TMI Blog2022 (4) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... yurethane. Further, the exports were under the claim for drawback. The officer who passed order under Section 51 of the Customs Act was satisfied after examination of the exports, that they are as declared in the shipping bill - it can be concluded that the declarations made in the import documents by the 3rd and 4thAppellants and the goods exported by the 1st Appellant are not disputed. It is clear that the case of the department is based on assumption and the investigation is not complete and conclusive. The case of circular trading is setup based on assumption and not proved definitively - It is constrained to observe that the contention of the Appellants that the goods imported and exported are different, deserves acceptance on merits. In a case of alleged circular trading, the crucial aspect is to prove that the goods exported and those subsequently imported are the same. Similarly, in case of alleged overvaluation of export goods with a claim of incentives, allegation of flow back of money from the exporter to the overseas buyer needs to be proved. It is found that the Revenue has failed to prove the same - there are considerable force in the argument that the goods exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 16A is liable to be set aside. Penalty under Section 114 and Section 114AA of the Customs Act - HELD THAT:- The revenue has failed to establish violation of any provisions of Section 113 of the Customs Act and/or any provisions of the Duty Drawback Rules and hence, no penalties can be imposed on any of the Appellants under Section 114 and Section 114AA of the Customs Act - In absence of any violation of provisions of Section 113 of the Customs Act, the goods are not liable to confiscation and seizure of goods is liable to be set aside. Appeal allowed - decided in favor of appellant. - Customs Appeal No. 20003- 20005 of 2020, Customs Appeal No. 20303-20307 of 2020 - FINAL ORDER NOS. 20169 - 20176/2022 - Dated:- 24-3-2022 - MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) AND MR. C. J. MATHEW, MEMBER (TECHNICAL) Shri Niveet Seth, Sh. Sarthak Sachdev, Sh. Prakash Shah, Sh. Mihir Mehta Advocates for the appellants Ms. Sangeeta D. S., Authorised Representative for the respondent ORDER The issue involved is whether the appellants herein have connived in doing circular trading in order to claim wrongful benefit of duty drawback. This batch of appeals are agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were rejected by the impugned Orders-in-Appeal dated 24.06.2019 and 26.05.2020. 10. The 1st proceedings which culminated into Order-in-Appeal dated 24.06.2019, pertain to confiscation of goods, covered under 14 shipping bills seized before export from Cochin port and the goods seized from the private warehouses at Kon and Palaspe villages in Maharashtra wherein the imported goods were stored by Mr. Parmar (one of the importers), under Section 113(d), (i) (ia) of the Customs Act. The amount of drawback claimed by Mr. Kishin Loungani (1stAppellant) in respect of the said 14 shipping bills were rejected. 11. 2nd proceedings which culminated into Order-in-Appeal dated 26.05.2020 pertain to recovery of drawback sanctioned/ pending sanction in relation to past exports under 545 shipping bills. The drawback of ₹ 15,37,11,193/- sanctioned and granted was sought to be recovered and balance amount of pending drawback claim of ₹ 6,22,75,310/- was rejected. 12. The broad allegations/findings of the lower adjudicating/ appellate authorities are as follows: (i) Appellant - Shri Kishin Loungani (Prop. R. Kishin Co.) initially purchased certain quantity of sports goods f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51 of the Customs Act were not originally passed by the Additional Commissioner, DRI. 15.2. It was submitted that the use of definitive article the before the words proper officer in Rule 8 of the Valuation Rules, manifest the intention of the Government of India that the power under Rule 8 the Valuation Rules can be exercised by the proper officer , who made the original assessment and not by any other officer or other proper officer. Reliance in this regard, was placed on the following judgments of the Hon ble Supreme Court: (a) Consolidated Coffee Ltd. Anr. Vs Coffee Board, Bangalore, (1980) 3 SCC 358 (b) Shri Ishar Alloy Steels Ltd. Vs Jayaswals Neco Ltd., (2001) 3 SCC 609 15.3 It was further submitted that though the aforesaid judgments in the case of Cannon India and Reliance Industries are dealing with demand under the provisions of Section 28 of the Customs Act, ratio thereof is clearly applicable to exercise of powers under Rule 8 of the Valuation Rules as well. 15.4 It was submitted that following the ratio of the judgment of the Hon ble Supreme Court in the case of Canon India (supra), the Hon ble Gujarat High Court in the case of CMR Chiho Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that no proceedings were initiated in respect of imported goods for any alleged contravention of Section 111 of the Customs Act. Thus, the declared description and the Country of Origin in respect of imported goods are not in doubt and are not alleged as being mis-declared by the importer(s) in the present proceedings. 16.7 It was submitted that the Revenue to prove its case relied upon 2 test reports. 1st test report pertains to two samples allegedly drawn one from the goods seized at Panvel and the other from export consignments. The Chemical Examiner in the test report has not specified the details of the source from which the samples were drawn. From the test reports, it is not clear whether the football made from PU were from the sample drawn from the consignment seized at the Cochin port or from the warehouse of the 3rd Appellant, where the goods were seized. There is always a possibility of error when samples are marked as A and B . 2nd test report confirmed that the sample of football exported from the Cochin port was made out of PU and the sample of football seized from the warehouse of 3 rd Appellant was made out of PVC. The test reports supported the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant are the same. 16.10 It was submitted that the show cause notice refers to certain emails and the attachments thereto exchanged between one Shri Nihar Pujara and the 1stAppellant. Shri Nihar Pujara is not a conoticee and statement of Nihar Pujara is not forthcoming from the show cause notice or the relied upon documents. In any event, the said emails do not establish charge of over-invoicing with an intent to claim excess incentive by resorting to circular trading. 16.11 Significantly in the impugned Order, the Commissioner of Customs (Appeals) does not rely upon the emails to sustain the said charge. 16.12 It was submitted that the authorities below have grossly erred in holding that there were no records to determine the value under Rules 4 and 5 of the Valuation Rules and hence, the value is determined under Rule 6 of the Valuation Rules by resorting to market survey. The goods imported were common sports goods such as footballs manufactured with PU/PVC and other sports articles, for which the details of identical or similar contemporaneous imported goods are easily available. 16.13 It was submitted that resorting to Rule 6 of the Valuation Rules and determining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACC dated 27.05.2004 issued by Commissioner of Customs (Exp.) Circular No. 74/2020 dated 07.09.2000 16.20 It was submitted that as per the drawback schedule, irrespective of the declared Free on Board ( FOB ) value, drawback cap per unit of football is ₹ 80. This meant that even though the drawback rate is 13.4%, the incentive value is restricted to ₹ 80, if the amount of drawback in percentage terms exceeds the drawback cap per unit of ₹ 80. In the instant case, drawback was restricted to ₹ 80 and therefore, the allegation of overvaluation for claiming excess incentive are legally not tenable. 16.21 It was submitted that sale consideration in respect of all the exports has been received by the 1st Appellant and the copies of the Bank realization certificates (e-BRC s) evidencing the same are available on the website of DGFT. Hence, the contention that consideration has not been received against the export of goods, is untenable in law. 16.22 It was further submitted that the entire case against the 1stAppellant is based on the statements of various persons purported to have been recorded under section 108 of the Customs Act, none of whom were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gaurav Mungad (supra). 17.2 It was submitted that the case against the Appellant of alleged circular exports/trading cannot be proved solely based on statements without independent corroboration with the evidence gathered. Reliance in this regard was placed on the judgment of the Hon ble Supreme Court in the case of A. Tajudeen Vs Union of India, 2015 (317) ELT 0177 (S.C.) and this Tribunal in the case of Narendra Raval vs Commissioner of Customs, 2017 (347) ELT 565. 17.3 It was submitted that retraction of the statement by the 1stAppellant before the Hon ble Kerala High Court cannot be ignored and brushed aside merely as an after-thought. Reliance in this regard was placed on the judgment of the Hon ble Supreme Court in the case of Parle Bevarages Pvt. Ltd. Vs CCE, Bombay, 1998 (98) ELT 585 (S.C.). 17.4 The statements of the Appellants in other connected appeals, particularly the supplier viz. Shri Mansukh Jagda are contradictory and not conclusive and hence the same cannot be relied upon. 18. In view of the above submissions, it was contended that the confiscation, re-assessment of value, the recovery of drawback sanctioned under Section 75 and Rule 16 / Rule 16A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d supplied the same to 1st Appellant for onward exports. The invoices for sale of manufactured goods from 5 th Appellant to 1st Appellant are on record. 24.2 The 5thAppellant had not prepared or dealt with any false documents regarding the value and manufacture of the aforesaid exported goods and had not connived in any circular trading of the goods, as held in the impugned Order. 24.3 It is a fact on record that the footballs and other sports goods purportedly procured from the local market by 1st Appellant and declared as manufactured by the 5th Appellant, were Indian goods. However, the goods imported by the 3rd and 4th Appellants were of Chinese origin and hence there can be no circular trading in the facts of the present case. 24.4 Other arguments of the 5th Appellant are similar to those stated above. Accordingly, it was submitted that no penalty under Section 114 and Section 114AA can be imposed on the 5th Appellant. Submissions on behalf of the Respondent Revenue 25. The issue in the judgment of Canon India (supra) is in relation to the power of the DRI Officers to issue SCN and/or raise demand under Section 28 of the Customs Act. 26. In the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K.P. Abdul Majeed Vs Commissioner of Customs 2014 (309) ELT 671 Commissioner of customs, Kerala Vs Om Prakash Khatri, Dhiraj Kumar Devasi, Surendra Singh Rao and Panna Gold Impex Ltd.2019 (3) TMI 457 - Kerala high court 33. It is submitted that the failure to give the opportunity to cross-examine the witnesses is not violative of principle of natural justice. The Apex Court has reiterated the same in the case of Surjeet Singh Chhabra (supra). Reliance is further placed on the following judgments: Kanungo Co. Vs CC, Calcutta Ors., 1983 (13) ELT 1486 (S.C.) Telestar Travels Pvt. Ltd. (supra) Shri Odiyandi Ayyappa Muddaiah, Shri Rajendra Prakash Pawar and Mohammed Anif Vs CC, 2019 (8) TMI 337 34. Reliance is placed on the findings of the Order-in-Original No. 139/2018, wherein it is stated that the adjudicating authority has observed from available record, that the fact that goods have been reimported has not been declared at the time of filing the bill of entry. But going by the admission, it is clear that the imported goods were used in circular trading. It is also evident that the consignments had mixture of different varieties and the samples were dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record and in view of the submissions made, we are of the considered opinion that entire case of the Revenue is based on the statements of the Appellants who are co-accused and various other persons like driver and other employees of the 1st Appellant, transporters, etc. 42. We find that entire case of the Revenue is mainly based on the statements, which are not corroborated with any independent credible evidence. 43. The Hon ble Supreme Court in the case of A. Tajudeen Vs Union of India, 2015 (317) ELT 177 (S.C.), in a challenge relating to adjudication proceeding albeit by Enforcement directorate, has held as follows: 3. Before adjudicating upon the merits of the controversy, it is essential to narrate the factual position leading to the issuance of the aforesaid memorandum dated 12-3-1990. The facts as they emerge from the pleadings, and the various orders leading to the passing of the impugned judgment rendered by the High Court of Judicature at Madras (hereinafter referred to as, the High Court) on 28-9- 2006, are being chronologically narrated hereunder :- 16. Having given our thoughtful consideration to the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otated. However, the record does not bring out how the cash was so used to generate remittances, or how the cash was rotated. It is also not alleged that the remitting firms in Dubai made payments out of their own pocket and the allegation is that Dirhams were procured from local Indians like Salam, Paicher and Zaida in Dubai. There is no allegation or finding that these three individuals were under the control of the appellants and therefore, for the department to succeed in its allegation of over-invoicing and hawala, compensatory payments against supply of such Dirhams in India have to be established which has not been done and no one has been identified as the person or persons to whom such compensatory payments were made in India. (emphasis supplied) 47. The Hon ble Supreme Court, in an appeal by the revenue, dismissed the appeal as reported in Commissioner of Customs, Mumbai Vs Tex-age, 2016 (340) ELT 3 (S.C.), and held as follows: 3. A perusal of the judgment of the CESTAT shows that the entire material placed before it has been discussed and on that basis, a finding of fact is arrived at to the extent that the allegations of flow back of the remittances by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. Counsel of the Appellants, we understand that footballs are generally made from both PU and PVC. Footballs manufactured out of PU are costlier compared to those manufactured from PVC, which is a cheaper material. The 3rd and 4th Appellants in their written submissions have submitted a chart providing the weight of the footballs imported by them and the weight of the footballs exported by the 1st Appellant. From the perusal of the said chart, it appears that average per unit weight of the football imported by the 3rd and 4th Appellant is 250 Grams and 344 Grams respectively and those exported by the 1 st Appellant is 429 Grams, which is substantially different. We find that the said argument of difference in weight has not been disputed by the revenue. This aspect of the matter is crucial, when there is no dispute as to vast difference in weight of imported and exported goods, it is difficult to hold that the same goods are repeatedly exported by 1st Appellant by way of circular trading. 51. The test reports issued by DYCC, Cochin are incomplete and inconclusive and do not further the case of the Revenue. It appears to us that contradictory results are achieved in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on merits. 56. We find that revenue, in paragraph E3 of its written submissions, accepts that ..it is submitted that there are certain deficiencies in the investigations on account of the above facts. 57. The Revenue has accepted that there are deficiencies in the investigations. We agree with the ratio of various judgments cited by the revenue that it is not required to prove its case with mathematical precision, however we find that the Revenue has failed to prove its case with even pre-ponderance of probability. In the present case, crucial aspects are not dealt with by the Revenue. 58. In a case of alleged circular trading, the crucial aspect is to prove that the goods exported and those subsequently imported are the same. Similarly, in case of alleged overvaluation of export goods with a claim of incentives, allegation of flow back of money from the exporter to the overseas buyer needs to be proved. We find that the Revenue has failed to prove the same. 59. We find that the above stated lapses in the investigation are serious and fatal to the case of the Revenue and crucial aspects for proving its case are overlooked and ignored by the Revenue. We find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igence Officer Place : Cochin Date : 25.08.2015 62. We find that such unilateral market survey report issued by the investigating officer, can never substitute the evidence required to subject a citizen to penal consequences. 63. We further find that apart from above report, the Revenue has failed to provide any conclusive evidence to substantiate that footballs exported were overvalued to claim ineligible drawback and more particularly when the 1st Appellant has produced Bank Realisation Certificate evidencing the receipt of export proceeds in convertible foreign exchange, as are downloaded from the website of DGFT. 64. We further find that the Revenue has failed to prove that (i) the footballs and other sports goods exported by the 1st Appellant were to the firms owned and/ or operated by the son of the 1 st Appellant i.e. Shri Kamal Loungani, who is the 2nd Appellant and (ii) the relationship between the 1st Appellant and the 2nd Appellant has affected the transaction value. 65. We find that there was a cap on maximum drawback per piece in respect of footballs. Hence, the Revenue had already taken effective steps to curb any loss due to any alleged over- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of proving, in any proceedings under the Customs Act, the truth of the facts which it contains only when the person who made the statement is examined in the case before the adjudicating authority and the adjudicating authority is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. None of the exceptions contained in Section 138B (1)(a) are recorded as reasons by the authorities below to dispense with the mandatory requirement of Section 138B. 71. The Hon ble High Court for Allahabad in the case of CCE, Meerut-I Vs Parmarth Iron Pvt. Ltd., 2010 (260) ELT 0514 (All) has held as follows: If the Revenue chooses not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. 72. Similar view has been taken by the Hon ble Delhi High Court in the case of Additional Director General (Adjudication) Vs Its My Name Pvt. Ltd., 2021 (375 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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