ORDER
S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 55/2005 dated 30.11.2005 by which the Commissioner of Customs, Cochin has confirmed the allegations made in the show cause notice with regard to overvaluation of the goods to claim DEPB credit under Sl. No. 43 (a) of Product Group Code 89 of DEPB Schedule. The details of the shipping bills filed by the CHA have been noted in the order. The Commissioner examined the various pleas raised by the appellants and the CHA and after due consideration rejected their pleas and also did not accept their declared value. The goods were re-valued after final assessment and the value was fixed at Rs. 16 per meter for DEPB purposes. The nominal fine of Rs. 5,20,000/- has been imposed on M/s. Siddarath Exports under Section 114(i) and Section 114(iii) of the Customs Act, 1962. The appellants had declared the value in respect of all the shipping bills amounting to Rs. 1,33,96,883/-. The findings recorded by the Commissioner from Paragraph 23 are reproduced herein below.
FINDINGS
23. M/s. Siddharth Exports have not bothered to reply to the Show Cause Notice.
24. Intimations were sent to M/s. Siddharth Exports for personal hearing on 08-07-2005, 18-07-2005, 02-08-2005 and 10-10-2005. Intimation was also got served through the jurisdictional Central Excise authorities. However, the exporter did not co-operate with the adjudication proceedings and chose not to appear before the adjudicating authority.
25. I have gone through the records of the case and the submissions made by the noticee in their written reply. This is a case of Export of 100% Poly & Poly Dyed and Printed fabrics by M/s. Siddharth Exports, Surat under DEPB Scheme post export basis. M/s. Siddharth Exports had filed three Shipping bills for export of 2,40,000 Yards (2,19,456 Metres) of Poly Poly Fabrics with a declared FOB value of Rs. 1,33,96,883/- and the DEPB amount involved was Rs. 14,73,657/-. DEPB credit at the rate of 11% under Sl. No. 43 (a) of product group code 89 of the DEPB schedule was claimed by the notice. As the declared value, considering the quality of goods, appeared suspect, the matter was referred to the Special Investigation Branch for investigation. Simultaneously, samples were drawn for test after which export was allowed provisionally pending investigation. After the chemical test, the Custom House Lab reported that the sample was an irregular cut piece of colored fabric having a damaged appearance and composed entirely of man made Filament yarns of Polyester. The GSM in respect of the goods were reported to be a maximum of 21.2 in respect of the goods covered under shipping bill No. 715/28-03-2003, 21 in respect of the goods covered under shipping bill 1173342/17-02-2003 and 20.7 in respect of the goods covered under shipping bill 1173343 dated 17-02-2003. In respect of the samples forwarded to them, the Textile Committee, Kannur, after testing the samples reported that the goods are made of polyester of a weight per linear metre ranging from 18.7 to 21.7.
26. The samples drawn from the consignments were also forwarded to the jurisdictional Central Excise authorities for market verification of value as the goods were brought for export from Surat under ARE-1 forms. The said jurisdictional authorities after verification with Merchants/Manufacturers/Processors of Polyester fabrics in Surat, reported that the cost of the fabrics of the samples submitted for verification vary from Rs. 7 to Rs. 13 per metre. The statements recorded from the Merchants/Manufacturers were also forwarded along with the report.
27. Based on the findings of the investigation as above and the results of the chemical test, show cause notice was issued to the noticee proposing confiscation of the goods covered by three shipping bills under Section 113 of the Customs Act, 1962. The value was proposed to be refixed at Rs. 13 per metre based on the findings after investigations, for DEPB purpose. Penalty under Section 114 of the Customs Act, 1962 was also proposed in the SCN. Opportunities given for Personal Hearing were not availed by the noticee. Enough opportunities have been given to meet the ends of the principles of natural justice.
28. According to Para 4.3 of the EXIM Policy, the objective of Duty Entitlement Pass Book scheme is to neutralize the incidence of Customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. From time to time, on the issue of entitlement of DEPB credit vis-a-vis the FOB/PMV has been considered and clarified by the Central Board of Excise and Customs, as in many cases the PMV was found to be much lower than the declared FOB value. Vide para 5 of circular No. 77/2002 Cus dated 27-11-2002, the CBEC had clarified that “In those cases where it is conclusively proved through the investigations that the FOB value has been artificially inflated/manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not FOB value”.
29. Circular No. 69/97 Cus dated 8-12-97, issued in F.No. 605/51/97-DBK circulating revised guidelines for determination/verification of the PMV under DEPB Scheme at para 2 states as follows:
Object of limiting the amount of credit based on the Present market Value (PMV)
The condition of restricting the credit amount under DEPB Scheme to 50% of the PMV was prescribed to prevent the exporters from obtaining excessive amount of credit by inflating the FOB price of the export product. It is stated that the FOB value may be higher as per the contract between the exporter and the foreign buyer (depending on various factors), but the “present market value” of the goods is an index of their local (wholesale/retail) price inclusive of excise duty, sales tax and other local taxes plus cost of transportation. Accordingly, the amount of credit is to be restricted to the domestic price of the product, and not with reference to the FOB price declared on the GR form/Shipping Bill.
30. I find that the verification of the present market value has been done on the basis of representative samples drawn from the export consignments, through the jurisdictional Central Excise formation from where the goods originated and the goods have been found to be different from those mentioned in the ARE 1 forms with reference to their weight and grammage as discussed in the SCN.
31. I find that the samples were subjected to inspection by (1) a number of reputed manufacturers/merchants/processors of repute dealing with the some goods in the place of origin of the goods (2) Custom House Laboratory, Cochin and (3) Textiles Committee, Kannur. All the above individuals/agencies have reported that the goods were low quality fabrics and GSM being one of the criteria for the low value. Textiles Committee, Kannur, who after testing the same forwarded the test results indicating the specification of the export fabrics with a reference to their value us noticed during the relevant period of the place of origin of the goods viz Surat, as discussed in the SCN In fact I find that the above mentioned Merchants/Manufacturers/Processors in Surat, after verifying the samples forwarded by the Custom House, stated that the fabrics are of a low quality and would cost around Rs. 7 to Rs. 13 per metre. This being the opinion and assessment alter examination of sample by people connected with the goods and trade and experts in their own right, their views are to be accepted as representing the general market value of the goods. The Textile Committee, Kannur, a Government of India Agency, while forwarding the test results, indicated the price of Rs. 9.50 per metre of Poonam quality fabrics, traded in Surat textile market, having a weight per metre of 56 grams as a comparison for valuation. Hence I find that the value proposed in the SCN is reflective of the market price of the goods, and thereto highest of the general value is proposed for determination of assessable value for DEPB purpose.
32. As regards the statement given by Shri. Kamal Kishore Kupuria at the time of investigation and the documents submitted in justification of the high value of the rubrics, I find that the goods at the point of export at Custom House was inspected and samples were drawn which were subjected to test/value verification. The goods were found to be of low quality fabrics not used in apparel manufacture but fit for other miscellaneous uses. The show cause notice discussed that the goods tendered for export were not representative of the ARE-1 forms submitted with respect to the weight ascertained bused on GSM and quality of samples drawn from the consignments. Hence the purchase bills submitted in this case also cannot be accepted as belonging to the exported goods in question. This fact coupled with the value stated by the persons in the trade clearly indicate that the actual value of the goods would be at best Rs. 13/- per metre.
33. The Hon’ble Apex Court has held that value under Section 14 of the Customs Act, 1962 is applicable in export cases also while delivering the judgment in the case of Om Prakash Bhatia v. Commissioner of Customs, Delhi. In the said case the Hon’ble Apex Court have also held that market price prevailing in the country is the relevant consideration for getting drawback, and not the price of the goods, which the exporter expects to receive from the overseas purchaser. While delivering the above said Judgment, the Hon’ble Apex Court also observed that in the days where information is easily available through Internet or various other sources, it is difficult to arrive at the conclusion that a foreign buyer a prudent businessman would pay ten times more than the prevailing market price. Though with the modifications that the export scheme is DEPB and the price is about 5 times the price of the goods in the market, the Hon’ble Apex Court’s observation is squarely applicable in the subject case.
34. From the above I find that the mis-declaration alleged in the SCN is established in this case, especially, since the goods are reportedly of inferior quality as reported by both the Custom House Lab as well as the Textiles Committee, Kannur.
35. In this case from the records it is seen that M/s. Siddharth Exports, Surat, the noticee, is a merchant exporter who purchased the goods from the market. The value ascertained at Rs. 13 per metre is based on the statement of experts in Surat and also based on the price noticed in textile market in Surat during the relevant period reported in Tex Trade Monitor, an Express group publication. Considering the fact that M/s. Siddharth Exports, Surat procured the fabrics from the market where the maximum price of such fabrics was Rs. 13 per metre, taking into account their profit as well as the transportation to Cochin and other incidentals/overheads, I am inclined to allow Rs. 3/-(Rupees three only) per metre towards such charges which works out to nearly 20% of the value proposed in the show cause notice. Accordingly, it would be fair, if the goods are finally assessed at Rs. 16/- per meter for DEPB purposes.
36. From the above, it is clear and apparent that M/s Siddharth Exports had wilfully procured inferior fabric from the market where the maximum price of such fabric was Rs. 13/- per metre and then at the time of export, deliberately overpriced the same at Rs. 60/- per metre. Mens Rea on their part is, therefore, clearly established.
37. On the basis of the above findings, I pass the following order;
ORDER
The goods covered under Shipping Bills No. (sic), 1173342 and 1173343 both dated 17-02-2003 and having a total declared value of Rs. 1,33,96,883/- are liable for confiscation under Section 113(d) and 113(i) of the Customs Act, 1962 read with Section 3(3) of the Foreign Trade (Development & Regulation) Act, 1992. However, the goods are not available for confiscation, as already exported.
I order the final assessment of the Shipping Bills above at a value of Rs. 16 per meter for DEPB purposes.
Taking all aspects into consideration, I impose a penalty of Rs. 05,20,000/- (Rupees Five lakhs twenty thousand only) on M/s. Siddharth Exports, Surat, under Section 114(i) & Section 114(iii) of the Customs Act, 1962.
2. The learned Counsel argued at length on various aspects of the findings. He referred to the various grounds and contended that there was no overvaluation of the goods for DEPB purposes. He submits that the declared price is a correct price and they have not overvalued the goods as alleged. He submitted that they have received the export orders at the same price at which it was declared. Revenue has wrongly relied on the declaration of ARE-I Forms. He submits that the Department’s reliance on purchase bills to justify the enhancement of the price in terms of the Surat Market is without any basis, as Surat is a far off place. He submits that the department has not applied their mind and revision of price is not justified. They cannot deny the benefit of DEPB claim. The reliance of market enquiries made by the department has been done against their back and violates the Principles of Natural Justice. He also submits that the Commissioner was not justified in relying on the CBEC Circular No. 10/97-Cus. dated 17.4.1997. He submits that the Tribunal ruling rendered in the case of MVT International v. CC, New Delhi as should have been accepted. He also submits that reliance on Om Prakash Bhatia’s case is not justified, as the said judgment relates to overvaluation of the goods. He submits that the value declared by the appellant at U $ 138000 was the sale value and not the market value. Therefore, the value should have been accepted. He relies on the judgment rendered in the case of Kobian ECN India Pvt. Ltd. v. CC, Mumbai 2004 (60) RLT 112; J. G. Exports v. CC, New Delhi ; Dear Impex v. CC, Mumbai 2004 (63) RLT 656 (CESAT-Mum.) and Shilpi Exports v. CC, Calcutta . The learned Counsel prays for setting aside the impugned order.
3. The learned JDR submits that the goods were tested and it was found that they were of inferior quality and in damaged condition. There was mis-declaration of the weight and gramage and market enquiries were also conducted with the help of reputed manufacturers, merchants and processors. The show cause notice referred to entire evidence and the appellants were given the opportunity to contest the matter. Therefore, there is no violation of Principles of Natural Justice. He submits that this very issue was subject matter of decision in the case of M/s. Olympia Overseas and Ors. heard by President’s Bench by Final Order Nos. 1123 and 1124/2007 dated 14.9.2007. He submits that the facts being identical, this judgment having been distinguished all facts of the citations referred by the learned Counsel should be accepted. He submits that no benefit has been given even with regard to the penalty. He places a copy of the order.
4. The learned Counsel again reiterates his submissions.
5. We have carefully considered the submissions and have gone through the impugned order. The impugned order is a detailed order discussing the entire evidence on record. The manner in which the mis-declaration has been done and the conditions in which the goods had been packed in the containers has been revealed. As per the detailed investigations, the goods were in damaged condition and were of inferior quality. The investigations with manufacturers, processors and also market enquiries were done and it was found that the assessee had overvalued the goods for availing wrongful benefits. In an identical situation, the President’s Bench in the case of M/s. Olympia Overseas dismissed the appeals by confirming the same findings. The Final Order No. 1123-1124/2007 dated 14.9.2007 and its findings are clearly applicable to the facts of the case. The findings recorded in Para 16 is reproduced herein below.
16. We have gone through the records of the case and the submissions urged by the appellants in their memo of appeal and the Revenue. The DEPB Scheme was instituted for promotion of exports. In terms of this scheme, when goods are exported, the exporter is entitled for credit at certain percentages on the FOB value of the goods exported. The rate of DEPB is specified in the DEPB schedule. The DEPB credit can be utilized for payment of duty on imported goods. The said credit is also transferable under the policy. The Government of India noticed that the Scheme was being utilized by unscrupulous exporters by resorting to artificial inflation of the FOB values to avail unintended DEPB benefits.
17. In order to curb such practices, the Government of India issued Circular No. 77/2002-Cus dated 27.11.2002 which restricts the DEPB credit and also provides for market verification of the value declared by the exporter. In para 5 of the said Circular, it has been stated “In those cases where it is conclusively proved through the investigations that the FOB value had been artificially inflated/manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not FOB value. The contention of the appellant that they had received the foreign remittances as mentioned in their shipping bills, is not a defence. There are various methods of money laundering and transfer of ill-gotten wealth from foreign countries to India. The export incentives are the mis-utilized by unscrupulous elements for transfer of money. There have, been cases where goods which have no value have been exported to get draw back. In those cases also, the exporters received the foreign remittances. Therefore, this cannot be a reason for accepting blindly the value declared by the appellants. In the present cases, in terms of the Circulars issued by the Government of India, the Customs Authorities allowed export of the goods under the DEPB Scheme provisionally after drawing samples. There is clear evidence that the impugned goods are inferior. It is evident not only from the test reports, but also from market inquiries conducted in Surat. In these circumstances, we cannot accept the contention that the Commissioner has fixed the value in an arbitrary fashion. In terms of para 4.41 of Chapter IV of the Foreign Trade Procedure, in respect of products where the rate of credit entitlement under DEPB Scheme comes to 10% or more, the amount of credit against each such export product shall not exceed 50% of the present market value (PMV) of the export product. The Government of India is very much conscious of the mis-use of the scheme and, therefore, the credit has also been restricted as mentioned above. We have also gone through the plethora of case laws furnished by the learned Departmental Representative. The Hon’ble Apex Court in the case of Om Prakash Bhatia v. CC, Delhi, , has dealt with the over invoicing of export goods, it has been held that, When the importation or exportation, of the goods are subjected to certain prescribed conditions to be fulfilled either before or after clearance of the goods, and if those conditions are not fulfilled, the said goods would be considered as prohibited goods and Sections 2(23), 11 and 113(d) of the Customs Act, 1962 would come into play and the exporters would be liable for penalty. In the case of Abishek Export v. CC, Cochin, 2007 (208) ELT 155 (T-Bang.), the Tribunal considered a case of over valuation of export goods to get higher DEPB credit. In that case, the confiscation of the impugned goods and penalty were upheld under the relevant provisions of the Customs Act. The Hon’ble Apex Court in the case of CCE v. Suresh Jhunjhunwala 2006 (203) ELT 353 (SC), dealt with a case of over-valuation of export goods for claiming higher DEPB. In that case, the Tribunal held that export goods being neither dutiable nor prohibited, confiscation under Section 113(d) was not sustainable, but the Apex Court over ruled the decision of the Tribunal. It was held that the decision of the Supreme Court in the case of Om Prakash Bhatia (supra) squarely covered the above case. Further, the following cases clearly establish that over valuation of export goods for getting higher DEPB is covered under Section 113 of the Customs Act for imposition of penalty.
(i) CCE, Gurgaon v. Exports Pvt. Ltd. ;
(ii) Deep International v. CC, New Delhi ;
(iii) Diamentions Overseas Pvt. Ltd. CC, ICD, New Delhi ;
(iv) Reoven International v. CC, Bangalore 2006 (198) ELT 55. (T-Bangalore); Ramesh Hagde v. CC, Bangalore ; and
(v) CCE, Gurgaon v. Sidhhachalan Export Pvt. Ltd. .
In all the above cases, the various Benches of the Tribunal have dealt with over valuation of export goods under the DEPB Scheme. In these cases, the imposition of penalties under Section 114 of the Customs Act, 1962 has been upheld. In the impugned order, the adjudicating authority has followed the correct procedure in fixing the value for the DEPB purposes. Considering the very high declaration of value for gaining DEPB credit, we do not feel that the penalties imposed are harsh. There is no merit in the appeals. Hence we reject the same and uphold the orders-in-original.
6. We find that the above judgment relies on Apex Court judgment rendered in the case of Om Prakash Bhatia v. CC, Delhi ; CCE v. Suresh Jhunjhunwala ; Abishek Export v. CC, Cochin 2007 (208) ELT 155 and other judgments as noted supra. We find that the findings recorded by the President’s Bench in the case of M/s. Olympia Overseas (supra) would apply to the facts of this case also. There is no infirmity in the impugned order. We do not find any ground to interfere with the impugned order or to scale down the penalty. There is no merit in this appeal and the same is rejected.
(Pronounced and dictated in open Court)