TMI Blog2015 (4) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... be given with reference to the FOB value. So, when there is nothing wrong with the declared FOB value of the goods exported, the DEPB benefit can not be restricted to 16% of the PMV. Moreover, there is a built in the foreign trade policy to discourage the inflation of the FOB to claim the higher DEPB benefit. This mechanism is in the form of restriction in the policy that in the case where the DEPB benefit is available at the rate of 10% or more, the total DEPB benefit available to the exporter shall not exceed 50% of the PMV of the goods. Therefore, as the DEPB benefit claimed by the appellant is much less than 50% of the prevailing market value determined by the Commissioner, the DEPB benefit to the appellant can not be restricted to 16% of the PMV. - Decided in favour of appellant with consequential relief - C/734/2008-CU(DB) - Final Order No. C/A/51384/2015-CU(DB) - Dated:- 9-4-2015 - Ms. Archana Wadhwa, Member (J) and Shri Manmohan Singh, Member (T) Thrd Member on Reference : Shri Rakesh Kumar, Member (T) Majority Order by : Shri B.S.V. Murthy, Member (T) and Ms. Archana Wadhwa Member (J) Shri Piyush Kumar and Ms. Reena Rawat, Advocates, for the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he had received full payment except ₹ 4,70,424/- from the appellant; that he had also exported similar goods in the past on 3-10-2001 and 4-10-2001 @ ₹ 23.87 and ₹ 12.73 per piece respectively, which were purchased from local manufacturers. Regarding huge difference in the prices of pliers supplied to the said exporter and those exported by him, he stated that the pliers exported by him in 2001 were of low quality. Shri Pitti in his second statement dated 2-9-2003 stated that the pliers supplied by him to the said exporter, were of superior quality and chrome plated with good quality PVC sleeves. He refused to state the name addresses of the local artisans from whom he purchased the pliers. He further stated that he has made the payments to these persons out of ₹ 80,00,000/- received from the said exporter; that the steel used in the pliers supplied to the exporter was ₹ 12/- per Kg and the quantity of steel used in one piece was 475 gms. He also submitted Daily Purchase Statement in support of purchase of pliers according to which 8 pliers were purchased @ ₹ 85/88/91/- per piece, 7 pliers were purchased @ ₹ 90/- per piece and 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sleeves. By adding reasonable mediator s margin, he arrived at the current PMV. Inasmuch as the declared FOB price was on the higher side, he determined the total PMV as ₹ 34,63,080/- and restricted the DEPB benefit to ₹ 5,54,093/-. He also imposed redemption fine of ₹ 8 lakhs and confiscating the already exported goods. Further, penalty of ₹ 73,58,267/- was imposed upon the appellant under Section 114 of the Customs Act, 1962 and penalty of ₹ 10 lakhs was imposed on Shri Anand Prakash Pitti, proprietor of M/s. Jindal Tools. 7. The said order of Commissioner (Appeals) is impugned order before us. We have heard Shri Piyush Kumar, advocate appearing along with Ms. Reena Rawat learned advocate, Shri R.K. Mishra, appellant for the Revenue. 8. We have considered the submissions made by both the sides and have gone through the impugned order passed by the Commissioner. The issue to be decided in the present appeal is the correct value of the Drop Forged Combination Pliers Chrome Plated with Heavy Red Transparent Sleeve for the purpose of DEPB. The said goods were procured by the appellant from M/s. Jindal Tools, Nagaur, which is a proprietary concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the invoice and having received the full payment except a part of ₹ 4 lakh, and the goods earlier exported by Shri Pitti being of low quality, we are of the view that the said statement of Shri Pitti has to be held as correct reflection of facts. 9. The Commissioner has also relied upon of the market inquiries resorted to by the Department market prices stands ascertain from the dealers of such goods at Jaipur, which are much on the lower side. However, there is nothing on record to show that the said inquiry related to the identical goods. There are variety of goods available in the market ranging from the lower price to the highest price. If a plier is available at a low cost, as ascertained by the revenue from a dealer at Jaipur, the price of the same can be adopted only if the pliers covered by the said export consignment are held to be contemporaneous. As already observed, there is nothing to show that the price ascertaining from Jaipur dealers was in respect of the same very goods. 10. The revenue has further referred to the investigations made at the end of the actual manufacturer of Pliers from whom M/s. Jindal Tools has purchased the same. He has himself o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the goods in the present case are Drop Forged Combination Pliers Chrome Plated with Heavy Red Transparent Sleeve . As such no comparison can be made in the absence of any report on the type of pliers and the quality of pliers from Jalandhar and Ludhiana. It may not be out of place to observe here that the Revenue itself has found two different prices, i.e., ₹ 10.46 and ₹ 3.86 in respect of different pliers thus lending credence to the appellant s submissions that the value of the pliers would vary from quality to quality. The immediate example which is coming in my mind is nail cutter. Whereas a simple nail cutter may be available at ₹ 10, a more sophiscated and a better quality may have a sale price tag of ₹ 150. The idea to take the above common example is to say that the same very goods may be available at different prices depending upon the quality of the material used and the design. To adopt the value of the other goods, Revenue has to establish beyond doubt that the goods are identical not only in design but also in quality. 12. Further he has not accepted the appellants stand that the Iron-Smiths of Nagaur are illiterate people and as such, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to him and M/s. Jindal Tools having accepted to have supplied the goods to the appellant at the value reflected in the invoice and in the light of our discussions that the evidences referred to by the adjudicating authority are not in respect of the same very goods, we find no reasons to reject the appellant claim and to uphold the impugned order. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief to the appellant. (Pronounced in the open Court on ) Sd/- (Archana Wadhwa) Member (Judicial) 14 . [Per : Manmohan Singh, Member (T)]. - I have gone through the draft order recorded by learned Member (Judicial) setting aside impugned order passed by Commissioner of Customs, Jaipur granting consequential relief to the appellant. I am not in agreement with the findings of the learned Member for which difference is recorded in following paras. 15. The issue for consideration in the appeal was that whether findings of Commissioner on overvaluation of goods exported to claim higher amount of DEPB was correct on the basis of evidences brought on record. 16. Following incriminating evidences are borne on record : (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured at Nagaur. Accordingly enquiries were conducted at Nagaur and such enquiry revealed price of pliers of different sizes as under : (i) 6 - ₹ 165-240 (per dozen) (ii) 7 - ₹ 174-252 (per dozen) (iii) 8 - ₹ 186-264 (per dozen) 17.5 When enquiry was made with Shri Dinesh Goyal Prop. M/s. Sitaram Ramdhan Co., it was revealed that value of purchased goods was ₹ 77,90,424/-. But amount bill in shipping bill was only ₹ 68,98,861/-. When enquired about exporting goods at lesser price than purchased price, he stated that difference was to be compensated from DEPB. 17.6 Statement of Sh. Anand Prakesh Prop. Jindal Tools, Nagaur was recorded to ascertain value of pliers. He stated that he is brother-in-law of Sh. Dinesh Goyal. He exported similar goods in the last on 3-10-2011 and 4-10-2001 @ ₹ 23.87 and @ ₹ 12.73 respectively. In spite of repeated summons Shri Dinesh Goyal and Shri Anand Prakesh, did not respond nor appeared. Even Sh. Abdul Rauf and Mujaffar Ali who supplied pliers to M/s. Jindal Tools also did not appear in response to summons. Accordingly a complaint was filed u/s 108/117 of Customs Act, 1962 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tools. Further M/s. Jindal Tools was not manufacturer. When asked to give source of the goods procured in question, it was intimated that goods were sourced from local dealers and blacksmiths. He was further asked to give details of purchase invoices. But he was not able to furnish as no such invoices were raised and received by him. However, he produced Daily Purchase Statement showing rate for ₹ 85 to 91 per piece of pliers. When asked to furnish names address of suppliers, he could not produce addresses. But he gave names of 8 persons. Out of such 8, two were untraceable and could not be traced. Two out of 6 above, denied supplying any goods to M/s. Jindal Tools, remaining four stated that they sold goods at the rate of ₹ 20 to 25 per piece which were in unpolished, buffed not chrome plated and without sleeve form. But no proof of invoices, payment details duty and receipts could be provided. 19. On the basis of above evidence, allegation is of overvaluation of pliers and also fraudulent availment of higher DEPB credit. 20. Learned adjudicating authority in his Order-in-Original No. 16/2008, dated 8-9-2008 recorded that :- (A) It is observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliers @ ₹ 90/- per pc and 6 pliers @ ₹ 85/- per pc from 30-40 local artisans but did not disclose their names addresses and at last he vide letter dated 24-9-2003 reported the names of only 8 local artisans/blacksmiths as S/Shri Julfikar S/o Mohammed Hasrun, Babu Khan S/o Moose Khan, Salam S/o Gayasuddin, Sheru S/o Jamaluddin, Abid Hussain S/o Mohammed Tahir Hussain, Faiyaz Ahmed S/o Jahoor Ahmed, Mujaffar Ali S/o Mohammed Ali, Kayum S/o Rajjak Khan, whereas on being inquired by the department, 2 persons namely S/o Shri Julfikar and Babu Khan were not found in existence, another 2 persons namely S/o Shri Salam and Sheru refused selling of any goods and 4 persons namely S/o Shri Abid Hussain, Faiyaz Ahmed, Mujaffar Ali and Kayum admitted selling of unpolished, unbuffed pliers without chrome plating PVC sleeves @ ₹ 20-25/- per piece and cost for polishing/buffing, chrome plating and PVC sleeves comes to ₹ 6.50, ₹ 10/- ₹ 1.50/- respectively. Accordingly, after adding the above elements of costing and mediator s margin to the basic price of ₹ 20/- for a 6 plier, ₹ 22/- for a 7 plier and ₹ 25/- for an 8 plier the PMV would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herever the declared FOB value is more than the PMV as declared by the exporter or as ascertained by the Customs authorities, the PMV shall be the basis for granting DEPB credit, and also as per Circular No. 77/2002-Cus., dated 27-11-2002 (para 5), where it is conclusively proved through investigations that the FOB value had been artificially inflated/manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not the FOB value. In view of the position discussed above, where it is conclusively proved through market inquiries and/or investigations, as has been done in this case, that the FOB value had been artificially inflated/manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not the FOB value. Para 3.5 I find that the declared FOB/PMV values were not genuine and obviously, the motive behind misdeclaration of FOB/OMV value was to avail higher DEPB credit. such high export price is not justified by market factors, which clearly establish the exporter s motive to defraud the public exchequer. Accordingly, I hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. In view of above, I am of the view that findings of Commissioner as contained in his Order-in-Original Number 16/2008, dated 8-9-2008 in File No. VIII(H)10/01/adj/2008 are to be upheld except for extent of imposition of penalty under Section 114(iii). Keeping in mind the totality of facts and circumstances, ends of justice shall be met if penalty on M/s. Sitaram Ramdhan Co. is modified and reduced to ₹ 25,00,000 (Rupees twenty five lakhs). There is no other interference in the findings. Ordered accordingly. Sd/- (Manmohan Singh) Member (Technical) DIFFERENCE OF OPINION Whether findings of Member (Technical) regarding fabrication of record and overvaluation of export goods and upholding Commissioner s Order with modification in penalty is to be upheld OR As per findings of Member (Judicial), there is no force in findings of Commissioner of Central Excise and Customs, Jaipur and consequently Order-in-Original is to set aside accepting submissions of appellant. (Pronounced) Sd/- Sd/- (Manmohan Singh) (Archana Wadhwa) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be ₹ 34,63,080 as against the declared PMV of about ₹ 80,94,094/-. Besides this, market enquiry was also conducted about the price of the pliers from several traders according to which the price of 6 inch, 7 inch and 8 inch pliers appeared to be ₹ 61 to 64 per piece, ₹ 63 to 65.5 per piece and ₹ 67 to 69.75 per piece respectively. The Investigating Officer were of the view that since the actual PMV of the goods is ₹ 34,63,080/- it is this value which should be adopted as the FOB price and the DEPB benefit should be available only on this value. Accordingly, the appellant were show caused for rejection of the declared FOB price and restricting the DEPB benefit only to value of ₹ 34,63,080/- and also for imposition of penalty on them under Section 114(ii) of the Customs Act and imposition of penalty on Shri Anand Prakash Pitti under Section 114AA of the Customs Act, 1962. 27. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 8-9-2008 by which he determined the PMV of the goods as ₹ 34,63,080/- in place of the declared PMV of ₹ 80,94,094/- and declared FOB value of ₹ 73,58,267/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reported in 2012 (275) E.L.T. 115 has held that the exporter is not bound to fix the FOB on the basis of the Prevailing Market Value (PMV) and exporter is free to sell the goods at profit and that there is no justification for the fixing FOB value as equal to PMV; that civil appeal filed by the Government against this judgment of the Tribunal has been dismissed by the Apex Court vide judgment reported in 2013 (293) E.L.T. A25 (S.C.); that this judgment of the Apex Court is binding on the Tribunal; that Tribunal in the case of Kanhyana Export Pvt. Limited v. Commissioner of Customs Court, Calcutta reported in 2006 (204) E.L.T. 295 has held that when the full amount of FOB value was received and the department has not refused this evidence and foreign buyers are not related to the exporter and there is no allegation of any flow back to the foreign buyers, the allegation of overvaluation export consignment would not be sustainable; that the same view has been taken in the case of Forge International Limited v. Commissioner of Customs, Mumbai reported in 2006 (206) E.L.T. 451 and that in view of the above submissions, it is the order recorded by the Member (Judicial) which is correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estricted to 16% of this value. 33. DEPB benefit available to an exporter is given on the basis of the FOB value of exports not on the basis of the prevailing market price. In terms of para 7.36A of the Export Import Handbook of Procedures in respect of products where the rate of DEPB scheme is 10% or more, the amount of DEPB Credit against such products should not exceed 50% of the PMV of the goods and at that time of export, the exporter shall declare on the shipping bill that the benefit under DEPB schemes against the export product would not exceed 50% of the PMV. Thus, while the DEPB benefit is available to an exporter is with reference to the FOB value, the total DEPB benefit available should not exceed 50% of the PMV. In this case, the Commissioner has determined the PMV as ₹ 34,63,080/- and has determined the DEPB benefit as 16% of this amount. The order is totally silent about the FOB. FOB value of the goods is examined under Section 14 of the Customs Act, according to which for the purpose of the Customs Tariff Act, 1975 or any other law for the time being export, the value of export goods shall be the transaction value of such goods, that is to say, the price ..... X X X X Extracts X X X X X X X X Extracts X X X X
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