination port. The FOB value is the product of negotiations and deliberations between the parties to the contract, which value cannot be modified by any stranger to the contract by virtue of the principle of "privity of contract". The FO....
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....the transport of the goods upto the place of destination. However, the seller is not responsible for any risk which may occur during the transportation. If the goods are sold on CIF basis, the seller is responsible for delivery of the goods including the cost of transportation and transit insurance upto the port of delivery. What is common in all these cases is that it is the price agreed to between the buyer and the seller. 12. It is a universally known principle that a stranger to the contract cannot change the terms of contract. If the buyer and seller agree to a particular price on FOB basis, no stranger to the contract including the Customs Officers, DRI etc., have any locus standi to modify the FOB value. ***** 14. Generally speaking, the transaction value shall be the assessable value on which duty should be determined-whether it is import duty or export duty. However, there are circumstances under which the transaction value can be rejected by the Customs Officers and the value can be re-determined as per the Valuation Rules adopting other methods. What needs to be noted is that if the transaction value is rejected and the value is redetermined by....
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.... is a direct nexus between the drawback and other export incentives and the receipt of remittance. In fact, the drawback rules provide that if the remittance is not received, the drawback can be recovered. Similarly, in some schemes like Merchandise Export from India Schemes10, the exporter is required to apply for the scrip along with bank relieasing certificate showing that the remittance has been received. In other words, neither the transaction value (FOB value) nor the obligation on the exporter to realize remittance of the FOB value can be modified by any customs officer. Therefore, export incentives also need to be paid accordingly as per rules." (emphasis supplied) 28. This is what was also held by a division bench of the Tribunal in Mahir Fashions and the relevant portion of the order: "10. What needs to be noted is that there is a clear distinction between the transaction value (which cannot be altered by any stranger to the contract) and the value under section 14 and the Valuation Rules (which can be determined by the proper officer). If the proper officer rejects the transaction value and determines the assessable value through some other methods s....