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TMI Blog2013 (10) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... available which carried the actual values of the exported spares. However, such other invoices were not submitted to the Customs authorities at the time of exports. They were not even produced before the DRI. The learned Commissioner also found that the set of invoices filed with Bills of Entry in Singapore for clearance of the spares was the same as those produced by the appellant before the Indian Customs authorities at the time of export. It was also found that, in the financial statements of the appellant, the sale of refurbishable spares was not mentioned towards foreign exchange income. On the basis of all these findings, it was concluded that the defective spares were exported free-of-cost by the appellant. Prima facie, there is no reason to doubt the correctness of the learned Commissioner s finding that such exports were made as a contractual obligation amounting to a condition of sale of the spares by Sun (Sing.) to the appellant. The monetary benefit of the export of refurbishable spares apparently accrued to Sun (Sing.) thereby constituting a flow-back. We have also examined the findings recorded by the learned Commissioner with regard to ALC charges, AEC charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore, (b) differential duty of Rs.9,12,55,033/- on goods imported through Chennai, (c) total penalty of Rs.155.13 crores imposed under Section 114A of the Customs Act and (d) redemption fine of Rs.35 crores imposed (under Section 125 of the Act) in lieu of confiscation of the goods seized and provisionally released. An amount of Rs.10.4 crores has been recovered towards redemption fine through encashment of bank guarantee. An amount of Rs.5.65 crores was deposited by the party during the course of investigations. 2. The facts of the case, briefly stated, are as follows: Sun(India) and Sun(Singapore) are wholly owned subsidiaries of Sun Microsystems Inc., US, hereinafter referred to as Sun(US) . Sun(US) manufactures spares and also formulates the pricing policy including discount rates. The spares manufactured by Sun(US) are supplied from Singapore by Sun(Sing.) to different group companies in Asia Pacific Region, including Sun(India). The activity of software development for Sun(US) is also undertaken by the STPI unit of Sun(India), for which there is an agreement viz. Research and Development Services Agreement between Sun(India) and Sun(US). As per this agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of differential duty on Sun (India) by invoking the extended period of limitation under the proviso to Section 28(1) of the Customs Act on the alleged ground of suppression of facts with intent to evade payment of appropriate duty. Interest on duty was also demanded under Section 28AB of the Act. A penalty was proposed on Sun (India) under Section 114A of the Act and penalties were also proposed on past and present functionaries of the company under Section 112 of the Act. The demands and other proposals were contested by the noticees. It was in adjudication of this dispute that the learned Commissioner passed the impugned order. The present stay application seeks waiver of pre-deposit and stay of recovery in respect of the dues adjudged against Sun(India). 4. Heard both sides. The learned counsel for the appellant contested the demand of duty on numerous grounds including merits and time-bar. His arguments were vehemently contested by the special consultant for the respondent. From the rival submissions, the following issues arose for consideration (as they appear to have been framed in the impugned order), which appear to have arisen before, and elaborately considered by, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to certain reports of PWC (who were appointed to analyze the transactions of the group company with various Sun entities as well as unrelated buyers) which stated that Sun(US) offered discounts to Sun(Sing.) and other Sun entities and that Sun(Sing.) offered deep discounts from the US Price List to other Sun entities in the Asia-Pacific Region as well as to independent 3rd party customers across the world. In this manner, the learned counsel invoked Rule 3(3)(a) of the Customs Valuation (Determination of Value of the Imported Goods) Rules, 2007 to show that the relationship between the appellant and the supplier did not, in any manner, influence the price of the spares imported from the latter. Per contra, it was submitted by the learned special consultant for the respondent that there was irrefutable evidence of direct and indirect flow-backs to indicate that the declared price of the goods was not the sole consideration for the sale. He submitted that the price was undervalued by the appellant and that the suppressed value was compensated to the suppliers by the appellant by making additional payments in the form of freight, ALC charges, AEC charges etc. These additional pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondent endeavoured to show short-payment to the extent of Rs.129.39 crores on additional consideration/flow-back. He also reiterated the relevant findings of the adjudicating authority as counter to the various arguments of the learned counsel for the appellant. 8. After considering the rival submissions as also the relevant findings of the learned Commissioner, we are unable to hold that the relationship of the appellant to the supplier did not influence the price of the imported spares. The refurbishable spares were found to have been exported through courier from January to May 2006. The courier who handled the export shipments confirmed that there was no foreign exchange involved in the shipments. The appellant s bankers also confirmed this. The officials of the appellant, who were incharge of bank-related works also stated that they had not received any remittance towards export of re-furbishable spares. Though some FIRCs were produced by the appellant during the course of DRI investigations, no connection was found between the FIRCs and the export of refurbishable spares. The values shown in the invoices produced by the appellant at the time of export were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such value was substantially influenced by direct and indirect flow-backs between the importer and the supplier being related Sun entities. 9. The learned counsel has argued that, as the appellant provided AMC service on behalf of Sun(Sing.) to unrelated independent Indian customers of Sun(Sing.) and the provision of such service was at arms length, the cost of goods (imported spares) used in the execution of such AMCs is indicative of the correctness of the declared value of the imported spares. This argument has not been substantiated before us and, therefore, we have no reason to alter the prima facie view already taken with regard to the declared value of the imported spares. 10. We find that the adjudicating authority considered the circumstances of sale and, after rejecting the declared value, proceeded sequentially from rule to rule under the Valuation Rules to determine the assessable value of the goods. It adopted the residual method of valuation and called upon the appellant to provide the rationale for the heavy discounts (61 to 70%) from the US List Price allowed by the supplier. The appellant stated the following reasons: a. Sun s ERP system, as set up, coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. 12. The learned counsel vehemently argued that it was not open to the Department to reopen the SVB order dt. 27/02/2004 whereby the declared value was accepted and accordingly assessments of Bills of Entry finalized for the period upto 2007. It was argued that, as the appealable SVB order was not appealed against and the finalized assessments were not reviewed, Section 28 of the Customs Act could not be invoked for demanding any duty on the imports covered by the above finalized assessments of Bills of Entry. In this connection, the learned counsel relied on certain decisions viz. Commissioner Vs. Flock (India) Pvt. Ltd. [2000(120) ELT 285 (SC)], Priya Blue Industries Ltd. Vs. CC (Preventive) [2004(172) ELT 145 (SC)] etc. The learned special consultant for the respondent pointed out that the appellant had not produced the Logistic Service Agreement, Spare Parts Agreement and the Escalated Technical Support Agreement before the SVB. The export of re-furbishable spares free-of-cost to Sun(Sing.) was not disclosed to the SVB. On the other hand, the appellant declared to the SVB that there was no formal agreement between them and Sun (Sing.). The grant of discount to the extent o ..... 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