The DCIT, Circle-8, Ahmedabad V. Vishal Plastomer Pvt.Ltd, Ahmedabad

ITA 2740/AHD/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9963 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-09-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 08-12-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMAD R
• Assessee Lawyers: S N SOPARKARSR
• Section: 80HHC; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BENCH D AHMEDABAD BENCH D AHMEDABAD BENCH D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING : 1-9-2010 DRAFTED ON:1-9-2010 ITA NO. 2740 /AHD/ 206 ASSESSMENT YEAR :2003-04 T HE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, ASHRAM ROAD, AHMEDABAD. VS. VISHAL PLASTOMERS PRIVATE LIMITED, VISHAL HOUSE, OPP. SALES INDIA, ASHRAM ROAD, AHMEDABAD. PAN/GIR NO. : AAACV 6745 Q (A PPELLANT ) .. ( RES PONDENT ) APPELLANT BY : SHRI VIMALENDU VERMA,D.R. RESPONDENT BY: SHRI S.N.SOPARKAR,SR.ADV. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI V, AHMEDABAD DATED 5-9-2006. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE IS T HAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW AND ON FACTS IN DIRECTING THE LEARNED ASSESSING OFFICER TO GIVE DEDUCTION UNDER SECTION 80HHC OF THE ACT IN RESPECT OF EXPORT OF GOODS TO RUSSIA. THE ASSESSING OFFICER IN HIS ASSESSMENT ORD ER HAS STATED THAT THE ASSESSEE HAS INFLATED THE FOB PRICE SO AS TO AVAIL MORE BENEFIT UNDER THE CUSTOMS ACT. THE ASSESSEE HAD NOT REPLIED TO THE SHOW CAUSE ISSUED BY THE DRI AND THEREFORE, DEDUCTI ON UNDER SECTION 80HHC ON SUCH EXPORT WAS RIGHTLY NOT ALLOWE D. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED AS UNDER:- - 2 - I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT AND GONE THROUGH THE CASE LAWS RELIED ON BY THE APPELLANT. I AM IN AGRE EMENT WITH THE APPELLANT FOR THE FOLLOWING REASONS:- I) AS PER THE PROVISIONS OF SEC. 80HHC, DEDUCTION IS ALLOWABLE IF FOLLOWING CONDITIONS ARE MET WITH A) GOODS ARE EXPORTED OUT OF INDIA. B) SALE PROCEEDS ARE RECEIVED IN CONVERTIBLE FOREI GN EXCHANGE WITHIN PRESCRIBED LIMIT. IN THIS CASE, THESE TWO CONDITIONS ARE SHOWN TO BE SATISFIED BY THE APPELLANT. II) IN THIS CASE, GOODS HAVE BEEN EXPORTED OUT OF INDIA AND MOVED OUT OF INDIAN PORTS. AS PER THE DECISIONS OF SUPREME COURT IN THE CASE O F COLLECTOR OF CUSTOMS, CALCUTTA VS. M/S. SUN INDUSTR IES 1988 (035) ELT-0241 SC, WHEN SHIP IS MOVED OUT OF INDIA PORT, EXPORT IS COMPLETED AND ASSESSEE IS ENTITLED TO BEN EFIT OF SEC.75 OF THE CUSTOMS ACT. THE HON'BLE CALCUTTA HIGH COURT OBSERVED IN THE CAS E OF TERAI OVERSEAS LTD. VS. UNION OF INDIA, 129 ELT 574 AS UNDER :- THE AUTHORITY CONCERNED NEED NOT LOOK INTO AS TO WHETHER THE GOODS HAVE BEEN RECEIVED BY IMPORTER OR CONSIGNEE AND IT WOULD BE A CASE AND/OR DISPUTE BETWEEN THE IMPORTER AND EXPORTER THAT IS TO SAY CONSIGNEE OR CONSIGNOR, I DO NOT FIND ANY MATERIAL THAT THE RUSSAIN CONSIGNEE HAD TAKEN ANY ACTION FOR ALLEGED NON RECEIPT OF THE GOODS. NON RECEIPT OF GO ODS IS ONE THING AND NON EXISTENCE OF GOODS FOR EXPORT IS ANOTHER THING FOR THE PURPOSE OF ADJUDICATING THE I SSUE HERE. IT IS NOBODYS CASE THAT THERE WAS NO DISPATC H OF THE GOODS OR NON RECEIPT OF THE CONSIDERATION OF TH E EXPORT VALUE. IT IS RATHER ADMITTED THAT THE GOODS WERE TAKEN OUT OF INDIA TO A PLACE OUTSIDE INDIA. ON THI S I FIND THAT THE EXPORT VALUE HAS BEEN RECEIVED BY LET TER OF CREDIT AND SUCH LETTER OF CREDIT HAS BEEN HONOUR ED AND PAYMENT HAVE BEEN REALIZED. THE APPROPRIATE AUTHORITY WITH HIS INGENUINITY HAS TRIED TO MAKE AN EFFORT TO UNEARTH THE CASE OF BOGUS EXPORT AND A MACHINERY TO DIVERT THE BLACK MONEY IN SHAPE OF THE EXPORT. IN MY VIEW THE AUTHORITY CONCERNED CANNOT DECIDE THE QUESTION WITHIN THE FOUR CORNERS OF THE AFORESAID SECTION 75. THE GOODS WERE DULY CLEARED B Y - 3 - CUSTOMS AUTHORITY FOR EXPORT AND CLEARANCE WAS PERMITTED AND IT IS NOBODYS CASE THAT THE AFORESAI D EXERCISE OF THE CUSTOMS AUTHORITY ARE FRAUDULENT ON E. EVEN THE DRI AUTHORITIES ADMIT THAT THE GOODS HAVE BEEN EXPORTED. IT WAS NOT IN THE CONTROL OF THE APPELLANT TO MONIT OR THE DESTINATION ONCE EXPORT IS MADE OUT OF INDIAN PORT. ITS ONLY CONCERN IS THAT EXPORT PROCEEDS ARE RECEIVED FROM T HE CONSIGNEE IN CONVERTIBLE FOREIGN EXCHANGE THROUGH B ANKING CHANNELS WITHIN PRESCRIBED TIME. III) AS FAR AS ISSUE OF OVER VALUATION IS CONCERNED, THE APPELLANT HAD PAID PURCHASE PRICE AND IT IS ACCEPTE D AND NOT FOUND BOGUS. THE VALUATION SHOWN AT DUBAI PORT IS NOT CONCLUSIVE AND NOT BINDING ON THE APPELLANT AND THE BENEFIT OF DEDUCTION UNDER SECTION 80HHC CANNOT BE DENIED. AS PER THE DECISION OF CESTAT MUMBAI BENCH IN THE CASE OF COMMISSIONER OF CUSTOMS, KANDLA VS. DIMPLE OVERSEAS 2005 (190) ELT 58, IT IS HELD THAT - EXIM MISDECLARATION OF EXPORT GOODS WHEN FULL REMITTANCES RECEIVED THROUGH BANKING CHANNELS, DECLARATIONS OF UNDERVALUATION MADE TO DUBAI CUSTOM S CANNOT BE A REASON TO ARRIVE AT BRINGING HOME THE CHARGE ON ASSESSEE OF HAVING KNOWLEDGE THERETO PRICE AS SHOWN AT HIGHER LEVELS ARE CLAIMED, DECLAR ED AND CONFIRMED TO BE RECEIVED VIA BANKING CHANNELS FACT OF DUPLICATE SETS BEING IN EXISTENCE IS ONLY A PRESUMPTION AND EXPORTERS NOT ADMITTING LOWER VALUE S ON SUCH INVOICES AS TRANSACTION VALUE. THE CESTAT DELHI BENCH HELD IN THE CASE OF VISHAL EXPORT OVERSEAS LTD. VS. COMMISSIONER OF CUSTOMS, 2 003 (157) ELT 420 - EXPORT DEPB CREDIT MISDECLARATION OF EXPORT PR ICE WITH INTENT TO AVAIL HIGHER DEPB BENEFIT ALLEGED NO MATERIAL ON RECORD INDICATING THAT DECLARED EXPORT PRICE WAS NOT GENUINE MARKET VALUE DECLARATION BY ASSESSEE FULLY SUPPORTED BY HIS PURCHASE PRICE FROM THE MANUFACTURER IN INDIA FIXING OF FOB PRICE ON THE BASIS OF COMPUTATION OF MANUFACTURERS PRICE CAN ON LY BE TREATED AS ACADEMIC OR LPSI DIXIT SINCE SUCH PRI CE HAS NO RELATION TO PRICE IN EXPORT TRADE IMPUGNED ORDER NOT SUSTAINABLE APPELLANTS SHALL BE EXTENDE D DEPB CREDIT ON THE BASIS OF DECLARED FOB VALUE PA RA 4.3 OF EXIM POLICY 2000-2007. - 4 - IV) EXPORT PROCEEDS HAVE BEEN RECEIVED THROUGH RBI AND NORMAL BANKING CHANNELS. NO ADVERSE VIEW HAS BEEN T AKEN BY THE RBI, NEITHER ANY ACTION HAS BEEN TAKEN BY RB I FOR ANY FAILURE OR BREACH ON THE PART OF THE APPELLANT. V) ON SIMILAR FACTS OF NOTICE ISSUED BY DRI AUTHORITIE S, THE DY. DGFT, AHMEDABAD PASSED SUSPENSION ORDER IN THE ASSESSEES CASE WHERE EXPORT BENEFITS DEPB LICENCES WERE SUSPENDED. ON APPEAL, APPELLATE AUTHORITY, THE ADDL . DIRECTOR GENERAL OF FOREIGN TRADE HAS PASSED ORDER DATED 19- 07-2006, BY WHICH THE SUSPENSION ORDER WAS SET ASID E. THE RELEVANT PORTION OF THE APPELLATE ORDER IS AS UNDER :- IN THIS CASE IT HAS BEEN OBSERVED THAT THE LICENSI NG AUTHORITY HAS PROCEEDED TO ACT AGAINST THE EXPORTER SOLELY ON THE BASIS OF A REPORT PROVIDED BY ANOTHER DEPARTMENT. IN THE CASE OF ENFORCEMENT DIRECTORATE VS. RAVI SHARMA (CRIMINAL APPEAL NO.187 OF 1995, DECIDED ON 19-2-2002) THE APPELLATE BOARD HAD HELD THAT: THE STATEMENT RECORDED UNDER SECTION 108OF TH E CUSTOMS ACT CAN NOT IPSO JURE CONSTITUTE EVIDENCE F OR THE PURPOSE OF ADJUDICATION PROCEEDINGS UNDER THE FOREIGN EXCHANGE REGULATION ACT, 1973. SO, HOW TH E SAME STATEMENT MADE BEFORE ANOTHER DEPARTMENT UNDER DIFFERENT ACT CAN CONSTITUTE EVIDENCE UNDER T HE FOREIGN TRADE (D&R) ACT, 1992? HENCE AN INVESTIGATI ON REPORT OF ANOTHER DEPARTMENT CANNOT BE A GROUND FOR INITIATING ACTION AGAINST AN EXPORTER UNDER THE FOR EIGN TRADE (D&R) ACT, 1992. MOREOVER, THE PROCEEDINGS BY DRI ARE YET TO BE FINALIZED. SINCE THE OUTCOME OF T HE PROCEEDINGS BEFORE DRI WILL HAVE DIRECT BEARING ON THIS CASE, IT WAS NOT APPROPRIATE TO JUMP TO THE CONCLUS ION STRAIGHTAWAY WITHOUT GOING INTO THE MERITS OF THE C ASE AND ISSUE SUSPENSION ORDER. IF THERE IS ANY VIOLATI ON UNDER THE CUSTOMS ACT OR ANY OTHER ACT, IT IS FOR T HE CONCERNED DEPARTMENT TO TAKE ACTION AGAINST THE EXPORTER UNDER THEIR RESPECTIVE ACT. AFTER GOING THROUGH THE SUSPENSION ORDER, IT IS OBSERVED THAT T HE ORDER HAS BEEN PASSED ON THE BASIS OF ASSUMPTION AN D PRESUMPTIONS ONLY, WITHOUT CONDUCTING AN INDEPENDEN T INQUIRY ON THE ALLEGATIONS MADE BY THE DRI, WHICH I S NOT SUSTAINABLE IN THE EYES OF LAW. COMING TO THE APPEAL, IN BRIEF THE ALLEGATIONS AGAI NST M/S. VEOL WERE THAT (I) EXPORTS WERE OF FRAUDULENT NATURE, (II) THE GOODS WERE DIVERTED FROM DUBAI ONWARD, (III) THE GOODS WERE OVER VALUED, AND (IV) THE LCS WERE IN THE NAME OF FICTITIOUS RUSSIAN BUYERS I N SOME CASES THE LCS WERE OPENED AFTER THE GOODS WERE ALREADY SHIPPED AND (V) THE RUSSIAN COMPANIES WERE NON EXISTING. ON THESE ALLEGATIONS, THE ADJUDICATIN G - 5 - AUTHORITY SUSPENDED THE IMPUGNED DEPB LICENCES OF M/S. VEOL VIDE HIS SUSPENSION ORDERS NO.08/F- 3/01/AM-06/ECA/2040 DATED 28.12.2005/ 2.1.2006, I.E . THE IMPUGNED ORDER. SO FAR AS THE ALLEGATION THAT THE EXPORTS WERE OF FRAUDULENT NATURE, IT IS NOT DISPUTED EITHER BY THE DRI OR BY THE ADJUDICATING AUTHORITY THAT THE APPELLANT S HAVE NOT FOLLOWED PRESCRIBED PROCEDURE FOR MAKING EXPORTS AND REALIZATION OF FOREIGN EXCHANGE. THEN H OW THE EXPORTS CAN BE OF FRAUDULENT NATURE? BEFORE SHIPMENT, THE GOODS WERE EXAMINED BY THE CUSTOMS OFFICIALS AS TO WHETHER THE SAME ARE CONFORMING AS PER THE DETAILS GIVEN IN THE SHIPPING BILL/DOCUMENTS WI TH REGARD TO QUALITY AS WELL AS PRICING ETC., AND AFTE R THEIR SATISFACTION ONLY, THEY ALLOWED THE GOODS TO BE LOA DED ON A SHIP FOR EXPORTS. THE LEARNED ADJUDICATING AUTHORITY HIMSELF, IN HIS SUSPENSION ORDER, HAD ADMITTED THAT THE SHIPPING BILL AND BANK REALISATI ON CERTIFICATE HAS ADMITTEDLY BEEN ISSUED BY THE CONCERNED CUSTOMS AND BANK AUTHORITIES AND AUTHENTICITY OF THE SAME IS NEITHER CHALLENGED BY D RI NOR THIS OFFICE. IN THE SUSPENSION ORDER, THE LEA RNED ADJUDICATING AUTHORITY HAS ALSO OBSERVED THAT THES E AUTHORITIES, WHICH ARE UNDER THE PRESSURE OF HEAVY WORKLOADS, GENERALLY LOOK INTO WHETHER PRESCRIBED DOCUMENTS HAVE BEEN SUBMITTED OR NOT AND IF SO THEY CLEAR CONSIGNMENTS FOR EXPORTS WITHOUT GOING INTO DETAILED BACK GROUNDS OF SUCH EXPORT TRANSACTIONS A S THE SAME IS NOT PRACTICALLY POSSIBLE UNLESS ANY INTELLIGENCE REPORTS ARE RECEIVED IN THIS REGARD. THIS STAND IS TOTALLY UNACCEPTABLE BECAUSE THE CUSTOMS OFFICIALS ARE ENTRUSTED WITH THE RESPONSIBILITY FOR EXAMINING THE GOODS BEING EXPORTED AND IT IS IN NO WAY CORRECT TO SAY, AT A LATER DATE, THAT EXPORTS W ERE OF FRAUDULENT NATURE WITHOUT ANY SUBSTANTIAL EVIDENCE TO PUT AN EXPORTER UNDER HARDSHIP. AS REGARDS DIVERSION OF GOODS, IN THE CASE OF COLLE CTOR OF CUSTOMS, CALCUTTA VS. SUN INDUSTRIES, IN WHICH HON'BLE SUPREME COURT OF INDIA HAS OBSERVED THAT EXPORTS IS COMPLETE AS SOON AS SHIP LEAVES TERRITO RIAL WATERS; SUBSEQUENT RETURN FOR REPAIRS DOES NOT REVE RSE IT. IN ANOTHER CASE OF M/S. RAJINDRA DYEING AND PRINTING MILLS VS. UNION OF INDIA (SPECIAL CIVIL APPLICATION NO.4998 OF 1985, DECIDED ON 8.5.1992) T HE HIGH COURT OF GUJARAT AT AHMEDABAD HELD THAT: THIS COURT IN PRABHAT COTTON & SILK MILLS LTD. VS. UNION OF INDIA 1982 (10) ELT 203, INTERPRETING SECTION 12 OF THE CUSTOMS ACT HAS TAKEN THE VIEW THAT THE EXPRESSION GOODS EXPORTED FROM INDIA CANNOT MEAN GOODS EXPORTED FROM THE TERRITORIAL WATERS OF INDIA . IT - 6 - CANNOT MEAN GOODS EXPORTED FROM THE HYPOTHETICAL LINE DRAWN ON THE BOUNDARY OF THE INDIAN TERRITORIA L WATERS. IT IS SUSCEPTIBLE TO ONLY ONE INTERPRETATIO N VIZ., THE GOODS EXPORTED FROM THE LANDMASS OF INDIA. ON CE THIS VIEW IS TAKEN IN THE CONTEXT OF EXPORTATION FR OM INDIA, THE EXPRESSION IMPORTED INTO WHICH FORMS A PART OF EXPRESSION IMPORTED INTO OR EXPORTED FROM INDIA CANNOT CARRY ANY OTHER MEANING THE EXPRESSIO N INDIA MUST MEAN LANDMASS OF INDIA WHETHER IT IS IN THE CONTEXT OF EXPORTATION FROM INDIA OR IMPORTATION IN TO INDIA OF GOODS WITHIN THE MEANING OF DUTIABLE GOODS IN THE CONTEXT OF SECTION 12(1) OF THE ACT. THE HON'BLE HIGH COURT FURTHER HELD THAT: GOODS LOADED ON SHIP WHICH LEFT FOR A FOREIGN PORT AFTER COMPLETION OF ALL CUSTOMS FORMALITIES BUT MET WITH AN ACCIDENT AND SANK WITHIN TERRITORIAL WATERS OF INDI A EXPORT COMPLETE FOR PURPOSES OF GRANT OF DRAWBACK A S INDIA IN THAT CONTEXT MEANS LANDMASS OF INDIA. SO, ONCE THE GOODS ARE LOADED ON A SHIP, ALL FORMAL ITIES REGARDING EXPORT ARE TREATED AS COMPLETED. THOUGH LOGICALLY THIS QUESTION IS TO BE DECIDED BY THE CUS TOMS DEPARTMENT AND NOT BY DGFT BUT ONCE GOODS ARE LOADED ON THE SHIP FOR EXPORTS, THE RESPONSIBILITY IN RESPECT OF THOSE GOODS GETS TRANSFERRED TO THE IMPORTER. FURTHER, THE INDIAN FOREIGN TRADE POLICY PERMITS SALE OF GOODS ON HIGH SEAS FOR IMPORT INTO INDIA AND SIMILARLY LAW OF THE OTHER COUNTRY MAY BE PERMITTING SUCH SALE. HOWEVER, THE APPELLANT FIRMS RESPONSIBILITY IS OVER AS SOON AS THE GOODS WERE LO ADED ON THE SHIP FOR EXPORTS, PARTICULARLY WHEN THE EXPO RT IS BEING MADE ON FOB BASIS, AS IN THIS CASE. HENCE, IN THESE CIRCUMSTANCES, IT IS THE WISH OF THE IMPORTER AS TO WHICH DESTINATION HE WANTS HIS GOODS TO BE SHIPPED/DELIVERED. SO, IT IS BEYOND DOUBT THAT EXPO RTS WERE MADE AND DESTINATION CAN CHANGE AS PER THE CONVENIENCE OF THE IMPORTER. THEREFORE, TO ALLEGE T HAT THE GOODS WERE DIVERTED TO/FROM DUBAI IS NOT AT ALL TENABLE IN REGARD TO CLAIMING BENEFITS UNDER FOREIG N TRADE POLICY BECAUSE EXPORTS ARE TREATED TO HAVE BE EN MADE ONCE GOODS ARE LOADED ON A SHIP FOR EXPORTS. REGARDING OVER VALUATION OF THE GOODS, AS DISCUSSED ABOVE, ON PRESENTATION OF SHIPPING BILL BEFORE THE CUSTOMS AUTHORITIES, THE CONCERNED APPROPRIATE AUTHORITY EXAMINED THE SAME AS TO WHETHER THE VALUE/PRICE MENTIONED THEREIN IS ACCEPTABLE OR NOT IN THE CONTEXT OF PRESENT MARKET VALUE OF SIMILAR PROD UCT. ONLY AFTER THAT THE LET EXPORT ORDER IS PASSED. T HE EXPORTS WERE NOT MADE BY A SINGLE CONSIGNMENT BUT THESE WERE MADE OVER A PERIOD OF TIME THROUGH MANY - 7 - CONSIGNMENTS WHICH WERE DULY CHECKED/VERIFIED BY TH E CONCERNED CUSTOMS AUTHORITIES AT THE TIME OF EXPORT S. HENCE, IT IS NOT PROPER TO ALLEGE AT A LATER DATE T HAT THE EXPORTS WERE OVERVALUED. THE APPELLANTS HAVE INFORMED THAT IN THE CASE OF COMMISSIONER OF CUSTOM S (EP), MUMBAI VS. FROST INTERNATIONAL LTD., SIMILAR ISSUE WAS INVOLVED FOR DECISION AND THE HON'BLE SUPREME COURT UPHOLD THE VALUATION OF THE PRODUCT. IN THAT CASE A REFERENCE OF THE SIMILAR PRODUCTS BEING EXPORTED AT SIMILAR PRICE BY M/S. VISHAL EXPORT OVERSEAS LTD., HAS ALSO BEEN MADE. IN VARIOUS ORDERS PASSED BY ADDL. COMMISSIONER OF CUSTOMS, WHO HAS REFERRED AND RELI EF UPON ORDERS OF ACCEPTANCE OF EXPORT VALUES BY THE COMMISSIONER (EP) FOR THE SIMILAR GOODS OF VARIOUS EXPORTERS INCLUDING THAT OF M/S. VISHAL EXPORTS OVERSEAS LTD. AND M/S. FROST INTERNATIONAL LTD., KA NPUR. IN ANOTHER SIMILAR CASE OF M/S. VISHAL EXPORTS OVER SEAS LTD. VS. COMMISSIONER OF CUSTOMS, MUMBAI [2003 (157) ELT 420 (TRIBUNAL.-DEL)] THE CESTAT, NORTHERN BENCH, NEW DELHI HELD THAT : MARKET VALUE DECLARATION BY APPELLANT FULLY SUPPOR TED BY HIS PURCHASE PRICE FROM THE MANUFACTURER IN INDI A FIXING OF FOB PRICE ON THE BASIS OF COMPUTATION OF MANUFACTURERS PRICE CAN ONLY BE TREATED AS ACADEMI C OR IPSI DIXIT SINCE SUCH PRICE HAS NO RELATION TO P RICE IN EXPORT TRADE IMPUGNED ORDER NOT SUSTAINABLE APPELLANTS SHALL BE EXTENDED DEPB CREDIT ON THE BAS IS OF DECLARED FOB VALUE. IN THE CASE OF COMMISSIONER OF CUSTOMS, KANDLA VS. DIMPLE OVERSEAS (2005) (190) ELT 58 (TRIBUNAL.-MUMB AI) THE CESTAT, WEST BENCH, MUMBAI HELD THAT: 2.4 EXAMINING THE ISSUE ON MERITS IT IS FOUND :- (I) (II) WHEN FULL REMITTANCE RECEIVED THROUGH BANKING CHANNELS IS BEING UPHELD, THE DECLARATIONS OF UNDERVALUATION MADE TO DUBAI CUSTOMS CANNOT BE A REASON TO ARRIVE AT BRINGING HOMER THE CHARGE ON TH E PRESENT APPELLANTS OF HAVING KNOWLEDGE THERETO. THE FORGING DOCUMENTS OF THE DELHI CHAMBER OFFICIALS BY THE APPELLANTS CANNOT BE CONCLUSIVELY ACCEPTED. IF THE APPELLANTS HAVE GIVEN DUPLICATE SETS OF INVOICES SHOWING DIFFERENT VALUES, THAT SURELY CANNOT BE AN OFFENCE OF MISDECLARATION ON CUSTOMS DOCUMENTS IN INDIA. SINCE IT IS NOT ADMITTED BY THE EXPORTERS TH AT THE LOWER VALUES ON SUCH INVOICES WAS THE TRANSACTION VALUE. THE PRICE AS SHOWN AT HIGHER LEVELS ARE CLAI MED, - 8 - DECLARED AND CONFIRMED TO BE RECEIVED VIA BANKING CHANNELS IS A FACT ON RECORD. THE DRI REPORT FURTHER SAYS THAT THE PRICES DECLAR ED BY THE EXPORTER WERE `.1.14 TO `.8.49 PER PIECE BEFORE THE DUBAI CUSTOMS. SAME REPORT ALSO CONFIRMS THAT.THE T. SHIRTS EXPORTED BY THEM TO THE VERY SAME BUYER, THE FOB HAS BEEN DECLARED FOR CLAIMING IMPUGNED DEPB. FOR THE VALUE DECLARED BEFORE DUBAI CUSTOMS IS THE RESPONSIBILITY OF THE BUYER AND FOR THIS THE EXPORT ER CANNOT BE PENALIZED. MOREOVER, IT IS PRACTICALLY IMPOSSIBLE TO GET A T. SHIRT EVEN FOR A CHILD AT `. 1.14 OR AT `.8.49. IN THE CASE OF M/S. UNIMAC (INDIA) LTD., 2000 (122) ELT 391 CEGAT HAS HELD THAT VALUE DECLARED BY THE IMPORTER OF THE GOODS BEFORE CUSTOMS OF HIS COUNTRY IS NOT RELEVANT TO DETERMINE THE EXPORT VAL UE FROM INDIA UNDER SECTION 14 OF THE CUSTOMS ACFT, 19 62. SIMILAR VIEW HAS BEEN TAKEN BY ANOTHER BENCH OF THE CESTAT ITSELF IN THE CASE OF CC VS. DIMPLE OVERSEAS REPORTED AT 2005 (190) ELT 68 (T). IN ANOTHER CASE OF M/S. FROST INTERNATIONAL, THE ADDITIONAL COMMISSIONER OF CUSTOMS, SIIB(X)/DOCKS MUMBAI VIDE HIS ORDER-IN-ORIGINAL F. NO. S/6-162/03 FB DATED 25.4.2003 HAD HELD: 3. FURTHER IT IS ALSO NOTICED UPON SECURITY THAT, THE DECLARED VALUE OF FOB OF 6.75 US $ PER PIECE I.E. ` .310, AS AGAINST THE PMV OF `.42 PER PIECE, HAS ALREADY B EEN ACCEPTED BY THE COMMISSIONER OF CUSTOMS (EP),NEW CUSTOMS HOUSE, MUMBAI, ON 07-12-2001 THROUGH F. NO. S/6-185/01/FB(EP) PART, AFTER DETAILED VERIFICA TION AND SCRUTINY, IN CASE OF THIS EXPORTER. 4. MOREOVER, IT IS ALSO NOTICED THAT, THE IDENTICA L VALUES AND VALUATION PATTERN OF THE COMPARABLE EXPORT GOOD S OF THE SUBJECT EXPORTER WERE UNDERTAKEN FOR DETAILS SCRUTINY BY THE SIIB(X), NEW CUSTOMS HOUSE, MUMBAI, THROUGH F. NO.SG/MISCELLANEOUS.-281/AC/2001 SIIBV(X ) AND AFTER DETAILED SCRUTINY AND CAREFUL EXAMINATION THE COMMISSIONER OF CUSTOMS (EP), NEW CUSTOMS HOUSE, MUMBAI HAS APPROVED IT ON 25.05.2002. IN THIS CASE THE CUSTOMS DEPARTMENT WENT IN APPEAL TO SUPREME COURT AND THE HON'BLE SUPREME COURT DISMISSED THE APPEAL. HENCE, SINCE SIMILAR PRODUCT WAS EXPORTED BY OTHER EXPORTER AT SIMILAR RANGE OF PRIC E, THIS IS NOT A CASE OF OVER-VALUATION. ANOTHER ALLEGATIONS THAT THE LCS WERE IN THE NAME OF FICTITIOUS RUSSIAN BUYERS IN SOME CASES AND THE LCS WERE OPENED AFTER THE GOODS WERE ALREADY SUPPLIED, - 9 - THE APPELLANTS PRODUCED COPIES OF THEIR CONTRACT BE FORE ME, IN WHICH IT WAS CLEARLY MENTIONED THAT SHIPMEN TS BEFORE OPENING OF LC ACCEPTABLE. MOREOVER, THE REMITTANCES WERE RECEIVED THROUGH NORMAL BANKING CHANNELS WHICH AT ANY STAGE HAS NOT BEEN DISPUTED B Y THE RBI. IF THERE WAS ANY VIOLATION ON THIS ACCOUNT , THE RBI MUST HAVE TAKEN ACTION AGAINST THEM. BUT BECAUS E THE CASE IS NO SO, I DO NOT SEE THE LOGIC OF ADJUDI CATING AUTHORITY BEING OVER ENTHUSIASTIC IN TAKING ACTION AGAINST THE EXPORTER. AS PER RBI CIRCULAR NO. AD (G ROSS PROFIT SERIES) CIRCULAR NO.4 DATED 19.5.1999 ON THE SUBJECT OF EXPORT OF GOODS AND SERVICES AGAINST REPAYMENT OF STATE CREDITS GRANTED BY ERSTWHILE SOV IET UNION, THERE WAS NO BAN ON MAKING EXPORTS PRIOR TO OPENING OF A LC. IN RESPECT OF THE ALLEGATION THAT THE RUSSIAN FIRMS WERE NON EXISTING, THE ADVOCATE SUBMITTED ENGLISH TRANSLATION OF REGISTRATION DOCUMENTS OF VARIOUS RUSSIAN COMPANIES WHICH SHOWED THAT THESE COMPANIES WERE VERY MUCH IN EXISTENCE AND WERE REGISTERED WITH THE RUSSIAN GOVERNMENT, HENCE, THIS ALLEGATION IS ALSO NOT TENA BLE. SOME PHOTO COPIES OF CORRESPONDENCE EXCHANGE BETWEEN DRI, EMBASSY OF INDIA, MOSCOW, CGI, DUBAI AND DUBAI CUSTOMS PRODUCED BEFORE ME DURING THE HEARING PROVE THAT EXPORTS WERE MADE. THE CGI, DUBA I VIDE HIS LETTER DATED 8.2.2005 INFORMED THE ADG, DR I, AHMEDABAD THAT IN THIS CONNECTION IT IS INFORMED THAT THE BILL O F ENTRIES STARTING FROM 13-1-01 OR 14-1-01 PERTAINS TO DUTY P AID CLEARANCES, 14-2-4 OR 13-2-4 ARE FOR TRANSIT GOODS AND BILLS ENTRIES STARTING FROM 14-1-2 OR 13-1-2 ARE FO R RE- EXPORT. IT IS FELT THAT GOODS IN QUESTION PERTAININ G TO THE TRANSIT OR RE-EXPORT GOODS COULD HAVE BEEN SENT TO OTHER DESTINATIONS OTHER THAN THE ORIGINAL DESTINAT IONS (OR) COULD HAVE BEEN CONSUMED LOCALLY AFTER PAYMENT OF DUTY. THE DIRECTOR OF DUBAI CUSTOMS VIDE HIS LETTER DATE D 14.3.2004 WROTE TO THE OFFICE OF CGI, DUBAI AS FOLL OWS: THIS INFORMATION IS PROVIDED AT THE REQUEST OF CONSULATE GENERAL OF INDIA, DUBAI AND THIS DEPARTME NT DOES NOT UNDERTAKE ANY RESPONSIBILITY ON THIS REGAR D. THE CONSUL (ECONOMIC), CGI, DUBAI VIDE HIS LETTER DATED 9-3-2005 WROTE TO THE ADG, DRI THAT: AS REGARDS YOUR LETTER F.NO. DRI/AZU/INV-01/04 DA TED 19.1.2005, IT HAS BEEN INFORMED ORALLY BY DUBAI CUSTOMS THAT THEY ARE NOT IN A POSITION TO DIG OUT THE - 10 - DETAILS FROM THEIR ARCHIVES AS THE SUBJECT MATTER PERTAINS TO VET} OLD PERIOD THE FIRST SECRETARY (TRADE), INDIAN EMBASSY, MOSCO W ALSO INFORMED VIDE THEIR LETTER DATED 17.6.2002 AND 28.1.2003 THAT EXPORTS WERE MADE TO THE COMPANIES WHICH WERE REGISTERED WITH THE RUSSIAN CUSTOMS. HENCE, FROM THE ABOVE INCONCLUSIVE FINDINGS/ STATEMENTS, IT CANNOT BE DERIVED THAT THE EXPORTS W ERE MADE TO NON-EXISTING COMPANIES AND HENCE THE EXPORTER CANNOT BE PENALIZED. IN VIEW OF THE FACTS DISCUSSED ABOVE, THERE IS NO DOUBT THAT THE EXPORTS WERE MADE BY ADHERING TO EACH PROCEDURE STIPULATED BY THE CUSTOMS DEPARTMENT AND DGFT AND THE FOREIGN EXCHANGE WAS REALIZED THROUGH NORMAL BANKING CHANNELS. FOR ISSUING A DEPB LICENS E, THE DGFT HAS TO OBJECTIVELY SEE THAT EXPORTS HAVE BEEN MADE AND THE FOREIGN EXCHANGE HAS BEEN REALIZED THROUGH PROPER BANKING CHANNELS. IN THIS C ASE BOTH THESE CONDITIONS HAVE BEEN FULLY MET BY THE EXPORTER AND THERE IS NO DOUBT ON THESE SCORES THAT THE APPLICANT FIRM IS FULLY ENTITLED TO GET DEPB LI CENCES. THE CUSTOMS AUTHORITIES, AFTER EXAMINING THE GOODS FOR QUALITY AND VALUATION, ALLOWED THE PRODUCT FOR EXPORT, AND HENCE THE ALLEGATION OF OVERVALUATION A ND FRAUDULENT EXPORTS AT A LATER STAGE ARE UNTENABLE. FROM THE VARIOUS DECISIONS OF DIFFERENT AUTHORITIES AS Q UOTED ABOVE, IT IS CLEAR THAT SIMILAR PRODUCT AT SIMILAR PRICE HAD BEEN EXPORTED BY THE SAME EXPORTER EARLIER ALSO . HENCE, KEEPING IN VIEW THE FACTS BROUGHT BEFORE ME AS WELL AS THE JUDGMENTS OF VARIOUS AUTHORITIES MENTIO NED ABOVE, THE ACTION TAKEN AGAINST THE EXPORTER IS BAS ED ON THE FINDINGS WHICH HINTS THAT EXPORTS WERE PROCEDURALLY CORRECT AND AT ANY STAGE THE EXPORTER HAVE NOT CONTRAVENED THE PROVISIONS OF THE FOREIGN TRADE (D & R) ACT. VI) IN VIEW OF THE ABOVE FACTS AND THE CASE LAWS RELIED ON BY THE APPELLANT AS MENTIONED ABOVE, IT IS HELD THA T THE APPELLANT IS ENTITLED TO DEDUCTION UNDER SECTION 8 0HHC OF THE I.T. ACT ON THE EXPORT MADE BY IT AND THIS GROU ND OF APPEAL IS ALLOWED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80HHC ON EXPORT OF T. SHIRTS OF `.5.21 CRORES TO A RUSSIAN PARTY. THE LEARNED ASSES SING OFFICER - 11 - OBSERVED THAT THE DRI ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS SHOWN INFLATED FOB PRICE IN ORDER TO CLAIM MORE CUSTOMS BENEFIT. THE LEARNED ASSESSIN G OFFICER FURTHER OBSERVED THAT THE DRI HAS ALLEGED THAT THE ASSESSEE HAS MANIPULATED THE SHIPPING BILLS, THE BILLS OF LADING ETC., SO AS TO SHOW THE SAME AS EXPORT TO THE DESTINATION IN USSR IN TH E DOCUMENTS SUBMITTED TO THE RBI THROUGH THE NOMINATED BANKS FO R RELEASE OF PAYMENT IN TERMS OF THE LC, WHEREAS THE SHIPPING WA S MADE TO DESTINATIONS OTHER THAN USSR. THE LEARNED ASSESSI NG OFFICER HAS FURTHER OBSERVED THAT THE DRI HAS STATED THAT THE D ATE OF EXPORT WAS PRIOR TO OPENING OF LC WHICH WAS IN VIOLATION O F THE RBI CIRCULAR NO.12 OF 27-8-1996. THUS, IN THE OPINION OF THE LEA RNED ASSESSING OFFICER THE ASSESSEE HAS NOT SATISFIED THE CONDITIO NS FOR EXPORT TO RUSSIA. HE THEREFORE, DISALLOWED THE CLAIM OF DEDUC TION UNDER SECTION 80HHC OF THE ACT. 5. ON THE APPEAL, LEARNED COMMISSIONER OF INCOME TA X (APPEALS) OBSERVING AS QUOTED ABOVE IN THIS ORDER, DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80HHC. 6. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE UNDER SECT ION 80HHC WAS MADE BY THE LEARNED ASSESSING OFFICER ON THE BA SIS OF ALLEGATION MADE BY DRI AGAINST THE ASSESSEE. HE SUB MITTED THAT SIMILAR ALLEGATION ON THE SIMILAR FACTS WERE ALSO L EVIED BY THE DRI AGAINST A SISTER CONCERN OF THE ASSESSEE NAMELY M/S . VISHAL EXPORTS OVERSEAS LTD., AND THE HON'BLE SUPREME COURT VIDE I TS ORDER DATED 12-2-2007 PASSED IN THE CASE OF M/S. VISHAL EXPORTS OVERSEAS LTD., REPORTED IN (2007)-(XC2)-GJX-0032-SC FOUND THE ALLE GATION AS INCORRECT. ACCORDING TO THE LEARNED AUTHORISED REP RESENTATIVE OF THE ASSESSEE IN VIEW OF THIS DECISION OF THE HON'BL E SUPREME COURT ALLEGATION MADE BY THE LEARNED ASSESSING OFFICER IN THE INSTANT CASE DOES NOT SURVIVE. - 12 - 7. WE FIND THAT THE ORDER OF THE HON'BLE SUPREME CO URT DATED 12-2-2007 PASSED IN THE CASE OF M/S. VISHAL EXPORTS OVERSEAS LTD., (SUPRA) WAS NOT CONSIDERED BY BOTH THE LOWER AUTHOR ITIES. FURTHER, THE FINAL OUTCOME OF THE DRI ALLEGATION IN THE CASE OF THE ASSESSEE COULD NOT BE INFORMED TO US BY BOTH THE PARTIES. I N THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION IT SHALL B E IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE BACK TO THE FILE O F THE LEARNED ASSESSING OFFICER FOR ADJUDICATION AFRESH IN THE LI GHT OF THE ABOVE MENTIONED DECISION OF THE HON'BLE SUPREME COURT. T HE LEARNED ASSESSING OFFICER IS DIRECTED TO VERIFY THE POINTS OF THE FINAL OUTCOME OF ALLEGATIONS MADE BY THE DRI AGAINST THE ASSESSEE AND TO TAKE INTO CONSIDERATION THE DECISION OF THE HON' BLE SUPREME COURT AND CBDT CIRCULAR NO.562 OF 23-5-1990 AND THE REAFTER, TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13TH SEPTEMBER, 2010 . SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: ON THIS 13 TH DAY OF SEPTEMBER, 2010 COMPILED AND COMPARED BY : PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS)-XIV, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 13 - DATE INITIALS 1. DRAFT DICTATED ON 1-9-2010 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 6-9-2010 ------- ------------ 3. DRAFT PROPOSED & PLACED 7-9-2010 ------------ ------- AM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ---- ---------------JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- -- ------------------ 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE AR -------------- -- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------