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2023 (1) TMI 155 - AT - CustomsValuation of imported goods - undervaluation - Urea - Ammonia - rejection of declared value - huge difference between the prices of the same goods imported in terms of UOTA and AOTA and international price of said goods - relationship between GOI, OMIFCO and the Appellants - related party or not - HELD THAT - Sub-clauses (i) to (viii) of Rule 2 (2) of CVR, 2007 indicates that each of these sub-clause deals with different means of establishing deemed relationship between two persons. In terms of Rule 2(2)(i) persons can be deemed to be related only if they are officers or directors of one another s business. In terms of Rule 2(2)(ii) persons can be deemed to be related only if they are legally recognized partner in business and in terms of rule 2(2)(iv) persons can be deemed to be related only if both of them are directly or indirectly controlled by the third person. In the present matter we find that department has failed to prove that as to how the Appellants on one hand and DOF, GOI on the other hand were officers or directors of one another s businesses. Thus, the condition prescribed in sub-rule 2(2)(i) is not satisfied in the instant case. The contention of the revenue also not correct in terms of Rule 2(2)(ii) on the ground that Appellants and OMIFCO are legally recognized partners in business, in as much as IFFCO/ KRIBHCO hold 50% of equity of OMIFCO and that there are two representatives of IFFCO/KRIBHCO on the Board of Directors of OMIFCO while another Director on the Board of OMIFCO represents the GOI - a company and shareholder cannot be termed as partner in the business carried on by the company. In partnership Act, 1932 partnership has been defined as relationship between two persons who have agreed to share profit of business carried on by all or any of them acting for all. Partnership is formed through an agreement. In the present matter there is no partnership agreement between the Appellants and OMIFCO, so they cannot be treated as legally recognized partners only because the Appellants hold 50% share in OMIFCO. It is a settled principle of law that the authority making the allegations has to prove with sufficient evidence. In the instant case, leaving alone the evidence, even reasons to entertain such a belief have not been properly brought forth or established - the declared prices cannot be reviewed without any evidence to the effect that the relation between the appellants and sellers has influenced the declared price or to the effect that there was a flow back of money from the importer to the related supplier. Therefore, we don t find any substance to sustain the impugned orders. The alleged relationship between the Appellants/ GOI and OMIFCO has not influenced the price of the imported goods. Urea- Off Take agreement and Ammonia- off Take agreement both are long term international contract finalized between two sovereign countries. From the MOUs and agreements it is also clear that rates were finalized for 15 years. Further it is evident that GOI had agreed to purchase 100% of rated production on the basis of fixed Long Term Pricing (LTP) for 15 years. These facts would evidence that there was a long term agreement as regards production and sale of goods by OMIFCO and purchase of the same by GOI/ Appellants. Government has issued Notification No. 4/2015 dated 16.02.2015 exempting Urea when imported into India from OMIFCO under the UOTA agreement dated 29.05.2002 from the customs duty and additional customs duty leviable under sub-section 1 of Section 3 of the Customs Tariff Act subject to condition that the importer produce the certificate to effect that the declared value is in the terms of agreed price under UOTA. The important aspect is not the exemption but the acceptance by the Government about the correctness of the price under UOTA. The goods imported in this matter have followed the said LTP price only. In the present matter impugned orders and department had not established that the price of the goods imported by the Appellants was influenced by the relationship between OMIFCO. Thus, it is clear that even if it is assumed that the buyer and seller are related in terms of Rule 2 (2) of valuation Rules, 2007 read with explanation II of said Rule, the price at which the goods were purchased from OMIFCO is the true transaction value and not influenced by their relationship. In the present matter Department has also not produced any evidence to show that the relationship between the parties has influenced the price. Therefore, the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside - Since the charges of misdeclaration undervaluation are not sustainable in law, the differential duty demand along with interest and penalties imposed is liable to be set aside. Appeal allowed.
Issues Involved:
1. Whether the declared value of imported Urea and Ammonia can be rejected under the provisions of the Customs Valuation Rules, 2007. 2. Whether IFFCO, KRIBHCO, and the Government of India are related to OMIFCO under Rule 2(2) of the Customs Valuation Rules, 2007. 3. Whether the relationship between the parties influenced the transaction value. 4. Whether the differential duty, interest, and penalties imposed are sustainable. 5. Whether the Revenue's appeal for imposition of redemption fine is valid. Detailed Analysis: 1. Rejection of Declared Value: The Department of Revenue Intelligence (DRI) investigated the imports of Urea and Ammonia by IFFCO and KRIBHCO, revealing that the import price from OMIFCO was significantly lower than the international price. The DRI proposed to reject the declared value of imported goods and re-determine the same under Section 14 of the Customs Act, 1962, read with Rule 4 of the Valuation Rules, 2007. The adjudicating authority confirmed the demand of customs duty, interest, and penalties on the grounds of undervaluation, asserting that the declared value did not represent the true and correct value of the goods. 2. Relationship Between Parties: The adjudicating authority held that IFFCO, KRIBHCO, and the Government of India (GOI) are related to OMIFCO under Rule 2(2)(i), (ii), and (vi) of the Customs Valuation Rules, 2007. However, the appellants argued that the relationship criteria under Rule 2(2) were not met. They contended that IFFCO and KRIBHCO's involvement with OMIFCO was limited to a joint venture agreement, and there was no partnership or control that would establish a related party relationship as per the Customs Valuation Rules. 3. Influence on Transaction Value: The appellants argued that even if they were considered related, the relationship did not influence the transaction value. They highlighted that the prices were determined based on long-term agreements (UOTA and AOTA) between the GOI and OMIFCO, which included provisions for fair pricing and profit margins. The appellants cited various judicial precedents to support their claim that the transaction value should be accepted if the relationship did not influence the price. 4. Differential Duty, Interest, and Penalties: The Tribunal found that the department failed to prove that the appellants and GOI were related to OMIFCO under Rule 2(2) of the Customs Valuation Rules, 2007. The Tribunal also noted that the declared prices could not be rejected without evidence showing that the relationship influenced the price or that there was a flow-back of money from the importer to the supplier. Consequently, the Tribunal set aside the differential duty, interest, and penalties imposed on the appellants. 5. Revenue's Appeal for Redemption Fine: The Revenue's appeal sought the imposition of a redemption fine on the goods in question. However, the Tribunal held that since the charges of misdeclaration and undervaluation were not sustainable, the grounds for the Revenue's appeal did not carry any substance. Therefore, the Revenue's appeal was dismissed. Conclusion: The Tribunal concluded that the relationship between the appellants and OMIFCO did not influence the transaction value and that the declared prices were based on long-term agreements that ensured fair pricing. The Tribunal set aside the differential duty, interest, and penalties imposed on the appellants and dismissed the Revenue's appeal for the imposition of a redemption fine. The appeals filed by the assessees were allowed with consequential relief in accordance with the law.
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