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TMI Blog2015 (9) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... if diamonds are segregated into a homogenous lot based on their size and quality, the value shall change even by employing simple labour intensive processes like sieving, boiling and assorting. The only piece of evidence we find on the relationship between the value addition and the process is in the form of representation made by Gem and Jewellery Export Promotion Council vide letter dated 23.10.2006 which relies on the same Circular of the CBEC while dealing with the various schemes in the Policy affecting the business of gem and jewellery including diamond industry. We are informed that the Customs Officers in charge of the bonded warehouse on being satisfied, have also cancelled the bonds, which aspect has been completely overlooked by the Commissioner. Section 14 of the Act provides that where duty is chargeable on ad valorem basis, the value shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation or exportation as the case may be in the course of international trade. There is no dispute about the CIF value declared by the Indian companies in the bills of entry. Rather such CIF value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teel India Company vs. CCE, [2014 (12) TMI 1035 - CESTAT MUMBAI] is of no assistance to the department. - declared FOB value is accepted to be the correct FOB value under Section 14 of the Act and to that extent the order of the Commissioner is set aside. Stand of the department in the show-cause notice to be self-contradictory. If the same lot is circulated into India a number of times, it is only rational to take the CIF value only once for the same lot to support the allegation of circular trading. By not doing so, and by accepting the CIG value of each individual consignments of imported diamonds, the department has admitted each consignment to be different from the other, and not of the same goods, thereby militating against their own case of circular trading. The Indian companies contend and rightly so, that the implications of acceptance of CIF value means each time a new consignment has been imported unrelated to any other in the past or future, duly corroborated by remittance of foreign exchange through banks or authorised dealers equal to the value of the goods received in India. Correspondingly in relation to exports, receipt of foreign exchange through banks and authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of foreign trade, that is export and import for more than 20 years. The appellant had been exporting and importing CPD during the financial years 19 94-95. The said activity of import and export of CPD was restarted in 2001 - 02 when the appellant also renewed the membership of Gem and Jewellery export promotion council, with a view to further grow its business. The appellant also obtained private bonded warehouse licence under Section 58 of the Customs Act in July, 2003 in order to carry on import and export of CPD as permissible under the Export and Import Policy 2002-07. 3. That with a view to expand the diamond business the appellant set up a 100% subsidiary in Mauritius known as Adani Global Limited which in turn set up to step down subsidiary in UAE namely Adani Global FZE (hereinafter referred to as AG FZE) and in Singapore namely Adani Global Pvt. Ltd. (hereinafter referred to as AGPL). With a view to grow its business appellant AEL and AG-FZE entered into a tripartite agreement with M/s Daboul trading LLC, Dubai and M/s. Gudami International Pvt. Ltd. 4. The appellant's imported consignment of CPD and filed bills of entry for warehousing. The consignments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained bonded warehouse licences. It is alleged that after import, the goods were taken into private bonded warehouse and without processing the same were removed for export within 3-4 hours or the next day as the case may be. It was therefore, alleged that the claim of AEL, that processes such boiling, sieving, sorting and packing was done as claimed by AEL and other appellants was bogus and that the same diamonds, without processing, were exported out of India. Reliance is placed heavily on the statements of Mr. Lumesh Sanghavi dated 30.01.2006, 07.02.2006, 28.02.2006 and 30.01.2007, who was at the relevant time Manager of AEL. Statements of Rajesh Adani, Managing Director, Samir Vora, Saurin Shah, Bhavik Shah, Kamraj Bodal, Vipul Desai, Kaushal Pandya, Mehul Shah and C.E. Mahadevan were recorded which allegedly support the allegations in the show-cause notice. It is therefore alleged that there was no processing undertaken by the Indian Companies inside the bonded warehouse and hence, there was no value addition, meaning thereby, that the FOB value declared was inflated in respect of same set of diamonds which were imported into and exported from bonded warehouse, only to be re-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow of funds between Indian companies and overseas entities by resorting to L/C discount and buyers credit which was an abnormal trend indicating circular trading. 6. On the basis of the above allegations, show-cause notice dated 30.03.2007 was issued alleging that the Indian entities have: (i) Mis-declared the FOB value of export goods in contravention of the provisions of Section 14 and Section 50 of the Act read with Section 11 of the Foreign Trade (Development & Regulation) Act, 1992 and Rule 11 & Rule 14 of the Foreign Trade (Regulation) Rules, 1993; (ii) Resorted to mis-declaration of value of export goods in the corresponding export documents before the designated authority which falls within the ambit of "illegal exports" as defined in Section 11H (a) of the Act and modus on the part of consortium amounts to "smuggling" as defined in Section 2(39) of the Act. As the goods have been exported resorting to mis-declaration in terms of quality and value rendering the goods liable for confiscation under Section 113(i) of the Act; (iii) Have rendered themselves liable for penal action under Section 114 of the Act; (iv) Through its Directors entered into c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Board of Excise and Customs in Circular No. 40/1999 dated 28.06.1999; d) The Gem and Jewellery Export Promotion Council in its letter dated 23.10.2006 addressed to then Union Minister of Commerce and Industry had accepted that the processing activity of the nature carried out by them in the bonded warehouse resulted in value addition of 5% or more; e) There was no circular trading and that as demonstrated by the number of examples in Annexure-H & I to the show-cause notice, the charge of circular trading was not sustainable as set out in Exhibit-D to the reply; f) All exports and imports of diamonds consignments were legal and proper and in accordance with the provisions of Para 4A.18 of the then prevailing Foreign Trade Policy (FTP); g) All the transactions were conducted at arms length between the parties and that neither the Indian Companies nor the overseas entities are related persons nor are they managed and controlled by the appellant - AEL, and all the transactions were based on commercial consideration as reflected by the terms contained in Memorandum of Understanding dated 19.03.2003 between M/s. Daboul Trading Co. (Daboul), M/s. Adani Global FZE, M/s. Gudami Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, sieving and assortment were carried out, the Noticees have not shown how these simple process can result in value addition of 5% or 10% in the two respective years". 10. The Commissioner, therefore, concluded that "Thus, the FOB value declared in the shipping bills by simply adding 5% or 10% of the CIF value is artificial and hence, the export value which is not a correct value has to be rejected under Section 14 of the Customs Act, 1962". Accordingly, the Commissioner held that- "................ mis-declaration of value declared in the shipping bills is firmly established. The goods cannot escape the mischief of confiscation for the mis-declaration of the value of export goods. The artificial value addition has also contributed to the mis-declaration of value of the export goods. No processing was undertaken to achieve the value addition and FOB value declared was incorrect. The simple process of boiling, sieving, and sorting do not automatically lead to value addition of 5% or 10% which was mechanically fixed by Shri Samir Vora and Shri Saurin Shah which is also confirmed by Shri Lumesh Sanghavi. It was possible for M/s. AEL to show incremental growt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry labour intensive work at low cost, yields high value and therefore, processes like sieving, boiling and assorting could result in value addition even higher than 5% or 10%. While reiterating that Lumesh Sanghavi had retracted his statements, the Ld. Advocates sought to explain his statements and submitted that the Commissioner have not correctly appreciated the same. It was further submitted that the charge of circular trading was sustainable neither in law nor on facts and examples of the same were given with the help of Exhibit-D to the reply and from the statement of Lumesh Sanghavi and his evidence in cross-examination. Our attention was also drawn to pages 42 to 44 of the show-cause notice to show that the inquiries made through the High Commission of India, at Singapore did not reveal either common shareholding or common Directors, except in respect of Adani Global Pvt. Ltd., which admittedly is a subsidiary of AEL. The same is the outcome also of the inquiry made by with Consulate General of India, at Dubai, which shows that except for the wholly owned subsidiary Adani Global FZE, there are no other related parties. After referring to the parts of reply to the sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies namely Aditya Corpex Private Ltd., Hinduja Exports Private Ltd., Midex Overseas, Jayant Agro Organics and Bagadia Brothers and obtained permission for setting up of Private bonded warehouses for import/export of CPD's. The activities covered under private bonded warehouses were - to import polished diamonds, to sieve the diamonds, to assort, to do boiling of the cut and polished diamonds, to pack the cut and polished diamonds, to re-export. It is further alleged that during the financial year 2002-03 the export turnover of AEL was 20.31 crores which increased to ₹ 1465.27 crores in 200-04, which further increased to ₹ 5626.67 crores in the year 2004-05 and during the year 2005-06 the same was at ₹ 11,193.64 crore. It is further stated thet the other 5 appellant companies had admittedly no turnover of CPD during 2002-03 but had turnover during the financial year 2003-04, 2004-05 and 2005-06. It is further stated that AEL was controlling export of other 5 companies under the understanding that the benefit of 'Target Plus Scheme' was to be availed by AEL. 16.1 That it is further urged that ACPL which was a partnership firm before being taken over b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 'Target Plus scheme'. Out of these, 5 companies stopped their business activities during the year 2005. Three of the overseas companies were functioning from the same premises at Hong Kong. One Global Enterprises is a supplier of the CPD to the Indian companies whereas the other 2 companies namely 'Kamsun Development International' and 'Wingate Trading' were importing CPD from the Indian companies and that too at a price which is higher by 5% to 10%. The registered office of one 'Planica Exports' have changed, at which address and other company Gracious export is already located. The said address is also the address of one Chew Bee Choo, one of the directors of Planica Exports and Gracious Exports. The registered address of Adani Global Pvt. Limited is also the residential address of Mr. Chang Chung Lind, Director of Gudami Internantional Private Ltd. Most of the companies at Singapore have some common directors, Miss Mary Joseph, the employee of Adani Global Private Ld. Singapore, is the Director of Gudami International. All the contracts of Gudami International, Singapore have been signed by Miss Mary in the capacity of director. 16.5 The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led written submissions filed by them. We have also perused the record and find that essentially the issues raised are questions of fact which we need to decide based on voluminous documents which each side has taken us through. We therefore first frame the issues for our decision. The issues framed are as under: I] Whether FOB value declared in the shipping bills for export of cut and polished diamonds by appellant companies is liable to be rejected on the ground that no processing activity to achieve value addition of 5% or 10% , was undertaken by the Indian companies in the bonded warehouses? II] Whether the Indian companies artificially inflated the export turnover to take benefit under the Target Plus Scheme (TPS) by resorting to circular trading/movement of the same set of diamonds between Indian companies and overseas entities which are allegedly inter related? III] What is the effect of the Commissions paid by the Indian entities for exports and the arrangement of buyers credit by the Indian entities on either the FOB value declared in the shipping bills or on the charge of circular trading referred to above? IV] Whether the export goods can be held liable for confiscat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt process was assortment, i.e., segregating the diamonds on purity basis. vii) Lot wise assorting of received consignments of CPD in the respective bonded warehouses of the aforesaid companies / firms by way of boiling for cleaning, sieving for separating diamonds size wise, size wise weightment of diamonds using weighing machine, further assortment with regard to quality required." viii) Repacking of the assorted CPD for exports by the office staff." C. In the same statement, Lumesh Sanghavi has further stated as under: "Qn.5: Please state whether 03 activities, i.e., sieving, boiling and quality assessment were done in respect of all the lots? Also, explain each process in detail? Ans.5: No, in all cases the above said 03 steps are not followed, as in some cases boiling may not be warranted and in some cases quality assessment may not be essential. The process of boiling of CPD is basically required to clean the diamonds. It is not done in all cases. For carrying out the process of sieving, the diamonds have to be placed on different sizes of metal sheets having perforations/holes and when the diamonds are placed on said metal sheets they pass through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I used to prepare export invoices by typing the same on the computer installed in our office and I used to fax the same to our CHA and the Security Agency who used to transport the same from our office to Custom Office." F. To the same effect is also the statement of Kaushal Pandya recorded on 06.02.2006 and the relevant portion reads as under: "The imported diamonds were packed in transparent plastic bags inside the wrapper of plain white paper. On receipts of the parcel of diamonds we put it into the safe meant for the custody of diamonds in the office of Aditya Corpex Pvt Ltd. Thereafter, on the same day, Mr. Lumesh Sanghavi came to the office of Aditya Corpex Pvt Ltd, he checked the parcel and packets contained in it. Thereafter, as per the requirement, Mr. Lumesh used to take out the packets of certain lots form the parcel of imported diamonds for sorting into various size, by the assorters, in the office of Aditya Corpex Pvt Ltd. Sometimes, when Lumesh Sanghavi could not come to the office Aditya Corpex Pvt. Ltd. he used to tell me on phone to take out packets of certain lots from the parcels (Aluminuim Box) of imported diamonds and give them for sorting. On b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncut & unset precious & semi-precious stones, Import & re-export of cut & polished diamonds & cut & polished coloured gemstones will be subject to achievement of minimum value addition of 5%." 18.2 Save and except increase in the percentage of value addition there is no other charge in para 4A.18 in 2005-06. A plain reading of para 4A.18 shows that it does not contain any condition, that the value addition must be as a result of any kind of manufacturing or specific processing activity in the bonded warehouse. In fact, it refers to import of cut and polished diamonds and to the export also of cut and polished diamonds. It is implies that para 4A.18 does not necessarily envisage any kind of manufacturing or processing activity to achieve value addition, because it does not refer to any new article at the time of export, different from the goods at the time of import. The sole objective is to earn foreign exchange by value addition, and subject to achieving this object, import and re-export out of bonded warehouse of the same item, namely; cut and polished diamonds is permitted. The Ld. Senior Advocates submitted that there is no bar in achieving value addition to satisfy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of a diamond depends on "4 Cs" which are colour, clarity, cut and carat. Therefore, if diamonds are segregated into a homogenous lot based on their size and quality, the value shall change even by employing simple labour intensive processes like sieving, boiling and assorting. The only piece of evidence we find on the relationship between the value addition and the process is in the form of representation made by Gem and Jewellery Export Promotion Council vide letter dated 23.10.2006 which relies on the same Circular of the CBEC while dealing with the various schemes in the Policy affecting the business of gem and jewellery including diamond industry. We are informed that the Customs Officers in charge of the bonded warehouse on being satisfied, have also cancelled the bonds, which aspect has been completely overlooked by the Commissioner. 18.5 It is true that Lumesh Sanghavi has not been able to say which of these processes were carried out in respect of how many consignments of imported diamonds before export, which (we are informed) aggregate to about 3000 consignments or whether all the processes were carried out for all the consignments, except making a general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re only one of the components for determining the value addition. Determination of value addition is a function of DGFT/licensing authorities. We are here not concerned with the determination of value addition. We are informed that the applications by the appellant companies under TPS are pending with the offices of Jt. DGFT. It will be for the licensing authority to determine the value addition at the appropriate stage. We are here concerned with the correctness of the FOB value as declared in the shipping bills which is within the jurisdiction of the Customs officer and for that the powers are derived from Section 14 of Act, which deals with determination of assessable value read with Section 17 of the Act which confer the power of assessment on consignments of exports, in respect of which shipping bills are filed under Section 50 of the Act. We shall first examine the law on this point. (a) In Frost International Vs. Commissioner 2006 (206) ELT 451 (Tri.) the selling price of the manufacturer of garments was taken to be the correct Present Market Value (PMV) and on that basis, the Commissioner rejected the higher FOB value declared by the exporter. This Tribunal held that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 4.8.1998. The Commissioner confirms that these officers ".............. only verified that the goods confirmed to the description, quantity and value as declared in the shipping bill." The confirmation of the value by these Customs officers in our opinion is a clinching evidence and there is nothing in the show-cause notice to rebut this primary evidence as to the correctness of FOB value. At no stage of the assessment of thousands of consignments, exported by the appellant companies, was any doubt raised as to the truth or accuracy of the declared FOB value. The confirmation by the Customs officers, and the admission by the Commissioner that they verified inter alia the value of the goods, is direct evidence of the correctness of the value on physical examination of the goods. In these circumstances, we do not see how the Commissioner can reject the declared FOB value. 18.9 Yet the Commissioner did so. And the only reason for the Commissioner to do so is because neither the Customs officers who examined the goods nor the appellant companies have been able to show how simple process of boiling, sieving and assortment can result in value addition of 5% or more. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Companies Act, 1956 to see whether one company controls the other and broadly, the two tests to establish "control" of one over the other is either 'voting power' or control over the appointment of Board of Directors. The relationship in the context of determination of FOB value is the relationship between the buyer and the seller in the course of international trade. Hence, the issue of inter se relationship between AEL and Indian companies is not relevant for the purposes of Section 14. The show cause notice dwells on this issue only to show that AEL connived with the 5 other Indian entities to take advantage of benefits under TPS by showing higher incremental exports to derive maximum benefit under TPS. We do not see the relevance of the issue in this case. At the risk of repetition, we hold that since the application for grant of duty free scrips made by the Indian companies including AEL for the year 2004-05 is pending before the Licensing authority, it is for the licensing authority to consider whether the export turnover of each individual Indian company is to be reckoned or whether export turnover of all Indian companies to be clubbed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies have common registered offices or that registered office happened to be the residential premises of their Directors is again something which cannot be faulted in law and by no stretch of imagination shows control by AEL over them on this account. Common Directors or Directors who are employees of AEL or its subsidiaries also does not establish mutuality of interest. So also merely because Vinod Shantilal Shah is brother in law of the Chairman and Managing Director of AEL, it does not establish the relationship particularly when it is now shown that the Vinod Shantilal Shah is also Director of AEL or holds significant shares to exercise control over AEL and vice versa AEL has any shareholding or common Directors in G A International. Section 14 of the Act requires the interest of the buyer and the seller in the business of each other. There is no allegation of common shareholding except for the subsidiaries. It is also not shown that AEL has the power to appoint Directors or control the composition of Board of Directors of companies in which its employees or its Directors are also partners or Directors. It is not shown that AEL holds sufficient shares or voting power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by Lumesh himself. Likewise, though Lumesh Sanghavi, admits to circular trading, on being shown during cross-examination the same examples referred to in his statements, which show the difference in quality, size and weight of each consignment, he had deposed to the contrary. We have independently also examined the evidence on record particularly Annexures 'H' and 'I' to the SCN and have found that the charge of the circular trading is not sustainable. Considering the overall facts and circumstances, this part of the statement of Lumesh Sanghvi cannot be seen as conclusive to the charge of, either over-valuation or circular trading. 18.16 In the above factual backdrop, we shall now deal with the case law cited by the department. In the case of Omprakash Bhatia vs. CC, 2003 (155) ELT 423 (SC), the exporter did not lead any evidence to show that the export value mentioned in the shipping bill was the true sale consideration, and accepted the lower value ascertained on market inquiry even at the time of hearing, while giving up the claim of drawback. It is in these facts that the Court was called upon to decided whether section 113(d) was applicable or not. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent man's estimate as to the probabilities of the case. "32.............However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice." 18.21 In the present case, we find that the department has failed in discharging the burden cast upon it to produce any tangible evidence in respect of the charge of over-valuation or circular trading. For the same reason, the judgment in Steel India Company vs. CCE, 2014 (310) ELT 184 (Tri) is of no assistance to the department. 18.22 For reasons aforesaid, the declared FOB value is accepted to be the correct FOB value under Section 14 of the Act and to that extent the order of the Commissioner is set aside. 19.0 ISSUE NO. II 19.1 The allegations relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s). It is therefore not possible to come to the conclusion that the appellant companies indulged in circular trading merely with reference to single lots (out of a consignment) which are said to be imported and exported during different periods. Curiously, the show cause notice itself admits in para 9.1 that even these single lots which are said to be involved in circular trading varied in weight and clarity. It however describes such variation to be marginal or slight variations. We are not impressed by the use of such adjectives particularly when the Commissioner also admits the value of each lot varies on account of variation in the 4 Cs. Whether such variation is marginal so as not to affect price is not for us to say. This perhaps required expert evidence who can only do so after examining each lot. We find this is missing. We cannot indulge in conjecture whether the variation in weight or clarity is marginal so as not to affect the value or identity of the lots. Weight is directly related to the size of diamonds. If the size of the diamonds is small, a small variation in weight can substantially increase the pieces of diamonds and similarly, if the size of the diamonds is bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, he accepted that there was a variation in the weight and quality of diamonds. On re-examination by DRI officer, LUmesh Sanghavi maintained the variation in the specifications of the lots covered by two different invoices. Besides the documents speaks for themselves, oral evidence if contrary to documents has no value since documentary evidence shall prevail over oral statements. At the time of hearing before us the Ld. Counsels also produced a typed statement analysing the transactions of July, 2005 shown to Lumesh Sanghavi as recorded in his statement dated 28.02.2006, to illustrate that on facts, the allegation of circular trading cannot be maintained. From the typed statements, it is seen that while exporting D-Cut white diamonds under invoice dated 21.07.2005, the weight of PK 4 variety was 486.57 carats and that of PK 5 variety was 733.67 carats and if the same set (lot) of diamonds were allegedly imported on 26.07.2005 from Spectrum Trading, UAE, then the weight of each variety at the time of second export ought to have been the same, but as seen from the export invoice dated 28.07.2005, the weight of PK 4 variety was 725.63 carats which is much more than 486.57 carats in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties. 20. On the contrary, AEL has sought to justify what they call as the business plan and the pattern of transactions on the basis of MOU dated 19.03.2003 between its subsidiary in Dubai, Daboul and Gudami whereby the UAE subsidiary agreed to arrange for and organise processing of unasserted diamonds in India through AEL or its nominees and Daboul agreed to procure unasserted diamonds directly or through its nominees for export to India and thereafter, purchase the same after processing in India through its intermediaries in Hong Kong or Singapore for its European buyers. Shri Singh, Ld. Special Counsel, as has the Commissioner strongly objected to the reliance on this MOU. He submits that this MOU was never produced during investigations. On the other hand, AEL submits that, although a copy of this MOU was not produced during investigations there are enough references to the arrangement and understanding mentioned in the MOU in the statements of various persons recorded during investigations. Our attention has been drawn to the statement dated 24.01.2006 of Samir Vora in which he has, inter alia, stated that AEL's overseas agents Daboul sent them proposal for unassort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adani Global Pte. Ltd. Singapore and these e-mails are sent internally to all persons connected with AEL based in either India or Singapore or Dubai. It is alleged that if AEL does not control overseas entities there was no reasons for Ms. Mary to pass on information relating to bank accounts and its details including password to other persons within the Adani group and likewise there was no need for Ms. Mary to report the transfer of funds with reference to certain specified transaction form one overseas entity to another or from Indian company to overseas entity or by an overseas entity to an Indian company. We find that except for agreeing to what has been stated in these e-mails, none of the persons like Bhavik Shah, Vipul Desai or C.E. Mahadevan have admitted to these e-mails evidence of either control by AEL of the overseas entities or to circular trading. Unfortunately, hereto the statement of Ms. Mary Joseph, author of almost all these mails have not been recorded, we are left to imagination why she was writing such mails and to whose instructions. These gaps are extremely vital to the issues at hand and fatal to the case of the department. AEL submits that she was doing so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponding to the circular trading of the lots as alleged in the show-cause notice, meaning thereby the allegation of circular trading is unsupported by evidence of corresponding financial trail. 21.2 As has been stated in the show-cause notice, the e-mails referred to in Annexure-M to the show cause notice show control by AEL of the overseas entities. We have already held what tests and conditions needs to be satisfied in law to establish "control". It seems Ms. Mary Joseph has merely collated the information into e-mails which is otherwise available from the documents relating to the respective transaction which documents show the name of the buyer, name of the seller, serial number and date of the invoice, the amount and the bank in which the payment is to be remitted. These e-mails do not reveal the possibility of these e-mails being sent as a result of said MOU cannot be ruled out. We find nothing incriminating in these e-mails or anything to draw an inference of control of overseas entities by AEL. 21.3 Even if we were not to consider the said MOU, the e-mails can at best give rise to suspicion that AEL controlled the overseas entities. This, however, will remain a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport the allegation of control by AEL. We have for reasons recorded above, found both these charges to be unsustainable. On behalf of the Indian companies it was submitted that payment of commission in fact proves that the transactions of import and export of diamonds were genuine and on principal to principal basis since otherwise there was no need for them to pay commission if the transactions were bogus or involved mere circular trading. So also in relation to LC discount and buyers credit, it is submitted that these transactions were entered into because of interest arbitrage, since there is wide variation in the rates of interest between international markets and India. It is submitted that they have acted like any other prudent business men would do in the like circumstances. The department however, contends that AEL was strictly monitoring the number of days involved in the fund flow and its banking team in India took all decisions in relation to payments for all imports and exports. Suffice for us to state that when we have held the declared FOB value to be correct and there is no circular trading, we need not go into these issues, more so, when in query from the Bench whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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