2012 (11) TMI 25 - AT - Central Excise

Penalty overvaluation alleged that FOB value export is less than the value declared by the exporters Held that - FOB value declared by the appellant cannot be discarded in lighter manner - cost to manufacture is not relevant for arriving at the FOB value as manufacturer might make huge profit and only fact is the selling price of the manufacturer on the basis of which, the FOB value cannot be rejected - manufacturer s selling price cannot be the price at which the goods are ordinarily sold in the wholesale market in India and in the absence of contemporaneous export, the Revenue s contention cannot be acceptable - M/s. Rochees Watches has already given a bank guarantee of Rs. 1.10 crore waiver of pre-deposit allowed

Summary

Issues:
Penalties imposed on various appellants for overvaluation in export of watches and watch parts under DEPB scheme.

Analysis:
The judgment addresses the penalties imposed on multiple appellants for overvaluation in the export of watches and watch parts under the Duty Entitlement Pass Book (DEPB) scheme. The Commissioner upheld the allegations of overvaluation, leading to penalties being imposed on the appellants. The appellants argued that the Commissioner's findings were based on unreliable evidence, including market inquiries and cost of production discrepancies. They contended that the market inquiries were based on local traders' statements, which were not produced for cross-examination, and two dealers retracted their statements. The Commissioner also considered discrepancies in gold plating of watches, which the appellants claimed were meant for domestic sale, not export. The appellants emphasized that the declared values fell within the FOB cap, as per relevant circulars.

The appellants further argued against the related buyer concept, stating that the connections between directors of exporting and buying companies did not meet the legal definition of related persons. The Commissioner also relied on overseas inquiries, where some exports showed lower values, but the appellants argued that these instances did not reflect the overall valuation accuracy. They cited Circular No. 27/2000-Cus., which states that for products under a notified FOB value cap, Post Manufacturing Value (PMV) is irrelevant. The Tribunal emphasized that the Revenue must adhere to this circular and cannot re-decide FOB values based on PMV.

Additionally, the Tribunal cited precedents where manufacturing costs were not the sole basis for determining FOB value, emphasizing the importance of actual selling prices. Considering all arguments and evidence, the Tribunal ruled in favor of the appellants, allowing their stay petitions and dispensing with the pre-deposit of penalties. The appellants were required to maintain a bank guarantee during the appeal process before the Tribunal. The judgment highlights the significance of legal circulars, precedents, and the need for substantial evidence in cases of valuation disputes related to exports under specific schemes.