Holding

The Tribunal's finding that the declared FOB price was genuine and supported by documentary evidence stands, and the revenue's contention of inflation is unsupported.

Summary

Vishal Exports Overseas Ltd exported 4.8 lakh coffee mugs at a declared FOB price of US $3.40 per piece and claimed Duty Entitlement Pass Book (DEPB) credit. The Customs authorities alleged that the FOB value was inflated to Rs.157 per piece (US $3.40) and recomputed it at Rs.80 per piece, confiscated the goods and imposed a penalty under the Customs Act. The Commissioner (Appeals) upheld the revenue's view, but the Customs, Excise & Gold (Control) Appellate Tribunal set aside those orders, finding that the FOB price was genuine and supported by bills of lading, BRCs and other export documents. On appeal, the Supreme Court held that the revenue failed to produce any evidence that the declared FOB price was excessive or not genuine, and that the Tribunal's findings were correct. Consequently, the appeal was dismissed and the DEPB credit based on the declared FOB price was allowed.

Issues considered

The validity of the declared FOB price of US $3.40 per piece for DEPB credit
Whether the Customs authorities could arbitrarily recompute the FOB value and deny credit
Whether the evidence on record proved mis‑declaration or inflation of export price
The applicability of Om Prakash Bhatia v. Commissioner of Customs, Delhi to the DEPB scheme

Legislation cited

Customs Act, 1962s. 11, s. 114

Subjects

DEPBDuty Entitlement Pass BookFOB pricemisdeclarationcustoms valuationexport creditCustoms Actevidence

Judgment

A COMMISSIONER OF CUSTOMS, NEW CUSTOMS HOUSE, MUMBAI
~
v.
MIS. VISHAL EXPORTS OVERSEAS LIMITED

FEBRUARY 12, 2007

B [TARUN CHA TTERJEEANDV.S. SIRPURKAR, JJ.]

Customs Act, 1962:
}-
-.
Export of coffee mugs at a price (FOB) $ •3. 4 per piece-Assessee
c availing benefits under Duty Entitlement Pass Book Benefit/Scheme-
Proceedings against assessee on ground of misdeclaration of export price-
Assessing authorities computing FOB@ Rs.801- per piece directing rissessee
to claim benefit under the Scheme in terms of export price so fixed-Affirmed
by Appellate Authority-Reversed by Tribunal-On appeal, Held: Revenue
D authorities arbitrarily computed FOB and fzxed credit on that basis-FOB
price supported amply by documentary evidence with which no fault found
by Revenue-Under the circumstances, it cannot be said that FOB declared ,_
by assessee is inflated-Since present market value also correctly fzxed by
) ,.(
assessees and same is within permissible limit, Tribunal rightly found it in
order-Assessee entitled to claim benefit under the scheme as per FOB price
E declared.

Respondent-assessee exported 4.8 lakh pieces of coffee mugs at an export
price (FOB) of US $3.40 per piece. The goods so exported were eligible for
Duty Entitlement Pass Book (DEPB) Benefit/Scheme. Accordingly, the
assessee claimed the benefit under the Scheme as per Rules. The assessee
F had declared a market value of Rs.52.50 per piece which was worked out at r--
150% of the assessee's purchase price of Rs.35/- per piece. Revenue
proceeded against the assessee by alleging that the assessee had mis-declared
the FOB value at US $40 (Rs. 150/-) per piece to get more DEPB benefit under
the Scheme. Revenue computed the FOB price @ Rs.80/- per piece and
G ordered that the assessee would be entitled to DEPB credit on.the basis of the
FOB price ofRs.80/- per piece and not at the sale price. Besides, the assessee .
was held liable for mis-declaration and accordingly the goods in question were ~
confiscated and the penalty under Section 11~ of the Customs Act was also
imposed. Commissioner (Appeals) upheld the order in appeal filed by the

H 426
'y-

COMMNR. OF CUSTOMS. NEW CUSTOMS HOUSE. MU~IBAI ,. VISHAL EXPORTS OVERSEAS LTD.
427
assessee. On appeal, the Tribunal !Jet aside the orders of the Revenue A
-~ authorities and allowed the appeal. Hence the present appeal.

Revenue contended that there could not be such a vast variation in-
between the domestic price of Rs. 35/- per piece and the declared FOB value
ofRs.157/- per piece, therefore, it was obvious that the assessee had claimed
inflated price with the sole objective of getting undeserved DEPB credit; that B
the Tribunal had not taken into consideration the evidence on record
regarding the price; and that the matter was completely covered by a decision
of this Court in Om Prakash Bhatia v. Commissioner of Customs, Delhi.
-7'
Respondent-assessee submitted that it was unthinkable that the party
to which the exports were made would act hand-in-glove with the assessee to c
make inflated payments to enable him to get undeserved DEPB credit; that
the fixing of price of the goods at Rs.80/- per piece by the Adjudicating
Authority as also by the Commissioner (Appeals) was based on no evidence;
and that there was no evidence whatsoever to support the finding that the export
price is not genuine and was mis-declared with the intent to avail higher DEPB D
benefit.

Dismissing the appeal, the Court
i' ;

HELD: 1.1. The contention of the Revenue to the effect that the FOB
value of the goods in question being 450% more than the purchase value is E
-I 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. Revenue could not show anything
concrete in support of its contention. From the orders of the appellate
authorities nothing can be found to hold that the FOB price was excessive or F
-~
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. In the absence of any concrete evidence having been put by
Revenue to support the contention that the FOB price is inflated, the findings
of the Tribunal are accepted. (Para 9) (430-H; 431-A-B) G
1.2. It is not a case of the Revenue that the assessee has not received
:-·1 the FOB price at all. That is clear from the BRCs. Therefore, the FOB price
b 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. [Para 9)
.. [431-C) B:
428 SUPREME COURT REPORTS (2007) 2 S.C.R.

A 1.3. As per the policy also the credit has to be linked with FOB price.
The fact that the present market value (PMV) is also correctly fixed and is J-r-
within the permissible limits i.e. 150% of AR4 value could not be ignored.
The market value is fixed at Rs.52.50. That has also been found to be in order
by the Tribunal. Hence, finding of the Tribunal in this behalf is also accepted.
B (Para 10] [431-D]

Om Prakash Bhatia v. Commissioner a/Customs, Delhi (2003) 155 ELT
423 SC, [2003] 6 SCC 161, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2269 of2004. )<

C From the Final Order No. 4i 7/2003-NB(A) dated 29.8.2003 of the Customs,
Excise & Gold (Control) Appellate Tribunal, West Block No. 2, R.K. Puram,
New Delhi in Appeal No. C/714/02-NB(A).

Raghenth Basant (for B.Krishna Prasad) for the Appellant.

D M. Chandraseakhran, Rupesh Kumar (for Tara Chandra Sharma) for the
Respondent.

The Judgment of the Court was delivered by

V.S. SIRPURKAR, J. 1. Final order of Customs, Excise & Gold (Control)
E Appellate Tribunal (hereinafter called "the Tribunal" for short) allowing the
appeal filed by M/s.Vishal Exports Overseas Limited (hereinafter called "the
assessee" for short) is in challenge at the instance of Commissioner of
Customs (hereinafter called "the Revenue" for short).

F
2. The assessee exported 4.8 lakh pieces of coffee mugs between February
and November, 2001. The export price (FOB) ·was US $3.40 per piece. The
exported goods were eligible for Duty Entitlement Pass Book (DEPB) Benefit/
,. .

Scheme. Accordingly, the same was claimed as per Rules at the rate of 11%
or I 0%. The assessee had declared a market value of Rs.52.50 per piece which
was worked out at 150% of the assessee's purchase price which was
G Rs.35/- per piece. These purchases were made from the manufacturers in
Rajasthan and as per the clearance documents of Central Excise (AR-4),
Rs.35/- was the price per piece.

3. The Assistant Commissioner of Customs proceeded against the
assessee by alleging that the assessee had mis-declared the FOB value at US
H $3.40 (Rs.150/-) per piece. It was the view of the Department that the price
COMMNR. OF CUSTOMS. NEW CUSTOMS HOUSE. MUMBAI v. VISHAL EXPORTS OVERSEAS LTD. tSIRPURKAR. J.J 429

was inflated to get more DEPB benefit. The original order ensued wherein it A
.... 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 iri place of Rs.157 /- per B
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 /-
"'-,.i_ 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 c
Section 114 of the Customs Act was also ordered.

4. Commissioner (Appeals) upheld the order in appeal filed by the
assessee. The Commissioner (Appeals) held that the assessee was not liable
to any further benefit than the one which was granted by the adjudicating
authority. On appeal, the Tribunal set aside the orders of the authorities below D
and allowed the appeal. It is against this order that the present statutory
appeal has been filed.
~

}
5. Shri R. Basant, Learned Advocate appearing on behalf of the Revenue
assailed the order of the Tribunal and pointed out that there could not be
such a vast variation in between the domestic price of Rs.35/- per piece and E
the declared FOB value of Rs.157 /- per piece, therefore, it was obvious that
the assessee had claimed inflated price with the sole objective of getting
undeserved DEPB credit. Learned counsel secondly contended that the
Tribunal had not taken into consideration the evidence on record regarding
the price. Lastly, the learned counsel contended that the matter was completely F
covered by a decision of this Court in Om Prakash Bhatia v. Commissioner

" of Customs, Delhi reported in (2003) 155 ELT 423 SC= [2003] 6 SCC 161.

6. As against this Shri M.Chandrasekharan, Senior Counsel drew our
attention to the Export and Import Policy (1st April, 1997- 3 lst March, 2002)
and more particularly at para 7.25 which reads as-under: G
"Under the Duty Entitlement Pass Book (DEPB) Scheme an exporter
:-1 shall be eligible to claim credit at a specified percentage of FOB value
of exports made in freely convertible currency. The cre,dit shall be
available against such export products and at such rates as may be
H
430 SUPREME COURT REPORTS [2007] 2 S.C.R.

A specified by the Director General of Foreign Trade by a Public Notice
issued in this behalf.

xx xx xx xx"

7. Learned Senior Counsel argues that the basis for the benefit of DEPB
B is the FOB value in support of which voluminous evidence was given by the
assessee and more particularly such evidence was in the form of (i) S/Bs
(print-outs); (ii) Invoices; (iii) Packing lists; (iv) Bills of Lading; (v) BRCs; and
(v) AR4s. Learned counsel painstakingly points out that there was no dispute
anywhere regarding the BRC which showed that the FOB price claimed by the
assessee was, actually, received by the assessee. According to the learned
C counsel it was unthinkable that the party to which the exports were made
would act hand-in-glove with the assessee to make inflated payments to the
assessee with the sole objective of obliging the assessee so as to enable him
to get undeserved DEPB credit. He points out that the fixing cf the price at
Rs.80/- per piece by the Adjudicating Authority as also by the Commissioner
D (Appeals) was based on no evidence. Learned counsel further urged that
those authorities could not have been allowed to "imagine" the price. Learned
counsel further invites our attention to the findings by the Tribunal in para
4 of its judgment wherein the Tribunal has clearly held that there was no
material on reccrd to indicate that the export price declared by the appellant ' 1

was not genuine or that the transaction was at a different price. Our attention
E was also drawn by the learned counsel towards further finding that the market
value declaration made by the assessee is also fully supported by its purchase
price from the manufacturer in India. Learned counsel also argued that the
Tribunal has correctly held that the finding regarding the FOB price being
Rs.80/- per piece was based on the computation ofthe price from manufacturer's
·F price which had no relation with the price in export trade. Our attention was
fu1ther drawn to the finding that there was no evidence whatsoever to support
the finding that the export price is not genuine and was mis-declared with the
intent to avail higher DEPB benefit. Lastly, the learned counsel pointed out
that the aforementioned judgment in Om Prakash Bhatia 's case (supra) could
not be pressed into service because that judgment was in the draw-back
G scheme and not related to DEPB Scheme.

8. We have considered' the matter in the light of the above contentions.

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
H be accepted for the simple reason that there is no evidence 011 record to
COMMNR. OF CUSTOMS. NEW CUSTOMS HOUSE. MUMBAI''· VISHAL EXPORTS OVERSEAS LTD (SIRPURKA~. J.( 43 J

support such a contention. The Tribunal has also specifically held so and A
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 B
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 C
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.

10. As per the policy also the credit has to be linked with the FOB price. D
Again we cannot ignore the fact that the PMV is also correctly fixed and is
within the permissible limits i.e. 150% of AR4 value. The market value is fixed
; . at Rs.52.50. That has also been found to be in order by the Tribunal. Therefore,
we accept the finding of the Tribunal in this behalf and reject the contention
of the learned counsel for the Revenue.
E
11. It was lastly contended that the matter is covered by the decision
in Om Prakash Bhatia 's case (supra). This was clearly against draw. back
scheme and not DEPB credit. We have carefully seen the judgment. We do
not find that on the basis of the factual scenario therein it applies in any
manner to the present controversy. There the factor of over-invoicing was p
found established. In the present case on the factual aspect also the FOB
price could not be said to be inflated. In our opinion the aforementioned
judgment would be of no consequence and help to the Revenue.

12. In view of the above we are of the opinion that the appeal has no
merits and it must be dismissed. It is accordingly dismissed. G
,,--, 13. There will be no order as to costs.

S.K.S. Appeal dismissed.