TaxTMI 
TaxTMI 
2026 (4) TMI 531
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....e dated 01.06.2017 was issued to the noticee (herein appellants) on the following grounds: (i) For contravention of the provisions of section 7 & 8 of FEMA 1999 read with paras 3, 9 & 13 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000, issued in exercise of the powers conferred by clause (a) of sub-section (1) and sub-section (3) of section 7 and sub-section 2 of section 47 of FEMA 1999, against (1) M/s Salitho Ores Pvt. Ltd. (Noticee No.1) to the extent of US$ 9,83,721 (Equivalent to 4,32,83,724/-), for failing to furnish the true and correct material particulars, including the amount representing the full export value of the goods exported, in the relevant export documents covering one export consignment and further, failing to take all reasonable steps to realize said export proceeds amounting to US$ 983,721), which represented the quantum of amount under-invoiced in the exports made by M/s Salitho Ores Pvt. Ltd. which were due to be received by them in India, as being the part of the full export value of the goods, and further for doing or refraining from doing anything, or taking, or refraining from taking any action to ensure the realiz....
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....rted. The actual transactions value was reduced from the negotiated value to the extent of commission charges paid to an overseas agent named M/s Artmuse Ltd., Hong Kong. Based on the above information, investigation against the noticee company was taken up by the Goa Zonal office of the Directorate of Enforcement under the Provisions of Foreign Exchange Management Act, 1999. During the investigation, Statement of Shri Mukesh M. Saglani, Director of the Noticee Company was recorded on 11.12.2015 under Section 37 of FEMA, 1999, wherein he stated that he was appointed as a Director in M/s Salitho Ores Pvt. Ltd. in December 2012. Shri Arjun Solgaoncar was the Director who was looking after the mines which were operational before the closure of the mining in the year 2012. Shri Arjun Salgaocar also used to look after the exports of iron ore consignments to the foreign buyers. Noticee Company had exported 1 export consignment of iron ore during the year 2011. The commission was paid in the said shipment of iron ore. The total commission paid by the Noticee Company was US $ 9,83,721. The Noticee Company appointed M/s Artmuse Ltd., Hong Kong as agent for helping them in facilitating th....
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.... consignments, whether it was paid directly or paid after the realization and no Member or Director of the Noticee Company holds any shares in M/s Artmuse Ltd. Hong Kong. Statement of Shri Arjun Solgaoncar, Director of Noticee Company was recorded under Section 37 of FEMA 1999 on 06.04.2016. In his statement he stated that Noticee Company has a lease of iron ore in Pale. Goa. It deals in procurement, production, processing and transport of iron ore. He was one of the Director of the Noticee Company during the period 2006 to 2012. He was looking after the daily production, quality assessment processing and transport to the port for exports that all the exports related meetings and negotiations were done by his father Shri Anil Solgaoncar. The exports made by the Noticee Company during the period 2008-11 were handled by his father, late Shri Anil Solgaoncar. His father late Shri Anil Solgaoncar was the owner of the group companies and major shareholder of the Noticee Company at that time. During the period 2008-11, all the export related price negotiations were done by his father late Shri Anil Solgaoncar and he was nowhere involved in the process of price negotiations. During ....
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....acts:- (i) M/s Salitho Ores Pvt Ltd was a group Company of the Salgaocar Group of companies and the company was dealing in the mining of iron ore as well as the sale of iron ore to foreign as well domestic buyers. During the period 2008-2012, Shri Arjun Salgaocar was the Director of M/s Salitho Ores Pvt Ltd. During October 2010, the noticee company had exported one export consignment of iron ore involving payment of commission to their overseas agent viz M/s Artmuse Ltd, Hong Kong. As per the instruction of the noticee company commission amounting to US$ 9,83,721.00 was paid by M/s Joyking Global Ltd., Hong Kong to the said overseas agent. The commission amount was paid from the negotiated price of the goods exported. (iii) The aforesaid commission paid to the M/s Artmuse Ltd., Hong Kong by the overseas buyer should have formed a part of the FOB value declared in the GR-I Form, so as to render the same an integral part of the export proceeds due to be realized by the noticee company in their capacity as the exporter. This commission amount was not included as a part of the FOB value, but the same was diverted by the noticee company through their aforesaid overseas....
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....he Company and the only other Director during the said period was a Nominee Director. The noticee Director, Shri Arjun Salgaocar was in charge of and was responsible to the noticee Company for its conduct of business. From the aforesaid facts, it appeared that the noticee company, M/s Salitho Ores Pvt. Ltd. and its noticee Director, Shri Arjun Salgaocar, had contravened the following provisions of FEMA 1999 and also the allied Rules and Regulations formulated thereunder, in respect of their export of iron made to their overseas buyers:- (i) By failing to furnish the true and correct material particulars including the amount representing the full export value of the goods exported in the relevant export documents covering one export consignment and further for failing to take all reasonable steps to realize said Export proceeds amounting to US$ 9,83,721, which represented the quantum of amount under-invoiced in the export made by M/s Salitho Ores Pvt. Ltd, which were due to be received by them in India, as being the port of the full export value of the goods, and further for doing or refraining from doing anything or taking or refraining from taking any action to ensure ....
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....ing the opportunity of hearing to both the sides, Ld. Adjudicating Authority with respect to first charge pertaining to non-declaration of true value of the goods exported/under valuation of goods export and transfer of amount undervalued in the guise of commission to overseas agents resulting in the non-repatriation of the undervalue amount to India and failure to take effective step to realize the export proceeds diverted in the guise of commission etc. in contravention of the provision of Section 7 & 8 of FEMA r.w. Regulation 3, 9 & 19 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000 to the extent of US$ 9,83,721/-(equivalent to Rs. 4,32,83,724/-) held that this charge stands proved. Accordingly, penalty of Rs. 1 cr was imposed on the M/s Salitho Pvt. Ltd. on account of non-repatriation of the amounts under-valued to the extent of US$ 9,83,721/-. The second charge against the Appellants for failure to repatriate the full value of export goods totaling the US$ 4,12,692.77/- (equivalent to Rs. 1,81,58,482/-) under one consignment of export which were found less than the final export value of the goods repatriated in term of Bank realization certifi....
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....on in the Show Cause Notice, or in the Complaint filed by the Respondent to show that the payment of commission to the Agent had been made by the Appellants in any manner or form. In fact, it is the Respondent's own case that the payment of commission to the Agent was not made by the Appellants, but by the overseas buyers themselves. Ld. Counsel for respondent ED contended that the payment to the said commission agent was made by the importer at the instance of the appellants, however, this particular amount is intentionally not reflected in the Invoice to escape from the additional Custom duties on the said amount. Without going into the fact that whether the commission agent was engaged by the appellants, or the importer, it is an admitted fact that the commission was given by the foreign importer to the said commission agent, but not by the present appellants. (ii) Whether Mr. Mukesh Saglani had any personal knowledge as to the affairs of the Appellants from 2008 to 2012? 5. As per the contention of Ld. Counsel for the appellants, the Show- Cause Notice and the Impugned Order, mainly relied upon the statements of Mr. Mukesh Saglani to contend and conclude t....
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....ed and repatriated by the Appellant, and the Impugned Order deserves to be set aside on this ground. He pointed out that even in the statements of Mr. Mukesh Saglani, which have been relied upon in the SCN as well as the Impugned Order, he has categorically stated that the Appellants have not made any payment to the Agent, and the commission was paid to the Agent directly by the overseas buyers. Therefore, it is uncontroverted that the Appellants have not paid any commission to the overseas Agent. In support of his contention, he pointed out Para 3, at Page 8 of the Annexure V in Volume III of the appeal, wherein it is mentioned that- the statement of Shri Mukesh Saglani, Director of the Noticee Company is mentioned wherein he inter alia stated that he was appointed as a Director in M/s Salitho Ores Pvt. Ltd. in December 2012. Accordingly, he contended that any personal knowledge regarding the appointment of commission agent, prior to his appointment does not arise. Ld. Counsel for the Respondent ED admitted the aforesaid content of the complaint being matter of record, but he stressed that there is nothing on record to doubt the facts disclosed by Mr. Mukesh Saglani being in hi....
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....r M/s Joyking Global Ltd.. After hearing the rival submissions, and perusal of documents there is nothing on record that Certificate of analysis of the iron content in the consignment was analysed by M/s Artmuse Ltd. at the instance of appellant company before issuing GR-I. Appellant company has not claimed any Certificate of analysis charges in the GR-I or the Final Invoice. Certificate of analysis is not filed by either party. In absence of the same, we are unable to hold that M/s Artmuse Ltd. was engaged by the exporter/appellant company to issue the Certificate of Analysis. Accordingly, in absence of the said claim for Certification, appellant company is not entitled to get the reimbursement of the same out of the realised remittance of export consignment. On the other hand, we can safely deduce that commission was paid to M/s Artmuse Ltd. by the importer M/s Joyking Global Ltd., as per clause 10 of the agreement, which states- "Buyer may, at Buyer's expense, have its representative(s) present at the time of such determination." Now, we will decide the legal issues one by one in the following paras. Legal Issues: (i) Whether Section 127J of Customs Act prohibi....
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....r law for the time being in force. 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." Ld. Counsel for the appellant pointed out that the facts in Khazana's case are identical to the facts in the present Appeals, and the same is binding upon the Respondent as well as this Tribunal, and the prohibition under Section 127J of the Customs Act on reopening of proceedings under FEMA is applicable to the present Appeals. It is settled law that a court or tribunal ought to follow the conclusion reached by another bench of the same court or tribunal on identical facts. A decision of a tribunal is binding on all benches of the tribunal and cannot be disregarded if the facts involved are same and not differentiable. He stressed that on the contrary, the decisions relied upon by the Respondent ED are not applicable or binding to the facts of the present appeals. The Respondent has relied upon the following judgments to contend that the Appellant cannot be granted the benefit of the prohibition under Section 127J of the Customs Act: (i) Vinod M. Chitalia v. Union of India, 2012 SCC OnLi....
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....lement Commission was neither argued, nor decided in any of the cases. It is settled law that a decision that is not express, and proceeds without consideration of an issue raised by the parties thereto cannot be deemed to have a binding effect on that issue. Therefore, the judgment of this Hon'ble Tribunal in Khazana is a binding precedent on the issue of maintainability of present proceedings, and the Impugned Order is liable to be set aside on this ground alone. On the other hand, Ld. Counsel for the respondent ED argued that the Respondent ED is not solely relying upon the order passed by the Settlement Commission, but also on the independent evidence collected during investigation/inquiry of the case, i.e. statement of Sh. Mukesh Saglani; concealment of fact regarding payment made to the Commission agent in the invoice; and the payment to the commission agent indirectly through the importer M/s Joyking Global Ltd. He stressed that this particular evidence is sufficient for imposing the penalty on the appellants. After hearing the rival submissions, we have given our consideration to the same. The Respondent ED is empowered to impose the penalty on the basis of indepe....
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....toms (2024) 19 Centax 72 (Tri.-Hyd), 22, wherein it was held that commissions paid to an agent cannot be added for the purpose of determining the value in case of exports, even if it was paid by the exporter. In Kutch Salt, the Hon'ble CESTAT was dealing with an identical case of export of iron ore, where the Customs department alleged that the commission paid by an overseas buyer to the overseas agent was liable to be added in the 'transaction value' declared by the export. Rejecting this contention, the CESTAT held as under: "24. As is evident from the proviso to sub-section (1) of Section 14 and the Export Valuation Rules, unlike in case of import valuation, Commissions paid cannot be added for the purpose of determining the value in case of exports even if it was paid by the exporter. 27. If, indeed, the price was not the sole consideration for sale, the transaction value can be rejected under Rule 8 of the Export Valuation Rules and then, it must be re-determined sequentially through Rules 4 to 6. Rule 4 provides for determining the value based on the transaction value of goods of like kind and quality exported at or about the same time. Rule 5 pr....
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.... buyers should have formed a part of the FOB value declared in the GR-I Form, so as to render the same an integral part of the export proceeds due to be realized by the appellant in their capacity as the exporter, however, the appellant did not include this amount and diverted the same through aforesaid overseas buyers in guise of payment of commission. The said commission amounts represented an integral part of the FOB value and should have been repatriated to India, as being part of export proceeds, but the appellant diverted the same in form of commission. Also, the appellant has not even cited any reason for the non-inclusion of the commission component in the GR-I Forms as adduced by the appellant before their Authorized Dealer. Further, the appellant neither declared the payment against the commission in the relevant GR-I Form, nor any agreement written understanding between the exporter and/or the beneficiary of commission existed on record and also no such agreement was brought to the notice of the authorized dealer by the appellant. He argued that the contention regarding "Full Export Value" being to defined under FEMA or its Regulations is also misplaced, as the provision....
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.... Counsel for the appellant submitted that the Impugned Order records that the Appellants have contravened Sections 7 & Section 8 of FEMA by not declaring and repatriating the amount of commission paid to the Agent by the overseas buyer of the Appellant's export goods. Sections 7 & 8 of FEMA, however, do not provide for inclusion of any amount in the export value beyond the invoice value of the goods. Section 7(1) of FEMA requires an exporter to declare the 'full export value of goods; and when the full export value of goods' is not ascertainable, the exporter is required to declare the amount that the exporter expects to receive on sale of goods outside India. He pointed out that in the present case, the amount that the Appellants expect to receive would be the price payable by the buyer for the iron ore, and not the commission amount payable to the overseas Agent. He contended that similarly, the obligation to repatriate foreign exchange under Section 8 of FEMA is limited only to the foreign exchange that is due or has accrued to the exporter, in such manner as may be specified. Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of....
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....of realising the amount of commission does not arise, as it will be payable to the foreign based commission agent either directly by the Indian exporter, or indirectly through foreign importer. Hence, we do not agree with the contention of Ld. Counsel for the respondent ED, as there is no loss of foreign exchange and question of repatriating the same does not arise. We agree with the contention of Ld. Counsel for the appellants, and accordingly, this issue is decided in favour of the appellants. (iv) Whether the Master Circular is applicable when no amount of commission has been paid by the exporter, and when it is a matter of record that the commission amount has been paid by the overseas buyer to the Agent directly? 9. The Impugned Order has held that the Appellants were liable to comply with the requirements stipulated in Paragraph C.26 of RBI Master Circular No.09/2009-10 dated 01.07.2009 ("Master Circular"), which reads as follows. "Banks may allow payment of commission, either by remittances or by deduction from invoice value, on application submitted by the exporter. The remittances on agency commission may be allowed subject to the following conditions:....
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....unsel for the appellant contended that the Export Regulations have been enacted in exercise of powers conferred by Section 7 of FEMA. Similarly worded as Section 7 of FEMA, Regulation 3 of the Export Regulations requires an exporter to furnish a declaration containing the true and correct amount representing the full export value of goods. Where the full export value is unascertainable, then the exporter shall declare the amount that the exporter expects to receive on sale of goods. As explained above, the amount of commission paid to the overseas Agent by the overseas buyer was neither part of the export value of the iron ore, nor was expected to be received by the Appellants for the sale of iron ore. Therefore, the Appellants have not contravened Regulation 3 of the Export Regulations. Ld. Counsel for the appellant argued that Regulation 9 of the Export Regulation concerns the time period within which the 'full export value of goods' must be realised and repatriated. The commission amount does not form part of full export value of goods exported by the Appellants; and therefore, the Appellants cannot be said to have contravened Regulation 9 of the Export Regulations. ....
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....he relevant time. However, during the recording of his statement, no questions as to the circumstances in which commission was paid to the Agent, the amount of such commission, the purported arrangement with the overseas buyers, etc. were put to Mr. Arjun Salgaocar. These questions were instead put to Mr. Mukesh Saglani, who admittedly was not a director of the Appellants at the relevant time. Ld. Counsel for the appellant argued that the lack of credibility in the Respondent's case is apparent from the fact that on the one hand, statement of a person who had no personal knowledge of the transactions in question has been taken at face value and relied upon without further corroboration; but the person who has been held liable for the transactions in question as being 'in-charge' of the Appellants was not even asked to provide any statement or evidence as to the nature of the transactions. In these circumstances, it was highly erroneous for the Respondent to selectively rely upon the statement of Mr. Mukesh Saglani, while conveniently and deliberately omitting to elicit relevant information from Mr. Arjun Salgaocar. Accordingly, he stressed that Respondent ED's selec....
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....d. Counsel for the appellant that there is nothing on record to show his involvement in indirect payment of commission and thus, neither the appellants or any other person is liable. 13. Even otherwise, if we presume the allegations made by respondent ED, as true & correct, even then, the question of imposing any penalty does not arise, as there is no loss of foreign exchange, as the foreign based commission agent was entitled to receive the commission either from the appellant directly, or from the foreign based importer. Hence, no loss of foreign exchange has been caused to the exchequer as the commission amount, even if repatriated, would have to be paid to the overseas Agent, and was never due or payable to the Appellant. The entire remittances that were supposed to be realized in India, i.e., the invoice value of the iron ore exported by the Appellants, have admittedly been realized in full and have remained in India. It is not the Respondent's case that the commission amount was not required to go to the Agent, but that the commission ought to have been repatriated into India and then paid to the overseas Agent by the Appellant. The Appellants did not stand to make any....