TMI Blog2010 (8) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Bills of Entry, the transaction was governed by the HSS contract and there was no other contract relevant to the value - this was a conscious and deliberate mis-declaration made by each of the HSBs in respect of each of the impugned imports. Therefore, the Commissioner rightly invoked the larger period to confirm the demands Regarding penalty - Held that: penalty imposed on each of the HSBs under Section 114A equal to the duty evaded is sustainable in view of our finding of deliberate suppression of payment of additional amounts for high seas purchase of SM. We consider the penalty of Rs. 3,00,00,000/- imposed on SPL under Section 112(a) of the Act to be on the higher side - As rightly argued, penalties could not be imposed on them u/s 114A as the provision is for imposing equal penalty as the duty on a person from whom duty is demanded u/s 28 (2) of the Act; there is no such demand on them - Appeals are partly allowed - C/158-160, 180-181, 189-190, 328-339, 355-356 , 391-392/2006 - A/294-316/2010-WZB/C-II/(CSTB) - Dated:- 18-8-2010 - S/Shri P. Karthikeyan, Ashok Jindal, JJ REPRESENTED BY : S/Shri V. Sridharan, Naresh Thacker, V.T.N. Kumar, N. Gopal, P. Nawathe, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges would be borne by SPL. As per the contract, HSBs would lift the SM from the storage tank at Aegis, Chembur at their own cost. Insurance for storage and transit, CVD and sale tax would be borne by HSBs. During the material period, all the HSBs entered into HSS contract whenever they purchased a consignment of SM from SPL on HSS basis. As per this contract, the price paid was the purchase price of SPL + 2% HSS commission. Every time a consignment was cleared by a HSB, Bill of Entry was filed along with related HSS contract. The authorities tentatively concluded that the supply contract. (YWPC) was wantonly suppressed from them by the HSBs. Bills of Entry filed always carried the following declaration in terms of Section 46 of the Customs Act, 1962 (the Act for short) that there was no other document relevant for the transaction value :- I/we declare that I/We have received and do not know of any other documents or information showing a different price, value (including local payments whether as commission or otherwise) quantity or description of the goods and that if at any time hereafter I/we discover any information showing a different stage of facts, I/we will immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a leading role in the whole subterfuge and the HSBs were willing accomplices. All were parties to the offending transactions and benefited from saving on customs duty due to the Government. The HSBs had filed Bills of Entry declaring lower values than the actual transaction value and paid the supplier in terms of separate contracts against debit notes concealed from the Customs. SPL was instrumental for evasion of customs duty of over Rs. 3.81 crores over a period of four years. SPL had recovered an amount of Rs. 11.36 crores through debit notes. The Commissioner demanded differential duty with applicable interest from the HSBs and imposed equal amount of penalty as the demand on the HSBs under Section 114A of the Act. He imposed a penalty of Rs. 300 lakhs under Section 112(a) of the Act on SPL for their having abetted HSBs rendering the impugned goods liable for confiscation under Section 111(d) and 111(m) of the Act. The Commissioner demanded from SPL an amount of Rs. 62,50,241/- under Section 28B of the Act. He ordered fine in lieu of confiscation in respect of the consignments imported following the ratio of the judgment in the case of Weston Components Ltd. [2000 (115) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Shri Narendra Kr. Gupta 5 lacs 21. Shri Sagar Goel 60,000/- 22. Shri Pradeep Nawathe 20,000/- 23. Shri M. Srinivasan 10,000/- An amount of Rs. 62,50,241/- was demanded from SPL u/s 28B of the Act. 4. In the appeal filed by SPL, the following grounds have been taken : The HSBs had declared transaction value of the goods imported by them as per Section 14 of the Act. Composite contracts executed between SPL and HSBs were for sale of goods and provision post importation services; this value could not be held to be the value under Section 14 of the Act. The price of identical goods imported contemporaneously was available and value could be determined under Rule 5 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (CVR for short). The amounts reflected in the debit notes were for services rendered post importation and did not form part of the value. There was no dispute that SPL handled the goods imported by HSBs and organized storage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods imported by it liable to confisaction. He has denied the charge on the ground that the assessee had paid duty due on the consignments and goods had not been rendered liable for confiscation. He is not liable for penalty ordered. The HSBs have raised the following grounds :- 4.4 SPL was specialized in handling and transporting of SM and provided expertise to the appellants at mutually agreed consideration. SPL recovered fixed amount of service charges towards services provided such as transportation of SM through pipeline from jetty to Aegis terminal at Chembur, storage there, credit facilities, administrative work such as filing of import documents. SPL incurred expenses for these services and recovered the same from the appellants by raising debit notes. The impugned demand was on the basis of a wrong assumption that SPL, in connivance with the appellants, had collected part of the price of the imported goods describing it as service charges. Customs duty could not be demanded on a consolidated value for goods and services. Debit notes represented charges payable to SPL for post importation services provided by it. SM was a hazardous material, being inflammable and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining value under Rule 5 of CVR. Goods came from the same supplier, same country, by the same vessel and were of the same quality as imported by SPL and assessed to duty. Appellants had paid duty on the import price of SPL + 2% apart from landing charges, insurance etc. The Bombay Custom House had adopted as the consistent basis to assess the goods purchased on HSS, invoice value of foreign supplier + 2% + landing charges + insurance charges, as laid down in Public Notice No. 145/2002, dated 3-12-2002. This practice was modified only vide Circular No. 32/2004-Cus., dated 11-5-2004 by the CBEC. The appellants had followed the same practice as followed by the Department; no differential duty was therefore payable by the appellants. The show cause notice issued on 22-7-2005 was barred by limitation since it covered demand for the period 8/2000 to 7/2004. Along with the Bills of Entry filed by the appellants, the invoice of SABIC/Shell raised on SPL alone had been filed in support of the declared value. No invoice of SPL had been filed with Bills of Entry. Other documents submitted included bill of lading endorsed by SPL in favour of the appellants, test bond, HSS agreement, declaratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment had no case that SPL did not provide any service to the appellants. In view of the different facts of the Hyderabad Industries Ltd. case, the ratio could not be applied to the present case. 4.8 The high sea sale by SPL was not a sale in the course of international trade but was an intra-national trade. The price at which the foreign exporter SABIC/Shell sold the goods to SPL alone was the price in the international market for delivery at the time of importation into India. The sale between SPL and appellants was an intra-national trade or domestic trade. Both buyer and seller were located in India. Only transactions involved for actual international transfer of goods could be used in valuing the merchandise under the Customs Act. Therefore the appellants had paid excess duty erroneously on the price charged by SABIC/Shell on SPL after adding 2% thereon. The value determined by the Commissioner for demanding differential duty was liable to be set aside. 4.9 SPL was not exporter of SM to India even when it sold SM on HSS basis to appellants. As per Rule 4 of CVR transaction value of imported goods shall be the price actually paid or payable for the goods when sold for exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. VISEN Inds. Ltd. pleaded that they had followed the general practice of the industry without any intention to evade duty due. They had already paid the duty due. Therefore, penalty could not be imposed on them. They prayed for vacating the penalties. 5.2 The counsel for SPL explained the rationale in entering into master contracts with the importers as well as individual HSS contracts as commercial. The statements of Dy. General Manager Shri V.T. Nandakumar explained the innocence of SPL. As per the impugned order, SPL was to pay an amount of above Rs. 6250241/- recovered by it from its customers in the name of customs duty. The ld. Counsel argued that Section 28B of the Act applied only in cases where a person liable to pay customs duty had collected amounts from its customers as representing duty of customs. SPL was not liable to pay customs duty in respect of the impugned imports on HSS basis. In the circumstances, the demand was not sustainable. SPL had not abetted HSBs rendering the impugned goods liable for confiscation. SPL was not liable to penalty u/s 112 of the Act. 5.3 Ld. Counsel for the Revenue countered the various submissions made by the counsel for the impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and represented the transaction value. Countering the claim of the ld. Counsel for the appellants, the ld. Counsel for the Revenue submitted that interpretative notes to Rule 4 provided that value of the imported goods shall not include the following charges or costs, provided that they are distinguishable from the price actually paid or payable for the imported goods. (a) charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment, (b) the cost of transport after importation, (c) duties and taxes of the country of importation. 5.5 In the present case, the appellants were not able to distinguish as to what part of the service charges (which included the profit of SPL) related to the above costs and charges. As the appellants claimed that service charges included re-imbursement of expenses of storage in Aegis tank, transportation in pipeline up to Aegis tank, barge charges and demurrage charges, these were not covered by clause (a) or (c) of interpretative notes to Rule 4. 5.6 In the present case, goods are cleared from customs bonded war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The court held that there were two sales, one at the auction in India and second, between the auction buyer (Indian buyer) and the foreign buyer. In this case, the Apex court held that only the second sale could be held to be in the course of export. It is submitted by the Revenue that there was no high seas sale in this case. It was held that either the sale must take place when the goods were already in the process of being exported which was established by their having crossed customs frontier (of the country of export) or the sale must occasion the export. It is argued that the finding supported the view that when the goods crossed the customs frontier of the foreign country and if they were sold when they were on the high seas they were sold in the course of export and in the course of international trade. In Binani Bros. P. Ltd. v. UOI [1974 (1) SCC 459] case, the facts were that the petitioner, a dealer in non-ferrous metals, imported goods into India from abroad. After import, the petitioner sold them locally to DGS D. The Apex court held that the sale to DGS D cannot be said to be a sale in the course of import. The court held that merely because the petitioner had impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia, as follows : 2. As per existing practice in Mumbai Custom House, the High -seas-sales-charges declared by the original importer and the High-Seas-sales-buyer are added in the declared CIF value. Such high-seas-sales-charges are taken to be 2% of the CIF value as a general practice. However, in cases, where actual high-sea-sales-charges are more than 2% of the CIF value, then the actual charges are required to be added to the CIF value. From a perusal of the above Public Notice cited by the appellants, we are not able to find in it any direction to the trade to adopt MSS Price plus 2% in all cases including cases where the consideration exchanged is higher than the CIF price + 2% commission. Therefore we cannot hold that the parties filed HSS contract and declared the CIF Value + 2% as value for assessment and paid a much higher amount every time, bona-fidely, following a practice approved by the Custom House. As for the SCN relied on, we find that the SCN issued cannot be relied on for any purpose today unless the decision on the SCN is known. Parties do not rely on the decision on the SCN. In the circumstances we find that the HSBs had declared lower price supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s initiated by MMTC but the Bill of Entry was actually presented by the appellant on the strength of high-sea sales by MMTC to the appellant. It is clear that at the time of sale, title vested with MMTC and at the time of presentation of the Bill of Entry title vested with the appellant. Rule 4 of the Customs Valuation Rules, 1988 speaks of transaction value . The question is which is the transaction which is to be taken into consideration; the transaction between the foreign supplier and MMTC or transaction between the MMTC and the appellant. The question whether the later transaction is the one which led to the import and whether that is the relevant transaction for the purpose of rule 4 of the rules would also arise for consideration. The Bench held the view that the decision in the case of Godavari Fertilisers and Chemicals Ltd. (Supra) needed reconsideration and in the circumstances referred the case to a Larger Bench. 3............. However it is observed that the issue under consideration stands fully resolved by the judgment of the Hon ble Supreme Court in the case of Hyderabad Industries Ltd. v. Union of India reported in 2000 (115) E.L.T. 593 (S.C.). A copy of this ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms the taxable event is the import of goods within the customs barrier. In other word, the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse the customs barrier would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country. 6.6 In the light of this binding ratio, we cannot accept the argument of the appellants relying on the Apex court s judgment in the case of JV Gokal Co. (Pvt.) Ltd. v. CST [1960 (2) SCR 852 = 1999 (110) E.L.T. 106 (S.C.)] that high sea seller could undertake post sale activities and the charges paid towards the same by the HSBs are not includible in the assessable value. 6.7 As regards the invocation of larger period, we find that undisputedly, the impugned transactions were governed by the master agreements entered into between SPL and each of the HSBs. However, for assessment of the impugned imports, the appellants had filed Bills of Entry accompanied by an HSS contract every time such an import took place. As per the declaration in the Bills of Entry, the transaction was governed by the HSS contract and there was no other contract relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.10 As regards the penalties, we find that penalty imposed on each of the HSBs under Section 114A equal to the duty evaded is sustainable in view of our finding of deliberate suppression of payment of additional amounts for high seas purchase of SM. We consider the penalty of Rs. 3,00,00,000/- imposed on SPL under Section 112(a) of the Act to be on the higher side. As regards the penalty imposed on SPL under Section 112(a), we find that SPL had connived with its buyers and executed HSS contracts for the only purpose of getting the impugned consignments assessed at a lower value and to evade payment of appropriate customs duty by the HSBs. SPL had abetted evasion of payment of duty due by its customers. Thus they abetted mis-declaration of value of consignments and rendered the impugned goods liable for confiscation under Section 111(m) of the Act. Therefore, SPL has been rightly found liable to penalty. However, we find that SPL was not a beneficiary of the contravention of provisions involved except that the beneficiaries were its customers. SPL was not legally liable to disclose the fact of its entering into any type of agreements with its buyers. However, its complicity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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