TaxTMI 
TaxTMI 
2025 (4) TMI 1838
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....estigators by M/s Coastal Energy Pvt Ltd [CEPL] importing coal and, of which, he happened to be a Director. 2. What anyone could see was plain enough: coal sourced from Indonesia for delivery at ports in India to be used by thermal energy producers who contracted with M/s Coastal Energy Pvt Ltd either directly or in tripartite agreements involving M/s Minerals and Metals Trading Corporation (MMTC) Ltd as successful bidder in supply tenders. What bewildered investigators was that both the discharge of liability to duties of customs despite availability of exemptions, accorded to goods imported from Indonesia by notification [notification no. 153/2009-Cus dated 31st December 2009 & 46/2011-Cus dated 1st June 2011] under Customs Act, 1962 in pursuance of ASEAN India Free Trade Area (AIFTA) agreement and the cascading of costs, attendant upon arranging the supply against bilateral contracts structured through back-to-back agreement involving a 'related person' based outside India or with the 'related person' roped in to fulfill supply against the tripartite agreements, owing to superfluous channel elongation, were so puzzling as to cause the adjudicating authority, vested with unque....
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....wer producers but of lesser 'calorific value', was 'shovelled down' into acceptance by substituting the 'certificate of sampling and analysis (CoSA)' issued at load port with another, at or near the same time, by an 'independent inspection agency (IIA)' other than the one designated in the sole, according to the investigation, valid and genuine contract between Indonesian coal suppliers and the intermediary entities which, in the present dispute, are M/s Coal and Oil LLC Company, Dubai [CNO LL] and M/s Coal and Oil DMCC Company, Dubai [CNO DM] The 'certificate of sampling and analysis (CoSA)' reports the parameters for evaluation of quality of coal - which has the sole saving grace of being endowed with capacity to generate heat for industrial use - with reference to standards that, in the present instance, is of the 'American Society of Testing and Materials (ASTM)' for 'gross calorific value (GCV)' by proximate analysis. 4. It was, therefore, posited that the 'mark up' of 25% in the aggregate value of imports by charging 'contracted value' from thermal power producers for supplying 'steam coal' of lesser 'latent heat capacity', procured at 'real cost' from Indonesian suppliers....
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....on by resort to 'surrogate value', enablement of recourse to re-determination and, thereby, to enablement of passage to the punitive machinery in the scheme of valuation, was just not possible and, without that, re-appraisal would not serve the purpose. That, in circumstances of recourse to re-assessment, resort to 'surrogate value' sufficing for invoking of section 111(m) of Customs Act, 1962 is another controversy which needs dealing with only if 'surrogate value' had been adopted in the impugned order but by resort to determination of 'actual' transaction value as 'end game' after treading that route seems to have been purposed for avoiding that particular pitfall. Prima facie, it appears that the three different, and mutually exclusive, aspects of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, each drawing distinct authority from the umbrella composition of section 14 of Customs Act, 1962, have been grafted on to each other. Thus has the problem of restoring jurisdiction vis-à-vis non-prohibited goods cleared on payment of duty been transformed into a puzzle on valuation that ended up assembled, by leveraging relationship between two entities f....
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....ess of the picture emanating therefrom. 7. To set the ground for rejection of declared value, it has been suggested that for the goods, of quality lower than contracted, two 'certificate of sampling and analysis (CoSA)' from two different 'independent inspection agencies (IIA) were in existence with one, furnished to customs authorities and the intended user, purporting to conform to contractual specifications for obtaining contractually obligated payment and the other, reporting the actual specifications, for determination of actual purchase price, furnished by Indonesian suppliers to their contracting recipients having been kept below the radar, along with 'certificate of origin' that would have revealed 'export value', to forestall customs scrutiny by disassociating shipping documents from the consignment. On this foundation was erected the discrepancy of the two measures of 'gross calorific value (GCV)', between that in the 'certificate of sampling analysis (CoSA)' presented on import and in 'certificate of sampling analysis (CoSA)' used for finalization of payment due to Indonesian suppliers, for enunciating that price in invoice issued by the ostensible supplier to the imp....
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....sting 9. The notice proposed rejection of declared value as the second 'certificate of sampling and analysis (CoSA)', presented before customs authorities and, though, purportedly evidencing the specifications in the contract entered into with thermal power generating companies, represented nothing but 'gross calorific value (GCV) on 'air dried basis (ADB)' in the first 'certificate of sampling and analysis (CoSA)' when converted from 'gross calorific value (GCV)' on 'as received basis (ARB)' using formula approved by American Society for Testing and Materials (ASTM). With the contracts of the two sellers, M/s Coal and Oil Company, DMCC Dubai and M/s Coal and Oil Company LLC, Dubai, with owner as suppliers of 'steam coal' taken on board from their insertion in the channel, it was sought to be established that the coal sourced by them, and of poorer quality, was the very same goods imported and impugned in the show cause notice. It was further sought to be established that the payment to Indonesian suppliers, after adjustment of base price for 'gross calorific value (GCV)', by the two Dubai entities represented the actual cost of the impugned goods and, for adoption of that as th....
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....o scope for deriving extra-contextual authority to 'relate' any, and whichever, at the whims of a 'proper officer' from this particular provision which qualifies the 'deeming' this: '(2) For the purposes of these rules, persons shall be deemed to be "related" only if - xxx' in rule 2 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, more so, as the absence of 'transitive relationship' therein taints any finding that ventures upon setting out to examine the link between anyone other than buyer and seller with lack of jurisdiction. The finding of any relationship of the buyer or seller other than with each other is nothing but unauthoritative determination that has no significance in the impugned proceedings. 11. The next 'jigsaw' piece that the adjudicating authority has put mind to is the American Society of Test and Materials (ASTM) and, in particular, to the relationship between 'gross calorific value (GCV)' on 'as received basis (ARB)' and on 'air dried basis (ADB)' as it is only with a tenable mutuality that the foundation of the allegation may have some semblance of being on firm ground. Without that, and in the absence of amena....
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....G for the coal said to have been supplied for eventual consumption in India and enhanced by what he considered to be a reasonable return by industry standards. This computation presumes that the coal was indeed procured through these parallel transactions, that credence should be placed on the internationally acclaimed renown of M/s IMR Metallurgical Resource AG and that there exists a verifiable average industry. Our findings on the contravention of the mandates of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 that discredits the adoption of the base price for computation is on record. We find no justification for the deployment of return of 3.5% as the enhancement factor in the absence of any verifiable source of that revelation; a revelation that suffers from the ignominy of mendacity that the same industry has been tarred with for discarding value of contemporaneous imports. The base price and margin of profit fail the test of law and veracity. The conversion of the 'gross calorific value' undertaken in the adjudication order is claimed to be nothing other than the loading of mineral content and moisture content on the 'mineral moisture free' resu....
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....onesian supplier is a leap off a cliff and not a leap over one lip of a chasm of the other. 12. The questions that bedevilled the adjudicating authority thus '5.6.3 Given the observed escalation in calorific value and the subsequent increase in the value of coal, several unanswered questions linger in my mind during the data analysis. The most immediate queries include: - * Which of the two sets of Certificates of Sampling & Analysis of Coal (COSA) are authentic and true? * If either one of the Certificates of Sampling & Analysis of Coal (COSA) is incorrect, what was the reason they have been used in the present deal? * If the Certificates of Sampling & Analysis of Coal (COSA) relied on by Coal supplier is assumed to be incorrect, why would an internationally reputed company underwrite the Gross Calorific Value of its coal and consequently also undervalue its price? * When CNO group purchased the said coal from Coal supplier at a much lesser value, why did it not sell the coal directly to its own holding company M/s Coastal Energy Pvt. Ltd., Chennai, at the lower price? * Why did Shri Buhari, Director of M/s Coastal Energy Pv....
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.... carried out by the intermediaries with the CEPL and 1st stage traders.' in the impugned order. We do not wish to dignify the remarks of judicially subordinate authorities masquerading as reasons adduced for discard of binding precedent in decisions of the Tribunal save to observe that the finding of '5.7.11 The Noticees has stated that the Hon'ble Tribunal in the cases of : (a) Knowledge Infrastructure Systems Private Limited vs Additional Director General (b) Commissioner Customs (Import), NS-III, JNCH, Raigad Versus Adani Power Maharashtra Ltd and (c) Commissioner of Customs (Import) V/s M/s Maharashtra Eastern Grid Power Transmission Company Ltd. (MEGPTCL) had very clearly held that such documents cannot be accepted as evidence in absence of required certification under 138C (4) of Customs Act 1962 and accordingly such evidences were not admissible in the present case as well. Since the existence of 1st/2nd stage dealers, coal producers, intermediaries and transaction between them are Undeniable facts accepted by the Noticees, the issue of non-admissibility of evidence will not affect the charges against Noticees on thi....
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....orter themselves had confirmed the fact of 1st stage traders being the shipper. The invoices issued by 1st stage traders and the corresponding contracts with intermediaries confirmed that the invoices for the coal shipped by the 1st stage traders, for export to India had been routed through the intermediaries. 5.9.11 In the overall context the enhancement of value by the intermediary does not appear to be on account of any bona fide value addition activity on their part, neither does it appear to be commercially prudent or justified or in the course of ordinary commerce. The artificial inflation of value at the hands of the intermediary firms is apparently a mechanism to siphon off money out of India, under the guise of import remittance and price does not appear to be the sole consideration for the sale.' in the impugned order. 14. Learned Senior Counsel contended that penalty has been imposed on the appellant under section 112 of Customs Act, 1962 and section 114AA of Customs Act,1962 on a finding which is mere indulgence in calumny and without any regard for the stipulations in the provisions invoked for fastening the detriments. It was submitted by him, and by co....
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....alties on the appellant merely from being a beneficiary as both section 112 of Customs Act, 1962 and section 114AA of Customs Act, 1962 stipulate circumstances of real contribution. That conclusion rests upon the finding that overvaluation stands proven by adoption of prices at which goods had been procured by the supplier from the producers with the adoption itself justified on the ground that price charged to the buyer was higher than price paid for the coal which is logic in permanent circular loop. The penalties are justifiable only to the extent that some act of omission or commission on the part of the appellant gave rise to circumstances in which the goods were held as liable for confiscation. Goods were held to have been imported in breach of section 111(m) of Customs Act, 1962 from redetermination of value by relying upon Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It is not on record that the appellant was associated with the minutiae of negotiation and structuring of the contracts with power producers, intermediary agents and coal producers. Nor is there any allegation that he was connected with filing of impugned bills of entry. 17. Per ....
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.... clearly within the ambit of rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Beyond that, recourse to rule 3 therein is not tenable for arriving at assessable value. 19. The impugned notice has made no suggestion, let alone offered evidence, of flowback to the importers to warrant reduction in declared value. Nor is there a suggestion in the grounds of appeal that crucial evidence of such flowback has been overlooked by the adjudicating authority. Recourse to rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, in the absence of evidence suggesting flowback, to depress the price is not sustainable. The recourse, by adjudicating authority without compliance of mandate, in rule 3(4) after discard of declared price in circumstances envisaged in rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, of ascertaining 'transaction value' of 'identical' or 'similar' goods, of which there is no whisper in the show cause notice, let alone of 'computed' value or 'deductive' value set out in rule 7 and rule 8 therein, and failure, thereby, to carry through the consequence of discard under rule 1....
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.... sale or offer for sale; (b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with rules made in this behalf XXXXXXX' in section 14, as at the time of enactment of Customs Act, 1962, and before some form of semblance to the extant scheme of valuation was brought about by Customs (Amendment) Act, 1988 with substitution by '14(1) For the purposes of the Indian Tariff Act, 1934, or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the buyer and seller have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. XXXXXXX....