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TMI Blog2024 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... e proprietor of PV Enterprises. Nothing has been brought on record to contradict the aforesaid observations of the Adjudicating Authority. Hence, in the absence of any evidence to the contrary, we do not find any reason to interfere with the conclusion arrived at by the Ld. Adjudicating Authority. We observe that the case of M/s Rudras Overseas was pertaining to the period prior to the subject imports of M/s P.V Enterprises/ Respondent and therefore the allegations fabricated invoices is not a matter of relevance in the instant case. In this regard, the Ld. AR also agrees to the fact that though such fabricated invoices had been relied upon to allege under-valuation of the said goods but re-determination of value of imported goods has not been made on the basis of such invoices but based upon the contemporaneous imports. In fact, it is a now matter on record that no fabricated invoice or no invoice said to be original, has been relied upon in the instant case to support the elements of related person and consequent alleged undervaluation, as rightly observed by the Ld. Adjudicating Authority vide para 28.16 of his order, reproduced supra. In such a situation, we have no option but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises/ Respondent and therefore, apparently, it is the case of the Department that the sales of the imported goods by M/s P.V Enterprises had direct connection with the seized cash as well as to prove the transactions to be related . Hence, we do not find any infirmity in the discussions carried out by the Ld. Adjudicating Authority under para 28.17, as the same is the integral part of the SCN as well as of the defence submissions along with documentary evidences as detailed under para 26.7 of the subject OIO. Regarding confiscation of the goods of the live consignment , On perusal of the said Panchnama, we note that the comparable transaction values have not been substantiated based on any documentary evidences or by referring to the specific Bills of entry and the other details of description, brand name, quantity, etc. in the said Panchnama. Hence, the basis of seizure itself is improper, with reference to the alleged undervaluation on comparable prices. The issues related to minor infractions of descriptions and quantities with reference to products listed at Sr. No. 9 of the Bill of Entry, we note that the same does not have any impact on the allegations of the undervaluation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' from Dubai by grossly undervaluing the goods. That on comparison of the transaction values of 8 items of the Bill of Entry No. 8216469 dt.20.07.2020 with the values declared by other importers at other ports, it appeared that Respondent - PVE has undervalued the imported goods. On a reasonable belief of undervaluation and mis-declaration in the Bill of Entry, the officers seized the said consignment under punchanama dt.29.07.2020. 3. During the follow up action, the DRI, Indore had conducted search proceedings at the residence/office premises of Mr. Sanjay Punjabi (sole director of Rax Trading Ltd, Hong Kong and sole proprietor of Rudra Overseas, Indore) and seized cash of Rs.34,82,000/- under Sec 110 of the Customs Act on the reasonable belief that the said amount is the sale proceeds of food supplements imported by PVE, which are liable for confiscation under Sec 121 of the Customs Act. 4. That, earlier in November 2019, DRI, Indore had registered a case of undervaluation against Rudra Overseas (Proprietor - Mr. Sanjay Punjabi). Mr. Hitesh Nagwani was also served notice as conspirator, financier and partner beneficiary. Mr. Sanjay Punjabi had imported nutritional supplements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the business transactions of Rax Trading and Rudra Overseas. Thus, it appeared that they are related parties and the transaction value declared in the Bill of Entry do not represent the actual transaction value in terms of Sec 14(1) of the Customs Act read with Rule 2(2)(v) and Rule 3 of the Customs Valuation Rules, 2007 (CVR) and both have business interest in each other and there is no arms length distance between them. It further appeared that the import values declared is not true or accurate and does not represent actual transaction value and the same needs to be rejected under Rule 12 of CVR, 2007 and the value needs to be re-determined under Rule 5 of CVR. 9. The declared value with respect to the aforementioned 3 earlier Bills of Entry totalling Rs.71,44,585/- were liable to be rejected and re-determined at Rs.3,95,18,575/- in terms of Sec 14 read with Rule 3 and Rule 5 of CVR. Further, differential duty was calculated at Rs.2,40,81,484/-. Further, the goods under the 3 earlier Bills of Entry appeared liable for confiscation under Sec 111(l) and Sec 111(m) of the Act. 10. It further appeared that the imported goods/supplements under the fourth/present Bill of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnments in the name of PVE. They were sharing the profits equally. He had sold the goods imported vide 4 Bills of Entry by PVE to (i) Rudra Overseas, Indore, (ii) Life Care Agencies, Indore, (iii) BDG, Delhi, (iv) The Nutrition Planet, Ghaziabad and (v) Hips and Shoulders, Bangalore; that other than Rudra Overseas, remaining parties are not related; that they usually negotiate prices on whatsapp group. Further, he stated that invoices pertaining to Rax Trading Ltd and Rudra Overseas were created in his laptop at Indore itself. The visiting cards of Rax Trading and Rudra Overseas have both their names printed with contact numbers. For export of goods by Rax Trading Ltd, Hong Kong, to PVE, the invoices were prepared and printed at Indore itself. On being asked about the logo difference of Five Stone General Trading LLC, Dubai on the invoice and the website, he stated that goods are actually not procured from Five Stone General Trading LLC and undervalued invoices were submitted to the Customs. Actually, he had contracted one Mr. Jawad for supply of Nutritional Supplements through Five Stone General Trading LLC. 15. In the statement recorded of Mr. Sanjay Punjabi on 14.06.2021, he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination. 18. Opposing the Appeal, learned Consultant for the Respondent - Mr. T. Chakrapani submitted that the Impugned Order is based on appropriate evidence, on examination of the allegations and evidence laid by Revenue and on correct application of the legal provisions. The Impugned Order is well reasoned and is a speaking order. The grounds of Appeal raised by the Revenue are more or less reiteration of the allegations in the SCN. The grounds do not raise any point of law in the application of the legal provisions. The Adjudicating Authority has considered each and every aspect of the allegations and the defence taken before him. He further urges that the Department has challenged the valuation of the subject imported goods on the ground that the Respondent and the exporter/ supplier are "related parties" and hence, there is a dent in the transaction value of the said goods in terms of Section 14 of the Customs Act, 1962 and accordingly, the value of the said goods has been sought to be re-determined on the basis of the contemporaneous imports in accordance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. He further urges that the demand of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are influenced by their mutual relationship & thus liable to be rejected before resorting to the provisions of Rule 5 of customs valuation rules, adopting values of similar goods. d. Whether the goods belonging to other importers, whose values had been considered for comparison to arrive at the value of the goods in question, fall within the realm of 'similar goods' as contemplated in the Customs Act and the rules made there under." 22. Ld. Commissioner goes on discussing each issue, as above, vis-à-vis the evidences brought out in the SCN, which can be summarized to state that: - i. Floating of companies/ firms by Shri Hitesh Nagwani and Shri Sanjay Punjabi, sharing of profits between them, non-intimation of being related party transactions to the Customs. ii The role of M/s Five Stone General Trading LLC, Dubai, whether they are the actual exporters or not. iii. The fact of re-assessment by Assessing officer at the said port of the past three consignments, against the declared Transaction Value by the Respondent/ Importer; iv. Visiting card in the name of M/s Rudrass Overseas, Indore and M/s Rax Trading Ltd., Hong Kong, displaying the names of Sri Hitesh N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Nagwani, the proprietor of the noticee firm cannot be considered as a coowner of M/s Rax Trading Hong Kong owned by Shri. Sanjay Punjabi, merely because they travelled together or they had made certain misrepresentations allegedly in visiting cards or for securing free accommodation or entry at certain events. These instances cannot suffice to legally infer co- ownership or related parties transactions influencing the transaction values. 28.10. The allegation of being 'related' has a specific legal connotation in terms of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Rule 2(2) of the said rule reads as follows: For the purpose of these rules, person shall be deemed to be "related" only if: (i) they are officers or directors of one another's businesses; (ii) they are legally recognised partners in business; (iii) they are employer and employee; (iv) any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of real invoices, if any, having the correct/higher value etc. or financial records/documents or some other evidence proving financial flow back of the undervalued consideration to the seller either through banking or non-banking channels, then it would have been a foolproof case of the Department. I find that no such evidence had been relied upon in the impugned show cause notice and the proposals in the show cause notice to reject the transaction value on the basis of non-financial peripheral circumstantial records available in bits & pieces and arrive at the new value are solely in terms of Rule 5 of the Customs Valuation (Determination of value of Imported Goods) Rules, 2007. Further to examine the aspect of undervaluation by way of related party transactions, I prefer to verify the sale values of imported goods from M/s Rax Trading Ltd, Hong Kong to M/s Rudras Overseas and other independent buyers by M/s PVE. This will help in understanding the allegation of undervaluation with proper reasoning." 24. Further, regarding the statement of Shri Hitesh Nagwani, the Ld. Adjudicating Authority had also observed that:- "28.7 (e)………………&h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -determination of value of imported goods has not been made on the basis of such invoices but based upon the contemporaneous imports. In fact, it is a now matter on record that no fabricated invoice or no invoice said to be original, has been relied upon in the instant case to support the elements of "related person" and consequent alleged undervaluation, as rightly observed by the Ld. Adjudicating Authority vide para 28.16 of his order, reproduced supra. In such a situation, we have no option but to accede to the submissions made by the Ld. Counsel for the Respondent since the valuation of the subject imported goods has not been done on the basis of the so-called fabricated invoices, hence, cognizance of the same cannot be taken to prove the allegations against the Respondent. 27. It is also argued that the Ld. Adjudicating Authority had not considered the forensic analysis of the laptop of Shri Hitesh Nagwani, seized during the search, wherein, the invoices etc. were retrieved in the name of M/s Rax Trading Limited, Hong Kong, as supplier and M/s P.V Enterprises/ Respondent, as Importer. Albeit, the issue was covered by the Ld. Adjudicating Authority vide para 28.16 of his Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 5 of CVR, 2007; that the same stands supported with the images of corresponding Bills of Entry pertaining to such similar goods as reproduced in the SCN; that the value has been re-determined correctly in accordance with Rule 5 of CVR, 2007; that the evidences put forth by the investigating authority with regard to the values adopted on comparable imported goods clearly points out the act of mis-declaration of value resorted to by the importers. 30. We observe that the issue of re-valuation of the subject goods would arise only in a situation wherein it is proved on record that the provisions of Section 14 of the Customs Act, 1962 are not satisfied. The entire case of the Department to dispute the transaction value declared by the Respondent was based upon the issue that the buyer and seller are related parties. However, it has already been concluded supra, that this issue has not been proved on record. Hence, in the absence of there being any related angle involved in the case, prima facie, there exists no cause to dispute the values declared by the Respondent or to re-determine the value of the subject imported goods in terms of CVR, 2007. 31. Further, on analysing the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods; 29.5 From the above, definition, it is abundantly clear that for such comparison to be legally permissible, the goods to which the imported goods are to be compared shall be constituent of like characteristic and component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being regard to valued having regard to the quality, reputation and the existence of trade mark. I also find that the exercise of comparision should also take into account country of manufacture, particulars of the manufacturer. 29.6. From the foregoing requirements, it is amply clear that the statutory contemplation requires that the exercise of comparison should taken into consideration important aspects like Brand, country of manufacture etc., Strict adherence to these requirements, is a sine qua non for any exercise of comparison to have legal sanctity. 29.7. A careful examination of the effort made in the impugned show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory essentials like Brand of the goods, details of manufacture and country of manufacturer. This has been the case with the entire exercise of comparison given in the impugned show cause notice. 32. The crux of the decision by Ld. Adjudicating Authority in the context is that the SCN failed to suggest that there is material on record that a proper exercise had been taken into consideration on the issues like, brand, ingredients, country of manufacturer, etc. The Ld. Adjudicating Authority had further exemplified his decision with reference to certain Bills of Entry, as detailed under para 29.8 of the subject OIO, as already reproduced above. We find that the issue of comparison is indeed not based on the issue of identical goods but is based on similar goods. However, the information contained in the SCN along with the referred annexures, as claimed by Ld. AR prima facie does not contain the comparison and the similarity thereof, with reference to the item description, as rightly observed by the Ld. Adjudicating Authority. Infact, the Annexures contained the details of item description, as if it is the same or similar in the subject Bills of Entry of the Respondent and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as to prove the transactions to be "related". Hence, we do not find any infirmity in the discussions carried out by the Ld. Adjudicating Authority under para 28.17, as the same is the integral part of the SCN as well as of the defence submissions along with documentary evidences as detailed under para 26.7 of the subject OIO. 36. Regarding confiscation of the goods of the live consignment, the Ld. AR argued that the Panchnama dated 29.07.2020, drawn at the said port confirms that the subject goods were largely undervalued and also that some of the goods were mis-declared in description and quantity with specific reference to the items listed at Sr. No. 9 mentioned as free samples. In the context of undervaluation, it is noted that the reference was drawn to certain comparable prices, declared by the importers at other ports. The Ld. Consultant submitted that there is nothing on record in the Panchnama about such Bills of Entry of other importers and common description of the goods to be considered as identical or similar in nature and description and that the said seizure was not based on any "related" transactions, as stated in para 2.2 of the SCN but was only based on alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticee have attained finality, as rightly claimed by the Ld. Consultant for the Respondent, especially in terms of alleged collusion and conspiracy between Shri Hitesh Nagwani and Shri Sanjay Punjabi. 40. The Appeal Memorandum also repeatedly refers to about the case in the SCN issued to M/s Rudras Overseas, Indore, and also to M/s P.V Enterprises/ Respondent in the instant case, in order to prove the existence of transactions to be related even in the present case. Specific attention was drawn to the modus operandi, said to have been evolved by both Shri Sanjay Punjabi and Shri Hitesh Nagwani, representing their respective firms. Reliance was also made upon the statements recorded under Section 108 of the Act ibid and the importance thereof, with reference to the referred case laws. The Ld. Consultant contested the same vehemently in drawing attention to the basic fact that the imports of and by M/s Rudras Overseas, Indore, were during the period of 2019, when M/s P.V Enterprises was never an Importer, during the said period; that the Respondent importer/ M/s P.V Enterprises had infact imported at the said port only in 2020. In other words, it is his argument that the allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s Rax Trading Limited, Hong Kong as supplier to be considered as "related parties". The Ld. Consultant brought to our notice the observations of the Ld. Adjudicating Authority vide para 31 of the subject OIO. On perusal of the same, we find that the Ld. Adjudicating Authority had precluded himself from further discussions on the issue, though, he admitted that, as per the email dated 27.07.2021 of M/s Five Stone General Trading LLC, Dubai, based on inquiry caused by DRI, HZU by email correspondence dated 16.07.2021, confirmed that they had supplied the goods to M/s P.V Enterprises, Indore. We are of the considered view that this aspect ought to have been included in the subject Show Cause Notice, as the fact of sending email correspondence by DRI, HZU has not been rebutted or claimed to be incorrect by the department, for fair process of raising allegations and for providing opportunity of defense. No doubt, the Ld. Adjudicating Authority had abstained himself in conferring any decision on this aspect, claiming that the reply was received after the issuance of SCN but we do realise that the forwarding the email correspondence was never under dispute. Hence, we disagree with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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