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TMI Blog2025 (3) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... or a consignment, the parties may agree the goods will be sold for US$ "X" on FOB basis and that settles the rights and liabilities of the buyer and seller in the transaction. In short, FOB value is the transaction value of the goods agreed to between the buyer and the seller. Does the Joint Commissioner, Commissioner (Appeals) or any other officer of Customs have the power to re-determine the FOB value of the goods and if so, under what legal provisions? - HELD THAT:- The exported goods are the consideration which the overseas buyer would receive and the price is the consideration which the exporter would receive. Therefore, this price has to be determined only by the buyer and seller. Consideration, as per the Indian Contract Act, need not be adequate for the goods. It can be higher or lower and so long as some consideration is paid the contract is valid. There is a privity of contract between the buyer and the seller and they alone can decide the terms of contract and in case of non-compliance by one, the other can seek to enforce it. The consideration or the transaction value cannot be modified by any stranger to the contract including any officer. If the assessable value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Act is to determine the assessable value of the goods and not to change the FOB value - All three export incentives in dispute-drawback, MESI and ROSL are to be paid as a percentage of FOB value as per the notifications issued by the Central Government under the Customs Act and the FT(D&R) Act and no officer has the power to order that they should instead be paid as a percentage of any other value. The purported letter sent by DRI is a blatant interference in the adjudication process by the Joint Commissioner. DRI seems to have issued the letter under the wrong impression that it has the power to dictate how adjudication orders are passed by quasi-judicial officers. The Joint Commissioner was wise enough to ignore this letter from DRI but the department seems to have lost sight of the fact that quasi-judicial orders should be passed without fear or favour and without obtaining NOCs from any investigating agency. Conclusion - i) FOB value is the transaction value of the goods agreed to between the buyer and the seller. ii) The consideration or the transaction value cannot be modified by any stranger to the contract including any officer. iii) The FOB value cannot be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had, in his Order-in-Original, dropped all the proceedings against the three exporters-JBN, Astha and JBB-in respect of the shipping bills which were investigated. The operative part of the order is as follows: ORDER (i) I drop the proceedings initiated in respect of Shipping Bills Nos. 1807036, 1807017 & 1807046 all dated 05.02.2019; 1807069 & 1807053 both dated 05.02.2019; shipping Bill Nos. 1710107, 1710004 & 1710110 all dated 31.01.2019. (ii) I hereby order for the release of the PD Bond of Rs. 2,61,83,717/-along with Bank Guarantee No. 10140100000090 dated 11.03.2019 of Rs. 8,64,063/- in respect of M/s. JBN Apparels Pvt. Ltd., PD Bond of Rs. 2,28,25,955/- along with Bank Guarantee No. 10140100000089 dated 08.03.2019 of Rs. 7,53,257/ in respect of M/s. Aastha Apparels Pvt. Ltd. & PD Bond of Rs. 5,35,38,778/- along with Bank Guarantee No. 10140100000091 dated 15.03.2019 of Rs. 18,00,000/-in respect of M/s. JBB Apparels Pvt. Ltd. submitted by the exporters at the time of provisional release of the goods covered under aforesaid Shipping Bills. (iii) I order that the all the aforesaid Shipping Bills may be finalised accordingly. 7. The facts of the case are that the thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttended personal hearings. After considering the submissions, the Joint Commissioner passed the Order in Original dropping all proceedings. 12. Aggrieved by the order-in-original, the department filed appeals before the Commissioner (Appeals) on the following grounds: (i) The investigations by income tax showed four export firms including the three appellants herein were involved in trade related money laundering without proper stock in books of account and manipulated purchase bills. The companies from whom they had claimed to have purchased the export goods were found not existence with by the Punjab GST authorities. (ii) Order-in-Original was passed by the Joint Commissioner without ascertaining the stance of DRI on the said export shipments. DRI had asked to obtain NOC before releasing the export incentives. (iii) The order in original does not mention any investigation or enquiry done with respect to the above before accepting the values declared by the exporters. (iv) E-way data pertaining to 12 firms owned and controlled by Shri R.K Goyal did not show the physical movement of the goods from Punjab to Delhi and only invoices were being raised. Enquiry by DRI found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Appeals) ignored the investigation report which shows that the supply chain in this case from Punjab to Delhi showed no movement of goods and only invoices were raised. (ii) He also ignored that overseas inquiry shows the substantial evidence to prove overvaluation of the goods which emerged out of DRI investigation. (iii) Bank realization of export proceeds cannot be a ground for accepting value. It is, therefore, prayed that the order of the Commissioner (Appeals) may be set aside and orders like direct any other direction as deemed fit by the Tribunal. 16. We have heard learned counsel for the exporters and the learned authorized representative appearing for the department and perused the records. 17. We find that the dispute in this case is regarding export incentives in the form of drawback, MEIS and ROSL. The suspicion of the department is that the exporters had overvalued their goods so as to claim excess export benefits. The department wants the FOB values to be re-determined and accordingly the export incentives to be recomputed. 18. De hors the facts of the case, the fundamental questions which need to be examined and answered are: a) What is the meaning of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receive and the price is the consideration which the exporter would receive. Therefore, this price has to be determined only by the buyer and seller. Consideration, as per the Indian Contract Act, need not be adequate for the goods. It can be higher or lower and so long as some consideration is paid the contract is valid. There is a privity of contract between the buyer and the seller and they alone can decide the terms of contract and in case of non-compliance by one, the other can seek to enforce it. The consideration or the transaction value cannot be modified by any stranger to the contract including any officer. If the assessable value of the export goods is re-determined under the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 by the proper officer, will it also change the FOB value? 21. Section 14 of the Customs Act and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, empower the proper officer to reject the declared value and to re-determine the value. However, one should not confuse this power to be the power to re-determine the FOB value. Section 14 reads as follows: "14. Valuation of goods.-(1) For the purposes of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the FOB value cannot be modified by anyone including any Customs officer. Nothing in the Customs Act confers any power on anyone to modify the transaction value between the buyer and seller-be it FOB, C&F or CIF or on any other terms. If the export incentives are based on FOB value, does any Customs officer have the power under the law to order that the export benefits shall instead be paid on the basis of some other value determined by the officer? 25. The last question to be answered is if the drawback or other export incentives are to be provided as a percentage of the FOB value of the goods, does the Customs officer have any power to order that they shall, instead, be given as a percentage of some other value determined by him such as the assessable value? To answer this question, one needs to examine the powers under which the drawback or other export incentives are notified. 26. Section 75 of the Customs Act empowers the Central Government to, by notification, direct that drawback shall be allowed. Relevant extract of this section is below: 75. Drawback on imported materials used in the manufacture of goods which are exported.-(1) Where it appears to the Central Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Customs or Deputy Commissioner of Customs to enable such authorised officer to inspect the processes of manufacture, process or any other operation carried out and to verify by actual check or otherwise the statements made in support of the claim for drawback. (d) for the manner and the time within which the claim for payment of drawback may be filed; (3) The power to make rules conferred by sub-section (2) shall include the power to give drawback with retrospective effect from a date not earlier than the date of changes in the rates of duty on inputs used in the export goods. 27. It is in exercise of this power under section 75, the Central Government notifies the rates at which drawback shall be allowed. Once the drawback schedule is notified by the Central Government, it is a direction to the officers that the drawback shall be paid accordingly. If the schedule prescribes drawback to be given as a percentage of FOB value, that is the direction of the central government under section 75. The concerned Customs officers are bound to follow the directions of the Central Government. No power is conferred under the Act on the Commissioner or any other officer of customs to defy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and no officer has the power to order that they should instead be paid as a percentage of any other value. 32. It also needs to be pointed out in this case that the bank realization certificates have been received in these cases confirming that the amount as per the FOB value have been received as remittances from the overseas buyers by the exporters herein. 33. One of the strange grounds taken in the appeals filed by the Revenue before Commissioner (Appeals) was that DRI had directed the Joint Commissioner to take an no objection certificate (NOC) from it before releasing the export incentives and the Joint Commissioner had erred in not obtaining an NOC from the Joint Commissioner accepting the values. The purported letter sent by DRI is a blatant interference in the adjudication process by the Joint Commissioner. DRI seems to have issued the letter under the wrong impression that it has the power to dictate how adjudication orders are passed by quasi-judicial officers. The Joint Commissioner was wise enough to ignore this letter from DRI but the department seems to have lost sight of the fact that quasi-judicial orders should be passed without fear or favour and without ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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