2006 (8) TMI 342 - AT - Customs

Valuation - Confiscation - Availment of fraudulent DEPB Scheme - Inflation of price - HELD THAT - 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 hand and the exporter and the foreign buyer on the other hand. (b)The 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 and 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 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 and 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 u/s14 of the Act. As regards fixation of DEPB eligibility pleaded by Revenue we find that this Tribunal in the case of Kobian ECS India Pvt. Ltd. 2003 (9) TMI 378 - CESTAT MUMBAI 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 1962 and 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. 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. In view of the findings no merits are found in Revenue s appeal. Thus appeal filed by Revenue in case of exports made by M/s. Subhalakshmi Exports on same grounds is to be rejected. Appeals filed by Revenue in case of M/s. Crown International and M/s. Subhalakshmi Exports are dismissed.

Summary

Issues:
- Allegation of inflated value in export of software
- Validity of declared value for export goods
- Application of Circular No. 69/97-Cus.
- Relevance of inquiries with Accidental Software
- Applicability of Apex Court judgment in Om Prakash Bhatia case
- DEPB Scheme and Customs Act provisions
- DEPB eligibility and Customs role
- Applicability of FERA, 1973

Analysis:

1. Allegation of Inflated Value:
The case involved an allegation of inflated value in the export of software by merchant exporters. The Revenue issued a show cause notice claiming that the declared value was inflated to take advantage of DEPB Schemes. The department relied on inquiries with Accidental Software to support their claim.

2. Validity of Declared Value:
The exporters purchased CD Roms from the manufacturer at a specific price per piece, which was not disputed. The exporters then sold these goods to foreign buyers at a higher price. The Tribunal found that there was no reason to discard the transaction value between the manufacturer and the exporters, as well as between the exporters and the foreign buyers.

3. Application of Circular No. 69/97-Cus.:
The Circular stipulated that if the FOB value is within 150% of the manufacturer's price, it cannot be rejected. The Tribunal upheld the Circular, noting that it was binding on the department and had been consistently followed in previous decisions.

4. Relevance of Inquiries with Accidental Software:
The inquiries with Accidental Software were deemed irrelevant for rejecting the FOB value under Section 14 of the Customs Act. The burden was on the department to prove that the exported goods were sold at a significantly lower price, which they failed to do. The Tribunal emphasized that the price was the sole consideration in the transactions.

5. Apex Court Judgment in Om Prakash Bhatia Case:
The Tribunal clarified that the Apex Court judgment in the Om Prakash Bhatia case was not applicable to the current scenario. Unlike the case in question, the Om Prakash Bhatia case involved different circumstances related to export under a Drawback Scheme.

6. DEPB Scheme and Customs Act Provisions:
Under the DEPB Scheme, the goods for export were neither dutiable nor prohibited. Therefore, the provisions of Section 113 of the Customs Act were not applicable in this case, as confirmed by previous Supreme Court and Tribunal decisions.

7. DEPB Eligibility and Customs Role:
The Tribunal highlighted that the Customs had a limited role in determining DEPB eligibility, as per previous judgments. It was established that a declaration for DEPB did not constitute a prohibition under the Customs Act.

8. Applicability of FERA, 1973:
The Tribunal dismissed the argument regarding the applicability of sections of FERA, 1973, as no substantial evidence was presented to support its relevance to the case.

In conclusion, the Tribunal found no merit in the Revenue's appeal and rejected the appeals related to exports made by different entities based on similar grounds. The judgment emphasized the importance of transaction value, adherence to Circulars, and the specific applicability of legal provisions to the case at hand.