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TMI Blog2014 (12) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... of to the African Countries viz. Nigeria & others, under Export Promotion Schemes viz Duty Entitlement Pass Book, Duty Free Replenishment Certificate/Duty Free Import Authorization (DEPB, DFRC,DFIA) etc. by over-valuation of the same on account of trade/agency commission, the matter was taken up for investigation. 3. Searches were conducted on 6.8.2007 at the premises of the said companies and relevant documents were seized wherever found. 4. From the documents seized, retrieved from the laptop and received from the Bank, Ports, Transferees of the DEPB/DFRC Licenses and statements of various persons, M/s SEIL and M/s. SPGL and investigations carried out, it appeared that M/s. SEIL and M/s. SPGL were exporting their goods by declaring commission @ 12.5% of f.o.b. value for the foreign agents in the invoices and shipping bills filed before Customs and claiming export incentives on total f.o.b. value inclusive of 12.5% commission. However, in the invoices sent to their overseas buyers, they were not declaring the said commission. It appeared that, there was no foreign agent involved with regard to securing/procuring the export orders mainly from the government agencies of Nigeria. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were regularly declaring commission at the flat rate 12.5% of f.o.b. value (in most of the cases) whereas on scrutiny of the invoices sent to the overseas buyer, it was found that there was no declaration regarding commission. Thus, it appeared that there was no agent for procuring the export orders thereby no commission was declared in the invoices sent to the overseas buyers. 7. In view of the above, it was evident that M/s. SEIL and M/s. SPGL were admittedly securing/procuring their export orders through open bids announced/published by the government agencies by way of various means viz. New Papers, Web Sites etc. Further, one of their buyers, M/s GTA Engineering Nigeria Ltd. was their subsidiary company. Thus, there was no agent between the exporters and buyers of the goods in connection with procurement of export orders. Thus, M/s. SEIL and M/a. SPGL were inflating the prices of exported goods to the extent of 12.5% of f.o.b. by claiming the commission in order to avail undue export incentives on inflated value. The DGFTs Policy Circular No. 55 (RE-98) dated 10th December 1998 & Circular No. 24 (RE-2004)2002-07 dated 14th Jan. 2004 and CBEC Circular No. 64/2003-Cus date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an overseas wholly owned subsidiary. M/s. GTA Engineering was a subsidiary of M/s SEIL. iii) M/s. SEIL & SPGL were inflating the prices of export goods to the extent of 12.5% of FOB by claiming the commission in order to avail export incentive on inflated value. iv) DGFT's Policy Circular No 55 (Re-98) Dated 10.12.98 and Circular No. 24 (Re-2004)/2002-07 Dt. 14.01.2004 and CBEC Circular No. 64/2003 Customs dated 21.07.2003 clearly stipulate that export incentives are permissible on FOB value without deducting the agency commission upto the limit 12.5% of FOB value. Agency commission exceeding this limit should be deducted from FOB value for granting export incentives. v) Hence, if agency commission was more than 12.5% of FOB it was to be restricted to 12.5% of FOB and if it was less then 12.5% than it was to be taken on actual basis for granting the export incentives. vi) No agency commission can be claimed in respect of export by Indian firm to their subsidiary as per master circular of 9/2006-07 dated 01.07.2006 of RBI. vii) The correct transaction value of the exported goods was only 87.5% of the declared value. viii) Hence, the export incentive was obtained through fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that any thing less than 12.5% was to be restricted to actual as mentioned in para 8.7 of the Show Cause Notice. 59.3. From the above it can be seen that: I The exports were mainly to government agencies on the basis of tenders called by an open bid. II It was commonsense and reasonable that when an open tender was called by any government agency for purchasing any goods it was the lowest tender, which was accepted and to get the order the tender has to be placed with the lower price, which clearly shows that the allegation of inflating the price by 12.5% by the tenderer (i.e. the exporter) while filing a tender was totally misconceived as it will be a self defeating proposition because higher price may lead to rejection of bid. III. Further the entire sum as per the tender which was same as the value declared in the shipping bills had been received by the exporter as evidenced from the Bank document annexed to the Show Cause Notice. IV. There was no requirement either under the Custom Act or under DGFTs regulation that the shipping bills and the tender documents should have specific clause regarding the amount of commission paid and the reasons for payment of such commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mit of 12.5% of FOB. VII. The charges against the exporters mentioned in Para 12.1 were as follows It appears that there was no foreign agent in procuring the export order from the government agencies and other private companies and there was no clause in any of the documents for an agent and related agent commission. But the exporters appears to be claiming the foreign agent commission in the export documents fraudulently for inflating FOB value of exports in order to avail undue export incentives and had shown realization of export proceeds through illegal means, in violation of the Foreign Exchange Management Act 1999 and Regulations issued there-under and all the RBI guidelines issued in this regard, as detailed above thus, these cannot be construed as export proceeds at all. And in Para 10 the exporter had realized export proceeds to the extent of inflated value but the same appears to have been realized on the other grounds which have no nexus with the exported goods. It is also settled law that realization of the declared export value by the exporter does not prove that export value had been correctly declared. VIII. Based on the discussion above, I find the allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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