DEPB Scheme - FOB value on invoices shown as 400-500 % of ARE-1 value - Normally, proforma invoice will indicate higher value & after negotiation final price would be less than invoice - No business man will enter into such deal - Such a thing can only be in fraud case: CESTAT
By TIOL News Service
MUMBAI, MAY 07, 2014: THE appellants are exporting Porcelain Mugs to M/s Ransat Services Ltd. UKafter procuring these from various manufacturers in India mainly M/s. JCPL, Mudrika Ceramic, Oasis Ceramics.
The dispute in the case is relating to the valuation of Porcelain Mugs. Appellants were exporting the said mugs under DEPB scheme which entitles them to claim DEPB benefit at the specified rates which are related to the FOB value of the goods exported.
While processing the shipping bills, it was realized that there was huge difference between the ARE-1 value (i.e. ex-factory value) declared by the manufacturers of Porcelain Mugs and FOB value (i.e. export price) declared by the appellants. The FOB value was to 4 to 5 times the ARE-1 value. In view of such huge difference, investigations were taken up.
Searches were conducted at the office premise of the appellantsand large number of incriminating documents were recovered which indicated ARE-1 value of various consignments exported in past as also FOB value, documents recovered also indicated price negotiations between the appellants and the importer in U.K. It was revealed that the appellants have accepted to add .08 pounds per pc of mug on the ARE-1 value and export at that price. It was revealed that some of the manufacturers from whom the appellants were procuring the Porcelain mugs were also supplying the same directly to the buyer in U.K. During searches, duplicate set of invoices indicating the same number were recovered while one set of documents indicated the price which was based upon ARE-1 plus .08 pounds per pc, the other set of invoices indicating very high value ranging 400 to 500% of the other invoice value. Details given in these documents such as manufacturer's invoice, ARE-1 and appellants' export invoice, packing list, container number etc. were all tallied. It was found that in the export documents presented to the Customs, invoices packing list, container number etc. were all tallied. It was also found that in the export documents invoices which represent 400 to 500% value compared to the ARE-1 were presented to the customs. Statements of various persons including the Director of the appellants as well as officials of the manufacturing units were recorded.
Based upon the investigation, show-cause notices were issued to the appellants proposing re-determination of the value of the goods.
The Commissioner of Customs (Export), Mumbai rejected the export value declared for the impugned goods exported by the appellants and re-determined the same on the basis of ARE-1 plus .08 pounds per pc. Since the goods were not available for confiscation, no order for redemption was issued. However, penalty equivalent to re-determined value was imposed on the appellants u/s 114(i) of the Customs Act. Similarly, equal amount of penalty was imposed on the Director of the appellants. Penalty of Rs.50 lakhs was also imposed on Shri Rajeev Verma erstwhile Export Manager of Appellants.
Being aggrieved, the appellants are before the CESTAT.
The appellant inter alia submitted that the goods exported by them had the brand name of the importer in U.K. and were of very high quality and, therefore, the prices were high; that even the drawback rate which is applicable to All Industry and that of branded goods are different. Reliance is placed on the decision in Vishal Exports Overseas Ltd. 2007-TIOL-20-SC-CUS.
The Revenue representative reiterated the findings of the adjudicating authority.
The Bench inter alia observed -
++ If the goods are tailor made the value may be higher but the question is which value. In our opinion, the ARE-1 value itself will become higher. This reasoning will not increase the FOB value to 400-500 percent of ARE-1 value. This factor is irrelevant to explain increase in FOB value from ARE-1 value. As far as the branded goods are concerned, it may not increase the ARE-1 value. By branding, the retail price of the goods may increase but would not affect the purchase price of the buyer from the manufacturer as the brand is that of buyer and not that of manufacturer.
++ The other contention of the appellants is that the Jt. Commissioner had accepted the value based upon the market enquiry and, therefore, the department cannot now say that the FOB price declared by them is on the higher side. It is a case of concealment of vital documents from Customs authorities and by producing some other documents that the value was accepted, the appellants cannot be allowed to take benefit of their wrong deeds.
++ In respect of the number of consignments, there were parallel set of invoices, one based upon the earlier mentioned formula and another indicating 400 to 500% more of the said value as indicated in the export document. The invoices had the same number.
++ Normally, proforma invoice will indicate a higher value and after negotiation the final price would be less than the proforma invoice, while in the present case Ld. advocate wants us to believe that the final price agreed was 400 to 500% more than the initially agreed price. No business man or any other person will enter into such deal. Such a thing can only be in fraud case.
++ In view of the overwhelming evidence found during the search of the appellants' premises, we have no doubt that the FOB value declared was not the actual transaction value/FOB value but were highly inflated for claiming DEPB benefits or for bringing in illegally obtained foreign exchange.
Holding that there is no merit in the contention of the appellants, the appeals were rejected.
In the matter of the appeal filed by the Director, the Bench noted that he was the main person managing the activities of both the appellants and was instrumental in the fraud. So, the penalty imposed on him was upheld and the appeal was dismissed. In the matter of the penalty imposed on the Export Manager/Business Development Manager, Shri Rajeev Verma, the Bench held that he was only a salaried employee and was working as per the directions of the director and the investigation had not brought out any specific role of his in the episode and, therefore, the penalty imposed was set aside.
Except the above, all the other appeals were dismissed.
(See 2014-TIOL-712-CESTAT-MUM)
