ORDER
S.S. Sekhon, Member (T)
1. These two appeals are being disposed by this common order, as the issues involved in both the appeals are the same. Revenue is in appeal.
2.1 The common facts in the two appeals are as under:
(a) The respondents are merchant exporters. They purchased CD Roms containing computer programs from the manufacturer thereof, M/s. Padmini Polymers Ltd. The purchase price was Rs. 640/- per piece. The two exporters had entered into contracts with foreign buyers for export of these CD Roms at the rate of USD 18 per piece, which is equivalent to Rs. 761.40 at the prevailing exchange rate.
(b) Shipping bills were filed, the goods were examined and upon final assessment let export order was passed by the proper officer under Section 51 of the Customs Act, 1962 (the Act). The exporters realised the full export proceeds from the foreign buyers.
(c) Based on investigations, show cause notice was issued alleging that the value declared was inflated as the exporter was indulging in export of software, which is otherwise freely downloadable from Internet, without having copyrights with a view to take the advantage of DEPB Schemes.
(d) The Ld. Consultant, appearing for the department submits that inquiries were made with M/s. Accidental Software, USA, who stated that they can supply full version of the games contained on the CD at the rate of USD 1 per unit. He submits that after calculation of the other costs and charges, including freight, insurance and replication cost, the fair value of the CDs would be as proposed in the notice. He relies on the Apex Court judgment in Om Prakash Bhatia v. C.C. .
(e) Mr. Madhur Baya, appearing for the respondents-exporters submitted that inquiries with Padmini Polymers Ltd revealed that they had the masters obtained on lump-sum price. He stated that the purchase price from Padmini Polymers Ltd. at the rate of Rs. 640/- per piece had not been challenged and that the export price is within 150% thereof. He relied on Circular No. 69/97-Cus dated 8.12.97 to submit that in view thereof, the declared value ought to be accepted. He further relies on the following decisions, where after noticing the said Circular, the declared value was accepted:
i) Peerless Consultant v. Commissioner
ii) C.C. v. Balaji Industrial and Agricultural Casting P. Ltd
iii) Cannon Steel Pvt Ltd. v. C.C. 2002 (145) ELT 490
Mr. Baya submitted that the exporter is not concerned how and at what price the manufacturer had obtained the masters. He submitted that the exporters are not concerned with the cost of manufacture, but only with the purchase price, which is undisputed. He further submitted that there is no allegation that the exporters are related either to the manufacturer or to the foreign buyer and both the transactions are at an arms length, where price is the sole consideration & relies on the following decisions:
1) Agarwal Distributors Pvt. Ltd v. C.C.
2) Akshay Exports and Industries v. C.C.
3) Globe Entertainment v. C.C.
4) Cora Chem v. C.C.
5) Suresh Jhunjhunwala v. C.CE
6) Polynova Chemical Industries v. C. CE
7) C.C. v. Dimple Overseas
8) C.C. v. Prayag Exporters Pvt. Ltd.
Mr. Baya submits that in the last case cited above, the Supreme Court dismissed the Review Petition filed by the Government of India as .
2.2 After hearing both sides and considering the written submissions filed, from the facts on record it emerges:
(a) The Exporters have no privity of contract with Accidental Software. The exporters purchased sourced the CD ROMs from the local market directly from the manufacturer. The purchase price of Rs. 640/- per piece has been accepted. Padmini Polymers Ltd. is not a party to the show cause notice. It is not the case of the department that the transaction between Padmini Polymers Ltd and the exporter is not genuine. It is also not the case of the department that the transaction between the exporters and the foreign buyers is not genuine. The exporters have procured the goods for valuable consideration and in turn, received the foreign exchange fully for the sale of goods to the foreign buyer. Therefore, there is no reason to discard the Transaction Value as between the manufacturer and the exporter on the one band and the exporter and the foreign buyer on the other hand.
(b) The said Board’s Circular relied by the Ld Advocate stipulates that if the FOB value is within 150% of the manfacturer’s price, the same cannot be rejected. The said Circular is binding on the department and has to be & been consistently followed in the decisions relied upon by the Ld. Advocate appearing for the respondents. We do not see any reasons to take a different view.
(c) The inquiries with M/s. Accidental Software cannot be the basis for rejecting the FOB value under Section 14 of the Act, which provides that the value shall deemed to be the price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of exportation, as in this case in the course of International Trade where the buyer and seller have no interest in the business of each other and the price is the sole consideration. The burden, therefore, lies on the department to show that at the time and place of exportation, such or like goods have been exported from India at or about USD 2. No instances of contemporaneous exports showing export price of USD 2 per unit have been shown. The exporter and buyer are not related parties. The price is not stated to be not the sole consideration. Rather it is on record that full consideration for the exported goods has been realised. At the most the inquiries with M/s. Accidental Software may only mean that the cost to the manufacturer is nominal but keeping in mind the provisions of Section 14 of the Act, the cost to the manufacturer is not relevant. The manufacturers do & may have made a huge profit. The manufacturer has imported the masters and there is nothing on record to dispute that. The only fact known is the selling price of the manufacturer, on the basis of which, applying the said Circular referred above, the FOB value cannot be rejected under Section 14 of the Act.
(d) The judgment of the Apex Court in Om Prakash Bhatia is not applicable in the facts the instructions on the subject and the law found that a declaration for DEPD is not a declaration which should be held as a prohibition under Customs Act, 1962 & the Customs have a limited roll to play especially as regards grant/eligibility of DEPB credit. Therefore, we find no reasons to uphold the present appeal to enable redetermining the DEPB eligibility and circumstances of the case. That was a case of Export under Drawback Scheme. There facts were conceded by the exporter and thereafter, the only question for determination was whether the goods were liable for confiscation under Section 113 of the Act. In the instant case, the proper officer allowed export after examination of the goods, there is no admission regarding the quality of the goods, being inferior.
(e) Under DEPB Scheme, as in this case, the goods for export are neither dutiable nor prohibited. Therefore, in such cases, the provisions of Section 113 of the Customs Act, 1962 are not applicable as held by the Hon’ble Supreme Court in Prayag Exporters (Supra), This is also the view taken by this Hon’ble Tribunal in Suresh Jhunjhumwala (Supra) and other decisions which being bound we respectfully follow.
(f) As regards fixation of DEPB eligibility pleaded by Revenue, we find that this Tribunal in the case of Kobian ECS India Pvt. Ltd. had after examining the provisions of DEPB Scheme, the instructions on the subject and the law found that a declaration for DEPB is not a declaration which should be held as a prohibition under Customs Act, 1992 & the Customs have a limited roll to play especially have a limited roll to play especially as regards grant/eligibility of DEPB credit. Therefore, we find no reasons to uphold the present appeal to enables redetermining the DEPB eligibility.
(g) No material was shown to us as to how the Sections of FERA, 1973 could be applicable in this case made out in the last few years of the last decade of 1990.
3.1 In view of the findings, no merits are found in Revenue’s appeal.
3.2 For the same reasons, the appeal filed by Revenue in case of exports made by M/s Subhalakshmi Exports on same grounds is to be rejected.
3.3 The appeals filed by Revenue in case of M/s Crown International & M/s Subhalakshmi Exports are dismissed.
(Pronounced in Court on 11/8/2006)