Tex-Age v. Commissioner Of Cus. (Exports), Nhava Sheva

[Order per : Jyoti Balasundaram, Vice-President]. - Vide the impugned order, the Commissioner of Customs (Exports) has :-

(a)     rejected declared FOB value of Rs. 10,53,40,623/- in respect of readymade garments such as gents trousers, jeans, ladies dresses etc. exported under 69 shipping bills under claim of duty drawback by M/s. Tex Age and redetermined the value as Rs. 75,81,720/-;

(b)     redetermined total present market value of goods exported as Rs. 60,65,376/-;

(c)     disallowed entire drawback of Rs. 1,21,73,997/- covered under 66 shipping bills, under the provisions of Section 76(1)(b) of the Customs Act and ordered this amount to be recovered under Rule 16 of the Customs & Central Excise Duties Drawback Rules, 1995 together with interest in terms of Section 75A(2) of the Customs Act;

(d)    disallowed excess duty drawback of Rs. 2,82,080/- out of the total duty drawback of Rs. 3,49,556/- in respect of three shipping bills and ordered recovery of the same together with interest;

(e)     confiscated goods exported under drawback claim with declared value of Rs. 10,53,40,623/-, under the provisions of Section 113(d) and (i) read with Sections 3(3) and 11(1) of the Foreign Trade (Development and Regulation) Act, 1992 read with Rules 11 and 14 of the Foreign Trade (Regulation) Rules, 1993 read with Section 50(2) of the Customs Act;

(f)      redetermined PMV of goods exported under claim of DEPB by Tex Age under 11 shipping bills as Rs. 24,45,965/-;

(g)     rejected total FOB value declared of Rs. 6,86,56,854/- in respect of goods exported under claim of DEPB by Tex Age and redetermined the value as Rs. 30,57,456/-;

(h)    rejected the entire DEPB credit of Rs. 95,85,068/- claimed by Tex Age;

(i)      ordered confiscation of goods exported under claim of DEPB;

(j)      imposed penalties as under on the following persons :-

(1) Tex Age                                                 : Rs. 1,10,00,000/-

(2) Subhash Choudhary                        : Rs. 25,00,000/-

(3) Satish Choudhary                             : Rs. 25,00,000/-

(4) Om Prakash Jhunjhunwala           : Rs. 2,00,000/-

(5) Prithvi Singh Kuntal                        : Rs. 2,00,000/-

(6) Deepak Khetawat                              : Rs. 2,00,000/-

(7) Awin Exim Co.                                   : Rs. 4,00,000/-

(8) Ceejay Exports                                    : Rs. 4,00,000/-

(9) Ekta Exports                                        : Rs. 4,00,000/-

all under the provisions of Section 114(i) and (iii) of the Customs Act.

2. The brief facts of the case leading to the filing of the present appeals are that M/s. Tex Age (hereinafter referred to as the exporter) is a partnership firm of Shri Subhash Choudhary and his daughter. Subhash Choudhary is also a partner in Emkay Exports and a director in Shubham Exports Pvt. Ltd. and Master Forms Pvt. Ltd. All these units are engaged in export of ready-made garments. Satish Choudhary who is the brother of Subhash Choudhary, is a partner in Awin Exim, Ceejay Exports and Ekta Exports which firms do not carry out exports of any items on their own, but are engaged in the discounting of invoices/bills under which exports are made by their clients including Tex Age. Export invoices raised by the exporter on its foreign buyers in Dubai, viz. Mohd. Essa Al Marri Trading Co. LLC, Reem Al Maha Trading Est., Babil Textiles Trading Est. and Al Sambook Trading Co., were submitted to Satish Choudhary’s firm which raised identical invoices showing themselves to be the exporter of goods in question, and the invoices were submitted to Bank of Baroda, Mumbai. The Bank immediately credited the amounts equivalent to the invoice value into the account of Satish Choudhary against the foreign bill purchase credit limit enjoyed by them. This amount was then given by Satish Choudhary to the exporter and remittance against the goods exported was therefore received even prior to the goods reached Dubai. When the goods reached Dubai, purchaser firm remitted the amounts into the firms of Satish Choudhary and the credit extended by Bank of Baroda was thereupon liquidated. The exported ready-made garments were sourced by the exporter from Prithvi Singh Kuntal and Sheetal Jain. Payments against these purchasers were made by “& Co.” cheques and “a/c payee” cheques.

3. On the basis of intelligence received in the Bombay zonal unit of DRI that the exporter was engaged in fraudulent exports of low quality ready-made garments from Nhava Sheva sea port by resorting to overvaluation in order to claim undue export benefits, investigations were carried out, on the basis of which it appeared that (as stated in paragraph 27 of the impugned order):-

27. From the foregoing paras it appeared that :

I.(i)    A massive export fraud was effected by the firm M/s. Tex-Age controlled by Mr. Subhash Choudhary, under Duty Drawback and DEPB scheme. The readymade garments viz. ladies long dresses, exclusive mens trousers, cotton knitted hosiery socks, T-shirts, denim jeans and knitted mens vests, etc. exported by the impugned firm were misdeclared to the extent of its value, thereby seeking substantially higher drawback and DEPB credit, than what was actually entitled. Mr. Subhash Choudhary controlling all activities of M/s. Tex-Age with active participation and financial support of his younger brother. Mr. Satish Choudhary, planned and carried out the said fraudulent exports of readymade garments so as to defraud the Government exchequer.

(ii)     To give effect to these fraudulent exports, Import Export Code (IEC) was taken in the name of the firm M/s. Tex-Age, a family concern of Mr. Subhash Choudhary. The entire business activities of M/s. Tex-Age were controlled by Mr. Subhash Choudhary. The decisions pertaining to the procurement of goods, their prices, export rates, payments to suppliers, etc. were taken by Mr. Subhash Choudhary. Whereas, his younger brother, Mr. Satish Choudhory, looked after the financial aspects like financing the procurements, cheque discounting arranging the remittances and discounting the export bills. He (Mr. Satish) also decided upon goods to be exported to Dubai, their clearance at Dubai Customs and subsequent delivery, storage and disposal of the same.

(iii)    For carrying out these impugned exports from the firm M/s. Tex-Age. Mr. Satish Choudhary decided upon the goods to be exported from India to Dubai, on the basis of demand assessed by him during his frequent visits to Dubai. The services of Mr. Navin Choudhary (nephew of Mr. Subhash & Mr. Satish), residing at Dubai and handling business activities of their (Mr. Subhash & Mr. Satish) front company M/s. Reem Al Maha Trading Est., Dubai were also taken. Entire exports were effected on the verbal instructions given by Mr. Satish Choudhary to Mr. Subhash Choudhary. The remittances pertaining to exports by M/s. Tex-Age were arranged to be sent from the firms viz. M/s. Mohd Essa Al Marri Trading Co. LLC, M/s. Reem Al Maha Trading Est. and  M/s. Babil Textiles Trading Est. and M/s. Al Sambook Trading.

(iv)    The Directors of the firm M/s. Mohd Essa Al Marri Trading Co. LLC are Ms. Ekta Choudhary @ Mona (daughter of Mr. Satish Choudhary) and one local Arab, Mr. Mohd Essa Mohd Essa Al Marri, who is also the sole proprietor of the remaining three firms M/s. Reem Al Maha Trading Est., M/s. Babil Textiles Trading Est. and M/s. Al Sambook Trading. M/s Mohd Essa Al Marri Trading Co. LLC is the front company of Mr. Satish Choudhary and statedly he has financial understanding with the said local Arab, wherein he was paying an amount equivalent to Rs. 1.5 lakhs per annum to use his (Mr. Mohd Essa) trading license. Also as stated by Mr. Satish Choudhary his daughter Ms. Ekta Choudhary is a major shareholder (51%) of the firm M/s. Mohd Essa Al Marri Trading Co. LLC and she does not look after the activities of the said firm. The entire business activities of the firms M/s. Mohd Essa Al Marri Trading Co. LLC and M/s. Reem Al Maha Trading Est. were handled by Mr. Pankaj Jhunjhunwala (Manager of M/s. Mohd Essa Al Marri Trading Co. LLC) and Mr, Navin Choudhary respectively as per the directions of Mr. Satish Choudhary. The bank accounts of the said four overseas firms were operated by Mr. Pankaj Jhunjhunwala and the bank account of the firm M/s. Reem Al Maha Trading Est. was also operated by Mr. Navin Choudhary.

(v)     For effecting these exports from M/s. Tex-Age and other firms, Mr. Subhash Choudhary procured various Ready Made Garments viz. mens exclusive trousers, ladies long dresses (i.e. ladies maxis/night gowns), mens T-shirts, knitted mens vests, knitted hosiery socks and shirting fabrics mainly from Mr. Sheetal Jain, Mr. Prithvi Singh @ Gulla and Mr. Vikram Sikaria @ Vicky of Kolkata, Mr. Subhash/Sanjay Makharia and through Mr. Rajesh Bhagat. The goods were also procured on “buy back” basis from one Mr. Kamruddin through Mr. Rajesh Bhagat. The details of the other supplier of RMGs were not divulged by Mr. Subhash Choudhary. The terms and the conditions for procurement of these RMGs were finalized by Mr. Subhash Choudhary. With the intention to suppress the actual purchase value of the export goods, the said purchases of RMGs were made without any documentation i.e. without cover of any purchase order, invoices, delivery challans and transport documents. However, after intervention by DRI, fake purchase bills were prepared on the directions of Mr. Subhash Choudhary by his employees and the same were submitted to the department.

(vi)    As per the statement given by the aforesaid suppliers under Section 108 of the Customs Act, 1962. Mr. Subhash Choudhary directly/indirectly purchased the impugned goods at the following rates :

However, when Mr. Subhash Choudhary was asked the details of the rates at which he had purchased the impugned RMGs and other goods, he again gave evasive replies by stating that he did not recollect the same.

(vii)   Mr. Prithvi Singh Kuntal @ Gulla was entrusted with all the works pertaining to Customs clearances of the impugned goods through CHA M/s. Dhakane & Co. Mr. Gulla arranged for transportation of export cargo upto the warehouses and its warehousing at various godowns in Dronagiri, Nhava Sheva, for the shipment of the impugned export cargo through shipping agent M/s. Greenwich Meridian Logistics (India) Pvt. Ltd. He also prepared the export documents mentioning the details thereon as given by Mr. Subhash Choudhary. All the export documents were signed by the employees of Mr. Prithvi Singh without having any authority to do so. As the intention was to evade detection of the fraudulent nature of the consignments by Customs, fictitious name and address of consignees were mentioned in the export documents. The consignees so mentioned were shown to be of Netherlands, being non-sensitive ports apparently to avoid detailed examination by Customs.

(viii)  After shipment of the goods fresh export invoices were got prepared by Mr. Subhash Choudhary either in his own office or in the office of Mr. Satish Choudhary. These freshly prepared invoices mentioned the actual rates of the export goods as “Rate in US$ per dozen” as against the rates declared to the Customs “US$ per piece”. As per the statutory requirement, the Certificate of Origin was obtained from various Chambers of Commerce, for the clearance of goods at Dubai Port, on the basis of these freshly prepared invoices. This is apparent from some of the certificates of origins retrieved from Indo-Arab Chamber of Commerce, Mumbai, which clearly show the actual rates of exported goods and that the rates declared in the corresponding shipping bills were substantially inflated. These export invoices showing actual rates of the export goods, along with packing list and Certificate of Origin were then separately, sent through courier to Mr. Pankaj Jhunjhunwala for effecting customs clearances at Dubai port. Apart from this, Mr. Pankaj Jhunjhunwala would also receive export bills (consisting of original bill of lading, invoice of third party firm, etc.) from BOB, Deira, Dubai, which were sent by BOB, IBB, Mumbai for export realization. Mr. Pankaj would then handover the documents received by him through courier, along with the original bill of lading received from the bank, to their CHA M/s. Al Nakhota Cargo for clearing the goods from Dubai customs. After clearance from Dubai customs the said goods were disposed off locally in the wholesale market at Murshid Bazaar, Deira, Dubai.

(ix)    Mr. Subhash Choudhary issued/got issued a large number of “& Co” cheques (i.e. cross bearer cheques) drawn in favour of various non-existing firms/individuals and also “A/c Payee” cheques, showing as if it were payments against the purchase of the impugned export goods. The fictitious nature of these drawee firms is also evident from the fact that the “& Co” cheques were invariably credited in the accounts of only few specific firms like M/s. Mudra Finvest (Gujarat) Ltd., M/s. Sanskrit Vitta Pvt. Ltd., etc. which were purely into the business of cheque discounting. Also to issue the said cheques huge funds, as per the availability, were transferred by the other firms of Mr. Subhash Choudhary as well as from M/s. Awin Exim Group of Companies and these funds were then utilized for issue of such “& Co” cheques. Mr. Subhash Choudhary then handed over these cheques to Mr. Satish Choudhary and sometimes directly to Mr. Sheetal Jain for getting them discounted. Mr. Satish Choudhary got the said “& Co” cheques discounted, against cash, through persons like Mr. Pradeep Dhelia and Mr. Sheetal Jain. These two persons discounted “& Co” cheques, against cash, of M/s. Tex-Age totally valued at around Rs. 14 crores. The cash so generated by discounting the said “& Co” cheques were then handed over to Mr. Satish Choudhary directly or through his employees.

(x)     The majority of the export bills of the impugned exports were negotiated by the firms viz. M/s. Awin Exim Co., M/s. Ceejay Exports and M/s. Ekta Exports and the remittances were arranged by Mr. Satish Choudhary mainly from four Dubai based remitting firms (i.e. M/s. Mohd. Essa, M/s. Reem Al Maha, etc.), irrespective of the consignees mentioned in the shipping bills of the impugned exports. The said 3rd party firms (controlled by Mr. Satish Choudhary) were enjoying huge foreign bill purchase credit limits totalling to Rs. 15.50 crores, amongst themselves, during the material period. The bank purchased the export bills from these 3rd party firms and against this, the bank immediately gave credit, equivalent to the FOB value mentioned in the shipping bills, in the accounts of the said 3rd party firms. The export bills purchased by Bank of Baroda, International Business Branch, Nariman Point, Mumbai were then sent by them to the overseas bank (i.e. BOB, Deira, Dubai) of the buyers for export realization. Further these 3rd party firms of Mr. Satish Choudhary transferred funds to M/s. Tex-Age in respect of exports bills negotiated by them. These payments made by the 3rd party firms were utilized by Mr. Subhash Choudhary to make payments to the so-called suppliers and to draw a large no. of “& Co” cheques in favour of various non-existing firms in order to generate cash, which was further utilized by Shri Satish Choudhary to send remittances from Dubai.

(xi)    Mr. Pankaj Jhunjunwala based in Dubai, would receive cash in Dirhams from persons like Mr. Salam, Mr. Paicher and Mr. Zaida, which was deposited in the bank accounts of the above four overseas remitting firms and the cash deposits were further utilized for sending remittances to M/s. Awin Exim Group of Companies. In some cases the cash received in Dirhams by Mr. Pankaj Jhunjhunwala was deposited in money exchange houses and it was further sent as an advance payment to M/s. Tex-Age against exports. These activities were carried out by Mr. Pankaj Jhunjhunwala statedly as per the fax messages/telephonic instructions/SMS sent by Mr. Satish Choudhary.

II.(i)  M/s. Tex-Age carried out exports of 85 consignments of mainly RMGs with total declared FOB value of Rs. 17,75,33,200/- during the period October 2002 to April 2003 through of Nhava Sheva Sea port. Out of these 85 consignments, investigations in the present Show Cause Notice was carried out against 80 consignments. The total declared FOB of these 80 consignments of RMGs is Rs. 17,39,97,477/- which were exported under claim of drawback amounting to Rs. 1,25,23,553/- and DEPB amounting to Rs. 95,85,068/-. M/s. Tex-Age has carried out fraudulent exports of low quality readymade garments by resorting to gross overvaluation so as to claim undue export benefits. These exports were effected without any purchase orders from any of the overseas firms and they were effected on the basis of verbal instructions given by Mr. Satish Choudhary and Mr. Navin Choudhary. All the goods exported by M/s. Tex-Age ports were diverted and offloaded in Dubai. The readymade garments exported by M/s. Tex-Age were purchased without any documentation. Their export documents were allowed to be signed by unauthorized persons. Subsequent to the shipment of the impugned goods fresh invoice of M/s. Tex-Age were prepared to obtain Certificates of Origin from various Chambers of Commerce. In these invoices the actual rates of the impugned export goods were mentioned as US $ per dozen which was found to be substantially lower than the rates declared in the corresponding shipping bills to the Customs.

(ii)     The 3rd party firms M/s. Awin Exim Co., M/s Ceejay Exports and M/s. Ekta Exports have knowingly and intentionally negotiated the export bills pertaining to the fraudulent exports of M/s. Tex-Age. These firms were collectively enjoying foreign bill purchase credit of Rs. 15.50 cores given to them by their banker Bank of Baroda, IBB, Nariman Point, Mumbai. The bank purchased the export bills from these 3rd party firms and against this, the bank gave credit, equivalent to the FOB value mentioned in the shipping bills. These 3rd party firms then transferred funds to M/s. Tex-Age which was utilized to make payments to the so called suppliers and to draw large number of “& Co” cheques in favour of various non-existing firms and also “A/c payee” cheques in favour of firms who appear to be purely into the business of cheque discounting, in order to generate cash. This cash was subsequently utilized for sending the remittances against the fraudulent exports carried by M/s. Tex-Age. Thus the said firms appeared to have actively aided and abetted in the fraudulent exports of M/s. Tex-Age.

(iii)    Mr. Subhash Choudhary is the main brain behind the subject exports fraud. He with active co-operation and participation of his brother Mr. Satish Choudhary hatched the entire conspiracy to export low quality RMGs from M/s. Tex-Age controlled by him by mis-declaring the value of the export goods. Mr. Subhash Choudhary effected such huge fraudulent exports without any purchase orders/export contracts from any of the overseas firms and they were effected on the verbal instructions given by Mr. Satish Choudhary and Mr. Navin Choudhary to Mr. Subhash Choudhary. Majority of the consignees and buyers declared by him in the shipping bills were fictitious and non-existing with apparent intention to deceive the Customs authorities into believing that the exports are destined to non-sensitive ports. All the goods exported were diverted and offloaded in Dubai by the four firms viz. M/s. Mohd Essa Al Marri Trading Co. LLC. M/s. Reem Al Maha Trading Estd. M/s. Babil Textiles Trading Est. and M/s. Al Sambook Trading. Mr. Subhash Choudhary procured cheap quality readymade garments from various suppliers/brokers. All these purchases were on verbal orders and without any documentation. Mr. Subhash Choudhary asked one of his suppliers to supply the impugned readymade garments without any documentation. The terms and the conditions for procurement of these RMGs were finalized by Mr. Subhash Choudhary. After DRI intervention, Mr. Subhash Choudhary directed his employees to prepare fake purchase bills and such fabricated documents were submitted to the department. Mr. Subhash Choudhary decided the rates to be declared in the export documents, which  were grossly overvalued so as to claim undue export benefits. Mr. Subhash Choudhary played a vital role in generation of cash by issuing a large no. of cheques in the names of various fictitious and non-existing firms, which was subsequently used for arranging remittances, “& Co” cheques thus issued were also used to mis-lead that they were payments against supplies.

(iv)    Mr. Satish Choudhary is the co-conspirator in the subject fraudulent exports, who was well aware of the impugned export fraud and played very vital role in its execution. He decided upon the goods to be exported to Dubai from the impugned firm, based on the demands assessed by him from Dubai wholesale market. Moreover, he arranged for customs clearance of impugned goods at Dubai, their delivery, storage and subsequent disposal through Mr. Pankaj Jhunjhunwala and Mr. Navin Choudhary, who were his paid employees.

Mr. Satish Choudhary financed the said exports through his firms and arranged for remittances against the impugned exports. He negotiated the export bills of M/s. Tex-Age through his firms and transferred huge funds to the subject export firms by utilizing the huge foreign bill purchase credit facility of Rs. 15.50 crores given to his firms by their bank. Mr. Satish Choudhary even provided advances through his firms to the said firm of Mr. Subhash Choudhary. Mr. Satish Choudhary arranged discounting of “& Co” cheques as well as “A/c Payee” cheques, issued by Mr. Subhash Choudhary against these funds/advances, through persons like Mr. Sheetal Jain and Mr. Pradeep Dhelia, thereby generating huge cash. The said cash was then utilized by Mr. Satish Choudhary for generating foreign exchange through illegal means and then Mr. Satish Choudhary arranged for delivery of this foreign exchange to Mr. Pankaj Jhunjhunwala through persons like Mr. Salam, Mr. Paicher and Mr. Zaida. He instructed Mr. Pankaj Jhunjhunwala to deposit the said cash in Dirham in the bank accounts of Dubai based companies viz. M/s. Mohd Essa Al Marri Trading Co. LLC, M/s. Reem Al Maha Trading Estd., M/s. Babil Textiles Trading Est. and M/s. Al Sambook Trading at Bank of Baroda, Deira, Dubai branch and the said funds were routed back to India by way of telegraphic transfers (T.T.), through banking channels as remittances against goods exported by gross overvaluation by the impugned firm of Mr. Subhash Choudhary.

(5)     Mr. Omprakash Jhunjhunwala, one of the Partners of the firms M/s. Awin Exim Co., M/s. Ceejay Exports and M/s. Ekta Exports was well aware that the foreign bill purchase credit limit given to their firms by the bank was being misused by Mr. Satish Choudhary by rotating the same to generate cash for arranging remittances by illegal means. He has also issued a number of cheques transferring the funds from M/s. Awin Group of Companies to the impugned exporting firm viz. M/s. Tex-Age. Thus it appeared that Mr. Omprakash Jhunjhunwala being one of the active Partners had the knowledge about the overvaluation of the impugned export goods and has thereby abetted in the fraudulent exports of RMGs by M/s Tex-Age.

(vi)    Mr. Prithvi Singh Kuntal @ Gulla, appeared to have the knowledge of the fraudulent nature of exports carried out by the impugned firm since he was actively and profoundly involved in the said exports. Mr. Prithvi Singh had arranged for the procurement of the impugned export goods for Mr. Subhash Choudhary on commission basis and therefore was well aware of the inferior quality and market rates of these goods. He arranged for warehousing of the impugned export cargo in Dronagiri, Nhava Sheva. Mr. Gulla got the export invoices prepared in his office as per the instructions of Mr. Subhash Choudhary. As such he was well aware of the overvaluation resorted by the impugned firm. He also arranged for customs clearance of the impugned goods through CHA M/s. Dhakane & Co. Further, he issued written instructions to the shipping agent to deliver the goods at Dubai irrespective of the destination mentioned on the shipping bills. Thus, Mr. Prithvi Singh Kuntal @ Gulla had complete knowledge about the impugned export fraud by gross overvaluation so as to claim under export benefits. Thus, Mr. Prithvi Singh Kuntal @ Gulla appeared to have actively aided and abetted in the mis-declaration of the value of the goods exported by M/s. Tex-Age with a view to defraud the Government.

(vii)   Mr. Deepak Khetawat, working as Account’s Manager of M/s. Tex-Age was looking after the accounts of impugned firm. Mr. Khetawat had total knowledge that the impugned goods being exported by M/s. Tex-Age by resorting to gross overvaluation was with an intention to claim undue export benefits. He actively aided and abetted in the violation of misdeclaration of the value of the exported goods with a view of defraud the Government.

Based on the above, show cause notice dated 30-3-2005 was issued to the appellants, proposing rejection of the FOB value and proposing redetermination thereof, proposing determination of PMV of the goods exported under claim of drawback and proposing recovery of the entire drawback, confiscation of goods exported under drawback claim and DEPB claim and also proposing penal action against the appellants. The notice was adjudicated by the Commissioner who upheld the charge of over-invoicing inter alia on the basis of statements of the three suppliers of the goods, Prithvi Singh Kuntal, Sheetal Jain and Kamruddin Shaikh and on the invoice submitted to the Indo-Arab Chamber of Commerce showing a lower value and also on the ground that compensatory payments were made in India, which resulted in part of the remittance received from Dubai against exports flowing back to the remitting firms. The Commissioner also relied upon the fact that the goods were originally shipped to non-existing firms in Netherlands but offloaded in Dubai and that the firms in Dubai were controlled by Satish Choudhary, brother of Subhash Choudhary of Tex-Age. Hence these appeals.

4. We have heard both sides and record our findings herein below.

5. The fact that the goods were actually exported and that remittances equivalent to the export prices were realized, is not denied. The fact that payment was made by the appellants by way of “& Co.” cheques is also not disputed. The declared PMV is sought to be discredited on the basis of statements of local suppliers like Prithvi Singh Kuntal, Sheetal Jain and Kamruddin Shaikh. However, we note that each and every consignment was inspected/examined, as admitted by the Commissioner in paragraph 75 of the impugned order, PMV verification was done and where any doubt existed, representative sealed samples were drawn and orders of the Deputy Commissioner obtained. The verification was carried out by different  officers, none of whom have been indicted or arrayed as co-noticees. Details of the examination and PMV verification in some cases are reproduced below :-

6. We also find that consignment of similar export goods of the appellants was examined 100% and found to be in order, as seen from the statement of Shri C.R. Unnikrishnan, partner of CHA firm, M/s. A.S. Vasan & Sons. The viability of the export price is also borne out by the factum of export of identical goods made by one Vaishnodevi Exports on the same day at the same export price. In this view of the matter, oral evidence cannot be relied upon by the Revenue. In any event, the statements of the suppliers are mainly in respect of the alleged procurement price of the goods rather than the correctness or otherwise of the export price and the local suppliers cannot depose about the export price of the goods. The drawback claim was therefore less than PMV in all cases.

7. As regards allegation of flow-back of remittances by way of hawala, the stand of the department is that “& Co.” cheques issued by the appellants were discounted by Pradeep Delia etc. and the cash so generated was returned to the appellants who used it to generate remittances from abroad. The further finding is that foreign bill purchase credit enjoyed by the discounting firms of Satish Choudhary (against which advance remittance was obtained) was rotated. However, the record does not bring out how the cash was so used to generate remittances, or how the cash was rotated. It is also not alleged that the remitting firms in Dubai made payments out of their own pocket and the allegation is that Dirhams were procured from local Indians like Salam, Paicher and Zaida in Dubai. There is no allegation of finding that these three individuals were under the control of the appellants and therefore, for the department to succeed in its allegation of over-invoicing and hawala, compensatory payments against supply of such Dirhams in India have to be established which has not been done and no  one has been identified as the person or persons to whom such compensatory payments were made in India. We may also point out that the statement of Prithvi Singh Kuntal @ Gulla, one of the local suppliers, was recorded under coercion and was retracted and the medical report shows that his statement was not a voluntary one. The statement of Deepak Khetawat (brother-in-law of Subhash Choudhary), manager of Tex-Age, was also recorded under coercion, in which he deposed about the low cost of the readymade garments exported, fictitious purchase bills, readymade garments were over-invoiced etc., and retracted and medical report also shows that his statement was not voluntary. As regards statement of Pankaj Jhunjhunwala, employee of one of the Dubai firms, that the unit rate of the export goods was highly over-invoiced whereas the rates mentioned in export invoices received through courier were the actual rates of the readymade garments and the rates at which the goods were sold in Dubai were slightly above the rates mentioned in the invoices received through courier, it is contrary to the averments contained in the Writ Petition filed by him before the Hon’ble Bombay High Court (page 502-530 of the paper book). Discounting through the firms of Satish Choudhary was done only in the case of drawback shipping bills and not the DEPB shipping bills. There is no documentary evidence of purchase of readymade garments by Tex Age at the prices indicated in the show cause notice. Although Pradeep Delia’s and Sheetal Jain’s statements have been relied upon, they have not been made co-noticees. (If their statements are to be believed, they were guilty of aiding and abetting Tex-Age and penal action against them ought to have been proposed). In this view of the matter, the furnishing of lower export price by the appellants to the Indo-Arab Chamber of Commerce loses significance and further such invoices are not statutory records and cannot prevail over the report of physical examination of the goods by customs officers. The explanation of the appellants for showing names of the Netherlands firms in the shipping bills is that this was done under the instructions of the Dubai firms and this explanation has not been controverted by the Revenue. The shipping bills also show Dubai as the notified port.

8. In the light of the above, and in the light of the fact that the PMV  was verified by customs officers and found to be fair, and that remittances equivalent to export invoices were received and there is no clinching evidence of hawala transactions, the finding of over-invoicing is not sustainable. We accordingly set aside the same.

9. The impugned order is set aside and the appeals allowed.

(Pronounced in Court)