TMI Blog2010 (11) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... n is wilful and the impugned order of penalty is justified - Appeal is rejected - C/38 & 343/2005 - 1454-1455/2010 - Dated:- 29-11-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri B.V. Kumar, Advocate, for the Assessee. Shri U. Raja Ram, JDR, for the Department. [Order per : P. Karthikeyan, Member (T)]. - These appeals are filed by M/s. Veeyem Exports and the Commissioner of Customs, Thiruvanathapuram against order of the Commissioner (No. 9/2004-Cus., dated 28-9-2004). M/s. Veeyem Exports were engaged in export of steel pegs (float pins of carburetor) under claim for DEPB as per EXIM Policy 1997-2002. Based on a communication from the Joint Director General of Foreign Trade, Kochi dated 21-3-2002 expressing doubt about the genuineness of value of the steel pegs declared in Shipping Bills by M/s. Veeyem Exports, investigation was initiated. Searches were conducted at the premises of M/s. Veeyem Exports at MG Road, Ernakulam on 25-8-2003 and statement was recorded from Shri P.M. Musthafa, Proprietor. Enquiries were conducted with M/s. Siko Carburetor Parts, New Delhi, a distributor who allegedly supplied steel pegs exported by M/s. Vee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt value of Rs. 28,32,80,585/- and consequently to re-determine the admissible DEPB credit as Rs. 29,02,466/- as against Rs. 3,68,26,476/- as per the export documents. It was proposed to adopt the price of Rs. 8,21,442/- declared by the consignee at the port of import as the value of all consignments and to accordingly determine the pro-rata export value of the consignment covered under Shipping Bill No. 1069903. It was proposed to re-determine DEPB credit due at Rs. 7,83,514/- in respect of this Shipping Bill. In adjudication, the Commissioner concluded that the price declared by the exporter ranging approximately from Rs. 9.50 per piece for larger pegs and Rs. 14.30 per piece for smaller pegs were reasonable and fair. As per the Order-in-Original, the quantity and value of the steel pegs exported and DEPB credit admissible were as follows : 1. Total number of steel pegs exported : 83,79,092 Nos. 2. F.O.B. value in INR : Rs. 11,76,78,302/- 3. DEPB benefit @ 13% in INR : Rs. 1,52,98,175/- 4. The appeal seeks to get the impugned order appropriately modified on the following grounds : In the Order-in-Original the Commissioner did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- to Rs. 200/- per piece. Despite detailed investigation including an overseas enquiry, no tangible evidence of any unholy nexus between the buyer and seller had been discovered. In the absence of mutuality of interest between the buyer and seller, the declared price could not be discarded. Consequently the adjudicating authority accepted the unit price declared by the appellant exporter ranging approximately from Rs. 9.50 for larger pegs and Rs. 14.30 for smaller pegs. The Commissioner had determined the quantity of steel pegs exported by dividing total weight declared by the exporter in Airway Bills and Shipping Bills by the weight per piece of a single steel peg. On this basis, the number of steel pegs actually exported was worked out at 83,79,093 numbers as against 2,06,23,960 numbers declared by the appellant exporter. The Commissioner had refrained from interfering in the value of the steel pegs but found excess credit availed by the exporter based on weight of one piece declared by the exporter. The appellants submit that this finding applied only for Shipping Bill No. 1069903 dated 15-1-2002 and not to any other Shipping Bill. It is submitted that to arrive at the number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was when the goods were tendered for export. The proceedings had been initiated belatedly and concluded with half-hearted allegations, of fictitious export, overvaluation, bogus buyers, etc. There was a simultaneous finding that overvaluation was not proved, it was observed. It is submitted that the conclusion arrived at by the Commissioner to determine the number of the steel pegs exported was not scientific and realistic; no proper and apt comparison had been made and sample products obtained for investigation. The appellant had purchased steel pegs for export from the open market. The weight of 0.45 gm per piece adopted for arriving at the number of pieces exported was arbitrary and was not representative of the impugned goods exported. No samples had been drawn from a single export consignment and weighed. Therefore, no such standard weight could be determined for the product since the weight of steel pegs varied from manufacturer to manufacturer. Moreover, a process of drilling was required to seat the spring inside the piece. In components where the drilling was less, the weight of the component would be less. Both for small and big pegs, this weight variation was inevitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act could not be invoked against them. They prayed for setting aside the impugned order. 10. During hearing the learned Counsel for the appellants relied on the following case laws : (i) Trustworth Enterprises v. Commissioner of Customs, Tuticorin [2008 (228) E.L.T. 201 (Tri.- Chennai)] (ii) Mercantile India v. Commissioner of Customs, Chennai [2007 (214) E.L.T. 540 (Tri. - Chennai)] (iii) TTK Prestige Ltd. v. Commissioner of Customs, Bangalore [2005 (188) E.L.T. 385 (Tri.- Bang.)] (iv) Pradip Polyfils Pvt. Ltd. v. UOI [2004 (173) E.L.T. 3 (Bom.)] (v) Avon Appliances v. Commissioner of Customs, Mumbai-II [2004 (172) E.L.T. 465] (vi) M.K. Fisheries v. Commissioner of Customs, Cochin [2002 (150) E.L.T. 998 (Tri. - Chennai)] 11. We have examined the case records and carefully considered the submissions made by both sides. FINDINGS Appeal C/343/05 12. The challenge raised by the Revenue to the impugned order accepting the export price declared by the respondent in the various Shipping Bills is on the basis that the investigating authority had conducted detailed enquiries regarding the market value of the export product from different manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not exported steel pegs having weightless than 0.45 gm. Analyzing the nature of the evidence available in support of the proposals to revise the value of the export goods as Rs. 2.55 per piece, the Commissioner observed as follows : 15. The first statement considered was of Shri Pradeep Kumar Ghai. He purchased the item at a price ranging from Rs. 4.50 to Rs. 4.75 per piece. In the same statement, he stated that the sale price of the item would range from Rs. 5/- to Rs. 8/- depending on quantity purchased. The MRP printed on a pack of steel pegs of 12 pieces was Rs. 21/-. He gave a discount ranging between 30% to 60% on the MRP. The Commissioner found himself in agreement with the exporter that the MRP of Rs. 21/- could not be of a pack of 12 pieces when the MRP per piece would be Rs. 1.75 i.e. lower than his cost of Rs. 4.50. The Commissioner concluded that the MRP of Rs. 21/- related to a single piece. Shri Pradeep Kumar Ghai also stated that he gave a discount up to 50%. The discounted price worked out to Rs. 8.40. He also found that in the price list of M/s. Siko Carburetor Parts furnished by the exporter, the price of float pins (item No. 734) was shown as Rs. 15/-. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared by the exporter, i.e. Rs. 10/- to Rs. 14/-, it can be seen that on the valuation of one piece of steel peg, no over valuation can be pointed out as the comparable price is not available and varies due to so many different variable factors. As regards the value declared for the export consignment before the Customs authority at Dubai, the Commissioner held that export valuation was governed by provisions of Section 14 of the Act. As per these provisions, the value was the normal price at which like goods were ordinarily sold for delivery at the time and place of exportation in the course of international trade in arms length transactions. The Commissioner observed that despite detailed investigation including the overseas enquiry, no tangible evidence of any unholy nexus between the buyer and seller had surfaced. No mutuality of interest between the buyer and seller was established nor any evidence found to prove that price was not the sole consideration for sale. The respondents had already realized the full foreign exchange remittance back through proper legal channel. As per the export documents, namely BRCs submitted by the exporter, 14,95,152 US$ had been realized. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the appellants. We first take up the legality of the order to recover the excess DEPB credit. The order is challenged on the basis that DEPB is granted by the licensing authority and the Customs authority has no jurisdiction to alter the same. There are no machinery provisions in the Act to recover the DEPB credit granted to an exporter. We find that following judicial authorities had held that the customs authorities are not competent to curtail the DEPB credit availed by the exporter : (i) Pradip Polyfils Pvt. Ltd. v. UOI [2004 (173) E.L.T. 3 (Bom.)] (ii) Avon Appliances v. C. Customs, Mumbai-II [2004 (172) E.L.T. 465] (iii) M.K. Fisheries v. CC, Cochin [2002 (150) E.L.T. 998 (Tri. - Chennai)] (iv) Kobian ECS India Pvt. Ltd. v. CC, Mumbai [2003 (157) E.L.T. 662 (T. - Mumbai)] (v) Polynova Chemical Industries v. C. Customs, Mumbai [2005 (179) E.L.T. 173] (vi) M/s. Dear Impex v. C.C., Mumbai [2004 IOL 320 CESTAT MUM] = 2004 (175) E.L.T. 611 (Tri. - Mumbai). There is also merit in the submission by the appellants that there are no machinery provisions in the Act to recover DEPB credit granted to an exporter by the DGFT. Therefore, we set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulently obtained an excess DEPB credit of Rs. 4,14,065/-. In view of the undisputed actual weight of the consignments exported (3940 Kg) and the minimum weight of a steel peg, the number of steel pegs exported is correctly determined. Absence of examination of sample does not cause a difficulty in determining the number of steel pegs. The figures are determined based on the declaration by the exporter. Therefore the case law cited in this regard is not relevant. We find that the Commissioner s finding as regards mis-declaration of the number of steel pegs exported by the appellants during the material period in all the Shipping Bills is correct. Section 113(i) of the Act reads as follows : (i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77; Such goods are liable for confiscation. 20. Therefore, the appellants have contravened the provisions of 113(i) of the Customs Act, 1962 and rendered the impugned goods liable for confiscation and themselves liable for penalty under Section 114 of the Customs Act, 1962. ..... 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