9911796707
TMI Blog2024 (11) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... is also no evidence of such dues having been made through unofficial route, commonly known as hawala, to M/s Bentley Motors Ltd. The illegality of these would surely have precluded M/s Bentley Motors Ltd from indulging in such transfers; the lack of any proceedings against them is sure evidence of the contrary. It appears improbable that invoices are raised and recorded without any payment insisted upon. The certification in terms of section 138C of Customs Act, 1962 would also make it appear that the documents were sourced from the electronic records of M/s Bentley Motors Ltd and, though said to have been raised on M/s Exclusive Motors Pvt Ltd, was absent in the electronic records of the buyer. The contention of appellants that intensive scrutiny of physical and electronic records of M/s Exclusive Motors Pvt Ltd had not yielded such invoices has not been disputed. It is also surprising that such supplementary invoices, on which, along with the finding that the original invoices are on FOB terms, has the enhancement of value of 51 cars despatched as air freight been justified, are not available for cars despatched by sea transport which were also held to be liable for enhancement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive Motors Pvt Ltd which would be attended upon by the importer engaging transport and procuring insurance which, uncontestedly, has not happened. The only feasible alternative is for the buyer to place reliance on seller s arrangement which not only varies the contract terms but brings in collusion between the two which is not the substance of the allegation in the notice or the findings in the impugned order. Mere declaration, and inconsequential too, in document meant for statistical reporting without risk of penal consequence does not suffice to hold that contract terms were altered to transfer the liability. The fiscal consequences of such far-reaching alteration in contract for supply of high-end motor vehicles would be enough of disincentive to suggest that risk liability stood altered and unless risk liability was altered, the reading down of invoice as excluding freight and insurance on the basis of unreliable statements does not stand the test for recourse to rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Nor do they discharge the onus of customs authorities, not having recourse to rule 12 of Customs Valuation (Determination of Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the importer do not exist. There being no misdeclaration of value, confiscation under section 111 of Customs Act, 1962 does not survive and with it the penalties under section 112 of Customs Act, 1962 lack sustenance. In the factual circumstances of this dispute, the impugned order is set aside to allow the appeals. - HON BLE MR JUSTICE DILIP GUPTA , PRESIDENT And HON BLE MR C J MATHEW , MEMBER ( TECHNICAL ) Shri Prakash Shah and Shri Suyog Bhave , advocates for the appellants Shri S K Rahman , Authorised Representative for the respondent ORDER PER : C J MATHEW M/s Exclusive Motors Pvt Ltd is before us with grievance that order [order-in-original no. 07/Commr/VC/Exclusive Motors/ ICD-PPG/2024-25 dated 25th July 2024] of Commissioner of Customs, Inland Container Depot (ICD), Patparganj, New Delhi has fastened differential duty of ₹ 71,74,00,000 under section 28 of Customs Act, 1962, along with applicable interest under section 28AA of Customs Act, 1962, for having been short-paid on import of cars between August 2018 and July 2023 besides imposing penalty of like amount under section 114A of Customs Act, 1962. Shri SP Bagla is aggrieved by imposition of penalties of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors Ltd and, hence, warranted additions as prescribed in rule 3(1) of Customs Valuation Rules, 2007. The appellants contend that this sweeping inference is without any factual support as scrutiny of documents of M/s Exclusive Motors Pvt Ltd by investigators had not elicited any record of separate payment of freight which surely would not have been foregone in the price charged by M/s Bentley Motors Ltd and that the demand has been confirmed on flimsy findings drawn from unsubstantiated hearsay evidence transposed on persons available in India and privy only to communication received over email from individuals purportedly concerned with declarations at the overseas end. 4. The price clause in the contract as well shipping documentation have adopted INCOTERMS notified by the International Chamber of Commerce (ICC) and have been categorized as four, including CIF/FOB [Cost Insurance Freight (CIF)/Free on Board (FOB)] , corresponding to the liability rules for sea and inland waterways and as seven, including CIP/DAP, corresponding to liability rules for any mode of transport. The price terms should, therefore, be uniform throughout a transaction or across the period, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary invoices with the original invoices of 12 of the other 24 cars imported by air. 7. Lastly, for the other 95 cars, all imported by sea, the adjudicating authority loaded the declared price with the full extent of additions at 21.125% towards freight and insurance by discarding a reasonable assumption that the air freight in supplementary invoices could, by that description, only be top- up over normal freight and by reliance on the other element, viz., declaration by freight forwarder being identical to price declared in the bill of entry, as in the preceding bunch of imports. The conclusions in the impugned order were painstakingly elaborated by Learned Authorized Representative through, as he preferred to refer, case studies of documentary evidence for our edification and enlightenment. This was laid out at two levels to set out the inexorable conclusion therefrom of deliberate suppression of a crucial element of value that enabled the adjudicating authority to work forward on available evidence for imports by air while working the implication of the same evidence backwards to strip the declared value of any claim to be transaction value and then to pad it with the last re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city of purported declaration, made by freight forwarders purportedly on their behalf, vis- -vis the contract terms. He averred that it suited the investigation to sanctify an unacknowledged declaration by an unconcerned entity because the complexity of cross-border trade placed many aspects in non-jurisdictional limbo which was sought to be filled by leaps of illogic that had no basis in fact or law. 10. The critique of the impugned order by Learned Counsel ranged from factual discrepancies relied upon in arriving at conclusions to questioning the credibility of purported testimony by those claiming knowledge of transaction minutiae and contractual obligation that only seller and buyer are privy to. He pointed out that no authenticated statement of authorized representative of M/s Bentley Motors Ltd was available to evidence the chain of logic that appealed to the mind of the adjudicating authority. Even the provenance of the supplementary invoices was, according to him, questionable because they remained to be corroborated as obligating M/s Exclusive Motors Pvt Ltd to recompense M/s Bentley Motors Ltd in the absence of being communicated to the former by the latter; that these we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustable, there was nothing owed to buyer against which adjustment could be made. 13. Responding to defence of the impugned order by Learned Authorized Representative, Learned Counsel submitted that it was not open to any sovereign or agency of sovereign to alter the terms of a commercial contract and, barring courts of law in dispute between contracting parties, to interpret any aspect of a private transaction. Furthermore, he contented that the price agreed to between buyer and seller need not always be amenable to vivisection for its elements to be disaggregated; that, according to him, would be as good as subordinating a commercial engagement to convenience of a tax administration whose connection with the pecuniary aspect of business is peripheral and incidental. He submitted that fiscal law may provide for acceptance or rejection thereof, with latter attended upon by alternative mode of ascertainment for that limited purpose, and may provide for additions without disputing the correctness of the sale price. Learned Counsel pointed out that lack of clarity about statutory scheme has been amply demonstrated by the colliding of several provisions of the statute and rules merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted that it was not for the appellants to be burdened with the onus of created fiction of FOB price to be declared on shipment that had so impressed the adjudicating authority; the respondent, he argued, had every means at their disposal to do so despite which it was found apt to feebly clutch at the last resort after brash disregard of contractual agreement on CIP/ DAP terms between the corporate entities in India and overseas. He summed up with the contention that the conspiracy drummed up by the investigators appeared to involve only the appellants and not the other party to the contract and that, too, stemming from fortuitous circumstances of some customers desiring to be in immediate possession of cars already ordered and under procurement which apparently enabled the appellants to press the supplier not to insist on payment for the difference this, according to him, has the ingredients of one party to a contract acting alone and from happenstance, too, which is no conspiracy at all begging the question of non-inclusion of freight and insurance in the contracted value without active role of both sides to the transaction. 15. Learned Authorized Representative set out his argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf with customs authorities at load point obtained from the invoices. 16. In the course of his response to arguments of Learned Counsel, Learned Authorized Representative pleaded that the decisions of the Hon ble Supreme Court in Union of India v. Mohit Minerals [2022 (61) GSTL 257 (SC)] , in Eicher Tractors Ltd v. Commissioner of Customs, Mumbai [2000 (122) ELT 321 (SC)] and in Century Metal Recycling Pvt Ltd v. Union of India [2019 (367) ELT 3 (SC)] and of the Tribunal in Jet Airways (India) Ltd v. Commissioner of Customs (I) (Airport), Mumbai [2021 (377) ELT 83 (Tri.-LB)] were distinguishable not only on facts but also as pertaining to either Goods and Service Tax (GST) disputes, as in re Mohit Minerals, or to Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 and, thus, inapplicable. He also submitted that reliance on the decisions of the Hon ble Supreme Court, in Union of India v. Mahindra Mahindra Ltd [1995 (76) ELT 481 (SC)] , in Commissioner of Customs (Imports), Mumbai v. Ganpati Overseas [2023 (386) ELT 802 (SC)] and in Commissioner of Customs, Mumbai v. Bussa Overseas Properties Ltd [2007 (216) ELT 659 (SC)] , and of the Tribunal, in Rajasthan P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not been loaded with actual freight only owing to refusal by the importer to correlate with the invoices. As far as 95 cars transported by sea was concerned, he fell back on the logic of supplementary invoices reflecting actual air freight as also from disclosure of invoice price as FOB value to HMRC at the time of export, and remaining unchanged for cars transported by sea, to support the conclusion in the impugned order that invoices, across the board, did not include the freight and insurance prescribed for conformity with transaction value. 19. Doubtlessly, we are at one with the Hon ble Supreme Court, and with Learned Authorized Representative too, that fraud vitiates everything, including solemn acts. There is, however, much danger in the Tribunal adopting that sentiment expressed by the highest court of the land without ruminating on applicability to the context; the Hon ble Supreme Court has jurisdiction over all laws while the Tribunal is restricted to commodity tax and service tax. This distinction is of particular significance as fraud is ensconced within section 28 and section 114A of Customs Act, 1962 which emplaces a particular jurisdiction of limitation upon a find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of quasi-criminal law but, as not being in the nature of criminal liability which arises from offence against the State in its protector role and not excluded from the civil jurisdiction which arises from grievance between persons over disputed interests, convention, such as in England, of such disputes being taken up in the Chancery Division of the Kings Bench, notwithstanding, immunity from the mandate of civil law presumption in tax litigation, which arises from the treasury role of the State, is not available to either side. In two of the cited cases, the interests of the State were under siege in one at the threshold by drawing upon a judgement that should have influenced disposal on merits and in the other by contrived directing to one of the two tax outcomes. Hence, the Hon ble Supreme Court held the procedures and mechanics to be of lesser significance than already determined revenue. 21. By both considerations above, it is inevitable that the evidence garnered by the agencies of the State to fasten tax consequences must serve the purpose of the law. In this dispute, the core is valuation which, along with rate of duty , is one of the two pillars on which assessment in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antamount to stretching of limits of section 108 of Customs Act, 1962 to frontiers unknown to law and poses severe hazard to credibility of investigation if approved as legal. Any facts and inferences drawn from these statements are, therefore, not relevant to the proceedings. 23. The communication from an employee of M/s Bentley Motors Ltd has been cited as evidence of instructions on air freighting to suit customer preference as well as attesting to supplementary invoices having been raised besides intimating manner of settlement of the differential amount thereon. We find nothing on record to demonstrate that this was a statement recorded in person under section 108 of Customs Act, 1962 nor that any summons issued to M/s Bentley Motors Ltd was responded to with offer of the said person as authorized representative for the purpose. The role of the individual in the said transactions or of responsibly assuring validated information of such transactions does not emerge from either the show cause notice or in the impugned order. And yet his observations have been raised to oracular acceptability by a process unknown to law. Statements are accorded credence by the apprehension of leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1962 has. Furthermore, an invoice original or supplementary is mere paper unless there is an acknowledgement of debt by payment or by appropriate debit as outstanding dues. The adjudicating authority has referred to adjustment of the amounts in credit balance held by M/s Bentley Motors Ltd but neither is any authentication of such account available nor its source established. It is also improbable that such purported outstandings are adjusted against an account which is not of M/s Exclusive Motors Pvt Ltd and, more so, in a contractual engagement bedrocked on prior payment. There is no record of any payment made through banking channels to the supplier either towards dues arising from the supplementary invoices or as transfers to the alleged adjustment account. There is also no evidence of such dues having been made through unofficial route, commonly known as hawala, to M/s Bentley Motors Ltd. The illegality of these would surely have precluded M/s Bentley Motors Ltd from indulging in such transfers; the lack of any proceedings against them is sure evidence of the contrary. It appears improbable that invoices are raised and recorded without any payment insisted upon. 25. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch documentation from the website of HMRC, it appears that undeserving sanctity has been accorded to them. These are not export declarations but reporting for statistical purposes; a role played by that wing of HMRC akin to that of the Directorate General of Commercial Intelligence and Statistics (DGCIS) for the Government of India. In the absence of authority under the customs statute of the exporting country to such agency for acting as customs authorities designated to assess export documents, these declaration lack the rigour that export declarations possess. It has not been evidenced that misdeclaration of statistical value has fiscal and penalty consequences which may, justifiably, be ground for sanctifying the contents of these reports. That these mirror the value in the original invoice may well be attributable to casual filing of commercially inconsequential information drawn from a conveniently available record. To clothe these with undeserved rigour stretches preponderance of probability to breaking point; neither can these suffice to represent mathematical approximation which, according to Learned Authorized Representative, has been approved by the Hon ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance were not only excluded but also, as in large portion of this dispute, not ascertainable. 28. To affirm that, on tenuous suggestion of wrong-doing, the onus stands shifted to the importer would be tantamount to transplanting the valuation scheme in the Customs Valuation Rules, 1963 to the present day. Thus, the finding for concluding that the declared price should be loaded by 21.125% to render it to be transaction value in 119 imports by sea or air is without any basis in law. 29. As far as supplementary invoices are concerned, there is nothing on record to suggest that these were issued to the buyers before or after the despatch of 51 cars by air. The scrutiny of records of importer-appellant had not yielded those. To conjecture so, and lend credence to documents reflecting transactions not envisaged in the contract, payment would have to be evidenced. Other than an inference of adjustment in some account purportedly held by M/s Bentley Motors Ltd, which, as set out supra, has only unreliable statements in support, no evidence has been led in the show cause notice. There is no evidence of remittance either through banking channels or, as Learned Counsel put it, through hawala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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