Overvaluation Allegation: Demand rejected due to Unexamined Bank Realisation Certificate

Prakash Ghosh Vs Commissioner of Customs (CESTAT Kolkata)

CESTAT Kolkata held that duty demand alleging overvaluation cannot be sustained as authority didn’t considered details of Bank Realisation Certificate (BRC) which establishes full realization of value of export invoices from overseas importer.

Facts- The Appellant has exported 12 consignments of synthetic fabrics during the period December 2009 and February 2010. For these consignments, the Appellants have utilized the benefit of DEPB Scheme granted under FTP. The exports of the Appellant to Bangladesh were required to be certified by certifying Agency SGS India Pvt. Ltd.

It was alleged that the value shown in the invoice submitted to SGS, was much lesser than the values as shown in the ultimate 12 Invoices and Bill of Exports used by the the Appellant. Show Cause Notice was issued on the ground that the value of the 12 consignments was Rs 19,55,487/- as per the Report of SGS, whereas the Appellant has shown the value at Rs.6,62,01,312/- in the Invoices and Bill of Exports to gain undue excess benefit of DEPB Licence.

After due process, the Adjudicating Authority confirmed the demands and penalties. Being aggrieved, the Appellants are before the Tribunal.

Conclusion- Held that the Department has not undertaken any other investigation towards the purchase cost given by the Appellant. The realized price and the purchase price cited by the Appellant more or less match giving no scope to over-value the consignment, much less over-value it by 330%. The Adjudicating Authority has also not considered the details of BRC submitted by the Appellant to the effect that they have fully realized the value of the export invoices from the overseas importer.

FULL TEXT OF THE CESTAT KOLKATA ORDER

The Appellant has exported 12 consignments of synthetic fabrics during the period December 2009 and February 2010. For these consignments, the Appellants have utilized the benefit of DEPB Scheme granted under FTP. The exports of the Appellant to Bangladesh were required to be certified by certifying Agency SGS India Pvt. Ltd. The DRI officials have investigated the case and have found that SGS India Ltd. have tested the consignment in respect of one invoice. The Invoice available with SGS India was indicating the entire quantity which was shown in 12 Shipping Bills individually and separately. The value shown in the invoice submitted to SGS, was much lesser than the values as shown in the ultimate 12 Invoices and Bill of Exports used by the the Appellant. Show Cause Notice was issued on the ground that the value of the 12 consignments was Rs 19,55,487/- as per the Report of SGS, whereas the Appellant has shown the value at Rs.6,62,01,312/- in the Invoices and Bill of Exports to gain undue excess benefit of DEPB Licence.

2. Alleging that by such overvaluation, the Appellant has taken undue benefit of obtaining excess valued DEPB Licence from the DGFT, the Show Cause Notice was issued to the Appellant and other co-noticees. After due process, the Adjudicating Authority confirmed the demands and penalties. Being aggrieved, the Appellants are before the Tribunal.

3. The Learned Advocate appearing on behalf of the Appellants submits that the rate of synthetic fabric was valued at US$ 2 & 2.10 per meter when the exports took place during December 2009 and February 2010. He submits that in respect of all the 12 export consignments, the Appellants have received the export proceedings through the bank. The BRC Certificates issued by the bank were also submitted before the Adjudicating Authority. This proves that whatever value was taken by the Appellant in the Invoices was also approved by the buyer, who has made the payments for such export invoices. The Appellants have produced copies of the purchase documents during the relevant period to show that the purchase price at that time was about Rs. 85 to 95 per metre in the Indian Market. He submits that the exports were made after issuance of ‘Let export’ order issued by the Customs officials and there was no objection at any point of time about the declared value of the consignments.

4. The Learned Advocate submits that the Department is taking the stand that SGS has given them Report dated 24/02/2013 which was not supplied to them at any point of time. He submits that the Department has taken the stand that the Appellant has enhanced the value by 330% in the Invoices for the Exported Consignment to Bangladesh. He submits that the Department has failed to address the issue when the Appellants have submitted that the purchase price of fabric itself was between Rs. 85 to 95 per meter at that particular point of time. If the Department has checked the purchase price vis-a-vis the price charged by the Appellant for their export consignment, they could have easily come to a conclusion that the Appellant was operating with a very small margin. If the value taken by the Department for such export consignment is considered, which is about 330 % less than the value cited by the Appellant, it would be obvious that within that price even the purchase of the fabric in India would have been absolutely impossible. Further, he submits that the very fact that the overseas importer has honored all their export consignment and have made all the payments and the same are reflected in the BRCs issued by the banks shows that it was a genuine transaction wherein the value as shown in the invoices have been actually realized by the Appellant. He submits that apart from solely relying on the purported report given by SGS, which has also not been given to the Appellant, the Department has not brought in any other corroborative evidence to the effect that the consignments which were exported to Bangladesh were inflated by 330%. They also did not verify the purchase details given by the Appellant which would have shown that there was absolutely no higher marking-up of the consignments when they were cleared to Bangladesh. Therefore, he submits that the entire proceedings were initiated by the Department on presumptions and assumptions basis without any corroborative evidence whatsoever. Even the SGS Report purportedly used relied upon by the Department has not been provided to the Appellant so that they were not in a position to counter the same. The Department has not disputed that for all the 12 consignments, the Appellants have received the foreign remittance and BRCs were submitted to the Department.

5. The Learned Advocate also relies on the case law of CCE, New Customs House, Mumbai Vs. Vishal Exports Overseas Ltd.-2007 (209) E.L.T. 331 (S.C.). He submits that in this case, the Supreme Court has held when other evidence in the form of proper bank realization statement and purchase details have been brought in by the party, the same cannot be ignored by the Department when they are trying the enhance the value of the exported consignment by 450%. He submits that the case law is squarely covered in their favour. Accordingly, the Learned Advocate prays that the present Appeals may be allowed.

6. The Learned AR reiterates the findings of the lower authorities. He further submits that the Invoice given to SGS for inspection shows much lesser value than what the Appellant has shown for the export of these 12 consignments. The quantity totally shown in the Invoice available with the SGS differs with the quantity of the 12 Invoices used for exports. The total value shown in that one of the Invoice given to SGS was the actual Invoice value in each of the 12 invoices individually. Thus, the Appellant has easily inflated the price by at least 12 times. By such inflated and overvalued exported consignment, the Appellant has unduly taken excess benefit of the DEPB Scheme granted under FTP. In view of the same, the AR submits that the present Appeals are required to be dismissed.

7. Heard both sides and perused the documents.

8. Admittedly, the Department has obtained the details from SGS India towards inspection carried out by them for the consignments. The value shown in the invoices available with SGS is lesser than the total value of the invoices and export documents raised by the Appellant on the overseas importer. Prima facie, it is seen that the values are different between the Invoices available with the SGS and the export invoices raised by the Appellant. But on their own, they do not prove whether the exports were done at a much higher value or were overvalued. The Appellant has provided details of BRC towards the realization of export proceeds. These BRCs which are filed by the Appellant before the Adjudicating Authority and Tribunal show that in respect of each and every export Invoice and Bill of Exports, the Appellant has been able to get the full realization from the overseas importer, in foreign currency and the same has been converted into Indian rupees by the receiving bank in India. The very fact that the overseas importer has accepted the value cited by the Appellant in the invoices and has honored the payment and has made the full payment, would show that he does not treat that the value of the imported consignment as inflated or overvalued. The data towards the purchase rate of such fabric in India has been provided by the Appellant to be at Rs. 85 to 95 per Meter in India. The Department has not made any effort to verify as to what was the purchase price in India for such fabric. When the appellant provides such details from their side, it is important for the Department to carry out further investigation to find out whether the purchase price shown by the Appellant was correct or not. This was not done at that particular point of time. The Department contends that the sale value was inflated by about 330%. For this, they should have checked what is the price of such fabric in India. If the figures of Rs.85 to 95 per meter as given by the Appellant towards the purchase is taken, the same would have the value of about USD 2 at that point of time. When the sale price of USD 2 or 2.10 is considered, we do not see any over valuation. As per the present calculation of the Department, the sale price should be less than 10 Cents if 330% over valuation is to be considered. In this case, apart from relying on the Invoices found with SGS, no other corroborative evidence in whatever form has been brought in by Department to fortify their allegation.

9. The Hon’ble Supreme court in the case of Vishal Exports Overseas Ltd. cited supra has held as under:-

3. The Assistant Commissioner of Customs proceeded against the assessee by alleging that the assessee had mis-declared the FOB value at US $3.40 (Rs. 150/-) per piece. It was the view of the Department that the price was inflated to get more DEPB benefit. The original order ensued wherein it was held that the export price was not genuine considering the local purchase price to be Rs. 35/- per piece only. It was held that the export price could not be as high as Rs. 157/- (450%) and that it was unlikely that there would be such a vast variation between the domestic price and export price acceptable in the competitive export market. By making his own calculations, the FOB price was computed and fixed at Rs. 80/- per piece in place of Rs. 157/- per piece by the Assistant Commissioner. It was further ordered that the assessee would be entitled to DEPB credit on the basis of the FOB price of Rs. 80/- per piece and not at the sale price. Holding the declared FOB price of Rs. 157/- per piece or US $3.40 per piece a mis-declaration, the Assistant Commissioner held that the goods were liable to be confiscated and the penalty under Section 114 of the Customs Act was also ordered.

9. The first contention of the appellant herein to the effect that the FOB value being 450% more than the purchase value is unreasonable and cannot be accepted for the simple reason that there is no evidence on record to support such a contention. The Tribunal has also specifically held so and returned a final finding of fact that the FOB price was correctly shown by the assessee. Learned counsel for the appellant could not show us anything concrete in support of his contention. From the orders of the first and the appellate authorities nothing can be found to hold that the FOB price was excessive or not genuine. The Tribunal has also given a finding that the Adjudicating Authority has arbitrarily computed the FOB value and have fixed the credit on that basis. We accept findings of the Tribunal in the absence of any concrete evidence having been put to support the contention of the learned counsel that the FOB price is inflated. In this behalf we cannot ignore the documents supplied by the assessee before the Revenue which we have already mentioned earlier. It is not a case of the Revenue that the assessee has not received the FOB price at all. That is clear from the BRCs. Therefore, the FOB price is supported amply by the BRCs with which no fault is found. Once that is clear, there will be no question to hold that the FOB is inflated. [Emphasis supplied]

10. We find that in this case also, the Department has not undertaken any other investigation towards the purchase cost given by the Appellant. The realized price and the purchase price cited by the Appellant more or less match giving no scope to over-value the consignment, much less over-value it by 330%. The Adjudicating Authority has also not considered the details of BRC submitted by the Appellant to the effect that they have fully realized the value of the export invoices from the overseas importer. The case law of Vishal Exports Overseas Ltd. cited by the Appellant is squarely applicable to the facts of the present case.

11. Accordingly, we set aside the impugned order and allow the Appeals filed by the Appellants with consequential relief, if any, as per law.

(Pronounced in the open court on 18/08/2023)