The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) while accepting the value of the shipping bill held that there was no evidence of flow back of money to buyers in UAE.
The bench of Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the only basis for alleged over-valuation is the statement of Shri Santosh Kumar Sinha. Even in his statement, he asserted that remittances have been received as per the value declared in the shipping bills in the past in the account of the exporter. He said that the amounts were further distributed to other paper companies and he does not know how the money was returned to the buyer in UAE. Even if the statement is taken at face value, the remittances were received as per the declared transaction value. There is no allegation, let alone evidence, of any flow back to the buyer.
The appellant/assessee, Universal is engaged in export of printed banners of various varieties and for this purpose they imported printing machinery at nil/concessional rate of duty under the Export Promotion Capital Goods Scheme under EPCG licence dated 16.12.2018 issued by the directorate General of Foreign Trade. The EPCG Scheme allows import of capital goods at nil/ concessional rate of duty subject to the condition that the importer exports goods manufactured using the machinery. The export obligation has to be fulfilled in terms of FOB value of the exported goods.
Universal filed a shipping bill dated 23.03.2015 to export 30,600 printed banners of size 17” X 27” with digital effects. It declared FOB value of U.S. $ 7.65 per piece totaling Rs. 1,45,21,020/-. It also submitted invoice and packing list which showed the same value and the goods were to be exported to its buyer in Sharjah, UAE. This export consignment was examined 100% by the officers in the presence of the customs broker of the exporter and the quantity of the goods was as declared, but the value appeared to be very high.
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It was also found that the Universal had exported banners under five shipping bills in 2013. The statement of Shri Santosh Kumar Sinha, Manager (Accounts) of Universal who had come to the customs office in connection with the live consignment was recorded on 06.04.2015 under section 108 of the Customs Act, 1962.
In this statement he said that the cost of the PVC sheet was approximately 80 per kg. and that of ink was Rs. 100/- and 200/- per kg. and the banners were designed in-house by their employee who gets a salary of Rs. 20,000/- to 25,000/- per month. No other cost was involved in manufacturing the banners, but that the export goods were highly over-valued so that the export obligation could be fulfilled in respect of the EPCG machinery imported as the export obligation period was to expire soon. Shri Tarun Jindal was the main person in the buyer’s firm at UAE who was in touch with Vikas. The over-valuation of the export goods was well known to Vikas and the payments for the over-valued exported goods in the past were received in the Central Bank of India Account of Universal in U.S. dollars and these amounts were further disbursed to paper companies.
A show cause notice dated 05.10.2015 was issued to Universal and Vikas proposing to reject the declared assessable value and re-determine as per Rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007; confiscate the goods; take penal action under section 114 and 114AA and restrict the fulfilment of export obligations to the extent of re-assessed value.
The appellant appealed to the Commissioner (Appeals) who upheld the order of the Additional Commissioner. The statement of Shri Santosh Kumar Sinha, the Manager, given on 06.04.2015 showed that the goods were over-valued and sufficient opportunity was given to Shri Vikas to substantiate the value of the goods, but he did not appear or produce any evidence. As the goods were peculiar to each export, there cannot be similar or identical goods. The Additional Commissioner was correct in getting the goods examined by a Chartered Engineer and re-determining the value. The confiscation of the goods under section 113 (i) was correct and the penalties imposed on Universal and Vikas also needed to be upheld.
The assessee contended that the sole basis for the rejection and re-determination of value was the report by the Chartered Engineer which is not correct. The Chartered Engineer failed to mention the method used to identify the quality and testing technique of the product, the Density Metre and Spectro Photo Meter used to conduct objective analysis of the print quality and colour information.
The tribunal found that the EPCG Scheme allows exporters to import capital goods on nil/concessional rate of duty subject to the condition that using that machinery then exporter manufactures and exports goods for several times the value of the duty forgone on the capital goods. The export obligation to be fulfilled is indicated in the licence by the DGFT. The duty forgone on the capital goods is the amount of duty assessed by the customs officers as payable, but for the licence.
The tribunal held that the transaction value, therefore, was wrongly rejected under Rule 8 and re-determined based on the cost of manufacture of like articles in India as per the Chartered Engineer’s certificate.
Case Details
Case Title: M/s Universal Offset Versus Commissioner of Customs (Export)
Citation: CUSTOMS APPEAL NO. 50871 OF 2021
Decision date: 02.09.2024
