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TMI Blog2022 (7) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... - HELD THAT:- Merely because M V Rabade signed the contract both on behalf of APML and EIF will not have any bearing on the relationship aspect. It is not in dispute that M V Rabade signed the contract on behalf of APML in the capacity of a Director and he signed the contract on behalf of EIF as an authorised representative. The authorization given to M V Rabade by EIF has not been challenged in the show cause notice and as such this will not advance the case of the department on the relationship aspect between APML/APRL and EIF. Even otherwise, there is no variation in the ultimate price paid by APML/APRL to EIF from the agreed contractual price and these contracts were arrived at through international competitive bidding process - Learned senior counsel for the respondent also submitted that when clause (v) of rule 2 (2) was not mentioned in the show cause notice for establishing the relationship, it is not open to the appellant to place reliance on this rule to establish that the relationship stood established - there is substance in this submission made by the learned senior counsel for the respondent. Tender Process - Scope of SCN - HELD THAT:- The adjudicating authority corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RL to SME/EIF was a complete EPC contract which included supply and service components. The entire contract was awarded on a turnkey basis and a lumpsum price was fixed for the entire contract as a whole. The execution of another contract by EIF or any of the consortium partners would, therefore, have no relevance so far as APML and APRL are concerned. It is also not the case of the department that APML and APRL paid any amount over and above the agreed contract value. The said contract was for design, engineering, manufacturing, procurements, packing forwarding, supply, transportation, receipt, unloading, installation, erection, testing, commission and performance guarantee test and it was not merely a supply contract - The amount received by each consortium member or the amount paid by the consortium members to the vendors or service providers would not be relevant for APML or APRL. Even if it is assumed that the service and/or testing was to be done by the Original Equipment Manufacturers, as has been pointed out, the same will not change the nature of the contract awarded by APML and APRL to SME/EIF in as much as the responsibility to execute the contract would be that of SME/E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices and hence cannot be compared with stand alone supply contract with Original Equipment Manufacturers. Invoices issued under two different sets of contractual obligation cannot be compared and relied upon to determine the value. Rule 11, therefore, has no application to the facts of the present case - the revenue has sought to invoke rule 9 by placing reliance on payments made by EIF to different vendors and/or manufacturers of the goods. The said evidence has been held to be not conclusive, as the revenue has considered the payment made through Axis Bank and Bank of Baroda only. The redetermination of the value of the goods under rule 4/9 of the Valuation Rules, cannot, therefore, be sustained and the adjudicating authority committed no illegality in rejecting this allegation made in the show cause notice. Incomplete Investigation - HELD THAT:- While the documents were received from Axis Bank and Bank of Baroda, the relied upon document at page 689 shows the name of Standard Chartered Bank as one of the other banks used by EIF. The same therefore, belies the case of the department that ORTTs and back-to-back invoices received from Bank of Baroda and Axis Bank are complete remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and is engaged in operating Thermal Power Plants. There was an acute shortage of power in the State of Maharashtra and in order to overcome this deficit of approximately 27.4% and meet the future requirements, the Government of Maharashtra encouraged private sector to set up power generating stations without the requirement of a license under The Electricity Act, 2003. APML was one such company that came forward to set up power generation plants in the State of Maharashtra. It acquired land in village Tiroda in the State of Maharashtra to develop a green field Thermal Power Plant. This power plant was originally envisaged to be of 1980 MW capacity, but the capacity was later on increased to 3300 MW. The project was to be implemented in three phases consisting of 5 Units. Phase I was for a total capacity of 2 x 660 MW, and Phase II was for a capacity of 1 x 660 MW. While Phase I consisted of Units 1 and 2, Phase II consisted of Unit 3. Phase III consisted of Units 4 and 5, each of 1 x 660 MW. The aggregate capacity of the entire plant, therefore, comes to 3300 MW. The dispute in the present appeal relates to the imports made by APML for Phase III. 5. It needs to be noted that pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be the lowest and most competitive and so the same was accepted and consequently APML entered into a contract with SCMEC on 28.11.2008 for supply of BTG and related equipments at a lumpsum value of USD 999.90 Million. Thereafter, APML applied for registration of the entire contract under Chapter Heading 98.01 of the Customs Tariff Act, 1985 [Tariff Act] as the same was in relation to setting up of mega power project. This registration of the contract allowed the imported goods to be cleared under NIL rate of duty. The entire contract for supply of BTG equipment and machinery for Phases I & II (Units 1, 2 & 3) entered between APML & SCMEC was registered on 06.01.2010 with the Customs House at Nhava Sheva in terms of Regulation Nos.4 and 5 of the Project Import Regulations, 1986 [PIR]. 10. After the registration of the contract with respect to Unit 1 & 2, an essentiality Certificate dated 18.12.2009 addressed to the Commissioner of Customs, Nhava Sheva, was issued by the Principal Secretary, Energy Department, Maharashtra specifying the goods which were required to be imported by APML for the project. Likewise, an essentiality Certificate for Unit 3 was issued on 01.06.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Entry which were assessed provisionally and subject to reconciliation of the contract registered under the 2009 Regulations for Phase III (Units 4 & 5). 17. The total project cost on the date of financial closure of Phase III was Rs.6,290 crores per MW, as the cost per MW was Rs. 4.76 crores. According to APML, the project cost was in consonance with the Central Electricity Regulatory Commission (Terms and Condition of the Tariff) Regulation, 2009 [2009 Regulation] and to support this connection, reliance has been placed on an order dated 04.06.2012 passed by the Central Electricity Regulatory Commission [CERC]. Annexure-II of the Order provides the benchmark fixed for the per MW cost in setting up a similar power project at Rs.5.01 crores for two Units and Rs.5.37 crores for one Unit. APRL 18. APRL is also a subsidiary of Adani Power Limited. The State of Rajasthan was also facing acute power shortage and in order to overcome this deficit power shortage of approximately 12.7% and to meet the future requirements, the Government of Rajasthan encouraged private sector participation in power generation, transmission and distribution. The private sector was encouraged to set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered under Chapter Heading 98.01 of the Tariff Act to seek the benefit of NIL rate of duty. An essentiality certificate dated 01.06.2010 was issued by the Principal Secretary certifying the goods that were to be imported by APRL for the project. Consequently, the goods were imported on the basis of a registered contract dated 02.04.2010 entered between APRL and EIF. 22. The total project cost on the date of financial closure was Rs.7,030 crores since the per MW cost was stated to be Rs.5.33 crores. According to APRL, the project cost was in consonance with the 2009 Regulations and to support this contention reliance was placed on an order dated 04.06.2012 passed by the CERC that provides the benchmark fixed for the per MW cost in setting up a similar power project at Rs. 5.01 crores for two units. SHOW CAUSE NOTICE 23. An investigation was, however, initiated by the Department of Revenue Intelligence regarding the goods imported by APML and APRL. The investigation for APML was carried out only with respect to Units 4 and 5 of Phase III. Post investigation, a common show cause notice dated 15.05.2014 was issued by the Additional Director General, Department of Revenue Intelligenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controlled by Shri Vinod Shantilal Adani @ Vinod Shantilal Shah through M/s Electrogen Infra Holding Pvt. Ltd., Mauritius. Shri Vinod Adani is shareholder in flag ship company of Adani Group viz. Adani Enterprises Limited (AEL). AEL owns and controls APML and APRL through its subsidiary company M/s Adani Power Limited. 17.4 Investigation in the present case has clearly revealed that while the critical BTG and its auxiliaries from SEC were sourced and shipped directly to India, the OEM invoices were routed through the above EIF i.e. the intermediary invoicing agent for inflating the value as a part of modus- operandi to siphon off money from India. SEC is a world- renowned supplier of BTG. It is also an undisputed fact that BTG are key components of a power plant and constitute a substantial portion of the cost of the power plant in terms of the aggregate value of equipment required for setting up the power plant. As stated earlier, EIF had entered into four contracts with SEC (the OEM for BTG) for supply of BTG and its auxiliaries, as summarised below:- S. No. Agreement Date Brief of scope of supplies covered by agreement Executing parties Consideration amount as per agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies made by SEC Sr. No. Aggregate value of EIF invoices raised on APML and APRL where the actual supplier is Shanghai Electric Group Co. Ltd., China in USD Aggregate value of remittance made by EIF to Shanghai Electric Group company for supplies to APML & APRL (USD- based on AORs/ORITs) Difference (B-C) Variation (B) as % of (C) (A) (B) (C) (D) (E) 1. 633,562,594 335,732,220 297,830,374 189% It is evident from above that against the aggregate payments of USD 335,732,220 paid by EIF to SEC for shipments made to APML & APRL, EIF appears to have raised back-to-back invoices with inflated price aggregating to USD 633,562,594 thereby leading to an inflation of nearly 189% over the OEM invoice-value (amounts actually remitted to SEC by EIF). 17.6 Similarly in case of supplies by two OEMs (Shanghai Shantra Trading Co. Limited, Shanghai, China and Reynold Power Transmission Limited) as per invoices raised by said OEMs on EIF with the corresponding back-to-back invoice of EIF on APML & APRL are as Table -11, ibid, which is repeated below- Sr. No. OEM invoice raised on EIF Invoice raised by EIF on APML/APRL Difference (USD) (F) as % of (C) A B C D E F G A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts obtained from the banks which formed the basis for issuance of the show cause notice were not admissible in evidence as they had been obtained contrary to the provisions of law, submissions on merits were also made. The reply states that the Notice Inviting Tender and the contract entered with the successful bidder would prove beyond reasonable doubts that the power project covered supply of goods and services. It was, therefore, required to be dealt with as an EPC and the respondents were not concerned with prices of individual equipments and machineries. The reply also states that the department had not disputed the value of the goods imported for setting up Phases I and II of Thermal Power Plant (Units 1, 2 & 3) and that the prices of the goods imported for Phases I & II were comparable with the prices for imports made for Phase III. The allegation made in the show cause notice that APML & EIF were related parties was also denied. The relationship between APRL and the consortium led by EIF was also denied and it was also stated that in any case the relationship, even if it was assumed to be correct, had not influenced the price. It has further been stated that the contract w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the cost of imports. The adjudicating authority also concluded that the contract between APML/APRL and EIF encompassed all the factors of an EPC contract. The adjudicating authority also considered that the project cost was comparatively lower when the cost per MW of APML/APRL was compared with other projects of super critical technology. In so far as the Phase III project of APML is concerned, the adjudicating authority also accepted the submission of the respondents that the same was comparable with the earlier contract for the Phase I & Phase II entered into with SCMEC, though this was not the sole criteria for deciding the value of the imported goods. 27. The relevant portions of the order passed by the adjudicating authority are reproduced below: "5.1 I would like to examine in detail the main issue involved in the SCN as to whether the value declared by M/s APML & M/s APRL be rejected in terms of Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962 and the same may be redetermined as per Rule 4/9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince Shri Vinod Shantilal Jain alias Adani was not a Director of EIF during the relevant time. Similarly, I find that for Rule 2(2)(iv) to be satisfied Shri Vinod Shantilal Adani needs to own or control five percent or more of the outstanding voting stock or shares of both APML and EIF during the relevant time. I find that he was one of the promoters and shareholders of AEL. As per the declarations filed with the market regulators Shri Vinod Shantilal Adani held 8.27% of the shares of AEL. However, Shri Vinod Shantilal Adani became a Director of EIF only on 29.03.2010 by virtue of it becoming a subsidiary of EIH. Thus, I find that the condition stipulated in Rule 2(2)(iv) is also not satisfied. Further, I find that the third condition as per Rule 2(2)(viii) i.e. they are members of the same family is also not satisfied since at the time of the signing of the contract, Shri Nasser Ali Shaban Ahli, a UAE national was the Director of EIF. Thus, I find that the two entities i.e. APML and EIF were not related in terms of Rule 2(2) of the CVR, 2007 on the date of the signing of the contract. 5.1.3.1.2 As regards APRL I find that the contract between APRL and EIF was signed on 02.04.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious entities of Adani group before resigning in August, 2009. It is mentioned that Shri Jatin Shah resigned on 19.08.2009 and the same was accepted by M/s Adani Power Ltd. on the same day while communicating to him that he would stand relieved from the services of the company with effect from 31.08.2009. Thus, I find that from 01st September, 2009 he was a free agent and being a professional was free to accept employment from anybody. Further, as regards Shri M.V. Rabade, it was alleged that he had signed the contract between EIF and APML as Director on behalf of APML and that he was also a Director of EIF which obliterated the distinction between the two companies. However Rule 2(2)(i) requires the person be officer or Director of each others business at the relevant time which is not the case here. I find that the SCN itself menions that Shri Moreshwar Vasant Rabade (Director of Electrogen Infra FZE UAE at one point of time) had signed the said agreement for and on behalf of M/s Adani Power Maharashtra Limited. Thus, it is not alleged in the SCN that he was Director/ officer in EIF and APML at the same time. Thus I do not agree with the contention in the show cause notice. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation 5 of the PIR, 1986. Further I find that as per requirement the noticee has filed the Reconciliation statement with the relevant customs authorities where the Project Import contract was registered and BG was executed. Thus, I find that all the requirement of the Project Imports have been followed by the noticee. Thus, as per the PIR, 1986 it is the contract as a whole which needs to be assessed on completion of the contract and not the individual consignments. To avoid numerous assessments requiring splitting of value for all the machineries brought under a single project contract and to provide for single assessment at a lower/nil duty, project imports had been brought under a separate tariff heading It, therefore, followed that comparison of value of goods covered by each and every individual consignment was impermissible and unjustified in law because the SCN has not challenged the validity of the contract between APML/APRL and EIF. Neverthless, I find that the contract had been allotted to EIF on the basis of International Competitive Bidding wherein the said bid was found not only to be in order by a technical evaluation team but was also found to be the lowest. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International Competitive Bidding process; (iv) The adjudicating authority held that the contracts were EPC contract without critically examining the nature of the contract; (v) The adjudicating authority could not have ignored that the so-called EPC contracts and other paper documentations were tailor-made to give the transaction a colour of a bonafide transaction, which was otherwise a sham transaction; (vi) The adjudicating authority erred in holding that in case of Project Import, valuation of each and every consignment is not permissible and valuation has to be done at project level; (vii) The adjudicating authority erred in concluding that the transactions between APRL/APML and EIF were at arm's length as per the assessment orders passed by the Income Tax Authority; (viii) Neither the respondents nor the adjudicating authority advanced any tangible data or valid basis to justify gross over-valuation at the hands of an intermediary invoicing agent who apparently did nothing except value inflation; and (ix) The adjudicating authority erred in holding that the relevant time/date for determining the relationship between the parties was the date of contract and not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue and the proposed re-determination is not tenable in law; (viii) In terms of PIR, the contract as a whole has to be assessed and not individual consignments of goods; (ix) The contract between APML/APRL and EIF cannot be compared with contract between EIF and the Original Equipment Manufacturers. The Revenue committed an error in alleging that the contract between APML/APRL and EIF is not an EPC contract; (x) The Deputy Commissioner of Income Tax had issued show cause notice for the financial Year 2012-13 & 2013-14 on the basis of alleged over- valuation but after considering the submissions of APML/APRL, the Income Tax authorities found no overvaluation in the prices of equipment imported by APML/APRL from EIF; (xi) There is no contradiction in the findings of the adjudicating authority since it is apparent that the adjudicating authority in paragraph 5.1.3.19 of the order had by mistake mentioned 'APRL' instead of 'APML', because in the subsequent paragraph the relationship between APRL and EIF has been considered; (xii) The issue on merits was settled in favor of APML/APRL in the decision of the Tribunal in Knowledge Infrastructure Systems Private Limited vs. Addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the discussion, the adjudicating authority wrongly mentioned 'APRL' instead of 'APML' in paragraph 5.1.3.19 (i). This is also clear from the fact that the relationship between APML and EIF has not be summed up and the relationship between APRL and EIF has been dealt with in paragraph 5.1.3.19(ii). This correction will bring paragraph 5.1.3.19(i) in conformity with the findings recorded in paragraph 5.1.3.1.1. In paragraph 5.1.3.19 (ii), the adjudicating authority dealt with the relationship between APRL and EIF and this is in conformity with the findings recorded in paragraph 5.1.3.1.2. The department has unnecessarily made an attempt to capitalize on this typographical error that has crept in paragraph 5.1.3.19 (i) of the order. If the typographical error is recognized, there would be no inconsistency between the finding recorded in earlier paragraph and the subsequent paragraph. RELATIONSHIP 33. To support case of overvaluation, the department alleges that APML/APRL and EIF are related and in this connection the following two factors have been highlighted. (a) APML and APRL are 100% subsidiary of Adani Power Limited and Mr. Vinod Shantilal Shah holds more than 8% shares in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MW capax in setting up green field power project determined by CERC. As noticed above, CERC had fixed per unit MW price of green field power project at Rs. 5.01 crores, whereas per MW cost for APML and APRL was Rs. 4.76 crores and Rs. 4.53 crores respectively, excluding the soft cost and other development cost. Thus, the per MW capax cost of APML and APRL was lower than the benchmark MW capax determined by CERC. It has also been found as a fact in the impugned order that the relationship had not influenced the price and this finding, as noticed above, does not suffer from any error. 37. With regards to Jatin Shah being an employee of both Adani Group and EIF, it is an undisputed position that Jatin Shah left the Adani Group on 19.08.2009. Thereafter he could join any organization and he decided to join EIF. At no point in time he was holding a position in Adani Group and EIF at that same time. Further, rule 2 (2) of the Valuation Rules, that defines the term 'related person' does not provide for a situation by which two parties can be treated as related just because one company has employed an employee of another company and both the companies have entered into an agreement for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty seven Consulaters/Embassies. The tender was for setting up of a thermal power plant on EPC basis and the lowest bidder was awarded the contract. 42. It also transpires from the tender notice that the scope of work was very wide and included design, engineering, manufacturing, procurement, packing & forwarding, supply, transportation, receipt, unloading, installation, erection, testing, commissioning, and performance guarantee test. Detailed scope was contained in the technical specification Vol. II of the bid document. The qualification of the bidder is contained in paragraphs 6.1 and 6.2 of the tender document and they are reproduced: "6.1 The Bidder should meet the qualifying requirement stipulated hereunder: If the Bidder is not a Manufacturer of Boiler and Turbine Generator Sets, he should have sourced the Boiler or Turbine Generator Sets from the Manufacturers who have supplied at least 2 nos of Boiler and Turbine Generator Sets of Minimum 300 MW Capacity which should be in Operation for a period of 2 years at the time of Bid Submission. OR If the Bidder is a Manufacturer of Boiler and Turbine Generator Sets, he should have supplied at least 2 nos of Boiler and Turb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards supply of BTG alone. The balance amount was divided, at the instance of EIF, into BTG services, BOP supply and services. As required by the consortium led by EIF, the balance two contracts were entered into with other consortium members. 45. On behalf of the department it was submitted that it was a sham transaction and elaborating this submission, learned special counsel for the appellant pointed out that SME/EIF had signed contracts with the original equipment manufacturers even before they submitted the bid. The learned senior counsel for the respondent, however, submitted since that entire contract was awarded by meticulously following the ICB process, the department cannot allege that it was a sham process. 46. Merely because the successful bidder had entered into an agreement with one of the original equipment manufacturer prior to submission of bid cannot be a reason to hold that the entire ICB process was a sham. The department has not raised doubts on the bids received by APML and APRL from other independent parties pursuant to the ICB process. It was for the department to have established its case and substantiated it by producing evidence. 47. The submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank, ICICI Bank and Bank of Baroda. The onus to prove over-valuation was on the Revenue, which burden was required to be discharged with cogent evidence. The department, therefore, had to establish the allegation on the basis of documents which were admissible as evidence. The documents obtained by the Department of Revenue Intelligence can be categorized into three categories. The first is in connection with the three consignments where back-to-back documents are available with respect to transaction between Original Equipment Manufacturers & EIF and EIF & APML/APRL and with respect to this category, the value is sought to be re- determined based on the invoice of the Original Equipment Manufacturers. The second is with respect to the six consignments where AORs/ORTTs were received from Bank of Baroda. Table-21 to the show cause notice indicates that the amount remitted by APRL to EIF and also the amount remitted by EIF to Original Equipment Manufacturers. With respect to these six consignments, rule 4 of the Valuation Rules has been invoked to re-determine the value, basis the amount remitted by EIF to Original Equipment Manufacturers. The third is with respect to the balance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether - (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combination of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings under this Act and the rules made thereunder where it is desired to give a stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here any document is required to be produced as an evidence in proceedings under the Customs Act and the Rules framed thereunder. It specifically mandates production of a certificate containing the following: (i) Identifying the document containing the statement and describing the manner in which it was produced; (ii) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer, (iii) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, to be provided by a person occupying a responsible position in relation to the operation of the device in question or the management of the relevant activities shall be evidence of any matter which is stated therein. 54. The Customs Act contains a specific provision that describes the manner in which the admissibility of computer print outs will be accepted as evidence in proceedings initiated under the Customs Act. When law requires a thing to be done in a particular manner it should be done in that manner alone. The Department had obtained the documents from foreign branches of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be admitted in evidence unless the requirement of section 65B of the Evidence Act is fulfilled. Paragraph 22 of the said judgment is relevant and the same is reproduced: "22. The evidence relating to electronic record, as noted herein before, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Section 59 and 65A dealing with the admissibility of electronic record. Section 63 and 65 have no application in the case of secondary evidence by way of electronic record; the same is wholly governed by Section 65A and 65B. to that extent, the statement of law on admissibility of secondary evidence pertaining to electronic record, as stated by this court in Navjot Sandhu case (supra), does not laydown the correct legal position. It requires to be overruled and we do so. An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65B are satisfied. Thus, in the case of CD, VCD, chip, etc., the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (299) E.L.T. 83 (Tri.-Mum)], where the issue was with respect to section 138C (4) of the Customs Act, also observed: "12. ...... it is clear that for admissibility of computer printout there are certain conditions have been imposed in the said section. Admittedly condition 4C of the said section has not been complied with and in the case of Premier Instruments & Controls (supra) this Tribunal relied on the case of International Computer Ribbon Corporation - 2004 (165) E.L.T. 186 (Tri.-Chennai) wherein this Tribunal has held that "computer printout were relied on by the Adjudicating Authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by the Tribunal that printouts were neither authenticated nor recovered under Mahazar... The Tribunal rejected the printouts... Nothing contained in the printout generated by the PC can be admitted as evidence." In this case also, we find that the parallel situation as to the decision of Premier Instruments & Controls (supra). 13. Therefore, the printout generated from the PC seized cannot be admitted into evidence for non-fulfillment of statutory condition of Section 138C of the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption under section 139(ii) of the Customs Act is not available. Paragraph 5 of the judgment is reproduced below: "5. The single Technical Member, who wrote the minority judgment, however, held the view that it was not essential on the part of the Customs Officer to strictly prove the documents as required by the Evidence Act and that the authenticity of the documents, though copies, could not be doubted as they had been collected by the Collector from foreign sources and could be admitted in evidence by virtue of Section 139(ii) of the Customs Act, 1962 which permits the raising of a presumption in respect of documents received from any place outside Indian in the course of investigation of any offence alleged to have been committed by any person under the Act. The majority points out that these documents, which are photocopies, do not bear the signature either of the exporter, the forwarding agent, the stevedore or the Customs Officer. In fact, they do not bear any signature whatsoever and, therefore, the authenticity of these documents is suspect and it is not possible to presume that the originals are duly signed. It is for this reason that the majority did not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. This decision is reported in Commissioner of Cus., Visakhapatnam vs. Truwoods Pvt. Ltd [2016 (331) E.L.T. 15 (S.C.)]. 65. The documents relied upon by the department are, therefore, inadmissible as evidence as the authenticity of the same has not proved in terms of the provisions of sections 138C (4) and 139 (ii) of the Customs Act. WHETHER THE CONTRACT WAS EPC 66. Learned special counsel for the department submitted that the contracts were not EPC. However, learned senior counsel for the respondent urged that both APML and APRL had awarded contracts to SME/EIF and the consortiums which were in the nature of EPC. Learned senior counsel submitted that splitting the contract into two separate contracts at the instance of EIF into the supply and service portions of the contract would not change the nature of contract for the reason that the respondent was concerned not just with the supply of the equipments but with the contract as a whole. 67. The submission advanced by the learned senior counsel for the respondent has substance. Merely because, for the sake of convenience and/ or commercial exigencies of the parties, a contract is broken into different sub-parts would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplier proposes to adopt for the supply of the Goods. No significant alteration to these arrangements and methods shall be made without the prior written consent of the Employer. The Supplier shall provide at its own costs, training to Employer's staff for operation and maintenance of the Goods at manufacturer's work in China and at a Site, in accordance with Training Schedule as per Appendix B and guidance to Employer's staff on operation and maintenance of the Goods for a period of 12 months from the date of completion of successful performance guarantee tests, the costs of transportation and accommodation of Employer's staff for the purpose of such training shall be borne by the Employer. 4.8 Sufficiency of the Contract Price The Supplier has satisfied himself as to the correctness and sufficiency of the Contract price. Unless otherwise stated in the Contract, the Contract Price covers all the supplier's obligations under the Contract including those under Provisional Sums, if any and all things necessary for the Supply of the goods and the remedying of any defects therein. Clause 7.3 of Annexure 5 deals with inspection of goods which provides that Company Personnel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract, 7.5 Rejection If, as a result of an examination, inspection, measurement, or testing any Good is found to be defective or otherwise not in accordance with the Contract, the Employer may reject the Goods by giving notice to the Supplier, with reasons. The Supplier shall them promptly make good the defect and then ensure that the rejected good comply with the requirements of the Contract. If the Employer requires the Goods to be retested, the goods shall be repeated under the same terms and conditions. If the Rejection and retesting cause the Employer to incur additional costs, the Supplier shall subject to Sub-Clause 2.3 (Employers Claims) pay these costs to the Employer." 70. The aforesaid clauses of the contract dated 05.11.2009 entered into between APML and EIF demonstrate that the same are part of the EPC awarded in respect of design, engineering, manufacturing, procurement, packing & forwarding, supply, transportation, receipt, unloading, installation, erection, testing, commissioning, and performance guarantee test of the equipment and machinery required for the power project at a lumpsum price. Thereafter, Essentiality Certificates were grated in respect of Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed design, engineering, procurement, supply, storage at Port of Loading and marine transportation of the Goods of all equipment and system(s). The Supplier shall advise the Employer of the shipping schedules of the Goods to the destination Port of Entry as far as possible, transshipment of major items shall be avoided. The Supplier shall supply the Goods in accordance with the Contract and Goods Industry Practice, and shall remedy any defects in the Goods. When completed the Goods shall be fit for the purposes for which the Goods are intended as defined in the Contract. The supplier shall, whenever required by the Employer, submits details of the arrangements and methods which the supplier proposes to adopt for the supply of the Goods. No significant alteration to these arrangements and methods shall be made without the prior written consent of the Employer. The Supplier shall provide at its own costs, training to Employer's staff for operation and maintenance of the Goods at manufacturer's work in China and at a Site, in accordance with Training Schedule as per Appendix B and guidance to Employer's staff on operation and maintenance of the Goods for a period of 12 month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been passed, the Employer shall endorse the Suppliers tests Certificate, or issue a certificate to him, or to that effect. If the Employer has not attended the tests, he shall be deemed to have accepted the readings as accurate. The Supplier shall inform the Employer at least 3(three) weeks in advance of any performance tests of all major Goods such as, but not limited to, pumps, boiler, burners, heat exchangers, turbines, cubicles, switchgears etc. The notification period for the purposes of this Sub-Clause shall be three weeks. The tests carried out in accordance with this Sub- Clause shall not relieve and absolve the supplier from its responsibility and obligations under the Contract, 7.5 Rejection If, as a result of an examination, inspection, measurement, or testing any Good is found to be defective or otherwise not in accordance with the Contract, the Employer may reject the Goods by giving notice to the Supplier, with reasons. The Supplier shall them promptly make good the defect and then ensure that the rejected good comply with the requirements of the Contract. If the Employer requires the Goods to be retested, the goods shall be repeated under the same terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisionally at the time of import but this was subject to reconciliation under PIR. The assessment with respect to APRL has been finalized by Order-in-Original dated 21.10.2019 passed by Assistant Commissioner of Customs, Kandla. 77. Learned special counsel for the department vehemently submitted that the contract entered between APML/APRL and EIF was not an EPC contract but was simply a supply contract. In this connection learned special counsel placed reliance on certain clauses of the EPC contract executed between APML & EIF and APRL & EIF to contend that identical provisions relating to the obligation of testing on the part of Original Equipment Manufacturers were also present in the contract executed between the Original Equipment Manufacturers and EIF. Learned special counsel also submitted that EIF made supplies under the contract, but rest of the activities were required to be carried out by the Original Equipment Manufacturers. Learned special counsel also submitted that the original contract had warranty/defect notification/ extended warranty for 1-2 years and not 10 years and the casting of additional responsibility without increase in the contract price and the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in nature with a lump sum price, that it was evident from the PPA agreements entered into by APML/APRL with the respective state electricity bodies that the contract for set up and commissioning of the mega power plants was on EPC basis. Therefore, as per notices Customs today had no ground to question the nature of the contract entered into between APML/APRL with EIF and claim the same to be a simple contract for supply of goods. I find that in the Power Purchase Agreement between Maharashtra State Electricity Distribution Company Ltd. (Procurer and Adani Power Maharashtra Ltd. (Seller) dated 31.03.2010 in Article 3: Conditions Subsequent to be satisfied by Seller/Procurer in condition 3.1.1 (e) it is mentioned that "the seller shall have awarded the Engineering, Procurement and Construction contract (EPC contract) or main plant contract for boiler, turbine and generator (BTG'), for setting up of the Power Station and shall have given to such contractor on irrevocable NTP and shall have submitted a letter to this effect to the Procurer,". Similarly, I find that vide PPA agreement between Jaipur Vidyut Vitran Nigam Ltd. (Procurer 1), Ajmer Vidyut Vitran Nigam Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum Contract Price payable under this contract by the Employer to the Supplier shall be United States Dollars 790,000,000 (United States Dollars Seven Hundred Ninety million only)." 5.1.3.17.4 Thus, I find that in an EPC contract the contractor is responsible for the entire gamut of the contract, i.e. right from detailed engineering design of the project, procuring all the equipment and materials necessary and then to construct and deliver a functioning facility or asset to their clients. Thus, the projects were turnkey projects where the scope of work was not only supply, but also included designing, installation, civil work and commissioning. Therefore, while the scope of work was divisible, the price was a lump sum price as determined from the contract between APML/APRL and EIF. Thus, I find that the contention of the notice that EIF was merely an intermediary invoicing agent for inflating value does not appear to be correct." 81. It can, therefore, safely be concluded that APML and APRL had awarded contracts to EIF/SME which were in the nature of EPC. WHOLE EFFECT OF CONTRACT /EFFECT OF REGISTRATION UNDER PIR 82. The adjudicating authority concluded in paragraph 5.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PIR deal with assessment and clearance, eligibility, registration of contract and finalization of contract. They are as follows: CHAPTER 98 OF TARIFF ACT "Project imports; laboratory chemicals; passengers' baggage, personal importations by air or post; ship stores NOTES: 1. This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more specific heading elsewhere in this Schedule. 2. Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under section 157 of the Customs Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations. 9801 ALL ITEMS OF MACHINERY INCLUDING PRIME MOVERS, INSTRUMENTS, APPARATUS AND APPLIANCES, CONTROL GEAR AND TRANSMISSION EQUIPMENT, AUXILIARY EQUIPMENT (INCLUDING THOSE REQUIRED FOR RESEARCH AND DEVELOPMENT PURPOSES, TESTING AND QUALITY CONTROL), AS WELL AS ALL COMPONENTS (WHETHER FINISHED OR NOT) OR RAW MATERIALS FOR THE MANUFACTURE OF THE AFORESAID ITEMS AND THEIR COMPONENTS, REQUIRED FOR THE INITIAL SETTING UP OF A UNIT, OR THE SUBSTANTIAL EXPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of assessment under the said heading. The application shall be accompanied by the original deed of contract together with a true copy thereof, the import trade control licence, wherever required, and an approved list of items from the Directorate General of Technical Development or the concerned sponsoring authority. The importer shall also furnish such other documents or other particulars as may be required by the proper officer in connection with the registration of contract. The proper officer shall, on being satisfied that the application in the order register the contract by entering the particulars thereof in a book kept for the purpose, assign a number in token of the registration and communicate that number of the importer and shall also return to the importer all the original documents which are no longer required by him. REGULATION 7. Finalisation of contract. - The importer shall within three months from the - Customs clearance for home consumption of the last consignment of the goods or within such extended period as the proper officer may allow, submit a statement indicating the details of the goods imported together with necessary documents as proof reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al with import of individual consignment and the assessment of the goods imported for the project have to be dealt with together. VALUATION 88. The issue under consideration is whether the value declared by APML and APRL is required to be rejected in terms of rule 12 of the Valuation Rules read with section 14 of the Customs Act and the same is required to be redetermined under rules 4/9 of the Valuation Rules read with section 14 of the Customs Act. 89. The aforesaid redetermination of the value has been sought by the department on the basis of an allegation that the goods imported by APML and APRL for setting up the Thermal Power Plants were grossly over-valued and basis the said over-valuation, excess money was siphoned off abroad. As per the department, the declared value as against the actual value post redetermination is mentioned in Table 33 of the show cause notice and the same is reproduced below: "Table 33 Importer No. of Consignment Declared Value (CIF) (in Rs.) Actual value (CIF) (as redetermined) (in Rs.) APML 301 3469,07,79,941 1557,44,21,785 APRL 262 3692,65,37,178 1630,16,82,151 TOTAL 563 7161,73,17,119 3187,61,03,936 90. The adjudicating author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which redetermination of value has been proposed are inadmissible in evidence. Thus, if the said documents are not admissible in evidence, the department cannot seek redetermination of value on the basis of these documents. 95. Even if the documents are relied upon, it is seen that in relation to the three consignments where there are back-to-back invoices and in six cases where the remittance was made by way of a single invoice AORs/ORTTs, the department alleges that the price paid by EIF to the Original Equipment Manufacturers represents the actual transaction value of the imported goods and the redetermination of the value has been made under rule 4 of the Valuation Rules read with section 14 of the Customs Act. For the balance of over 550 consignments, the value is sought to be redetermined under rule 9 of the Valuation Rules by proportionately reducing the declared value in ratio of inflation i.e. 2.2 times. The said figure of 2.2 inflation has been arrived at by the department by taking the total value of ORTTs by which payments have been made by EIF to Original Equipment Manufacturers as the amount representing actual transaction value and reducing the same with the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. Only in the absence of actual cost, fictionalised cost is to be adopted. Here again, the scheme gives an ample message that an attempt is to arrive at value of goods or services as well as costs and services which bear almost near resemblance to the actual price of the goods or actual price of costs and services. That is why the sequence goes from the price of identical goods to similar goods and then to deductive value and the best judgment assessment, as a last resort. 27) In the present case, we are concerned with the amount payable for costs and services. Rule 9 which is incorporated in the Valuation Rules and pertains to costs and services also contains the underlying principle which runs though in the length and breadth of the scheme so eloquently. It categorically mentions the exact nature of those costs and services which have to be included like commission and brokerage, costs of containers, cost of packing for labour or material etc. Significantly, Clause (a) of sub-rule (1) of Rule 9 which specifies the aforesaid heads, cost whereof is to be added to the price, again mandates that it is to be "to the extent they are incurred by the buyer". That would clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with the reason given by the authorities to have such a provision and are of the opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority. ----- 36) We are, therefore, of the opinion that impugned amendment, namely, proviso (ii) to sub-rule (2) of Rule 9 introduced vide Notification dated 05.07.1990 is unsustainable and bad in law as it exists in the present form and it has to be read down to mean that this clause would apply only when actual charges referred to in Clause (b) are not ascertainable." 98. The Supreme Court also noticed the change in the principle that had been brought about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value' where the buyer and the seller are related to each other. As per the first proviso to the amended section 14 (1), certain charges are to be added in the transaction value of the imported goods. 100. It would now be appropriate to examine the relevant provisions of the Valuation Rules. In terms of rule 3, the valuation of the imported goods should be the transaction value adjusted in accordance with provisions of rule 10. Rule 3 further provides for certain cases where the transaction value declared by the importer should not be accepted. Rule 4 states that the transaction value of the imported goods is the value of identical goods. Rule 5 provides that the value of imported goods shall be the transaction value of the similar goods. Rule 6 states that when the value cannot be determined under rules 3, 4 and 5, the value should be determined under rule 7. Rule 7 provides for deductive method of valuation. In terms of rule 8, when value cannot be determined under any of the above rules, the value should be determined basis the computed value. Rule 9 is a residual rule made applicable if the value cannot be determined under the provisions of the preceding rules. Rule 10 deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between EIF and APML/APRL in respect of exposure to foreign exchange variation, stringent payment terms, higher liquidated damages in case of delay, higher interest on delayed payment, period of warranty than in the contract executed between Original Equipment Manufacturers and EIF has led to an upward escalation in price. The said two contracts cannot, therefore, be treated as comparable. 106. The contention advanced on behalf of the revenue that once information under rule 11 of the Valuation Rules is obtained and it is established that intermediary invoice was grossly inflated in comparison to manufacturer's invoice or other information, there is no option but to reject value under rule 12 of the Valuation Rules. It has been also submitted that the rule does not prescribe the manufacturer's invoice alone as sole document for ascertaining authenticity of the declared value, but also includes any other statement, information, or document. Reliance has been placed on the mechanism provided under rule 11 to doubt the accuracy of declared value and in case there is a reasonable doubt, it permits comparison with manufacturer's invoice or other information. 107. The department has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at the rate of USD 1090.00 per KW of shortfall * Gross Heat Rate per generating Unit: if the measured Gross Heat Rate specified by the Supplier, the Supplier will be liable to pay damages to the Employer at the rate of USD 400,000.00 per kCal/kWHr increase in Gross Unit Heat per Unit * Auxiliary Power Consumption per Generating Unit: if the measured Auxiliary Power Consumption of each Generating Unit is greater than the Guaranteed Auxiliary Power Consumption specified by the Supplier, the Supplier will be liable to pay damages to the Employer at the rate of USD 4000.00per KW increase in Auxiliary Power Consumption per Unit d) The sum of all damages payable by the Supplier for Shortfall in performance will not exceed USD 57,500,000.00 except in the following cases (threshold limit) on breach of which Employer shall have the option to reject the Contractual Plant. i. If the Gross Electrical Power output per Generating Unit of the Contractual Plant falls short below 97.5% of t he Guaranteed Gross Electrical Power Output Specified by the Supplier or ii. If the Gross Heat Rate per Generating Unit of the Contractual Plant is greater than 2205 kcal/kWHr or iii. If the percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on delayed Payment Financing charges on delayed payments shall be at LIBOR+2% per annum After grace period of 14 days simple interest @ 6% shall be payable on delayed payments 110. A perusal of the terms of the contracts do substantiate the findings of the adjudicating authority that the terms and conditions in respect to the contract between APML/APRL and EIF are much severe in respect of exposure to foreign exchange variation, stringent payment terms, higher liquidated damages in case of delay, higher interest on delayed payments when compared to contract between EIF & Original Equipment Manufacturers. 111. The contract between APML/APRL and EIF is for entire gamut of goods and services and hence cannot be compared with stand alone supply contract with Original Equipment Manufacturers. Invoices issued under two different sets of contractual obligation cannot be compared and relied upon to determine the value. Rule 11, therefore, has no application to the facts of the present case. 112. The revenue has sought to invoke rule 9 by placing reliance on payments made by EIF to different vendors and/or manufacturers of the goods. The said evidence has been held to be not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion since the price indicated in the invoices submitted by APRL/APML are higher than the price indicated in the above documents. While the documents were received from Axis Bank and Bank of Baroda, the relied upon document at page 689 shows the name of Standard Chartered Bank as one of the other banks used by EIF. The same therefore, belies the case of the department that ORTTs and back-to-back invoices received from Bank of Baroda and Axis Bank are complete remittances made by EIF to Original Equipment Manufacturers. Merely because the department could not interrogate or make the Standard Chartered Bank join the investigation cannot be a reason to ignore the possibility of it acting as an active banker on behalf of EIF for the purpose of remitting the amount of Original Equipment Manufacturers. The burden was on the department to prove why the total remittance amount was only through these two banks and no other bank. It, therefore, follows that the investigation carried out by the revenue was incomplete. CONFISCATION 117. Another important issue that arises for consideration in this appeal is as to whether the goods can be held liable for confiscation under section 111 (d) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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