TMI Blog2022 (7) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... earing on the relationship aspect. It is not in dispute that M V Rabade signed the contract on behalf of APML in the capacity of a Director and he signed the contract on behalf of EIF as an authorised representative. The authorization given to M V Rabade by EIF has not been challenged in the show cause notice and as such this will not advance the case of the department on the relationship aspect between APML/APRL and EIF. Even otherwise, there is no variation in the ultimate price paid by APML/APRL to EIF from the agreed contractual price and these contracts were arrived at through international competitive bidding process - Learned senior counsel for the respondent also submitted that when clause (v) of rule 2 (2) was not mentioned in the show cause notice for establishing the relationship, it is not open to the appellant to place reliance on this rule to establish that the relationship stood established - there is substance in this submission made by the learned senior counsel for the respondent. Tender Process - Scope of SCN - HELD THAT:- The adjudicating authority correctly appreciated that the letter of credit was opened by APML and APRL in favour of EIF in terms of Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire contract was awarded on a turnkey basis and a lumpsum price was fixed for the entire contract as a whole. The execution of another contract by EIF or any of the consortium partners would, therefore, have no relevance so far as APML and APRL are concerned. It is also not the case of the department that APML and APRL paid any amount over and above the agreed contract value. The said contract was for design, engineering, manufacturing, procurements, packing forwarding, supply, transportation, receipt, unloading, installation, erection, testing, commission and performance guarantee test and it was not merely a supply contract - The amount received by each consortium member or the amount paid by the consortium members to the vendors or service providers would not be relevant for APML or APRL. Even if it is assumed that the service and/or testing was to be done by the Original Equipment Manufacturers, as has been pointed out, the same will not change the nature of the contract awarded by APML and APRL to SME/EIF in as much as the responsibility to execute the contract would be that of SME/EIF only. It can, therefore, safely be concluded that APML and APRL had awarded contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Original Equipment Manufacturers. Invoices issued under two different sets of contractual obligation cannot be compared and relied upon to determine the value. Rule 11, therefore, has no application to the facts of the present case - the revenue has sought to invoke rule 9 by placing reliance on payments made by EIF to different vendors and/or manufacturers of the goods. The said evidence has been held to be not conclusive, as the revenue has considered the payment made through Axis Bank and Bank of Baroda only. The redetermination of the value of the goods under rule 4/9 of the Valuation Rules, cannot, therefore, be sustained and the adjudicating authority committed no illegality in rejecting this allegation made in the show cause notice. Incomplete Investigation - HELD THAT:- While the documents were received from Axis Bank and Bank of Baroda, the relied upon document at page 689 shows the name of Standard Chartered Bank as one of the other banks used by EIF. The same therefore, belies the case of the department that ORTTs and back-to-back invoices received from Bank of Baroda and Axis Bank are complete remittances made by EIF to Original Equipment Manufacturers. Merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PML is a 100% subsidiary of Adani Power Limited and is engaged in operating Thermal Power Plants. There was an acute shortage of power in the State of Maharashtra and in order to overcome this deficit of approximately 27.4% and meet the future requirements, the Government of Maharashtra encouraged private sector to set up power generating stations without the requirement of a license under The Electricity Act, 2003. APML was one such company that came forward to set up power generation plants in the State of Maharashtra. It acquired land in village Tiroda in the State of Maharashtra to develop a green field Thermal Power Plant. This power plant was originally envisaged to be of 1980 MW capacity, but the capacity was later on increased to 3300 MW. The project was to be implemented in three phases consisting of 5 Units. Phase I was for a total capacity of 2 x 660 MW, and Phase II was for a capacity of 1 x 660 MW. While Phase I consisted of Units 1 and 2, Phase II consisted of Unit 3. Phase III consisted of Units 4 and 5, each of 1 x 660 MW. The aggregate capacity of the entire plant, therefore, comes to 3300 MW. The dispute in the present appeal relates to the imports made by APML fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ids to source the BTG and related equipments from reputed foreign manufacturer/supplier. A Notice Inviting Tender was, therefore, issued on 08.01.2008. The bid of M/s. Sichuan Machinery Equipment Export and Import Co. Limited, China [SCMEC] was found to be the lowest and most competitive and so the same was accepted and consequently APML entered into a contract with SCMEC on 28.11.2008 for supply of BTG and related equipments at a lumpsum value of USD 999.90 Million. Thereafter, APML applied for registration of the entire contract under Chapter Heading 98.01 of the Customs Tariff Act, 1985 [Tariff Act] as the same was in relation to setting up of mega power project. This registration of the contract allowed the imported goods to be cleared under NIL rate of duty. The entire contract for supply of BTG equipment and machinery for Phases I II (Units 1, 2 3) entered between APML SCMEC was registered on 06.01.2010 with the Customs House at Nhava Sheva in terms of Regulation Nos.4 and 5 of the Project Import Regulations, 1986 [PIR]. 10. After the registration of the contract with respect to Unit 1 2, an essentiality Certificate dated 18.12.2009 addressed to the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificates describe the equipments that were to be imported. 15. In the meantime the name of SME was changed to M/s. Electrogen Infra FZE, UAE [EIF] with effect from 04.01.2010. It needs to be noted that EIF became a 100% subsidiary of M/s. Electrogen Infra Holding Private Limited, Mauritius [EIH] w.e.f. 29.03.2010. 16. Upon import of the goods under the said supply contract dated 05.11.2009, APML filed Bills of Entry which were assessed provisionally and subject to reconciliation of the contract registered under the 2009 Regulations for Phase III (Units 4 5). 17. The total project cost on the date of financial closure of Phase III was Rs.6,290 crores per MW, as the cost per MW was Rs. 4.76 crores. According to APML, the project cost was in consonance with the Central Electricity Regulatory Commission (Terms and Condition of the Tariff) Regulation, 2009 [2009 Regulation] and to support this connection, reliance has been placed on an order dated 04.06.2012 passed by the Central Electricity Regulatory Commission [CERC]. Annexure-II of the Order provides the benchmark fixed for the per MW cost in setting up a similar power project at Rs.5.01 crores for two Units and Rs.5.37 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found to be the lowest. From the bid documents submitted by APRL in this appeal, it appears that the total bid amount of SME led consortium was USD 1.2 Billion covering BTG supply, BTG services as well as BOP supply and services. It also transpires from the supply contract dated 02.04.2010 entered between APRL and EIF that out of the total bid amount, the contract for USD 790 Million was awarded to EIF towards supply of BTG and related equipment. The balance amount was divided, at the instance of EIF, into BTG services, BOP supply and services. The contract was thereafter registered under Chapter Heading 98.01 of the Tariff Act to seek the benefit of NIL rate of duty. An essentiality certificate dated 01.06.2010 was issued by the Principal Secretary certifying the goods that were to be imported by APRL for the project. Consequently, the goods were imported on the basis of a registered contract dated 02.04.2010 entered between APRL and EIF. 22. The total project cost on the date of financial closure was Rs.7,030 crores since the per MW cost was stated to be Rs.5.33 crores. According to APRL, the project cost was in consonance with the 2009 Regulations and to support this conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PML and APRL appear to have indulged in Trade Based Money Laundering by trade mis-pricing by routing invoice through an intermediary invoicing agent (EIF) in the UAE-a front company of the Adani Group rum and controlled by one of the Adani brothers and assisted by ex-employees of the Adani Group. EIF in UAE appears to have been created as a front for siphoning off of money under the guise of outward remittances for over-valued imports, by indulging in invoice inflating. xxxxxxxxxx 17.3 The relationship between EIF and APML and APRL has been established during the investigation. EIF is owned and controlled by Shri Vinod Shantilal Adani @ Vinod Shantilal Shah through M/s Electrogen Infra Holding Pvt. Ltd., Mauritius. Shri Vinod Adani is shareholder in flag ship company of Adani Group viz. Adani Enterprises Limited (AEL). AEL owns and controls APML and APRL through its subsidiary company M/s Adani Power Limited. 17.4 Investigation in the present case has clearly revealed that while the critical BTG and its auxiliaries from SEC were sourced and shipped directly to India, the OEM invoices were routed through the above EIF i.e. the intermediary invoicing agent for inflating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 367,040,000 17.5 The aggregate value of all the contracts between EIF and SEC (as detailed above) put together work out to USD 367,040,000. Investigation has brought out the fact that goods shipped by SEC to APML and APRL were invoiced by EIF, the UAE based intermediary invoicing agent to APML and APRL. Investigation have been able to clearly identify consignments shipped by SEC to APML and APRL, which were cleared on the strength of EIF's invoices by APML and APRL upon importation in India on the basis of combined analysis of invoice numbers dates, shippers/exporters as appearing in the Bills of Lading/COO certificates and AORs/ORTTs showing the name of SEC as the beneficiary. The aggregate value of shipments invoiced by EIF to APML and APRL, wherein the actual shipper is SEC works out to USD 633,562,594 (APML:USD 307147429.72 + APRL:USD-326415164). Analysis of the outward remittances though AORs/ORTTs to SEC made from the accounts of EIF held with Axis Bank and Bank of Baroda has revealed a total outflow of USD 335,732,220 for consignments shipped to APML and APRL on the basis of invoice numbers appearing on the AORs/ORTTs made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N dt. 04.05.2011 (Shanghai Shantra) 1647395 10SDMS01G1 80 IN dt. 04.05.2011 (on APRL) 3294790 1674395 100% 3. 50582 dt.25.06.2013 (Reynold Transmission) 85041.22 (equivalent of GBP 54279.68 converted to USD) 500582 dt. 25.06.2013 (on APML) 230550 145509 171% The inflation to the extent of 100% and 171% in case of shipments by two OEMs also corroborates the fact the EIF has resorted to value inflation in the invoices raised by it on APML and APRL. 17.7 Thus, the declared values in the impugned 301 262 consignments imported by APML APRL respectively totally amounting to Rs. 3469,07,79,940/-CIF and Rs. 3692,65,37,178/--CIF respectively, declared on the basis of inflated invoice prices in invoices of the intermediary EIF, do not represent the actual value of the goods as has been brought out by the investigation. The overall overvaluation to the extent of Rs. 3974,12,13,183/- CIF is summarised in Table below:- Table-32 Proportionate dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting up Phases I and II of Thermal Power Plant (Units 1, 2 3) and that the prices of the goods imported for Phases I II were comparable with the prices for imports made for Phase III. The allegation made in the show cause notice that APML EIF were related parties was also denied. The relationship between APRL and the consortium led by EIF was also denied and it was also stated that in any case the relationship, even if it was assumed to be correct, had not influenced the price. It has further been stated that the contract was awarded to the EIF led consortium by following the International Competitive Bidding route and the two Notices Inviting Tender were published in national newspapers having wide circulations with bids being open to all eligible bidders of foreign countries. The redetermination of the value under rule 4 of the Valuation Rules was stated to be erroneous and the show cause notice had also ignored the contemporaneous data provided by the respondents which clearly depict that the value was comparable with the MW per unit cost of other projects undertaken by the competitors. ORDER 26. The adjudicating authority, on an analysis of the allegations made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported goods. 27. The relevant portions of the order passed by the adjudicating authority are reproduced below: 5.1 I would like to examine in detail the main issue involved in the SCN as to whether the value declared by M/s APML M/s APRL be rejected in terms of Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962 and the same may be redetermined as per Rule 4/9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962. 5.1.1.10 Thus, I find that it was alleged in the show cause notice that for every transaction there were two invoices - i.e. one from OEM to M/s EIF and, the other from EIF to APML/APRL which was grossly inflated and did not appear to be bonafide for the reason that xxxxxxxxxx 5.1.3 Thus on perusal of the SCN and the various replies filed by the noticees (APML APRL) I find that one of the main allegations in the SCN is that Adani group companies and EIF were related to each other through Shri Vinod Shantilal Shah @ Vinod Shantilal Adani in terms of Rule 2(2) of the CVR, 2007. Thus, I have to examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion stipulated in Rule 2(2)(iv) is also not satisfied. Further, I find that the third condition as per Rule 2(2)(viii) i.e. they are members of the same family is also not satisfied since at the time of the signing of the contract, Shri Nasser Ali Shaban Ahli, a UAE national was the Director of EIF. Thus, I find that the two entities i.e. APML and EIF were not related in terms of Rule 2(2) of the CVR, 2007 on the date of the signing of the contract. 5.1.3.1.2 As regards APRL I find that the contract between APRL and EIF was signed on 02.04.2010 i.e. after Shri Vinod Shantilal Adani became a Director of EIF on 29.03.2010 by virtue of it becoming a subsidiary of EIH. On going through the provisions of Rule 2(2) of the CVR, 2007, with respect to Rule 2(2)(i). I find that Shri Vinod Shantilal Adani was a director of EIF by virtue of it becoming a subsidiary of EIH, as regards Adani group of companies he was only one of the promoters and shareholders in flagship company of the Adani group viz. M/s Adani Enterprises Ltd. which is evident from contents of copy of a letter dated September 13, 2012 signed by him and addressed to, inter-alia, the Bombay Stock Exchange Limited and the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinction between the two companies. However Rule 2(2)(i) requires the person be officer or Director of each others business at the relevant time which is not the case here. I find that the SCN itself menions that Shri Moreshwar Vasant Rabade (Director of Electrogen Infra FZE UAE at one point of time) had signed the said agreement for and on behalf of M/s Adani Power Maharashtra Limited. Thus, it is not alleged in the SCN that he was Director/ officer in EIF and APML at the same time. Thus I do not agree with the contention in the show cause notice. 5.1.3.12 I further find that the SCN mentions that the intermediary EIF was remitting the payments to its OEM through its two accounts held by them in Axis Bank and Bank of Baroda by way of Outward Remittances by way of Telegraphic Transfer (ORTT) using SWIFT Network. I find that it was alleged that the payments made by APML/APRL to EIF against the back to back invoices raised by it. I was in excess by 180% to 190% the aggregate remittances made by EIF to its OEMs thereby leading to allegation of gross over-valuation of the goods at the time of import by APML/APRL. 5.1.3.12.1 I find that the contract between APML/APRL and EIF was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment at a lower/nil duty, project imports had been brought under a separate tariff heading It, therefore, followed that comparison of value of goods covered by each and every individual consignment was impermissible and unjustified in law because the SCN has not challenged the validity of the contract between APML/APRL and EIF. Neverthless, I find that the contract had been allotted to EIF on the basis of International Competitive Bidding wherein the said bid was found not only to be in order by a technical evaluation team but was also found to be the lowest. 5.1.3.19 In view of the above discussions I am of the opinion that: (i) the two entities viz. APRL and EIF were not related during the relevant period; (ii) APRL and EIF may be considered as related during the relevant period, but the price was not affected by the relationship because the contract entered into between them was on the basis of International Competitive Bidding (ICB), and (iii) all the payment made as a condition of sale of the imported goods by the importer to the seller are includable in the assessable value since the goods were imported under PIR against EPC contract. Thus, I find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (vii) The adjudicating authority erred in concluding that the transactions between APRL/APML and EIF were at arm s length as per the assessment orders passed by the Income Tax Authority; (viii) Neither the respondents nor the adjudicating authority advanced any tangible data or valid basis to justify gross over-valuation at the hands of an intermediary invoicing agent who apparently did nothing except value inflation; and (ix) The adjudicating authority erred in holding that the relevant time/date for determining the relationship between the parties was the date of contract and not the actual date of import. 29. Shri Vikram Nankani, assisted by Shri Jitendra Motwani and Ms. Shilpi Jain, made the following submissions: (i) The whole transaction is based on genuine international competitive bidding process. In fact the notice inviting tender was published in various newspapers and as the bid was for turnkey project at lumpsum amount, APML/ APRL were not concerned with the break-up of individual items or services. The show cause notice also does not allege the validity and/or correctness of the tendering and/or bidding process; (ii) The contract price is at par wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the submissions of APML/APRL, the Income Tax authorities found no overvaluation in the prices of equipment imported by APML/APRL from EIF; (xi) There is no contradiction in the findings of the adjudicating authority since it is apparent that the adjudicating authority in paragraph 5.1.3.19 of the order had by mistake mentioned APRL instead of APML , because in the subsequent paragraph the relationship between APRL and EIF has been considered; (xii) The issue on merits was settled in favor of APML/APRL in the decision of the Tribunal in Knowledge Infrastructure Systems Private Limited vs. Additional Director General D.R.I. [2019 (366) E.L.T. A95 (Tri.-Mumbai)]. This fact is admitted to the Revenue, as can be seen from the submissions made by the Revenue in the early hearing application; (xiii) The respondent is eligible for refund of the excess duty, if any, paid by it; (xiv) The imported goods are not liable for confiscation in terms of section 111(d) and (m) of the Customs Act. Further, no penalty is imposable on the respondents under sections 112 and 114AA of Customs Act; and (xv) The Revenue has not contested the findings on confiscation and penalty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded in paragraph 5.1.3.1.2. The department has unnecessarily made an attempt to capitalize on this typographical error that has crept in paragraph 5.1.3.19 (i) of the order. If the typographical error is recognized, there would be no inconsistency between the finding recorded in earlier paragraph and the subsequent paragraph. RELATIONSHIP 33. To support case of overvaluation, the department alleges that APML/APRL and EIF are related and in this connection the following two factors have been highlighted. (a) APML and APRL are 100% subsidiary of Adani Power Limited and Mr. Vinod Shantilal Shah holds more than 8% shares in Adani Enterprises Limited. At the same time Mr. Vinod Shantilal Shah is 100% owner of the EIH, of which EIF became 100% subsidiary on 29.03.2010. Therefore APML/APRL and EIF are related through Vinod Shantilal Shah. (b) Mr. Jatin Shah worked with various entities of Adani Group till August 2009 and thereafter was the authorised signatory of the EIF. This shows that Jatin Shah was handling the affairs of EIF at the behest of Adani Group. Further, one of the employees of APML namely Mr. M V Rabade has signed the contract on behalf of both APML and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jindal India Powertech Ltd. Super Critical 2009 660 NA 3160 5.27 APRL Super Critical 2010 1320 660*2 7,030 5.33 36. This apart, the per MW capax for APML/APRL was less than the benchmark fixed cost for per MW capax in setting up green field power project determined by CERC. As noticed above, CERC had fixed per unit MW price of green field power project at Rs. 5.01 crores, whereas per MW cost for APML and APRL was Rs. 4.76 crores and Rs. 4.53 crores respectively, excluding the soft cost and other development cost. Thus, the per MW capax cost of APML and APRL was lower than the benchmark MW capax determined by CERC. It has also been found as a fact in the impugned order that the relationship had not influenced the price and this finding, as noticed above, does not suffer from any error. 37. With regards to Jatin Shah being an employee of both Adani Group and EIF, it is an undisputed position that Jatin Shah left the Adani Group on 19.08.2009. Thereafter he could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R PROCESS 41. Much emphasis has been placed by the learned special counsel appearing for the department on the manner in which the contract was awarded to EIF. In this connection, it needs to be noted that the contract was awarded on the basis of international competitive bidding process. The notice inviting tender was published in various national and regional news-papers having wide circulation and the notices were also sent to twenty seven Consulaters/Embassies. The tender was for setting up of a thermal power plant on EPC basis and the lowest bidder was awarded the contract. 42. It also transpires from the tender notice that the scope of work was very wide and included design, engineering, manufacturing, procurement, packing forwarding, supply, transportation, receipt, unloading, installation, erection, testing, commissioning, and performance guarantee test. Detailed scope was contained in the technical specification Vol. II of the bid document. The qualification of the bidder is contained in paragraphs 6.1 and 6.2 of the tender document and they are reproduced: 6.1 The Bidder should meet the qualifying requirement stipulated hereunder: If the Bidder is not a Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2010. With effect from 29.03.2010 EIF became a 100% subsidiary of M/s. Electrogen Infra Holding Pvt. Ltd., Mauritius (EIH). EIF thereafter requested for forming of a consortium and the same was accepted. The bid submitted by the three bidders were evaluated and it was recommended that consortium led by EIF, then known as SME, should be awarded the contract. Out of the total bid price, contract for USD 790 Million was awarded on 02.04.2010 to EIF towards supply of BTG alone. The balance amount was divided, at the instance of EIF, into BTG services, BOP supply and services. As required by the consortium led by EIF, the balance two contracts were entered into with other consortium members. 45. On behalf of the department it was submitted that it was a sham transaction and elaborating this submission, learned special counsel for the appellant pointed out that SME/EIF had signed contracts with the original equipment manufacturers even before they submitted the bid. The learned senior counsel for the respondent, however, submitted since that entire contract was awarded by meticulously following the ICB process, the department cannot allege that it was a sham process. 46. Merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the respondent before awarding the contract to consortium led by SME/EIF. In Commissioner of C. Ex., Nagpur vs. Ballarpur Industries [2007 (215) E.L.T. 489 (S.C.)] the Supreme Court held that show cause notice is the foundation of a matter and the department cannot travel beyond its contents. DOCUMENTS NOT ADMISSIBLE AS EVIDENCE 50. The case of the department as regards over-valuation is based on certain documents received from the UAE branches of Axis Bank, ICICI Bank and Bank of Baroda. The onus to prove over-valuation was on the Revenue, which burden was required to be discharged with cogent evidence. The department, therefore, had to establish the allegation on the basis of documents which were admissible as evidence. The documents obtained by the Department of Revenue Intelligence can be categorized into three categories. The first is in connection with the three consignments where back-to-back documents are available with respect to transaction between Original Equipment Manufacturers EIF and EIF APML/APRL and with respect to this category, the value is sought to be re- determined based on the invoice of the Original Equipment Manufacturers. The second is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, (b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether - (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying stipulated processes to the information and supplying results of these processes; and (b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process. 53. A bare perusal at the aforesaid provision reveals that a computer print-out is admissible as direct evidence under the Customs Act if the condition mentioned in sub-section (2) is satisfied. Section 138 C (4) deals with cases where any document is required to be produced as an evidence in proceedings under the Customs Act and the Rules framed thereunder. It specifically mandates production of a certificate containing the following: (i) Identifying the document containing the statement and describing the manner in which it was produced; (ii) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer, (iii) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, to be provided by a person occupying a responsible position in relation to the operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining a certificate under section 138C (4) of the Customs Act was extremely necessary to prove the authenticity of the documents but the same has not been done. 57. In this connection, would be relevant to refer to the observations of the Supreme Court in Anvar P. V. vs. P. K. Basheer [AIR 2015 SC 180] wherein the Supreme Court, in respect of section 65B of the Evidence Act which is pari materia to the provisions of section 138C (4) of the Customs Act, held that evidence relating to electronic record shall not be admitted in evidence unless the requirement of section 65B of the Evidence Act is fulfilled. Paragraph 22 of the said judgment is relevant and the same is reproduced: 22. The evidence relating to electronic record, as noted herein before, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Section 59 and 65A dealing with the admissibility of electronic record. Section 63 and 65 have no application in the case of secondary evidence by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 65B(4). The last sentence in Anvar P.V. (supra) which reads as .. if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act... is thus clarified; it is to be read without the words under Section 62 of the Evidence Act,... With this clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to revisited. s 59. The Mumbai Bench of the Tribunal in Agarvanshi Aluminium Ltd. vs. Commissioner of Customs (I), Nhava Sheva [2014 (299) E.L.T. 83 (Tri.-Mum)], where the issue was with respect to section 138C (4) of the Customs Act, also observed: 12. ...... it is clear that for admissibility of computer printout there are certain conditions have been imposed in the said section. Admittedly condition 4C of the said section has not been complied with and in the case of Premier Instruments Controls (supra) this Tribunal relied on the case of International Computer Ribbon Corporation - 2004 (165) E.L.T. 186 (Tri.-Chennai) wherein this Tribunal has held that computer printout were relied on by the Adjudicating Authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther authored nor received it cannot be a substitute to the requirement of section 138 C (4) of the Customs Act. 63. This is what was stated by the Supreme Court in Collector of Customs, Bombay vs. East Punjab Traders [(1998) 9 SCC 115] wherein it was held that presumption under section 139 (ii) of the Customs Act cannot be raised because the document did not bear any signature. The Supreme Court held that when the authenticity of the photocopies of the documents itself is suspected, the presumption under section 139(ii) of the Customs Act is not available. Paragraph 5 of the judgment is reproduced below: 5. The single Technical Member, who wrote the minority judgment, however, held the view that it was not essential on the part of the Customs Officer to strictly prove the documents as required by the Evidence Act and that the authenticity of the documents, though copies, could not be doubted as they had been collected by the Collector from foreign sources and could be admitted in evidence by virtue of Section 139(ii) of the Customs Act, 1962 which permits the raising of a presumption in respect of documents received from any place outside Indian in the course of investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of customs at Kobe also raises a serious doubt whether the copies relate to any of the consignments in question. In these circumstances, if the majority was disinclined to place reliance on these documents we find it difficult to hold that it was in error in doing so. 64. This view was also expressed by the Tribunal in Truwoods Pvt. Ltd. vs. Commissioner [2005 (186) E.L.T. 135 (Tribunal)] and the Appeal filed before the Supreme Court by the department against the aforesaid decision was dismissed. This decision is reported in Commissioner of Cus., Visakhapatnam vs. Truwoods Pvt. Ltd [2016 (331) E.L.T. 15 (S.C.)]. 65. The documents relied upon by the department are, therefore, inadmissible as evidence as the authenticity of the same has not proved in terms of the provisions of sections 138C (4) and 139 (ii) of the Customs Act. WHETHER THE CONTRACT WAS EPC 66. Learned special counsel for the department submitted that the contracts were not EPC. However, learned senior counsel for the respondent urged that both APML and APRL had awarded contracts to SME/EIF and the consortiums which were in the nature of EPC. Learned senior counsel submitted that splitting the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise the Employer of the shipping schedules of the Goods to the destination Port of Entry as far as possible, transshipment of major items shall be avoided. The Supplier shall supply the Goods in accordance with the Contract and Goods Industry Practice, and shall remedy any defects in the Goods. When completed the Goods shall be fit for the purposes for which the Goods are intended as defined in the Contract. The supplier shall, whenever required by the Employer, submits details of the arrangements and methods which the supplier proposes to adopt for the supply of the Goods. No significant alteration to these arrangements and methods shall be made without the prior written consent of the Employer. The Supplier shall provide at its own costs, training to Employer s staff for operation and maintenance of the Goods at manufacturer s work in China and at a Site, in accordance with Training Schedule as per Appendix B and guidance to Employer s staff on operation and maintenance of the Goods for a period of 12 months from the date of completion of successful performance guarantee tests, the costs of transportation and accommodation of Employer s staff for the purpose of such trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attended the tests, he shall be deemed to have accepted the readings as accurate. The Supplier shall inform the Employer at least 3(three) weeks in advance of any performance tests of all major Goods such as, but not limited to, pumps, boiler, burners, heat exchangers, turbines, cubicles, switchgears etc. The notification period for the purposes of this Sub-Clause shall be three weeks. The tests carried out in accordance with this Sub- Clause shall not relieve and absolve the supplier from its responsibility and obligations under the Contract, 7.5 Rejection If, as a result of an examination, inspection, measurement, or testing any Good is found to be defective or otherwise not in accordance with the Contract, the Employer may reject the Goods by giving notice to the Supplier, with reasons. The Supplier shall them promptly make good the defect and then ensure that the rejected good comply with the requirements of the Contract. If the Employer requires the Goods to be retested, the goods shall be repeated under the same terms and conditions. If the Rejection and retesting cause the Employer to incur additional costs, the Supplier shall subject to Sub-Clause 2.3 (Empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pments, in accordance with Annexure 3 hereto. (b) The Supplier shall pay all taxes, duties and fees required to be paid by him under this Supply Contract in its country, and the Contract Price shall not be adjusted for any of these costs, except as stated in Sub-clause 13.4 [adjustments for changes in legislation] of the Conditions of the Contract; The Employer shall pay all taxes, duties and fees under this Supply Contract in his country (India). 4.0 THE SUPPLIER 4.1 Suppliers General Obligation The supplier shall be responsible for the basic and detailed design, engineering, procurement, supply, storage at Port of Loading and marine transportation of the Goods of all equipment and system(s). The Supplier shall advise the Employer of the shipping schedules of the Goods to the destination Port of Entry as far as possible, transshipment of major items shall be avoided. The Supplier shall supply the Goods in accordance with the Contract and Goods Industry Practice, and shall remedy any defects in the Goods. When completed the Goods shall be fit for the purposes for which the Goods are intended as defined in the Contract. The supplier shall, whenever r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Contract, the Costs of carrying out this variation shall be borne by the Supplier, notwithstanding other provisions of the Contract. The Employer shall give the Supplier not less than 24 hours notice of the Employers intention to attend the tests. If the Employer does not attend at the time and place agreed, the Supplier may proceed with the tests unless otherwise instructed by the Employer, and the tests shall then be deemed to have been made in the Employers presence. The Supplier shall promptly forward to the Employer duly certified reports of the tests. When the specified tests have been passed, the Employer shall endorse the Suppliers tests Certificate, or issue a certificate to him, or to that effect. If the Employer has not attended the tests, he shall be deemed to have accepted the readings as accurate. The Supplier shall inform the Employer at least 3(three) weeks in advance of any performance tests of all major Goods such as, but not limited to, pumps, boiler, burners, heat exchangers, turbines, cubicles, switchgears etc. The notification period for the purposes of this Sub-Clause shall be three weeks. The tests carried out in accordance with this Sub- Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Essentiality Certificate, the entire contract for supply of BTG equipment and machinery for the said power project entered between APRL and EIF, was registered on 06.07.2010 with the Customs House at Kandla as prescribed under Regulation Nos. 4 and 5 of the PIR. 76. Pursuant to the said Contract dated 02.04.2010, APRL imported the said goods. Before import of the first consignment under the said Contract dated 02.04.2010, it was registered under PIR and consequently, the said goods were duly assessed under Heading 98.01 of the First Schedule to the Tariff Act. All the Bills of Entry were assessed provisionally at the time of import but this was subject to reconciliation under PIR. The assessment with respect to APRL has been finalized by Order-in-Original dated 21.10.2019 passed by Assistant Commissioner of Customs, Kandla. 77. Learned special counsel for the department vehemently submitted that the contract entered between APML/APRL and EIF was not an EPC contract but was simply a supply contract. In this connection learned special counsel placed reliance on certain clauses of the EPC contract executed between APML EIF and APRL EIF to contend that identical provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to execute the contract would be that of SME/EIF only. 80. In this connection, it would also be useful to reproduce paragraphs 5.1.3.17 to 5.1.3.17.4 of impugned order concerning this issue and they are as follows: 5.1.3.17 The noticee has submitted that the contract as a whole was an EPC (Engineering, Procurement, and Construction) Contract. The projects were turnkey projects where the scope of work was not only supply of goods but also included designing, installation, civil work and commissioning. While the scope of work was divisible, the price was a lump sum price. The contracts were, therefore, composite in nature with a lump sum price, that it was evident from the PPA agreements entered into by APML/APRL with the respective state electricity bodies that the contract for set up and commissioning of the mega power plants was on EPC basis. Therefore, as per notices Customs today had no ground to question the nature of the contract entered into between APML/APRL with EIF and claim the same to be a simple contract for supply of goods. I find that in the Power Purchase Agreement between Maharashtra State Electricity Distribution Company Ltd. (Procurer and Adani Power Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is mentioned wherein in para 14. 1 reads as follows- 14.1 The Contract Price The lump sum Contract Price payable under this contract by the Employer to the Supplier shall be United States Dollars 736,000,000 (United States Dollars Seven Hundred Thirty Six million only). 5.1.3.17.3 Similarly, I find that in the contract between Adani Power Rajasthan Limited and Electrogen Infra FZE dated 02.04.2010, in Annexure 5 i.e. Conditions of Contract, in para 14.0 the details regarding Contract Price and Payment is mentioned wherein in para 14.1reads as follows 14.1 The Contract Price The lump sum Contract Price payable under this contract by the Employer to the Supplier shall be United States Dollars 790,000,000 (United States Dollars Seven Hundred Ninety million only). 5.1.3.17.4 Thus, I find that in an EPC contract the contractor is responsible for the entire gamut of the contract, i.e. right from detailed engineering design of the project, procuring all the equipment and materials necessary and then to construct and deliver a functioning facility or asset to their clients. Thus, the projects were turnkey projects where the scope of work was not only suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are housed under Tariff Heading 98.01 of the Tariff Act. Learned special counsel also submitted that it may not be necessary to carry out an assessment in respect of classification of each and every product but there is no bar to ascertain the transaction value of each individual import consignment in terms of the Valuation Rules, even though the contract may have been registered under PIR. 85. It would, therefore, be necessary to examine the provisions Chapter 98.01 of the Tariff Act and PIR issued under Chapter 98.01 of the Tariff Act. While Chapter 98.01 deals with imports under project import, regulations 2, 4, 5 7 of PIR deal with assessment and clearance, eligibility, registration of contract and finalization of contract. They are as follows: CHAPTER 98 OF TARIFF ACT Project imports; laboratory chemicals; passengers' baggage, personal importations by air or post; ship stores NOTES: 1. This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more specific heading elsewhere in this Schedule. 2. Heading 9801 is to be taken to apply to all goods which are imported in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng run as a joint stock company (hereinafter referred to as Government Agency ) as soon as clearance from the concerned Administrative Ministry or Department, as the case may be, has been obtained. The application shall specify - (a) the location of the plant or project; (b) the description of the articles to be manufactured, produced, mined or explored; (c) the installed or designed capacity of the plant or project and in the case of substantial expansion of an existing plant or project the installed capacity and the proposed addition thereto; (d) such other particulars as may be considered necessary by the proper officer for purposes of assessment under the said heading. The application shall be accompanied by the original deed of contract together with a true copy thereof, the import trade control licence, wherever required, and an approved list of items from the Directorate General of Technical Development or the concerned sponsoring authority. The importer shall also furnish such other documents or other particulars as may be required by the proper officer in connection with the registration of contract. The proper officer shall, on being satisfied tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are imported under a specific contract registered with the appropriate Customs House under PIR. What is evident from the provisions and requirements of PIR is that it recognises contracts of the nature that APML/APRL had executed with EIF and the other consortium members. Infact, PIR ensures that large infrastructure projects benefit from the duty exemption. As such, it is clear that what is registered is the contract as a whole. When considered in this light, the goods imported for the project become a subject matter of assessment as whole and individual consignments are not required to be separately assessed. It is, therefore, clear that PIR does not deal with import of individual consignment and the assessment of the goods imported for the project have to be dealt with together. VALUATION 88. The issue under consideration is whether the value declared by APML and APRL is required to be rejected in terms of rule 12 of the Valuation Rules read with section 14 of the Customs Act and the same is required to be redetermined under rules 4/9 of the Valuation Rules read with section 14 of the Customs Act. 89. The aforesaid redetermination of the value has been sought by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same consisted of two Units of 660 MW each and the per MW cost, excluding the soft cost, is Rs. 4.53 crore, which is lesser than the benchmark price fixed by CERC at Rs. 5.01 crore. 93. The department proceeded to reject the value of imported goods declared by APML and APRL and intended to redetermine it on the basis of the transaction between the supplier namely EIF and Original Equipment Manufacturers. For this purpose, the provisions of rule 12 of Valuation Rules read with section 14 of the Customs Act have been invoked. The following three sets of the documents have been relied upon for this purpose: a. Three consignments where back-to-back documents are available; b. Six consignments where remittance was made by way of single invoice AORs/ORTTs; and c. Other consignments where remittance details are available against multiple invoices. 94. It has been found in the earlier part of this order that the documents on the basis of which redetermination of value has been proposed are inadmissible in evidence. Thus, if the said documents are not admissible in evidence, the department cannot seek redetermination of value on the basis of these documents. 95. Even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent and in the manner specified in the rules made in this behalf: 97. The Supreme Court in Wipro Ltd. vs. Assistant Collector of Customs [2015 (319) E.L.T. 177 (SC)] noticed that under the unamended provisions of section 14 of the Customs Act, the principle was to find out the valuation of goods by reference to the value and it introduced a determining / fictional provision by stipulating that the value of all the goods would be the price at which such or like goods are ordinarily sold . However, under the amended provisions, the valuation is based on the transaction price namely, the price actually paid or payable for the goods . It is in this context, that the Supreme Court observed: 26) On the aforesaid examination of the scheme contained in the Act as well as in the Rules to arrive at the valuation of the goods, it becomes clear that wherever actual cost of the goods or the services is available, that would be the determinative factor. Only in the absence of actual cost, fictionalised cost is to be adopted. Here again, the scheme gives an ample message that an attempt is to arrive at value of goods or services as well as costs and services which bear almost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 14 and would clearly be ultravires this provision. We are also of the opinion that when the actual charges paid are available and ascertainable, introducing a fiction for arriving at the purported cost of loading, unloading and handling charges is clearly arbitrary with no nexus with the objectives sought to be achieved. On the contrary, it goes against the objective behind Section 14 namely to accept the actual cost paid or payable and even in the absence thereof to arrive at the cost which is most proximate to the actual cost. Addition of 1% of free on board value is thus, in the circumstance, clearly arbitrary and irrational and would be violative of Article 14 of the Constitution. ---- 34) In the present case before us, the only justification for stipulating 1% of the F.O.B. value as the cost of loading, unloading and handling charges is that it would help customs authorities to apply the aforesaid rate uniformly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner which can be prescribed in the rules. Sub-section (2) of Section 14, which remains the same, is an over-riding provision which empowers the Board to fix tariff values for any class of imported goods or export goods under certain circumstances. We are not concerned with this aspect in the instant case. 99. Thus, what has to be seen under section 14(1) of the Customs Act, as amended in 2007, is the transaction value of the goods imported or exported for the purpose of customs duty and transaction value is stated to be the price actually paid or payable for the goods when sold for export to India for delivery at that time and place of importation. Sub-section (1) of section 14 also makes it clear that the price actually paid or payable for the goods will not be treated as transactional value where the buyer and the seller are related to each other. As per the first proviso to the amended section 14 (1), certain charges are to be added in the transaction value of the imported goods. 100. It would now be appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e permitted to look into assessment of individual consignment as this would be contrary to the provisions of Chapter 98.01 of the Tariff Act and PIR has also been upheld. 103. There is, therefore, absolutely no evidence available on record which can doubt the correctness of the transaction value declared by APML/APRL. Therefore, the declared value is required to be accepted under rule 3 of the Valuation Rules read with section 14 of the Customs Act. 104. Even otherwise, the value has to be redetermined under rule 4 by relying upon the value of identical goods. A plain reading of rule 4 would show that it speaks of identical goods imported at or about the same time as the goods being valued, which necessarily means that the identical goods should be goods other than the goods being valued and which are imported at or about the same time as the goods being valued. 105. At the cost of repetition, it needs to be noted that the terms and conditions of the contract between EIF and APML/APRL in respect of exposure to foreign exchange variation, stringent payment terms, higher liquidated damages in case of delay, higher interest on delayed payment, period of warranty than in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price based of 1USD=6.8332 RMB and any variation to be compensated by either party at actual. 4. Payment Terms (a) 10% advance against ABG of equivalent amount by TT/LC with 30 days (b) 75% prorate by LC against shipment docs (c) 5% Security deposit by LC against TOC (Unit wise) (d) Retention (i) 5% against TOC (Unit wise on submission of PBG of equivalent amount. (ii) 5% retention against PGT (Unit wise) on submission of PGB of equivalent amount A1) 3 Million USD as part of advance against ABG after signing of Contract. This advance to be adjusted at sr. no.A2. B) 60% prorate by LC against shipmens docs. C) Retention C1) 5% against TOC (Unit wise) on submission of PBG of equivalent amount. C2) 5% against PGT (Unit wise) on submission of PBG of equivalent amount. 5. Liquidated Damages 1) LD for delay: 0.5% per week price or part thereof subject to max LD of 19% Contract price. 2) LD for shortfall in performance guarantee- Gross Electrical Power Output per Generating Unit: If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r difference in LD clause between two contracts is LD calculation (i.e. 0.5% for per week delay) is on complete contract price in case of EIF, whereas it is on delayed equipment price in case of SEC. also, EIF has taken a lumpsum EPC contract from APML/APRL for supply of BTG; however, as evident form the scope of supply of SEC contract EIF have broken the scope in several small contracts. SEC contract mainly covers Steam Turbine, condenser, LP heater, generator Steam generator and many major items like ESP, critical piping, Coal mills feeder, BFPs, draft fans, EOTs etc. are missing in the delivery schedule attached with the commercial contract provided under RUD. This indicates that EIF had not given the single back to back contract to SEC but broken the scope in several parts and awarded as separate contracts. Even if one assumes that the LD clauses in those other contracts are similar of this contract, the LD risk gets diluted due to smaller contract values of these each individual contract. E.g. If one of the small package supplier default in delivery, he is liable to pay LD maximum @10% of only undelivered portion of contract price, whereas because of this default, EIF shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allegation made in the show cause notice. INCOMPLETE INVESTIGATION 115. The department made an attempt to substantiate the overvaluation on the basis of the certain documents. It is the case of the department that the aggregate invoice value of the goods invoiced by EIF to APML and APRL for 301 and 262 consignments respectively was USD 1477,934,270/- as mentioned in Table 20 and 21 of the show cause notice, against which the aggregate invoice value remitted by EIF to various Original Equipment Manufacturers was USD 669,595,215/- as mentioned in the Table 23 of the show cause notice. It is on the basis the difference in these two values, that the department alleged over-valuation to the extent of 220%. Apart from fact that the Original Equipment Manufacturers invoice could not have been treated as transaction value, even the basis of arriving at the figures mentioned in Table 23 (the amount paid by EIF to Original Equipment Manufacturers) is based on the ORTTs received by the Department of Revenue Intelligence from two banks namely Axis Bank and Bank of Baroda. The department has placed reliance on the following documents: (i) Contract between EIF (under its erstwhile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 111(m) ibid there is no judicial approval of proposition that goods be held liable for confiscation without nexus with collection of duty and enforcement of prohibitions or without breach of the machinery provisions for safeguard of revenue and prevention of smuggling. 118. Learned special counsel for the appellant submitted that the decision of the Tribunal in Knowledge Infrastructure was delivered without considering the past decisions and properly appreciating the provisions of the Customs Act and this decision is also under challenge before the Supreme Court. It needs to be noted that in early hearing application, the department opposed the prayer for an early hearing for the reason the decision of the Tribunal in Knowledge Infrastructure is applicable to the facts of this case. 119. However, as the allegation of over-valuation has not been established, it is not necessary to examine this aspect. 120. Thus, as none of the contention advanced by the learned special counsel for the appellant have any force, the order dated 22.08.2017 passed by the adjudicating authority dropping the proceedings that were initiated by issuance of a show cause notice dated 15.05.2014 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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