2019 (11) TMI 622 - AT - Customs

Import of certain capital goods under EPCG Scheme - concessional rate of duty - N/N. 97/2004- Customs - Inclusion of freight charges - extended period of limitation - HELD THAT - The AMW paid the Freight forwarder an amount of ₹ 4,32,98,915/- where as in the 15 Bills of entries they included freight amounting to ₹ 1,60,69,376/- only. As a result an amount of ₹ 2,92,35,480/- escaped inclusion in the assessable value. The reason given by AMW is that at the time of filing bill of entry in first 10 cases they were aware of the actual freight charged by the freight forwarder whereas in last 5 Bills of entries they were not aware of the actual freight payable to the freight forwarder. The reason cited was that the variable cost based on CAF/BAF was not known. The method of calculating freight agreed by AMW with PLIL was very clear. It can be seen that the only variable in the cost is the currency adjustments which simply converts all cost payable in US Dollar terms into Rupees. Thus it won‟t be correct for AMW to say that the cost of transport was not immediately available to them. The currency price are available directly on minute to minute basis every day. More over it is seen that out of total cost of ₹ 4.32 Crores paid to the freight forwarder. The appellant had included only ₹ 1.6 crores, in 15 consignments. Even if the actual freight of first 10 consignments was known on actual basis it could not have been its 40% of the total freight for 66% of the total consignments. The documents on the basis of which they had included freight on actual basis were however not available with AMW. Benefit of EPCG Scheme denied on the enhanced value of the imports - HELD THAT - The impugned order denies the benefit of the EPCG scheme on the ground that the Chapter 5 of the Foreign Trade Policy requires the importer to produce license for debit by the proper officer of customs at the time of clearance. It has been argued in the impugned order that since the said amount was not declared at the time of import the benefit of scheme cannot be extended to the appellant. We do not find any merit in this argument -It is a fact that the appellant have EPCG License containing a specific amount. Therefore, if the value is enhanced then AMW is entitled for benefit to the extent the enhanced value is covered in the EPCG License. It has been argued by the Ld. Counsel for AMW that since the assessment has not been challenged, demand under section 28 cannot be raised - HELD THAT - The demand can be raised under section 28 even if challenging assessment. Consequently this argument of Ld. Counsel for AMW is rejected. Extended period of limitation - HELD THAT - The appellant have paid significantly higher amount to the freight forwarder as freight. However, in 15 Bills of entry filed by AMW only 40% of the freight has been included in the assessable value. When the agreement and terms of payment are crystal clear the actions of importer are clearly intended to evade taxes. When documents on actual freight paid were demanded, Ld. Counsel failed to produce the same. In these circumstances, we find that it was a specific modus operandi devised by AMW to defraud the Government and therefore, extended period of limitation is rightly invoked in the instant case. Confiscation of the goods already cleared by the AMW - HELD THAT - The bond executed by the AMW is not for production of goods but for fulfillment of export obligation and to pay duty in case of failure to fulfill export obligation - The goods cannot be confiscated, even if, the same are liable for confiscation. Appeal allowed in part.

Summary

Issues Involved:
1. Demand of Customs Duty
2. Imposition of Penalty
3. Denial of Notification No. 97/2004-Customs
4. Failure to Confiscate Goods
5. Failure to Impose Redemption Fine
6. Cross Objections by the Appellant

Detailed Analysis:

1. Demand of Customs Duty
M/s. Asia Motor Works (AMW) imported capital goods under the EPCG Scheme, claiming a concessional rate of 5% duty under Notification No. 97/2004-Customs. AMW appointed Pro Logistics (I) Limited (PLIL) for freight forwarding. AMW filed 15 Bills of Entry; for 10, they included actual freight charges, and for 5, they included freight at 20% of the FOB value per Rule 9 of the Custom Valuation Rules, 1998. The Revenue alleged that AMW did not include the full freight amount in the assessable value, leading to undervaluation. The Tribunal found that AMW paid ?4,32,98,915/- to PLIL but included only ?1,60,69,376/- in the assessable value, resulting in an exclusion of ?2,92,35,480/-. The Tribunal held that the cost of transport was ascertainable and should have been included, rejecting AMW's claim that the variable costs were unknown at the time of filing.

2. Imposition of Penalty
The Tribunal found that AMW's actions of not including the full freight charges in the assessable value were intended to evade taxes. The Tribunal upheld the imposition of penalties, noting that AMW's failure to include the correct freight amount was a deliberate act to defraud the government.

3. Denial of Notification No. 97/2004-Customs
The Tribunal rejected the Revenue's argument that AMW was not entitled to the benefit of Notification No. 97/2004-Customs on the enhanced value because the amount was not declared at the time of import. The Tribunal held that AMW is entitled to the benefit to the extent that the enhanced value is covered in their EPCG license.

4. Failure to Confiscate Goods
The Revenue argued that the goods were liable for confiscation under Section 111(m) of the Customs Act, 1962, due to undervaluation. The Tribunal noted that the goods were cleared in the regular course and not against a bond for production of goods but for fulfillment of export obligation. Therefore, the Tribunal held that the goods could not be confiscated even if liable for confiscation.

5. Failure to Impose Redemption Fine
The Revenue's appeal for the imposition of redemption fine was rejected. The Tribunal referred to the Supreme Court's decision in Weston Components Ltd., where goods released against a bond could be subject to redemption fine. However, in this case, the bond was for export obligation and not for the production of goods, making the ratio of Weston Components Ltd. inapplicable.

6. Cross Objections by the Appellant
AMW's cross objections were disposed of in light of the Tribunal's findings. The Tribunal partially allowed AMW's appeal, specifically regarding the entitlement to the benefit of Notification No. 97/2004-Customs on the enhanced value. The Revenue's appeal was rejected, and the Tribunal upheld the extended period of limitation due to AMW's deliberate undervaluation.

Conclusion:
The Tribunal concluded that AMW had deliberately undervalued the imported goods by not including the full freight charges in the assessable value, thus evading taxes. The Tribunal upheld the demand for customs duty and penalties but allowed AMW the benefit of Notification No. 97/2004-Customs on the enhanced value. The Tribunal rejected the Revenue's appeal for confiscation and redemption fine, as the goods were cleared in the regular course and the bond was for export obligation. The cross objections by AMW were disposed of accordingly.