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2015 (4) TMI 1072 - CESTAT NEW DELHI

2015 (4) TMI 1072 - CESTAT NEW DELHI - 2015 (330) E.L.T. 210 (Tri. - Del.) - DEPB benefit - Misdeclaration of value - Appellant exported Drop Forged Combination Pliers Chrome Plated with Heavy Red Transparent Sleeve under DEPB scheme but revenue after examination, doubts about the eligibility of goods for DEPB and allowed the export on provisional basis under DEPB. After clearance of the goods it appeared that the FOB as well as PMV of the goods has been inflated and department rejected the decl .....

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arket price of the goods, so long as it conforms to the provisions of Section 14 of the Customs Act, 1962 and DEPB benefit is to 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 t .....

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15-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. Shri R.K. Mishra, AR, for the Respondent. ORDER [Order per : Archana Wadhwa, Member (J)]. - The appellant M/s. Sitaram Ramdhan & Co. filed a Shipping Bill dated 28-3-2003 for export of 78 .....

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. Accordingly, samples were drawn and marketing inquiries were conducted with local dealers at Jaipur. The prices of the pliers were ascertained in the range on the lower side for each size of the pliers as compared to the declared price accordingly. Further, investigations were conducted at M/s. Jindal Tools, Nagaur who had supplied the goods to the present appellant. He was also asked to inform the source of procurement of pliers supplied by them to the present appellant along with costing dat .....

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er exporters, in which the prices of pliers exported were very less compared to their prices, he stated that this could be due to difference in quality of the goods with respect to metal, plastic sleeves, etc. Regarding purchase of goods for ₹ 77,90,424/- and export of the same only on ₹ 68,98,861/-, he stated that he planned to compensate this loss by the amount of DEPB to be received. 4. Shri Anand Prakash Pitti, proprietor of M/s. Jindal Tools, Nagaur, in his statement dated .....

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he 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 .....

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ious manufacturers of pliers in support of prices charged by him. M/s. Jindal Tools, Nagaur vide letter dated 24-9-2003 informed the names of 8 persons from whom they purchased the pliers for supply to the said exporter, were S/Shri Julfikar s/o Mohammed Harun, Abid Hussain s/o Mohammed Tahir Hussain, Faiyaz Ahmed s/o Jahoor Ahmed, Mujaffar Ali s/o Mohammed Ali, Babu Khan s/o Moose Khan, Kayum s/o Rajjak Khan, Salam s/o Gayasuddin, Sheru s/o Jamaluddin, all of Nagaur. Out of these 8 persons, onl .....

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ellant also produced invoice dated 27-3-2003 of M/s. Jindal Tools, Nagaur showing purchase price of export goods as ₹ 77,90,424/-. As M/s. Jindal Tools had procured the goods manufactured from dealers/blacksmiths at Nagaur; they were asked to give the details of the said persons. However, M/s. Jindal Tools produced a Daily Purchase Statement giving details of the purchase of said goods from individual persons showing price of the goods ranging from ₹ 85/- and ₹ 91/- per piece. .....

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e notice was issued to them proposing denial of the excess DEPB made by them. It is seen that the adjudicating authority, adopted the price at which the pliers were supplied by the blacksmiths to M/s. Jindal Tools and added the expenses incurred for polishing, buffing and for chrome plating and cost of PVC 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/- an .....

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long 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 proprieta .....

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such the invoice raised by him does not reflect upon the correct position. He has also referred to the said statement wherein Shri Pitti disclosed that the Pliers were also exported by him in the year 2001 at a less value. However, the adjudicating authority has failed to take into consideration the discloser made by Shir Pitti that the Pliers exported by him in the year 2001 at lower rate were not of the same quality as the Pliers involved in the present case. The goods supplied by him to the .....

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produced by the revenue to reflect upon the fact that the exports made by Shri Pitti and the present export goods were identical in quality. Shri Pitti has very clearly deposed that the goods exported by him in 2001 were of low quality. For adopting, the value of the other goods, they have to be contemporaneous in nature, i.e., they should match in respect of quality, quantity and time. Learned advocate appearing for the appellant has very strongly contested that the goods covered by the present .....

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ods 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 availab .....

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d of the actual manufacturer of Pliers from whom M/s. Jindal Tools has purchased the same. He has himself observed that such pliers manufactured by the Iron Smiths of Nagaur are crude and in unfinished condition, when the same were supplied to M/s. Jindal Tools. The said M/s. Jindal Tools further did grinding, polishing, buffing and other ancillary process to make them finished and marketable. This process, increased the cost of pliers. However, he has added the cost of such activities of polish .....

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g of the adjudicating authority. He has picked up the basic price, as revealed by the Iron-Smiths, who are illiterate people and do not maintain any records. In the said price, he has added the cost of the various processes, which stands revealed by the artisans. There is no basis for the Commissioner to pick up the price of polishing, buffing, chrome plating, etc., has ₹ 6.50, ₹ 10/- and ₹ 1.50 respectively. In the business, the sale price of the goods cannot be decided based .....

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e stand of the Revenue. 11. He has also referred to the information received from ICD, Jalandhar and Ludhiana indicating that the price of similar goods is ranging from ₹ 10.46/- to ₹ 3.86/- per piece. However, as the appellant have claimed that the goods supplied were of higher quality and are different from the goods exported from ICD, Jalandhar and Ludhiana. Learned advocate has submitted that the goods, which are being referred to by the Commissioner, may be the simple plier .....

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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 .....

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ent, they have to be accepted as correct reflection of facts. However, we fail to understand that the same reasoning does not stand applied by the adjudicating authority to the statement of Shri Pitti, who has actually supplied the goods. The said statement of Shri Pitti was also recorded in terms of the provisions of Section 108 of the Customs Act, 1962, before a Gazetted Officer and during the course of investigation. The same is also supported by documentary evidences, in the shape of invoice .....

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sent to the foreign buyer through the Commission agents efficient trading under a contract order and they have received the entire consideration from their foreign buyer through the Banks. The said fact is not disputed by the revenue but stands rejected by the Commissioner on the ground that realization of foreign exchange equal to the FOB value cannot be accepted in the light of the judgment in the case of Olympia Overseas wherein it was held that the receipt of foreign receipt is no defence wh .....

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he revenue. The appellant have procured the goods from M/s. Jindal Tools and having paid the entire consideration 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 s .....

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owing 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) There was purported export of Drop Forged Combination Pliers Chrome Plated with Heavy Red Transparent Sleeve. These tools were procured from M/s. Jindal Tools. Nagaur - a proprietary concern of Sri Anan .....

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l of suppliers of M/s. Jindal Tools based in Nagaur revealed price of pliers to be very low. On enquiry relating to 8 suppliers, it was found that two were non-existent. Other two admitted that no supply of pliers made by them. Four suppliers stated that the impugned goods were sold for ₹ 20/- to ₹ 25/-. (d) Enquiry was also conducted from ICD, Jalandhar and ICD, Ludhiana indicating that price of similar goods being exported from both ICDs ranging from ₹ 10.46/- to ₹ 3.86 .....

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/27-3-2003 of M/s. Jindal Tools, Nagaur indicating values of different sizes of pliers as follows : (i) 8 Pliers = ₹ 101/- (ii) 7 Pliers = ₹ 96/- (iii) 6 Pliers = ₹ 91/- Total value ₹ 77,90,424/- 17.3 Market enquiry was conducted at Jaipur on 29-4-2000 and prices of pliers as ascertained are as follow : (i) 6 pliers - ₹ 61-64 (ii) 7 pliers - ₹ 63-65.5 (iii) 8 pliers - ₹ 67-69.75 17.4 It was found that pliers were grossly overvalued with intenti .....

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l 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 D .....

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dated 21-2-2004 of Shri Salam s/o Gayasuddin and Shri Sheru s/o Jamaluddin both of Nagaur tendered under Section 108 of the Customs Act, 1962 whose names were informed by Shri Anand Prakash Pitti as suppliers of pliers. In the said statements, these two persons have denied having supplied any such tools to M/s. Jindal Tools, Nagaur meaning thereby that the names of suppliers and details of purchases mentioned in the daily purchase statement are false and fabricated. (ii) He was shown the stateme .....

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statement that he had purchased the 78024 pliers from local manufacturers and had made payment to them. In this regard he stated that he had neither obtained any bills for purchase nor obtained any receipts for payments made to the suppliers. 17.8 As the goods presented for export appeared to be overvalued, market inquiry was conducted for ascertaining PMV (Prevailing Market Value) Difference found out was as under :- Size of pliers Declared PMV (Rs.) Average PMV as per market inquiry (Rs. .....

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ere 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 supply .....

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008 recorded that :- (A) It is observed that the exporter in his export invoice showed Unit price for 8 Pliers as USD 2.00 (equivalent to ₹ 95.10), 7 Pliers as USD 1.95 (equivalent to ₹ 92.72) and 6 Pliers as USD 1.90 (equivalent to ₹ 90.35) and claimed to be sourced the export goods at the rate of ₹ 101/- ₹ 96/- & ₹ 91/- for 8 , 7 & 6 Pliers respectively from one M/s. Jindal Tools, Nagaur owned by his close relative (brother-in-law) under Invoice No. .....

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acturers of Nagpur was ₹ 165-240/- per dozen for 6 plier, ₹ 174-252/- per dozen for 7 plier and ₹ 186-264/- per dozen for 8 plier. (iii) Contemporary export price of similar goods as reported by AC, ICD, Jalandhar and Ludhiana were ranging from USD 0.22 to 0.67 per piece, which is equivalent to ₹ 10.46 to 31.86 per piece. (iv) Shri Anand Prakash Pitti, Proprietor of M/s. Jindal Tools, Nagpur, who supplied the export goods in his statement dated 28-8-2003 deposed that he h .....

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suppliers 2 were non-existent, 2 submitted that did not supply any material and other 4 though confirmed supply but price quoted was only 20-25 (without sleeves, polishing, buffing, chrome plating, Commissioner accordingly concluded. Para 3.3 I further observed that Shri Anand Prakash Pitti of M/s. Jindal Tools, Nagaur in his further statement claimed procurement of 8 pliers @ ₹ 85/88/91 per pc, 7 pliers @ ₹ 90/- per pc and 6 pliers @ ₹ 85/- per pc from 30-40 local artisa .....

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xistence, 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 t .....

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I find the PMV ascertained by the department fair & justified. Para 3.4 As per the provisions under erstwhile Section 14(1) of the Customs Act, 1962, in case of assessing the value for purpose of export, value is to be determined at the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of exportation in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price .....

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e the rate specified under DEPB is in relation to FOB, at best, an attempt was made to ascertain the FOB in respect of the market price. Further, as per the guidelines for determination of PMV in respect of the export goods prescribed in C.B.E. & C. Circular No. 69/97-Cus., dated 8-12-1997, in the case of export goods purchased from open market, or from a manufacturer and the PMV cannot be determined following the prescribed procedure, the evidence of local prices of similar goods may also b .....

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dated 9-9-2002 clarifies that wherever 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 work .....

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tive 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 that the PMV ₹ 80,94,094/- and FOB value of ₹ 73,58,267/- declared by the exporter in his Shipping Bill No. 2249, dated 28-3-2003 are liable to be rejected and the true PMV is determined as ₹ 34,63,080/- and accordingly actual DEPB credit entitlem .....

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heir presence. It was only after this, statement could be recorded for completing investigations. Only contention of the exporter was that no action can be initiated once foreign exchange equal to FOB value has been realized. In this regard judgment in the case of Olympia Overseas v. C.C., Cochin - 2008 (223) E.L.T. 114 (Tri.) (citation) is relevant where it has been held that the receipt of foreign remittance is no defence where overvaluation is conclusively proved. In the case of Om Prakash Bh .....

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higher DEPB/Drawback. There is no evidence on record as to higher quality of goods to command a high value. Investigations also brought out that false documentations was made to defraud Revenue. Existence of suppliers remained in mystery. Aforesaid evidence borne by record reveals that Revenue was defrauded making higher DEPB/drawback by the appellant. 23. Since we have arrived at conclusion of fabrication of records and overvaluations, defrauding of Revenue in the form of DEPB is proved. T .....

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. 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 Commissi .....

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akish Building Material Trading (LLC), Dubai under DEPB scheme. For the purpose of DEPB benefit, the Prevailing Market Value (PMV) of the goods was declared as ₹ 80,94,094/-. The pliers being exported were of 6 , 7 and 8 in length. The shipping bill for export of this consignment had been filed at ICD, Jodhpur on 28-3-2003. The goods were examined, the samples of the goods were drawn and sent to CRCL for a test and the CRCL s report confirms the description of the goods that the goods are .....

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were initiated. The appellant had purchased the goods being exported from M/s. Jindal Tools, Ajmer. The proprietor of M/s. Jindal Tools, was one Shri Anand Prakash who had supplied the goods in question to the appellant at the rate of ₹ 85 to 91 per piece for 8 inch pliers, ₹ 90 per piece for 7 inch pliers and at the rate of ₹ 85 per piece for 6 inch pliers. On being asked to disclose the source of procurement, Shri Anand Prakash stated that he had purchased the goods from loca .....

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of the goods consignment appeared 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, .....

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judicated 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/- and restricted the DEPB benefit to ₹ 5,54,093/- as against the DEPB of ₹ 11,77,323 claimed by the appellant. He also ordered confiscation of the export consignment for misdeclaration of the value, but since the same had already been exported, the redempti .....

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ief, holding that there is no evidence to justify the rejection of the declared FOB value and the declared PMV, the Member (Technical) by separate order dated 25-10-2013 rejected the appeal except for reducing the penalty on the appellant to ₹ 25 lakh. On account of difference between Member (Judicial) and Member (Technical), the point of difference as mentioned above has been referred to the undersigned for decision. 29. Heard both the sides in respect of the point of difference. 30. .....

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e declared FOB is sought to be rejected only on the basis of the market enquiry which was conducted behind the appellant s back; that the DEPB benefit in respect of the goods exported is 16% of the FOB value and the total DEPB benefit claimed is much less than the 50% of the declared PMV of the goods, that the DEPB benefit claimed is also less than 50% of the PMV determined by the department; that the PMV adopted by the Commissioner ₹ 34,63,080/- is even less than the market value of the g .....

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sed 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 bu .....

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xported from M/s. Jindal Tools, Ajmer and the proprietor of M/s. Jindal Tools Sh. Anand Prakash Pitti has not co-operated with the investigating officers; that though he claims to have procured the pliers from 30 to 40 local artisans, he could name only few of them and some of them have even denied supplying the pliers to them; that there is no justification for huge difference between the price at which the artisans supplied the pliers and the price at which M/s. Jindal Tools had supplied the p .....

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(Technical) which is correct. 31. I have considered the submissions from both the sides and perused the records. 32. The declared FOB value of the export consignment is ₹ 73,58,267/- and the declared PMV is ₹ 80,94,094/-. There is no dispute that on examination by the Customs, the goods were found to be as per the declaration and even the chemical examiner s report also supports the declared description of the goods. There is also no dispute that the export proceeds have be .....

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would be about ₹ 40 per piece for 6 inch pliers, ₹ 42 for 7 inch pliers and ₹ 45.45 for 8 inch pliers. It is on this basis that PMV value of the goods has been determined as ₹ 34,63,080/- and the DEPB benefit has been restricted 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 re .....

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se, 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 actually paid or payable for the goods when sold f .....

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ery of the export consignment at the time and place for exportation and the exporter and the foreign buyer should not be related person and price should be the sole consideration for export sale. In this case, there is no allegation that the appellant and the foreign buyer were related persons and there is no dispute that full export proceeds have been received by the appellant. There is no allegation that there was no flow back from the appellant to the foreign buyer. The Tribunal in the case o .....

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