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TMI Blog2024 (7) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in CC (II) AIRPORT SPECIAL CARGO, MUMBAI AND OTHERS VERSUS SHRI SAMIR VORA AND OTHERS [ 2015 (9) TMI 1370 - CESTAT MUMBAI ] duly affirmed by Hon ble Supreme Court by dismissing the Revenue s Appeal as reported in COMMISSIONER VERSUS ADANI ENTERPRISE LTD. [ 2017 (1) TMI 474 - SC ORDER ] and further, review Petition filed by Revenue was also dismissed by Hon ble Supreme Court vide Order dated 30-3-2017. It is found that By way of the said order, it was held by the Tribunal to the effect that there was no inter relationship between the Respondents and Indian/overseas entities as well as no circular trading had taken place. The Order dtd. 27.12.2013 passed by the Joint Director General of Foreign Trade in the matter of M/s AEL is perused. It is found that in the said order he accepted the fact that there was no Circular trading, and that all the exports were to be accepted towards the discharge of the obligation under the Advance Licenses, and accordingly, redeemed all the Advance Licenses. The Order dated 27.12.2013 of the Joint DGFT covers the very same Advance Licenses, which are the subject matter of the present Show Cause Notices. Since the Licensing Authority, having accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p/associated companies, during the year 2004-05 carried out by DRI, also revealed existence of circular trading and over invoicing of their exports of studded Gold Jewellery to avail benefits of Target Plus Scheme. 2. On the misuse of the Scheme being brought to its notice, the DGFT vide Notification No. 27/2004-09 dtd. 23.02.2005 excluded the export of studded Gold Jewellery from the purview of Target Plus Scheme. Further, vide Notification No. 48/2005 dtd. 20.02.2006, the exports of diamonds and other precious, semi precious stones were also removed from the list of export items entitled for Target Plus Scheme. Surprisingly, the export volume declined for all the Companies when the incentive scheme for cut and polished diamonds and studded Gold Jewellery was withdrawn. Further, investigation revealed that studded Jewellery was exported by M/s AEL and its group companies and against these exports Gold was imported either in the name of these exporter or their supporting manufacturers under Advance Licenses. Some quantity of gold was procured locally and used in the studded Jewellery exported by them. Since M/s AEL did not have facility for manufacture of Gold Jewellery, they got i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating authority has failed to notice the fact that from the statements of various supporting manufacturers who had manufactured the studded Gold Jewellery, coupled with the statements of the regular exporters of studded Gold Jewellery, it was amply brought out in the SCN that what was exported was not even Jewellery, to say least, let alone the same being called studded Jewellery. This was born out from the statement of various supporting manufacturers/job workers who manufactured the studded Gold Jewellery for M/s AEL its consortium companies. The statements as enumerated at para 18 of the Show Cause Notice clearly brings out the facts that the studded Gold Jewellery manufactured exported was mostly bangles of about 100gms. each and in some case even chain pendants of heavy weight. The haste with which over 200 to 300 kgs. of such Jewellery of 995 (24 Carat) purity was manufactured in a day or two exported, without any concern to design or size or the quality of stone affixed, even though the same were meant for exports, clearly reveals that the same were just manufactured and exported to be scraped overseas. 5. He further submits that the Ld. Commissioner also failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have also elaborated the process of manufacturing of studded Jewellery by making mountings in which finally precious/semi precious stones are fixed. The studded Jewellery exported by M/s AEL Others was not made in the regular fashion and only stone were glued into the collets to give it a look alike of studded Jewellery. The job workers have also confirmed that they charged M/s AEL and others only at the rate of 2.50 to Rs. 3.50 per gram as they did not insist on any design or finish. In fact, in the case of studded Jewellery manufactured by M/s Rajesh Exports, Bangalore, and supplied to M/s AEL, M/s Rajesh Exports had charged Rs. 21.70 crores less than the actual price of Gold used in the manufacture, not to talk of the other charges such a job charges and costs of stones. On being asked specifically Shri Rajesh Mehta, Director of Rajesh exports could not give any plausible explanation. Moreover, the Job workers from whom the studded chains were got manufactured by M/s AEL have stated that they had never made studded chains, as stones cannot ne normally fitted in chains. However, on specifically asked by M/s AEL, they had made the studded chains by soldering collets on the chain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir imports studded Jewellery, was all controlled and stage managed by the employees of M/s. Adani Global FZE, Dubai, a subsidiary of M/s. AEL and M/s G.A. International, a company owned and managed by Shri Vinod Shantilal Shah, the elder brother of the Director of M/s AEL. Investigation have also revealed that the Bank accounts of many of the UAE based importers and exporters were opened in the same Banks so as to facilitate easy transfer of funds from one account to the other for to and fro remittance in the name of these companies. 9. He also submits that the mails reported at para 8.8 8.11 of the SCN, apart from establishing the fact of control and management of M/s AEL over the Dubai based firms, also shows that the funding of the firms are also under the management and control of M/s AEL only. It is only seen from the sample mail tabulated at para 8.11, as to how the fund received in one company for their exports of Gold bars/cut polished diamonds are transferred to other companies for making similar payments for their imports of so-called Gold Jewellery/Cut Polished diamonds. Also as elaborated at para 15 of the SCN it was observed that both in case of imports, as well as, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority has erred in not appreciating that the case of the department is substantiated with elaborate evidence that increase in export of studded jewellery during 2004-05, by AEL and other consortium companies, has been achieved by mis-declaration of FOB value and circular trading with intention to avail the benefit of export incentive schemes (Target Plus). That the other consortium companies were controlled by AEL and even the overseas companies who exported Gold bars imported studded Jewellery, were inter-related and in fact controlled by AEL through its associates companies. The department is not required to prove the charges with mathematical precision and charges are to be proved on the basis of preponderance of probability. He placed reliance on the decisions of Hon ble Apex court in the matter of Collector of Customs, Madras and Others Vs. D. Bhoormull reported at 1983 (13 )ELT 1546 (SC). 13. He further argued that the evidences on records clearly show that Gold imported by M/s AEL and its consortium is not used in the export product, viz. studded Gold Jewellery for which they were allowed duty free imports. Therefore duty is required to be recovered from M/s AEL in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture is stated thus: Gold bars were fed into rolling press and drawn into strips. The strips are passed through another press having design mould so that the design gets embossed on it. Thereafter the strips were cut into desired length and given round shape of Bangle and soldered at the end. Thereafter, the Bengals were polished. After polishing round collets made of wire were soldered on the bangles to affix stones. The stones were affixed and final polishing was done. Based on the aforesaid evidence the Commissioner has rightly held that the goods exported cannot be said to be mere Gold Bars. The imported Gold bars were subjected to the aforesaid process of manufacture and conversion into Gold Bangles studded with stones and therefore, the export product was Gold Studded jewellery. 16. He further submits that the Commissioner has rightly held that merely because the jewellery exported was of 995 purity gold, it cannot be said that what was exported was not Jewellery but only gold. The Advance Licenses did not put any restriction of the purity or weight of the gold Jewellery to be exported. The Commissioner has rightly held that there is no basis for contending that Gold Jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid documents prove the allegation of Circular trading. The reasons are as under: (a) The comparative Cost Sheets at RUD 25 is an unsigned document. Who prepared this document, and for what purpose is not known. None of the person whose statement was recorded during investigation under Section 108 of the Customs Act, 1962 were confronted with this Comparative Cost Sheet. Assuming that this Cost Sheet was seized form the Office of the Respondent at the time of search, that by itself does not make the document admissible or reliable; Besides, on the face of it, this document does not make any reference to melting or re-melting of the jewellery. There is no such word melting or re-melting; Baring one page (page 52 of the seized file) all other pages, referred to Refining Charges , and at 3 pages referred to Labor Charges . Refining Charges is a distinct part of the manufacturing process of gold bars. So also, labour charges are for manufacture of gold bars. Neither refining nor labour charges can be equated with melting and therefore, no inference can be drawn only on the basis of reference to the word melting charges at one amongst 20 pages referred to collectively as RUD 25; Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted in Dubai, and the gold bars obtained therefrom, were imported back into India. (iv) Re: RUD 29: a) This is a copy of an email found in the seized file. There is no evidence of it being printed form the Inbox of the recipient or Sent box of the sender thereof. There is no proof of transmission of this email or the receipt thereof. As such, mere copy of what purports to be an email has no evidentiary value. Apart from the aforesaid, the contents of this document shows that it refers to some transaction in Platinum, and gold bars or gold jewellery, which will be undertaken in future. Hence, the subject matter of the document also has no relevance to the present case which relates only to gold bars and gold jewellery, and not Platinum. (v) Re: Emails: a) Bunch of emails has been relied upon to show that AEL managed and controlled all the Indian as well as the overseas entities referred to in the Show Cause Notice. These emails are part of a common investigation which were conducted by DRI in relation to export of Cut and Polished Diamonds (CPD) and gold Jewellery under TPS. A separate Show Cause Notice bearing No. DRI/AZU/INQ-15/2005 dated 30.03.2007 was however, issued in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the department at all. The file listed at Sr. No. 32 of the said panchanama is titled Folders Containing - Misc. Papers (First page Adani Exports Ltd.-Precious Metal) and, therefore, the assertion of the Department in the show cause notice is entirely incorrect, false and motivated. The whole file titled gold costing , at referred to in the notices, therefore was not recovered from the premises of M/s AEL. 22 He argued that it is relevant to point out herein that despite the fact that these documents are the most important piece of evidence with the Department to allege circular trading, not one individual from M/s AEL was questioned about the same. It is pertinent to mention that these documents were not even shown to any employee of M/s AEL during the entire course of investigation. 23. He also submits that it is alleged that though each export consignment was worth crores of rupees, M/s AEL and its group companies did not insist on L/Cs from the so-called importers or payment against documents and instead the terms of payments were settled at Documents against Acceptance (D.A) for 90 days. The Ld. Commissioner in the impugned order has rightly hold that if the business relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue addition description of the Gold studded Jewellery and dropped proposal for demanding duty, interest and penalty and ordered to finalise the Shipping Bills. The said Order of the Commissioner has been upheld by the Hon ble CESTAT, Bangalore vide Order dated 10.2.2009 by rejecting the appeal filed by the department which is reported in CC Vs. Adani Exports Ltd. 2009 (243) ELT 115 . Further, the Hon ble Karnataka High Court vide Order dated 30.10.2014 dismissed the appeal preferred by the Revenue against the order of CESTAT which is reported in Commissioner Vs. Rajesh Exports Ltd. reported in 2015 (318) ELT A 55 (Kar). Though the Department has preferred appeal before Hon ble Supreme Court, who vide Order dated 18.3.2016 admitted the Civil Appeal, but no stay has been granted till date. 25. He further submits that revenue alleged that there was interrelationship between the overseas seller/buyer with M/s AEL and the other four Indian companies and that the overseas party and the Indian party had interest in each others business is totally incorrect and unsubstantiated. The word interrelationship has been judicially interpreted and means mutuality of interest . The expression mutu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the origin of the goods or whether any value addition was undertaken in India or not, or whether the goods are exported in the same or substantially the same form or whether there has been value addition or not. The basis of Section 14, plainly speaking, is the price of the goods in the international trade. If such a price has been realized, and none of the factors provided under law/rule on the basis of which the declared value can be rejected, are found to exist, the rejection of the declared value cannot be justified on any other basis, which would, per se be outside and/or beyond the provisions of Section 14 of the said Act. Accordingly, for the purposes of Section 14, the limited issue to be addressed is whether the value declared is based on the correct price as prevalent in the international trade. If the answer is in the affirmative, and such price has been actually realised by the exporter, no other consideration arises. All other factors are then extraneous. As such, without going into the issue whether or not there was value addition on account of the processes carried out, inasmuch as there is no allegation in the show cause notice that the value declared in the Ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exports made by M/s AEL, the Exchange Control Declaration (G.R.) Form No. A was submitted which bears the export value verification of the customs appraiser. Each such verification made and endorsed on the said declaration by the customs appraiser establishes that the export value declared in the shipping bills had been verified and found to be correct by the customs appraiser. 29. He also submits that the Show Cause Notice proceeded on the footing that the activity carried out to convert the gold into Gold studded Jewellery cannot result in value addition to the extent of 7% and on this wrongful assumption, it is alleged that the value of the Gold studded Jewellery exported has been artificially inflated. It is alleged that entire value addition is reflected in the making charges paid to the job-workers. While on the one hand the making charges paid to the job-workers was in the range of approx. Rs. 2.50 to Rs. 3.50 (0.40 to 0.60%) the making charges shown in the export invoices were Rs. 42 to Rs. 48 (i.e. 7% or above). The notices allege that this shows that the value addition of over 7% shown is merely on paper and it is also further established that the value declared by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter that the imports and exports of the said firms had been arranged by AEL. Further, M/s AEL had obtained 88 Advance licenses, from the Joint DGFT, Ahmedabad. The said 88 Advance Licences were issued allowing import of Gold Bars of .995 purity. The said licence required M/s AEL to complete its export obligation by exporting Studded Gold Jewellery (SGJ) of .995 purity made out of imported gold. It is a matter of record that the entire quantity of imported Gold Bars were utilized in the manufacture of SGJ. This entire quantity of SGJ was manufactured through various job workers / supporting manufacturers whose names were mentioned in respective licences. The entire quantity of SGJ manufactured was exported by AEL. There is no allegation that the imported Gold Bars were mis-utilised and/or retained by AEL and/or the job workers / supporting manufacturers and/or diverted in the local market. As the entire quantity of imported Gold Bars stands utilized in the manufacture of SGJ and further as the SGJ itself stands exported, AEL have fulfilled the conditions of the Notification No. 93/2004-Cus dated 10.09.2004 as well as Advance Licence. This is more so since the import and export has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms to verify whether the same are corresponding to description made therein. If the Shipping Bill is filed in Electronic Data Interchange System, the System directs the nature of examination as well as the specific number of package to be examined. At the time of examination, an expert duly nominated by the Customs Department was also called to check and verify the purity of gold jewellery being exported. All the Documents i.e. Shipping Bill, Invoice, Packing List are also examined by the Departmental officers along with physical examination of the exported product and upon being satisfy himself with the description of the goods in shipping bill allowed for the export under section 51 of Customs Act. The said order is a statutory order and has not been reviewed and/or challenged by the department, therefore the export made by Respondent was within the four-corner of law. 33. He also submits that a certificate from a Jewellers Association recognized by the Department itself, had been furnished at the time of exports. No representative samples to dispute the same at the time of export had been drawn. The gold (SGJ) which has been exported had gone through a proper process of export i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Policy and the Handbook of Procedures inasmuch as it ignores part of para 4.56.1(a) thereof. In para 4.56.1 (a) of the said Policy uses the word studded and the same is not used in para 4.56.1(b). It is on this basis it is contended in the notices that all studded jewellery falls within para 4.56.1(a), and that only plain jewellery is covered under para 4.56.1 (b). This interpretation is contrary to the description given in para 4.56.1(a). In para 4.56.1 (a) of the Policy it is clearly stated that the items of export in respect of which 15% value addition is required are studded/gold/platinum/silver jewellery - and articles thereof, other than those covered by para 4.56.1 (b). Therefore, it is clear that the jewellery which falls under para 4.56.1 (a) are those which do not fall under para 4.56.1 (b). Para 4.56.1 (b) on the other hand covers plain gold/platinum/silver jewellery/ articles as well as ornaments like mangalasutra containing gold and black beads/imitation stones, precious stones and semi precious stones, cubic zirconia etc. but excluding those containing diamonds, precious and semi-precious stones. However, if the per gram value of the precious stones, semi-precious st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the case of the revenue in the present matter is that M/s AEL alongwith other respondents had indulged in mis-use of the Target Plus Scheme. The main allegation is against the M/s AEL is that they entered into conspiracy with certain entities/persons and colluded with them to cause of dubious import of gold and exports of so called studded Jewellery, to take undue benefits of the Target Plus Scheme. We also find that the identical allegations were raised by the department in Show Cause Notice F. No. DRI/AZU/INQ-15/2005 dated 30.3.2007 issued by Additional Director General, Directorate of Revenue Intelligence, Ahmedabad. However, the allegations were set aside and transactions were held to be genuine by the Hon ble Tribunal by its decision reported as CC v Samir Vora-2015 (330) ELT 609 , duly affirmed by Hon ble Supreme Court by dismissing the Revenue s Appeal as reported in Commissioner v Adani Enterprise Ltd 2016 (342) ELT A50 (SC) and further, review Petition filed by Revenue was also dismissed by Hon ble Supreme Court vide Order dated 30-3-2017. We find that By way of the said order, it was held by the Tribunal to the effect that there was no inter relationship betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. The fact that some processing activity was carried out in the bonded warehouse cannot be denied as even Lumesh Sanghavi, whose statements have been heavily relied upon by the department, has also admitted to the processing activity being conducted in the bonded warehouse. It would be useful to reproduce the portions from the statements of Lumesh Sanghavi. In his statement dated 7-2-2006, Lumesh Sanghavi has stated as under : (vi) The assorter first checks the correctness of the lot wise weight declared in each of the import packets. Then he will start the process of actual assortment. Assortment would therefore include sieving, boiling and segregation. The process of sieving on a sieve, which is a round apparatus which consists of perforated metal sheet of various sizes. The process of sieving for an average lot would normally take around 30 minutes. However, according to my experience, in the bonded warehouse activity, only about 25% consignments were put for sieving. The rest of the consignments did not go through this process at all. The process of boiling involves boiling of the diamonds in a small glass like see through beaker (machine) which operates on electricity. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in different lots for export and lot Nos. and weight in carats would be marked on each packet as was done in import consignments. The entire process of assortment would take 3 to 4 hours and the imported diamonds would be exported within 3 to 4 days of their imports. Sometimes the exports would also takes place on the second or third day of imports. On being asked, I state that the imported diamonds and the exported diamonds were in the same form i.e. cut and polished diamonds were imported and cut and polished diamonds were exported without carrying out any process except sieving, boiling and segregation. E. On this issue of whether processing at all was carried out or not, Kamaraj Bodal, who reported to Lumesh Sanghavi in his statement dated 30-1-2006 stated as under : Qn. 7 : Who used to physically receive the diamonds and what activities were carried out in the office of M/s. Adani Exports Ltd. after receiving the diamonds? Ans. 7 : I used to physically receive the diamonds brought by our Security Agency and I used make an entry of the same in bond register. Shri Lumesh Sanghavi used to bring assorters along with him and they used to assort the diamonds by sieving and boiling. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No acknowledgement of receipt of affidavit of retraction have been produced before us to uphold such a contention. Be that as it may, it is not as if retracted statements cannot be looked into at all in law. The Hon ble Supreme Court in Vinod Solanki v. Union of India, Laws (SC)-2008-12-139 = 2009 (233) E.L.T. 157 (S.C.) = 2009 (13) S.T.R. 337 (S.C.), has administered a word of caution in evaluating retracted statements. We have therefore closely examined not only the statements of Lumesh Sanghavi but two others who were also involved in the activities of import and export of diamonds from bonded warehouse. After careful consideration we find that there is no manner of doubt that processes such as sieving, boiling and sorting were carried out by the Indian companies in the bonded warehouse. It is therefore not possible to hold no process at all was carried out by the Indian companies in the bonded warehouse. 18.1 This takes us to the next question as to whether processes of boiling, sieving and sorting carried out in the bonded warehouse resulted in value addition of 5% or more in the years 2004-05 and 2005-06. These percentages of value addition flow from provisions of Para 4A.18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99, dated 28-6-1999 issued by C.B.E. C. which was issued in the context of para 8.13 of the Import and Export Policy 1997-2002, which is pari materia to para 4A.18 of FTP 2004-09, para 2 thereof is reproduced herein : 2. The issue has been examined in consultation with the Ministry of Commerce and they have clarified that the activities of mixing, sieving, assortment and cleaning, etc. are allowed in respect of imported cut and polished diamonds and cut polished coloured gemstones in the private/public bonded warehouses set up under paragraph 8.13 of the Exim Policy. However, the activities of mixing, sieving, assortment and cleaning would be restricted to individual consignment only and mixing of different consignments for the purpose of carrying out the activities of assortment, sieving and cleaning shall not be permitted. 18.4 Besides, we find that the Commissioner has not relied upon any evidence to show that minimum value addition of 5% or more cannot be achieved by such processes. The show cause notice also does not refer to any evidence on this point. The question whether these simple processes can result in value addition of 5% or more is a matter of fact. If the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same, we go back to the question whether the FOB value as declared in the shipping bill is correct. 18.6 For this purpose, we have to bear in mind the distinction between FOB value and the value addition. 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 has been adopted by the Commissioner, to be the correct FOB value. We shall deal with this aspect later in detail when dealing with circular trading. Value addition is a concept under the Foreign Trade Policy (FTP). The formula for determining value addition is given in para 4A.6 of the FTP for 2004-09 which is reproduced herein : 4A.6 The value addition for the purpose of gem and jewellery sector shall be as per paragraph 4A.2.1 of Handbook (Vol. 1) (A V.A.= B) x 100, where B V.A. = Value Addition A = FOB value of the export realised/FOR value of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court observed that although the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 applied only to goods imported into India, the principles thereof were also applicable to goods exported from India. 18.8 The transaction value in the present case is established by the fact that sale proceeds in foreign exchange have been fully realised. There is also no evidence on record as required under Section 14, to show that the price of such or like goods for delivery at the time and place of exportation is lower. On the other hand the appellant companies have shown that the contemporaneous imports are at comparable prices, something which the Commissioner does not accept, because according to the Commissioner in case of diamonds, it is not possible to have evidence of identical or similar goods since each lot of diamonds varies from the other and valuation of diamonds, which is based on carat, colour, cut and clarity cannot be compared. May be the Commissioner is right. But that be so, we have no option but to go with the examination reports recorded at the time of assessment of the export consignments on the shipping bill, on the basis of which let export orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ependently determined, applying the tests under Section 14, the question of verification of the value addition, by the Customs officers at the time of export does not arise at all. This is more so since determination of value addition is within the jurisdiction of licensing authorities and not the Customs authorities under the provisions of FTP to which we have already adverted. We therefore find that the sole ground of the Commissioner to reject the FOB value, is that the value addition of 5% or more cannot be achieved only by carrying out simple processes, is not sustainable. We therefore, hold that the FOB value declared is correct. 18.10 On the question of valuation, the Commissioner also records that evidences disclosed in the show cause notice, there is an allegation that the FOB value declared is not genuine on account of control by AEL over all the overseas parties involved in the transactions as buyers or sellers of diamonds. Having recorded this objection, the Commissioner does not give any categorical finding thereon but instead treads into the question of circular trading. We however prefer to deal with this issue in the context of valuation and circular trading as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPS was over; (b) Registered office of some of the entities in Singapore like M/s. Planica Exports Pte Ltd. and M/s. Emperor Exports Pte Ltd. is common; (c) The registered address in some cases is residence of individual Directors; (d) Ms. Mary Joseph who is an employee of Adani Global Pte Ltd. has also signed all contracts as Director of M/s. Gudami International and Mr. Chang Chung Ling - a Director of Gudami is shareholder/Director of M/s. Adani Global Mauritius and Adani Global Pte Ltd., Singapore; (e) Rajendra Prasad Nair, Manoj Chandrasekharan Nair and Sudhkar Kannadiga who are Managers/Partners/Directors of Gold Star FZE, Shine Jewellery and Queen Jewellery, all UAE entities, respectively are employees of Adani Global FZE, while Vinod Shantilal Shah who is Director of Adani Global FZE and GA International is the brother in law of the Chairman and Managing Director of AEL. 18.13 The fact that some of the overseas entities were started around time of introduction of TPS or closed business simultaneously with closure of TPS does not establish these entities in Singapore and Hongkong were controlled by AEL. We find that out of 45 overseas entities, six have started business be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to reject the declared FOB value. If the relationship has not influenced the price, then such export price must be accepted. Out of all the overseas buyers to whom the cut and polished diamonds were exported from bonded warehouse by Indian companies, only two such buyers namely; GA International and Gudami International, Singapore are part of the list of alleged related parties, but the total exports to them in 2004-05 constitutes only about 22.45% which means that the remaining 77.55% of exports at or about the same price has been made to independent buyers. In 2005-06, exports to independent buyers is about 28.21% assuming all the buyers in Singapore are related. We have arrived at this finding based on the information given on page 46 of the show cause notice. As long as price of exports to independent parties in respect of whom there is no allegation of relationship is available, the same would apply to all other exports including those made to related persons. This is notwithstanding the fact that the department has failed to discharge the onus of proving relationship between AEL and overseas entities, as concluded above. 18.15 We have noted that Lumesh Sanghavi has in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice issued relying on the documents statements, which we have examined as above. 18.18 The judgment in Bu ssa Overseas v. C.L. Mahar, 2004 (163) E.L.T. 304 (Bom.) deals with a case where the goods were cleared under a Bond and therefore the argument that the proceedings could not have been commenced under Section 112 was not accepted. The Bonds in the present case were for the warehousing under Section 58 of the Act. These Bonds have been cancelled by the Bond Officer. In any case we have held the declared value to be correct. Hence, the question of confiscation does not arise at all. 18.19 The issue involved in the judgment in Euresian Equipment and Chemicals Ltd. and Others v. CC, 1980 (6) E.L.T. 38 (Cal.) does not arise for consideration in the facts of the instant case, as it is not the claim of the appellants that liability if any is wiped out or extinguished with the exportation of goods. 18.20 In CC v. D. Bhoormull, 1983 (13) E.L.T. 1546 (S.C.), the Hon ble Apex Court held that a case need not be proved with a mathematical precision in the context of smuggled goods seized from the shop where the claimant sought to justify the purchase with the help of documents whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s during different periods as detailed in the two tables on pages 81 to 83 of the show cause notice. We have therefore looked at import and export invoices to see how the individual lots referred to at pages 81 to 83 have been imported and exported. On examination of the invoices relating to import as well as export of cut and polished diamonds it is seen that each consignment consists of various lots of different descriptions, weight, value and quality. It is not the case of the department that all the lots referred to at pages 81 to 83 have been imported under one invoice. We have found each invoice to cover number of lots ranging from 8 to 23 in number. Identifying one or two lots from a consignment consisting of 8 to 23 different lots being the same which have been allegedly circulated more than once is a method which is unknown to law. The subject matter of assessment is a consignment as a whole. The Bill of entry under Section 46 or the shipping bill under Section 50 contains a declaration of the goods covered by the total quantity and value of the goods supported by the invoice, which covers the totality of all the lots constituting the consignment. Singling out one or two l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the movement of same alleged lot to prove circular trading does not exist. AEL also submits with reference to Exhibit-D, there is no explanation how the same alleged lot exported to Singapore or Hong Kong has been re-imported from Dubai the next day keeping in mind the locational difference in three countries and the time involved in transporting the goods from India to Singapore or Hong Kong and from there to Dubai and Dubai to India, suggesting thereby the whole theory of circular trading is bogus and impossible. We find no answers to this point in the contentions raised by the department. 19.4 To prove circular trading show cause notice also relies upon the statement of Lumesh Sanghavi. In his statement dated 28-2-2006, he has admitted to circular trading in relation to documents shown to him in respect of imports and exports by and to the Indian companies in July, 2005 as recorded on pages 4 to 6 of the said statement. To the same effect, he has also admitted to lots of diamonds being imported and exported over and over again in the transaction which were shown to him and recorded by him on pages 4 to 8 of his statement dated 3-1-2007. We have already dealt with the aspect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho did not correctly appreciate the facts as flowing from the same documents which were shown to him. We find force in these submissions and hold that not only is the defence to circular trading plausible but incontrovertible. 19.5 The third piece of evidence referred to in the show cause notice, to support the allegation of circular trading are the 3 charts reproduced on Pages 86 to 88. These charts have been recovered from the desktop (computer) of Vipul Desai who in his statement dated 19-2-2007 said that these were prepared by Sudhakar Nair, Junior Assistant in the Banking department. No statement of Sudhakar Nair has been recorded. We have however, independently considered these charts without the benefit of the statement of the author thereof. We find that the Chart by themselves do not prove circular trading. AEL has explained these charts to depict the business plan and a pattern of transactions. This in fact appears to be so, these charts appeared to be graphic representation of information which have been tabulated by DRI in the show cause notice covering the names and identities of overseas entities and the classification of overseas entities into buyer and seller as can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opportunity to ascertain the veracity of the documents before filing its written comments to reply filed by AEL. The DRI made general and sweeping remarks about the genuineness of said MOU in its written comments filed before the Commissioner. The Commissioner could have caused necessary inquiry through DRI or otherwise to ascertain the genuineness of the said MOU. After all, as an adjudicating authority, the Commissioner must undertake fact finding especially when it is not as if AEL had adverted to business relationship with Daboul for the first time in its reply to show cause notice. We cannot help but noticing that the reply disclosing the MOU with Daboul was filed on 29-10-2007 and the adjudication order has been passed after more than 5 years, which gave ample opportunity to inquire into the genuineness of the said MOU. 21. The most significant material relied upon in the show cause notice are the number of e-mails sent mainly by Ms. Mary and others. Some of the e-mails have been extracted in the show cause notice, as for instance at pages 59 to 64, again from pages 67 to 69 and thereafter from 70 to 79. All the e-mails have been compiled in Annexure-M to the show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udami shall be entitled to call for and maintain and monitor financial information and records. In order to coordinate the working of these transactions, including movement of funds wherever necessary, Daboul, AGFZE and Gudami may nominate a common person to act as a representative of all the parties who is acceptable to all the parties. For want of better explanation from the department, we have no option but to accept that the reason why Ms. Mary Joseph wrote e-mails was because of the understanding recorded in the said MOU. 21.1 We have independently gone through the set of e-mails which have been extracted in the show cause notice on the pages referred to above. We observe as under : (a) The e-mails pertains to large number of transaction like iron ore exports and coal transactions apart from the transactions of cut and polished diamonds; (b) The e-mails referred to transactions with parties other than the 45 overseas entities, as for example, Aramex International Exchange, Radya Baqer Trading LLC, Navy Impex LLC and White Monitor General Trading LLC to name a few. (c) The e-mails provide no explanation on the transfer of funds from one overseas entity to another. In many cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot was circulated number of times as tabulated from pages 81 to 83 of the show cause notice, then the CIF value of the lots repeatedly circulated ought not to have been accepted, whereas the CIF value of all the consignments of imported diamonds has been accepted to be true and correct value, meaning thereby each consignment is a fresh and a new transaction, independent of each other and not of the same goods repeatedly circulated. We do see force in this argument. We find the 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 CIF 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of remittance, which they have duly done so. There is according to them, no violation of the provisions of Foreign Exchange Management Act in the payment of commission or discounting of LC or availing buyers credit. We are unable to find any such allegation about these actions being in breach of the law in the show cause notice or any finding to this effect in the impugned order. Besides, the payment of commission would be relevant for calculating the value addition if and when the pending applications for grant of duty free scrip under TPS is taken up by the competent authority. 23. Issue No. IV Having held that the declared FOB value is correct, we set aside the confiscation of the exports goods under Section 113 (i) of the Act, consequently, we also set aside the penalties imposed by the Commissioner in the impugned order under Section 114 of the Act. 23.1 Before parting, on behalf of some of the individuals on whom the penalties have been imposed it has been submitted that penalties have been mechanically imposed without ascertaining the role played by each of them. It was submitted that the penalty on Rajesh Adani has been imposed simply because he is Managing Director. Lumes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, Bangalore in this matter held as under : 8.1 We have considered the submissions made at length by both sides and perused records. 8.2 We would first deal with the issue of the revenue as to whether the Adjudicating Authority was in error to decide the show cause notice when an appeal is pending before the Division Bench of Hon ble High Court of Karnataka. It is undisputed that the exports of the jewellery by the respondents were as per provisions of Export Import Policy. Respondents have obtained licence for value addition of minimum of 7% as per Paragraph 4.56.1(b) of the Policy. Somewhere down the line, DGFT issued 9 policy circulars, which required the respondents to achieve minimum value addition of 15% for studded jewellery. Respondents advance licences submitted for redemption were held back by DGFT authorities based on the said circular. Respondents moved Hon ble High Court of Karnataka in W.P. No. 7256 of 2005 (GM-RES). Hon ble Single Judge in the judgment dated 15th June 2005 disposed of the W.P. by ordering as under : 8. In the light of the aforesaid legal position it is unnecessary for us to go into the question whether the impugned circular would amend the policy or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is open to them to do so. Suffice it to say, the said circular cannot be construed at this stage as denying the benefit of the policy to the petitioner. Therefore keeping open the aforesaid questions to be agitated in future it is held that the petitioner is entitled to the redemption of the license in respect of which they have performed their export obligations. Hence, I pass the following order. 1. Writ Petition is allowed. 2. Respondents are directed to redeem the license in respect of which the petitioner has completed exports in accordance with the Foreign Trade Policy 2004-2009 by achieving required value addition of 7% under Paragraph 4.56.1 (b). 3. No costs. It was submitted by the Special Counsel for revenue that revenue has challenged the above order in a Writ Appeal and the same is admitted in the Hon ble High Court of Karnataka. On a specific query from the Bench, it was submitted that the Division Bench of Hon ble High Court of Karnataka has not stayed the order of the Hon ble Single Judge. It is a settled law, that, unless there is a stay of the order by higher judicial forum, the order is binding. We note that in the absence of any stay of the order in W.P. No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings before the Court. The Commissioner was bound to follow the Board s instructions directing that cases in which the department had gone in Appeal to the appropriate authority to be transferred to Call Book and it was improper to decide a matter on which the department had gone in appeal to the higher Bench of the High Court, which matter was sub judice. (iii) The Commissioner in his order has rejected, without assigning any valid reasons, the evidence adduced by the department in the form of a report received from the Consul (Economics), Consulate General of India, Dubai, UAE, enclosing the photocopies of the Bills of Entry filed by M/s. Excel Goldsmith, Sharjah towards import of three consignments of Gold jewellery exported by M/s. Rajesh Exports, Bangalore and five consignments of gold jewellery exported by M/s. Adani Exports substantiating the fact that the gold jewellery exported by the above said companies were cleared as gold scrap by M/s. Excel Goldsmith, Sharjah. Instead he proceeded to rely upon the attested copies of five Bills of Entry bearing the same DEC numbers submitted by M/s. Adani Exports during the personal hearing showing the goods declared by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to enumerate in brief the procedure followed right from time of filing of Shipping Bill to issue of Let Export Order. The Shipping Bills in respect of goods to be exported is filed either by the Exporter or the authorized Custom House Agent. Once the Shipping Bill is filed, the Documents filed are scrutinized by the Customs to verify whether the same are proper. If the Shipping Bill is filed in Electronic Data Interchange System, the System directs the nature of examination as well as the specific number of package to be examined. At the time of examination, a representative of the local Jewellers Association, recognized by the Department is also called to check and verify the purity of gold jewellery being exported. As a token of such check, a certificate from the representative of the Jewellers Association is also obtained verifying the purity of gold. All the Documents i.e. Shipping Bill, Invoice, Packing List are also examined by the Departmental officers indicating the Customs Appraiser and goods also examined by the Department before Let Export Order given. 64. I also note that the weight of the gold bangle exported and the fineness (purity) of the gold content in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the country including in the country of export. Thus the allegations and arguments as levelled in the SCN, that the gold Bangles/products exported cannot be termed as gold jewellery or studded gold jewellery are unacceptable. It has also been alleged in the Show Cause Notice that 24 carat jewellery is generally not worn. The point raised is irrelevant. If a customer or importer of gold jewellery, outside the county, places order for supply of 24 carat gold jewellery, the same has to be supplied. 65. The show cause notice has also alleged that the export product was not studded gold jewellery, as required under the Advance Licence. I find from the records that a certificate from a Jewellers Association recognized by the Department itself, had been furnished at the time of exports. No representative samples to dispute the same at the time of export had been drawn. The gold which has been exported had gone through a proper process of export in terms of documentation in which shipping bills, invoice, packing list etc. were filed with the Customs Authority and were assessed by the proper officer. Further, the entire lot of export consignment was examined, in terms of description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuted were being violated, the concerned Customs Officers should not have allowed Let Export Order . No such action was taken. In this connection, I have also taken note of the Bombay High Court Judgment in case of Popular Dyechem - 1987 (28) E.L.T. 63 (Bom.) and CESTAT judgment in case of Madhus Garage Equipment - 2006 (198) E.L.T. 388. 66. As regards the alleged mis-declaration of product at the time of import in UAE, it is observed that M/s. Adani Export Ltd. have produced Notarized documents as indicated above. Also in view of the Supreme Court and other Judgments referred above, the description of goods have to be examined with reference to Indian laws and not as per Customs Tariff and laws of the importing country. A point has been raised in the show cause notice that the exported gold jewellery at the time of import in foreign country was declared and/or cleared as gold scrap . Such declaration by importer would have evidentiary value only if there had been similar evidence of gold scrap been exported. There is no such collaborative evidence. On the other hand, there is overwhelming evidence in respect of description of product, at the time of export in respect of above exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e refer to your reply dated 3-1-2006 filed in connection with the above mentioned Show Cause Notice, wherein you have requested for certain documents for the purpose of defending the allegations made in para 19 of the subject SCN. 2. In this connection I have been directed by the Commissioner of Customs Bangalore to reply to queries raised in your aforesaid letter as under 2.1 Full report of the India Consulate at Dubai referred to in para 19 of the subject notice: In this regard, it is to inform you that para 19 subject SCN mentions the nature of enquiries which were made at the port of destination through the Indian Consulate at Dubai viz., to ascertain description/declaration made by the buyers at the time of import of these goods and also to ascertain the manner in which the gold jewellery (bangles) imported by the buyers from M/s. Rajesh Exports Ltd. and M/s. Adani Exports Ltd. were being used. The letter addressed to the Indian Consulate is not a document relied upon in the SCN. The Consulate in response to the enquiries made by this office have provided information respect of 8 consignments imported by M/s. Excel Gold Smith, Sharjah from M/s. Rajesh Exports Ltd. and M/s. Ada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be the basis of making any allegation against the exporter in India. This line of defence adopted by you is not tenable for the reason that the judgments of the Hon ble Tribunal relied upon are pertaining to cases of undervaluation. In the instant case, the issues of the valuation of the items imported by the buyers at Sharjah are not disputed. The documents for the declaration of the import filed before the Sharjah Customs has been relied upon in the SCN only to substantiate the allegation that the exporter had mis-declared the item of export. 2.5 What are the relevant portions of UAE law relating to examination, assessment and clearance of goods imported into UAE and whether the same were followed in the present case: The laws relating to the examination and assessment of the import by the Sharjah Customs is not relevant to the present case. The SCN at para 19 has clearly spelt out the manner in which the imported goods were declared and how they have been cleared. The facts that the goods have been cleared by the importer at Sharjah Customs is evident from the seal on the import declaration documents viz Airport Customs - Clearance . Therefore when the Sharjah Customs has acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms, the fact remains that they are copies of copies and indisputably bear no signature of the exporter, the forwarding agent, the stevedore or the Customs Officer; no signature at all of any of them. The discrepancy in regard to copies hearing the seal of customs at Kobe also raises a serious doubt whether the copies relate to any of the consignments in question. In these circumstances, if the majority was disinclined to place reliance on these documents we find it to hold that it was in error in doing so (Para 5). 9.3 We find that in the present case before us, revenue has not given the copy of the report received from Indian Consulate to establish that the declarations before the Customs Authorities at Dubai were from authentic source and further, the said documents were copies of the copies obtained from some sources. We are of the considered view that unauthenticated documents cannot be relied upon for pressing home charge of misdeclaration on an assessee. On the contrary, we find that the respondents have produced certified copies of the Bills of Entry filed by the importer before Customs authorities at Dubai. We are of the view that the finding of the Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an officer from Indian Consulate, Dubai, UAE while the very same documents produced by the revenue through Indian Consulate were not attested. Suffice to say, that the documents produced by respondent has more evidentiary value, we hold that the reliance placed by Adjudicating Authority on such documents (as produced by respondents) cannot be faulted with. 10. In totality, on the facts and circumstances of the case, we find that impugned order passed by the Adjudicating Authority is correct, legal and cannot be faulted with. 11. In view of the above reasonings, we are of the considered view that the impugned order needs to be upheld and we do so and reject the appeals filed by the revenue. 42. Further, we find that the Hon ble Karnataka High Court vide Order dated 30.10.2014 dismissed the appeal preferred by the Revenue against the above order of CESTAT which is reported in Commissioner Vs. Rajesh Exports Ltd. reported in 2015 (318) ELT A 55 (Kar). 43. We find that the disputed matter is well settled in favour of the respondents by the above decisions and Ld. Adjudicating authority correctly dropped the demands. We have also gone through the details finding of the Ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates and accessories as contained in the shipping bills furnished by the petitioners. The said DEPB licences were required to be forwarded to the Customs for verification of the particulars set out in the shipping bills and necessary endorsement thereon. Under Circular No. 15/97 dated 3-6-1997 the verification by the Customs authorities was restricted to the description, quantity and FOB value of the export product set out in the Shipping Bill. it is not the case of the Customs authorities that there is any discrepancy, quantity and FOB value of the export product. Under the circumstances, when the DEPB licence is issued by the Licensing authorities specifically holding that the Petitioners are entitled to avail the benefit of the DEPB Scheme in respect of Polypropylene filter plates and accessories, the Customs authorities were not justified in rejecting the claim of the Petitioners on the ground that the Articles exported by the Petitioners were not covered under Chapter 39 ITC (HS) classification. Whether an item falls under Chapter 39 of ITC classification or not is for the licensing authorities to consider before issuing the licence. Even after the issuance of the licences, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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