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TMI Blog2019 (12) TMI 1627X X X X Extracts X X X X X X X X Extracts X X X X ..... nd IFFCO. 2. Department of Revenue Intelligence (DRI) initiated investigation into the imports made by the assessee-respondent during the course of which, it recorded statement of some of the employees of the assessee. After analysing the documents and statements, a Show cause notice (SCN) dated 02.05.2014 was issued proposing inter alia to reject the declared value of imported urea and also to re-determine the same in terms of Section 14 of the Customs Act, 1962 read with Rule 4 of the Valuation Rules, 2007; that the imported urea (643994.20 MTs) should be liable for confiscation under Section 111 (m) ibid; etc. It was also proposed to demand the differential customs duty in terms of Section 28 (1) ibid apart from interest under Section 28 AA and penalty under Section 112 (a) ibid. Thereafter, a corrigendum was also issued vide C.No. VIII/10/79/2014-ADJN dated 12.08.2014, proposing to demand differential custom duties payable under Section 28 (A) ibid, apart from penalty under Section 114 A and 112 (a) ibid. 3. Assessee-respondent filed a detailed reply vide letter dated 19.09.2014, interalia contending that:- i. The GOI and Sultanate of Oman signed a memorandum of under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-respondent and one Director would be nominated jointly by IFFCO and the assessee-respondent; that accordingly, assessee-respondent and IFFCO appointed a senior officer of the Department of Fertilizers (hereinafter referred to as DOF) on the Board of OMIFCO out of their quota of one combined director; that the GOI was not a shareholder in OMIFCO and they had no rights to appoint any nominee/representative on the board of OMIFCO; iv) that as per paragraph 8.4 (b) of the JVA 2000 the company had entered into a take or pay agreement with the GOI which would provide for fixed long term pricing of urea for fifteen years commencing with the date of commercial production; that the assessee-respondent and IFFCO would get urea sales fee of US$ 3.50 per MT of urea sold to the GOI (Para 8.4 of the JVA); that a separate agreement known as urea sold to the GOI (Para 8.4 of the JVA); that a separate agreement known as urea sales fee agreement was also arrived at amongst OMIFCO, assessee-respondent and IFFCO for this purpose; that as the project was of national importance the GOI agreed to purchase entire quantity (16.52 lakh metric tonnes per annum being the rated capacity), under a fifteen y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills of Entry was based on long term price agreement (LTP) between OMIFCO and the GOI; that invoices were also raised by the OMIFCO in accordance with the LTP and the GOI also paid as per the invoice raised by OMIFCO; xi) that even though DRI presumed that the GOI and assessee-respondent were related because at the time of signing MOU/JVA, the GOI had equity stake in assessee-respondent, which incidentally on date was zero the notice would not like to dwell upon this issue any more because for the purpose of determining relationship under Section 14 of the Customs Act,1962, it was primarily important that the two persons were buyer and seller; xii) that the GOI as a buyer and OMIFCO as seller cannot be considered as legally recognised partners in business for the simple reason that the GOI was not a business entity; that merely because the GOI bought urea from OMIFCO as per contracted prices indicated in the UOTA and both were bound by certain terms and conditions of the agreement, they cannot be considered as legally recognised partners in business. xiii) that the GOI was neither a sole agent nor a sole distributor or a sole concessionaire of OMIFCO; that merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city which only points out that the price of urea imported was not representing the true and correct value. 5. When the matter was taken up for hearing, Ms. K. Komathi, Jt. Commissioner appeared for the Revenue but, however, the assessee-respondent was not represented. 6. We have heard the Learned Departmental Representative and perused the documents placed on record. 7.1 Learned Adjudicating authority in the impugned order has analysed various documentary evidences including various agreements entered into between the two Governments i.e. GOI and Govt. of Sultanate of Oman and the following are some of his findings on facts/law which have remained unquestioned/ unchallenged:- i) Perusal of records reveal that in order to meet out the urea requirement in India and to ensure uninterrupted supply of urea to farmers in India at a subsidized price a joint venture company had been formed as per the Memorandum of Understanding (MOU) dated 15.06.1993 entered in to between the GOI and the Sultanate of Oman. In terms of the said MOU the companies designated by the GOI for setting up of the proposed joint venture ammonia-urea project were M/ KRIBHCO (assessee-respondent) and M/s. Rashtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meeting held on 20.12.19999 and 27.12.1999 of the Public Investment Board of the GOI vide paragraph 8 thereof that the imports made under the project would be on GOI account and that under the UOTA the Indian sponsors (assessee-respondent and RCF then and IFFCO now) have been designated as agents of GOI. iii) In OMIFCO, though equity participation is by assessee-respondent and IFFCO and directors are nominated by them it is evident that the real person behind the project is the GOI as far as the Indian side is concerned and that the entities are only agents. In addition, it is a fact that when the J V agreement was signed between the assessee-respondent, IFFCI and Oman Oil Company the GOI was having a majority equity stake in IFFCO/assessee-respondent. As a result one has to acknowledge the fact that GOI had control over OMIFCO through assessee-respondent and IFFCO during the relevant period of import. Since both the promoters holding equal stakes (50:50) in the joint venture company through their entities they were having equal control over OMIFCO. iv) Clause 2.1 of Urea Off-Take Agreement (UOTA) as regards (supply and sale by the company) OMIFCO was bound to offer to supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e import of urea was effected by GOI directly and the cost was paid to OMIFCO directly and thus it cannot be disputed that the GOI is the buyer of the goods. But, however, the assessee-respondent having filed the relevant Bills of Entry under Section 46 ibid has legally become the importer of urea in question (in terms of Section 2 (26) ibid) since the assessee-respondent has cleared the urea imported for home consumption being the importer of the same. 7.4. In ultimatum, Learned Adjudicating authority has concluded that GOI is the buyer and OMIFCO is the seller and they are related to each other in terms of Rule 2 (2) (i) (ii) and (vi) of the Valuation Rules 2007. But, however, there was no evidence to show that the value of the imported goods was influenced by their relationship. Learned Commissioner has also concluded that the demand proposed was also hit by limitation of time under Section 28 ibid and accordingly has held that the proposal to reject the transaction value of the imported goods and redetermination of the same was not legally sustainable. We find that the Revenue before us has not brought anything on record as evidence to support its contentions that there has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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