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TMI Blog2025 (5) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... ,52,09,459/- deposited by the appellant on account of interest. The order also imposes a penalty of Rs. 164,75,70,456/- upon the appellant under section 114A of the Customs Act. 2. The appellant asserts that it is engaged in gold and silver refining and minting facilities and for performing these functions in India, the appellant imports gold/silver dore bars under an actual user license (import authorization) issued by the Directorate General of Foreign Trade [DGFT]. The said dore bars are imported by the appellant from various foreign suppliers, including International Bullion Banks, across the world and for this purpose the appellant entered into separate contracts with each of its supplier. 3. The list of suppliers and the contracts, as stated by the appellant, is tabulated below: S. No. Foreign Supplier Details of Agreements 1. M/s MKS, SA [MKS] Dore Sourcing Agreement [DSA] dated 02.02.2012 read with six supplementary Agreements along with supplemental Agreements 2. Standard Chartered Bank [SCB] Consignment, Safe keeping, Production and Purchase Agreement for Precious Metal dated 20.07.2012 [SCB Agreement] 3. Bank of Nova Scotia [Scotia Bank] Bullion Refining Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld dore bars are taken to the factory of the appellant, wherein they are weighed and melted to form a homogenized solution. It is from such a solution that multiple samples are drawn and sealed in the presence of a representative appointed by individual mining companies. One sample is assayed by a refinery and another sample is sent to an overseas laboratory nominated by the supplier. The two assay reports are reconciled to agree on a final assay of gold/silver content on the basis of which the final quantity of gold/silver is determined. The settlement document called as "final settlement report" becomes the final quantity. The quantity mentioned in the aforementioned document is one of the factors, basis which MKS or International Bullion Banks issue the final supplier invoice capturing the final quantity of gold and silver content in the dore bars. (vi) Refining: At the same time refining and manufacture of gold/ silver alloys and gold/silver products as per the market requirements are undertaken at the factory of the appellant. The ownership, however, lies with the foreign suppliers and the appellant merely acts as a bailee of the goods. (vii) Customer Invoicing and Settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g therein that during their internal review exercise, they noticed certain inconsistencies in respect of the Bills of Entry which had been finalized in the past. The importer pointed out that the value declared in the invoices submitted at the time of import was not the transaction value of import and that it was finalized on the basis of invoices issued at a later date by the supplier. It was further stated that inconsistency took place as the Bills of Entry were finalized on the basis of the provisional invoice instead of the final invoice issued later by the supplier and further that freight and Dore Procurement Charges [DPC] were also paid based on provisional invoice as against the final invoices; (iii) At the time of commencement of import operations in the year 2012 as well as at the time of reply to the questionnaire in the year 2017, the appellant informed the Customs that the declared value in the Bill of Entry was the transaction value whereas it was provisional only subject to finalization at a settlement date It also appeared that the importer did not disclose the facts about the methodology of issuance of final invoices by their foreign suppliers; (iv) Prima-facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRI or in their submission during the related party enquiry by the Assessing Group. The Agreement mentioned about an internal Agreement which was never disclosed to the customs and by way of misrepresentation of facts about the said internal arrangement or about mutually accepted mechanism with their sellers, the importer created a picture that mutually accepted mechanism / internal arrangement was that the price was computed on the basis of London Bullion Market Association [LBMA] price a day before the handing over the goods for import. The upward finalization of price at a later date resulted in short payment of duty and huge loss to the exchequer which needed to be demanded; and (ix) It appeared that extended period of limitation provided under sub-section (4) of section 28 of the Customs Act was invokable for raising the demand against the importer and, accordingly, the importer appeared to be liable to pay the differential duty amounting to Rs. 152,22,81,895/- in respect of the imports of Gold Dore Bars and Bills of Entry finalized during the period 24.10.2016 to 12.09.2020. 8. Regarding inclusion of Metal Lease Charges in the assessable value, the show cause notice mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the imported goods valued at Rs. 54563,18,86,790/- (Rupees Fifty Four Thousand Five Hundred and Sixty Three Crores Eighteen Lakhs Eighty Six Thousand and Seven Hundred Ninety only) were liable for confiscation under Section 111(m) of the Customs Act, 1962; iii. Whether the differential Customs duty amounting to Rs. 164,75,70,456/- ( Rupees One Hundred Sixty Four Crores Seventy Five Lakhs Seventy Thousand Four Hundred Fifty Six Only) evaded/short paid by them was liable to be demanded and recovered from the importer by invoking the extended period of limitation as per provisions of Section 28(4) of the Customs Act, 1962; iv. Whether interest was liable to be demanded and recovered from the importer on the aforesaid evaded/short paid Customs duty in terms of section 28 AA of the Customs Act, 1962; v. Whether importer was liable to face penal consequences under Section 112(a)(ii) of the Customs Act, 1962 for the act and omission rendering the goods liable for confiscation; vi. Whether importer was liable to face penal consequences under Section 114A of the Customs Act, 1962 for having short paid the duty by reason of willful misstatement and suppression of facts; vii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principal Commissioner was justified in imposing penalty under section 114A of the Customs Act; and (iv) The Principal Commissioner was justified in ordering for inclusion of the metal lease charges and insurance premium with the transaction value. 16. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered. 17. The transaction value of the gold/silver dore bars imported by the appellant has been rejected for the following reasons: (i) The difference in value, basis the final invoice has to be included in the assessable value; (ii) Metal lease charges have to be included in the assessable value; and (iii) Post-import insurance premium has to be included in the assessable value. 18. The order passed by the Principal Commissioner confirms differential customs duty of Rs. 164,75,70,456/- and appropriates an amount of Rs. 152,22,81,144/- deposited by the appellant during investigation. The details are contained in the following chart: Sl. No. Particulars Amount in Rs. 1. A Valuation of imported goods on the basis of final invoices in respect of 714 Bill of Entires finalized duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainment of such duty; or (ii) the duty ascertained by the proper officer, the amount of duty along with the interest payable thereon under section 28AA or the amount of interest which has not been so paid or part-paid. Provided that the proper officer shall not serve such show cause notice, where the amount involved is less than rupees one hundred. ***** (4) Where any duty has not been 10[levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,- (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been 11[so levied or not paid] or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice." 22. The relevant portion of section 114A of the Customs Act under which penalty has been impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not final and for the said omission to truthfully disclose the value at the time of filing of Bill of entry, the importer have rendered the said goods liable for confiscation and themselves liable for penalty Further, for the act of short payment of duty by way of willful misstatement and suppression of facts and for which the duty has been demanded by invoking the provisions of sub section 4 of Section 28 of the Customs Act, the importer had rendered themselves liable to pay a penalty equal to the duty under Section 114A of the said Act. 61.3 The noticees has vehemently submitted that as far as differential duty was concerned this was paid by them suo moto. However their tall claim of suo motto payment has already been negated in the paras above bringing to the fore the compelling circumstances under which the said payments were made. Further they have submitted that penalty was not imposable when the issue was one of interpretation of law. I find that the case is not of interpretation of law. It is a matter of fact wherein the importer has willfully submitted provisional invoice at the time of import in their Bill of Entry, but, remitted the amount as per the final invoice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be less, the appellant would have paid more customs duty. It is for this reason the appellant has claimed refund of the excess customs duty, which is clear from the following chart: Details of differential duty refundable Period Total Differential duty in Rs. Normal period of limitation i.e. Bill of Entry finalized on or after 22.10.2019 - 10,72,09,917 Extended period of limitation i.e. Bills of Entry finalized before 22.10.2019 but on or after 22.10.2016 - 1,16,13,19,835 Total finalized Bill of Entries - 1,26,85,29,752 31. It is also a fact that the appellant had also claimed refund of customs duty to the extent of Rs. 113,97,35,837/- on 22.04.2024 on account of excess duty payment in respect of provisionally assessed 300 Bills of Entry filed from December 2019 to October 2023 and by an order dated 08.10.2024, the Assistant Commissioner (Refund) sanctioned refund. The relevant portion of the order is reproduced below: "18. I find that in the past similar refund claims of the importer had been sanctioned vide A.O. No. 02/AKS/2022 dated 07.04.2022, 28/AKS/2022 dated 13.06.2022 and 344/UK/2022 dated 31.03.2023 issued by the then refund sanctioning authority. The Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty payable (as per customs department) Period Total different duty in Rs. Normal period of limitation i.e. Bill of Entry finalized on or after 22.10.2019 60,33,73,436 Extended period of limitation i.e. Bills of Entry finalized before 22.10.2019 but on or after 22.10.2016 91,89,07,708 Total finalized Bill of Entries 1,52,22,81,144 35. Penalty under section 114A of the Customs Act could not have also been imposed upon the appellant because the grounds for imposing penalty are similar to the grounds for invoking the extended period of limitation. 36. The second issue relates to metal lease charges. The Principal Commissioner did not accept the contention of the appellant that metal lease charges were towards interest paid on differed payment accruing post the importation of dore bars and the issuance of the final invoice by the supplier. According to the Principal Commissioner, it was clear from the Agreements entered into with the foreign suppliers that the title of ownership of the imported goods was not transferred to the importer at the time of importation and the appellant was treated as a bailee by the overseas supplier. The relevant findings are as follows: "59.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of deferred payment and situation of deferred pricing and the importer cannot use these terms as per their choice as I find being tried in this case. Once the invoice price was provisional and finalized on the settlement date much later than the date of importation, there was no rationale to notify such charges as post importation specially when their status till the settlement of invoice was of a bailee. ***** In the present case, after going through the agreement between the importer and their overseas suppliers, it is clear that 'Metal Lease Charges' were paid as a condition of sale. There were no two separate agreements as cited in above case law. There was only one agreement and importation occurred as lease wherein the relationship between the overseas supplier importer was of bailer and bailee. Hence, the cited case laws do not support the narrative of the importer." (emphasis supplied) 38. Learned counsel for the appellant reiterated the submissions that were advanced before the Principal Commissioner but could not dispute that the ownership of the imported goods was not transferred to the appellant at the time of importation of the goods. In view of the specific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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