2014 (12) TMI 692 - AT - Customs

Denial of export benefits - Over Valuation of goods - Seizure of documents - Inflation of the export value to the extent of 12.5% on account of commission and had availed undue export incentives on the inflated value. - Held that - We really fail to understand the objection of the Revenue. - On one hand, it is being contended that no commission was payable as the entire contract between the respondents and their foreign buyers was a direct contract and no Commission Agent was involved. As per the Respondents, the said commissions are not exactly in the nature of the commission interests, the same are in the nature of the reward to the foreign persons, which have held the appellant in various fields and which stands paid to them through their own pocket. This fact reveal that the appellant have received the entire consideration from the one buyer and the export benefits filed on the entire consideration so received without being effected by any payment made by them to the foreign agent. It is clear from the Circular that any commission up to the limit 12.5% is not required to be deducted from FOB value for grant of export benefits. The circular 64/2003-Cus dated 21.07.2003 is fully applicable to the facts of the present case - No merit in Revenue appeal - Decided against Revenue.

Issues Involved:
1. Validity of commission claims by M/s. SEIL and M/s. SPGL.
2. Export to a subsidiary and related commission prohibition.
3. Alleged inflation of export prices by 12.5%.
4. Applicability of DGFT and CBEC circulars regarding commission and export incentives.
5. Correct transaction value of exported goods.
6. Legality of export incentives obtained.
7. Compliance with RBI master circular regarding commission payments.

Issue-wise Detailed Analysis:

1. Validity of Commission Claims:
The primary issue was whether M/s. SEIL and M/s. SPGL could claim a 12.5% commission on their exports. The Commissioner observed that the tender documents did not mention any commission payments, and the exports were made directly to government agencies through open bids. Consequently, it was concluded that no foreign agent was involved, and the commission claims were not justified.

2. Export to a Subsidiary and Commission Prohibition:
The Commissioner noted that exports were made to M/s. GTA Engineering Nigeria Ltd., a subsidiary of M/s. SEIL. According to the RBI Master Circular dated 01.07.2006, commission payments on exports to a wholly-owned subsidiary are prohibited. However, the Commissioner found no evidence that the commission payments were related to equity participation in the subsidiary.

3. Alleged Inflation of Export Prices by 12.5%:
The Commissioner ruled that the allegation of inflating export prices by 12.5% was unfounded. The tender prices matched the declared shipping bill values, and the full amounts were received by the exporter. The Commissioner reasoned that inflating prices in an open bid would be self-defeating as it could lead to bid rejection.

4. Applicability of DGFT and CBEC Circulars:
The Commissioner referenced DGFT Policy Circular No. 55 (RE-98) and Circular No. 24 (RE-2004)/2002-07, along with CBEC Circular No. 64/2003-Cus, which allow export incentives on FOB value without deducting commission up to 12.5%. The Commissioner clarified that any commission up to 12.5% need not be deducted from the FOB value for granting export benefits, and anything above this limit should be restricted to 12.5%.

5. Correct Transaction Value of Exported Goods:
The Commissioner concluded that the correct transaction value was the full declared value, not 87.5% as contended by the Revenue. The declared value in the shipping bills matched the tender documents, and the full amount was received by the exporter.

6. Legality of Export Incentives Obtained:
The Commissioner found that the export incentives were correctly obtained. The declared values were accurate, and the incentives were based on the full FOB value, as allowed by the applicable circulars. Consequently, no fraudulent means were used to obtain the incentives.

7. Compliance with RBI Master Circular:
The Commissioner determined that there was no violation of the RBI Master Circular regarding commission payments. The payments were not related to equity participation in the subsidiary, and the actual commission paid was within permissible limits.

Conclusion:
The Tribunal upheld the Commissioner's decision, rejecting the Revenue's appeals. It was concluded that the commission claims, export values, and incentives were in compliance with the relevant circulars and regulations. The declared values were accurate, and the incentives were correctly obtained. The Tribunal found no merit in the Revenue's objections and dismissed the appeals.

Pronounced in the open court on 10/11/2014.

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