JUDGMENT
C.N.B. Nair, Member (T)
1. These appeals are directed against confiscation of export garments, imposition of penalties and reduction of amounts of drawback claimed, on account of finding that the prices of the exported goods had been overstated in the export documents so as to claim higher amounts to drawback.
2. The goods under exports were cotton knitted T-shirts and Polo shirts and the exports were during June-July 1999. The T-shirts in question were exported against the price of Rs. 150 per piece while Polo shirts were exported at a price of Rs. 225 per piece. At the time of export itself, the Customs authorities had challenged the export prices as high and made enquiries about the market value of the exported items. The appellant exporter in their response informed that the goods had been purchased at a price of about Rs. 90 per piece and Rs. 115 per piece. They had also indicated a break-up of the price by way of costs, of the garment, packing charges, loading and other cost margin of profit etc. in order to justify the export prices. Thereafter exports were allowed. A year and half later in July 2001, show cause notices were issued proposing the confiscation of the goods for overvaluation. It was also specifically alleged that the summon issued in January 2001 to the purported seller of the garments to the appellants had been returned, which showed that the party did not exist. It was also alleged that T-shirts were available at very much lower prices.
3. The appellants contested the allegations by pointing out that the garments with which the appellant’s garments were compared appeared to be inferior in quality and that the comparison was not proper. It was also pointed out that these garments were made under specific names, QUIZZ & ACES, according to the labels supplied by the buyer. It was also pointed out that the quality of the fabric was very different. With regard to the return of the summon, it was pointed out that the appellants had made payments for the garments by bank cheques and the transaction remains proved by such payments. It was also pointed out that due to the long delay in verification, the appellants’ suppliers may have wound up their business or shifted the premises. It was also submitted that the appellant’s purchase prices as well as export prices remain broadly in line with the costing indicated by the appellant and therefore, there is no justification to the allegation that export prices have been inflated to derive undue drawback benefit.
4. The above submissions of the appellant did not find acceptance in adjudication. The Commissioner was persuaded by the variations in the two cost break ups indicated by the appellants themselves, the non-availability of the supplier firm and the price of other export T-shirts, and held against the appellants. The present appeals challenge those findings.
5. Learned Counsels contention is that the findings are entirely unjustified. He has pointed out that the variation between the purchase prices and export prices is not abnormal so as to warrant doubting of the export prices. Similarly, the costing break ups by the appellants also showed that prices were in no way inflated. With regard to the appellant’s suppliers being not in existence, the submission of the learned Counsel is that the return of the summon of 2001 is no ground for holding that the purchase transactions of the appellant of 1999 were not genuine. The Counsel submitted that the appellants had given particulars of the supplier at the time of export in July 1999 itself; but the department attempted verification only in 2001. The delay may have defected the investigation. It is also further pointed out that the return of the summons by itself leads to no conclusion against the transaction inasmuch as the substance of the appellant’s contention relating to purchase and payment by cheque was capable of verification through the banks and other channels, which the authorities have not to cared to do. Learned Counsel also emphasized that the comparison made by the lower authorities were not justified at all inasmuch as it is well known that there is difference in the prices of garments on account of type, and quality of fabric, besides design, branding etc. The authorities have passed the order contrary to the well-known fact of difference in quality leading to difference in prices. Learned Counsel has also pointed out that the authorities have failed to take notice of the fact that T-shirts cannot be compared with Polo shirt.
6. We have heard the learned SDR who was taken us through the detailed information contained in the file about the value of comparable goods, the findings of the Commissioner about the errors in costing etc. He has also emphasized that since the appellant’s claim about suppliers was found false, the export value based on such purchase prices cannot be accepted.
7. In the present case, the differences among purchase prices, the export prices and cost break ups are not too vast as to warrant a finding that the export prices are on the face of it too high or that the over invoicing is self-evidence. Further, the appellant has explained the higher F.O.B. value of the garments under export as the result of superior fabric, branded nature of the item etc. Another aspect is that comparing T-shirt with Polo shirt may not be appropriate. These explanations are well taken and merit acceptance.
8. The return of the summons by itself does not disprove the transaction with the appellant’s sellers. Perhaps delay in the verification has caused this problem. During the intervening period the buyers may have closed premises or shifted their business. The unreliability of a delayed verification has been thus dealt with by the Hon’ble High Court of Calcutta in the case of Mather & Platt (India) Ltd. v. Commissioner of Income Tax.
“The only fact on which the Tribunal has proceeded is that four years after the transactions, summonses served on the commission agents had come back un-served. On the entirety of the evidence, it cannot be held that if a person is not found in an address after four years, he is non-existent. In our view, the assessee has discharged its primary onus and established the identities of the said two commission agents and no evidence had been brought on record by the Revenue to rebut the case of the assessee. On the entirely of the evidence, it would be unreasonable to hold that the assessee had failed to establish the identity of the said two commission agents and that payments to the said commission agents were not genuine”.
9. In any event, the transaction has not been disproved inasmuch as the appellant’s claim that they had made payments through the bank and other verifiable aspect remains unverified.
10. Taking an overall view of the cases, we are of the opinion that the finding regarding over invoicing and mis-declaration of export prices of the garments is not sustainable. The impugned orders are therefore, set aside and it is ordered that full drawback as available on the basis of the declared F.O.B. values of the garments be paid to the exporters.