Commissioner Of Central Tax Hyderabad vs P.V. Enterprises

Anil Choudhary, Member (J)

This Appeal has been filed by Revenue against the OIO dt.30.10.2022 passed by the Principal Commissioner of Customs, Hyderabad dropping the proceedings initiated vide SCN dt.23.07.2021 with further direction to reassess the Bill of Entry No. 8216469 dt.20.07.2020 by the port assessing officer, in line with the already assessed previous 3 import consignments of Respondent – M/s P.V. Enterprises (PVE or importer for short), with further direction to release the cash of Rs.34,82,000/- seized under panchanama dt.31.07.2020 from Mr. Sanjay Punjabi, Indore. It was also directed to release the bank guarantee, which was submitted in terms of provisional order dt.15.11.2021 and the bond executed, if any, shall be cancelled.

The brief facts are that based on the intelligence gathered, it appeared to DRI, Hyderabad Zonal Unit that Respondent – PVE (EC No. 1111004595), having registered office at Indore (M.P.) are importing ‘Nutritional Supplements’ i.e., DYM Glutamine, DYM Creatine, GAT Nitraflex, Insane Psychotic, DYM Whey Protein Elite, DYM Whey Protein ISO, MTECH Whey Protein Nitrotech 4lbs/ 10lbs etc., by way of undervaluation to evade Customs duty. It further appeared that Mr. Hitesh Nagwani – Proprietor of PVE, along with Mr. Sanjay Punjabi, have floated companies/concerns by the name (i) M/s Rax Trading Ltd., Hong Kong (Director – Mr. Sanjay Punjabi) and (ii) M/s Rudra Overseas, Indore (Proprietor – Mr. Sanjay Punjabi), for import of ‘Nutritional Supplements’ from Dubai by grossly undervaluing the goods. That on comparison of the transaction values of 8 items of the Bill of Entry No. 8216469 dt.20.07.2020 with the values declared by other importers at other ports, it appeared that Respondent - PVE has undervalued the imported goods. On a reasonable belief of undervaluation and mis-declaration in the Bill of Entry, the officers seized the said consignment under punchanama dt.29.07.2020.

During the follow up action, the DRI, Indore had conducted search proceedings at the residence/office premises of Mr. Sanjay Punjabi (sole director of Rax Trading Ltd, Hong Kong and sole proprietor of Rudra Overseas, Indore) and seized cash of Rs.34,82,000/- under Sec 110 of the Customs Act on the reasonable belief that the said amount is the sale proceeds of food supplements imported by PVE, which are liable for confiscation under Sec 121 of the Customs Act.

That, earlier in November 2019, DRI, Indore had registered a case of undervaluation against Rudra Overseas (Proprietor – Mr. Sanjay Punjabi). Mr. Hitesh Nagwani was also served notice as conspirator, financier and partner beneficiary. Mr. Sanjay Punjabi had imported nutritional supplements in the name of his concern Rudra Overseas, Indore from Rax Trading Ltd, Hong Kong during the said period. During investigation, DRI recovered laptop of Mr. Hitesh Nagwani and retireved the original purchase invoices/bills/sales order/delivery notes, packing list and other documents of purchase in the name of Rax Trading Ltd, Hong Kong. The said documents appeared to have revealed the actual price of the goods. The said proceedings are subject matter of SCN issued vide F.No. DRI/IZU/INT/93/2020 dt.30.12.2020.

It further appeared that PVE had earlier imported 3 consignments of nutritional supplements from Rax Trading Ltd, vide the following 3 Bills of Entry.

S.No.

Bill of Entry No.

Date

1.

6426756

10.01.2020

2.

6839301

11.02.2020

3.

7952776

19.06.2020

Rax Trading Ltd, Hong Kong had received two consignments from Dubai through Five Stone General Trading LLC and one consignment from Supplement Hero LLC, USA. The fourth/present consignment was imported vide Bill of Entry No. 8216469 dt.20.07.2020 from Five Stone General Trading LLC, Dubai. It appeared from the website of Five Stone General Trading LLC, that they are the leading stockist and manufacturer’s representative of electrical cables, accessories and related products in UAE, and not into the business of supplying Nutritional Supplements. It also appeared that the logo of Five Stone General Trading LLC printed on the invoices is different from the original logo as on the website.

It further appeared that Mr. Hitesh Nagwani and Mr. Sanjay Punjabi are the directors in Rax Trading Ltd, Hong Kong. Further, in the statement recorded, Mr. Hitesh Nagwani and Mr. Sanjay Punjabi had stated that they share equal profits from the business of these firms. It appeared that they have hatched a conspiracy by creating the firms/companies and generated/prepared documents such as purchase orders, proforma invoices, Invoices at their own premises in Indore by deliberately declaring lesser values/prices, for declaring to Customs at the time of import of goods to evade Customs duty. Some items so imported have been in turn sold to Rudra Overseas, Indore. As Mr. Sanjay Punjabi is the director of Rax Trading Ltd and proprietor of Rudra Overseas, Indore, it makes the transaction related and does not pass the test of arms length transaction.

It further appeared that Mr. Hitesh Nagwani is actively involved in the business transactions of Rax Trading and Rudra Overseas. Thus, it appeared that they are related parties and the transaction value declared in the Bill of Entry do not represent the actual transaction value in terms of Sec 14(1) of the Customs Act read with Rule 2(2)(v) and Rule 3 of the Customs Valuation Rules, 2007 (CVR) and both have business interest in each other and there is no arms length distance between them. It further appeared that the import values declared is not true or accurate and does not represent actual transaction value and the same needs to be rejected under Rule 12 of CVR, 2007 and the value needs to be re-determined under Rule 5 of CVR.

The declared value with respect to the aforementioned 3 earlier Bills of Entry totalling Rs.71,44,585/- were liable to be rejected and re-determined at Rs.3,95,18,575/- in terms of Sec 14 read with Rule 3 and Rule 5 of CVR. Further, differential duty was calculated at Rs.2,40,81,484/-. Further, the goods under the 3 earlier Bills of Entry appeared liable for confiscation under Sec 111(l) and Sec 111(m) of the Act.

It further appeared that the imported goods/supplements under the fourth/present Bill of Entry No. 8216469 dt.20.07.2020 declaring transaction value of Rs.1,02,18,954/- needs to be rejected and re-determined and the goods are liable for confiscation under Sec 111(l) & Sec 111(m) of the Act. Accordingly, SCN dt.23.07.2021 was issued with the aforementioned proposals with further proposal to confiscate the goods and impose penalty under Sec 114A, 114AA, 112(a), 112(b) and 117 of the Act. Mr. Sanjay Punjabi was made co-noticee – sole Director of Rax Trading Ltd and Proprietor of Rudra Overseas, proposing to confiscate the seized cash of Rs.34,82,000/- under Sec 121 of the Act as alleged sale proceeds of smuggled goods and further, impose penalty under Sec 114AA, 112(a), 112(b) and 117 of the Act.

The SCN was adjudicated on contest and the Impugned Order was passed by the learned Principal Commissioner of Customs, dropping the charges in the SCN with consequential benefits as aforementioned. Being aggrieved, Revenue is in Appeal, inter alia, urging that in Bill of Entry No.8216469 dt.20.07.2020, there are total 1212 brown corrugated boxes consisting of different products/ items. Table 2.2 of SCN shows the declared value and the comparable transaction value of identical goods with reference to description. For the said identical goods at different ports, much higher value has been declared than the value declared by PVE.

Further, in the said Bill of Entry at S.No.9, the description of goods is mentioned as free samples (promotion) 25Kgs and the Invoice PV 002 dt.01.07.2020 at S.No.9, the quantity mentioned as 3 pieces (25Kgs) and the price declared is 12.50 USD, whereas on physical examination of the same, it was found that physical quantities are not in tune with the declared quantities. Thus, the consignment was seized.

Follow up searches were conducted as aforementioned and there was seizure of (i) cash of Rs.34,82,000/- (ii) one Vivo 1811 model mobile with two sims of different IMEIs.

Statement of Mr. Hitesh Nagwani – Proprietor of PVE was recorded on 31.07.2020 and 14.06.2021, wherein, he, inter alia, stated that he was importing Nutritional Supplements along with Mr. Sanjay Punjabi up to November 2019. Thereafter, as the case was booked by the Customs against Rudra Overseas, he started to import through is own firm – PVE. He along with Mr. Sanjay Punjabi had imported 12 consignments in the name of Rudra Overseas and 4 consignments in the name of PVE. They were sharing the profits equally. He had sold the goods imported vide 4 Bills of Entry by PVE to (i) Rudra Overseas, Indore, (ii) Life Care Agencies, Indore, (iii) BDG, Delhi, (iv) The Nutrition Planet, Ghaziabad and (v) Hips and Shoulders, Bangalore; that other than Rudra Overseas, remaining parties are not related; that they usually negotiate prices on whatsapp group. Further, he stated that invoices pertaining to Rax Trading Ltd and Rudra Overseas were created in his laptop at Indore itself. The visiting cards of Rax Trading and Rudra Overseas have both their names printed with contact numbers. For export of goods by Rax Trading Ltd, Hong Kong, to PVE, the invoices were prepared and printed at Indore itself. On being asked about the logo difference of Five Stone General Trading LLC, Dubai on the invoice and the website, he stated that goods are actually not procured from Five Stone General Trading LLC and undervalued invoices were submitted to the Customs. Actually, he had contracted one Mr. Jawad for supply of Nutritional Supplements through Five Stone General Trading LLC.

In the statement recorded of Mr. Sanjay Punjabi on 14.06.2021, he had, inter alia, stated that Rax Trading is found jointly with Mr. Hitesh Nagwani for which invoices were printed and prepared at Indore itself. As regards query for difference in logo on the website and invoice of Five Stone General Trading, he stated that he was not aware of the website and the difference in logo.

Statement of one Mr. Omer Pasha, ‘H’ card holder of M/s RS Travels was recorded on 31.07.2020 of CHA firm, who, inter alia, stated that they used to receive documents for Customs clearance from the importers and have filed the aforementioned 4 Bills of Entry for labelling of the goods. In Customs supervision, labels are sent by importers through couriers.

On verification of samples collected and forwarded to Vision Labs, Malakpet for testing, which reported that samples comply with FSSAI regulations and the goods are fit for human consumption. It further appeared to Revenue that PVE have misrepresented the facts at ICD, Sanathnagar, Hyderabad that buyer and seller are not related persons. It further appeared that transaction value is not true transaction value in view of the parties viz., PVE and Rax Trading, being related and further, PVE selling the goods to Rax Trading also among others. Thus PVE, by not informing the related parties status, violated CVR, 2007, thus declared value was rightly proposed to be rejected and re-determined under Rule 5 of CVR, 2007. Further, he urges that in Para 28.9 of the Impugned Order, learned Commissioner has stated that there is prima facie suspicion but it is a matter of record that the legal status of Mr. Hitesh Nagwani – Proprietor of PVE cannot be considered as co-owner of Rax Trading Ltd, Hong Kong, which is owned by Mr. Sanjay Punjabi, merely because they travelled together or they had made certain mis-representations allegedly in visiting cards or for securing free accommodation or entry at certain events. Further, he urges that evidence on record indicates that Mr. Hitesh Nagwani – Proprietor of PVE is related to Mr. Sanjay Punjabi having interest in each other businesses. Learned Commissioner has erred in dropping the proposal of rejection of declared value and re-determination, demanding differential duty along with penalty etc. Accordingly, he prays for setting aside the Impugned Order and for confirming the proposal in SCN and/or remanding the matter to the Adjudicating Authority for re-determination.

Opposing the Appeal, learned Consultant for the Respondent – Mr. T. Chakrapani submitted that the Impugned Order is based on appropriate evidence, on examination of the allegations and evidence laid by Revenue and on correct application of the legal provisions. The Impugned Order is well reasoned and is a speaking order. The grounds of Appeal raised by the Revenue are more or less reiteration of the allegations in the SCN. The grounds do not raise any point of law in the application of the legal provisions. The Adjudicating Authority has considered each and every aspect of the allegations and the defence taken before him. He further urges that the Department has challenged the valuation of the subject imported goods on the ground that the Respondent and the exporter/ supplier are “related parties” and hence, there is a dent in the transaction value of the said goods in terms of Section 14 of the Customs Act, 1962 and accordingly, the value of the said goods has been sought to be re-determined on the basis of the contemporaneous imports in accordance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. He further urges that the demand of differential duty has been worked out in respect of earlier three consignments under Sec 28 of the Act. Further, no demand has been worked out with reference to live consignment (assessed provisionally).

Further, he urges that based on the pleadings of the Revenue, the following issues arise for determination.

i. Whether the Ld. Adjudicating Authority failed to appreciate the evidences on record in sustaining the allegations/ the issues raised in the SCN.

ii. Whether the issues raised under the said SCN can be considered as valid and legal notwithstanding the allegations of failure on the part of Ld. Adjudicating Authority in considering the evidences while passing the impugned OIO.

Primarily, we note that the Ld. Adjudicating Authority had infact considered all the evidences, as per the SCN, and provided his categorical findings on each issue. Regarding technical grounds, as contested by the Noticee/ present Respondent, we find that the Ld. Adjudicating Authority had discussed the issues of “proper officer” in terms of the ratio of the decision of the Hon’ble Supreme Court of India in the case of M/s Canon India Pvt. Ltd Vs. Commissioner of Customs, in Civil Appeal No. 1887 of 2018; “proper officer” in terms of Section 2(34) of Customs Act, 1962; non-application of mind by the Notice issuing authority; non-challenging of the assessment, already made by Custom Authorities, without preferring an appeal under Section 128 of the Act ibid; reopening of assessment of the Bill of Entry by way of issuance of SCN. We note that the technical issues have gained the status of academic discussions and therefore, we shall deal with the same after discussions on merits.

On merits, we find that the Ld. Adjudicating Authority had evaluated the evidences on record vis-à-vis the allegations, by examining the issues as reproduced below: -

“a. Whether there is sufficient material on record of the proceedings to prove that the parties involved are 'related persons’ within the purport of Customs Act and the rules made thereunder.

b. Whether, in the event of the enquiry in respect of the above point being in the affirmative, there is evidence on record to prove that such relation had influenced the price of the goods in question.

c. Whether, there are sufficient evidences on record to conclusively establish that the transaction values declared are influenced by their mutual relationship & thus liable to be rejected before resorting to the provisions of Rule 5 of customs valuation rules, adopting values of similar goods.

d. Whether the goods belonging to other importers, whose values had been considered for comparison to arrive at the value of the goods in question, fall within the realm of ‘similar goods' as contemplated in the Customs Act and the rules made there under.”

Ld. Commissioner goes on discussing each issue, as above, vis-à-vis the evidences brought out in the SCN, which can be summarized to state that: -

i. Floating of companies/ firms by Shri Hitesh Nagwani and Shri Sanjay Punjabi, sharing of profits between them, non-intimation of being related party transactions to the Customs.

ii The role of M/s Five Stone General Trading LLC, Dubai, whether they are the actual exporters or not.

iii. The fact of re-assessment by Assessing officer at the said port of the past three consignments, against the declared Transaction Value by the Respondent/ Importer;

iv. Visiting card in the name of M/s Rudrass Overseas, Indore and M/s Rax Trading Ltd., Hong Kong, displaying the names of Sri Hitesh Nagwani and Sri Sanjay Punjabi and their Phone numbers.

v Declaration by them Sri Sanjay Punjabi as Proprietor & Sri Hitesh Nagwani as CEO of the firm M/s Rudrass Overseas, 228, Vinay Nagar, Old RTO Road, Indore, in the Application for free accommodation at the IWF Shanghai 2019.

vi. Declaration by them, as Directors of M/s Rax Trading Limited Hong Kong in Procurement Meeting Application Form of IWF, 2019, China (Shanghai) International Health, Wellness and Fitness Expo dated from 07-09 March 2019.

vii. The relevance of Bill of Lading BL No TSV AEJEA19122342 and BL No TSV AEJEA 20012128 submitted by the respondent to Customs in respect of Bill of Entry 6426756 dated 10.01.2020 & Bill of Entry 6839301 dated 11.02.2020, for goods received from M/s Rax Trading Ltd, Hong Kong, whereunder, the name of the shipper is mentioned as M/s Five Stone General Trading LLC C/o M/s Rax Trading Ltd. Hong Kong, Dubai, UAE.

viii. Further, certain documents such as Airway Bill/ Bill of Lading pertaining to M/s Rax Trading Ltd, Hong Kong, (Pertaining to case of M/s Rudrass Overseas) submitted to Customs wherein the shipper was mentioned as Jawad Ahmed C/o Rax Trading Ltd. Dubai, UAE, and in another instance the shipper is mentioned as M/s Five Stone General Trading LLC C/o M/s Rax Trading Ltd. Hong Kong, Dubai, UAE, indicating that Mr. Jawad and M/s Five Stone General Trading LLC, are related to M/s Rax Trading Ltd.

ix. Shri. Hitesh Nagwani, Respondent, in his deposition dated 31.07.2020 before the DRI officers, inter-alia, admitted that he along with Sri. Sanjay Punjabi had imported 12 consignments in the name of firm M/s Rudras Overseas and four consignments in the name of M/s P.V Enterprises and the profit earned, was shared equally between him and Sri. Sanjay Punjabi who owned M/s Rudras Overseas and M/s Rax Trading, Hong Kong.

Based on the above evidences, the Ld. Adjudicating Authority had concluded as reproduced below: -

“28.9. In this regard, I find that the investigative outcomes cited at (a) to (c) above, can in no way constitute legal grounds for bringing home the allegation of related party transactions conclusively influencing the transaction values in the imports made, while the same may at best prima facie arouse suspicion in that regard which would necessitate further investigation. It is also a matter on record that the legal status of Sri. Hitesh Nagwani, the proprietor of the noticee firm cannot be considered as a co-owner of M/s Rax Trading Hong Kong owned by Shri. Sanjay Punjabi, merely because they travelled together or they had made certain mis-representations allegedly in visiting cards or for securing free accommodation or entry at certain events. These instances cannot suffice to legally infer co- ownership or related parties transactions influencing the transaction values.

28.10. The allegation of being ‘related’ has a specific legal connotation in terms of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Rule 2(2) of the said rule reads as follows:

For the purpose of these rules, person shall be deemed to be "related" only if:

(i) they are officers or directors of one another's businesses;

(ii) they are legally recognised partners in business;

(iii) they are employer and employee;

(iv) any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them;

(v) one of them directly or indirectly controls the other;

(vi) both of them are directly or indirectly controlled by a third person;

(vii) together they directly or indirectly control a third person; or

(viii) they are members of the same family.

I find that (i), (ii) & (v) find relevance to the case in hand & the applicability of each one need to be examined in detail to arrive at any conclusion as to whether the case in hand involves Related person transactions at all or not.

Rule 2(2)(i) whether they are officers or directors of one another businesses? 3 Consignments are imported from Rax Trading Hong Kong by PV enterprices& 1 consignment is imported from Five Stone General Trading LLC Dubai by PV Enterprises. As per the records available Sanjay Punjabi is the sole Director of Rax Trading Hong Kong. One Mr. Jawad, the sole representative of Five Stone LLC Dubai has confirmed that m/s Five Stone has no relations with that of either Rax Trading or PVE. Further Mr. Hitesh Nagwani is the sole proprietor of PV Enterprises. Thus, all three are not fitting into the criterion laid down under above clause of Related Persons.

Rule 2(2)(ii) Whether They are legally recognized partners in business?

As discussed above the one Indian importer & two foreign supplier firms have no legally recognized partners in the business of each other. Thus all the three are not fitting into the criterion laid down under above clause of Related Persons also.

Rule 2(2)(v) whether one of them directly or indirectly controls the other? There has nothing been conclusively brought on record that one of them was directly or indirectly controls the other. However, this clause need to be further examined in detail, given the insinuations that Sanjay Punjabi is the sole Director of M/s. Rax Trading & also he is the sole proprietor of M/s. Rudras overseas Indore (buyer of PV Enterprises).

28.11. From the foregoing, it is clear that for the deeming fiction of being related to come into play, the material on record of the proceedings should invariably support existence of one of the situations enumerated at 2(i) to (viii). As already stated herein above, the investigative outcomes enlisted above herein, do not support any such inference for reasons elucidated herein, in the preceding paragraphs.

………………………………………..

28.16. Had the show cause notice based it’s allegations on the basis of availability of real invoices, if any, having the correct/higher value etc. or financial records/documents or some other evidence proving financial flow back of the undervalued consideration to the seller either through banking or non-banking channels, then it would have been a foolproof case of the Department. I find that no such evidence had been relied upon in the impugned show cause notice and the proposals in the show cause notice to reject the transaction value on the basis of non-financial peripheral circumstantial records available in bits & pieces and arrive at the new value are solely in terms of Rule 5 of the Customs Valuation (Determination of value of Imported Goods) Rules, 2007. Further to examine the aspect of undervaluation by way of related party transactions, I prefer to verify the sale values of imported goods from M/s Rax Trading Ltd, Hong Kong to M/s Rudras Overseas and other independent buyers by M/s PVE. This will help in understanding the allegation of undervaluation with proper reasoning.”

Further, regarding the statement of Shri Hitesh Nagwani, the Ld. Adjudicating Authority had also observed that:-

“28.7 (e)………………………(However, this deposition was retracted by letter dated 02.08.2020 and in subsequent deposition dated 14.06.2021, nothing similar to the inculpatory contents contained in the first deposition dated 31.07.2020 could be elicited)”

Having considered the rival contentions, we find that the Ld. AR, while assailing arguments reiterating the allegations as per the SCN has not made any submission on the aforesaid observations of the Adjudicating Authority. From the above, it is understood that the Adjudicating Authority has thoroughly examined the facts on record giving a categorical observation that Shri Sanjay Punjabi is the sole Director of M/s Rax Trading Limited, Hong Kong and that Shri Hitesh Nagwani is the sole proprietor of PV Enterprises. Nothing has been brought on record to contradict the aforesaid observations of the Adjudicating Authority. Hence, in the absence of any evidence to the contrary, we do not find any reason to interfere with the conclusion arrived at by the Ld. Adjudicating Authority.

As regards the issue of fabricated invoices/ original invoices etc. the Ld. Counsel for the Respondent, brings it to our notice that the case of the Department regarding re-determination of transaction value of the subjected imported goods is not based upon such alleged fabricated invoices but the same is based upon the contemporaneous imports wherein data pertaining to other importers during the relevant period, has been considered for arriving at re-determined transaction value of the subject goods. He concludes by submitting that the issue of fabricated invoices is thus, no longer resintegra as the Department itself have not considered the same as evidence against the Respondent for the purposes of arriving at the valuation of the subject goods apart from the fact the issue of alleged fabrication of invoices was related to the investigations by the DRI, Indore in the case of M/s Rudras Overseas and not related to M/s P.V Enterprises. We observe that the case of M/s Rudras Overseas was pertaining to the period prior to the subject imports of M/s P.V Enterprises/ Respondent and therefore the allegations fabricated invoices is not a matter of relevance in the instant case. In this regard, the Ld. AR also agrees to the fact that though such fabricated invoices had been relied upon to allege under-valuation of the said goods but re-determination of value of imported goods has not been made on the basis of such invoices but based upon the contemporaneous imports. In fact, it is a now matter on record that no fabricated invoice or no invoice said to be original, has been relied upon in the instant case to support the elements of “related person” and consequent alleged undervaluation, as rightly observed by the Ld. Adjudicating Authority vide para 28.16 of his order, reproduced supra. In such a situation, we have no option but to accede to the submissions made by the Ld. Counsel for the Respondent since the valuation of the subject imported goods has not been done on the basis of the so-called fabricated invoices, hence, cognizance of the same cannot be taken to prove the allegations against the Respondent.

It is also argued that the Ld. Adjudicating Authority had not considered the forensic analysis of the laptop of Shri Hitesh Nagwani, seized during the search, wherein, the invoices etc. were retrieved in the name of M/s Rax Trading Limited, Hong Kong, as supplier and M/s P.V Enterprises/ Respondent, as Importer. Albeit, the issue was covered by the Ld. Adjudicating Authority vide para 28.16 of his Order, however, the consultant appearing for Respondent drew our attention to the basic fact that para 4.2 of the SCN refers to about the case of M/s Rudras Overseas by DRI, Indore and the searches and the retrievals thereof were with reference to M/s Rudras Overseas, as supplier and M/s Rax Trading Limited Hong Kong as supplier and M/s Rudras Overseas as importer and not M/s P.V Enterprises as importer. It was also claimed by the Ld. Consultant that the officers of the DRI, Indore, recovered certain documents vide Panchnama dated 31.07.2020 from the premises of M/s P.V Enterprises/ Respondent and also recovered certain mobiles vide Panchnama dated 31.07.2022 from the premises of M/s Rudras Overseas, Indore, however, neither the said documents, nor the information as per the mobiles were relied upon in the instant case. On the contrary, since, the claim of the Respondent is based on record, thus, the arguments that there were some fabricated invoices, with reference to M/s P.V Enterprises, as importer, during the investigations in the case of M/s Rudras Overseas, Indore, is totally a false claim on the part of the Appellant.

Hence, we are unable to accept the claim that the Ld. Adjudicating Authority did not pass a speaking order with reference to the evidences on record or that he had failed to appreciate the given evidences, as per the impugned SCN.

The Ld. AR drew our attention to para 29.4 to 29.11 of the subject OIO in asserting that the observations of the Ld. Adjudicating Authority are not tenable - that the subject SCN failed to bring out the comparison of values of similar goods, rationally. It is their case that para 2.2, 15.4 and 15.6.1 of the subject SCN provides adequate information, documentary evidence to prove the contra. He further argues that comparison of transaction values as shown in the SCN reveal that the values declared at other ports by the other importers for similar goods are much higher than the transaction value declared by M/s P.V. Enterprises, which clearly established under-valuation of imported goods; that the value of similar goods- nutritional supplements imported by other importers at or about the same time, with same brand, same manufacturer, same country of origin and similar description, comparable commercial quantities etc was taken for purpose of re-determination of transaction value in terms of provisions of Rule 5 of CVR, 2007; that the same stands supported with the images of corresponding Bills of Entry pertaining to such similar goods as reproduced in the SCN; that the value has been re-determined correctly in accordance with Rule 5 of CVR, 2007; that the evidences put forth by the investigating authority with regard to the values adopted on comparable imported goods clearly points out the act of mis-declaration of value resorted to by the importers.

We observe that the issue of re-valuation of the subject goods would arise only in a situation wherein it is proved on record that the provisions of Section 14 of the Customs Act, 1962 are not satisfied. The entire case of the Department to dispute the transaction value declared by the Respondent was based upon the issue that the buyer and seller are related parties. However, it has already been concluded supra, that this issue has not been proved on record. Hence, in the absence of there being any related angle involved in the case, prima facie, there exists no cause to dispute the values declared by the Respondent or to re-determine the value of the subject imported goods in terms of CVR, 2007.

Further, on analysing the subject SCN and subject OIO, we understand that the issue of undervaluation has been finally concluded with reference to comparable Transaction Values of similar goods, declared by other importers as per information contained under para 15.6 to 16.4 of the SCN, along with the relevance of the specific Bills of Entry of other importers contained in the Annexures- C1 to C24. The Ld. consultant for the Respondent argued that the Ld. Adjudicating Authority had amply provided as to why the said Bills of Entry of other importers cannot be considered for comparison purposes of similar goods imported, with reference to para 29.3 to 29.9, as reproduced below: -

“29.3. I find that the rationale adopted in applying Rule 5 of Customs Valuation Rules, 2007, is given each product-wise and Bills of entry wise. The same is available at paragraph 15.6.2 of the impugned show cause notice, bills of entry- wise as follows:

S.no.

Bill of entry

Date

Paragraph in SCN

Remarks

1

6426756

10.01.2020

15.6.2 (i) to (ix)

BE already re- assessed once and value Enhanced

by proper officer

2

6839301

11.02.2020

15.7.2. (i) to (iv)

-do-

3

7952776

19.06.2020

15.8.2 (i) to (iv)

-do-

4

8216469

20.07.2020

15.10 (i) to (viii)

Goods seized by DRI and provisionally released

29.4. I find that the above comparison made in the impugned show cause notice in respect of goods in respect of the Four Bills of entry are under the aegis of the allegation that the goods imported under the above Bills of entry are ‘Similar goods’ and recourse had been taken to Rule 5 of the Customs Valuation Rules, 2007. I find that the phrase 'similar goods' is defined at Rule 2(f) in the said Rules, which reads as under

“Similar goods” means imported goods

(i) which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark;

(ii) produced in the country in which the goods being valued were produced; and

(iii) produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person, but shall not include imported goods where engineering, development work, art work, design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods;

29.5 From the above, definition, it is abundantly clear that for such comparison to be legally permissible, the goods to which the imported goods are to be compared shall be constituent of like characteristic and component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being regard to valued having regard to the quality, reputation and the existence of trade mark. I also find that the exercise of comparision should also take into account country of manufacture, particulars of the manufacturer.

29.6. From the foregoing requirements, it is amply clear that the statutory contemplation requires that the exercise of comparison should taken into consideration important aspects like Brand, country of manufacture etc., Strict adherence to these requirements, is a sine qua non for any exercise of comparison to have legal sanctity.

29.7. A careful examination of the effort made in the impugned show cause notice at paragraphs, mentioned at the table supra would clearly reveal that there is no material in the impugned show cause notice to suggest that the exercise had taken into consideration very important issues like brand, ingredients, country of manufacturer etc., On the contrary, as can be seen from the careful reading of the details at tabular columns given at paragraphs cited supra.

29.8. For example, with respect to BE No. 6426756 dated 10.01.2020 given at paragraph 15.6.2 (i), the goods imported by the noticee had been described as ‘Nutrition supp on Whey Protein Isolate 5.2 Lbs.’ The same has been compared to goods whose description has been given as ‘on 100% Whey Gold 5 lbs. (Nutritional supplements). Thus, the goods imported by the noticee is based on whey protein isolate and the goods have been compared to goods based on 100% Whey Gold supplements; (ii) the goods imported by the noticee had been described as ‘Nutrition Supp Isopure Low Carb Whey Protein 3 LBS. The same has been compared to goods whose description has been given as ‘Isopure India Low Carb GF/LF 1.36 Kgs (Nutritional supplem). Thus, the goods imported by the noticee is based on Isopure Low carb whey protein and the goods have been compared to goods based on Isopure India low carb GF/LF; (iii) the goods imported by the noticee had been described as ‘Nutrition supp on Gold Standard 100% Whey Protein 5 LB’. The same has been compared to goods whose description has been given as ‘on 100% Whey Gold 5 lbs. (Nutritional supplements). Thus, the goods imported by the noticee is based on Gold Standard 100% whey protein and the goods have been compared to goods based on 100% Whey Gold; and (iv) the goods imported by the noticee had been described as ‘Nutrition supp DYM Glutamine 300 Gms. The same has been compared to goods whose description has been given as Health Supplements- Glutamine 60S 300G – 60 Servings. The goods imported by the noticee is based on Nutrition Supplement DYM Glutamine and the goods have been compared to goods based on Health Supplements-Glutamine 60 Servings;

Thus, one can cogently conclude that the goods whose values are proposed to be adopted for the purpose of adopting the value as similar goods U/R 5 are actually not the similar goods at all.

29.9. There is no material in the impugned Show cause notice in respect of the goods being compared to as regards the statutory essentials like Brand of the goods, details of manufacture and country of manufacturer. This has been the case with the entire exercise of comparison given in the impugned show cause notice.

The crux of the decision by Ld. Adjudicating Authority in the context is that the SCN failed to suggest that there is material on record that a proper exercise had been taken into consideration on the issues like, brand, ingredients, country of manufacturer, etc. The Ld. Adjudicating Authority had further exemplified his decision with reference to certain Bills of Entry, as detailed under para 29.8 of the subject OIO, as already reproduced above. We find that the issue of comparison is indeed not based on the issue of identical goods but is based on similar goods. However, the information contained in the SCN along with the referred annexures, as claimed by Ld. AR prima facie does not contain the comparison and the similarity thereof, with reference to the item description, as rightly observed by the Ld. Adjudicating Authority. Infact, the Annexures contained the details of item description, as if it is the same or similar in the subject Bills of Entry of the Respondent and that of the other importers. It was quintessential for the Appellant to have been specifically explain as how the description, if not identical, is similar in nature, description, contents, etc. Hence, by merely stating that the description is similar in the Bills of Entry under comparison, is to be considered as a bald statement sans evidence. However, having observed so, we do find that the observations of the Ld. Adjudicating Authority are not correct with reference to the country of manufacturer, as the same has been provided in the Annexures, as well as in the narrative part of the SCN. Nevertheless, this observation is not sufficient enough to compare the values in order to confirm the aspects of undervaluation.

Hence, we are of the considered opinion that the Transaction Values of the other importers cannot be considered for the purposes of redetermination of Transaction Value in terms of Rule 5 of CVR, 2007. Accordingly, the referred case laws stand distinguished.

The Ld. AR argued that the findings of the Ld. Adjudicating Authority with reference to sale prices of some of the impugned imported goods, sold by M/s P.V Enterprises/ Respondent to M/s Rudras Overseas and other independent buyers is out of context in deciding the matter of undervaluation of the imported goods. The Ld. Consultant, referred to para 14(iii) of SCN, which is reproduced below, in support of his claim that the issue of after sales was brought out in the SCN itself in order to prove the transactions to be “related” and does not pass the test of an arm’s length transactions: -

“14. Rejection of Value declared:

iii. Some items so imported by PVE from M/s Rax Trading Ltd, have been in turn sold to M/s Rudras Overseas, Indore. M/s Rax Trading Ltd, and M/s Rudras Overseas are owned by the same person i.e., Sri Sanjay Punjabi, which makes the transaction related and does not pass the test of arms length transaction.”

Moreover, we note that the seizure of cash at the residence of Shri Sanjay Punjabi vide Panchnama dated 31.07.2020 has been made out, as if it is the sale proceeds of food supplements, imported by M/s P.V Enterprises/ Respondent and therefore, apparently, it is the case of the Department that the sales of the imported goods by M/s P.V Enterprises had direct connection with the seized cash as well as to prove the transactions to be “related”. Hence, we do not find any infirmity in the discussions carried out by the Ld. Adjudicating Authority under para 28.17, as the same is the integral part of the SCN as well as of the defence submissions along with documentary evidences as detailed under para 26.7 of the subject OIO.

Regarding confiscation of the goods of the live consignment, the Ld. AR argued that the Panchnama dated 29.07.2020, drawn at the said port confirms that the subject goods were largely undervalued and also that some of the goods were mis-declared in description and quantity with specific reference to the items listed at Sr. No. 9 mentioned as free samples. In the context of undervaluation, it is noted that the reference was drawn to certain comparable prices, declared by the importers at other ports. The Ld. Consultant submitted that there is nothing on record in the Panchnama about such Bills of Entry of other importers and common description of the goods to be considered as identical or similar in nature and description and that the said seizure was not based on any “related” transactions, as stated in para 2.2 of the SCN but was only based on alleged undervaluation. On perusal of the said Panchnama, we note that the comparable transaction values have not been substantiated based on any documentary evidences or by referring to the specific Bills of entry and the other details of description, brand name, quantity, etc. in the said Panchnama. Hence, the basis of seizure itself is improper, with reference to the alleged undervaluation on comparable prices. The issues related to minor infractions of descriptions and quantities with reference to products listed at Sr. No. 9 of the Bill of Entry, we note that the same does not have any impact on the allegations of the undervaluation, which was principally, basis for the seizure.

Now referring to the question whether the issues raised under the said SCN can be considered as valid and legal notwithstanding the allegations of failure on the part of Ld. Adjudicating Authority in considering the evidences while passing the impugned OIO, we are of the considered opinion that the basis of the allegations pertaining to the comparable prices, as per the referred Bills of Entry of the other importers, as already stated above, do not sustain, as rightly observed by the Ld. Adjudicating Authority vide paras 29.7 to 29.10 of the subject OIO and therefore, the subject OIO is upheld in toto.

Having observed so, we would dwell upon certain technical issues, raised in the subject appeal.

The Ld. AR contested about the order for release of seized cash from the residence of Shri Sanjay Punjabi. As already observed above, the issue of Shri Sanjay Punjabi is no longer res-integra in the present appeal, as Shri Sanjay Punjabi was not made a respondent in the entirety of the case. Hence, by merely stating or contesting about the role of Shri Sanjay Punjabi in the present appeal, will not survive, as no appeal has been preferred by the Department against the OIO with reference to the role of the Shri Sanjay Punjabi, as a Respondent individually or even jointly. It would not be out of context to mention here that since, Shri Sanjay Punjabi has not been made a Respondent, he is denied of natural justice in offering his defense submissions. Hence, we refrain from any discussions on the contentions raised with reference to the Order related to Shri Sanjay Punjabi/ Co-Noticee. In other words, it is now deemed that the findings, with reference to Shri Sanjay Punjabi, as Co-Noticee have attained finality, as rightly claimed by the Ld. Consultant for the Respondent, especially in terms of alleged collusion and conspiracy between Shri Hitesh Nagwani and Shri Sanjay Punjabi.

The Appeal Memorandum also repeatedly refers to about the case in the SCN issued to M/s Rudras Overseas, Indore, and also to M/s P.V Enterprises/ Respondent in the instant case, in order to prove the existence of transactions to be related even in the present case. Specific attention was drawn to the modus operandi, said to have been evolved by both Shri Sanjay Punjabi and Shri Hitesh Nagwani, representing their respective firms. Reliance was also made upon the statements recorded under Section 108 of the Act ibid and the importance thereof, with reference to the referred case laws. The Ld. Consultant contested the same vehemently in drawing attention to the basic fact that the imports of and by M/s Rudras Overseas, Indore, were during the period of 2019, when M/s P.V Enterprises was never an Importer, during the said period; that the Respondent importer/ M/s P.V Enterprises had infact imported at the said port only in 2020. In other words, it is his argument that the allegations contained in the case of M/s Rudras Overseas, Indore, including the resumed and retrieved documents, as claimed, cannot be considered in the instant case against M/s P.V Enterprises/ Respondent, as they were never importers under the Act ibid during 2019 and since, the events of M/s Rudras Overseas, Indore are a matter of period prior to the period covered in the instant case. In this context, primarily, we note that the case of M/s Rudras Overseas Indore is totally independent case, involving the present Importer/ Respondent as the co-Noticee in the said case. Secondly, the Ld. AR failed to convince us as to how the facts and figures, allegations and the evidences of a prior period can be used against the Respondent in the later period, when they were never the importers in the said prior period. Hence, the arguments are legally not tenable.

The Ld. AR raised the issue of the referred judgement of Canon India, which we find is totally not a matter of concern in adjudicating the present case, as the Ld. Adjudicating Authority had already gave his categorical findings, as to why, the said judgement is squarely not applicable in the instant case under para 28.2 of the impugned OIO. While we do not want to comment upon the decision of the Ld. Adjudicating Authority on this issue, at the same time, we also note that the Ld. Consultant appearing for the Respondent had submitted that he had not filed any counter arguments with reference to the said decisions. Hence, the matter of the applicability of the said judgement of Canon India, is no longer a matter of contention in the instant case on the part of the Appellant.

The dispute regarding “related party” transactions, have also been alleged, even in the case of direct import from M/s Five Stone General Trading LLC, Dubai in the case of live consignment, the Ld. AR argued that as per the investigations, it was noted that the said company was not dealing in any nutritional supplements as was evident from the website of the said company; that the logo of the said company printed on the invoice of M/s P.V Enterprises, Indore and the logo as per the website are different; that one Mr. Jawad and M/s Five Stone General Trading LLC, Dubai appeared to be related to M/s Rax Trading Limited, Hong Kong and therefore, the earlier consignments routed through M/s Five Stone General Trading LLC, Dubai, as shipper, and M/s Rax Trading Limited, Hong Kong as supplier to be considered as “related parties”. The Ld. Consultant brought to our notice the observations of the Ld. Adjudicating Authority vide para 31 of the subject OIO. On perusal of the same, we find that the Ld. Adjudicating Authority had precluded himself from further discussions on the issue, though, he admitted that, as per the email dated 27.07.2021 of M/s Five Stone General Trading LLC, Dubai, based on inquiry caused by DRI, HZU by email correspondence dated 16.07.2021, confirmed that they had supplied the goods to M/s P.V Enterprises, Indore. We are of the considered view that this aspect ought to have been included in the subject Show Cause Notice, as the fact of sending email correspondence by DRI, HZU has not been rebutted or claimed to be incorrect by the department, for fair process of raising allegations and for providing opportunity of defense. No doubt, the Ld. Adjudicating Authority had abstained himself in conferring any decision on this aspect, claiming that the reply was received after the issuance of SCN but we do realise that the forwarding the email correspondence was never under dispute. Hence, we disagree with the observations of the Ld. Adjudicating Authority, nevertheless, since, the issue has been decided on merits, we leave this issue as such.

Thus, having considered the rival contentions and grounds of the appeal and on perusal of records, we find that there is no error in the impugned Order-in-Original. Accordingly, we dismiss this appeal by Revenue.

Appeal dismissed.