9911796707
TMI Blog2010 (8) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... s the customs barrier viz. when the goods are cleared for home consumption from the warehouse on payment of duty Regarding time limitation - As per the declaration in the Bills of Entry, the transaction was governed by the HSS contract and there was no other contract relevant to the value - this was a conscious and deliberate mis-declaration made by each of the HSBs in respect of each of the impugned imports. Therefore, the Commissioner rightly invoked the larger period to confirm the demands Regarding penalty - Held that: penalty imposed on each of the HSBs under Section 114A equal to the duty evaded is sustainable in view of our finding of deliberate suppression of payment of additional amounts for high seas purchase of SM. We consider the penalty of Rs. 3,00,00,000/- imposed on SPL under Section 112(a) of the Act to be on the higher side - As rightly argued, penalties could not be imposed on them u/s 114A as the provision is for imposing equal penalty as the duty on a person from whom duty is demanded u/s 28 (2) of the Act; there is no such demand on them - Appeals are partly allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurance upto storage and barge charges would be borne by SPL. As per the contract, HSBs would lift the SM from the storage tank at Aegis, Chembur at their own cost. Insurance for storage and transit, CVD and sale tax would be borne by HSBs. During the material period, all the HSBs entered into HSS contract whenever they purchased a consignment of SM from SPL on HSS basis. As per this contract, the price paid was the purchase price of SPL + 2% HSS commission. Every time a consignment was cleared by a HSB, Bill of Entry was filed along with related HSS contract. The authorities tentatively concluded that the supply contract. (YWPC) was wantonly suppressed from them by the HSBs. Bills of Entry filed always carried the following declaration in terms of Section 46 of the Customs Act, 1962 (the Act for short) that there was no other document relevant for the transaction value :- "I/we declare that I/We have received and do not know of any other documents or information showing a different price, value (including local payments whether as commission or otherwise) quantity or description of the goods and that if at any time hereafter I/we discover any information showing a different stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner found that SPL had played a leading role in the whole subterfuge and the HSBs were willing accomplices. All were parties to the offending transactions and benefited from saving on customs duty due to the Government. The HSBs had filed Bills of Entry declaring lower values than the actual transaction value and paid the supplier in terms of separate contracts against debit notes concealed from the Customs. SPL was instrumental for evasion of customs duty of over Rs. 3.81 crores over a period of four years. SPL had recovered an amount of Rs. 11.36 crores through debit notes. The Commissioner demanded differential duty with applicable interest from the HSBs and imposed equal amount of penalty as the demand on the HSBs under Section 114A of the Act. He imposed a penalty of Rs. 300 lakhs under Section 112(a) of the Act on SPL for their having abetted HSBs rendering the impugned goods liable for confiscation under Section 111(d) and 111(m) of the Act. The Commissioner demanded from SPL an amount of Rs. 62,50,241/- under Section 28B of the Act. He ordered fine in lieu of confiscation in respect of the consignments imported following the ratio of the judgment in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation and did not form part of the value. There was no dispute that SPL handled the goods imported by HSBs and organized storage thereof; SPL was entitled to collect service charges as per the contract. SPL had paid service tax on the impugned differential amounts; therefore this could not be made part of the value exigible to customs duty. SPL had not abetted misdeclaration and had not incurred liability to penalty under Section 112(a) of the Act. There was no iota of evidence to hold that SPL had persuaded HSBs to misdeclare value for assessment. The transactions between SPL and HSBs were on principal to principal basis and at arm's length. SPL was not legally bound to furnish any information relating to the Goods sold by it on HSS basis to Customs authorities. SPL had not manipulated any documents to attract charge of abetment by it. The penalty of Rs. Three crores imposed on it was not justified. 4.1 The appellant had not collected the amount of Rs. 62,50,241/- as representing duty of customs. This amount was collected towards adjustment of the total cost as explained by its representative Shri V.T. Nandkumar during the proceedings. Section 28B applied only when any amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it notes represented charges payable to SPL for post importation services provided by it. SM was a hazardous material, being inflammable and prone to polymerizing in handling and storage, which had to be prevented. Aegis terminal was located 2.5 kms away from the place of importation. These pipelines were specially designed to convey sensitive materials like SM. Transportation of imported goods was a post importation activity. At Aegis terminal SM was stored in special tanks designed to store SM. SPL paid warehousing charges to Aegis and appellant paid a portion for storage of goods purchased by it on HSS basis. As per the contract with SPL, the appellants were provided a credit free period of 15 to 30 days for making payment from the date of signing HSS documents. SPL paid wharfage charges to Mumbai Port Trust and also incurred administrative charges such as documentation work after importation. SPL paid service tax on the service charges recovered from the appellants. It was settled that post importation charges were not includible in the value of goods imported. 4.5 Even if it was assumed that appellants were liable to pay duty on the total amount paid to SPL, charges paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bills of Entry. Other documents submitted included bill of lading endorsed by SPL in favour of the appellants, test bond, HSS agreement, declaration in terms of Rule 10 of CVR and sale letter by SPL. There was no suppression. In terms of Rule 10 of CVR, appellants had disclosed all relevant information and the manner of computation of value for assessment. Till issuance of Circular No. 32/2004-Cus., dated 11-5-2004, Public Notice No. 145/2002, dated 3-12-2002 of the Custom House had prescribed addition of 2% towards HSS commission to the original invoice for computation of value for assessment of goods purchased on HSS basis. As the service charges realized by SPL covered a host of post importation services, value had to be determined adopting best judgment assessment by addition of 2%. In a show cause notice dt. 26-2-2001 issued to M/s. Hotline Glass Ltd. by Bombay Customs House, it was proposed to revise the value declared (CIF + HSS commission higher than 2%) and to re-assess the goods at CIF + 2%. This notice reflected the practice followed in the Bombay Custom House for computing value for assessment of HSS purchases as adding 2% HSS commission to the CIF value charged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n HSS basis to appellants. As per Rule 4 of CVR transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9. The Hon'ble Supreme Court in the case of Burma Shell v. CTO [1960 (11) STC 764] had held that 'export' occurred when there was a foreign destination where the goods could be sold. The expression when sold for export to India employed in the Rule 4 of CVR referred to transaction between the foreign exporter and the Indian importer. Therefore, the price at which the foreign supplier SABIC/Shell sold goods to SPL was the price of the goods exported to India. No two international entities were involved in the HSS. There was no international transportation of goods. Sale by SPL was not on export to India but on import to India. The contrary conclusions by the Commissioner was not sustainable. The appellants relied on Advisory Opinion 14.1 by Technical Committee on Customs Valuation which clarified the expression 'sold for export to the country of importation' as transaction involving actual international transfer of goods which could be used in valuing merchandise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable for confiscation. SPL was not liable to penalty u/s 112 of the Act. 5.3 Ld. Counsel for the Revenue countered the various submissions made by the counsel for the importers. The service charges were part of the basic price for the sale of the goods and constituted consideration for sale of the goods and payable as condition of sale of the goods. The debit notes raised by SPL clearly showed the same being service charges on HSS consignments of SM. Hon'ble Supreme Court in Hyderabad Industries v. UOI case (supra) laid down that amount recovered as service charges by the high seas seller apart from the invoice value paid by the HSS seller would form part of the transaction value of the goods sold on high seas and duty was payable by the HSB on such value. Facts of the present case were similar. In the Eternit Everest Ltd. v. CC [2000 (119) E.L.T. 716 (Tri. - LB)], it was held that in the case of HSS, duty was payable not merely on the price paid by the high seas seller to foreign supplier but on the CIF value + the charges recovered by the high seas seller from the high seas buyers. This decision upheld similar view taken by the Tribunal in Godavari Fertilisers & Chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demurrage charges, these were not covered by clause (a) or (c) of interpretative notes to Rule 4. 5.6 In the present case, goods are cleared from customs bonded warehouse after initial warehousing. Hon'ble Supreme Court in the case of Kiran Spinning Mills v. CCE [1999 (113) E.L.T. 753] held that taxable event of importation takes place when the customs barrier is crossed and that, in the case of goods which are warehoused, the customs barrier would be crossed when they are taken out of the customs and brought to the landmass of the country. The Apex Court also observed that the contention that import was complete when the goods entered territorial waters stood rejected by that Court in the case of UOI v. Apar Private Ltd. & Others [1999 (112) E.L.T. 3 (S.C.)]. 5.7 Service charges paid by the HSBs allegedly included the payment towards storage, transportation, barge charges and shipping demurrage. These were payable as a condition of the sale and were therefore liable to form part of the transaction value under Rule 9(e) of the CVR. This was the ratio of the Tata Power Co. Ltd. case where the Tribunal held that facilitation charges, demurrage, bank charges, wharfage, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. The Apex court held that the sale to DGS&D cannot be said to be a sale in the course of import. The court held that merely because the petitioner had imported the goods for selling in India to DGS&D, to could not be said that the sale to DGS&D had occasioned the movement of the goods into India. Revenue has submitted that the case did not deal with high seas sale. 6. We have carefully studied the case records and considered the rival submissions. The following issues arise for our consideration : (i) Sustainability of demand of differential customs duty on the service charges paid by HSBs to SPL invoking larger period. (ii) Sustainability of demand raised on SPL under Section 28B of the Act (iii) Sustainability of penalties u/s 114A and fine u/s 125 imposed on HSBs. (iv) Sustainability of penalty imposed on SPL u/s 112. (v) Sustainability of penalty imposed on employees of SPL and HSBs u/s 112/114A. 6.1 The case of the revenue is that HSBs paid consideration on HSS of SM by SPL as per contracts not disclosed to the department. A false HSS contract was submitted whenever a HSB bought SM on HSS basis from SPL. As per the supply contract (YWPC), SPL recovered a basic p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on the SCN is known. Parties do not rely on the decision on the SCN. In the circumstances we find that the HSBs had declared lower price suppressing the transaction value as per the supply contracts deliberately to avoid paying the duty due on the consignments. The judicial authorities cited by the Revenue fully support the demand invoking larger period. We hold that the demands for short levy raised in the impugned order on HSBs are sustainable. 6.3 As regards the claim that HSS does not take place in the course of international trade but intra-national trade, we find that HSS is a species of transaction happening on the high seas and not after import of the goods into India. We cannot hold that HSS is not on sale for export to India. All the case laws relied on by the ld. Counsel referred to the sale, taking place in India prior to sale for export, and held that such sales were not in the course of export and attracted sales tax. These cases are different from the case on hand on material facts and had read the provisions relating to Sales Tax Act. These are not relevant to the subject issue. 6.4 In this connection we note that in the Godavari Fertilisers and Chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon'ble Supreme Court in the case of 'Hyderabad Industries Ltd. v. Union of India reported in 2000 (115) E.L.T. 593 (S.C.). A copy of this judgment, incidentally, is placed in the paper book, filed by the appellant. In this judgment their Lordship of the Supreme Court have held that service charges payable to the MMTC by the appellant for importation of the goods made by them, is includible in the assessable value of imports as provided in the Customs Act and Customs Valuation (Determinational of Price) Rules, 1988. They have repelled the arguments of the appellants advanced before them and dismissed their appeals with costs. Admittedly the HSB held title to the goods after the HSS and the bill of lading concerned was endorsed in its favour. At the time of sale, title vested with SPL and at the time of presentation of the Bill of Entry title vested with the HSB. Facts of the instant case are similar to those of Godavari Fertilisers and Chemicals Ltd. [1996 (81) E.L.T. 535 (T)] and the above decision applies to the subject case. 6.5 We find that the consignments involved were delivered to HSBs on sale by SPL ex-Aegis warehouse under ex-bond Bills of Entry. As rightly argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt took place. As per the declaration in the Bills of Entry, the transaction was governed by the HSS contract and there was no other contract relevant to the value. We find that this was a conscious and deliberate mis-declaration made by each of the HSBs in respect of each of the impugned imports. Therefore, the Commissioner rightly invoked the larger period to confirm the demands. We observe that in the Tata Yodogawa Ltd. case (supra), this Tribunal had held that non-disclosure of payment of service charges for purchase on high seas in the relevant Bill of Entry constituted suppression of facts and that the larger period was rightly invoked. 6.8 In view of the mis-declaration, the goods were rendered liable to confiscation under Section 111(m) of the Act by the HSBs. SPL had recovered additional amounts towards sale of the impugned consignments by raising debit notes. This enabled evasion by the HSBs by mis-declaration. SPL was thus justifiably found to have abetted evasion of duty by the HSBs. We find that the HSBs and SPL are liable to penalty as found by the Commissioner. However, as the goods had already been released without any undertaking or bond executed by the HSBs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were its customers. SPL was not legally liable to disclose the fact of its entering into any type of agreements with its buyers. However, its complicity in the contravention by the HSBs cannot be denied. Taking the totality of the case into consideration, we reduce the penalty imposed on SPL to Rs. 50 lakhs. 6.11 As regards penalties imposed on the appellant HSBs under Section 114A of the Act, we find that they are mandatory in view in the demands raised on them u/s 28(2) of the Act. The personal penalties imposed on the employees of SPL and HSBs are challenged on the basis that the impugned goods had not been rendered liable for confiscation by any act of omission or commission by them as duty due had been paid. Individuals were not liable to penalty u/s 114A as they were not found liable to pay any duty. Since the appellants operated through their employees/executives, we do not consider it necessary to impose separate penalty under Section 112(a) of the Act on the executives of HSBs and SPL. There is no finding in the order on the role of the employees of the HSBs or SPL in the offending transactions. These are imposed apparently considering their position in the organ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
