Full Judgment
Since the issue involved is same, they are being decided through a common order.
2. The brief facts of the case are that two units i.e. Citizen Impex and Neptune Impex after purchasing fabrics from one M/s Shreeji Enterprise filed shipping bills for export under DEPB Scheme where the PMV was declared as Rs. 45/- per yard in both cases but the FOB was declared as Rs. 73.41 per yard in the case of Citizen Impex and Rs. 73.59 per yard in the case of Neptune Impex. In the case of Citizen Impex, the total FOB value declared was Rs. 73,41,160/- and the DEPB claimed amounted to Rs. 7,34,11.6/- while in the case of Neptune Impex, the total FOB value was Rs. 1,44,52,630/- and the DEPB claimed amounted to Rs. 14,45,263/-. In both the case the shipping bills were accompanied by ARE-1 forms to show that the export goods were purchased from M/s Shreeji Enterprise, Surat and the same were removed under self removal procedure of excisable goods for export. In both the cases the rate of goods shown in ARE-1 form was Rs. 59.43 per yard exclusive of excise duty and Rs. 68.38 per yard inclusive of excise duty. The goods were examined on random basis and it was found that the total net weight of the goods was 4100 Kgs. as against declared weight of 7554.7 Kgs. in the case of Citizen Impex and 8077 Kgs. as against declared weight of 14503.7 Kgs. in the case of Neptune Impex. Thus the goods on examination were found to be less by about 45%. As per the statement of Shri Rakesh Agarwal, proprietor of M/s Shreeji Enterprises, the goods were purchased from open market and not manufactured by M/s Shreeji Enterprises and the ARE-1 Form incorrectly described M/s Shreeji Enterprises as a manufacturer of goods and gave its Central Excise Registration No. Market survey of the goods was also conducted from one M/s MRM Company, Kalbadevi, Mumbai in the presence of exporter's CHA in which he gave a quotation of Rs. 18/- per meter for identical goods as per sample shown to him on 23.11.2004 which was only 36.50% and 40% of the PMV declared by the two exporters respectively. Statement of Shri Sunil Khandelwal, proprietor of M/s Citizen Impex and Shri Anil Kumar Krishna Kumar Gautam, Proprietor of M/s Neptune Impex were recorded wherein they inter alia stated that they and one Shri Suresh Ladha were working in a mill in Surat and that Shri Suresh Ladha offered them to do the export work and that they had neither the knowledge nor money for export and that Shri Suresh Ladha opened two units in their name and that Shri Suresh Ladha used to look after the export work and all the transaction were entered into by Shri Suresh Ladha and fabrics purchased from Shreeji Enterprises and that they were paid some money by Shri Ladha and that fabrics shown in the consignment were not of goods quality and the value should be around Rs. 13 to Rs. 20/- per meter. Shri Suresh Ladha in his statement accepted the above facts that he was looking after the complete work of two units i.e. M/s Citizen Impex and M/s Neptune Impex that he put full finance in these companies and that these people (Shri Sunil Khandelwal and Shri Anil Kumar Krishna Kumar Gautam, proprietor) do not know the work of export and therefore it was their agreement that he will finance and look after the work and these two proprietors will take IEC in their names and that he used to get 75% of the income and 25% was given to the other two. He admitted that the PMV declared was Rs. 45/- wherein the actual PMV was around Rs. 30/- per meter which includes packing, transportation and office expenses etc.
3. In view of the above facts, the PMV declared was rejected and goods were sought to be confiscated as they did not match in description given in Shipping Bills as per weight and value and DEPB was sought to be denied along with proposal for penalties on the two proprietors of M/s Citizen Impex and M/s Neptune Impex, Shri Suresh Ladha and Rakesh Agarwasl of M/s Shreeji Enterprises for abetment.
4. The matter was adjudicated by the Commissioner who confiscated the goods for mis-declaring the value under Section 113(d) and 113(i) of the Customs Act, 1962, gave an option to redeem the same on payment of redemption fine of Rs. 15 Lakhs in the case of Citizen Impex and Rs. 30 Lakhs in the case of M/s Neptune Impex and DEPB claims of Rs. 73,41,160/- and 14,45,263/- were disallowed and PMV was restricted to Rs. 20/- per meter. Penalties of Rs. 7 Lakhs and Rs. 14 Lakhs were imposed on Shri Sunil Ladha, Shri Anil Kumar Krishna Kumar Gautam respectively. Further a penalty of Rs. 25 Lakhs was imposed on Shri Suresh Khandelwal in the case of Neptune Impex and another Rs. 50 Lakhs in the case of Citizen Impex. Similarly a penalty of Rs. 5 Lakhs in the case of Citizen Impex and Rs. 10 Lakhs in the case of M/s Neptune Impex was imposed on Shri Rakesh Agarwal, proprietor of M/s Shreeji Enterprises. All the above persons are in appeal before us.
5. Learned Advocate for the appellants submitted that the PMV has been rejected on account of variation in weight, market survey, discrepancy in the ARE-1 regarding the actual manufacturer of the goods and that there is a gap of more than six months between the date of export and market survey etc.
6. As regards weight, it was submitted that the net weight was ascertained on a sample basis, when only few cartons were weighted and the net weight was arrived on estimated basis. Since 100% weighment was not done shortage on the basis of sample weighment cannot be sustained.
As regards market enquiry, it was submitted that the sample of the fabrics was not tested by M/s MRM Company regarding denier of yarn, quality of dye used for dying in the fabrics, design of print, type of embroidery etc. The price cannot be determined merely by seeing the fabric. Reference in this regard was invited to the Tribunal decision in the case of Perfect Trading Company v. C.C. 2002 (149) E.L.T. 207 (T). It was also submitted that Shri Anand Agarwal of M/s MRM & Co. has admitted during his cross examination that by looking at the fabrics, no one can verify whether the print is table print or power print. The weaving rates of the both the looms vary from Rs. 7 per meter and difference of printing rate between the table print and power print is Rs. 6 to 7 per meter. Shri Anand Agarwal also mentioned that expenditure for export of the goods ex-Mumbai adds upto 25% after the cost towards packing, loading, unloading, CHA, THC charges, bank commission, LIC negotiation etc. and that the market enquiry report has not taken into account any of these factors and therefore, the price given by M/s MRM & CO. cannot be regarded as authentic one.
7. It was further submitted that the ARE-1 value cannot be disputed as ARE-1 is signed by the jurisdictional Central Excise Officer. The finding of the Commissioner that the goods mentioned in ARE-1 were not manufactured by M/s Shreeji Enterprise as has been mentioned in the ARE-1 form has gone beyond the scope of show cause notice, as no such allegation was made in the show cause notice and therefore this order cannot be sustained as has been held by the Tribunal in the case of Kalyani Sharp India v. C.C.E. Pune . It was further submitted that the FOB value declared under Section 14 cannot be discarded as none of the ingredient of Section 14 are absent and it is not the case of the department that the seller and buyer have interest in the business of each other. As regards PMV it was submitted that, Board vide its Circular No. 69/97 has clarified that the PMV should not be more than 150% of the ARE-1 value. In the present matter ARE-1 price is equivalent to Rs. 65/- per meter of which 150% would be Rs. 97.50 and as the declared price is only Rs. 74.25 per meter it is less than 150% and therefore it cannot be rejected. Reference was also invited to the decision of Apex Court in the case of Commissioner of Customs v.Vishal Exports Overseal Ltd. wherein the department's plea of FOB value being 450% more than the purchase value as unreasonable was found has not acceptable for want of evidence to support such contention when no fault was found with the PMV fixed which was within 150% of the AEE value. Price of goods as Rs. 30/- stated by Shri Suresh Ladha is the cost of the goods and does not take into account margin of profit and various miscellaneous expenses and therefore the price of Rs. 45/- has been corrected declared.
8. In view of this it was submitted that the goods cannot be confiscated and since there was no mis-declaration, no penalty can be imposed on the proprietor of two exporting firms, Shri Sunil Khandelwal & Shri Anil Kumar Krishna Kumar Gautam and for the same reasons no penalty can be imposed on Shri Rakesh Agarwal, proprietor of Shri Shreeji Enterprises and Shri Suresh Ladha.
9. We have considered the submissions. We find that the goods on examination were found to be 40% less in weight than the one declared.
Though the appellants have disputed the weight being arrived on a sample basis, we find that the weighment was carried out in their presence and at that time they have agreed with the examination report and have not asked for 100% weighment to establish that the weight declared was correct. Once the goods after weighment etc. were seized on account of shortage, it was at that point of time that they should have asked for 100% weighment and once having not done the same cannot be challenged now. We further note that even though the goods are lying with the Customs and have not been cleared due to imposition of high redemption fine, the appellants have still not asked for 100% weighment of the goods to establish that there was no shortage in weight. In view of this, finding of shortage in weight is upheld.10. As regards ARE-1 value, we find that Shri Rakesh Agarwal, proprietor of M/s Shreeji Enterprises has admitted that the goods were not manufactured by them but was purchased by them and the price of the same was around Rs. 30/- per square yard. Even though the department has not raised this plea in the show cause notice, but since the appellants in support of their claim have taken a plea that the price declared is correct price as is borne out from the ARE-1 filed by them, the department is fully justified in disputing the claim made in defence. We note that Shri Rakesh Agarwal has accepted, that the fabric was not manufactured by them and this statement has not been retracted so far. Even in the appeal filed by Shri Rakesh Agarwal, he has not denied his statement nor has made a positive statement that the goods were manufactured by him only. Therefore once there is a mis-declaration regarding manufacture of the goods in the ARE-1, the price referred to therein cannot be accepted an has rightly been rejected. Similarly the market survey cannot be disputed as it was carried out within three to six months and the expenses towards export are of no relevance for determining the PMV, as what is being disputed is the PMV and not the FOB value. Export expenses will account for FOB value and not the PMV value. Shri Anand Agarwal has nowhere mentioned that the price quoted by him would be different if the fabric in question was power printed and he has given his opinion as per the sample presented to him. Now has the appellant produced any evidence to show that the fabrics being exported by them were power printed.
11. In view of above, we find justifiable reason to reject the PMV as first they did not match in weight, the value declared in ARE-1 was incorrect in as much as M/s Shreeji Enterprises have never manufactured as admitted by them and market survey brings out the value as Rs. 20/- per square meter which at best would be Rs. 30/- per meter, even if the statements of Shri Rakesh Agarwal, proprietor of M/s Shreeji Enterprises and Suresh Ladha are taken into account. As regards the Apex Court decision in the case of Vishal Exports cited (supra), the same is not relevant here as in that case the PMV was not disputed whereas in the present case both ARE-1 value and PMV are being disputed. We therefore uphold the confiscation under Section 113(d), 113(i) of the Customs Act, 1962 and rejection of the claim of the DEPB at the declared value and limiting it to Rs. 20/- per meter. In view of our finding that the PMV has been mis-declared, the proprietor of both the exporting firms i.e. M/s Citizen Impex and M/s Neptune Impex are liable to penalty. Since Shri Suresh Ladha and Shri Rakesh Agarwal had aided abetted the two exporting firms by giving false description in the ARE-1 Form and Shri Suresh Ladha by carrying out all the activities of the two exporter firm and both of them are liable to penalty under Section 114(i) of the Customs Act, 1962. However, looking into the totality of circumstances, we feel that the redemption fine imposed is excessive and penalties are harsh. We accordingly reduce the same as under: