Commissioner of Customs Kolkata v. M/s. Peerless Consultancy Services Pvt. Ltd. (SC) BS129445
SUPREME COURT OF INDIA

Before:- Dr. Arijit Pasayat and Lokeshwar Singh Panta, JJ.

Civil Appeal Nos. 5415-5417 of 2002. D/d. 24.5.2007.

Commissioner of Customs Kolkata - Appellant

Versus

M/s. Peerless Consultancy Services Pvt. Ltd. - Respondent

For the Appellant :- P. Vishwanath Shetty, Sr. Advocate with G. Umapathy, S.J. Aristotle and B. Krishna Prasad, Advocates.

For the Respondent :- S.K. Bagaria, Sr. Advocate with Sanjay Ghosh, Ms. Anitha Shenoy, Saurabh Suman Sinha, Piyush Kumar and Navneet Panwar, Advocates.

Foreign Trade (Regulation) Rules, 1993, Rule 11 - Customs Act, 1962, Section 113(d) and 114 - Duty Entitlement Pass Book (DEPB) Scheme - Foreign buyer purchased goods for agreed FOB (declared Export Price) and made full payment - Entire export proceeds have been realised in foreign currency and copies of bank remittances or FIRC were filed - No allegation or finding that the foreign buyer was a related person - FOB fully supported by all export documents such as invoices and shipping bills and by the documents as regards its realisation such as BRC/FIRC - Commissioner confirmed the demand made in Show Cause Notice after referring to various aspects to conclude about over-invoicing - Appellate Tribunal without discussing in detail as to how conclusions of Commissioner were erroneous reversed the order of Commissioner - Order of Tribunal set aside - Matter remitted back.

[Paras 17 to 20]

Cases Referred ;

Commissioner of Custom, New Custom House, Mumbai v. Vishal Exports Overseas Ltd. [2007(309) ELT 331 (SC)].

JUDGMENT

Dr. Arijit Pasayat, J. - Challenge in these appeals is to the orders passed by the Customs Excise and Gold (Control) Appellate Tribunal, EZB Kolkata (in short the 'CEGAT') allowing the appeals filed by the respondent holding that the guidelines contained in circular No. 69/97-CUS dated 8.12.1997 issued by the Government of India, Ministry of Finance, Department of Revenue, New Delhi, as it has not succeeded in making out a case against respondent as the Present Market Value (in short the 'PMV')declared is not more than 150% of the AR 4 value. Accordingly the order passed by the Commissioner of Customs (Post) Kolkatta was set aside.

2. Background facts in a nutshell are as follows :

3. The Respondent Company which is engaged in the business of computerized printing exported for the first time consignments of steel balls of a total declared value at Rs. 14.63 crores to one M/s. Ria Multiple Enterprises of Malaysia under Duty Entitlement Pass Book (in short the 'DEPB') Scheme. Incidentally, the consignee is also a dealer of computer and information technology based products who also acts as General Insurance Agent. Exports were made under DEPB scheme and a claim of Rs. 3.20 crores was made.

4. In the light of information received by DRI of gross over-invoicing of the goods to avail higher DEPB credit, it conducted investigation which revealed inter-alia that :

5. Accordingly, alleging gross misdeclaration of material facts and the value of the steel balls and willful misstatement and suppression and violation of Section 113(d) of Customs Act, 1962 (in short the 'Act') read with Rule 11 of Foreign Trade (Regulation) Rules 1993 (in short the 'Foreign Trade Rules') and for penal action under Section 114 of the Customs Act, a Show Cause Notice was issued asking to show cause as to why -

6. In support of the appeal learned counsel for the appellant submitted that Sri Parasmal Lodha who was the Director of the respondent-Company had clearly admitted about the following aspects :

7. On the basis of the aforesaid materials the Commissioner recorded the following findings :

8. All these clearly show that the shipping bills and the export invoices do not reflect the correct transaction value. He was therefore, inclined to hold that the subject goods were over invoiced with an intent to wrongly avail higher DEPB credit and the PMV indicated on the shipping bills was also inflated. He rejected the FOB value as well as the declared PMV. He held that the FOB value and the PMV of the subject goods need to be ascertained on the basis of the findings of the market enquiry.

9. With regard to PMV, the Commissioner held as under :

10. The Commissioner accordingly intra vires held as follows :

11. He accordingly confirmed the demand made in the Show Cause Notice.

12. Aggrieved by the orders passed by the Commissioner, the respondent filed appeal before the CEGAT.

13. Allowing respondents' appeals, CEGAT accepted the stand of the assessee. Its conclusions were essentially as follows :

14. According to appellant, the Tribunal has failed to note that the findings recorded by the Commissioner were based on the evidence tendered by the company from which it can be clearly inferred that there has been a mis-declaration and misstatement only with the object to boost the value to get higher DEPB benefit. The entire transaction is vitiated by misstatement, mis-declaration and suppression of material facts which has not been considered by the Tribunal."

15. It is pointed out by the learned counsel for the appellant that absolutely no reason has been indicated by the Tribunal to set aside the elaborate order passed by the Commissioner. There were clear findings of over invoicing. So far as Circular No. 69/97 is concerned, it only delineates the general principles. The fraudulent transaction was clearly established. Approach of the Tribunal is relevant from the abrupt conclusions arrived at.

16. In response, learned counsel for the respondent submitted that the issues involved in the appeal relate to the DEPB credit allowable to the respondent under the Export and Import Policy, 1997-2002 (in short the 'EXIM Policy'). With reference to para 7.25 of the EXIM Policy, DEPB was allowable as a percentage of FOB value of exports. In para 7.36 of the Handbook of Procedures, 1997-2002 (in short the 'Handbook'), if the rate of credit entitlement was 15% or more, the credit shall not exceed 50% of the PMP of the export product.

17. In the present case, the foreign buyer purchased the goods for agreed FOB and made full payment. Entire export proceeds have been realised in foreign currency and copies of bank remittances/FIRC were filed. There is no allegation or finding that the foreign buyer was a related person. FOB was fully supported by all export documents such as invoices and shipping bills and by the documents as regards its realisation such as BRC/FIRC.

18. It is stated that the expressions "FOB' and 'PMV' were not defined in the EXIM Policy. However, the method of determination was laid down by the Ministry of Finance in the Circular No. 69/97.

19. It is submitted in almost identical case in Commissioner of Custom, New Custom House, Mumbai v. Vishal Exports Overseas Ltd. [2007(309) ELT 331 (SC)], this Court has dismissed the appeal filed by the Revenue.

20. We find that the Commissioner had in detail referred to various aspects to conclude about over-invoicing. The applicability of Circular No. 69/97 would depend upon the factual scenario of a particular case.

21. In the instant case, what the Tribunal appears to have done is to refer to the arguments of parties and then came to abrupt conclusions without discussing in detail as to how the conclusions of the Commissioner were erroneous. That having not been done the order is vulnerable. Accordingly, we set aside the order of the CEGAT and remit the same to it for fresh adjudication. It is to be noted that present CEGAT is known as Customs Excise and Service Tax Appellate Tribunal (in short 'CEGAT').

The appeals are allowed to the aforesaid extent. We express no opinion on the merits of the case.

Appeals allowed.