[Order per : M.V. Ravindran, Member (J)]. - All these appeals are preferred against Order-in-Original No. KDL/COMMR/78/2003, dated 26-12-2003. Since all the appeals are arising out of the issue from the same Order-in-Original, they are being disposed of by a common order.

2. The relevant facts that arise for consideration are appellant M/s. Colourtex is a merchant manufacturer and was engaged in the business of export of dyes, chemicals and polished diamonds. The appellants purchased CD ROMs from M/s. Padmini Polymers Ltd., New Delhi at a price of Rs. 600/- to Rs. 615/- per piece and exported through Kandla Port. On an investigation conducted by DRI, show cause notice was issued seeking to re-determine the value of the CD ROMs exported on the ground that the value which was declared was excessive. The said show cause notice also sought to impose penalties on the partner of the exporter M/s. Colourtex, M/s. Adani Exports Ltd. and M/s. Padmini Polymers Ltd. All the appellants herein contested the show cause notice on merits before the adjudicating authority. The adjudicating authority did not agree with the contentions raised by the appellants and confirmed that the appellant M/s. Colourtex had overvalued the CD ROMs exported and coming to such a conclusion re-determined and reduced the FOB value and proportionate DEPB credit, he also ordered for confiscation of the CD ROMs, imposed penalty on M/s. Colourtex, Shri Jariwala, M/s. Adani Exports Ltd. and M/s. Padmini Polymers Ltd. Hence these appeals.

3. Learned counsel Shri Uday Joshi, appearing on behalf of M/s. Colourtex Ltd. submits that the CD ROMs which were exported by the appellant were purchased from M/s. Padmini Polymers Ltd. It is his submission that M/s. Padmini Polymers Ltd. had cleared the said CD ROMs under the cover of AR4s which were purchased by the appellant M/s. Colourtex at a price varying from Rs. 500/- to Rs. 615/- per piece. It is his submission that at the time of export appellant M/s. Colourtex has filed 29 shipping billings for export of the said goods and the value declared for such exports was between US$ 18 to US$ 18.15 (approximately Rs. 764/- to Rs. 770/- per piece) and all the shipping bills were finally assessed. It is his submission that the export proceeds for all the shipping bills were realized in full from the foreign buyer. He would submit that though the present market value (PMV) of the goods was not mentioned on the shipping bill, the reason for doing so was that there was a value cap on exports under DEPB scheme for the CD ROMs. He would draw out attention to the Public Notice No. 15/97-2002, dated 8-6-1998 which was issued by the DGFT read with Para 7.36A of undertook of procedures of imports and exports. It is his submission that C.B.E. & C. vide Clarification No. 69/97-Cus., dated 8-12-1997 had clarified that if the FOB value is within 150% of the manufacturer’s price, such FOB value is to be ascertained. It is his submission that in the current case the FOB value is less than the limit as laid down by the C.B.E. & C. Circular. It is his submission that the show cause notice which was issued to the main appellant, the partner of the appellant had relied upon number of show cause notices/investigations carried out, both for imports and exports made by M/s. Padmini Polymers Ltd. and others as has been referred to, but for the purpose of value of CD ROMs in question reliance is placed upon the exports made by M/s. Padmini Polymers Ltd. and M/s. Harshita Ltd. It is his submission that there is error for the purpose of discarding the export value filed by the appellant M/s. Colourtex as they had always considered the invoice value/AR4 values mentioned on the documents on which the CD ROMs were cleared by M/s. Padmini Polymers Ltd. It is his submission that there is no evidence adduced by the authorities of any contemporary export at a different price. It is his submission that DEPB credits for the FOB value declared by the appellants were given after obtaining no objection certificate from SIIB who had endorsed the shipping bills. It is his submission that M/s. Colourtex was not related with M/s. Padmini Polymers Ltd. or the foreign buyers in any way and the impugned order is not speaking order as such as the same reiterates the allegations made in the show cause notice but does not take into consideration various submissions made by the appellants before the adjudicating authority and more specifically in respect of Circular No. 69/97-Cus., dated 8-12-1997. He would rely upon the judgment of the Tribunal in the following cases :

(1)     Cannon Steel Pvt. Ltd. - (Tri. - Del.)

(2)     Cora Chem - (Tri. - Mumbai)

(3)     Polynova Chemical Industries - (Tri. - Mumbai)

(4)     Advance Exports - (Tri. - Ahmd.)

He would also rely upon the judgment of the Hon’ble Supreme Court in the case of Suresh Jhunjhunwala - (S.C.) and more specifically to Para 20 of the said judgment for the proposition that the judgment delivered in the case of drawback will be equally applicable in the case of DEPB scheme also. While submitting up he would submit that the impugned order being an order which has been issued without considering the valid evidences putforth by the appellant M/s. Colourtex and its partner is liable to be set aside and he prays for the same.

4. Shri V.S. Nankani, learned counsel appearing on behalf of M/s. Adani Exports Ltd. would submit that they adopt the submissions made by the counsel of M/s. Colourtex regarding there being no overvaluation involved in respect of export of CD ROMs. It is his submission that there is no dispute as regards M/s. Colourtex having purchased the goods directly from M/s. Padmini Polymers Ltd. and payments were directly made. It is also undisputed that M/s. Colourtex exported the goods at its own account. It is his submission that no statement of any of the officers or concerned persons of the appellant were recorded and without any investigation show cause notice was issued to the appellant M/s. Adani Exports Ltd. and penalty was imposed. It is his submission that the penalty which has been imposed under Section 114 of the Customs Act, 1962 is unwarranted as the appellant had only introduced bank accounts and there is no omission or commission of whatsoever nature in the exportation of CD ROMs by M/s. Colourtex. It is also his submission that the impugned order imposing penalty on the appellant has been passed on irrelevant extraneous and not germane facts and circumstances. He would pray that the penalty imposed on the appellant M/s. Colourtex be set aside.

5. Shri Harishankar, learned counsel appeared on behalf of M/s. Padmini Polymers Ltd. and submits that he is adopting the submissions made by the counsels for M/s. Colourtex and M/s. Adani Exports Ltd. It is his submission that M/s. Padmini Polymers Ltd. had sold the CD ROMs to M/s. Colourtex and the said sale was done at a value as indicated and the sales invoices recorded by them. It is his submission that this appellant had not any act of omission or commission for imposition of penalty on them.

6. Shri K.M. Mondal, learned special counsel appeared on behalf of the Revenue. At the outset he would submit that M/s. Colourtex had purchased CD ROMs from M/s. Padmini Polymers Ltd. under the invoices and there was no submission before the lower authorities that M/s. Padmini Polymers Ltd. had prepared AR4s. It is his submission that during the relevant period the said CD ROMs were the goods which carried nil rate of duty which would mean that there cannot be any duty paying document. He would submit that numerous instances were cited in the show cause notice in respect of imports and exports clearly established that M/s. Padmini Polymers Ltd. was engaged in manufacture of counterfeit CD ROMs and used to export such CD ROMs either directly or through merchant exports and such CD ROMs would not have fetched such exorbitant price of Rs. 600/- to Rs. 615/- per piece. It is his submission that the export price of M/s. Colourtex was not the genuine export price. He would submit that the show cause notice relies upon the evidences in respect of export of CD ROMs by M/s. Harshita Ltd. purchased from M/s. Padmini Polymers Ltd. and investigation conducted by the United States Customs clearly indicated overvaluation. It is his submission that the procurement of CD ROMs by M/s. Colourtex was from M/s. Padmini Polymers Ltd. as was done by M/s. Harshita Ltd. and hence there is no valid reason as to why the revaluation of sale price of identical CD ROMs at United States by United States Customs be not made basis for determination of export price thereof. He would rely upon the decision of the Tribunal in the case of J.M. Industries - (Tribunal) which has been maintained by Hon’ble Supreme Court [ (S.C.)]. He would also rely upon the judgment of the Tribunal in the case of Annapurna Yarn Fabrics - (Tribunal). He would distinguish various case laws submitted by the counsel for M/s. Colourtex and submits that in the case of advance exports the case has not attained any finality as an appeal filed against the majority decision has been admitted by the Apex Court and hence the judgment of the Tribunal is in jeopardy. It is his submission that the contention of M/s. Colourtex that all their shipping bills were finally assessed and export proceeds realised in full from the foreign buyer cannot be considered to come to a conclusion that the declared export price was genuine as the subsequent investigation has clearly brought out that M/s. Padmini Polymers Ltd. were engaged in this kind of business of manufacturing of counterfeit CD ROMs. He would rely upon the judgment of the Tribunal in the case of Merchant Export Ltd. - for the proposition that realisation of the export value does not prove that the export value was correctly declared. He would submit that in the case of fraudulent imports and exports, the bills of entry or shipping bills need not be challenged as has been laid down by the Hon’ble Apex Court in the case of Jain Sudh Vanaspati Ltd. - . (S.C.). It is his submission that the Board’s Circular relied upon by the main appellants M/s. Colourtex is only guideline to the assessing officers and it cannot preclude the department from investigating any fraudulent exports. It is also his submission that the sale price of M/s. Padmini Polymers Ltd. of the CD ROMs during the relevant period indicated that they had only sold about 0.5% of the total production in the domestic market and hence it cannot be taken as respective domestic sale price. It is his submission that as regards the penalties imposed on M/s. Adani Exports Ltd., M/s. Padmini Polymers Ltd., it is clearly established that the amounts which have been paid to M/s. Padmini Polymers Ltd. had been transferred to M/s. Adani Exports Ltd. thereby establishing a clear linkage between M/s. Colourtex, M/s. Padmini Polymers Ltd. & M/s. Adani Exports Ltd. and the role in the fraudulent exports is proved; as regards the penalty imposed on M/s. Padmini Polymers Ltd., evidences disclose that M/s. Padmini Polymers Ltd. was engaged in the manufacture of counterfeit and pirated CD ROMs which were exported directly by them and also through merchant exporters by overvaluing them. In view of the submissions made as above, the appeals filed by the appellants deserve to be rejected and prays accordingly.

7. We have considered the submissions made at length by both sides and perused the records.

8. The issue involved in this case is whether the main appellant M/s. Colourtex had overvalued the CD ROMs exported by them in order to claim ineligible DEPB benefits. The adjudicating authority has held in the Order-in-Original that it is so by coming to a conclusion which is summarized as under :

“That M/s. Colourtex were never in the business of export of CD ROMs or computer related items but the real business was export of dyes, chemicals and polished diamonds and they were entering into business of new products and had not thought over but the profit and loss in such a case of business when it is a case of export of involving crores of rupees and that too from a fresh port as well as through a New Customs House Agent. It is also held by him that appellant M/s. Colourtex were helped in opening of bank account by M/s. Padmini Polymers Ltd. and by M/s. Adani Exports Ltd. He also held that the appellant M/s. Colourtex on receipt of export order from M/s. Wajilam Exports (Singapore) Pvt. Ltd. immediately placed an order of CD ROMs with M/s. Padmini Polymers Ltd. for purchase and export the goods through Custom House Agent whom they have never seen or contacted. It is also recorded that this haste on the part of M/s. Colourtex implies that they have already indulged in conspiracy hatched for defrauding the Government of the Revenue. He has also come to the conclusion that appellant M/s. Colourtex has done so with an intent to facilitate other two persons in hatching conspiracy and he has also held that there was a payment made by the purchasers M/s. Colourtex was beyond the period of 120 days which itself indicates that they were waiting for the consideration to be received from Singapore to make the payments to M/s. Padmini Polymers Ltd. and M/s. Padmini Polymers Ltd. kept silence for two and a half months and did not try and recover any interest from the appellant M/s. Colourtex. He has also recorded a finding that appellant M/s. Colourtex has made an excess payment of more than Rs. 53 lakhs to M/s. Padmini Polymers Ltd. which was returned after two and a half months, and M/s. Colourtex did not seek any interest from them. After recording of the above findings, he holds that the price declared by the appellant of Rs. 764/- to Rs. 770/- per CD ROM cannot be accepted as genuine price and he has also held that the appellant had not declared the present marked value of the goods on the shipping bill”.

9. We are unable to accept the reasoning given by the adjudicating authority which is summarized as hereinabove to come to a conclusion that there was an overvaluation of the CD ROMs exported by the appellant. We find that in the replies given to the adjudicating authority, the appellant has very clearly indicated in the reply dated 8-5-2003 that M/s. Padmini Polymers Ltd. had made payment of central excise duty on the CD ROMs sold by them. It is also seen that the said reply, appellants are categorically stated that they had negotiated with the purchasers in Singapore for the sale of CD ROMs for Rs. 764/- to Rs. 770/- per piece. In the said reply, they had specifically pointed out that the difference, between the purchase price and selling price was not major one and which was their business profit. This specific and categorical submission made by the appellant M/s. Colourtex is not disputed by the adjudicating authority. The adjudicating authority has only gone on the presumption that the appellant had not declared the present market value on the shipping bills. We do not find any provision which requires the declaration to be made by them of the present market value on the shipping bills. In this regard, C.B.E. & C. Circular No. 69/97-Cus., dated 8-12-1997 needs to be read which is as under :

“Attention is invited to Circular No. 15/97-Cus., dated 3-6-1997. The instructions contained in Para 3, 4, & 5 of the above Circular, in sofar as they relate to verification of the Present Market Value (PMV) under DEPB Scheme, are hereby superseded by the Guidelines in this Circular :-

1. As you are aware para 7.36A of Public Notice No. 10/97 (P.N.) 97-2002 dated 21-5-1997 provides that the amount of Credit entitlement rate, in respect of export products whose DEPB rate 15% or more, shall not exceed 50% of the PMV of the goods.

2. Object of Limiting the amount of Credit Based on the Present Market Value (PMV).

The condition of restricting the credit-amount under DEPB Scheme to 50% of the PMV was prescribed to prevent the exporters from obtaining excessive amount of credit by inflating the FOB price of the export product. It is stated that the FOB value may be higher, as per the contract between the exporter and foreign buyer, (depending on various factors), but the Present Market Value of the goods is an index of their local (wholesale/retail) price inclusive of excise duty, Sales tax and other local taxes plus cost of transportation. Accordingly the amount of credit is to be restricted with reference to the domestic price of the product, and not with reference to the FOB price declared on the GR Form/Shipping Bill.

3. Determination of PMV

(i) Manufactures-Exporters

(a) As regards Manufacturers-Exporters who export under AR-4 form, where the AR-4 value is declared as the PMV, the same shall be accepted.

(b) Where the Manufacturer-Exporters declares PMV which is higher than the AR-4 price, (as PMV is inclusive of transportation costs and domestic duties and taxes), the higher PMV declared may be accepted upto 150% of AR-4 value (exclusive of excise duty). Market enquiry may be caused only if PMV is more than 150% of AR-4 price, and exporter does not agree to lower the PMV below the 150% mark.

(c) Where the Maximum Retail Price (MRP) is required to be printed on the products as per the Weights & Measures Act, the MRP indicated on the products may also be accepted as PMV.

(d) For the products for which manufacturers have a Printed Price list, or a Catalogue indicating the local price of the products, the price indicated on the price list/catalogue shall be accepted as PMV.

4. (ii)Merchant Exporters

(a) In the case of export goods purchased from the open market, or from a Manufacturer, the PMV will accepted on the basis of Guidelines in paras (a) to (b) of para 3(1) ibid.

(b) In case the PMV of the goods can not be determined as per the para above, the exporters may be required to furnish the sale invoice of the Authorised Dealer, or any other evidence to determine the correctness of the PMV declared by the exporters. In such cases evidence of local prices of similar goods may also be accepted as PMV.

5. In any case where PMV declared by the exporter can not be verified with reference to the parameters mentioned above, or is higher than 150% of AR-4 value and Asstt. Commissioner is of the opinion that PMV declared is not acceptable, the exporter shall be given an opportunity to justify the correctness of the PMV declared by issue of a Show Cause Notice indicating the reasons for reducing the PMV. Before issue of Show Cause Notice concurrence of the concerned Deputy Commissioners must be obtained.

6. Verification of PMV/FOB value through market enquiries should be specifically assigned to the SIIB and not the assessing officer. The enquiry must be completed and final view taken in 30 days.

7. In all case where no Show Cause Notice challenging the declared PMV is issued within 30 days from the date of export, the PMV declared shall be deemed to have been accepted.

8. Under no circumstances will the shipments be stopped/held back for the above purposes.”

10. It can be noted from the above circular that the Board has laid down the guidelines for determination of present market value. We are more concerned with the situation of determination of the present market value which has been clarified in Para 3.b. The said Para 3.b specifically talks about PMV and is up to 150% of AR4 value no market enquiry requires to be caused but if it is more than 150% of AR4 price, then market enquiry has to be caused. In this case before us, it can he seen from the records that the invoices which were raised by M/s. Padmini Polymers Ltd. were undisputedly for Rs. 600/- to Rs. 615/- per piece of the CD ROMs purchased by the appellant M/s. Colourtex and declared FOB value was Rs. 764/- to Rs. 770/- per piece which is well within the accepted norms of 150% or less, as indicated in the said circular. It is also undisputed that the shipping bills were filed along with all the documents and were accepted by the authorities and were cleared for export after considering the said circular causing the verification by SIIB, on a conclusion there being no case of the value being more than 150% of AR4 value. It is also seen from the above circular and more specifically clause 7, that if the said PMV declared by the exporter cannot be accepted by the Assistant Commissioner then a show cause notice has to be issued to the appellant indicating the reasons for reducing the PMV and market enquiries should be specifically assigned to SIIB. In this case, even this situation does not arise as the Assistant Commissioner or the Deputy Commissioner has not issued any show cause notice to the appellant and the shipping bills were approved by SIIB which indicates that the procedures for export and the value declared was in the knowledge and was in accordance with the circular issued by the Board. We also find that clause 7 of the said circular categorically states that if no show cause notice is issued within thirty days from the date of export, the PMV declared shall be deemed to have been accepted. In the instant case, the show cause notice was issued to the appellant almost after a period of three years though after the investigation conducted by the office of the DRI.

11. The findings recorded by the adjudicating authority for coming to a conclusion it does not indicate that the appellants’ case has been considered by him with reference to the submissions made by them at the time of personal hearings and the replies filed by them. The factual aspect of the purchase of CD ROMs from M/s. Padmini Polymers Ltd. at a price cannot be discarded by the Revenue simply for the reason that the said M/s. Padmini Polymers Ltd. had no domestic sale and even if there is any domestic sale, it was to the tune of just merely 0.5% of the total sales affected by them. It is undisputed that even the 0.5% of domestic sales which were affected by M/s. Padmini Polymers Ltd. were of the value which were the purchase price of M/s. Colourtex. If that be so, the quantum of local sale clearances cannot be determinative factor as to whether the purchase price of M/s. Colourtex of the CD ROMs is incorrect or otherwise.

12. Accordingly, in our considered view, the impugned order is unsustainable for all the appellants. Accordingly, the impugned order is set aside and the appeals are allowed.

(Pronounced in Court on 18-1-2012)