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Mr. Ka Yu Terence (1) M/s Global Enterprise Co
(2) M/s Kamsun Development
International Ltd.
The details above clearly show the inter-relationship between the Singapore
based firms. It also brings out clearly the common interests shared by the Directors of
the above firms, with AEL and its group companies as..
(a) Shri Joseph Selvamalar, the Director of M/s. Orchid Overseas Pte Ltd,
Singapore, M/s.Emperor Exports Pte Ltd, Singapore and M/s.Gudami International
Ftc Ltd, Singapore is also a Director of M/s.Adani Global Pte Ltd, Singapore as per the
r.solution of the Directors of Adani Global Pte Ltd.
(b) Further, the contracts between M/s Gudami International, Singapore with
AEL and other 5 companies have been signed by this Ms.Mary Jopseph in the
capacity of Director. Ms. Mary Joseph, the employee of Adani Global Pte, Singapore is
also the Director of M/s. Gudami International.
(c) Further, as seen from the document recovered under panchnarna
dtcl.22/ 12/2005 from the premises of AEL, Shikhar Building, Ahmedabad [RUD-25]
Shri Chang Chung Ling, the Director of M/s Gudami International, Singapore is also a
Shareholder Director of M/s Adani Global Ltd, Mauritius and M/s Adani Global Pte,
Singapore which are the wholly owned subsidiary of AEL.
(d) Also the fact that Shri Joseph Selvamalar and Shri Chang Chung Ling are
the directors of M/s Adani Global Pte, Singapore arid /or Adani Global Ltd,
Mauritius is also evident from the balance Sheet of AEL for the year 2000-2001, for
the year 2004-05 and the balance sheet of AEL for the year 2005-2006 wherein Shri
Joseph Selvamalar and Shri Chang Chung Ling are shown as the directors of M/s
Adani Global Pte, Singapore, along with Shri Vinod Shantilal Shah, brother of the
Chairman and the Managing Director of AEL. Moreover in the said Balance Sheet for
2000-2001 Shri Chang Chung Ling is shown to be the director Adani Global Ltd,
Mauritius alongwith Shri Vinod Shantilal Shah and others. Further as per the
balance sheet for the year 2000-2001, M/s Adani Global Ltd., Mauritius is the wholly
owned subsidiary of AEL, Ahmedabad and Adani Global Pte Ltd. and Adani Global
FZE are the wholly owned subsidiaries of Adani Global Ltd, Mauritius.
It was also seen from the Email dtd.23/ 1/2006, that Ms.Mary, an employee of
M/s Adani Global Pte, Singapore was also the authorized person, or rather the Director
as is discussed in paragraph 8.5 (b) above, of M/s.Gudami International, Singarpore.
"From: " Hiren Padhya" <hiren@adanigroup.com>
To: "'Sunil Shah' <smshah@adanigroup.com>
Cc: "'Ashish Chauudhary'" <ashishc@adanigroup.com>,
"mukesh" <mukesh@adanigroup.com>
Subject: AEL GUDAMI CONTRACTadvance payment
Date: Mon, 23 Jan 2006 16:08:03 +0530
Dear Sunilbhai,
As per our teletalk, pl get this agreement signed by Gudami's authorised
person (may be Ms. Mary) and send me signed scanned copie to me and
Ashish so that another signature can be made from AEL.
IIiren Padhya"
It was said to have established that M/s. Gudami International, Singapore was
directly/indirectly owned by AEL only. Therefore, all the transactions between AEL
and the other 5 companies and Gudami International would require to be treated as
transactions between related firms wherein one has interest in the other.
Consequently, the transactions of AEL and the other 5 companies with Gudami
International cannot be termed as transactions in the normal course of international
trade.
1.5.6 Apart from the Hong Kong and Singapore based firms, the import and export of
C PD also involved firms based in UAE. Though the Directors/Partners/Proprietors of
these firms were mainly persons of UAE origin, the activities relating to the trade in
C PD with AP_I_ and group companies of these firms were controlled by AEL through the
•](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-19-320.jpg)
![30
the Show Cause Notice however for the sake of brevity the same are not bcii ig
reproduced here. However the gist of these e mails is:
The user ID and Password for GOLD STAR FZE,User ID : 361428 ay d
Password : 496990 was forwarded by mail, which made it quite obvious that the biu-.k
account of M/s. Gold Star FZE was controlled and operated by AEL through the
personnel of its overseas subsidiary Adani Global, Dubai and Singapore. This fact d
also been confirmed by Shri Bhavik Shah, Senior Vice President of M/s.Adani Agro Pvt
Ltd, Ahmedabad and Incharge of Treasury Desk of AEL in his statement recorded (_,n
8/1/2007. In his statement he stated that the aforesaid e mail was about Intein:q
banking sent by Ms. Mary Joseph of M/s. Adani Global Pte Limited, Singapore .o
Rakesh. Shah, Dubai, Bhavik and others and copy was marked to him and others.
The same was forwarded by Ms. Mary to facilitate the banking transaction of Gold Star
FZE by the staff of Adani Global FZE / Adani Exports Ltd. Further messages as suer.
(I) "Now Gold remittance is over at our end. We will start diamond documents
remittance, we will start with Excel global' dubai from Hinduja. This is for
your information only" - Vipul Desai"
(II) "Please transfer daily 3 to 4 mio to RAK Excel A/c and STOP remitting to
UAB A/C" - Savan
(III) " Please note A/c number of Excel Global Limited's A/c with RAK Bank
0012-765195-USD AED This is for your information please - K
Sudhakar
(IV) Subject: NO FUNDING OF SHINE JEWELLERY TO BE DONE IN BANK OF
BARODA, DUBAI
With regard to the subject matter we would like to inform you that no
further payment should be made TO THE ACCOUNT OF SHIT E
JEWELLERY FZE, WITH BANK OF BARODA, DUBAI, until further
instructions regarding the same is received from our end. In case of any
emergency please consult Mr.Rakesh Shah for any decision regarding the
same -manoj"
(V) "With reference to following message, Absa Bank has asked us to
some alternative arrangement for financing our trade transaction as they
will not be able to take up transactions after one month from now. They
will also not be able to do any back to back transaction for Gudami Intl
for capital goods Also we have to open A/c of Gudami Intl with other
bank for our Diamond transactions
(VI) "This mail is with respect to opening of Daboul Trading a/c at UBS for
transfer of shares.
I have raised certain queries for UBS people (Andrew Cumming) to answer. It
would be better if we are doubly sure about the structure of transaction My
personal assessment is that we will be able to open the a/c by 30th
November (date as promised to you by Bhavikbhai and me). Coming to the
cost front, if 4.99 % of holding is shifted to Daboul i.e 10978 cr shares of Rs
60 each or Rs 65.868 crs or $14.6 million (@ Rs 45.10), then the cost would
be
a. 1.5% on the first $10 million = $0.15 million
b. 1% on the remaining $4.6 million = $0.046 miilion
So the total cost would be $0.196 miilion or Rs 90 lakhs plus brokerage
costs. Another important point is that the charge would be levied at the e]id
of every quarter and on the market value of the shares held. i had a tLlk
with Rajiv Maheshwari yesterday and if you could put in a word about the
cost reduction in charges.
Regards
Kaushal"
To summarise, the above mails : -
a. The bank account of M/s. Gold Star FZE, UAE who is shown to be
supplier of CPD to AEL and group companies is under the control and being](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-22-320.jpg)
![56
•
LTD.,
6.5
PNJ 030991
25/09/2
004
D CUT LB
NATTS PK
0.01-
0.45
2288.
01
PNJ Trading
6.5.1
AEL/PBW/PD/5
06/2004-2005
30/09/2
004
D CUT LB
NATTS PK
0.14-
0.45
649.2
0
M/S. GUDAMI
INTERNATIONA
L PTE. LTD.
6.5.2
AEL/ PBW/ PD / 5
07/2004-2005
30/09/2
004
D CUT LB
NATTS PK
0.01-
0.14
1638.
81
M/S. GUDAMI
INTERNATIONA
L PTE. LTD.
6.6
873-
DBL/PD/2004
03/10/2
004
D CUT LB
NATTS PK
0.01-
0.45
2306.
29
DABOUL
TRADING Co.
(L.L.C.)
6.6.1
AEL/PBW/PD/5
27/2004-2005
06/10/2
004
D CUT LB
NATTS PK 0.10-
0.45
1251.
16
M/S. KAMSUN
DEVELOPMENT
INTERNATIONA
L LTD.,
6.6.2
AEL/ PBW/ PD / 5
28/2004-2005
06/10/2
004
D CUT LB
NATTS PK 0.01-
0.12
1055.
13
M/S. KAMSUN
DEVELOPMENT
INTERNATIONA
L LTD.,
6.7
PNJ 030995
08/10/2
004
D CUT LB
NATTS PK
0.01-
0.45
2310.
3
PNJ Trading
13.7.1
AEL/PBW/PD/5
53/2004-2005
12/10/2
004
D CUT LB
NATTS PK
0.01-
0.12
1392.
03
CHOKSEY
DIAMONDS
(L.L.C.)
1).7.2
AEL/PBW/PD/5
52/2004-2005
12/10/2
004
D CUT LB
NATTS PK
0.12-
0.45
918.2
7
AL SHAHAD
GOLD 86
JEWELLERY
1).8
PNJ 031012
12/11/2
004
D CUT LB
NATTS PK
0.01-
0.45
2306.
21
PNJ Trading
0.8.1
1).8.2
AEL/PBW/PD/7
44/2004-2005
23/11/ 2
004
D CUT LB
NATTS PK 0.10-
0.45
1125.
27
M/S. KAMSUN
DEVELOPMENT
INTERNATIONA
L LTD.,
AEL/ PBW/ PD / 7
38/2004-2005
23/11/2
004
D CUT LB
NATTS PK 0.10-
0.45
1180.
94
M/S. KAMSUN
DEVELOPMENT
INTERNATIONA
L LTD.,
lote:• In the above table the first row 1.1, 1.2,; 2.1, 2.2. and so on represents imports
.ind the subsequent rows 1.1.1, 1.1.2, ; 2.1.1, 2.1.2 and so on represents exports.
For illustration the transaction shown at Sr. No. 1 pertains to the variety " D
(:,
'ut Natts PK". As per sr.no. 1.1 , D Cut Natts PK variety with size 0.02 - 0.22 and
Iota] carats 3571.54 were imported by AEL from Tanb trading, UAE vide invoice No.
234-AEL/11/2004 dated 05/10/2004. These CPD were exported by AEL to Al Shahad
crold & Chokshey Diamonds, both of U.A.E., vide export invoice no.
AEL/PBW/PD/539/2004-05 dated 05/10/2004 & invoice no.
AEL/PBW/PD/538/2004-05 dated 07/ 10/2004, respectively. Again, as shown against
Sr.no 1.2, the same variety of CPD with same size and weight 3583.49 carats were
imported from Daboul Trading, UAE vide import invoice no. 913/DBL/PD/2004 dated
[1/ 10/2004 and then exported to Choksy Diamonds, U.A.E. vide export invoice no.
AEL/PBW/PD/559/2004-05 & AEL/PBW/PD/561/2004-05 dated both dated
4/10/2004. Again, as per sr.no. 1.3 the same variety of CPD with same size and
weight 3567.54 carats were imported from Tanb Trading, UAE vide import invoice no.
24l-AEL/ 11/2004 dated 18/10/2004 and then exported to Choksy Diamonds and Al
5hahad Gold of U.A.E. vide export invoice no. AEL/PBW/PD/573/2004-05 dated](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-48-320.jpg)
![•
77
Brothers Pvt Ltd Exports, Hong Kong. Ltd, Singapore
9
Hinduja Exports
Pvt Ltd
Mine Gold &
Jewellery, Dubai
Chokshey
Diamonds LLC,
Dubai 24/12/2004
I--
10
Hinduja Exports
Pvt Ltd
Planica Exports Pte
Ltd, Singapore.
Gudami
International,
Singapore 20/12 / 2004
In terms of the agreement between AEL and the other 5 firms with the overseas
agents, it evolves that commission was payable by AEL and the other 5 li--ms
respect of the so called clients brought by these agents. The amounts of commission
payable as per the terms of the contracts have been worked out (Details as Per
Arinexure Q attached) and are as summarised as below:-
1)ADANI EXPORTS LIMITED:
2004-05
No. of
SBs
Total Value
of exports
(US$)
% of Amt of
Commission Commission
(US$]
Gudami 276 280373944.5 3% 8411218.34
Kamsun 114 111109553.5 2% 2222191.07
Others 822 859135437 0
TOTAL 1212 1250618935 10633409.41
2005-06
No. of
SBs
Total Value
(US$)
% of Amt of
Commission Commission
(US$)
Gudami 191 186984436.5 3% 5609533.09
Kamsun 82 81597587.38 2% 1631951.75
Others 3 994294.68 - 0
TOTAL 276 269576318.5 7241484 .84
2) HINDUJA EXPORTS PVT LIMITED
2004-05
No. of
SBs
Total Value
(US$)
% of Amt of
Commission Commission
(US$)
Mine
Gold 145 147856590.7
1.75%
2587490.34
Planica 57 56150154.03 1.75% 982627.70
Others 69 40210924.59 - 0
TOTAL 271 244217669.3 3570118.04](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-69-320.jpg)
![•
79
6 2.2 Shri Omi Bagadiya, Director of M/s. BBPL in his statement dtd.7/3/2006 after
seeing Schedule 12 regarding Direct Expenses for the financial year 2004-200,5 which
reflected payment of Rs.6,93,96,987.00 as Brokerage, Rs.1,92,020.00 as Expense s.
Rs.9,24,719.00 as Insurance expenses and Rs.7,992.00 as Supervision charges in
respect of Diamond Trade, stated that the brokerage was to be paid to Sinta Impex
Pte Ltd, Singapore however, the same had not yet been paid. Shri Bagadiya further
stated that this amount was to be paid as per the instructions of Shri Devcn Mehta of
HEPL as export brokerage in respect of CPD. Shri Bagadiya also stated that it was for
HEPL to arrange and send the said amount to the party in Singapore.
Similarly, Shri Narottam Somani, Director of M/s. Midex Overseas Limited
tendered, among other documents, journal voucher dtd.31/3/ 2005 in respect of their
Ahmedabad branch which showed an amount of Rs. 7,60,03,380/- debited to the
account of M/s. Sinta Impex Pte Ltd, Singapore as being 'brokerage and commission
(foreign)'. He stated that he had no idea about the said entries as no brokerage and
commission (foreign) had been paid from the account of Midex overseas Ltd., lndorc.
This amount had been paid from the account of Midex Overseas Ltd., Ahmedabad
which was absolutely under the control of Shri Samir Vora.
It was also evident that the commission was being paid subsequent to the export
of the CPD and therefore, provision was being made in the books of account ;or the
amount of commission payable. These facts corroborate the details of the commission
payable as shown above at table No. 1 to 6.
Thus from the above it is evident that in case of the exports by the India
companies to the aforesaid overseas companies where agency agreements 1% ere
existence the commission was paid /payable and therefore the same has to be
deducted from the FOB value of exports (which have also been shown on the higher
side by fraudulantely showing value addition of 5% / 10%) to arrive at the actual value
addition. Thus as detailed in Annexure Q the value addition was not achieved as far
as exports to (i) Kamsun Development international, HK., (ii) Gudami Internadonal,
Singapore, (iii) G.A.International, Dubai, (iv) Emperor Exports Pte Ltd. HK, (A )
Swebhani Inc, Dubai, (vi) Gracious Exports, Hong Kong, (vii) Mine Gold & Jeweller} ,
Dubai, (viii) Planica Exports Pte Ltd, Singapore.
6.2.3 It was also seen that commission was being paid by AEL and group companies
in respect of their exports to M/s. Kamsun Development International, M/s. Gudarni
International, M/s. G.A.International, M/s.Emperor Exports Pte Ltd, M/s. Graciotv;
Exports, M/s. Mine Gold and Jewellery and M/s. Planica Exports Pte Ltd. and that the
commissions were also being paid to, among others, M/s. Gudami International, M/s.
Kamsun Development International, M/s. Al Shahad Gold and Jewellery an(
Chokshey Diamonds. However, all the firms to whom the exports were being made and.
in respect of which the commissions are shown to paid were managed and controlled
by AEL only, as detailed above. Therefore, the very nature of the so called commission
is doubtful.
6.2.4 Among the data retrieved by the DFS from the hard disc of the computer i use
with Shri Vipul Desai of AEL which was seized during the course of the search of the
office premises of AEL, "Shikhar", Navrangpura, Ahmedabad on 24/1/2006 was
Excel worksheet file named "DIA_FOB". Scrutiny of the data contained in the said file
revealed that the same contained the month wise details of Commission paid/pavab]c
by AEL towards their exports of CPD during April, 2004 to November, 2004. The
summary of the details contained in the said file are as below:
Month Buyer Total FOB
Value of
Export (US$)
% of
Commission
payable
COMIlliS3i0/1
payable / pai
d (US$)
April'04 1) Leo Diamonds, Dubai, 2)
Gudami International,
Singapore, 3)
G.A.International, Dubai, 4)
Excel Global, Dubai 23181690.0
7
8% 1,854.53
May:04 1) Leo Diamonds, Dubai, 2) 41062941.4 8% 3,285,03
Gudami International,
Singapore, 3)
4
5
5](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-71-320.jpg)
![•
81
less the amount of commission paid/payable. The commissionwa being deducted fro; n
the FOB value only for the purpose of ascertaining the true and correct value of the
export goods and the deduction of commission is not in any way an attempt to rc-
determine the export benefits, if any, sought to be claimed by AEL. Further, it has
already been explained at para 11 of the notice that how the value addition of 5% to
10% as shown by AEL and its group /associated companies was artificially shown 0
paper only.
6.2.5 It was alleged that the value addition claimed in respect of the CPD exported by
AEL and the other 5 firms was required to be re-determined by deducting the amount
of commission paid/payable from the FOB value of the CPD exported. Consequently,
the amount of commission, ranging from 1.5% to 4.5% of the FOB value, being
paid/payable by AEL and the other 5 firms when deducted from the declared FOB of
the exported CPD would clearly result in the value addition being less than 3"/0 as
required under the bonded warehousing conditions as well as under the Target Plus
scheme.
7.0 From the documents seized during the search and those obtained from banks,
etc. it was observed that the terms of payments in respect of the imports were most] st
through letters of credit issued for 180 to 365 days or shown to be D.A. for 60 to 90
days. Whereas the terms of payments for exports are D.A. for 60 to 90 days. As
brought out in para 8 to the notice most of the companies to whom AEL and its group
companies had exported CPD were established in and around September 2004 and
were new to the business, however the Indian companies did not insist for L/cs from
them or payment against documents and instead the terms of payments were settled
at D.A. for 60 to 90 days, even though each export consignment was worth crores of
rupees which establishes the nexus between the Indian companies and the oversew.;
companies. For imports, AEL and their group/associate companies opened Len ers of
Credit of normally 180 days or 365 days. Another method of financing for the import:;
in case of imports on D.A. terms of 60 to 90 days adopted by AEL and thei:-
group/associate companies was External Commercial Borrowings -Buyers Credit (BC)
of about 365 days. In case of Buyers credit AEL and their group/associate companies
obtain loans from overseas branches of Indian banks and the payments are made to
the suppliers of AEL and their group/associate companies by the overseas bank:;. The
interest for the loan was obviously borne by AEL and their group/associate
companies. Prima facie this mode of payments seems to be innocous. Howeve - in a
number of cases it was observed that though the imports are made against D.A. of 60
to 90 days, the payments were made to the overseas companies prior to the expiry oc
D.A. terms, mostly within a month of imports, by resorting to external commercial
borrowings in the form of buyers credit from overseas bank, for which the India].
companies had to pay interest @ LIBOR + 0.5%. To avail of the buyers credit facility.
they had also to obtain letter of comfort from the Indian banks, for which they Fad tc
pay the bank charges for the same as well as make a fixed deposit of 100'' and
thereby their funds are blocked. It was also observed that the invoices for imports
submitted to the Indian Customs at the time of imports are showing terms of
payments as D.A. for 60 to 90 days, however while submitting these invoices to the
banks at the time of obtaining buyers credit/ letter of comfort, they were manually
manipulated to change the terms of payments from "D.A. of 60 to 90 days" t) "Al
SIGHT" by overwriting the original terms of payments. It is beyond comprehension
that why the Indian companies had to make pre-payment when the terms of payments
are for credit of 60 to 90 days, and that too by resorting to external borrowings for
which they had to bear interest. The details of such instances where the payments
for ..mports are made much before the credit period of 60 to 90 days had expired is as
per Annexure P. From the details as mentioned in Annexure P it was evident that in
most of the cases where the terms of payments are "D.A. of 60 to 90 days" pre-
payments are made within one month of the date of invoice/imports and in many
cases even within a couple of days from the date of invoice/ imports. Similarly in case
..... . where the imports were against L/cs. for say 180 days or 365 days it was also
observed that in most of the cases the overseas companies in whose favour the L/cs
,..'4•,
",- 2.___
•-• were opened, discounted the same immediately. There seems nothing wrong in the
..).1
%/ / . beneficiaries discounting the L/cs for making funds available to their company, but
.'
.5.
. it:;:,
-,-, at appears apparently wrong in the present arrangement between the Indian
t 4:-.,. i .
..:
,,?c . pries and the overseas companies was the fact that as per the terms of the Lies.
(
;..... '...the interest for discounting of the L/cs. was borne by the Indian companies, which in
•
:.' fad should have been borne by the overseas companies in the normal courie of
business, as the terms of payment for the Indian companies is 180 days or 365 days
by Lie. The details of instances where L/cs. are discounted immediately after the 7 are](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-73-320.jpg)
![105
and conditions which proves that these terms and conditions were merely on paper
and it was for AEL to decide and make payments as per their convenience. Which
shows the dubious nature of the transaction, created by AEL with intent to generate
high export turnover and to avail benefit of Target Plus scheme.
8.3. The contracts under which the CPD were being imported and exported by AEL
tip the other 5 companies were also examined. All the exports of CPD by all the six
firms were purportedly under a contract with the overseas firms of Dubai, Hong Kong
and Singapore. The contracts were all similarly worded and for sake of illustration, the
contract No. GIPL/AEL/PD/ 13/2004-05 dated 10/11/2004 between AEL and M/s.
Gudami International Pte Ltd, Singapore [RUD- 50] is reproduced below :-
"Purchase Order No .GIPL/AEL/ PD / 13L2004-05
Agents
1. Description
2. Rate
3. Total Quantity
4. Total Amount
5. Terms of Payment
6. Shipments
7. Partial Shipment
8. Insurance
: Cut & Polished Diamonds.
: US $ 25 to US $ 2000 per carat
: 30 to 100,000 Carats (+ / - 5 %)
: US $ 15,000,000.00 (+ / - 5 %)
: Up to 180 days D.A. (CNF Basis)
: November/ December 2004
: Allowed
: Covered by Brinks/Carrier's
9. Collection bank charges outside India at importer's account
10. A set of non-negotiable documents to accompany with the air
consignment.
The contract is for supply of Cut and Polished Diamonds by AEL to M/s
Kamsun. However, the contract does not in any manner indicate anything about the
quality, size or variety of the diamonds which are to be supplied by AEL. Whereas in
so far as Cut and Polished Diamonds are concerned the most important aspect of the
diamonds based on which they are normally transacted are the cut of the diamond,
the colour of the diamond, the clarity of the diamond, the size of the diamond etc. for
the reason that the value of the diamond is based on these parameters. Even the rate
at which the CPD are to be supplied by AEL to Kamsun as well as the terms of
payment are also very vague. As is seen that the contract is for a total amount of US$
50 lakhs (+/- 5%) against which the total quantity to be exported was in the range of
.3000 to 50,000 carats (+/- 5%). Thus any quantity between 3000 to 50,000 carats can
'ae exported but the total value would remain US$ 50 lakhs. Such terms are vague and
reflect the absence of any requirement of quality and at the same time it shows that
only the value of the export was important in as much as the same was necessary for
achieving quantum of exports so as to be eligible for the benefits of target plus
scheme.
:3.3.1 The contracts under which the CPD were imported by AEL and the other 5
companies were also similar in their contents. Contract
No.20/4/DTCP/DIAMONDS/04 dtd.20/4/2004 between AEL and Daboul Trading Co
I'LLC), Dubai:
"PRODUCTS: CUT AND POLISHED DIAMONDS
Q UANTITY IN CARAT RATE/ PER CARAT AMOUNT IN USD
,..,.
ra TO 65000 Us $ 10 TO us $ 2800 US $ 8,000,000.00
SHIPMENT : BY AIR ON OR BEFORE 30.06.2004
PARTIAL SHIPMENT PERMITTED.
TERMS OF PAYMENT : BY AN IRREVOCABLE LETTER OF CREDIT
PAYABLE AT UPTO 180 DAYS FROM BILL OF
EXCHANGE/AIRWAY BILL DATE.
CHARGES : OUTSIDE INDIA TO OUR ACCOUNT.
SHIPMENT FROM/TO ANY HONG KONG/DUBAI AIRPORT TO
•](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-97-320.jpg)
![Percentage incremental growth Duty Credit Entitlement (as a
°A) of the incremental growth)
20% and above but below 25%
25% or above but below 100%
5%
10%
15% (of 100%)
100% and above
111
Scrutiny of the applications made by the parties indicated that these parties
had applied for grant of Licence under the Target Plus Scheme, including, the exports of
Cut and Polished Diamonds for the relevant year.
9.] .3 The export of Cut and Polished Diamonds by these parties was not eligible
towards the FOB value of the eligible exports due to the exclusions given in Para 3.7.5
read with Para 3.7.3 of the Target Plus Scheme . The relevant provisions of the FTP
2004-09 are discussed below:
Para 3.7.1. of the Foreign Trade Policy-2004-2009 states that:
"The objective of the scheme is to accelerate growth in exports by rewarding Star Export
Houses who have achieved a quantum growth in exports. High performing Star Export
Houses shall be entitled for a duty credit based on incremental exports substantially
higher than the general annual export target fixed (Since the target fixed for 2005-06 is
17 %, the lower limit of performance for qualifying for rewards is pegged at 20% for the
current year)."
Para 3.7.2. of the Foreign Trade Policy-2004-2009 states that
"All Star Export Houses (including Status Holders as defined in para 3.7.2.1 of Exim
Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange
of Rs 10 crores in the previous licencing year are eligible for consideration under the
Target Plus Scheme."
Para 3.7.3. of the Foreign Trade Policy-2004-2009 states that
The entitlement under this scheme would be contingent on the percentage incremental
growth in FOB value of exports in the current licencing year over the previous licencing
year, as under:
NOTES:-
(1) Incremental growth beyond 100% will not qualify for computation of duty credit
entitlement.
12) For the purpose of this scheme, the export performance shall not be transferred to or
transferred from any other exporter. In the case of third party exports, the name of the
supporting manufacturer/ manufacturer exporter shall be declared.
,3) Exporters shall have the option to apply for benefit either under the Target Plus
Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same
exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the
..otal eligible exports shall be taken into account for computing the percentage
ncremental growth but the duty credit entitlement shall be arrived at on the eligible
exports reduced by the amount on which the benefit is claimed under para 3.8.2.
;4) All exports including exports under free shipping bill verified and authenticated by
Customs and Gems& Jewellery shipping bills but excluding exports specified under
para 3.7.5, shall be eligible for benefits under the Target Plus Scheme
(5) In respect of export of Cut & Polished diamonds only those shipments would be
taken into account for computation of eligible exports under the scheme where a
minimum of 10% value addition has been achieved.
Para 3.7.4. of the Foreign Trade Policy-2004-2009 states that
Companies which are Star Export Houses as well as part of a Group company shall
have an option to either apply as an individual company or as a Group based on the
growth in the Group's turnover as a whole. (For the purpose of this scheme the
•](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-103-320.jpg)
![117
based in Dubai, Singapore and Hong Kong etc. to cause dubious import and
export of Cut and Polished Diamonds, to take undue benefits of the Target
Plus Scheme under Foreign Trade Policy.
entered into a MOU ( through their group company or on their own with
other noticee company) or arranged to transfer their export performance
knowingly and with ulterior motive of obtaining undue benefit accruing to
other company.
(I) entered into a MOU ( through their group company or on their own with
other noticee company) by virtue of which, it was agreed that the benefits of
Target Plus Scheme accruing on account of incremental exports would be
gassed on to M/s Adani Exports Ltd or their group company. The ultimate
beneficiary of the DFCE/TPS would be the Adani Group of companies. The
confidentiality clause in the MOU's clearly bring out the clandestine nature
of arrangement right from the stage of physical activities of import and
export till the actual availment of benefits on the issue of license.
(viii) mis-declared the value addition of 5% and 10% in as much as activities of
the Assortment, Boiling, Sieving and Repacking without any manufacturing/
processing or change in form of the CPD cannot by any stretch of
imagination contribute to such value addition. Further, even these
processes too were not carried out on all the CPD imported and re-exported
by them. The CPD were exported in the same form in which they were
imported and thereby mis-declared and inflated FOB value of the CPD and
at the same time they have failed to declare the correct FOB value of
exports.
(ix) resorted to circular trading activity in the import and export of CPD by re-
importing the same lot on more than one occasion to artificially boost export
turnover and despite the existing agency agreements with different overseas
firms for payment of commission by M/s AEL and their group of companies
failed to declare the details of commission payable by them in any of the
shipping bills/GR/SDF filed by them to the Customs for export of CPD
during 2004-05 and 2005-06 resulting in mis-declaration of the FOB value
to tile emelt' of the commission payable which is otherwise required to be
deducted. him' the export value for arriving at the correct FOB value of the
exported goods amid therefore have made themselves ineligible for the
benefits of Target Plus scheme, if claimed by them amounting to a sum
detailed to column I; 0 of the Table 'A, above.
(x) The' ai live 1)ireetors were alleged to have indulged personally in the
11..11.11dent and manipulative practice and entered into the criminal
-.pit at v with :several person of India and overseas to cause import and
l'N.11.+Cl. of L• ri ), involved themselves into mis-declaration of export value of
) durilig the iteriod 2004-05 and 2005-06; indulged into dubious imports
:111([ expo. is to take itiulite brnefits of the Target Plus Scheme under Foreign
trade y It was known to them and they had reasons to believe that for
the sap] < ot aventioti of %,ariotts provisions of Customs Act, 1962 and FTDR
Act/1•11'. Hie CH-) exported by them were liable to confiscation under
Sec !too 113 of Customs Act, 1962 and thereby made themselves liable to
per wider Section i 1.1 of Customs Act, 1962.
Table 'A'
Benefit
Benefit if
claimed claimed
I ilitFk ilib iiii iiii,
1
Pat I y Mont( 1 .)tio.i M.
• -
M/s Achim 1,:xix.rts
I
I
1 Ltd 01_':i.) . ;. f,.6266616582 t 11936363495
•
Declared crores) crores)
2004-
05
2005-06 2005-06
498.19 0.00](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-109-320.jpg)
![122
"'dutiable goods' means any goods which are chargeable to duty and on which
duty has not been paid"
The Hon'ble Supreme Court in Associated Cement Companies Limited vs.
Commissioner [2001 (128) ELT 21 (SC)] held that where goods are exempted from duty
of customs, the same are non-dutiable goods.
And in the present case, CPD exported by the Company are not dutiable goods
as the same do not appear in the Second Schedule to the Customs Tariff Act, 1975
("CTA"). It was submitted that where the goods were non-dutiable, the provisions of
Section 14 shall not apply. In case of goods exported from bonded warehouse, this is
also clear from the provisions of Section 69 of the said Act whereunder a proper Officer
has the power to determine the rate of duty, and therefore, consequentially the value,
but where there is no rate of duty prescribed, there is no independent power for
determining the value of the goods exported from bonded warehouse. Admittedly,
there is no duty of customs levied on export of CPD and therefore, there is no power to
determine the value thereof under Section 14 read with Section 69 of the said Act.
The Notice is, therefore, without jurisdiction and violation of Section 14 o the said Act.
11.2.3 It was submitted that the Company AEL, was a merchant exporter and engaged
in the business of trading in agro-products, petroleum and petrochemicals, vegetable
oils, coal & coke trading, Iron Ore, Textile Products, Ferrous and Non Ferrous Metals
and precious metals including diamonds. The Company was recognised as an Export
House by the Government of India in 1991. The Company had been awarded prizes
for being the highest foreign exchange earner in the private sector in the country.
Various other awards were also granted to the company for its export performance.
The Company had grown from export house to the highest category amongst status
holders, as a "Premier Trading House", which requires the minimum export turnover
of Rs. 10,000 Crores.
In the year 1997, the Company set up a 100% subsidiary in Mauritius called
Adam Global Ltd., which in turn set up two 100% subsidiaries called Adani Global
FZE, UAE and Adani Global PTE Ltd., Singapore (hereinafter respectively referred to as
"AGFZE" and "AGPL"). Being 100% subsidiaries, these entities support the Company
in its international business. The function of AGFZE and AGPL was to look after its
own international business and also work in coordination with the Company in the
Company's International businesss. The Company had diversified in various
businesses and promoted Mundra private port and SEZ at Mundra, gas distribution,
power generation, trading and transmission, ICDs, handling and logistical support to
Agro industry, Real estate, Coal mining, Retail, Ship Owning and Chartering, Ship
Breaking and Repairs, etc. The total. turnover (sales) of the Company during the last
three financial years has been as under:
Year Turnover (Rs. In Crores)
200()-07 9742.33
2005-06 9156.43
2004 -05 13417.80
The Group turnover of all the businesses reached Rs.15355.35 Crores in the year
2006-07.
The Company being a merchant exporter explored new markets and new
commodities depending on the opportunities available in the global trade. Based on
commercial considerations and commercial expediency, the Company at different
times focused on different products so as to achieve maximum growth and profits. The
details of new products started and exited are as per Exhibit-B. The economic policies
of the Government is an important factor which world over influences business
decisions. Whenever the Central Government had announced the export-import
policies, the objective had been, to provide impetus to export and boost exports
particularly by status holders, such as Premier Trading House. The Company started
export of CPD in 1994 and had been a Member of the Gem and Jewellery Export
Promotion Council (GJEPC) since 2001. In 2001-02, the Company re-entered the
diamond business and exported rough diamonds worth Rs.83 Crores. In the year,
2002-03, the Company also exported CPD to the tune of Rs.20 Crores. Thus the
Company was familiar with the diamond business, and did not entere into the same
for the first time in 2003-04. Company obtained a License for bonded warehouse](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-114-320.jpg)
![year
% Rise
over
2002-03 2798.15 35,595.66 35525.00 1680.07
Adani Exports Ltd. managed to achieve over 100% incremental Exports in 200.1-4
over the exports of 2003-04 for all the five companies to achieve the maximum belie iit
of 15% incentive as prescribed under the Target Plus Scheme for incremental exi
over 100%. The figures for the increase in exports in 2004-05 when compared witli tl le
exports of 2002-03 as above, the % increase in the exports is all the more T T (d
boggling.
14.1 4Again DGFT, on being brought to notice of the misuse of the scherw, vi lc
notification No. 27/2004-09 dated 23.02.2005 amended Para 3.7.5 (f) to read I hi's:
"Gold, Silver, Platinum and other precious metals in any form including plain and
studded jewellery". Thus excluding the export of Studded gold jewellery f, on. di:
-
purview of Target Plus Scheme. Further vide Notification No. 48/2005 d:d
20/02/2006, the exports of diamonds and other precious, semi precious stones wT
also removed from the list of export items entitled for Target Plus scheme. Ancl vi Jc
Notification No. 57/2005 dtd. 31/03/2006 the "Target Plus Scheme" was abolished le;
all the exports with effect from 01.04.2006. Thus the genesis of the fraudulent c.xport!:
of cut and polished diamonds, gold jewellery and gold Medallions by AEL a; d
group/associate companies by indulging in circular trading and artificial Mem. 3( II
the value addition, to artificially boost their export turnover dates back to the yrar
2003-04, when the Incremental Promotion Scheme was introduced and therefore h"
defence of the noticees, at any stage, that the figures or the mails or the amount.
the parties referred to does not pertain to the period of the Target Plus Schema or
to gold/gold jewellery and not cut and polished diamonds, should be vievced
in this perspective. It was also mentioned that the case as a whole is to be viev,,c.1
from the perspective of the fraudulent intention of the exporters to artificially beD:.4
their export turn over by way of circular trading of the same sets of dial-non:Is. to
achieve disproportionate incremental exports to avail undue benefits of Target 1 'Ins
Scheme,
14.1.5The unprecedented volume and value of imports and exports by the Not; :c. ns
compared to the value of exports by the other top 35 exporters, also needs to be gi t)
a consideration while arriving at a conclusion that the importers and exporters v (*Ye
interrelated and were hand in glove in the fraudulent design of the Noticec to ;wail
undue Target Plus benefits. Ample evidences had been adduced in the SCN tt. slow
that the overseas importers and the exporters were interrelated and hand in glo
the Indian companies and that there was circular trading of CPD between then'. 1'w-a
8 & 9 of the SCN refers.
14.1.6It was submitted that looking to the huge size of the individual
consignments running into thousands of Carats, no contemporaneous exports by kin3
other exporter, having the same volume of consignment could have been to ip.1 to
draw a comparison. Moreover the stray instances brought forwarded by the lo!iece
to show comparable prices, vide Exhibit A to their reply, also cannot be decnieJ bc
contemporaneous in view of the fact that the "Range Converted" shown in 5 O-
dle Exhibit A has no basis. Therefore the range of diamonds shown to be c:(pi Tied
could not be said to be comparable with the size (range) of diamonds expoTtc,1 11
----them. Also the Noticees have not drawn any reference to their export consig)inient:.
•
,-- w.ith which they were attempting to compare the said prices. Moreover in the
',411ibit A there is no reference to the quantum of exports per consignincin. an,
- country to which the same were exported, to draw any comparison. Thus a Trier:
talw,lation giving some instances of prices without any reference to the size t ,'• the
diarrionds exported, quantum of exports, country to which the exports were li taidc,
cannot make them comparable prices.
Their contentions that Section 14 is also not applicable in this case as th( (21)1)
exported by them as the same are not dutiable. Various courts, including the 1+ rible
Apex court have held in a number of cases that in case of export fraud, :5( ctionli
comes into play and is applicable. The Honble Apex court's judgment in case t ,f (tit)
Prakash Bhatia [ 2003 (155) ELT 423 (SC)] is aptly applicable in this case, wire, cili it
is held that, mode for determining the value of the goods provided under Section 14 of
the Customs Act, 1962 is required to be followed even if no duty is payable. INIcy cover
in the said judgment the Honble court has also held that, when mat gin1.)f pi °lit](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-170-320.jpg)
![194
mentioned that the major exports by Adani group in 2004-05 was after ti
announcement of Target Plus Scheme in September 2004, whereas the other e.,.po-; el s
had been exporting from the beginning of 2004-05. Further, it was incorrect te
that in Annexure "N" the export figures for 2005-06 of Adani group are taken t 11
January 2006 whereas those of other 34 exporters are up to 31.10.2005. The fiv or(
for exports for Adani group are also taken only up to 31.10.2005.
14.4.5 The noticees also wrongly state that the export of Studded Gold Jewellery
not covered under the Target Plus Scheme. In fact when the Target Plus Scheme was
introduced in September 2004 Studded Gold Jewellery was included in the
permissible for exports. It was only in February 2005 when the DGFT came 1 o 1;•icw
about the large scale misuse, by way of Circular Trading of Gold in the guise of exports
of studded jewellery, it by Notification No. 27/2004-09 dated 23.02.2005 arnenclecl
Para 3.7.5 (1) to read thus: "Gold, Silver, Platinum and other precious metals in ai'y
form including plain and studded jewellery". It is also to mention that all the hottec,.'s
in their applications made to the DGFT for obtaining DFCE certificates tinder the
Target Plus Scheme have included the value of exports of studded jewellerir i.t the
value of their total exports and have also contended that since their exports of stud&d
jewellery was prior to the issue of the notification, they have not excluded these fig, ir.:s
from their total export figures. That out of total exports of Rs. 10938.80 Crore:.
Aclani Exports Ltd. in 2004-05 the exports of CPD and studded jewellery togl!ilier
account for Rs. 7787.25 Crores, i.e. 71%. Similarly the other noticees have also
achieved the major chunk of their export turn over through export of CPD
jewellery.
14.4.6 It is not the case of the department that an exporter cannot diversify its c x port
products. Adani Exports Ltd. with intent to misuse the Target Plus benefits entered
into a secret MOU with these three companies, through its associate companie.i, in
which companies also the relatives/employees of Ada.n.is were the directors. The :.re.-et
MOU (i) provided for entire operations of exports to achieve the desired growth in tic
export turn over to enable them to claim the benefit of the target plus scheme, to lx
handled by Adani Group; (ii) benefit of Target Plus scheme to accrue to Aclani Groilp o'
Companies and (iii) these three firms would be paid commission @ 2% to 2.5% of 1:C.T3
Admittedly the entire incremental growth in the exports of these three companies wa:.
achieved by exports of CPD and studded Jewellery. Thus AEL, right from the ince] aka ,
of the scheme had fraudulent intentions and had planned to achieve unprecedent ed
export turn over by circular trading of CPD and therefore also roped in
companies into their fraudulent scheme. It was admitted by the notices thai
"Apparently, it would have not been possible for M/s Adani Exports Ltd. to achieve 111-
required increase in turnover to approx. Rs. 22000 crores in 2005-06 in order le
the benefit of Target Plus Scheme. Therefore, M/s. AEL appeared to have achieve, ' • h,
desired turn over in 2005-06 by means of a rise in the export of C&P diarioncl
through its other five group / associate companies".
14.4.7 The little inconsistency in the statement of Shri Samir Vora or any SI iti Cie •et
Mehta attempted to be highlighted does not turn the tables against the show calls
notice. Further, various averments made by the noticees only lead to the conch
that admittedly the entire business of so called import & export of CPD in the
all the six companies, including the financial arrangements was managed. eonti-o lc I.
and handled by AEL through its Indian as well as overseas group/associate corn panic::
and its employees.
14.4.E, The contention in the notice that the FOB value of exports was artificially fiN.e, 1
by adding 5% or 10% over the value of the imports, as mentioned in the statemim t r f
Shri kamraj Bodal, who prepared the export invoices, is attempted to be folsiiicC 1.
bringing about some stray instances of some invoices as per Exhibit R. At the cots( I
the instances quoted in Exhibit R are far too few and far apart when compared to tl
total number of export consignments. Further the value addition of 5% or
artificially shown to be achieved as per the instructions given by Shri Sarnir Vora ae 1
has also been admitted by Shri Lumesh Sanghvi who handled the entire import
export of CPD from the bonded premises of all the companies. It is also not displitri
by the noticee that in all cases of export, the value addition of 5% or 10% as Lb,-
may be had been shown to be achieved.
The noticees have no option but to admit that so called import and e:.liort it
CPD for all the six companies was managed, handled and controlled by "1.'bc](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-178-320.jpg)
![206
us the proposal for the unassorted
diamonds.
S arnir Vora 02.02.2006 Para 1 (point 2 & 3) at page 8 :
Thereafter orders for import would
be placed and Sh. Rakesh Shah of
M/ s. Adani Global FZE would
corordinate for export of cut 86
polish diamonds from Dubai.
Similarly when export are made to
various parties in Dubai, Sh.
Rakesh Shah coordinate.
13havik Shah 31.01.2006 Para 2 at page 9 : On being asked,
I state that I keep in contact with
Mr. Tejas Chokshi of M/s. Dabhol
Trading Co. LLC Dubai regarding
financial transaction of import &
exports of above companies. On
being further asked I state that
one Shri Rakesh Shah, Employee
of Adani Global FZE, Dubai
coordinates for the business of
import & exorts of gold, gold
jewellery &articles & Cut &
Polished diamonds with dabhol
trading co. & also keep in contact
with him.
And merely because one person is a common director between Adani Global Pte. Ltd.,
Singapore and Gudami, does not make them or with AEL a related person within tae
meaning of Rule 2(2) of the Customs Valuation Rules, 1988 (hereinafter referred to as
the "Valuation Rules"). This legal position is well settled in the following amongst
other, cases:
(i) 2008 (222) ELT 84 (Tri.-Mumbai)-Lloyds Metals & Engineers Ltd. Vs. CC E.
Nagpur
(ii) 2004 (164) ELT 191 (Tri.-Chennai)-Prasiddha Trading Corporation Vs;. (.'C.
Coimbatore
(iii) 2002 (143) ELT 244 (SC)-Alembic Glass Industries Ltd. Vs. CCE & Cus.
(iv) 2000 (115) ELT 489 (Tribunal)-Daewoo Motors India ltd. Vs. CC, I c‘x
Delhi
(v) 2002 (150) E.L.T. 1144 (Tri. - Mumbai)- Commr. of C. Ex. & Gus.
Aurangabad Vs. Pinnacle Exports Pvt. Ltd. - Maintained in Suprcmc•
Court as reported in - 2008 (226) E.L.T. A142 (S.C.)]
As such,.merely because Merry Joseph was a common Director, it does not mean that
Gudami is a "related person" since AEL does not hold any shares in Gudami.
15.2.1 References to the email dated 16th June, 2005 sent by Sunil Shah, emails dated
• 16th February, 2005 and another undated mail from Kaushal Kabra merely give
information regarding closing down of Absa Bank and therefore. Sunil Shah was
▪ rlit.ely sharing information that Absa Bank had asked Adani to make alterm tive
arrangement and temporary instructions not to make the payment in the accour.t
Shine Jewellery FZE with Bank of Baroda, Dubai respectively. The contents of the
email dated 16th June, 2005 are not inculpatory and it does not in any manner snow
any "control" by AEL over Gudami. Further, the email sent by "Manoj" of Dabhol OTC
and there was no reason to infer that said "Manoj" was Manoj Nair, who Wi.IS the
employee of Adani Global. Manoj is a common name in India, and hence no adverse
inference can be drawn. The contents of undated email of Kaushal Kabra have been.](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-190-320.jpg)
![•
207
misunderstood. DTC wanted to acquire shares of AEL, but being a listed Company,
AEI, advised DTC that it could transfer only less than 5% of the shares. To the
question by DTC whether AEL could introduce DTC to bankers for financing this
purchase of 4.99% shares of. AEL, in view of the longstanding relations AEL had with
various bankers, Kaushal Kabra was seeking to inform the Company of its
implications, so that in turn, DTC could be informed about the offer of UBS. Neither
the email dated 16th February, 2005 nor the undated email, in any manner
whatsoever, prove that the exports or imports made by AEL and other Noticees are not
genuine. The allegation that DTC was controlled and managed by AEL is meaningless
since AEL had only imported goods from DTC and the CIF Value of all such imports
has riot been questioned or challenged.
15.2.2 it was argued that the instances set out in Exhibit-D were not stray incidences.
Annexure-H to the show cause notice covers approx 1000 lots and Annexure-I thereto
covers approx 2000 lots. Exhibit-D, which is also now resubmitted with reasons and
reinarks as Annexures-II and III to the Written Submissions, shows that in respect of
48 lots of Annexure-H and 139 lots of Annexure-I, the charge of Circular trading, on
the face of it, do not survive. Even if Entry 11 is removed and placed on page 3 of
A nnextire-1, after Serial No. 9, the charge of Circular trading must stay. The
contention that there are only 13 lots which were split (separated) into different lots is
also incorrect. The reliance on Statement dated 6th February, 2006 of Kaushal Pandya
is inappropriate inasmuch as none of the examination reports revealed that imported
diamonds were wrapped lot-wise in different packets of plain white paper and each
such packet had an endorsement of the nos. 1, 2, 3, etc. as per the invoice and carats
lw eight) written with pencil. The conclusion, therefore, based on the Statement of
Kaushal Pandya that the imported CPDs did not require sorting before export is
incorrect and false. The statement of none of the sorters has been recorded. Lumesh
Sarighvi in his Statement dated 28.02.2006 also refers to engaging of sorters. This
clearly shows that sorting was done, and undertaken by sorters who were engaged by
Noticees. The further contention that one import consignment would be exported as
two different consignments, and upon receipt of such export consignments, the
`overseas employees" of Adani Group would again merge them into different lots is a
aire conjecture and surmise. Except for the bold statement, there is nothing on
record to establish or show including amongst the series of emails relied upon in the
:•;liow Cause Notice, that employees of AEL/Adani Group outside Indian split or merge
Cl]) consignments. The allegation of Circular trading is based on further assumption
tlmt the weight was varied marginally by adding or removing a few pieces from each
lot. There is absolutely not an iota of evidence to this effect, but a mere suspicion,
which cannot take the place of proof. Instead of treating lots with different weights as
different consignments altogether, it is being presumed that the weight is being
marginally varied by adding or removing a few pieces from each lot. It is denied that
the Department has painstakingly been able to prove thousands of instances of
Circular trading having the same description of the diamonds, same size range and
',ear about the same weight as brought out in Annexures-H and I, which as aforesaid,
and in the reply as well as in the Written Submissions, full of discrepancies, errors
and mistakes which ex facie render the story of Circular trading unbelievable.The
Statement of Lumesh Sanghvi dated 3rd January, 2007 also does not support the case
of Circular trading. Lumesh Sanghvi, in his cross-examination on 25th March, 2008,
admitted, upon looking at the documents (invoices) that there was no Circular Trading.
15.3. I The comments of DRI that the rate varies because of the difference in the
description/quality of the diamonds amount to an admission of the fact. The following
almissions on the part of DRI all of which have been sought to be camouflaged by
Y .fit leging that these factors have been created to give a semblance of genuineness for
of E:F leia*It of an answer on merits: -
s•s::t
r There is a difference in the weight of different lots;
.:-! • 4a) There is a difference in the clarity of the different lots;
• t
4- r )
' '
ts* ; There is a difference in the rate, and thereby the value of different lots;
4r/ * There is a difference in the description/quality of the diamonds and
-
therefore, the variation in the rate of CPDs.
•
...13.:W •
15.3.2The statement that "to expect the investigating agency to prove how the goods
ea poctect to one company were transferred to another company is a clear admission of
a serious fact. The very essence and fundamental fact of circular trading is to show a
cc.mplete chain of the same goods passing from one hand to another and ultimately,](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-191-320.jpg)
![landing up in the same hands. It is absurd to suggest that without the chain i)1+,,
established, circular trading can be established. By its very concept and definition, •
circular trading requires every link in the chain to be proved and/or establisqe0. To
say that the investigating agency cannot prove how goods exported by one corni,a iy
were transferred to another, is a clear and unequivocal admission of failure to 1:reec
circular trading without showing that the same goods exported by one comortny rc
transferred to another company, there is no circular trading. As such, the atle{-,ation
of circular trading is based only on assumptions and presumptions. Further the
admission of errors on the part of DRI once again totally demolishes the thetry o
circular trading. A new and a desperate case to cover up the absence of evidence o.
circular trading is sought to be made out in the comments to the reply. The Hof )1(
Supreme Court in Oryx Fisheries Private Limited V/s Union of India reported in I!()]
(266) ELT 422 (S.C.) held that SCN is the basic document for the charges klgaill I h(
Noticee and therefore the new and fresh charges outside the SCN cann.::t 13,
entertained at this stage.
15.4.1The reference to e-mail from Asha to Mary is inappropriate for the followtri:
reasons :
(i) The e-mail is undatedThere is no reference to Asha in any n 1.h
statements relied upon in the SCN, and no one from .AEL ha:: I2,!c,
questioned about who is Asha and what was her relationship to IVA, (--
its subsidiaries
(ii) There is no proof of actual communication or transmission of this i lad
from Asha to Mary or any other person
(iii) There is no proof of reply to this e-mail
(iv) There is no proof to establish the truth of the contents Ma:amt.:11 t.
having got the data in relation to all the exports and imports. DI-:I in ;
not been able to show whether at all AEL made any shipments of C1'1)1
Gudami and thereafter contemporaneously imported the same 01 i ..1
Shahad, Dubai. As a matter of record, there is no import of CPD a:.
from Al Shahad by AEL or any other Noticee, and therefore, the cot t, m
of email are on the face of it unreliable and false.
It was submitted that, for reasons aforesaid, the e-mail under reference it; n,,t
at all admissible in evidence and/or has no evidentiary value. The quantum of or t
of AEL and other Noticees does not establish circular trading as alleged or at :ill. ail)
the allegation to this effect, is based on conjectures and surmises.
15.4.2Para 4A.6 of VIP (2004-2009) contains the formula for calculation el al, to
addition. The only two elements for determining value addition are F013 price a
CIF price. The Noticees have entered into transactions in accordance with I'ara 'IA. ' :;
of the FTP where the value addition prescribed was 5% in 2004-2005 and 10 in
2005-2006. To attribute value addition as a function of cost or the manufacturilig of
processing activity is incorrect. FOB value is related to the price in the ce..trrie oi
international trade. As such, irrespective of the cost incurred by the export :r ci
irrespective of the nature and extent of processing or manufacturing octiN
undertaken by the exporter, there can be value addition. Para 4A.18 of the FIT (1 c:.
not prescribe the mode of achieving the value addition. As long as, the exporter
command a price in the international market, and actually realises the sank i , 1-ir•
form of FOB price, which is over and above the CIF price by at least 5% or 10°4.
case may be, the conditions of Para 4A.18 are satisfied. The Noticee:; has • tic
claimed that the value addition is attributable to the cost and/or the mrr:•reie
incurred by them in India. The Noticees have also not claimed that the value cl.lil on
is attributable only to the cost of undertaking the processing by them. Value .(',1
is only a condition precedent for doing business. It is a non-tariff barrier. In of
.words, if an exporter wants to operate under Para 4A.18 i.e. in the Private Bonded
Morehouse, it is a condition of this statutory compliance that he can only um:1,0:14e
,,such transactions where the exporter is able to command a price from the buyer in the
-ctitirse of international trade which ensures compliance with the condition of vAlje
addition. Value addition is therefore a condition of the transaction between the bt et
and the seller in the course of international trade, reflected in the form of F' )13 IT lie:,
and nothing to do with the actual costs and expenses incurred by the seller (es.r.oi ; et ).
Accordingly, to say that no value addition was achieved by relying on the :itatetlicilt of
Luinesh Sanghvi or any other person to show that no or miniscule proce:,sii g A:L:3
undertaken by AEL/Noticees, does not further the case of the investigating tigenr.:y.
Because the buyer agreed to pay a higher price to the seller after 1.4.2005,](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-192-320.jpg)
![211
...:ommercial reasons. This burden has not been discharged by the investigating agency.
It was legitimate to infer that 2 business entities between Dubai and Singapore may
have their own transactions and until and unless the investigating agency rules out
completely any such possibility, no adverse inference can be drawn against AEL. Some
of the buyers of the Noticee referred to in the e-mails are the recipients of funds from
some of the suppliers to the Noticee, does not mean that such buyers and such
suppliers cannot inter se have any transactions between themselves. Where the said
suppliers have made payments to the said buyers, it is presumed that the same have
been made in the normal course of business. The reliance on judgment of the Hot-Chic
Supreme Court in Collector V/s D.Bhoormull - 1983 (13) ELT 1546 is totally mis-
placed. In that case, the party relying on certain evidences / documents regarding
:acquisition of contraband and notified goods covered by Section 123 of the Customs
Act where the burden of proof is on the person and not the Department, was unable to
prove the authenticity or genuineness of such documents. In the present case,
;-;ection 123 is not applicable. The burden is therefore on the investigating agency and
hence assuming that mathematical precision may not be required, even then the
probability in case of circumstantial evidence must point only to one possibility of
c ommission of the crime. None of the e-mails referred to in the SCN unequivocally
establish "funding" by AEL or "control" by AEL. The statement that valuation Mould
he an issue for any buyer only when he is to pay for the same from his own pockets is
vithout substance inasmuch as there is not an iota of evidence on record that the
buyer had not paid of his own account for the goods exported by the Noticees / AEL.
li is denied that the overseas firms were paying for the CPD exported from India to
them out of funds provided by AEL and therefore such a transaction cannot be
equated with a normal transaction in the course of international trade as alleged or at
all. The payments made by AEL/Noticees are for goods actually bought and sold. Each
payment was valuable consideration for goods sold and delivered in accordance with
the contract between the parties and therefore, the allegation that buyers did not pay
from their own pocket is ex facie absurd.Each show cause notice is to be adjudicated
tat its own allegations and not with reference to another notice as held by the Hoit'bie
Supreme Court in GSFC Vs Collector of Central Excise [1997 (91) ELT 3 (S.C)].
15.6.5 It was denied that e-mail dated 30.12.2005 showed any control by AEL over the
funds. The allegation on the basis of the e-mail dated 30.12.2005 presumes many
things such as, Gracious Exports received money from Mine Gold and Jewellery
ivithout consideration and on the directions and under instructions of AEL, and
-;iitiilarly, the further assumptions that AEL directed Gracious Exports to transfer the
noney to Planica Exports without consideration. However, e-mail dated 30 12.2005
sssi merely to share and impart information regarding cash flow which was necessary
tOi AEL to monitor its own exposures in the CPD transaction. The discrepancies in the
e-mails have not been denied by DRI and therefore, the truth of the contents thereof
need to be independently proved. The Hon'ble Supreme Court in Narbada Devi Gupta
]3irendra Kumar [2003 (8) SSC 7451 held that the truth of the contents of a
document also need to be established. This is more so since the hard disk was sealed
enly by paper at the time of seizure. The report of the Directorate of Forensics is also
ague inasmuch as he does not identify the security software used for retrieving the
Ltda. There is nothing on record to rule out the tampering of the hard disk or the data
therein.
15.6.6 Bank Accounts were opened not on the basis of goodwill but on the basis of
introductions by an existing customer. Bank Accounts were not opened by employees
of Adani Global Pte Ltd. The word "we" had been mis-construed as the mail was
written as reporting on behalf of the parties who had opened the accounts and
therefore "we" did not mean Adani Global Pte Ltd. The Bank Accounts were indeed
0 wiled by each of the companies separately on their own and Mary Joseph was only
communicated the fact thereof.
1.5.6.7 Any party to the transaction would put forth its conditions before entering into
the transaction. After the parties have mutually agreed, each party is entitled to the
benefits (rights) and the obligations there under and hence there is no question of
benefit accruing only to AEL. There was no re-cycling of funds. All the transactions
wre normal and were undertaken in the usual course of business. AEL did not trust
the funds to remain with the overseas firms for more than the time required by AEL,
for large amounts and the fact that funds were remitted into foreign accounts over
waich AEL had no control shows that these transactions were independent and
undertaken in the normal course of business.
•](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-195-320.jpg)
![217
•
retracted by the petitioners such retraction is not determination of its involuntary
character. It may only be one of the factors to be considered along with other factors in
determining the question whether a statement was voluntary or not. In the present case,
there is a very vague suggestion of recording of statement under duress and coercion
that too alter two years from the date of statement and that also came in reply to show
cause notice. On the other hand there is sufficient evidence in the form of statements of
Shi i Kishan Unde and documentary evidence in the form of purchase/sale invoices of
11,1/ s. Metro Exporters Ltd., M/ s. Swikar Steel Products, M/s. Thapar Industnes and
N'/ s. Mongomery Saddle Works who has sold like or similar products to M/s. Metro
Exporters Ltd. for exports and the standard export quotation for bicycle spare parts
issued by M/ s. Metro Exporters Ltd. which shows that the procurement price was
heavily over-invoiced". (Para 20)[Emphasis added]
It was only in his reply to the show-cause notice that Shri Mukha
complained for the first time that his earlier statements had been recorded under
duress, threat etc. He stated that his earlier statements were not voluntary. I find that
no proof of duress, coercion or threat was produced by Shri Mukhia. Moreover, the
retraction made through reply to show-cause notice after more than two years from the
dote' of confessional statement is not a valid retraction " (Para 26)
Similar views were also taken in ALOK GUPTA Versus COMMISSIONER OF
CUSTOMS, NEW DELHI 2004 (170) E.L.T. 546 (Tri. - Del.) " In the statement
under Section 108 of the Customs Act, the appellant has disclosed several details about
the arrangements made for the import of the goods and under valuation. This shows
that the appellant is the main person behind the import and he has arranged all the
details, particularly, in regard to the under invoicing of the goods, by arranging for part
payment of the goods in Singapore through his Uncle. Thus, the under invoicing and
pajrnent of the differential value are appellant's arrangement. The later retraction of
statement does not appear to affect the credibility of the detailed disclosure. The
? etradtion appears to be only an effort to get out of liability as contended by the learned
SDR (Para 5)
ln DIPEN ENTERPRISES Versus COMMISSIONER OF CUSTOMS, MUMBAI 2004
(164) E.L.T. 470 (TA. - Mumbai), the following observations were made.,
These statements of Shri A.K. Sheth have been claimed to have been retracted by him.
i! was claimed that the statements dated 25-4-94 and 8-11-94 were retracted on 26-4-](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-201-320.jpg)
![225
being the force;"
Section 112 reads : -
"Any person -
(a) who, in relation to any goods, does or omits to do any act, with act or
omission would render such goods liable to confiscation under Section
111.. ....
(h) who acquires possession of or is in any way concerned in carrying,
removing, depositing, harbouring, keeping, concealing, selling or
purchasing, or in any other manner dealing with any goods which lie
knows or has reason to believe are liable to confiscation under Section
111.. ..." (Para 13)
"A careful reading of the sections would clearly show that it is the liability to
confiscation that is spoken to and not the actual confiscation. Therefore, it would mean
rhot the power to adjudicate upon for the imposition of penalty for improper importation,
springs from the liability to confiscate, and not actual confiscation. This is because not
,n/y Section 110 occurs under a different chapter, but the purpose of that section relates
urav ro seizure about which I have already noted. There again the words are "any goods
(ire liable to confiscation under this Act." Merely because the department by reason
of its inaction is not in a position to seize the goods, does not and cannot
disable it adjudicating upon the liability for action under Section 111 read with
'ec'iorz. 112 of the Act. In other words, the language of both the sections above referred
t, does not warrant the actual confiscation, but merely speaks of the liability of the
goods being confiscated, This is the plain and most unambiguous meaning of the
phraseology 'liable to confiscation' spoken to in these two sections". (Para 14)
1,, ;Dhasis added]
am fortified in my conclusion by referring to Collector of Customs and Central
Excise v. Arnrutalakshmi, AIR 1975 Mad., 43 and Munilalv. Collector, Central Excise,
.•; •-
•• Chandigarh, AIR 1975 Punj. and Haryana 130. In both these noses, though this line of
interpretation has not been adopted, it has been categorically found that having reaard
to the scope of these two sections viz. Section 110 on the one hand and Section 111 read
ivi!h Section 112 on the other, being independent of each other, seizure is not necessary
fol confiscation. This will be an added reasoning to any conclusion. Therefore, the
second point raised by the petitioner also has to be rejected". (Para 15)](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-209-320.jpg)
![•
228
11, or abets the doing or omission of such an act, is liable to a penalty. The power to
impose penalty can be exercised not only when the goods are available for confiscation
Eut when such goods are liable to confiscation. The expression 'liable to confiscation
c'early indicates that the power to impose penalty can be exercised even if the goods are
not available for confiscation. It is possible that the goods may be cleared for home
consumption without the Customs Authorities being aware that the clearance is sought
b.i 'suppressing the relevant facts or by producing documents which are not genuine. The
mere fact that the importers secured such clearance and disposed of the goods and
thereafter goods are not available for confiscation cannot divest the Customs Authorities
of the powers to levy penalty under Section 112 of the Act.Shri Chagla relied upon the
decision of Calcutta High Court reported in 2000 (123) E.L.T. 330 (Cal.) - 1976 Tox. L. R.
1E67 (Thomas Duff and Co. (India) Ltd. vs. Collector of Customs and others). The
Cc lcutta High Court took the view in a case of export where a show-cause notice was
is5ued as to why penal action should not be taken, that once the goods were exported
anlior not available for confiscation, then the Customs Authority had no jurisdiction to
iniliate the proceedings by issuance of show-cause notice for levy of penalty. It is not
possible to share the view taken by the Calcutta High Court. The power to levy penalty
7.-; 110r dependant upon availability of the goods imported or exported. The power to levy
per alty arises because the importer or exporter has done or omitted an act in relation to
floo(L- and which renders such goods liable for confiscation. The power, in our
judgment, to levy penalty is available once the Customs Authorities conic to the
conclusion that the goods imported or exported were liable to confiscation
because of act or omission on the part of the importer or exporter as the case
may be. The power is not dependant upon the availability of the goods. It is
ther4Ore not possible to accede to the submission of Shri Chagla that as the goods
1: .7
;0,-cogONd by 45 consignments were not available for confiscation under Section II I of the
Ay Li::
•
. ANiiivustoms Department could not have commenced proceedings under Section 112
. •
'
42.15f•r 1 j30 for levy of penalty". (Para 7) [Emphasis added]
• it„.z.
.1.:/
••
- -
BHAIRAV PRINTERS Versus COMMISSIONER OF CUSTOMS (I), MUMBAI 2002
(144) E.L.T. 560 (Tri. - Mumbai)
Learned Counsel tries to argue before me about the legality of the imposition of
the penalty as the goods are not factually available for confiscation which has been](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-212-320.jpg)
![234
export of imported goods covered under para 2.35 of the Foreign Trade Policy or
exports made though transhipment.
(ii)
(u)
Export performance made by one exporter on behalf of another exporter.
(3)
31. Customs duty exemption flows from the said notification, which interalia,
stipulates certain conditions and criteria to be eligible for the duty exemption, such as
incremental growth in FOB values of exports (Condition 1) and exclusion of export of
imported goods covered under para 2.35 of FTP [Para 2(i)]. It has already been held
that the value addition (condition 1) claimed is bogus. Further, from the statements
of Shri Lumesh Sanghvi it is clear that in many shipments the CPD imported are not
subjected to any processing and are exported in the same condition as imported.
Hnce the exclusion clause under para 2(i) is also attracted. Thus the eligiblity
conditions and criteria for the Customs exemption notification are not fulfilled by the
Noticees and therefore they will not be eligible for the said Customs duty exemption
under Target Plus Scheme.
32. Misdeclaration of value of export goods and attempt to avail illegally the benefit
of customs duty exemption are offences under the Customs Act. Therefore, the duty
exemption is also to be denied. The noticees are therefore not eligible for the
•
Customs duty exemption benefit of Rs. 679.62 crores for 2004-05.
,<<t F 1,4
'‘‘
As regards 2005-06, as per DGFT Notification No. 48/2005 dated 20.02 2006,
t
•leFID which were earlier permissible for calculation of export performance or for
computation of entitlement of TPS will not be allowed for calculation of export
performance or for computation of entitlement of TPS for exports made on of after
01.04.2005 (i.e., for 2005-06). Therefore the Noticees are in any case not eligible for
the' benefit of Customs duty exemption under TPS for 2005-06. It is also noted that
Nolicees have not claimed the benefit under TPS for the year 2005-06.](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-218-320.jpg)
![236
25. Thus in view of the above and in accordance with the detailed discussions
and findings in the earlier paras, it is held that all the four charges and proposed
actions vide the impugned Show Cause Notice are confirmed.
ORDER
36. In view of the above, I order the following;
i) FOB values declared during 2004-05 and during 2005-06 in respect of the CPD
exported by the six companies M/s Adani Exports Ltd (AEL), M/s Hinduja
Exports P. Ltd (HEPL), M/s Aditya Corpex P. Ltd. (ACPL), M/s Bagadiya
Brothers P. Ltd. (BBPL), M/s Jayant Agro Organics Ltd. (JAOL) and M/s Midex
Overseas Ltd. (MOL), as detailed in Annexure A, B, D, F, E & C to trie SCN
respectively, are rejected for contravention of the provisions of Section 14 of the
Customs Act, 1962.
ii) FOB values declared during 2004-05 and during 2005-06 in respect of the CI'D
exported by the six companies M/s Adani Exports Ltd (AEL), M/s Hinduja
Exports P. Ltd (HEPL), M/s Aditya Corpex P. Ltd. (ACPL), M/s Bagadiya
Brothers P. Ltd. (BBPL), M/s Jayant Agro Organics Ltd. (JAOL) and M/s Midex
Overseas Ltd. (MOL) are ordered to be redetermined under the provisions of
Section 14 of the Customs Act, 1962, to be the value of the CPD at the time of
its import as detailed in Annexure AA, BB, DD, FF, EE &CC to the SCN
respectively.
iii) The cut and polished diamonds of assorted variety exported by them during
2004-05 and during 2005-06 [declared FOB value (i) above] are held liable to
confiscation under Section 113 (i) of Customs Act, 1962 for contravention of the
provisions of Section 14 & 50 of Customs Act, 1962 read with Rule 11 iii 14 of
Foreign Trade (Regulation) Rules, 1993. However the goods are not available for
confiscation.
iv) A penalty of Rs.25,00,00,000/- ( Rupees Twenty Five CRORES only) is imposed
on M/s Adani Exports Ltd (AEL)under Section 114 of the Customs Act, 1962.
•
v) A penalty of Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M/s
Hinduja Exports P. Ltd (HEPL) under Section 114 of the Customs Act, 1962.](https://image.slidesharecdn.com/diamondscamorder2013-221110143703-48245a2b/85/Diamond-Scam-Order-2013-pdf-220-320.jpg)
Uploaded byHindenburg Research
Diamond Scam Order 2013.pdf
This document summarizes an investigation conducted by the Directorate of Revenue Intelligence (DRI) into alleged misdeclaration of export values of cut and polished diamonds by six companies between 2004-2005 and 2005-2006. The DRI analyzed import/export trends and found a large spike in diamond imports from and exports to specific countries that coincided with new export promotion schemes. One company, Adani Exports Ltd., saw its diamond exports increase over 500% while other major exporters did not see similar growth. Simultaneous searches were conducted at several company premises. The document outlines background information found on the six noticed companies, including Adani Exports Ltd. which saw its exports rise from Rs. 377 crores to over Rs. 7
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Diamond Scam Order 2013.pdf
- 1. • ••••---• • ..• CT'. 3.- .1 • OFFICE OF THE COMMISSIONER OF CUSTOMS, , CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT, f AVAS CORPORATE POINT, MAKWANA LAN&._2_ ANDHERI KURLA ROAD, ANDHERI (EAST) MUMBAI - 400 059 F. No. S/14-7-05/2007-08 Adin ORDER NO. COMMR/PMS/ADJN/13/2012-13 DRI/ AZWINQ-15/ 2005 . DATE OF ORDER • 14.01.2013 / t DATE OF DESPATCH : 21.01 2013 ORDER-IN-ORIGINAL PASSED BY SHRI P. M. SALEEM, COMMISSIONER OF CUSTOMS, CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT, MUMBAI. A. This copy is granted free of charge for the use of the person to whom it is issued. B. An appeal against this order lies with the Regional Bench, Customs, Central Excise 86 Service Tax Appellate Tribunal, Jai Centre, 34, P. D'MelIo Road, Poona Street, Masjid Bunder (E), Mumbai - 400 009. C. The appeal is required to be filed within 3 months and as provided in Rule 6 of the Customs (Appeals) Rules, 1982, in form C.A. 3 appended to those rules. The appeal should be in quadruplicate and shall be accompanied by: Four copies of the order appealed against (at least one of which should be a certified copy). (ii) A crossed Bank Draft in favour of the Assistant Registrar of the Bench of the Tribunal on a branch of any Nationalized Bank located at a place where the Bench is situated, for an amount equal to the fee required to be paid under the provisions of Section 129A of the Customs Act, 1962, for the appeal. D. The appeal shall be presented in person to the Registrar of the Bench or an Officer authorised in this behalf by him or sent by registered post addressed to Registrar or such Officer. E. Any person desirous of appealing against this decision or order shall pending the appeal deposit the duty demanded or the penalty levied . 1 4:7 71 0, therein and produce proof of such payment along with the appeal failing 1.0 which the appeal is liable to be rejected for non-compliance with the provisions of Section 129 of the Customs Act, 1962. , • ! *********** Sub: Show Cause Notice against M/s Adani Exports Ltd., now Adani Enterprises Ltd., Ahmedabad and five other Noticees for misdeclaration of FOB Value of -Cut and Polished Diamonds exported by them during 2004-05 and 2005-06 - Reg. (i)
- 2. 2 • The matter underadjudication here is the Show Cause Notice No.DRI/AZU/INQ-15/2005 dated 30.03.2007 issued by Addl. Director General, Directorate of Revenue Intelligence, Ahmedabad. The said Show Cause Notice, narrates the background of the issue, the details of the investigations, the allegations, and the charges as stated briefly as follows : 1.1.1 Intelligence was received by the Directorate of Revenue Intelligence that M/s. Adam Exports Ltd., Ahmedabad - now Adani Enterprises Limited - (hereinafter referred to as AEL) had formed a consortium with various companies and indulged in the mis-declaration of FOB value and circular trading of Cut and Polished Diamonds (hereinafter referred to as CPD) exported by them with an intent to inflate their export turnover to fraudulently avail the benefit of Target Plus scheme. The investigation was carried out by DRI, Ahmedabad. Various aspects were studied/examined and investigated. The details of Import/ export of CPD into/from India were analysed which revealed that there was a perceptible spurt in import of cut and polished diamonds from Dubai and Hong Kong and exports to Singapore, Hong Kong and UAE after announcement of the Target Plus Scheme. It was noticed that the total imports of cut and polished diamonds from India which was only to the tune of Rs. 2155.15 crores in 2002-03 suddenly increased by over 105% to Rs. 4417.10 crores in 2003-04. The statistics indicated that the majority of this rise in imports was attributed to the rise in imports from Hong Kong and U.A.E;., which also rose by 120% and 135% respectively. Further, out of total imports of Rs. 4417.10 crores in 2003-04, the total imports from Hong Kong and U.A.E. accounted for Rs. 2932.76 crores i.e. more than 66%. It was stated by the DRI that this sudden spurt in the imports of cut & polished diamonds was due to the advent of "Incremental Export Promotion Scheme" in 2003-04. That on introduction of "Target Plus Scheme" in 2004-05 the spurt in the imports of diamonds got a further boost in 2004 -05 and 2005-06 and the total imports rose by 339.54% and 328.66% in 2004-05 and 2005-06 as compared to 2002-03. The share of U.A.E. in this unprecedented rise of imports rose by 1240.68% and 968.23% in 2004-05 and 2005-06, respectively over its imports of 2002-03. It was also observed that of the total imports of Rs. 11514.46 crores in 2004-05 the share of imports from Hong Kong and U.A.E. was of Rs. 9676.98 crores i.e. more than 84%. Similarly in 2005-06 out of total imports of Rs. 11162.38 crores the total imports from Hong Kong and U.A.E. was Rs. 9465.18 crores i.e. again more than 84%. Such exponential growth in the imports of cut 86 polished diamonds into India and that to from only two countries was never seen in the past. 1.1.2 Similar trends were also observed in the exports of CPD, the details of exports examined which indicated sudden spurt in exports to Hong Kong, U.A.E. 86 Singapore in 2004-05 and 2005-06 after the introduction of "Target Plus Scheme". It was observed that out of total exports of Rs. 45357.56 crores in 2004-05 the total exports to Hong Kong, U.A.E. and Singapore accounted for Rs. 20380.51 crores i.e. more than 45%. Similarly in 2005-06 out of total exports of Rs. 49140.43 crores the total exports to Hong Kong, U.A.E. and Singapore was Rs. 23382.40 crores i.e. more than 47%. The share of Singapore in this unprecedented rise of exports rose by 126.57% and 734.11% in 2004-05 and 2005-06, respectively over exports of 2002-03. 1.1.3 The trends of major importers/exporters of CPD from Diamond Plaza Clearance Centre (DPCC) Mumbai were studied. It was revealed that in case of all other importers of the same goods, further analysis of the import / exports of CPD, volume n different periods, value additions, common suppliers and consignees etc. during the same years indicated that most of the parties who had been consistently importing and exporting diamonds over the years had not seen any major increase in their ‘:.xpoits of diamonds in terms of value and quantity, the details of which were given Annexure N to the Show Cause Notice. A study of 40 major CPD importers and exporters operating from the bonded premises in the Diamond Plaza Clearance Center (DPCC), Mumbai was carried out. The details of imports and exports of CPD given by Assistant Commissioner of Customs, Diamond Plaza Customs Clearance Centre, Mumbai, revealed that during 2003-04, the import and export of CPD by AEL was 31.39% and 32.55% respectively, of the total import export from the DPCC by the major 40 importers/exporters. While the other 5 firms viz. HEPL, JAOL, MOL, BBPL and ACPL did not have any import and export of Diamonds from the DPCC. However, with the introduction of the Target Plus Scheme, the total imports and exports of AEL and the above 5 companies shot up to 72.31% -Imports and 72.56% - Exports of the total import and exports of the 40 firms from the DPCC during 2004-05. Similarly
- 3. 3 during 2005-06 thetotal imports of AEL and the other 5 companies was 73.33% and the export was 73.99% of the total import and exports of the 40 firms from the DPCC during 2004-05. The details of the imports and exports of the said 40 firms of the DPCC, were scrutinized and it was noticed that the total imports and exports of the 34 major firms dealing from DPCC was consistent during the period 2003-04 to 2005-06 and in fact their exports in 2005-06 reduced from Rs. 2996.05 Crores in 2004-05 to Rs. 2266.95 Crores in 2005-06 (fall of about 24%). Whereas the exports of Adani Exports and its other five group companies which was only Rs. 1248.41 Crores in 2003-04 suddenly shot upto to Rs. 7924.35 Crores in 2004-05 (a boost of 535%). whereas their exports in 2005-06 marginally reduced to Rs. 6447.10 Crores as compared to 2004-05, in 2004-05 and in 2005-06 the total exports of Adani Exports Ltd. and their 5 group companies was about 3 times the total exports of all the other 34 firms put together. Such unprecedent growth in the exports achieved by the Adani Group of companies was unheard of in the diamond business and even the top 34 exporters who were veterans in the field could not achieve such growth. 1.1.4 The study suggested that the following parties had formed a consortium under the direct management and control of M/s. Adani Exports Ltd., Ahmedabad and had attained unprecedented growth in the volume of import and exports of diamonds, 1. M/s Adani Exports Ltd. (hereinafter referred to as AEL) 2. M/s Aditya Corpex Pvt. Ltd. (hereinafter referred to as ACPL) 3. M/s Hinduja Exports Pvt. Ltd. (hereinafter referred to as HEPL) 4. M/s Midex Overseas Ltd. (hereinafter referred to as MOL) 5. M/s Jayant Agro Organics Ltd. (hereinafter referred to as (JAOL) 6. M/s Bagadiya Brothers Pvt Ltd. (hereinafter referred to as (BBPL) On the basis of the intelligence received and in order to collect the relevant evidence, simultaneous searches were conducted by the officers of DRI at various premises at Mumbai, Ahmedabad, Bangalore, Indore and Raipur. 1.2 The business profile and the export turn over of all the six companies were examined, which revealed the following: • 1.2.1 M/s. Adani Exports Ltd.(also known as M/s Adani Enterprises Ltd) (M/s AEL):- It was an Ahmedabad based company with its registered office at Ahmedabad. The major Directors of this company are the borthers of Adani family viz. Shri Gautam Adani, Shri Rajesh Adani and Shri Vasant Adani. At that time it had the status of a Five Star Trading House bestowed by DGFT based on its export turn over. The group was mainly engaged in the import and export of various commodities as merchant exporters. The statistics of exports indicated that the exports of M/s. Adani Exports Ltd. during the year 2002-03 was only Rs. 377.44 crores which shot up to Rs. 4838.53 crores (more than 1200%) in the year 2003-04 when the "Incremental Export Promotion Scheme" was introduced. This spurt in turn over was mainly achieved through unprecedented rise in the exports of C&P diamonds, plain jewellery of gold, rough diamonds and third party exports (all of which were permissible for calculation of FOB for incremental growth). In the year 2004-05, the turn over shot up to Rs. 10938.80 crores (more than double from the year 2003-04 & more than 2400% as compared to 2002-03). This again was attributed to unprecedented rise in turn over of C&P diamonds, articles of gold and studded jewellery of gold (Rs. 8669.80 croi es .about 80% of total exports). However in 2005-06 the total exports was only 1/3rd of the previous year and the exports of 03613 diamonds and Articles of gold also considerably reduced to only 44% of the total exports. It was also noticed that the major exports of the4e items were affected after September 2004, when the Target Plus Scheme was ' intrpduced. Moreover, the permission for setting up Private/ Public Bonded Warehouses was obtained by AEL from Customs, under Section 58 of the Customs Act, 1962 only on 02.07.2003 i.e after introduction of Incremental promotion scheme. 1.2.2 M/s Jayant Agro Organics Ltd. (M/s JAOL or M/s Jayant Agro): It is a company owned by the members of Udeshi family and Shri Vithaldas Gokaldas Udehsi as the chairman of the company. They were having their registered office at Mumbai. It had 2 units at Ranoli & Vadodara engaged in the manufacture of derivatives of Castor oiI and dehydrated castor oil, etc. The study et their export/import revealed that the exports of M/s. Jayant Agro Organics Ltd. suddenly shot up from Rs. 209.17 crores in 2003-04 to Rs. 538.57 crores in 2004-05 i.e. over 157%. Similarly it had a corresponding increase of over Rs. 191 crores in 2005-06 over
- 4. 4 • the previous yearand this sudden increase in their exports was mainly attributed to the sudden increase in the exports of C&P diamonds (about 38% of total exports in 2004-05 and 75% in 2005-06), which was apparently arranged and managed by AEL. This company was never into the business of diamonds. Moreover, the permission for setting up Private/ Public Bonded Warehouses was obtained by JAOL from Customs, under Section 58 of the Customs Act, 1962 only on 07-03-2005, i.e after introduction of Target Plus scheme. 1.2.3. Xil/s Bagadia Brothers P Ltd (M/s BBPL or M/s Bagadia Brothers): - It is a Raipur based company owned by Shri Omprakash Bagadia and its family members. It was mainly engaged in exporting Rice, wheat, Iron ore and De-oiled cakes. The details of its exports during the period 2001-02 to 2005-06 (upto January 2006) were analysed which showed that over 100% incremental growth of exports achieved by Bagadiya brothers in the year 2004-05 over 2003-04 and about 100% growth achieved in 2005-06 over 2004-05 was mainly attributed to the exports of C&P diamonds (about 39% and 41% of total exports in 2004-05 and 2005-06, respectively), which admittedly were arranged for and managed by AEL. This company had never dealt in diamonds earlier. Moreover, the permission for setting up Private/ Public Bonded Warehouses was obtained by BBPL from Customs, under Section 58 of the Customs Act, 1962 only on 15-03-05, i.e after introduction of Target Plus scheme. 1 2.4. M/s Midex Overseas Ltd (M/s MOL Or Midex):- M/s. Midex Overseas Ltd was Indore based company mainly engaged in the business of export of Molasses, Soybean Meal and other agro products like Rapeseed meal, Rice, Maize etc. including certain other sundry items to Africa. The directors of this company were Shri Narottam Somani and the other directors joined from April, 2005 were Shri Deepak Shah and Shri Amit Tandon. The details of the export performance of Midex overseas were studied which revealed that the exports of Midex overseas which was Rs. 244.60 crores in 2003-04 suddenly rose to Rs. 503.05 crores in 2004-05, a spurt of over 100%. Similarly in 2005-06 also their exports had a further boost of over 90% over 2004-05. This sudden increase in their exports was mainly attributed to the sudden increase in the exports of C&P diamonds (above 78% of total exports in 2004-05 and 87% in 2005-06), which was admittedly arranged for and managed by AEL. This company was never into the business of diamonds before. Moreover, the permission for setting up Private/ Public Bonded Warehouses was obtained by MOL from Customs, under Section 58 of the Customs Act, 1962 only on 28-02-05, i.e after introduction of Target Plus scheme. 1.2.5. M/s. Hinduja Exports Pvt. Ltd (M/s HEPL or Hinduja Exports).: This company prior to being incorporated as a company, was a partnership firm owned by M/s Gokaldas Group in Bangalore. This firm was taken over by M/s. Ambitious Trade Link Pvt. Ltd., Ahmedabad, a group/associate company of the Adanis, in which the brother in law of Shri Rajesh Adani, Direcotr of AEL, was the director. Thereafter it was converted into a limited company and Shri Deven Mehta (Business associate) and Shri Samir Vora (Brother in law of the director of AEL) were made its directors at the behest of Shri Rajesh Adani, Director of AEL. The sudden spurt in the exports of this company in 2004-05 and 2005-06 reveals similar trend as in case of the aforesaid companies, the exports of M/s HEPL which was meager Rs. 4.15 crores in 2001-02, jumped to Rs. 694.07 crores in 2002-03 (16,628%), when "Incremental Export Promotion Scheme" was introduced. This unprecedented growth was mainly achieved through the exports of rough diamonds, C&P diamonds and third party exports, all of which were permissible for calculation of FOB for incremental growth. The exports saw a further boost of more than 100% growth in the year 2004-05 and 2005-06, with the advent of Target Plus Scheme and this time, in the year 2004-05 more than 95% of the total exports was of C&P diamonds. And that in the year 2005-06 the entire exports of Rs. 2258.80 crores of M/s HEPL was of C&P diamonds only. Moreover, the permission for setting up Private/ Public Bonded Warehouses was obtained by HEPL from Customs, under Section 58 of the Customs Act, 1962 only on 09-11-2004, i.e after introduction of Target Plus scheme. 1.2.6 M/s. Aditya Corpex Pvt. Ltd (ACPL or M/s Aditya Corpex): This company was also .3L partnership firm before being taken over by M/s. Milestones Trade Link ?vt. Ltd., in which Shri Sameer Vora, brother in law of Shri Gautam Adani, was the director. Shri Rakesh Shah, brother in law of Shri Rajesh Adani and Shri Saurin Shah, General Manager (Imports & Exports) of AEL were made its directors. The study of export performance of this company revealed that the company whose turnover was
- 5. • 13 export growth targetof balance Rs. 300 Crores approximately, they would he importing mainly cut and polished diamonds and after value addition to the extent of 5 to 10% they would export the same under the target plus scheme; that he was not aware whether any kind of machinery or equipment were installed at the Bonded warehouse in Mumbai but no such purchase of machinery/equipment had been reflected in the account statements received from their Ahmedabad office; that he was not aware as to how Cut & Polished diamonds were imported, how the export orders were procured and how they were exported; that he was also not aware of the manner in which the payments for the imports were made and how the export remittances were received; that he was not aware about the foreign suppliers and customer:. of Cut & Polished Diamonds. In his further statement of Shri Narottam Somani, Director of M/s.Midex Overseas Limited inter-alia stated that he had signed various memorandum of understanding on behalf of the company in the capacity of Managing Director of Midex Overseas Ltd. which were : 1) MOU dated January 18th January 2005, between M/s Midex Overseas Ltd and M/s. Aditya Corpex Pvt Ltd - By way of this MOU M/s Midex Overseas Ltd had permitted to carry out the shortfall of exports during financial year 2004-05, to achieve 100% incremental growth over the exports of 2003-04. Power of attorney dt. January 18th 2005 was signed by him in favor of Mr. Saurin Shah and Mr. Sanjay Shah of M/s. Aditya Corpex Pvt Ltd, granting full powers and authority to do and execute the deeds mentioned therein. 2) MOU dated 7th March 2005, between M/s Midex Overseas Ltd and M/s. Aditya Corpex Pvt Ltd - Under this MOU M/s Midex Overseas Ltd entrusted Shri Saurin Shah, director of M/s. Aditya Corpex Pvt Ltd and S/shri Sanjay Shah, PV Reny and Vishwas Shah, representatives of M/s. Aditya Corpex Pvt Ltd with adequate corporate powers and control over the operations and resources of the company to the extent necessary and required towards realization of DPEC 03- 04. This MOU also detailed the terms of payment to be received by M/s Midex Overseas Ltd from M/s. Aditya Corpex Pvt Ltd to the tune of 67.5% of licence value, i.e. Rs. 13.17 Crores. Power of attorney dt. 7th March 2005 was signed by him in favor of Mr. Saurin Shah, Mr. Vishwas Shah and Mr. Sanjay Shah of M/s. Aditya Corpex Pvt Ltd granting full powers and authority to do and execute the deeds mentioned therein. He further stated that it is true to say that the entire exports of 2003-04 was done by his company without help of M/s. Aditya Corpex Pvt Ltd but the licence was not getting issued and they were not sure of the government policy, and due to tight monetary position, when Mr. Samir Vora offered upfront payment in lieu of usage of licence by M/s. Aditya Corpex Pvt Ltd, they accepted the same and signed the application for the licence and handed over the same to M/s. Aditya Corpex Pvt Ltd; that they had received Rs 12 cr. in various trenches and which have been credited as profits accrued from Ahmedabad office; that this Rs 12 cr had been shown as profits generated out of the trading activity carried out solely by Adani Group at the Ahmedabad office in the name of M/s Midex Overseas Ltd. Regarding the remittances for the exports during 2004-05 and 2005-06 Shri Somani stated that the transaction done by Indore Office were fully recovered, however he had no idea of any payments or receipts for the trade done by Adani Group in their books for year 2004-05, as the banking was done and controlled by them exclusively; that the transaction done in the Indore office were exclusively for the products like Soyabean meal, Rapeseed meal and Engineering Goods. As far as 05-06 is concerned M/s Midex Overseas Ltd was already sold to Adani Group company M/s Anand Trade Movers Pvt. Ltd; that the applications :iiextipt, in the name of M/s Midex Overseas Ltd for the year 2003-04 under DFEC file and 2004-05 under Target Plus Scheme were prepared by Adani Group and • — • c-> :•,-,..tlieytikried it, and handed over to them; that the submissions to DGFT was also made / 1:py the Adani Group, and application fee for submission of the same was also made by 36 citte ci , Try, Regarding the amount of US $ 14,569,067 shown against exports that have not 0 -- iikai into account under categories (A to G) as per the calculation sheet forming 0 ---- 1,plaxt,t•s.the application, made under appendix 17D, for the year 2004-05 Shri Somani that these transactions were done in Ahmedabad by Adani Group and not related to lndore office, hence he could not comment on it. He further stated that the application under Appendix 17D along with its enclosures, calculation sheet etc was prepared by the Adani Group and they just signed it; that they had sold the company somewhere in early January 2006 , and the proof of the same had also been submitted by him and he had no idea of the present activity of M/s Midex Overseas Ltd; that till
- 6. 14 • the period thecompany was under his control, he could confirm that they had not made any application/ amendments other than those mentioned by him; that they were issued two licenses against DFEC scheme of 2003-04 , vide letter dated 24.03.2006, (file No. 02/ 98/074/00084/ am06 dt. 02.09.2005). The value of the licence No. 0310373241 24.03.2006 was Rs. 10 crores and the value of licence No. 0310373242 dt. 24.03.2006 was Rs. 5,45,92,396.90 which was subsequently amended to Rs.6,62,96,269.00 under amendment sheet No. 1 dt. April 17th 2006 (file No. 03/ 98/74/74/AM06) ;that he nor his person had ever visited the office of DGFT Mumbai except for the surrendering the DFEC license for the year 2003-04, on their request: which came to his Indore office address; that they had received a communication from the office of DGFT Mumbai, asking them to send the DFEC Licencse issued in name name of M/s Midex Overseas Ltd for the year 2003-04 for minor correction and they submitted the license back to them vide letter dt. May 8th 2006 and were delivered personally to the DGFT office; that they also inquired the status of the license from the DGFT on July 25th 2006 and were informed by DGFT vide letter No. 03/98/074/00084/AMO6 dated September 12th 2006; that the same were delivered by them to address of Midex Overseas Ltd. in Ahmedabad. Since the company had been sold by them and they did not control the company, he was not aware as to where the license was, and the current status of the same; that he was aware that he had signed the application for Bonded Warehouse, and some stamp papers pertaining to it; that these papers came from office of Adani Exports Ltd., Ahmedabad, and Mr. Sameer Shah called him and asked him to sign it; that he did not know where the Bonded warehouse was and what is the present status. 1.3.12 Shri Mehul Shah, Deputy Manager, M/s AEL inter-alia stated that he had been working in AEL since last four and half year ; that he maintained books of accounts related to precious metals which included import/exports, domestic sale and purchase of precious metals; that he prepared his books of accounts on receipt of hard copies of import/export invoices and other documents from their office at Mtunbai and Delhi ; that he was reporting to Shri Samir Vora; that apart from AEL he also looked after the accounts of M/s HEPL, M/s Aditya Corpex Pvt. Ltd ( ACPL), M/s Midex Overseas Ltd. ( MOL); that he had been looking after accounts of above said companies since last two years; that Shri Samir Vora and Shri Saurin Shah were the directors in HEPL and ACPL respectively; that there were 6-7 suppliers (overseas) of diamonds imported by AEL viz. (i) Daboul Trading- Dubai, (ii) Al Shahad Gold Jewellery- Sharjah (iii) Shine Jewellery- Dubai, (iv) Gold Star FZE- Dubai and (v) D.J. Ltd- Dubai; that the abovesaid companies were supplying diamonds to HEPL, ACPL, MOL, M/s Jayant , M/s Inter Continental and M/s Bagadiya; that there may be other suppliers also; that the overseas buyers of diamonds exported by AEL and other companies mentioned above were (i) Kamsun Development- Hong Kong (ii) Gudam International- Singapore, (iii) Gracious Exports- Singapore and (iv) Emperor Overseas- Singapore; that the books of accounts pertaining to M/s Jayant Agro Organics Ltd ( JAOL) and M/s Bagadiya Brothers Pvt. Ltd ( BBPL ) were maintained by Shri Vishwas Shah also Deputy Manager, AEL at Adani House, Ahmedabad; that employees of AEL were authorised to sign the bank cheques and other bank documents; that he had been authorised to sign bank cheques and other bank documents pertaining to HEPL; that all the bank cheque books and other banking documents pertaining to these companies were in the possession of Shri Mahadevan, Deputy General Manager, Banking 86 Finance; that on an average 20-25 consignments of diamonds were imported and 15-20 consignments were exported by AEL and other companies; that terms and conditions of imports of diamonds made by AEL was on L/C basis with 180 days; that in case of exports, AEL and other companies were paying commission/ brokerage to their overseas agent ; that they were not paying any commission for import orders; that the details of commission paid to the overseas agent was known only to Shri Samir Vora and Shri Mahavevan; that AEL provided all the. necessary finance to HEPL, ACPL, MOL for opening of L/C which was required for importation of gold and diamonds ; that payments against these L/C s were recovered from the account of these companies after receipt of export remittance; that all the policy decisions regarding imports/exports of gold/diamonds in respect of AEL and other companies was being taken by Shri Samir Vora in consultation with Shri Rajesh Adani, Managing Director, AEL; that operational aspects of imports/exports of diamonds from Mumbai was looked after by Shri Lumesh Sanghvi at Mumbai ; that Shri Saxriir Vora looked after operations of export/import of diamonds from other places such as Ahmedabad, Delhi, Bangalore. 1.3.13 Shri Bhavik Shah, Senior Vice President , M/s Adani Agro Pvt. Ltd (AAPL) , Ahniedabad interalia stated that he was Head of Finance of Precious Metal Desk of
- 7. 15 AEL and wasalso looking after the finances of M/s Inter Continentional ( M/s Hinduja Exports Pvt. Ltd (HEPL) , M/s Aditya Corpex Pvt. Ltd ( ACPL), M/s Midex Overseas Ltd. ( MOL), M/s Jayant Agro Organics Ltd ( JAOL) and M/s Bagadiya Brothers Pvt. Ltd ( BBPL) related to import and export of CPD; that these companies were in the export/import business of gold jewellery and articles of cut and polished diamonds since last 2 years; that as per his knowledge Shri Samir Vora and Devan Mehta were the directors in HEPL; that S/Shri. Rakesh Shah and Saurin Shah were the directors in ACPL; that Shri Samir Vora is brother of Gautam Adani's wife and Shri Rakesh Shah is brother in law of Gautam Adani; that Shri Saurin Shah was working as General Manager in AEL; that AEL provided financial assistance to HEPL ,ACPL, MOL and BBPL by way of opening L/C for the imports of precious metals and diamonds and by arranging short time loans from associates companies; that these companies repaid the loans given after receipt of remittance of exports; that Shri Samir Vora looked after entire business of exports/imports of gold & diamonds for all the above said companies; that he (Bhavik Shah) interacted with Shri Tejas Chokshi of M/s Dabhol Trading Co. LLC, Dubai regarding financial transaction of import and export of diamonds on behalf of abovesaid companies; that one Shri Rakesh Shah employee of Adani Global FZE, Dubai coordinated for the business of export and imports of gold and diamonds with Dabhol Trading Co. LLC, Dubai; that M/s Adani Global FZE, Dubai , GA International, Dubai, Adani Global PTE , Singapore and Adani Global Ltd, Mauritius were the overseas group companies of Adani ; that Shri Vinod Shantilal Shah ( Adani), director of M/s Adani Global FZE, Dubai is brother of Shri Gautam Adani and Shri Rajesh Adani; that he did not know about the other directors of overseas Adani group of companies; that Shri Lumesh Sanghvi looked after operational part of AEL at Mumbai and Shri Ajit Barodia was looking after clearance part of AEL; that AEL recovered service charges on accounts of opening L/C's for HEPL and ACPL ,similarly AEL or associate companies charged interest on short term loans provided to above companies or JAOL, MOL and BBPL ; that Shri Sarnir Vora was overall incharge of precious metals and diamonds and taking decision regarding pricing of gold/ gold jewellery & articles, cut & polished diamonds imported and exported by AEL and above said companies; that Shri Samir Vora was directly reporting to Shri Rajesh Adani / Shri Samir Shah ; that the processing of the cut and polished diamonds imported and exported by above said companies was looked after by Shri Lumesh Sanghvi. 1.3.14 Shri Kaushal Pandya, office assistant M/s Adani Exports Ltd, inter-aline stated that he was looking after the work of data entry of export documentation in the Ahmedabad office; that he was asked to report to Shri Lumesh Sanghavi in the Mumbai office; that in the Mumbai office he was asked by Shri Lumesh Sanghavi to prepare the export invoices of diamonds on the basis of hand written details provided to him by Lumesh Sanghavi; that accordingly he prepared the invoices on the computer installed in the office of M/s Adani Exports Ltd; that he was instructed by Shri Lumesh Sanghavi to sit in the office of M/s Aditya Corpex Pvt Ltd situated at 706, Raheja Centre Nariman Point, Mumbai; that Lumesh Sanghavi was looking after the import/ export activities of M/s Aditya Corpex Pvt Ltd and as per Lumesh's instructions all the activities of M/s Aditya Corpex Pvt Ltd were controlled; that Shri Manish Shah, an employee of M/s Adani Exports Ltd looked after all the administrative work of M/s Aditya Corpex Pvt Ltd such as payments of rent, telephone, light bills etc; that Manish Shah did not sit permanently in the office of M/s Aditya Corpex Pvt Ltd; that Shri Bhor used to look after the customs clearance work of the import and export of diamonds and carry the packets of the diamonds to Air Customs for appraising; that Shri Bhor reported to Sri Ajit Barodia, who was also :m _ employee of M/s Adani Exports Ltd. and looked after customs clearance work of ;imports and exports at Mumbai; that in the office of M/s Aditya Corpex Pvt. Ltd., he irt&Vishal Bhaysar prepared the export invoices of cut and polished diamonds as per 14e' andwritten details given to him by Mr. Lumesh Sanghvi; that details such as tion of the diamonds, size, carats, rate, name of the buyer, bond no., against yirliv_ the exports were made etc, written on a blank paper were provided to them each and,;every time; that he along with Shri Rahul Bhor wrote the details in a customs bt$,id register maintained in the office of Aditya Corpex Pvt. Ltd.; that the delivery of The consignments to their office after customs clearance were made by insurance agencies Malca Amit, Mumbai and Brinks Arya; that either he or Mr. Rahul used to receive the parcel in the office of M/s Aditya Corpex Pvt. Ltd. with the AWB, BE and invoice etc.; the parcel of diamonds packed in light aluminum box in a canvas/plastic bag; that only one metal box was received against one bill of entry and that the met al box contained different packets of imported diamonds wrapped lot wise in a plain white paper and on each packet endorsement i.e. 1,2,3 etc (lot No. as per invoice) and •
- 8. 16 • carats (weight) withpencil was written; that on the same day Lumesh Sanghvi used to come to the office of M/s Aditya Corpex Pvt. Ltd to check the parcel/contents; that Shri Lumesh Sanghvi used to take out the packets of certain lots from the parcel for sorting into various sizes by assorters in the office of "Aditya Corpex Pvt. Ltd. ; that in his absence Lumesh used to give instructions to him on phone regarding the sorting to be done; that the assorters used to separate diamonds based on their sizes with the help of sieves on the instructions of Shri Lumesh Sanghvi and under his supervision; that upon working into different sizes two to four lots of different size groups were niade and packed separately in plastic bags and were weighed; that they used to tally the weight of the imported diamonds after separating it lot wise; thereafter they (Rahul or Kaushal) used to keep the diamonds in transparent plastic bag and wrap them in plain white paper and put lot no. and carats with pencil as per the details shown for the said diamonds in the export invoice; that thereafter on completion of packing, they used to fax the export invoice to their CHA Jasraj Kalyanji and to their Security/insurance agency for the purpose of preparation of customs documents by CHA and for taking delivery of diamonds by the security agency; that the parcel were presented for appraising before exports by Shri Rahul Bhor at Bharat Diamond Bourse; that he looked after the aforesaid work in Aditya Corpex Pvt. Ltd. from October 2004 to June 2005; that for some period during March 2005 to April 2005, as per th instructions of Shri Lumesh Sanghvi, he had worked in the office of M /s Hinduja Exports Pvt. Ltd. Located at Dalarnal House, Nariman. Point, Mumbai where he used to prepare the export invoices of M/s Hinduja Exports Pvt. Ltd. on the basis of hand written details provided to him by Shri Lumesh Sanghvi on a plain white paper; that except preparation of export invoices all other activities done by him in Aditya Corpex Pvt. Ltd. were done by Shri Bhavik Desai for M/s Hinduja Exports Pvt. Ltd ; that 112 was the authorized signatory for M/s Aditya Corpex Pvt. Ltd. for signing various export documents; that in the case of M/s Hinduja Exports Pvt. Ltd. , he was not authorized to do so and documents were signed by Shri Bhavik Desai; that the invoices were prepared on computer and were mailed to Mr. Mehul Shah of accounts department of their Ahmedabad office and that he would have taken a print out of the same and must have got it signed by Mr. Vishwas Shah for submitting to the bank; that ali the copies of the invoices submitted to Customs were signed by either him or Shri Vishal Bhaysar; that he used to e-mail the invoices to Mr. Mehul Shah at meshah@adanigrop,corn; 1.3.15 3hri Kamraj Pitambar Bodal, Office Assistant of M/s. Adani Exports Ltd. inter- alia stated that he was working with M/s. Adani Exports Ltd. since April 2002 as Office Assistant and working under the directions and instructions of Shri Lumesh Skinghavi; that M/s. Adani Exports Ltd. were carrying out import and export business of cut 8G polished diamonds under Bond from the private bonded warehouse; that Shri Lumesh Sanghavi used to inform about the diamonds to be received and their CHA M/s. Jasraj Kalianji used to send them invoice and airway bill in respect of the import consignments of diamonds; that he used to take physical delivery of the diamonds arid used to make an entry of the same in bond register; that Shri Lumesh Sanghavi used to bring assorters along with him and they used to assort the diamonds by sieving and boiling ; that the assorters segregated the diamonds as per quality and they used to pack the same for exports ; that he never participated in said assorting of diamords; that thereafter on the instructions of Shri Lumesh Sanghavi, he used to prepared export invoices by typing the same on the computer installed in their office ; that he had never seen any export orders from foreign buyers to whom they are exporti:ig cut and polished diamonds; that Shri Lumesh Sanghavi never informed him anything about any such order ; that he used to type the invoices, as per the material details provided by Shri Lumesh Sanghavi with regard to name/address of buyer; port; -ifet&Tiption, weight Et rate/value of the cut & polished diamonds; that he had already I'Pre1S51-one sample of export invoice in the excel worksheet of their office computer t erotri„- e had given formula for automatically generating the export value of the It !;,s d arnonag y feeding import value in the rate column; that he used to prepare the . retyping on the last existing invoice. The formula given by him was : Value :a extort 4 Import Rate x 5% or 10% x Weight of diamond in Carats ; that this sample ,invoice has been prepared on the instructions received from Shri Lumesh Sanghavi; Aka_ he used to sign the export invoices of M/s. Adani Exports Ltd. and apart from him Shri Lumesh Sanghavi used to sign the same; that he had no knowledge of cut as polished diamonds; that Shri Lumesh Sanghavi used to decide the value of diamonds exported by M/s. Adani Exports Ltd; that they were receiving faxes from Ahmedabad office o' M/s. Adani Exports Ltd; that the said faxes pertaining to the import invoice for import of cut and polished diamonds by M/s. Adani Exports Ltd. as well as M/s. Jay-ant Agro Organics Pvt. Ltd., M/s. Aditya Corpex Ltd., M/s. Midex Overseas Ltd.,
- 9. 17 M/s. Hinduja ExportsLtd., M/s. Bagadiya Brothers Pvt. Ltd; that the invoices in respect of above said 5 firms other than M/s. Adani Exports Ltd. used to come for Shri Lumesh Sanghavi and he used to keep said invoices with him. 1.3.16 That the entire activity of import and export of CPD of all the five firms HEPL, JAOL, ACPL, BBPL and MOL were all managed and controlled by AEL only is further strengthened by the statement of Shri Vipul Popat alias Pappu, Partner, M/s Jasraj Kalyanji and Co. (CHA 11/ 110). Shri Vipul Popat inter-alia stated that their firm was dealing exclusively into the clearance of import and export of Diamonds and Gold Jewellery and machinery related to this industry; that he was introduced with M /s Hinduja Exports Pvt. Ltd, M/s Midex Overseas Ltd , M/s Aditya Corpex Pvt. Ltd and M/s Bagadia Brothers Exports Pvt. Ltd by Shri Deven Jitendra Mehta; that Shri Deven Mehta had come to their office somewhere in the year 2004 ; that initially Shri Deven Mehta had brought two parties viz. M/s Hinduja Exports and M/s Adit3a Corpex Pvt. Ltd and had requested whether he would clear the documents of Import s and exports of Cut and Polished diamonds of these parties; that Shri Deven Mehl a further informed him that the documentation part of both these companies would be looked after by Shri Manish and Shri Kaushal respectively; that after working on the modalities, they had started the work of both these parties; that none of these parties imported / exported Cut and Polished Diamonds prior to this period; that both these parties had applied and obtained permission to operate private bonded warehouse for the activity of Import/ Export of Cut and Polished Diamonds under Section 58 of the Customs Act, 1962; that he never interacted with the management of both these firms; that he always interacted with Shri Manish and Kaushal respectively for day to day operations of these two firms; that thereafter Shri Deven Mehta introduced with two other firms viz. M/s Midex Overseas Ltd and M/s Bagadiya Brothers Pt t. Ltd; that these two firms were introduced to them by Shri Deven Mehta somewhere in the month of February 2005; that Shri Deven Mehta informed him that these two parties will also be applying for permission to operate Bonded Warehouse under Section 58 of the Customs Act, 1962, he also informed that that the documentation part for these two firms will be looked after by Shri Vishal and Shri Rakesh respectively; that Shri Deven Mehta was introduced to their firm by Shri Lumesh Sanghavi, a senior person working in M/s Adani Exports and looks after all the Import and Export documents of Cut and Polished Diamonds of M/s Adani Exports; that their CHA firm handled the imports/ Exports of Cut and Polished Diamonds of M/s Adani Exports since last four- five years; that they also interacted with Shri Kamraj Badal, who handled the documentation in M/s Adani Exports ; that Shri Manish used to look after the documentation of M/s Bagadiya Brothers in the earlier period also used to look after the documentation of M/s Hinduja Exports; that as far as they knew these four companies were controlled by Shri Deven Jitendra Mehta. Shri Rajesh Adani, Managing director of Adani Exports Ltd., during the recording of his statement was confronted with the fact regarding the existence of MOU between its group/sister concerns and the three companies mentioned aboN e and the fact that the exports of CPD of all the six companies was arranged for and managed by Adani Exports Ltd. and that the benefits of Target Plus Scheme were to accrue to Adani group of companies, he interalia confirmed it. Also when Le was confronted with the fact that M/s. Hinduja Exports and M/s. Aditya Corpex wei e paid a sum of Rs. 12.5 crores and Rs. 8.5 crores were taken over on payment of 12.5 crores and Rs. 8.5 crores respectively even though none of its asssets or liabilities were taken over, he confirmed the facts. 1.:3.17 Thus, it is evident that out of the above said five firms; HEPL and ACP:, weie indirectly owned, managed and controlled by AEL. In so far as the other three firms viz. JAOL, BBPL and MOL are concerned, they had entered into a fraudulent arrangement with HEPL/ ACPL, by entering into MOUs so as to attain the desired . turnover for obtaining the benefit of Target Plus scheme. According to this aitAngement the entire activity for exports to achieve the desired turnover including 'arrangement of finance was to be managed by AEL through its group companies and emplioyees. Their involvement and participation in the activity of import and export of CPI:As explained by the incentives assured to them by AEL through the Memorandum of Understanding (MOU) entered in to by AEL with these firms. It was alleged that the statements recorded during the investigations as detailed above clearly reveal that the said companies entered into a clandestine arrangement of transferring export performance from one company to another to artificially boost the export turn-over of a company for availing of the benefit of Target Plus Scheme with the ultimate intention of transferring the benefit to the Adani Group. •
- 10. 18 S 1.4 The contentof the MOU's illustrated bring out the nature of the arrangement:- 1.4.1 MOU dated 25.11.2004 between HINDUJA EXPORTS PVT. LTD (HEPL) and JAYANT AGRO ORGANICS LTD. (JAOL) Clause.1 JAOL is a recognized Status Holder as per Para 3.5.2 of policy and is in the business of export of Caster Oil and various Caster Oil derivatives. Below mentioned are the approximate FOB value of Exports of JAOL; Financial Year EOU NON-EOU Total Exports (Inc. EOU approx.) 2003-2004 104 106 210 2004-2005 ( Projected) 100 250 350 JAOL Shall submit certificate to HEPL duly certifying the above figures of FY 2003- 2004 from their statutory auditors. Clause.2. For the purpose of getting 15% Duty Credit Entitlement, JAOL will have to achieve Rs. 420 Crores of FOB value of Exports (100% incremental growth) in the current financial year 2004-2005. Moreover, the entire exports of Rs.420 Crores shall be exported by JAOL from Non- EOU unit. Clause.3. Out of Total Exports of Rs.420 Crores to be done, JAOL shall exports approximately Rs.250 Crores from their Non- EOU Unit. Balance exports of approximately Rs. 170 Crores shall be facilitated by HEPL to be done in the name of JAOL. Clause.4 HEPL has agreed to pay consideration amount to JAOL at 1.65% on FOB value of Exports to be done by JAOL from their non EOU unit. Out of the projected exports of Rs. 250 Crores from their Non- EOU nit, JAOL has already completed exports of Rs. 140 Crores till date. Clause.5 HEPL shall facilitate balance exports of Rs. 170 Crores of various items in current financial year in consonance with the provision and rules of the Exim- Policy 2004-2009. Clause.6 :- Schedule of Payment Rs.50 lacs on Signing of MOU, balance amount on producing Chartered Accountant certificate within 7 days on Monthly basis. Clause.7. Clause.8. HEPL shall have full rights as permitted in the policy for utilization of Duty Credit Entitlement to be issued in favour of JAOL, as per Para 3.7.3 of Exim Policy 2004-2009 , JAOL shall co-operate for the utilisation of the Duty Credit Entitlement by HEPL and JAOL shall be bound by the instruction and direction of HEPL in the Matters of utilisation of Duty Credit Entitlement in consonance with the provisions and rules of Exim Policy 2004-2009. 1.4.2 MOU dated 28.1.2005 between M/s Hinduja Exports Pvt Ltd and M/s Bagadiya Brothers Pvt Ltd The MOU stated interalia, that M/s Bagadiya Brothers Pvt Ltd had approached M/s Hinduja Exports Pvt Ltd to assist them in their exports to achieve the exports for target plus scheme and M/s Hinduja Exports Pvt Ltd agreed to do the same, at the terms and conditions and for the consideration set out hereinafter. Para 1. Intent of the parties : The MOO is intended to record the basic agreement between M/s Bagadiya Brothers Pvt Ltd and M/s Hinduja Exports Pvt Ltd in respect of the purpose and transaction set out above. Notwithstanding anything stated in the MOU, in respect of the balance exports, M/s Bagadiya Brothers Pvt Ltd shall be owner of the goods and the export turnover shall
- 11. S 19 be exclusively tothe account of M/s Bagadiya Brothers Pvt Ltd . Para 5. Consideration: In consideration of the assistance provided by M/s Hinduja Exports Pvt Ltd to M/ s Bagadiya Brothers Pvt Ltd, M/s Bagadiya Brothers Pvt Ltd shall under the guidance and at the instruction of M/s Hinduja Exports Pvt Ltd import such goods utilize the entire DFEC 04-05 solely for the import of such permissible goods for the exclusive benefit of M/s Hinduja Exports Pvt Ltd provided that only such items shall be imported as are permissible under the FTP M/s Bagadi) a Brothers Pvt Ltd shall not protest , object or hinder the vesting of the benefits under the DFEC 04-05 in M/s Hinduja Exports Pvt Ltd , M/s Bagadiya Brothers Pvt Ltd shall be bound by the instructions and directions of M/s Hinduja Exports Pvt Ltd in the matter of utilization of DFEC 04-05 in consonance with the provisions and rules of the FTP and also in the disposal use, transfer of the goods including inputs and finished products manufactured there from in accordance with the provisions of FTP. Para 5.2.1. M/s Hinduja Exports Pvt Ltd shall pay M/s Bagadiya Brothers Pvt Ltd at the rate of 2.50 % on M/s Bagadiya Brothers Pvt Ltd obligation ( Rs. 235 Crores) amounting to Rs. 5,87,50,000/- ( Rupees Five Crores Eighty even Lakhs and Fifty Thousand only) which shall be payable in the following manner Rs. 1,00,00,000/- upon signing this MOU Rs. 1,00,00,000/- on Feb 7th 2005 Rs. 1,00,00,000/- on Feb 20th 2005 Rs. 1,00,00,00/- on Feb 28th 2005 Balance payment @ 2.5% on FOB value of exports within 10 days on handing over of complete set of export documents Para 6.1 Obligations of M / s Bagadiya Brothers Pvt Ltd : M/s Bagadiya Brothers Pvt Ltd shall submit copy of all relevant export documents, as specified by M/s Hinduja Exports Pvt Ltd , of Rs. 1,55,00,00,000,"- pertaining to financial year 2004-05 and to M/s Hinduja Exports Pvt Ltd within 7 days from effective date. . Further as and when exports take place, M/s Bagadiya Brothers Pvt Ltd shall ensure that one full set of export documents is submitted to MIs Hinduja Exports Pvt Ltd within 15 days of date of exports. However, figures of export shall be given to M/s Hinduja Exports Pvt Ltd on weekly basis. M,/s Bagadiya Brothers Pvt Ltd shall immediately inform M/s Hinduja Exports Pvt Ltd upon issuance of DFEC 04-05 Kis Bagadiya Brothers Pvt Ltd shall raise invoices in accordance with the directions of Mis Hinduja Exports Pvt Ltd in order to enable M/s Hinduja Exports Pvt Ltd to realize the benefits of DFEC 2004-05, subject however that such directions issued by M/s Hinduja Exports Pvt Ltd are in accordance with the requirements of the FTP and the applicable provisions of any other laws for the time being in force. MI's Bagadiya Brothers Pvt Ltd agrees and confirms that M/s Hinduja Exports Pvt Ltd shall have full rights, interest and benefits of the DFEC 04-05, whether issued in part or full. M/ s Bagadiya Brothers Pvt Ltd undertakes to achieve an export turnover of a further sum of Rs. 80.00 crores by the close of the financial year 2004-05 6.2 Obligations and Undertakings of M/s Hinduja Exports Pvt Ltd All statutory levies, taxes and imposts such as sales tax, excise, turn over tax and any other levies, taxes and imposts arising out of achieving balance Exports and while utilizing DFEC 04-05 shall be to the account of M/s Hinduja Exports Pvt Ltd Mjs Hinduja Exports Pvt Ltd shall facilitate balance exports of Rs. 15 Crores of various items in current financial year in consonance with the provisions and rules of the policy. M/s Bagadiya Brothers Pvt Ltd will not be responsible / liable for any reason if the DFEC 04-05 is not issued / any change in EXIM Policy. M/s Bagadiya Brothers Pvt Ltd will not refund the premium of 2.5 % i.e Rs. 5,87,50,000/- paid by M/s Hinduja Exports Pvt Ltd . 1.4.3 MOU dated 18/1/2005 between Aditya Corpex Ltd. (Aditya) and Midex
- 12. 20 • Overseas Ltd. (Midex): The MOU stated that interalia, M/s Midex Overseas Limited has approached M / s.Aditya Corpex Pvt Ltd to assist them in their exports to achieve the exports for target plus scheme and M/s Aditya Corpex Pvt Ltd has agreed to do the same , at the terms and conditions and for the consideration set out hereinafter. Para 1. Intent of the parties : - The MOU is intended to record the basic agreement between M/s Midex Overseas Limited and M/s.Aditya Corpex Pvt Limited in respect of the purpose and transaction se•t out above. - Notwithstanding anything stated in the MOU, in respect of the balance exports, M/s. Midex Overseas Limited shall be owner of the goods and the export turnover shall be exclusively to the account of M/s Midex Overseas Limited. Para 4. Consideration: In consideration of the assistance provided by M/s Aditya Corpex Pvt Ltd to M/s. Midex Overseas Limited, M/s. Midex Overseas Limited shall under the guidance and at the instruction of M / s Aditya Corpex Pvt Ltd import such goods utilize the entire DFEC 04-05 solely for the import of such permissible goods for the exclusive benefit of M/s Aditya Corpex Pvt Ltd provided that only such items shall be imported as are permissible under the FTP in the utilization of the DFEC0405. M/s. Midex Overseas Limited shall not protest , object or hinder the vesting of the benefits under the DFEC0405 in M/s. Aditya Corpex Pvt Ltd, M/s. Midex Overseas Limited shall be bound by the instructions and directions of M/s. Aditya Corpex Pvt Ltd in the matter of utilization of DFEC0405 in consonance with the provisions and rules of the FTP and also in the disposal use, transfer of the goods including inputs and finished products manufactured there from in accordance with the provisions of FTP. Para 4.1. M/s Aditya Corpex Pvt Ltd shall pay M/s Midex Overseas Limited, in respect of DFEC0405, Rs.4,50,00,000/- crores (Rupees Four Crores fifty lakhs) as consideration, which shall be payable in the following manner Rs. 4,50,00,000/- upon signing this MOU Rs. 1,00,00,000/- between Feb 15th 2005 to Feb 20th 2005 Rs. 1,00,00,000/- between March 15th to March 20th 2005. Para 5.1 Obligations of M/s Midex Overseas Limtied : - M / s Midex Overseas Limited shall submit copy of all relevant export documents, as specified by M/s Aditya Corpex Pvt Ltd of approximately Rs. 100 crores pertaining to financial year 2004-05 to M/s Aditya Corpex Pvt Ltd. within 7 days from effective date. Further as and when exports take place, M/s Midex Overseas Limited shall ensure that one full set of export documents is submitted to M/s Aditya Corpex Pvt Ltd within 10 days of date of exports. However, figures of export shall be given to M/s Aditya Corpex Pvt Ltd on weekly basis. - M/s Midex Overseas Limited agrees and confirms that M/s Aditya Corpex Pvt Ltd shall have full rights, interest and benefits of the DFEC 04-05, whether issued in part or full. - M/s Midex Overseas Limited undertakes to achieve an export turnover of a further sum of Rs. 20.00 crores by the close of the financial year 2004-05 5.2 Obligations and Undertakings of M/s Aditya Corpex Pvt Ltd - All statutory levies, taxes and imposts such as sales tax, excise, turn over tax and any other levies, taxes and imposts arising out of achieving balance Exports and while utilizing DFEC 04-05 shall be to the account of M/s Aditya Corpex Pvt Ltd - M/s Aditya Corpex Pvt Ltd shall facilitate balance exports of various items in current financial year in consonance with the provisions and rules of the policy. L4.4 Shri Rajesh Shantilal Adani, Group Managing Director of M/s. Adani Exports Limited (Now Adani Enterprises Limited) in his statement recorded on 11/ 1/2007 inter-alia stated that the imports and exports of cut and polished diamonds by M/s. Adani Exports Ltd. and its group / associate companies viz. M/s. Hinduja Exports Ltd., M/s. Aditya Corpex Ltd., M/s. Bagadiya Brothers Pvt. Ltd., Jayant Agro Oils ad., and Midex Overseas Ltd., with whom they had signed MOUs for achieving export turnover were all handled by the precious metal desk of their company, and Shri 3ameer Sevantilal Vora, Deputy General Manager of their company and Shri Saurin
- 13. 21 Shah, Senior GeneralManager of M/s. Adani Exports Ltd. were the over all in charge as regards the imports and exports of cut and polished diamonds and other precious metals, such as gold, gold jewellery, rough diamonds, etc. for all the companies . 1.5. During the course of the searches, documents as well as computers relevant to the case were withdrawn under panchnama. In course of searches, it was noticed that M/s. Adani Exports Ltd and five other companies (herein after referred to as "group companies") had obtained licences for warehousing of imported cut and polished diamonds under Section 58 of the Customs Act, 1962. The bonded warehouses set up by AEL and others are under the provisions of Para 4A.18 of the FTP, 2004-2009. Para 4 A 18 of FTP 2004-09 allows exporters to set up Private/Public Bonded Warehouses for import and re-export of Cut and Polished diamonds subject to a minimum value addition of 5 %. The permission for setting up Private/ Public Bonded Warehouses was granted by Customs under Section 58 of ther Customs Act, 1962 as per the following details Sr.No Name of the Party Date on which Permission granted by Customs under Para 4A 18 Address for which Permission to set up warehouse granted 01 M/s Adani Exports Ltd 02-07-2003 64-A, 6th Floor, Maker Chamber-III, Nariman Point, Mumbai-400021. 02 M/s Aditya Corpex Pvt Ltd 11-11-2004 Room no. 706, Raheja Centre, 214, Free Press Journal Marg, Nariman Point, Mumbai-400021 03 M/s Hinduja Exports Pvt Ltd 09-11-2004 506, 5th Floor, Dalamal House, Nariman Point, Mumbai-400021 04 M/s Bagadiya Brothers Pvt Ltd 15-03-2005 3/ 28, Devkripa Building, Raichur Street, Masjid ( East), Mumbai- 400009 05 M/s Jayant Agro Organics Ltd 07-03-2005 116, Commerce House, CTS No. 123. Street no. 140, Nagindas Market., Mumbai. 06 M/s Midex Overseas Ltd 28-02-2005 807, Maker Chambers-V, Nariman Point, Mumbai-400021 • Scrutiny they were issued „..rr., -=.7:fTepect of CPD in ' • ••,, `. • / • - iCz . k • • i ". • " • • 1 ifly •••• Zs.,*NT.;t• • .7. • of the applications made by these companies (RUD 6) revealed that licence under Section 58 for carrying out following operations only in their above mentioned bonded premises at Mumbai : To import Polished Diamonds To Sieve the Diamonds To Assort the Diamonds To do the boiling of the Polished Diamonds To pack the Cut and Polished Diamonds To Re-export them. They were however not permitted to carry out any manufacturing activity in the said bonded premises as they neither applied for nor issued any licence / permission for manufacture under Section 65 of Customs Act, 1962. 1.5.1. In the course of investigation, it appeared that there were following irregularities in the import and export of CPD: 1. Buyers and sellers had interrelationship and one of them had the interest in the business of others involving circular trading and financial manipulation; 2. Mis declaration of Export value; 3. Suppression of Commission paid to overseas agent from the Customs.
- 14. 22 • 1.5.2 The statusof the exporter and buyers was examined during the investigation. Import and export documents of the aforesaid companies revealed that the two Hong Kong based companies viz. Kwality Diamonds and Seven Stars and four UAE based companies viz. Excel Global, Jewel Trade, Crown Diamonds and KVK Diamonds had acted as supplier as well buyer of the CPD to/ from M/ s. Adani Exports Ltd. and group companies. The evidence also indicated that most of the overseas companies to whom CPD was exported by AEL and their group/ associate companies, were opened in and around September 2004 i.e. when the Target Plus Scheme was announced. Moreover most of them were owned and /or controlled managed by the relatives and /or employees of M/s. Adani Exports Limited and or their overseas group companies. This following profile of the overseas firms as received from the High Commission of India, Singapore vide their letter no. COIN/ SIN/ SQ/2005-47 dtd.16/2 /2006, COIN/SIN/SQ/2006-12 dated 13/4/ 2006, COIN/SIN/2006-16 dtd.9/5/2006 and letter No. HON/CUS/HK/20/2005 dtd.14/ 2/2007 of the Consul, Consulate General of India, Hong Kong is reproduced below: Name of the Firm Address Date of commence ment of Business Date of stopping of business Name of Proprietor/P artner/Direc tor Residential Address 1806, 18th Floor, Progress Commercial Wingate Building, 9, Irving Street, Causeway Bay, Hong Kong, P.O.Box 25/10/200 16/09/200 Ms. Nishaben Flat J, 2nd Floor, Star Mansion, 3-5, Minden Row, Tsim Tsa Tsui, Trading No.98996 4 5 Vijay Gandhi Hong Kong Seven Flat C, 8/F, Star Mansion, 3-5, Minden Avenue, Tsim Tsa Tsui, Hong 15/09/199 Ashish Flat C, 8th Floor, Star Mansion, 3-5, Minden Row, Tsim Tsa Tsui, Stars Kong 7 NA Pareek Hong Kong Flat C, 14/F, Harilela Sphere Mansion, 89, Nathan Road, Tsim Tsa Tsui, Kowloon, Hong Kong. P.O.Box 25/10/200 16/09/200 Ms. Nishaben Flat J, 2nd Floor, Star Mansion, 3-5, Minden Row, Tsim Tsa Tsui, Trading No. 99058 4 5 Vijay Gandhi Hong Kong 1806, 18th Floor, Progress Room 2406, Block A, Perfect Mount 1•:amslin Commercial Gardens, 1 PO Developme nt Intern ation al Ltd Building, 9, Irving Street, Causeway Bay, Hong Kong. 19/10/199 8 NA 1) Kwan Ka Yu Terence Man Street, Shau Kei Wan, Hong Kong. 1806, 18th Floor, Progress Flat D, 27F, Shui Pak 131obal enterprise Commercial Building, 9, Irving Street, Causeway Bay, 24/08/ 200 Kwan Ka Yu Mansions, 4, Greig Road, Quarry Bay, Hong Kong. Co Hong Kong. 5 NA Terence
- 15. Kwality Diamonds (HK) Twinkledia m Hong Kong Ltd 22/03/199 1NA 1) 1)-, 31/10/199 6, 2) 1/10/2001 2) 10/ 1/ 1997 3) 1/10/2002 3) 29/1/2002 • 23 PNJ Trading Puja Exports Harshdiam Flat B, 10/F, Dor Fu Court, 5-6, Mau Fook Street, Tsim Tsa Tsui, Kowloon, Hong Kong. Flat F, 14/F, Union Mansion, 33-35, Chatham Road, Tsim Tsa Tsui, Hong Kong C-3, 10/F, Hankow Centre, 1 C, Middle Road, TST, Kowloon, Hong Kong 08/09/200 01/09/200 3 5 09/04/199 7 29/09/199 3 NA Ms. Nishaben Vijay Gandhi 1) Khunt Hiren Kumar Rameshbhai , 2) Patel Vipulkumar Manubhai Shah Jayesh Kumar I Flat J, '2nd Floor, Star Mansion, 3-3, Minden Row, Tsim Tsa Tsui, Hong Kong Block F, 2/F', Union Mansion, 33- 35, Chathani Road, TST, Kowloon, Hong Kong Flat A3, 9/F, Hankow Centre. 41-E.1, Peking Road, TST, Kowloon, Hong Kong. NA Unit 808, Lafford Centre, 838, Lai Chi Kok Road, Cheung Kim Tin Shaman, Kowloon, Hong 17/05/199 Ind Ltd Kong 7 NA NA Unit 12, 2/F, Shing Lee Martin Centre, 6-12, Wing Kut Materials Street, Hong 10/09/199 1) Li KamYiu Co Kong 6 NA Alan NA Rm 913, Blk C-2, Model House Estate, 774, King's Road, Hong Kong. Rm 1506, 15/F, Peninsula Square, 18, Sung On Street, Kowloon, Hong Kong 1) Unit A, 9/F, Tung Fia Building, 27A, Cameron Road, TST, Kowloon, Hong Kong, 2) Flat 11B, Mangan Building, 18-20, Cameron Road, TST, Kowloon, Hong Kong, 3) Flat B3, 12/F, Hankow Centre- B, 4A, Ashley Road, TST, Kowloon, Hong Kong Kanakia Jayesh P 1)Adcor (Hong Kong) 2) Adcor (Hong Kong) 3) Jhaveri Darshan Jitendra 1) Flat C, 8/F, Golden Mansion, 83- 85, Chatham Road, "ST, Kowloon, Hong klong. NA
- 16. 24 • Flat B, 5/F, HangLung Bank Building, 46-48, Granville Road, TST, Flat A, 9/F, Chung Fai Building, 27A, Cameron Road, TST. Top Rich Kowloon, Hong Kong 11/05/200 5 11/11/200 5 Singh Ashok Kowloon, Hong Kong Flat 3, 2/F, Star Mansion, 3-5, Minden Ms. Flat J, 2/F, Star Mansion, 3-5, Minden Little Heart Row, Hong 01/09 /200 Nishaben Row, Hong Creation Kong 8/9/2003 5 Vijay Gandhi Kong 1) Flat G, 7/ F, Kim Hing Mansion, 4c.1- 51, Kimnm 4Cs Flat 5, 9/F, Kiu Fung Mansion, 18, Austin I) 1) Patwa Amit Haresh Kumar, 2) Road, TST, Kowloon, Hong Kong.. 2) Diamond Diamonds Distributor s Avenue, TST, Kowloon, Hong Kong. 1) 11/3/1988 NA Mehta Hitesh Lalitbhai. Tower, 3/F, Silom SOI-7, Bangkok. 1) 100, Jalan 1) 307A, Anchorvale Sultan, # 09- 06, Sultan Road, 09-38, Singapore, 2) Plaza, 2) Presently at - 1) Chew Bee 5000B, Marine Parade Planica 307A, Anchorvale Choo, 2) Rajendra Road, # 02- 07, Hawaii Expor:s Road, 09-38, 23/12/200 Hiralal Tower, Pte Ltd Singapore 4 NA Mehta. Singapore 1) 100, Jalan 1) 320, And; Sultan, # 09- 06, Sultan Plaza, 2) Mo Kio Ave-1, 0 08-1519, Singapore, 2) Emperor Exports Presently at - 320, Ang Mokia Ave-i # 08- 20/09/200 1) Joseph Selvamalar, 2) Lee Lam 307A, Anchorvale Road, # 09- Pte Ltd 1519, Singapore 4 NA Cheng 38, Singapore 1) 75, Meyer Road, # 17- 01, Hawaii Tower, Singapore, 2) 320, Ang Mio Kio Ave-1, # Gudami Internation al Pte Ltd 63, Robinson Road, # 05-20, Afro Asia Building, Singapore 26/05/199 7 NA 1) Chang Chung Ling, 2) Joseph Selvamalar, 3) Chew Bee Choo 08-1519, Singapore, 3) 307A, Anchorvaie Road, # 09- 38, Singapore. 3, Shenton 75, Meyer Adani Way, # 19-08, 1) Vinod Road # 17-01, Global Pte Shenton House, 08/04/200 Shantilal Hawaii Tower, Ltd Singapore. 0 NA Shah Singapore. 307A, 03/09/200 1) Chew Bee 1) 307A, Gracious Anchorvale 4 NA Choo, 2) Anchorvaie Export Pte Road, 09-38, Rajendra Road, 09-38,
- 17. • 25 Ltd Singapore HiralalSingapore, .2) Mehta. 5000B, Marine Parade Road, # 02- 07, Hawaii Tower. Singapore 1) 320, Ang, Mo Kio Ave-1, # 08-1519, Singapore, 2) Orchid Overseas 320, Ang Mokia Ave-1 # 08- 15/ 12/200 1) Joseph Selvamalar, 2) Lee Lam 307A, Anchorvale Road, # 09 - Pte Ltd 1519, Singapore 4 NA Cheng 38, Singapore From the above following observations were made: (i) eight of the above companies viz. M/s. Wingate Trading, Hong Kong, M/s Sphere Trading, Hong Kong, M/s. Global Enterprises, Hong Kong, M/s. Top Rich, Hong Kong, M/s. Planica Exports Pte Ltd, Singapore, M/s. Emperor Exports Pte Ltd, Singapore, M/s. Gracious Exports Pte Ltd, Singapore and M/s. Orchid Overseas Pte Ltd, Singapore were all incorporated after September, 2004, i.e. after the introduction of the Target Plus Scheme. (ii) M/s. Wingate Trading, M/s. Sphere Trading, M/s. Top Rich, Hong Kong, M/s. l'NJ Trading, Hong Kong and M/s Little Hart Creation, Hong Kong stopped their business activities during 2005. (iii) Ms. Nishaben Vijay Gandhi was the Proprietor of four companies 1) M/s. Wingate Trading, Hong Kong, 2) M/s. Sphere Trading, Hong Kong, 3) M/s. PNJ Trading, Hong Kong and 4) Little Heart Creation, Hong Kong, of which M/s. Wingate Trading, Hong Kong and M/s. Sphere Trading, Hong Kong, were incorporated in September 2004 only and all the four companies stopped their business activities during 2005 itself, in spite of showing to have achieved such huge volumes of business. That the fact of their closing down their business assumes significance when viewed in light of the fact that their entire business volumes was achieved only with AEL and its group/ associated companies and was built around the period when the Target Plus Scheme was in existence. It is pertinent to mention that of the above three firms, M/s. PNJ Trading, Hong Kong is the supplier (exporter) of CPD to the Indian companies, whereas the other two companies of the same proprietor are the buyers (importer) of CPD from the same Indian companies and that too at a value addition of 5% to 10% over the value their own other company supplies the diamonds to the same Indian companies. This is quite unheard of in the normal course of business. (iv) M/s. Wingate Trading, M/s. Global Enterprises and M/s. Karnsun Development International were all functioning from the same premises i.e. 1806, 18th Floor, Progress Commercial Building, 9, Irving Street, Causeway Bay, Hong Kong. (v) Of the above three companies M/s. Global Enterprises is the supplier (exporter) of CPD to the Indian companies, whereas the other two companies M/s.Kamsun Development International and M/s.Wingate Trading are importing the CPD from the same Indian companies and that too at a price which is higher by 5 to 10%. (vi) In spite of these companies being newly established and new to the trade of CPD. they had shown an unprecedented volume of imports and exports of CPD with the ;Indian companies and that too during a short span of over one year, which even the veterans in the business of CPD would have aspired to achieve. -(vii),The above facts were substantiated by the details of the imports and exports of CPD of these overseas firms It was found that out of total exports of CPD worth 1643.02 Million US$ by the Indian companies in 2004-05, exports worth 1314.19 Million US$ (81.63%) was only to eight companies viz. Al Shahad Gold & Jwellery, UAE (276.89 Million US$), Choksey Diamonds(LLC), UAE (196.87 Million US$), Excel Global, UAE (131.47 Million L S$), G.A. International, UAE (110.68 Million US$), Gudami International PTE., Singapore (257.24 Million US$), Karnsun Development Interantional, HK (103.40 Million US$), D.J. Ltd., UAE, (112.10 Million US$) and Mine Gold & Jwellery, UAE (125.54 Million US$). (viii) Similarly during 2005-06 out of total exports of CPD worth 1448.99 Million US$, exports worth 1347.99 Million US$ (93.02%) was only to seven companies vii. Gudami International PTE., Singapore (178.60 Million US$), Kamsun Development I nterantional,
- 18. 26 • HK (86.49 MillionUS$), Emperor Exports Pte., Ltd., Singapore (172.48 Million US$), Wingate Trading, Hong Kong (81.86 Million US$), Planica Exports (247.38 Million US$) Gracious Exports PTE Ltd., Singapore (283.26 Million US$) and Orchid Overseas Pte. Ltd., Singapore (297.12 Million US$). Of the above companies Emperor Exports Pte., Ltd., Singapore, Wingate Trading, Hong Kong, Planica Exports PTE Ltd., Singapore, Gracious Exports PTE Ltd., Singapore, and Orchid Overseas Pte. Ltd., Singapore were established only after September 2004, when the target Plus Scheme was introduced. (ix) The details of imports made by the overseas firms during 2004-04 and 2005-06 were analysed and observed that during 2004-05 out of total imports worth 1641.68 Million USD, imports worth 1304.13 Million US$ (79.44%) was effected from only seven companies viz. Daboul Tading Co. LLC, UAE, (664.08 Million US$), Gold Star FZE, UAE (123.29 Million US$), Spectrum Trading FZE, UAE (137.08 Million US$), Tanb Trading LLC, UAE (171.74 Million US$), Mohd. Al Qari Gold & Jwellers , UAE (109.75 Million US$J, Crown Diamond FZE, UAE (57.97 Million US$) and Excel Global Ltd., UAE (40.22 Million US$). (x) Similarly in 2005-06 out of total imports of 1357.28 Million US $, imports worth 1150.22 Million US$ (84.74%) was from eight companies only viz. Daboul Tading Co. LLC. UAE, (353.27 Million US$), Gold Star FZE, UAE (154.73 Million US$), Spectrum Trading FZE, UAE (27.16 Million US$), Tanb Trading LLC, UAE (49.21 Million US $), Mohd. Al Qari Gold & Jwellers, UAE (81.77 Million US$), Little Hearts, Hong Kong (96.24 Million US$), Crown Diamond FZE, UAE (167.68 Million US$) and Excel Global Ltd. UAE (220.16 Million US$) 1.5..3 In respect of the Singapore based firms it was observed that the addresses were shared by individuals, as residence, and firms as Registered office:- a) The registered office address of M/s. Planica Exports Pte Ltd, Singapore previously was 100, Jalan Sultan, # 09-06, Sultan Plaza, Singapore. The new registered office address was 307A, Anchorvale Road, #09-38, Singapore. The registered office of M/s. Gracious Exports Pte Ltd, was also located at this address. This address was also the residential address of Mr. Chew Bee Choo, one of the Directors of M/s. Planica Exports and M/s. Gracious Exports. This address was also the residential premises of Mr. Lee Lam Cheng, Director of M/s. Emperor Exports Pte Ltd and M/s. Orchid Overseas Pte Ltd. b) The registered office address of M/s. Emperor Exports Pte Ltd previously was 100, Jalan Sultan, # 09-06, Sultan Plaza, Singapore. (same as that of M/s. Planica Exports Pte Ltd) The new registered office address was 320, Ang Mo Kio Avenue-1, # 08-1519, Singapore, which was also the registered office address of M/s. Orchid Overseas Pte Ltd. The residence of Mr. Joseph Selvarnalar, the Director of M/s. Emperor Exports, M/s. Gudami International and M/s. Orchid Overseas was also located at this address. c) The registered office address of M/s.Adani Global Pte Ltd at 3, Shenton Way, # 19-08, Shenton House, Singapore was also the residential address of Mr. Chang Chung Ling, Director of M/s. Gudami International Pte Ltd. I) Mr. Vinod Shantilal Shah, Director of M/s. Adani Global Ltd and Mr. Chang Chung Ling, another Director of M/s. Gudami International were shown to be residing at the same address : 75, Meyer Road, # 17-01, Hawaii Tower, Singapore. 1.5.4 Most of these firms in Singapore shared common directors. The details received from the High Commission of India, Singapore also revealed that most of the firms had common directors. The details are as under: - S.No. Name of person (director) Firms in which Director 1 Mr. Chew Bee Choo 1) M/s. Gracious Exports Pte Ltd. 2) M/s. Planica Exports Pte Ltd. 3) M/s. Gudami International Pte Ltd 2 Mr. Mehta Rajendra Hiralal 1) M/s. Gracious Exports Pte Ltd. 2) M/s. Planica Exports Pte Ltd. 3 Mr. Joseph Selvamalar 1)M/s. Orchid Overseas Pte Ltd. 2) M/s. Emperor Exports Pte Ltd. 3) M/s. Gudami International Pte Ltd 4 Mr. Lee Lam Cheng 1) M/s. Orchid Overseas Pte Ltd. 2) M/s. Emperor Exports Pte Ltd.
- 19. 27 Mr. Ka YuTerence (1) M/s Global Enterprise Co (2) M/s Kamsun Development International Ltd. The details above clearly show the inter-relationship between the Singapore based firms. It also brings out clearly the common interests shared by the Directors of the above firms, with AEL and its group companies as.. (a) Shri Joseph Selvamalar, the Director of M/s. Orchid Overseas Pte Ltd, Singapore, M/s.Emperor Exports Pte Ltd, Singapore and M/s.Gudami International Ftc Ltd, Singapore is also a Director of M/s.Adani Global Pte Ltd, Singapore as per the r.solution of the Directors of Adani Global Pte Ltd. (b) Further, the contracts between M/s Gudami International, Singapore with AEL and other 5 companies have been signed by this Ms.Mary Jopseph in the capacity of Director. Ms. Mary Joseph, the employee of Adani Global Pte, Singapore is also the Director of M/s. Gudami International. (c) Further, as seen from the document recovered under panchnarna dtcl.22/ 12/2005 from the premises of AEL, Shikhar Building, Ahmedabad [RUD-25] Shri Chang Chung Ling, the Director of M/s Gudami International, Singapore is also a Shareholder Director of M/s Adani Global Ltd, Mauritius and M/s Adani Global Pte, Singapore which are the wholly owned subsidiary of AEL. (d) Also the fact that Shri Joseph Selvamalar and Shri Chang Chung Ling are the directors of M/s Adani Global Pte, Singapore arid /or Adani Global Ltd, Mauritius is also evident from the balance Sheet of AEL for the year 2000-2001, for the year 2004-05 and the balance sheet of AEL for the year 2005-2006 wherein Shri Joseph Selvamalar and Shri Chang Chung Ling are shown as the directors of M/s Adani Global Pte, Singapore, along with Shri Vinod Shantilal Shah, brother of the Chairman and the Managing Director of AEL. Moreover in the said Balance Sheet for 2000-2001 Shri Chang Chung Ling is shown to be the director Adani Global Ltd, Mauritius alongwith Shri Vinod Shantilal Shah and others. Further as per the balance sheet for the year 2000-2001, M/s Adani Global Ltd., Mauritius is the wholly owned subsidiary of AEL, Ahmedabad and Adani Global Pte Ltd. and Adani Global FZE are the wholly owned subsidiaries of Adani Global Ltd, Mauritius. It was also seen from the Email dtd.23/ 1/2006, that Ms.Mary, an employee of M/s Adani Global Pte, Singapore was also the authorized person, or rather the Director as is discussed in paragraph 8.5 (b) above, of M/s.Gudami International, Singarpore. "From: " Hiren Padhya" <hiren@adanigroup.com> To: "'Sunil Shah' <smshah@adanigroup.com> Cc: "'Ashish Chauudhary'" <ashishc@adanigroup.com>, "mukesh" <mukesh@adanigroup.com> Subject: AEL GUDAMI CONTRACTadvance payment Date: Mon, 23 Jan 2006 16:08:03 +0530 Dear Sunilbhai, As per our teletalk, pl get this agreement signed by Gudami's authorised person (may be Ms. Mary) and send me signed scanned copie to me and Ashish so that another signature can be made from AEL. IIiren Padhya" It was said to have established that M/s. Gudami International, Singapore was directly/indirectly owned by AEL only. Therefore, all the transactions between AEL and the other 5 companies and Gudami International would require to be treated as transactions between related firms wherein one has interest in the other. Consequently, the transactions of AEL and the other 5 companies with Gudami International cannot be termed as transactions in the normal course of international trade. 1.5.6 Apart from the Hong Kong and Singapore based firms, the import and export of C PD also involved firms based in UAE. Though the Directors/Partners/Proprietors of these firms were mainly persons of UAE origin, the activities relating to the trade in C PD with AP_I_ and group companies of these firms were controlled by AEL through the •
- 20. 28 employees of itsoverseas firm M/s Adani Global FZE, UAE (AGF). Further, some of tic employees of AEL/AGF (presently with AGF and formerly with AEL in India) were ill so the Managers/Partners/Directors of some of these UAE based firms. The details of tl e owners of the firms were received from the Consulate General of India, Dubai. Some of the firms wherein the employees of AEL/AGF were the Manager/Partner/Director are as below :- S.No. Name of the Firm Manager/Partner/Director Relationship with AEL 1 Gold Star FZE Rajendraprasad Nair Employee of AEL/Adani Global FZE 2 Shine Jewellery Manoj Chandrashekaran Nair Employee of AEL/Adani Global FZE 3 Queen Jewellery Sudhakar Kanadiga Employee of AEL/Adani Global FZE 4 G.A.International Vinod Shantilal Shah Director of Adani Global FZE, UAE and Adani Global Pte Ltd, Singapore. Also the brother of the Shri Gautam Adani and Rajesh Adani Chairman and Managing Direcotr of AEL 5 Adani Global FZE - (a wholly owned subsidiary of AEL) Vinod Shantilal Shah Rakesh Shantilal Shah Brother of the directors of AEL The director of M/s.G.A.International, UAE is Shri Vinod Shantilal Shah who is the brother of Shri Rajesh Adani and Shri Gautam Adani of AEL. Further, Shri Vinod Shantilal Shah, is also a Director of M/s Adani Global FZE, Dubai along with Rakesh Shantilal Shah, relative of the Directors of AEL as can be seen from page No. 36. of the balance sheet of AEL for the year ended on 2000-2001. Shri Vinod Shantilal Shah is also the Director of M/s. Adani Global Pte Ltd, Singapore which is also a wholly owned subsidiary of AEL as can be seen from the balance sheet of AEL for the year ended on 2000-2001. Further, as revealed from the statement of Shri C.E.Mahadevan, L)epu 1.) General Manager (Banking & Finance) dated 5/ 1/2007 and the statemeni dtd.8/ 1'2007 of Shri Bhavik Shah, Senior Vice-President, M/s. Adani Agro Pvt Ltc and incharge of precious metal desk of AEL, Shri Manoj Chandrashekaran Nair, tlic owner of M/s.Shine Jewellery, UAE was the employee of AEL and thereafter, at thu time of his being the owner of M/s Shine Jewellery, Shri Manoj was an employee o M/ s Adani Global FZE Ltd, Dubai which is the wholly owned subsidiary of AEL Similarly as per the statement dtd.8/1/2007 of Shri Bhavik Shah, Senior Vice- President, M/s. Adani Agro Pvt Ltd and finance incharge of precious metal desk of AEL, Shri Sudhakar, shown to be the owner of Queen Jwellery, was also 111 employee of AEL and during the period 2004 he was deputed to Dubai office tc replace Manoj Nair. 1.5.6 Apart from the above companies where the relatives and / or the employees of the Adani group were the directors/partners/managers it was also seen that tlic effective control of all the Singapore, Hong Kong and U.A.E. based companies was with the Adani group through their overseas group companies such as M/s. Adani Global FZE, U.A.E., M/s. Adani Global PTE., Singapore, and their employees, as is evident from the following: Shri 13havik Shah, Senior Vice-President of M/s. Adani Agro Pvt Ltd, Ahmedabad in his statement dated 8/1/2007 gave the postings of the following empolyees of AEL as below :- i) Sudhakar Nair - M/s. Adani Global FZE, UAE ii) Ms. Mary Joseph - M/s. Adani Global Pte Ltd., Singapore
- 21. 29 0 Mr. Rajesh Sagar Mr.R. Rao - Mr. Sayan Patel - Mr. Vipul Desai Mr. Jamesh Joseph Mr. Rakesh Shah Mr. N R Nayak Mr. Manoj Nair M/s. M/s. Adani M/s. M/ s. Adani M/s. M/s. M/s. Adani M/s. Adani Adani Global FZE, UAE Global FZE, UAE Adani Global FZE, UAE Exports Ltd. Adani Exports Ltd. Adani Global FZE, UAE Exports Ltd. Exports Ltd. Mr. S. M. Shah (Sunil Shah) M/s. Adani Global Pte Ltd., Singapore Shri Bhavik Shah confirmed that it was true that he was in touch with Mr. Sucihakar at Dubai, Ms. Mary at Singapore, Mr. Rajesh Sagar of Adani Global FZE, N. r. Rao of Adani Global FZE and Mr. Sayan Patel of Adani Global and others through E-mail correspondences, regarding the confirmation of remittances sent and received with respect to import and exports of diamonds by AEL and the various Adani Group/associated companies. He also stated that Mr. Sudhakar, Mr.Rajesh Sagar, Mr. Rao and Mr. Sayan Patel are the employees of M/s. Adani Global FZE, Dubai; that previously Mr. Manoj Nair was deputed at Dubai and in the year 2004, he came back to India and Mr. Sudhakar had taken his place; that Ms. Mary Joseph was also employee of M/s. Adani Global Pte Ltd., Singapore and for the last ten years looking alter import and export operation of the company at Singapore. Shri Bavik Shah also confirmed that the e-mail id. @adanigroup.com belonged to M/s. Adani Exports Ltd. and the e-mail i.d. @ adani-global.com belonged to Adani Global FZE, U.A.E. Shri Mahadevan Deputy General Manager, Banking and Finance in his Statement dated 5/1/2007 also confirmed that he used to communicate with Mr. Rakesh Shah of M/s. Adani Global Limited, FZE, UAE, Mr. Sunil Shah, Branch Head of Adani Global Pte Ltd., Singapore through e mails 86 telephones since last eight to ten years. He also stated that he had also been dealing with Mr. Tejal Death at Dubai through E mails and telephones. Shri Mahadevan further stated that he had communicated with Mr. Sudhkar, Mr. Manoj Nair, etc.through emails regarding remittances relating to import and export of cut and polished diamonds, gold etc. 1.5.7 Shri Rajesh Adani, the Group Managing Director of AEL, in his statement dtd.11/1/2007 confirmed that Ms. Mary Joseph and Shri Sunil Shah were working in M/s. Adani Global Pte Ltd., Singapore and Shri Rakesh Shah was with M/s.Adani Global FZE, Dubai. That the persons as mentioned above with whom Shri Bhavik Shah, Shri Mahadevan, Shri Sameer Vora used to communicate as regards the business relating to the imports and exports of CPD were the employess of Adani Group of companies is also borne out from the Adani Group Telephone Directory seized under Panchnarna dated 24/25-01-2006 from the office premises of AEL, "Shikhar", Navrangpura, Ahmedabad. 1.5.8 Thus the firms Queen Jewellery, Shine Jewellery, G.A.International and Adani Gobal FZE, Dubai are all firms which are directly/indirectly owned and controlled by AEI, the transactions of AEL and the other 5 companies with the aforesaid UAE based firms during 2004-05 and 2005-06 cannot be termed to be at arms length. On the ccntrary it was evident that the transactions of AEL and the other 5 companies with these firms are all transactions between firms where one had an interest in the other. In fact it would be proper to state that the transactions are all only between the group firms of AEL. In addition to the above five UAE firms, the import and export of CPD was carried out by AEL and its group companies with other UAE based firms too viz. 1) Daboul Trading, 2) Al Shahad Gold and Jewellery, 3) Excel Global Ltd, 4) Mine Gold atd Jewellery, 5) Crown Diamond, 6) Tanb Trading, 7) Chokshey Diamonds LLC., 8) Leo Diamonds. That the imports and exports of CPD by these firms as well as the banking and financing too were being managed and controlled by AEL was apparent from the various E-Mail communications of Ms. Mary Joseph of Adani Global Pte, Shri Sudhakaran Nair, Shri Manoj Nair of Adani Global FZE to Shri Mahadevan and Shri Bhavik of AEL, Ahmedabad. These E-Mail communications were retrieved by the Directorate of Forensic Science (DFS), Gandhinagar from the hard disk copy of the Mail Server withdrawn during the course of the search of the office premises of M/s. AEI_ on 24-01-2006, and copies of the same were forwarded vide their letter No.l)/EE/2006/CF/04 dated 02-01-2007. A few of the E-Mails were reproduced in
- 22. 30 the Show CauseNotice however for the sake of brevity the same are not bcii ig reproduced here. However the gist of these e mails is: The user ID and Password for GOLD STAR FZE,User ID : 361428 ay d Password : 496990 was forwarded by mail, which made it quite obvious that the biu-.k account of M/s. Gold Star FZE was controlled and operated by AEL through the personnel of its overseas subsidiary Adani Global, Dubai and Singapore. This fact d also been confirmed by Shri Bhavik Shah, Senior Vice President of M/s.Adani Agro Pvt Ltd, Ahmedabad and Incharge of Treasury Desk of AEL in his statement recorded (_,n 8/1/2007. In his statement he stated that the aforesaid e mail was about Intein:q banking sent by Ms. Mary Joseph of M/s. Adani Global Pte Limited, Singapore .o Rakesh. Shah, Dubai, Bhavik and others and copy was marked to him and others. The same was forwarded by Ms. Mary to facilitate the banking transaction of Gold Star FZE by the staff of Adani Global FZE / Adani Exports Ltd. Further messages as suer. (I) "Now Gold remittance is over at our end. We will start diamond documents remittance, we will start with Excel global' dubai from Hinduja. This is for your information only" - Vipul Desai" (II) "Please transfer daily 3 to 4 mio to RAK Excel A/c and STOP remitting to UAB A/C" - Savan (III) " Please note A/c number of Excel Global Limited's A/c with RAK Bank 0012-765195-USD AED This is for your information please - K Sudhakar (IV) Subject: NO FUNDING OF SHINE JEWELLERY TO BE DONE IN BANK OF BARODA, DUBAI With regard to the subject matter we would like to inform you that no further payment should be made TO THE ACCOUNT OF SHIT E JEWELLERY FZE, WITH BANK OF BARODA, DUBAI, until further instructions regarding the same is received from our end. In case of any emergency please consult Mr.Rakesh Shah for any decision regarding the same -manoj" (V) "With reference to following message, Absa Bank has asked us to some alternative arrangement for financing our trade transaction as they will not be able to take up transactions after one month from now. They will also not be able to do any back to back transaction for Gudami Intl for capital goods Also we have to open A/c of Gudami Intl with other bank for our Diamond transactions (VI) "This mail is with respect to opening of Daboul Trading a/c at UBS for transfer of shares. I have raised certain queries for UBS people (Andrew Cumming) to answer. It would be better if we are doubly sure about the structure of transaction My personal assessment is that we will be able to open the a/c by 30th November (date as promised to you by Bhavikbhai and me). Coming to the cost front, if 4.99 % of holding is shifted to Daboul i.e 10978 cr shares of Rs 60 each or Rs 65.868 crs or $14.6 million (@ Rs 45.10), then the cost would be a. 1.5% on the first $10 million = $0.15 million b. 1% on the remaining $4.6 million = $0.046 miilion So the total cost would be $0.196 miilion or Rs 90 lakhs plus brokerage costs. Another important point is that the charge would be levied at the e]id of every quarter and on the market value of the shares held. i had a tLlk with Rajiv Maheshwari yesterday and if you could put in a word about the cost reduction in charges. Regards Kaushal" To summarise, the above mails : - a. The bank account of M/s. Gold Star FZE, UAE who is shown to be supplier of CPD to AEL and group companies is under the control and being
- 23. 31 operated by AEL-. b.M/s. Daboul Trading LLC and M/s. Shine Jewellery FZE, UAE are also controlled and managed by AEL. The mail at Sr. No.IV above has been sent by Shri Manoj (Manoj Nair) who is an employee of M/s. AEL (who was in Dubai during the relevant period) using the e-mail i.d. of Daboul Trading company which cleary indicates that Daboul Trading company was also managed and controlled by the employees of AEL . This was indicative of the fact that apart from Daboul and Shine Jewellery being inter relai ed, both these firms were also under the control of AEL. c. M/s. Daboul Trading LLC, UAE belonged to / managed and controllec: by AEL was evident from the Mail at Sr.No. VI above of Shri Kushal Kabra of AEL to Shri Gautam Adani, the Chairman of AEL. In the said communication the transfer of shares to Daboul Trading and its ..:ost implication are discussed. d. In all the above mails the e-mail ids used for communication were "adanigroup.com" and "adani-global.com", which admittedly belong to the Adani group of companies as confirmed by Shri Bhavik Shal in his statement dated 8/1/2007. Thus it was evident that the persons entering into e-mail correspondence through the said e-mail ids are either employees or authorized persons of Adani group and have been allotted individual e- mail ids with their name as suffix, by the Adani group of companies. It was said that even the bank account of M/s. Gudami International. Singapore was opened by AEL only. This supports the contention that M/: Guclami International with M/s AEL and its group companies were related in terms of Section 14 of the Customs Act. M/s. Gudami International was being directly/ indirectly owned by AEL in as much as Ms.Mary Joseph, the employee of M/s. Adaiii Global. Singapore was the Director of M/s. Gudami International. 1.5.9 Further, the mails illustrated in para 8.14 of the notice, said to have apart from establishing the fact of control and management of AEL over the Dubai based firms, also showed that the Singapore and Hong Kong based firms, were also being controlled and managed by AEL and even the funding of the firms were also under the management and control of AEL only. It was seen from that M/s. Gudami International, Singapore who was a buyer of CPD from AEL and its group companies was receiving funds from Dubai based firms to enable it to pay for its purchases from AEL and others. Similar instances were also seen in the case of M/s. Gracious Exports Pte, Singapore, M/s. Orchid Overseas Pte, Singapore, M/s. Planica Exports Ptc, Singapore. It was seen from these mail communications that : i) M/s. Gudami International, Singapore and M/s. Orchid Overseas Pte Ltd, Singapore were inter related and both these firms were managed and controlled by AEL only as was evident from the mail of Ms. Mary Joseph. From which, it could be seen that the funds were transferred from Gold Star, Daboul Trading, D.J.Ltd and Spectrum Trading to Gudami International and the same funds were utilized for making the payments on behalf of M/s.Orchid Overseas, to M/s.Hinduja Exports Pvt Ltd. It therefore, was apparent that all these firms i.e. the UAE and Singapore based firms were inter related with each other as well as with AEL. Further, the import export activities of CPD and funds. of tlese firms are under the control and management of AEL only. ii) M/s. Gracious Exports Pte Ltd, Singapore and M/s. Planica Exports Pte Ltd, Singapore are inter related and both these firms are managed and controlled by L only as is evident from the mail of Ms. Mary Joseph. From the said mail Communication it could be seen that the funds were transferred from Mine 'fold :arid Jewellery, UAE to Gracious Exports Pte Ltd and these funds were in turn ttansferred by M/s. Gracious Exports Pte Ltd to M/s. Planica Exports Pte Ltd. 'for making the payments in the name of M/s. Planica Exports Pte Ltd to M/s.Hinduja Exports Pvt Ltd., showing payments towards the purchases of CPD. It therefore, was apparent that all these firms i.e. the UAE and Singapore based firms were inter related with each other as well as with AEL. Further, the import export activities of CPD and funds of these firms were under the control and management of AEL only. iii) The inter relationship between M/s. Gracious Exports Pte Ltd, Singapore and M/s. Tanb Trading, UAE was evident from the mail communication of Ms. Mary Joseph at Sr. No. 5 aboe. It was seen from the said communication that •
- 24. 32 Taiib Trading istransferring funds to M/s. Gracious Exports Pte Ltd which funds were in turn utilized for making payments to M/s. Aditya Corpex Pvt Ltd towards the purchases of CPD. 1.5. I Olt was also established from the evidences that the activities pertaining to import and export of CPD by the overseas firms in Dubai, Singapore and Hong Kong were also under the control of AEL. This is illustrated by the following mail of Ms. Asha of M /s Adani Global, Dubai to Ms. Mary of M/s Adani Global, Singapore: "From: "asha" <asha@adani-global.com> To: <maryPadanigroup.com>, <smshah@adanigroup.corn> Cc: <rakesh@adani-global.corn>, <tejal@adani-global.com> Attn: Ms. Mary Please arrange for shipment to Al Shahad, Dubai as per following details. You vill i eceive shipment in Gudami Intl, Singapore from Adani Exports, India, which you have to export from Emperor / Orchid to Al Shahad, Dubai. Please find below address details for Al Shahad Gold & Jewellery Al Shahad Gold & Jewellery P.B. 30712, Dubai, U.A.E. Tel Fax: 04-3933732 / 3933792 regards Ash a" It is seen from the above mail that the CPD exported by AEL to M/s Gudami International, Singapore is instructed by Ms. Asha of M/s Adani Global, Dubai to be exported to M/s Al Shahad Gold & Jewellery, Dubai through M/s Emperor Exports/ M/s Orchid Overseas, Singapore. It indicates that : a) M/s Gudami International, Singapore, M/s Emperor Exports, Singapore, M/s Orchid Overseas, Singapore and M/s Al Shahad Gold & Jewellery, Dubai are all managed, controlled and operated by AEL through its overseas firms M/s Adani Global at Dubai and Singapore, b) the transactions between the Indian firms and the overseas firms are not genuine transactions in the normal course of trade in as much as it can be seen that M/s Emperor Exports/M/s Orchid Overseas, Singapore are merely used as a intermediary for 1_ransfer of the CPD to M/s Al Shahad Gold & Jewellery, Dubai. ThatM/s Al Shahad Gold & tfewellery was also merely another intermediary in the transfer of CPD from AEI, to Singapore, Singapore to Dubai and back to AEL from Dubai. That the Singapore based firms were managed and controlled by AEL only was further corroborated by the fact that the bank accounts of these firms viz. M/s Gracious Exports, M/s. Planica Exports, M/s.Emperor Exports and M/s.Orchid Overseas in different banks in Singapore were all opened by M/s Adani Global Pte Ltd, Singapore. This was evident from the following communications of Ms. Mary Joseph of AGPL, Singapore dtd. 22/8/2005 sent by E-Mail to AEL: "From: "Mary" <mary@adanigroup.com> To: <savan@adanigroup.com>, "Rao" <rao@adani-global.com>, <rakesh@adani-global.corn> Cc: "Smshah" <smshah@adanigroup.corn>, <nayak@adanigroup.com>, "mahadevan" <mahadevan@adanigroup.com> Subject: Re: State Bank of India Date: Mon, 22 Aug 2005 15:04:41 +0800
- 25. 33 WE HAVE OPENEDUSD A/C WITH STATE BANK OF INDIA FOR THE FOLLWG TWO COMPANIES AS UNDER:- 1. GRACIOUS EXPORTS PTE LTD - USD A/C NO. 4002311101 2. PLANICA EXPORTS PTE LTD - USD A/C NO. 4002301101 STATE BANK OF INDIA 6 SHENTON WAY # 22-08, DBS BUILDING (TOWER TWO) SINGAPORE 068809 TEL: 62222033 SWIFT: SBINSGSG REMITTANCE DETAILS: BANKERS TRUST COMPANY, NEW YORK FOR CREDIT OF STATE BANK OF INDIA, SINGAPORE CHIPS UID 132551 FOR FURTHER CREDIT TO: GRACIOUS EXPORTS PTE LTD USD A/C NO. 4002311101 PLANICA EXPORTS PTE LTD USD A/C NO. 4002301101 Thanks and regards Mary Joseph. From: "Mary" <mary@adanigroup.com> To: <savan@adanigroup.com>, "Rao" <rao@adani-global.com>, <rakesh@adani-global.com> Cc: <nayak@adanigroup.com>, "mahadevan" <mahadevan@adanigroup.corn>, "Smshah" <smshah@adanigroup.com> Subject: Re: Emperor / Orchid / Gracious / Planica Date: Mon, 22 Aug 2005 12:07:38 +0800 WE HAVE OPENED USD ACCOUNTS AS UNDER :- 1. PLANICA EXPORTS PTE LTD WITH DBS BANK - A/C NO. 0001-012392- 01-2-022 USD 2. ORCHID OVERSEAS PTE LTD WITH DBS BANK - A/C NO. 0001- 012412-01-9-022 USD DBS BANK 6 SHENTON WAY •
- 26. 34 I DBS BUILDING SINGAPORE 068809 TEL:68788888 SWIFT: DBSSSGSG REMITTANCE DETAILS: BANK OF NEW YORK, NEW YORK ABA / ROUTING # 021000018 FOR CREDIT TO DBS BANK, SHENTON WAY BRANCH SWIFT: DBSSSGSG CHIPS UID NO. 034675 FOR FURTHER CREDIT TO: PLANICA EXPORTS PTE LTD A/C NO. 0001-012392-01-2-022 USD ORCHID OVERSEAS PTE LTD A/C NO. 0001-012412-01-9-022 USD 1. GRACIOUS EXPORTS PTE LTD WITH OCBC BANK - A/C NO. 501- 171094-301 2. EMPEROR EXPORTS PTE LTD WITH OCBC BANK - A/C NO. 501- 170195-301 OCBC BANK 65 CHULIA STREET OCBC CENTRE SINGAPORE 049513 TEL: 63187222 SWIFT: OCBCSGSG REMITTANCE DETAILS: OCBC BANK SWIFT CODE: OCBCSGSG BANK CODE: 7339 BRANCH CODE: 501 FOR CREDIT TO: GRACIOUS EXPORTS PTE LTD A/C NO. 501-171094-301 EMPEROR EXPORTS PTE LTD A/C NO. 501-170195-301 1. GRACIOUS EXPORTS PTE LTD WITH UNITED OVERSEAS BANK LTD - A/C NO.352-901-729-2
- 27. 35 2. EMPEROR EXPORTSPTE LTD WITH UNITED OVERSEAS BANIc LTD - A/C NO.352-901-730-6 UNITED OVERSEAS BANK LTD 80 RAFFLES PLACE UOB PLAZA 1, SINGAPORE 048624 TEL: 1800-2266121 SWIFT: UOVBSGSG REMITTANCE DETAILS: BANK OF NEW YORK, NEW YORK SWIFT: IRVTUS3N FOR CREDIT TO: UNITED OVERSEAS BANK LTD 80 RAFFLES PLACE, UOB PLAZA 1, SINGAPORE 048624 FOR FURTHER CREDIT TO: GRACIOUS EXPORTS PTE LTD A/C NO. 352-901-729-2 EMPEROR EXPORTS PTE LTD A/C NO. 352-901-730-6 Thanks and regards Mary Joseph" The above mail communications between the offices of Adani Group companies at Ahmedabad, UAE and Singapore clearly prove that overseas firms with whom AEL and its group companies indulged in so called import and export of CPD were all managed and controlled by AEL and these firms can be said to be fronting for AEI, to camouflage the dubious nature of the transactions and lend credibility to their transactions. That the transactions were dubious in nature was established by the circular movement of the CPD between the Indian firms and the UAE, Singapore nd HPng Kong based firms. The mail communications further corroborate the fact of ciroular movement of the CPD in as much as the funds remitted by the Indian firms to their' overseas suppliers were in turn transferred to the overseas firms who were buyers of CPD from AEL and its group companies and in turn returned to tlw. Indian companies showing payments received for their exports. It was alleged that the transaction value for the consignments exported to these companies by M/s AEL and its group companies and declared before the Customs authorities are not acceptable as they do not represent the true transaction value as is required with in the meaning of Section 14 of Customs Act, 1962 as made applicable to export goods also. The few of the mails discussed in the notice are to illustrate the nature of the relationship of the overseas firms and establish the fact that they are being managed, controlled and operated by AEL. All such mails which were recovered from the various computer harddisks withdrawn during the course of the searches are relied upon and EtnneNed •
- 28. • 36 to t noticeas detailed in Annexure "M" to this notice. The gist of the messages contained in a few of these Emails also tabulated and reproduced and may be referred to ir► par► 8.20 of the notice in the notice. 1.5.11 It was further seen that though the mails mentioned in paras 8.11, 8.14, 8.16 and 8.19 to the notice refer to the various transactions pertaining to different overseas companies, there was no correspondence between these overseas companies and the Indian cmipanies. These facts have also been admitted by Shri Mahadeven in his statement dated 6/1/2007 and Shri Bhavik Shah in his statement dated 8/1/2007, when they say that they never entered into correspondence with any of the overseas companies regarding remittance of funds for the imports and exports of diamonds and nor was there any correspondence with any of the overseas companies regarding remittance of funds for the imports and exports of diamonds. Even there was no correspondence with the persons or employees of any of the Indian companies, except Adani Exports Ltd. This clearly brings out the fact that the entire trade of CPD in India as well a s overseas was contolled and managed by AEL. Ir, addition the entire import and export of CPD by AEL and the other cornparres needs to be viewed in the light of the text contained in a document: recovered from the computer hard disk of Shri Vipul Desai, Officer, Banking Department of AEL, Ahmedabad. The said document was recovered by the Directorate of Fa-ensic Science, Gandhinagar and forwarded vide their letter No.ID/E./2006/CF/20 dtd.17/ 2/2007. From the text and content of the above do,,ument it was very clearly brought out that the entire transaction in the CPD was a well thought out, premeditated and pre-determined exercise for indulging in fraudulent import and exports of CPD with an intention to defraud the government ex,±equer by availing of undue export benefits. It was also evident from the above document that the overseas firms were all created/co-opted by AEL so as to facilitate their scheme of carrying out the fraudulent imports and exports in Diamonds. To use their ovm word, the 'SYSTEM', created and put in place by AEL during 2003 has been used during 2004-2005 and 2005-2006 in furtherance of their ulterior motive of claiming undue benefits under the Target Plus scheme by creating artificial turnover through the import and exports of CPD. That right from the establishing of the firms, the cor cerned persons, their telephone and facsimile numbers, the mode of dispatch of documents, the mode of transport of the goods, right up to the manner in which the goods are to be sorted and the value is to be added in Dubai have all been put in place by AEL before embarking upon the fraudulent import and export transactions of CPD to achieve their pre-determined incremental turnover so as to avail of the Target plus benefits from the government exchequer. And that from the above document pertaining to the system put in place by AEL for the import and export of CPD it came to light that : a) The overseas firms to whom the CPD are to be exported and the overseas firms from whom the CPD are to be imported are all created and put in place by AEL. b) The export orders/import contracts are arranged on request from Ahmedabad. c) The same format of export order/import contract of independent parties is maintained throughout however all the contracts have to look different. d) The CPD are shipped on the same day to different destinations and different parties. e) The sorting of the CPD is done at Dubai and importantly the items from q, particular consignment of CPD to be withdrawn and items added from a pervious consignment and the change in the description of the CPD is also done at Dubai and communicated to India to Shri Tejas and Shri Mahadevan as per pre-coded descriptions and quantity. f) The value addition to the CPD is done at every location other than Dubai. The value addition /even deletion is to be within 0.25%-0.50% profit adjustment and the discretion on item is with Shri Rakesh in consultation with Shri Bhavik. 2.0 A detailed analysis of the import and export consignment of the CPD by all the six Indian companies during 2004-05 and 2005-06 revealed that the same set of diamonds were imported and exported by the Indian companies with the oversea companies based at Dubai, Singapore and Hongkong, which were also controlled and managed by AEL through the employees of their overseas group companies. The
- 29. 37 details of suchinstances of circular trading of the same sets of diamonds brought out as per Annexure H and Annexure I to the notice for the imports and exports effected in 2004-05 and 2005-06, respectively. On perusal of the said Annex ures it is revealed that the same set of CPDs of various descriptions were imported, exported and re-imported a number of times. It is also observed that the imported CPD were re- exported within two to three days of their imports. In some cases the exports look place the next day. Further the details also indicated that the CPD exported to Di ibai and Hong kong were re-imported from Dubai and Hong Kong respectively, but in case of exports to Singapore the same were reimported through Dubai. This is evident from the following illustrations wherein the same set of CPDs have been circularly traded atleast 4 to 5 times in a month : 2004-05 No. of instant es of Quantit Circula period during Sr.N y r which imported o. Description size (carat) trading /export, d 0.01- 07/04/2004 to 1 D CUT BL NATTS PK 1.20 1153 15 03/11/2004 0.01- 25/04/2004 to 2 D CUT BL NATTS PK 0.46 1120 18 07/11/2004 0.01- 20/06/2004 to 3 D CUT BR NATTS PK 0.30 945 17 05/10/2004 0.16- 07/09/2004 to 4 D CUT BR NATTS PK 0.45 286 22 23/03/ 2005 D CUT BR NATTS PK 0.01- 28/10/2004 to 5 10,11 0.07 957 15 02/03/2005 D CUT LB LC NATTS 0.17- 02/09/2004 to 6 PK 0.97 386 15 29/12/2004 0.005- 05/06/2004 to 7 D CUT LC PK 0.28 489 17 08/10/2004 0.11- 04/05/2004 to 8 D CUT LC PK 0.33 621 15 25/08/2004 0.03- 08/10/2004 to 9 D CUT LC PK 5,6 0.11 720 15 10/12/2004 0.08- 23/06/2004 to 10 D CUT OFF WH LB PK 0.20 161 18 19/08/2004 D CUT OFF WH LB PK 0.02- 23/09/2004 to 11 5,6 0.25 605 17 30/03/2005 D CUT OFF WH LB PK 0.02- 09/08/2004 to 12 8,9 0.09 618 24 09/03/20)5 0.02- 05/06/2004 to 13 D cur TLB NATTS PK 0.09 405 15 07/ 10/2004 0.02- 20/06/ 2004 to 14 D CUT TLB NAM PK 0.66 1190 15 07/10/2004 0.25- 29/05/2004 to 15 D CUT TLB NATTS PK 2.51 81 16 23/12/2004 D CUT TLB NATTS PK 0.02- 24/07/2004 to 16 3,4 0.05 197 18 03/11/2004 i _ •
- 30. • 38 17 D CUT TLBNATTS PK 5,6 0.02- 0.08 736 15 18/11/2004 to 30/03/2005 D CUT TLB NATTS PK 0.02- 17/07/2004 to 18 6,7 0.09 394 15 03/11/2004 0.005- 28/05/2004 to 19 D CUT TLB PK 0.51 2616 26 16/12/2004 0.02- 11/05/2004 to 20 D CUT TLB PK 0.09 398 25 06/10/2004 0.08- 25/05/2004 to 21 D CUT TLB PK 0.20 211 15 06/10/2004 0.08- 03/06/2004 to 22 D CUT TLB PK 0.20 409 24 01/11/2004 0.005- 25/12/2004 to 23 D CUT TLB PK 10,11 0.20 563 16 22/02/2005 0.02- 04/08/2004 to 24 D CUT TLB PK 10,11 0.09 670 21 17/09/2004 0.02- 28/04/2004 to 25 D CUT TLB PK 4 0.09 294 15 30/07/2004 0.02- 31/07/2004 to 26 D CUT TLB PK 5,6 0.07 400 15 15/02/2005 0.02- 24/07/2004 to 27 D CUT TLB PK 5,6 0.09 374 25 24/12/2004 0.02- 24/08/2004 to 28 D CUT TLB PK 6,7 0.09 1510 20 02/03/2005 0.02- 22/07/2004 to 29 D CUT TLB PK 6,7 0.09 304 25 03/11/2004 0.02- 17/10/2004 to 3C D CUT TLB PK 8,9 0.11 2225 18 18/02/2005 0.01- 16/10/2004 to 31 D CUT TLB PK 9,10 0.06 652 15 03/02/2005 0.01- 07/04/2004 to 32 D CUT TLC NATTS PK 0.92 127 21 22/09/ 2004 0.02- 01/04/2004 to 33 D CUT TLC PK 0.60 1408 15 02/08/2004 0.005- 01/04/2004 to 34 D CUT WH NATTS PK 1.15 175 28 05/10/2004 0.005- 26/06/2004 to 35 D CUT WH NATTS PK 0.45 1341 16 29/09/2004 0.18- 22/07/2004 to 36 D CUT WH NATTS PK 0.86 360 20 22/11/2004 D CUT WH NATTS PK 0.005- 17/07/2004 to 07 3,4 0.01 553 20 15/02 / 2005 D CUT WH NATTS PK 0.02- 25/10/2004 to :;8 4,5 0.10 272 17 05/03/2005 D CUT WH NATTS PK 0.005- 22/08/2004 to 39 6,7 0.03 706 16 07/03/2005 40 401 15 D CUT WH NATTS PK 0.02- 11/10/2004 to
- 31. 39 8,9 0.09 03/02/2)05 41D CUT WH PK 0.07- 1.03 962 19 19/09/2004 to 01/03/2005 42 D CUT WH PK 6,7 0.08- 0.25 1521 25 16/09/2004 to 04/03/2005 43 D CUT WH PK 8,9 0.08- 0.11 893 18 02/09/2004 to 1 07/03/ 2005 44 F CUT WH TAPPER PK 0.01- 0.30 744 15 07/04/2004 to 07/03/2005 45 TAPPER CUT WH PK 0.01- 0.30 779 20 01/04/2004 to 22/02/2005 - 2005-06 , Sr.N co Description size Qty (car ats) No of instance s of Circular trading period during which imported /exported 1 D CUT WN PK 7,8 0.07-0.35 581 24 09/04/2005 to 31/08/2005 2 D CUT FANYC COL TREATED PK 3 J 0. 43 612 01-0. 21 02/05/2005 to 30/09/2005 3 D CUT OLB PK 5-6 0.02-0.23 185 7 24 05/05/2005 to 05/10/2005 4 S CUT BL NATTS 0.01-0.04 256 24 01/05/2005 to 03/10/2005 5 S CUT LC PK 4 0.01-0.04 428 20 04/05/2005 to 03/10/2005 6 D CUT BLN PK 9,10 0.01-0.08 964 21 10/04/2005 to 30/09/2005 7 D CUT BLACK NATTS PK 2,3 0.19-0.45 366 20 28/04/205 to 03/10/2005 8 D/CUT BR NATTS PK 0.005-0.28 149 0 21 22/04/2005 to 08/09/2005 r-- 9 D CUT BN PK 10 0.01-1.20 115 2 21 10/04/2005 to 27/09/2005 10 D CUT W PK 5,6 0.005-0.08 248 6 21 09/04/200.5 to 05/10/2005 11 D CUT WHITE BLACK NATTS PK 0.005-0.08 192 7 20 05/05/2005 to 27/09/2005 12 _. D CUT BLACK NATTS PK 2,3 0.09-0.32 318 22 04/05/2005 to 28/09/2005 13 D CUT BLACK NATTS PK 1,2 0.01-0.45 622 23 05/05/2005 to 27/09/2005 •
- 32. • 40 14 D CUTMIX COL PK 0.005-0.42 921 22 09/04/2005 to 27/09/2005 15 D CUT LB PK 1/PK 2 0.01-0.20 225 2 23 22/04/2005 to 28/09/2005 6 F CUT TAPPER WHITE PK 0.01-0.20 73 22 22/04/ 2005 to 08/09 / 2005 t7 D CUT TLBN PK 7,8 0.005-0.02 487 21 09/04 / 2005 to 01/09/ 2005 18 D CUT WH NATTS PK 2,3 0.005-0.02 106 6 20 28/04/2005 to 27/09/2005 19 D / CUT TLB PK 0.15-0.49 351 21 22/04/2005 to 01/09/2005 20 D CUT TLBN PK 4,5 0.01-0.47 974 22 09/04/ 2005 to 28/09/2005 21 D CUT TLBN PK 7,8 0.005-0.03 377 22 09/04/2005 to 12/09/2005 22 D CUT WH NATTS PK 6,7 0.005-0.03 706 21 09/04/2005 to 14/09/2005 0.005-0.03 175 9 20 05/05/2005 to 22/09/ 2005 23 D CUT LB NATTS PK 3,4 24 S CUT LB PK 2,3 0.005-0.03 222 5 23 05/05/2005 to 03/ 10/2005 25 S CUT LB PK 2,3 0.005- 0.03 206 3 22 05/05/2005 to 03/10/2005 26 D CUT TLB NATTS PK 7,8 0.005-0.03 548 6 21 12/05/2005 to 28/09/2005 27 F CUT WH PRIN PK 4,5 0.005-0.06 614 20 03/05/2005 TO 01/09/2005 28 D CUT TLB PK 7-8 0.02-0.07 409 28 30/04/2005 to 03/10/2005 29 D CUT BRN PK 0.03-0.08 438 21 09/04/2005 to 03/ 10/2005 30 D/ CUT LB NATTS PK 3- 4 0.08-0.44 638 20 30/04/2005 to 28/09/2005 31 D CUT WHITE TAPPERS PK 0.02-0.18 980 20 28/04/2005 to 27/09/2005 32 D CUT LB NATTS PK 7,8 0.005-0.84 144 4 21 09/04/2005 to 28/09/2005 33 D CUT LC PK 8,9 0.01-0.19 560 21 10/04/2005 to 03/10/2005 34 D CUT BR PK 6,7 0.01-0.17 902 22 09/04/2005 to 05/10/2005 35 D CUT OFF W PIC 0.08-0.37 167. 00 24 10/04/2005 to 26/09/2005 3E D CUT LB NATTS PK 0.005-0.49 230 6.52 25 22/04/2005 to 30/09/2005 , 3; D CUT LB/LC NATTS 0.17-0.97 387. 21 22/04/2005 to
- 33. 41 PK 27 1 28/09/2005 38 DCUT WN PK 3,4 0.02-0.10 594 25 09/0412005 to 28/09/2005 05/05/2005 to 28/09/2005 39 D CUT WH PK 3,4 0.02-0.10 250 6 21 40 D CUT TLB PK 0.02-0.10 570 0 20 30/04/2005 to 04/10/2C 05 41 D CUT WHITE PK 0.37-1.20 266 29 09/04/2005 to 10/11/2005 01/05/2005 to 27109/2005 42 PRIN CUT WH PK 0.06-0.75 617 22 28/04/2005 to 03/10/2005 43 D CUT WHITE NATTS PK 2,3 0.02-0.08 517 22 44 D CUT TLB NATTS PK 1,2 0.02-0.08 736 26 28/04/2005 to 27/08/2005 45 D CUT TTL8 NATTS PK 5,6 l 0.02-0.08 120 20 07/05/2003 to 08/08/2005 46 D CUT WN PK 4,5 0.005-0.20 927 24 10/04/2005 to 03/10/2005 47 D/CUT TLB PK 2-3 0.08-0.94 579 20 30/04/2005 to 04/10/2005 48 D CUT WHITE PK 8,9 0.08-0.11 910 21 09/04/2005 to 30/09/2005 49 D CUT WHITE PK 8,9 0.02-0.06 194 4 25 09/04/2004 to 30/09/2005 50 1--- D CUT WH NATTS PK 3,4 0.02-0.06 615 22 28/04/2005 to 27/09/2005 51 D CUT LB NATTS PK 3,4 0.02-0.06 736 20 04/05/2005 to 30/09/2005 52 D CUT LC PK 0.005-0.11 719 21 22/04/2005 to 30/09/2005 53 D CUT TLB PK 8,9 0.02-0.11 222 5 24 09/04/2005 to 05/10/2005 54 D CUT WH NATTS PK 8,9 0.02-0.11 188 8 25 09/04/2005 to 05/10/2003 55 D CUT LB PK 2-3 0.25-0.56 716 21 22/04/2005 to ' 12/09/2005 56 D CUT TLB PK 4 0.005-0.04 405 20 06/05/2005 to 05/10/2005 57 D CUT WH NATTS PK 0.45-0.92 184 23 30/04/2005 to 20/ 10/2006 58 F CUT MARQUISE WHITE NATTS PK 2 0.24-0.90 255 20 22/04/2005 ..o 27/09/2005 59 F CUT MARQUISE WHITE NATTS PK 3 0.24-0.90 521 21 22/04/200510 27)09/2005 60 D/CUT LC PK __I. 0.33-1.11 607 21 22/04/2005 to 03/10/2005
- 34. 42 • 61 D CUTLC NATTS PK 0.42-0.95 22/04/2005 to 261 20 30/09/2005 10/04/2005 to 62 D CUT LC PK 5,6 0.01-0.07 343 24 30/09/2005 145 05/05/2005 to 63 D CUT WH PK 7-8 0.08-1.07 9 20 28/09/2005 233 09/04/2005 to 64 D CUT WHITE PK 7,8 0.002-0.05 7 25 05/ 10/2005 131 22/04/2005 to 65 D CUT BR NATTS PK 0.01-0.94 7 22 27/09/ 2005 D CUT BR NATTS PK 10/04/2005 to 66 6,7 0.16-0.45 286 23 28/09/2005 135 22/04/2005 to 67 D CUT BR PK 3 0.18-0.96 4 20 28/09/2005 30/04/2005 to 68 D CUT WHITE PK 8,9 0.02-0.05 970 22 27/09/2005 06/05/2005 to 69 D CUT WH PK 2,3 0.04-0.45 941 21 27/09/ 2005 D CUT WHITE NATTS 253 09/04/2005 to 70 PK 0.02-0.09 2 24 05/ 10/2005 D CUT WHITE NATTS 157 10/04/2005 to 71 PK 6,7 0.02-0.09 9 24 27/09/2005 09/04/ 2005 to 72 D CUT TLB PK 10,11 0.02-0.09 670 25 22/09/2005 104 09/04/2005 to 73 D CUT WHITE PK 6,7 0.06-0.25 6 24 30/09/2005 D CUT WH NATTS PK 169 17/06/2005 to 74 4,5 0.01-0.02 4 23 27/09/2005 75 D CUT WHITE NATTS PK 1,2 0.02-0.04 848 23 28/04/2005 to 04/10/2005 D CUT WHITE NATTS 395 22/04/2005 to 76 PK 7-8 86 9 0.01-1.05 9 20 05/09/2005 D CUT WHITE NATTS 418 22/04/2005 to 77 PK 7-8 0.01-1.05 8 24 03/10/2005 22/04/2005 to 78 D CUT TTLB NATTS PK 0.005-0.45 305 25 01/09/2005 D CUT TLB NATTS PK 28/04/2005 to 7c, 3,4 0.005-0.45 223 25 13/06/2005 261 28/05/ 2005 to 80 D CUT TLB PK 5,6 0.005-0.45 6 22 03/10/2005 126 22/04/2005 to D/CUT WHITE SI 1 0.19-1.06 2 20 04/10/2005 09/04/2005 to 82 D CUT TOP LB PK 9,10 0.01-0.06 669 25 05/10/2005 22/04/2005 to 8.3 D CUT LC PK 0.11-0.33 621 21 27/09/2005 81 D CUT WH PK 0.25-0.50 326 21 30/04/2005 to
- 35. • 43 27/09/2005 223 10/04 /20(6 to 85 D CUT WHITE PK 7,8 0.03-0.09 9 27 27/09/2005 04/05/2005 to 86 D CUT WH PK 4-5 0.98-4.70 270 22 10/11/2005 102 28/04/2005 to 87 D CUT WH PK 4,5 0.09-0.92 0 20 21/09/2005 09/04/2005 to 88 D CUT BR NATTs PK 0.01-0.03 186 22 03/10/2005 10/04/2005 to 89 D CUT LC PK 7,8 0.01-0.03 350 21 14/09/2035 F CUT WHITE 22/04/2003 to 90 PRINCESS PK 0.08-0.75 830 21 04/10/2005 Thus it is seen from the above details how CPD having the same description and size were imported and exported and re-imported over and over again atleast 4 to 5 times in a month. 2.1.1 From the above tables and Annexures H & I, it can be seen that the same set of CPD were imported and exported in a circular manner and to give a semblance of genuiness to the import / export transactions the weight of reimported consignments was marginally varied by removing a few pieces of CPD or adding a few pieces of CPI), from the CPD exported by the Indian companies to the overseas companies. Also in certain cases the description was slightly varied i.e if the CPD exported were say of PK 2,3 clarity, the re-imports were shown as of the PK 4,5 or 5,6 clarity. However in all these cases the size range of the CPD imported, exported and re-imported would remain the same as well as the cut and the colour of the re-imported CPD would be the same. This position was confirmed by Shri Lumesh Sanghavi, Manager, AEL who handled ail the so called sorting activities of the imported CPD, in bond, for all the six companies, in his statement dated 3/ 1/2007, wherein he deposed that the marginal difference in weight was possible by adding or removing a few pieces of CPD from those imported by the overseas companies, from the Indian companies. As regards the slight difference shown in the clarity of CPD exported and re-imported he stated that the CPD of the clarity lower than PK 3 are not graded and therefore the clarity of CPD shown as PK 4, 5 or 5, 6 was not possible in the subsequent reimports. Thus it was evident that the slight variation shown in clarity of re-imported CPD was only to give a semblance of genu inity. 2.1.2 On being shown the illustrations of circular trading of CPD , Shri Lu mesh Sangvi in his statement dtd.3/ 1/2007 interalia confirmed that the same sets of CPL' were being imported and exported in circular manner and he also explained one suet-, instance as below : ; t sr. no. 2 of the said annexure A-1 the variety D CUT BL N PK 9,10 having, 3 c:( -1-4iie of t to 0.08 and weight of 964.52 cts. was imported by M/s Adani Exports Ltd B1pf no. 100606 dated 13.12.2004 from M/s Daboul Trading, Dubai, the said lot ;:was expoited to M/s Al Shahad, Dubai as D CUT BL N PK 9 - 627.48 CTS and D CUT BL N PK 10- 337.04 Cts under shipping bill no. 1074 and 2572 both dated 15.12.2004 "respectively. This lot was again imported by M/s Adani Exports Ltd under B/E no. 201302 dated 27.12.2004 as D CUT BL N PK 9,10 ( 964.52 Cts.) from M/s Tanb Trading, Dubai. This lot was split and exported as D CUT BL N PK 9 ( 622.47 Cts.) to M/s Al- Shahad Dubai under shipping bill no. 1826 dated 29.12.2005 and D CUT BL N PK 10 (342.05 Cts.) to M/s Choksey Diamonds, Dubai under shipping bill no. 4399 dated 29.12.2004.This lot was again imported by M/s Adani Exports Ltd under B/E no.
- 36. 44 • 200093 dated 7.1.2005from M/s Gold Star, Dubai as D CUT BL N PK 9,10 ( 964.52 "as.). This was exported to M/s Gudami International, Singapore as D CUT BL N PK 9 580.05 Cts.) and D CUT BL N PK 10 ( 384.47 Cts.) under shipping bills no. 581 and 580 ')oth dated 10.1.2005. This lot was again imported by M/s Adani Exports Ltd under 13/E no. 100838 dated 24.1.2005 from M/s Shine Jewellery, Dubai as D CUT BN PK 9,10 (964.52) Cts. This lot was exported to M/s Gudami International, Singapore as D CUT 13N PK 9 (652.96 Cts.) and D CUT BN PK 10 (311.56 Cts.) under shipping bill nos. 2258 and 2256 both dated 27.1.2005. This lot was again imported by M/s Adani Exports Ltd under B/E no. 100377 dated 8.2.2005 from M/s Shine Jewellery, Dubai as 13N D CUT PK 9, 10 ( 964.52 Cts). This lot was exported to M/s Choksey Diamonds, I)uba as BN D CUT PK 10( 391.48 Cts) and BN D CUT PK 9 ( 573.04Cts.) under ;hipping bill nos. 2865 and 2862 respectively both dated 15.2.2005. This lot was again imported by M/s Hinduja Exports Pvt Ltd under B/E No. 101226 dated 25.2.2005, from Ivl/s Spectrum Trading, Dubai as D CUT BN PK 9,10 ( 964.52 Cts), which was split and exporied to M/s Harsh Diam, Hong Kong as D CUT BN PK 10 ( 380.60 Cts.) under shipping bill no. 2346 dated 28.2.2005 and to M/s Planica Exports, Singapore as D CUT FIN PK 9 ( 583.92 Cts) under Shipping bill no. 2351 dated 28.2.2005. This lot was subsequently re-imported by M/s Hinduja Exports Pvt Ltd from M/s Star Impex Dubai under B/E no. 100506 dated 7.3.2005 as D CUT BN PK 9,10 ( 964.52 Cts.) . This lot was split and exported to M/s Mine Gold Dubai as D CUT BN PK 10 ( 329.08 Cts) and D CUT BN PK 9 ( 635.44 Cts.) under shipping bill no. 2687 and 2686 respectively both dated 12.3.2005. This lot was further imported by M/s. Jayant Agro Organics Ltd under B/E no. 200859 dated 22.3.2005 from M/s Excel Global, Dubai as D CUT BL N PK 9,10 ( 964.52 Cts.) . This lot was split and exported as D CUT BL N PK 10 ( 337.60 Cts) and D CUT BL N PK 9 ( 626.92 Cts) to M/s Orchid Overseas, Singapore under shipping bill nos. 5947 and 5941 respectively both dated 28.3. 2005. The instances refer to same set of diamonds which were imported on 13.12.2004 and exported on 15.12.2004 was again imported on 27.12.2004 and re exported. on 29.12.2004 and again imported on 7.1.2005 and subsequently exported on 10.1.2005. This was again imported on 24.1.2005 and exported on 27.1.2005 and again imported 0:1 8.2.2005 and exported on 15.2.2005, subsequently imported on 25.2.2005 and exported on 28.2.2005, which was again imported on 7.3.2005 and exported on 12.3.2005. This lot was again imported on 22.3.2005 and exported on 28.3.2005. 2 1.3 That the same set/sets of CPD were being circularly traded by AEL and others is also borne out from the flow chart diagrams recovered from the harddisk of Shri Vipul of AEL bearing serial No7ED2WKW7 Seized under panchnama dated 24-25/1/2006 di-awn at the office premises of AEL, Ahmedabadyes. The said flow charts were recovered as per letter No. D/EE/2006/CF/20 dated 17-02.2007 of DFS, Gandhinagar, alongwith other documents. The flowchart diagrams contained in Excel files named as DEACHMRT and DIACHTI are reproduced below for ready reference: FLOW CHART ON NEXT PAGE
- 37. X -1)e aapfr '" /*P r7frtt7r-r. Kamsup Day. kiti. • 45 CHART-1(RUD 30/392) Atafiari7." DIAMOND CI eltAt • • • "-DUBAI .; !• none KON .e?-4.74t ;1 17 . AEL „.- • Mine Gqid .•• : • .W.,tqwellary ' : • . :•••• t" 1 • 's! Kwality Kwality Diamonds Diamonds e ••• •Cr :*• • ••••••-•• •.: ::• • !,• • . • • • • I • • • • ‘I; .AEL: • • ?ONO DabOUI Trading AEL • ;;;;iN: .• : • CHART -2 ON NEXT PAGE
- 38. Ix ....... ' iikE i' • t:Ntli, :',',1• ..;:ak w.: , AEL -,.. • ; ' DUBAI • 46 CHART-2 (RUD 30/391) • . • Excel Global at. Ltd ^.A.IntSfl V • • • : • ; 1 11414441144 ? dia4 40 . Mine Gold & Jewellery • I. •• 40:4116- 761.1 . §."9- - . • Daboul Triedingri: . :• . : -• Daboul Ini" .•; •,:*.`4; :t., ;&;43.2.1ki 4161101111W • AEL -• f & CHART -3 ON NEXT PAGE
- 39. ' HONG KONG • ••SINGAP RE. • • ?-: AEI. =!,018; • • i - PN1Tradinil 1 Seven Star L AE • . ••:PAEL: ••.• : .• • 47 CHART-3 (RUD 30/328) When Shri Vipul Desai, officer Banking of AEL was shown printouts of the .abon phi chart diagrams and questioned regarding the same, during his statement 1 ,er-64:tea on 19/2/2007 he stated that these flow charts were pertaining to the imports and exports of diamonds; that the flow charts were with respect to import and e sport of diamonds to various parties of Dubai, Singapore and Hong Kong;. Shri Vipul stated that these charts were not prepared by him but by Shri Sudhakar Nair, Junior Assistant (Banking) who was not with their company anymore as he had resigned about 1 1/2 years back. Shri Vipul stated that he was not aware of the details of the said documents. He further stated that he had asked and confirmed with Shri 12kjesh Nair, of their banking department over telephone, regarding the above said documents
- 40. 48 • having been preparedby Shri Sudhakar Nair. Shri Mahadevan Deputy General Manager Banking and Finance of AEL also confirmed in his statement dated 19/02 /2007, that Shri Sudhakar was working in banking department during the year 2004. That the CPD imported by AEL from Dubai, Singapore and Hong Kong were the very same CPD exported by them in the first instance. For example, in the flow chart diagram at Sr.No.3 it is seen that CPD is imported by AEL from Daboul Trading and Tanb Trading of Dubai. This lot of CPD is then exported by AEL to Al Shahad Gold 86 Jewellery and Chokshey Diamonds who in turn supply/transfer the same to Mine Cold ez, Jewellery and Mine Gold & Jewellery supplies these CPD to Daboul Trading and Tanb Trading who supply them back to AEL. Similarly, in the case of Singapore, the CF'D imported by AEL from Daboul Trading are exported to Gudami International who in turn supply the same to Mine Gold &, Jewellery, Dubai and Mine Gold & Jewellery in turn supplies the same to Daboul Trading and Daboul Trading in turn sells re-exports the same to AEL. In the case of Hong Kong, the CPD imported by AEL from F'NJ Trading and Seven Star, Hong Kong are exported to Kamsun Development Intern itional, Hong Kong and Kamsun Development International in turn stippl) /transfer the same to PNJ Trading and Seven Star, Hong Kong and these firms i.e. PNJ Trading and Seven Star, Hong Kong sell these very CPD back to AEL. 2.2.1 M/s. Adani Exports Ltd was engaged in the circular trading of CPD with the overseas parties controlled and managed by them is evident from the aforesaid Diamond Flow chart. And that the CPD imported by AEL from Dubai, Singapore and Hong Kong were the very same CPD exported by them in the first instance. This transaction was chartered in such a way that diamonds exported by M/s. Adani Expor:s Ltd were finally re-imported by Adani Exports Limited which were again exported by them and were again received back by them in a cyclic manner. The fact that the diamonds were imported and exported in cyclic manner between AEL and the overseas companies controlled 86 managed by them, as per ihe flow charts depicted above, is substantiated by the pattern of import and export of CPD by AEL and its group companies with the overseas parties controlled 86 managed by them, as brought out in Annexure -H and I. A few illustrations of such circular movement are detailed in para 9.8 and is reproduced as under: Sr.No Invoice No. Date/ Inv/ Weigh Description of Goods Size t Buyer 1.1 234-AEL/TT/04 05/10/2 004 D CUT BL NATTS PK 0.02- 0.22 3571. 54 TANB TRADING EST 1.1.1 Y AEL/PBW/PD/5 39/2004-2005 07/10/2 004 D CUT BL NATTS PK 0.02- 0.12 1164. 99 AL SHAHAD GOLD & JEWELLERY 1- 1.1.2 AEL/PBW/PD/5 38/2004-2005 07/10/2 004 D CUT BL 0.02- NATTS PK 0.12 1398. 69 CHOKSEY DIAMONDS (L.L.C.) .1.3 AEL/PBW/PD/5 39/2004-2005 07/10/2 004 D CUT BL NATTS PK 0.12- 0.22 1007. 86 AL SHAHAD GOLD & JEWELLERY 1..2 913- DBL/PD/2004 11/10/2 004 D CUT BL NATTS PK 0.02- 0.22 3583. 49 DABOUL TRADING CO. (L.L.C.) `l .2.1 AEL/PBW/PD/5 61/ 2004-2005 14/10/2 004 D CUT BL NATTS PK 0.02 - 0.10 1238. 84 CHOKSEY DIAMONDS (L.L.C.) 1.2.2 AEL/PBW/PD/5 59/2004-2005 14/10/2 004 D CUT BL NATTS PK 0.02- 0.09 912.8 0 CHOKSEY DIAMONDS (L.L.C.) 1.2.3 AEL/PBW/PD/5 14/10/2 D CUT BL 0.10 - 1431. CHOKSEY DIAMONDS
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- 48. 56 • LTD., 6.5 PNJ 030991 25/09/2 004 D CUTLB NATTS PK 0.01- 0.45 2288. 01 PNJ Trading 6.5.1 AEL/PBW/PD/5 06/2004-2005 30/09/2 004 D CUT LB NATTS PK 0.14- 0.45 649.2 0 M/S. GUDAMI INTERNATIONA L PTE. LTD. 6.5.2 AEL/ PBW/ PD / 5 07/2004-2005 30/09/2 004 D CUT LB NATTS PK 0.01- 0.14 1638. 81 M/S. GUDAMI INTERNATIONA L PTE. LTD. 6.6 873- DBL/PD/2004 03/10/2 004 D CUT LB NATTS PK 0.01- 0.45 2306. 29 DABOUL TRADING Co. (L.L.C.) 6.6.1 AEL/PBW/PD/5 27/2004-2005 06/10/2 004 D CUT LB NATTS PK 0.10- 0.45 1251. 16 M/S. KAMSUN DEVELOPMENT INTERNATIONA L LTD., 6.6.2 AEL/ PBW/ PD / 5 28/2004-2005 06/10/2 004 D CUT LB NATTS PK 0.01- 0.12 1055. 13 M/S. KAMSUN DEVELOPMENT INTERNATIONA L LTD., 6.7 PNJ 030995 08/10/2 004 D CUT LB NATTS PK 0.01- 0.45 2310. 3 PNJ Trading 13.7.1 AEL/PBW/PD/5 53/2004-2005 12/10/2 004 D CUT LB NATTS PK 0.01- 0.12 1392. 03 CHOKSEY DIAMONDS (L.L.C.) 1).7.2 AEL/PBW/PD/5 52/2004-2005 12/10/2 004 D CUT LB NATTS PK 0.12- 0.45 918.2 7 AL SHAHAD GOLD 86 JEWELLERY 1).8 PNJ 031012 12/11/2 004 D CUT LB NATTS PK 0.01- 0.45 2306. 21 PNJ Trading 0.8.1 1).8.2 AEL/PBW/PD/7 44/2004-2005 23/11/ 2 004 D CUT LB NATTS PK 0.10- 0.45 1125. 27 M/S. KAMSUN DEVELOPMENT INTERNATIONA L LTD., AEL/ PBW/ PD / 7 38/2004-2005 23/11/2 004 D CUT LB NATTS PK 0.10- 0.45 1180. 94 M/S. KAMSUN DEVELOPMENT INTERNATIONA L LTD., lote:• In the above table the first row 1.1, 1.2,; 2.1, 2.2. and so on represents imports .ind the subsequent rows 1.1.1, 1.1.2, ; 2.1.1, 2.1.2 and so on represents exports. For illustration the transaction shown at Sr. No. 1 pertains to the variety " D (:, 'ut Natts PK". As per sr.no. 1.1 , D Cut Natts PK variety with size 0.02 - 0.22 and Iota] carats 3571.54 were imported by AEL from Tanb trading, UAE vide invoice No. 234-AEL/11/2004 dated 05/10/2004. These CPD were exported by AEL to Al Shahad crold & Chokshey Diamonds, both of U.A.E., vide export invoice no. AEL/PBW/PD/539/2004-05 dated 05/10/2004 & invoice no. AEL/PBW/PD/538/2004-05 dated 07/ 10/2004, respectively. Again, as shown against Sr.no 1.2, the same variety of CPD with same size and weight 3583.49 carats were imported from Daboul Trading, UAE vide import invoice no. 913/DBL/PD/2004 dated [1/ 10/2004 and then exported to Choksy Diamonds, U.A.E. vide export invoice no. AEL/PBW/PD/559/2004-05 & AEL/PBW/PD/561/2004-05 dated both dated 4/10/2004. Again, as per sr.no. 1.3 the same variety of CPD with same size and weight 3567.54 carats were imported from Tanb Trading, UAE vide import invoice no. 24l-AEL/ 11/2004 dated 18/10/2004 and then exported to Choksy Diamonds and Al 5hahad Gold of U.A.E. vide export invoice no. AEL/PBW/PD/573/2004-05 dated
- 49. • 57 19/10/2004 &AEL/PBW/PD/574/2004-05, dated 19/10/2004, respectively. Also as shown at S. No. 1.4 the same variety of CPD with same size and weight :1583.19 carats were imported from Daboul Trading Co. (L.L.C.), UAE vide import invoice no. 938-DBL/PD/2004 dated 20/10/2004 and then exported to Choksy Diamond:. and Al Shahad Gold of U.A.E. vide export invoice no. AEL/PBW/PD/600/2004-05 dated 23/10/2004 & AEL/PBW/PD/599/2004-05, dated 23/10/2004, respectively. Further, as shown against Sr.no. 1.5, the same variety of CPD with same size and weight 3568.77 carats were imported from Tanb Trading, UAE vide import invoice no. 249-AEL/11/2004 dated 25/10/2004 and then exported to Gudami International, Singapore vide export invoice no. AEL/PBW/PD/619 /2004-05 & AEL/PBW/PD/620/2004-05 dated both dated 28/10/2004. Again as per sr.no. 1 6, the same variety of CPD with same size and weight 3583.49 carats were imported from Daboul Trading, UAE vide import invoice no. 967-DBL/PD/LC/2004 dated 30/10/2004 and then exported to AI Shahad & Jewellery, vide export invoice r.o. AEL/PBW/PD/641/2004-05 & AEL/PBW/PD/642/2004-05 both dated 02/11/2004. In this way, the pattern of circular trading by way of import of CPD by AEL either from Daboul or Tanb Trading, UAE & export to Al Shahad Gold & Choksy Diamonds in UAE and Gudami International, Singapore and re-importing the same from Daboul or Tanb Trading, via Mine Gold & Jwellery was existing in a circular fashion during the period under investigation. Similarly the transactions pertaining to other entries in the table can be seen. 2.2.2 The fact that the diamonds exported by the Indian companies was traded in a circular fashion by importing back the exported diamonds and re-exporting the same in a cyclic manner was also supported by the following mails between the employees of Adani group of companies : "From: "asha" <asha@adani-global.com> (RUD 29/113) To: < mary@ ad an igrou p . co rn > , <smshah@adanigroup.corn> Cc: <rakesh@adani-global.com>, <tejal@adani-global.com> Attn: Ms. Mary Please arrange for shipment to Al Shahad, Dubai as per following details. You will receive shipment in Gudami Intl, Singapore from Adani Exports, India which you have to export from Emperor / Orchid. to Al Shahad, Dubai. Please find below address details for Al Shahad Gold & Jewellery Al Shahad Gold & Jewellery P.B. 30712, Dubai, U.A.E. Tel / Fax: 04-3933732 / 3933792 regards Asha" The above mail of Asha clearly brings forth the modus adopted by A EL for circular trading of the same set of diamonds. As per the above mail of Ms. Asha of Adani Global, wherein she informs her counterpart Ms. Mary in Adani Global PTE., Singapore regarding a shipment exported by AEL to Gudami International, Singapore, which in turn is to be re-exported to Al Shahad Gold & Jewellery, Dubai through either Emperor Exports or Orchid Overseas Pte Ltd of Singapore . As is seen above the same set of CPD would be re-exported from Dubai to any of the six Indian companies, which would be further re-exported by the Indian company and again imported in a cyclic manner. The above mail also evidences the fact that the various Singapore and Dubai based companies were managed amd controlled by Adani. 2.2.3 It was alleged that the above circular manner in which the same CPI) were being traded in, was a clear indication of the artificial nature of the transactions 10 7- boost up export turnover. It was important that though the same CPD were being traded in again and again, the value of the CPD at each time of its export by AEL and othex five companies was enhanced by 5% to 10%. Further, the value of re-import in • the Ovular movement of CPD in many cases was declared to be less then that declared at the time of first import as was clear from the instances of circular trading in Annexure-H and Annexure-I. It was alleged that the value addition was merely on paper and it was also further established that the value declared by AEL at the lime of import and export did not represent the true and correct value of CPD.
- 50. 58 I 2.2.4 The contentsof the document were recovered from the Computer Hard disk of Shri Vipul Desai, Officer, Banking Department of AEL, Ahmedabad by the Directorate of Forensic Science, Gandhinagar. In the said document it was mentioned that "CENTRE SPECIFIC ACTIVITY - DUBAI, BOTH EXPORTS/IMPORTS FROM DUBAI". From the said document it was seen that AEL had arranged for the movement of CPD to be "SAME DAY SHIPMENT TO DIFF. DESTINATIONS/PARTIES TO BE ATTEMPTED". It was also seen from the said document that " SORTING OF GOODS AT DUI3AI - IMPORTANT - ITEMS WITHDRAWN AND CHANGE OF DESCRIPTION IF Ar4y OP GOODS, SORTING - withdrawn items - added items from previous supplies to be communicated to India - Tejas/Maahadevan as per pre-coded descriptions and quantity". This indicates that AEL had planned for the shipments of CPD in such a manner that though the same CPD are shipped to different destinations and different parties and that too on the same day, the sorting of CPD to be exported to India was being done at Dubai and it was ensured that there was a change in the description and caratage (weight) by withdrawing itmes from the present lot and adding items fri )m tl- e previous lots of the CPD when they are again imported by AEL and the other 5 companies into India. That the change in description of the CPD imported and export( d by AEL and the other 5 companies was merely on paper is also confirmed by Shri IA.,mesh Sanghvi in his statement dtd.3/ 1/2007. It was alleged that this is clearly indicative of the modus adopted by AEL in consonance with the other 5 companies to camoulage the fact that the same set of CPD are being repeatedly imported and exported so as to achieve the targeted incremental export volumes, in order to be eligible to avail the benefits of the Target Plus scheme. The above document also explair ed the variation in the quantity and description of some of the CPD which were being .. -:ircularly traded in by AEL and the other 5 companies. This fact was also corroborated by the Email dtd.3/8/2004 of Shri Manuj Nair of Adani Global, UAE to Shri Llimesh Sanghvi, Shri Bhavik, Shri Mahadevan, Shri Tejas, Shri Tejal and Shri Rakesli of Adani Global, UAE as detailed at Para 12.2, wherein it is mentioned that some of the Cut and Polished Diamonds are being kept in stock at Dubai. All these facts lead to the only possible conclusion that AEL and the other 5 companies are indulg.ng in artificial import and export transactions of CPD, by circularly trading the same sets of CPD, with a view to show incremental export turnover and avail of the benefits of the Target Plus scheme. 3.0 The notice further alleges that after importation of CPD, no manufacturing process was undertaken in the Bonded warehouse of M/s. Adani Exports and its group companies as they possessed warehousing licence under Section 58 of Customs Act, 1962 only. The statements of various persons recorded during the course of the investigation revealed the following activities undertaken on the imported CPD before export of the same: (i) on receipt of the cut and polished diamonds in the bonded warehouse premises the sorter checks the correctness of the lot wise weight declared on each of the import packets. (ii) Then the process of actual assortment is undertaken. Assortment includes the process of sieving, boiling and segregation. (iii; The process of sieving on a sieve, which is a round apparatus consisting of perforated metal sheet of various sizes. The process of sieving for an average lot normally takes around 30 minutes. Further, in the bonded warehouse activity, only about 25% consignments were put for sieving and the rest of the consignments did not go through this process at all. (iNa The process of boiling involves boiling of the diamonds in a small glass like see-through beaker (machine) which operates on electricity; the diamonds are normally boiled for about 20 minutes to remove dust/ impurities and only 50% consignments were subjected to boiling. (v) After the process of sieving and boiling, if at all done, the next process was segregation i.e. segregating/assorting the diamonds on purity basis. (vi) Lot wise assorting of received consignments of CPD in the respective bonded 1.varehouses of the aforesaid companies/firms by way of boiling for cleaning, sieving for separating diamonds size wise, size wise weighment of diamonds using weighing machine, further assortment with regard to quality if required. (vi) Repacking of the assorted CPD for export by the office staff. All these activities including assorting were carried out and completed within 2 to 4 nours Hrs even though each consignment ran into thousands of carats. As the size of the imported diamonds was very small and therefore number of pieces per carat would be very large as is brought out in the statemtent dated 28.02.2006 of Shri
- 51. • 59 Lumesh Sanghvi. Thefact that the entire process was carried out in 2 to 4 hours AN as confirmed by Shri Lumesh Sanghvi in his statements dated 31.01.2006 arid 28.02.2006. 3.1.1 Various Statements of Shri Lumesh Sanghvi, Manager of M/s. Adani Exports , Ltd., Mumbai who handled the import and exports of diamonds for Adani Exports Ltd. and its group companies were recorded under section 108 of the Customs Act 1962. In his statement dated 31-01-2006, Shri Lumesh Sanghvi inter-alia stated that from around Diwali 2003 to Diwali 2005 M/s Adani Exports Ltd had been operating from office at 64A, Maker Chamber III, Nariman Point Mumbai which was the ooncled Warehouse; that he was the sole in charge of this office; that the entire activity related to import and export of Cut and Polished Diamonds (CPD) was done from this address which was the registered address registered with the Customs as the Bonded Warehouse registered with the Diamond Plaza Clearing Center ; that in order to arrive at the exact value each lot should have been examined thoroughly and not in the casual manner within overall assorting period of 2 to 4 hours. Shri Lumesh Sanghavi admitted in his statement that the value of the diamonds should have been the actual value of the diamonds exported; that they have not been concentrating much on this aspect, since he was directed by Shri Samir Vora to simply load value by 5% or 10% of the import value; that the value mentioned in the export invoices were not the true value but the value arrived by loading 5% or 10%. During his statement Shri Lumcsh Sanghavi was shown the import and export related documents of M/s. Adani Exports Ltd. and that of the companies controlled by M/s Adani Exports Ltd viz (i) M/s Jaya nt Agro Organics Ltd, (ii) M/s Midex Overseas Ltd, (iii) Mis Bagadiya Brothers P..rt Ltd, (iv) M/s Aditya Corpex Pvt Ltd and (v) M/s Hinduja Exports Pvt Ltd which weie recovered from the office premises of respective companies during the searches conducted by DRI. On being asked to inform about the various types and qualities of diamonds imported and exported, Shri Lumesh Sanghavi admitted that very limitcJ variety of CPD were imported and exported. In his further statement recorded on 07- 02-2006, Shri Lumesh Sanghvi inter-alia stated that the import and export of 'Cut Polished Diamonds' of M/s. Jayant Agro Organics Ltd., M/s. Aditya Corpex Pvt. Ltd , M/s. Midex Overseas Ltd., M/s. Hinduja Exports Pvt. Ltd., M/s. Bagadiya Brothers Pvt. Ltd. in addition to that of M/s. Adani Exports Ltd. were being handled by him a the sole in charge at Mumbai; that the various activities under bonded warehouses of aforesaid companies in respect of CPD are: i) Receipt of import documents consisting of Import Invoice &, Airway Bill 5y fa:: in his office; that these documents used to be received by fax either directly from supplier overseas or from Ahmedabad office of M/s. Adani Export 3 Ltd. particularly from the office of Shri Samir Vora. ii) Sending the import documents described above to the office of CHA namely M/s Jasraj Kalyanji 136 Co., Mumbai; that their work was handled by Shri Vipu Popat @ Pappu of M/s Jasraj Kalyanji 8v Co., having mobile no. 98202884/r7. iii) sending either S/Shri Kamraj Bodal, Chabilal Pant, Satish oi Rahul Bhor to Diamond Plaza Customs Clearance Centre (D.P.C.0 ) fot facilitating the clearance of the CPD from Customs in association with CHA: sometimes sending Shri Ajit Barodia also to visit the DPCC to facilitate the clearance iv) Getting the delivery of the import consignment of CPD at their office from the respective Security Agencies. v) Lot wise checking of the imported consignment by the staff of the aforesaid companies/firms at their respective office premises. All the persons who were checking the import lots, were the employees of M/s. Adani Exports Ltd. and they used to report to him for all their activities; that as on date, S/ Shri Tejas Doshi, Manish Shah, Bhavik Desai, Kaushal Pandya, Vishal Bhaysar are working in the Ahmedabad office of M/s. Adani Exports Ltd. and S/Shri Kamraj Bodal, Rahul Bhor 136 Chabilal Pant are working at their Mumbai office; that the salary of the all these persons range between Rs. 7,000- Rs.10,000 per month. vi) Intimating Shri Mukesh Patel, Master Assorter, to arrange for the other assorters, depending upon the load of the consignments at a time. Since January 2005, Shri Mukesh Patel was employed as part time assorter by Adani Group for carrying out assorting of CPD for which he was paid 'nor thly
- 52. 60 • -emuneration of aboutRs. 10,000/- per month irrespective of the quantum of Nork in a month; that the other assorters were brought by Shri Mukesh Patel as per need and some 10 to 12 different persons came for the said work who were paid weekly by the respective companies separately; that in some cases where no assorter was available, the work of assortment was done by him Lurnesh). vii) that the assorter first checks the correctness of the lot wise weight declared on each of the import packets. Then he will start the process of actual assortment. Assortment would therefore include sieving, boiling and segregation. viii) The process of sieving on a sieve, which is a round apparatus, which consists of perforated metal sheet of various sizes. The process of sieving for an average lot would normally take around 30 minutes; that in the bonded warehouse activity, only about 25% consignments were put for sieving; that the rest of the consignments did not go through this process at all; that the process of boiling involves boiling of the diamonds in a small glass like see-through beaker (machine) which operates on electricity; that the diamonds are normally boiled for about 20 minutes to remove dust/ impurities; that only 50% consignments were subjected to boiling; that after the process of sieving and boiling, if at all done, the next process was assortment. i.e segregating the diamonds on purity basis. ix) Lot wise assorting of received consignments of CPD in the respective bonded warehouses of the aforesaid companies/firms by way of boiling for cleaning, sieving for separating diamonds size wise, size wise weighment of diamonds using weighing machine, further assortment with regard to quality if required. x) Repacking of the assorted CPD for exports by the office staff. xi) Preparing export invoice and value addition sheet in respect of the exports by loading 5% or 10% on the value of the imports; that the said loading was simply done as per the directions of Shri Samir Vora from time to time; that all details like name of the exporter, quantity to be exported were given by Shri Samir Vora or Shri Saureen Shah over phone or by fax. xii) Faxing the said export invoices to their CHA for preparing export documents as well as to the concerned Security Agency for picking up the export parcels from their office to D.P.C.C. xiii) Appraising of the export consignment by Customs Officers in presence of their CHA and any of the aforesaid office staff. xiv) Checking of weight by Customs staff and packing of export consignment. xv) Receiving assessed copy of Invoice, Shipping Bill, Air Way Bill, Insurance Copy from their CHA after affecting the exports. Shri Lumesh Sanghavi further stated that he had never seen any purchase order by the buyers or even received any communication regarding the quantity/quality of CPD to be supplied by them; that he had never seen any purchase order placed by any of the 6 companies for import of CPD; that the export of M/s Adani Exports Ltd were made by showing value addition of 5% even after 1.4.2005; that however, the export of other 5 companies viz. M/s Aditya Corpex Ltd. M/s Midex Overseas, M/s Baghadya Brother Ltd., M/s Hinduja Exports Pvt. Ltd., and M/s Jayant Agro Organics Ltd., were made showing value addition of 10% for exports after 1.4.2005; that he did notice the difference in valuation for exports by M/s Adani exports Ltd. and by the other five companies but he was going strictly by the instructions of Shri Samir Vora and Shri Sakti en Shah who had told him to ignore the question of true value; that value addition ,..,. . (30.0-0 for 5 companies other M/s Adani exports Ltd. had nothing to do with the true lc 7: • - va). _.6/ the exports and export valuation was overvalued. ( i. .1 kc. .' ., • y-;„ 0,7_ . e ,,,/ In his further statement dated 28.02.2006, Shri Lumesh Sanghavi interalia '.<, , swirl that he was entrusted with the work of exports and imports of cut and polished "•---:.- .:.:1.1-• ___1;:iiinonds (CPD) of M/s Adani Exports Ltd. and five other companies viz. M/s Hinduja Exports Pvt. Ltd. , M/s Aditya Corpex Pvt. Ltd., M/s Midex Overseas, M/s Jayant Agro Oil Mills, M/s Bagadia Brothers.; that there were separate bonded warehouses for each of the above companies for import and export of CPD; that he did not know their
- 53. • 61 exact postal addressesbut he used to visit the bonded warehouses of the above companies also, as he was the overall in-charge for the export and import of CPC, of all the above companies, including M/s Adani Exports Ltd.; that the entire process of assortment would take between 3 to 4 hours and the imported diamonds would be exported within 3 to 4 days of their imports ; that sometimes the exports would also take place on the second or third day of imports; that imported diamonds and exported diamonds were in the same form i.e. cut and polished diamonds were imported and cut and polished diamonds were exported without carrying out any process except sieving, boiling and segregation; that there was a standing instruction to load 5% over the import value prior to 31.3.2005 and to load 10% over the import value after 01.04.2005, irrespective of the actual value of the diamonds: that though the total value addition was shown at 5% and 10% as had been directed, the lot wise value of the diamonds in each invoice was conveyed to him by Shri Saineer Vora over fax; that it was ensured that the value addition was 5% before. 31.3.2005 and 10% after 01.04.2005, irrespective of the correct value of the diamonds being exported; that except the payment made to the assorters not much cost was involved; that the master assorter was paid Rs. 10,000/- per month for all the• companies together, irrespective of the quantity of diamonds and the other assorters which he brought along were paid about Rs. 200 per day; that regarding the instruments available in the bonded warehouses of the above companies foi assortment of CPD, he stated that sieves of different sizes for sieving, electric heater with beaker for boiling and tripod (magnifying glass) for sorting, and electronic scale for weighment were available in each bonded warehouse; that the size of the diamonds was mentioned in pointer such as 0.03 to 0.10, 0.005 to 0.35, 0.01 to 0.06 etc. for each lot of diamond in the invoice; that there would be 33 pieces per carat if the size was 0.03 pointer and 10 pieces if the size was 0.10 pointer; that therefore in a lot having size range of 0.03 to 0.10 pointer there would be 10 to 33 pieces per carat. similarly for lot having size range of 0.005 to 0.35 pointer there would be 3 to 200 pieces per carat. 3.1.2 That the imported CPD were only subjected to the process of sieving for separating the same into different sizes, segregation into different grades such PK 1, PK2, VS1, VS2, etc. and some times subjected to boiling for cleaning and thereafter re- exported in the same form by packing in different lots. This process was normally completed within three to four hours. After carrying out the above process. the imported CPD were exported within a day or two. The main assorter who was sEid to be hired for this job was paid @ Rs. 10,000/- per month, together for all the companies irrespective of the quantum of work and the other persons that he brought along on piecemeal basis were paid @ Rs. 200 per day. As regards the machinery, equipments at the bonded warehouse, it is seen that except he sieves of different size, a weighing scale, and eye glass no other machinery or equipments were used. 3.1.3 It was alleged that no activity was undertaken in the bonded warehouse which could bring about any change in the form of the CPD imported and subsequently re- exported. The CPD imported was merely subjected to sorting, sieving and boiling and these processes in no way brought about any change in the imported CPD which were again exported. What was imported was CPD of specific characteristics and what was exported was also CPD with the same specific characteristics. Therefore, there is no intrinsic value addition to the CPD imported. Consequently, the value addition of 5% and 10% shown by AEL and others is merely value addition on paper. Hence the requirement of achieving the value addition in terms of the bonded warehouse condition was also not fulfilled by AEL and the other 5 companies. 4.0 That the process carried out on the imported diamonds did not justify the value addition of 5% to 10% shown by the Indian companies. Moreover the type of persons employed for the job and the payments made to them was also indicative of the fact that not much expertise was involved in the job and on this count also the value addition of 5% to 10% cannot be justified. It was also observed that export of CPI) by --M/s Adani Exports and group companies were made by showing value addition of 5°, over .the import value upto 01/04/2005 and after 1.4.2005 the exports of CPD by group companies viz. M/s Aditya Corpex Ltd. M/s Midex Overseas, M/s Bagadiya Brother Ltd., M/s Hinduja Exports Pvt. Ltd., and M/s Jayant Agro Organics Ltd., were made by showing value addition of 10% over the import value. However the value addition for the exports of CPD by M/s. Adani Exports Ltd. continued to be at 5% even w. e.f. 01.04.2005. When confronted with this fact Shri Lu mesh San ghavi Manager, M/s Adani Exports Ltd in his statement recorded on 31/01/ 2006 and 28.02.2006, stated that value addition in respect of M/s. Adani Exports Ltd was continued at 5%
- 54. 62 • even after 01/04/2005;that he did notice the difference in valuation for exports by NI/s Adani exports Ltd. and by five other companies but he was going strictly by the instru,:tions of Shri Samir Vora and Shri Saureen Shah who had told him to ignore the question of true value; that Value addition of 10% had nothing to do with the true value of the exports and export valuation was overvalued; that as per his knowledge there was planning to take benefit of some licensing scheme and hence there was big tarnover by these 6 companies. 4.1.1 In his statement dtd.3/1/2007, Shri Lumesh Sanghvi stated that the value of the diamonds imported under the Target Plus Scheme by the Adani Group companies was it the range starting from US $ 16 per carat upto US $ 2500; that these diamonds were ( xported as per instructions of Shri Samir Vora or Saurin Shah as the case may be after value addition of 5% or 10%; that of the total lots imported / exported by the Adani Group in 2004-05, approximately about 75% of the imports and exports have been effected in the price range of US $ 23 to US $ 300 per carat and that the remai ling 25% have been imported and exported in the price range exceeding US $ 300 per carat; that it occurred to him that the same set of diamonds were being imported and exported over and over again to achieve higher exports, however, since lie was not supposed to say anything in the matter, he just executed his job as was instructed by Shri Saureen Shah and Shri Samir Vora; that normally, the market for CPD is for the bigger diamonds of the higher value, however, in the case of M/s Adani Exports Ltd and other five companies viz. M/s Hinduja Exports Pvt Ltd, M/s. Aditya Corpex Pvt Ltd, M/s. Jayant Agro Organics Ltd, M/s Midex Overseas Ltd and M/s. l3agacliya Brothers Pvt Ltd the entire emphasis was on boosting the exports and hence such huge exports of low quality diamonds was shown. 4.1.2 The statement of Shri Lumesh Sanghvi, Manager of AEL at Mumbai was :significant in the context of the export valuation of the CPD of AEL and the other 5 companies. Shri Lumesh had in his statement dtd.7/ 2/2006 and 28/2/2006 stated that the imported diamonds were kept in aluminum bag, which were further packed inside the canvas cloth cover/plastic. The said aluminum bag contained the different packets of imported diamonds wrapped in white paper, lot wise and on each packet, there was endorsement of numbers i.e. 1,2,3 etc. showing lot nos. as per invoice and weight in carats was also endorsed on each packet as per the invoice. The endorsement was mostly made with the pencil. Shri Sanghvi further stated that the procc ss of assorting includes sieving, boiling and segregation. He further stated that only about 25% consignments were put for sieving and the rest of the consignments did not go through this process at all. He further stated that only 50% consignments were subjected to boiling. He further stated that the processes of sieving, boiling and segregation would not be applied on all the consignments and sometimes, only sieving and boiling would be undertaken and no segregation would be done. Similarly some cons.gnment would not be subjected to boiling. What this indicates is that even the mini:num processes were also not carried out on all the CPD imported and subsequently re-exported by AEL and the other 5 companies in the original form of the imported diamonds. It was noticed that the CPD at the time of their import were already sorted and segregated into different lots as per their description and size as is evident from the statement of Shri Lumesh Sanghvi dated 7/2/2006 and 28/2/2006 and statement of Shri Kamraj Pitambar Bodal, Office Assistant of AEL dated 30/1/2006 and Shri Kau.ihal Pandya, Office Assistant of AEL dtd.6/2/2006 that only one metal box was received against one bill of entry and that the metal box contained different packets of imported diamonds wrapped lot wise in a plain white paper and on each packet endorsement i.e. 1,2,3 etc (lot No. as per invoice) and carats (weight) with pencil was writ en on each packet as per the lot no. mentioned in the invoice. Therefore, the imported CPD did not require any detailed sorting before their consequent exports. The only so called sorting that was under taken on each packet /Lot of imported diamonds before exports was either segregating them into diamonds with two different size ranges or two different grades of clarity. To Illustrate, if a particular packet/lot of CPL) containing description "D Cut BR Natts PK 4" of size 0.01 - 0.22 was imported it would be re-exported into two lots with the same description "D Cut BR Natts PK 4" and size 0.01 - 0.11 and 0.12 to 0.22 by the simple process of sieving. Similarly if a paccet/lot of CPD with description "D Cut BR PK 10,11" was imported it would be re- exported in two lots by segregating the same into "D Cut BR PK 10" and "D Cut BR PK 11" This was further forthcoming from the statement of Shri Lumesh Sanghvi recorded on 3/1/2007 wherein he had stated that the CPD of description "D CUT BR PK 10,11" imported from Gold Star FZE, Dubai was rexported to Chokshey
- 55. • 63 Diamonds, Dubaias "D CUT BR PK 10" and "D CUT BR PK 11". The importci diamonds were thus assorted into PK10 and PK 11 and exported in two consignments to Chowksey Diamonds, Dubai. This shows that the imported CPD does not undergo much sorting or any other such processes as claimed by AEL and the other 5 companies and is re-exported in substantially the same form. It was therefore alleged that, the value of the CPD declared at the time of export by AEL and the o .her 5 companies were merely imaginary and abnormally inflated values. 4.1.4 The value addition of 5% was shown during 2004-05 on account of the processes such as assorting, sieving, boiling and segregation. However, during 2005- 06, the other 5 companies (HEPL, MOL, ACPL, BBPL AND JAOL) had by showing the same processes of assorting, sieving, boiling and segregation on the importec CPI) claimed a value addition of 10% at the time of export of the CPD. Whereas, AEI. kept the value addition @ 5% intact for the exports of 2005-06 also though the same processes were claimed to have been carried out on the imported diamonds before the same were exported. It is relevant to note that AEL had continued showing value addition of 5% even during 2005-06 for the fact that AEL had not claimed the benefit:, of Target Plus scheme during 2005-06. It is allegd that it was a clear indication that. the value addition was merely on paper and kept in tune with the requirement of the• Target Plus scheme and there was no real and intrinsic value addition to the CPD exported. Shri Lumesh Sanghvi in his statement dated 7/2/2006 interalia stated thai he was going strictly by the instructions of Shri Samir Vora and Shri Saurin Shah who had told him to ignore the question of true value. Shri Rajesh Adani MD of AEI, was confronted with this fact during the recording of his statement dated 11/1/2007 he vaguely replied that AEL had pending orders and so they continued to export at value addition of 5% whereas it was not economically viable for other companies to export at value addition of 5% and so the value addition was shown at 10%. 4.1.5 It was further stated that the value of the goods exported declared at the tine 01 export had no relevance to the export goods are further strengthened by the e-mail dtd.17 /4 / 2004 of Shri C.E.Mahadevan, Deputy General Manger (Banking) of AEL Ahmedabad:- "Subject: CONTRACTS PERMANENT ARRANGEMENT FOR EXPORTS Date: Sat, 17 Apr 2004 11:56:54 +0530 REFERS TO OUR DISCUSSION ON THE SUBJECT AS PER THE UNDERSTANDING U ARE TO SEND IMMEDIATELY CONTRACT FOR OUR 3 EXPORT SHIPMENTS FROM INDIA ALREAD'J EFFECTED COMMUNICATED BY MANOJ. your imports SECONDLY CONSIDERING THE VOLUME OF USD 14 MN PER MONTI-I IT WILL BE IDEAL FOR YOU TO CONSIDER SENDING A. IN RESPECT OF EXCEL GLOBAL DUBAI - TWO CONTRATS EACH FOR USD 5 MN EVERY SATURDAY TO RECEIVE HERE BY MONDAY FOR OPERATION. b. SIMILARLY TWO CONTRACTS EACH OF 5 MN FROM LEO FOR OUR EXPORTS FROM INDIA THIS MAY PLEASE BE CONSIDERED FOR ISSUANCE EVERY SATURDAY. WE SHALL SEND A MESSAGE FOR SUCH EXPORT ORDERS EVERY THURSDAY AS DESIRED BY YOU. REGARDS MAHADEVAN" The contents of the mail that AEL is instructing its staff in UAE to send 2 contracts of 5 million each every Saturday of Excel Global, Dubai. The contract:; of Excel Global are for supply of CPD to AEL. Further, the staff of AEL, UAE are also instructed to send 2 contracts of 5 million of Leo Diamonds, UAE for exports of AEL from India. This clearly indicates that irrespective of the quality and quantity of the CPD, AEL is arranging for imports and exports to the tune of US $ 20 million et, ery month. This is clearly indicative of the fact that there was no relation between the goods and the value declared thereof and that there was no case of rejection of itny
- 56. 64 • consignment at anystage. Thus irrespective of the quality of the imported goods and the so called processes undertaken on them in India, the value was pre-determined for import and export diamonds. 4.1.6 The imports were analysed by tracking their exports and subsequent re-import into Lidia by the six companies by DRI. The consignments with the exact match in Description and Size but a little variation in Caratage (weight) were analyzed. The analysis led to repetitive instances of the same sets of diamonds being imported and expor:ed with a little variation in weight, of about 2 to 3%. The details of such instances of repetitive import and export of the same set of diamonds during 2004-05 and 2005-06 are listed at Annexure H & I. It was also observed that there was a systematic pattern followed in the imports and Exports of diamonds made by AEL and its associate companies. The imported diamonds were exported within a day or two of their imports and the same set of ( liamonds were re-imported within a day or two of their exports. It was also observed hat when the diamonds were exported to Hong Kong, the re-imports were made from Hong Kong only. Whereas, in cases of exports to Singapore, the re-imports are routed through U.A.E. According to the report of the First Secretary (Commercial), High Commission of India, Singapore imports of C&P diamonds into Singapore from India saw a stupendous growth during the period, and at the same time the export of C&P diamonds from Singapore to U.A.E also observed a parallel growth. To elaborate • In 2003 Singapore imported diamonds worth S$ 686 million, out of which diamonds worth S$ 305 million, constituting 44.5% were imported from India and the balance from rest of the world. The average monthly import from world was S$57.2 million and that from India was S$ 25.4. • In 2004 the imports of diamonds into Singapore registered and unprecedented growth of 49% over 2003. The imports were to the tune of S$ 1021 million as compared to S$ 686 million in 2003. The average monthly imports of diamonds were S$85 million from rest of the world as against S$ 49.5 million from India. The imports from India were 58% of the total imports of Singapore. • However in 2005 the annual imports of diamonds in Singapore registered a three fold increase to S$ 3151 million, moving from S$ 1021 million in 2004. The average monthly imports of diamonds from world and from India were S$263 million and S$ 228 million, respectively. • As can be seen from the monthly trends in the imports of diamonds by Singapore from Jan 2003 to March 2006, the average monthly import from India by Singapore was S$29 million per month up to September 2004. However during the period October'04 to October'05 (i.e after the announcement of Target Plus Scheme in August 2004) the average monthly imports from India were S$ 228 million, with a peak of S$ 365 million in June 05. • From Nov. 05 the average monthly imports dwindled to S$ 32 million, i.e. at the rate prior to October 2004. • Prior to May'04, Singapore's average monthly export of diamonds was S$ 23.5 million per month out of which the exports toUAE was virtually NIL. However as can be seen from the table titled "The Link between Singapore's import of diamonds from India Singapore's exports to UAE", during May'04 to Nov'05 the gradient began to rise with the corresponding surge in the imports from India. The monthly exports to UAE reached the peak of S$ 369 million in June'05. 4.1 7 It was alleged that the same set of diamonds exported from India to Singapore were exported from Singapore to UAE and re-imported into India by the six companies. The instances of repetition of the same variety, size and quantity of the diamonds are far too many to assume any co-incidence. In certain cases it was also observed that to camouflage the circular trading of diamonds, sometimes the clarity of the imported diamonds (in description column) is slightly varied i.e. instead of PK1 to PK2 or PK5 to PK6, etc. were mentioned. Such little variation in weight or clarity is of little consequence looking to the nexus between the importers and the exporters. Moreover as discussed in the foregoing paras, the variety of diamonds with clarity PK are the lowest quality of diamonds as far as clarity is concerned and normally the diamond labs do not grade diamonds with clarity lower than PK3. The fact of the same set of CPD being repeatedely imported and exported by AEL and the other 5 firms is also borne out by the statement of Shri Lumesh Sanghvi,
- 57. • 65 Manager of AELrecorded on 3/1/2007 wherein he had explained by way of llustrations giving details of Shippin Bill and Bill of Entry numbers showing as to how the same set of diamonds were imported, exported and subsequently re-importcid and exported in a cyclic manner. The fact of circular trading of CPD was admitted by the key person Shri L nnesla Sanghvi who handled the import/export of CPD for all the six companies, when he stated that that these details give clear instances where circular trading of same diamonds had taken place. In these cases there was no variation in the description, size and weight of the import lots i.e the subsequent imported lots are exactly matching the earlier import lots in all the parameters like description, size and weight of the diamonds. Shri Sanghvi further stated that the same set of CPD were imported and exported by Mi s Adani Exports Ltd by adding, deleting a few pieces of diamonds from the import lots involving Circular Trading to artificially boost export turnover. lie further stated that it did occur to him that the same set of diamonds were bein; imported and exported over and over again to achieve higher exports. 4.1.8 In the context of the above facts stated by Shri Lumesh Sanghvi, it would also be relevant to examine the contents of the e-mail : From: "Tejas" <tejas®adanigroup.com> To: "Kamraj Bodal" <kamraj@adanigroup.com> Subject: Fw: stock position as on 1st August, 2004 Date: The, 3 Aug 2004 11:32:17 +0530 Original Message From: manoj nair To: lumesh®adanigroup.com ; tejaadanigroup.com Cc: BHAVIK ; Mahadevan ; Rakesh (Adani global) ; Tejal Desai Sent: Sunday, August 01, 2004 7:30 PM Subject: stock position as on I st August, 2004 Please find attached herewith STOCK STATEMENT latest updated as on 1st Au gust. 2004 for your kind information, reference, records and confirmation from you end regarding the same. Apart from the attached statement we are having Stock as follows : I. Prepared packets : 20783.07 carats ; value : usd 3,688,690.21 I. VS-22 ( 255 - 21 & 256 - 7 + stock added) : 57.20 Carats kept in stock as per yr instruction 2. VS-39 ( 247 - 15 & 248 - 7) : 27.59 Carats kept in stock as the qty is very :mall u had instructed not to export small quantity. 3. P1c07 251 - 11 & 252 -10) : 224.09 Carats kept in stock as per yr instructions 4. PK07 - tlb pk ( 226 - 441.25 Carats & 227 - 100.19 Carats) kept in stock a per your instructions. Kindly intimate regarding the action to be taken for point no. 1, 2, 3 & 4 as mentioned above. regards, manoj 4.1.9 Shri Bhavik Shah, the Senior Vice-President of Adani Agro Pvt Ltd, and incharge of the finance of the precious metal desk of AEL ,and Shri Mahadevan, the Deputy General Manager (Banking & Finance) of AEL were questioned about the above e-mail, they in their statements dated 8/1/07 and 5/1/07 respectively stated that the email shows the stock of different varieties of cut and polished diamonds as on 01/08/2004 held by their Dubai office and the e-mail was addressed to Shri Lumesh Sanghvi regarding action to be taken by him only. It shows that AEL had a stock of CPD in their Dubai office. When AEL claims that the CPD were being exported by them to different firms at Dubai, Singapore and Hong Kong and similarly CPD were being imported by them from different Dubai, Singapore and Hong Kong based firms, it is
- 58. 66 S beyond comprehension thatAEL, Dubai has a stock of CPD; this, therefore, indicates that the exporter of CPD in India is AEL and its other 5 companies and the buyer of the CPD overseas is also none other than the AEL through the firms directly/indirectly controlled by it through the personnel of its wholly owned subsidiaries located overseas. 42.1 From the document recovered from the computer hard disk of Shri Vipul Desai, Officer, Banking of AEL, Ahmedabad and forwarded by the Directorate of Forensic Science, Gandhinagar it was seen that AEL had planned for the same day re-export of the imported CPD and that the Letter of Credit value should not be exceeded. This indicated that neither the CPD /the value of the CPD nor the value addition of the CPD mattered, what mattered was only the value of the letter of credit established in favour of the so called overseas buyer of the CPD. The content of the above said document wherein it is stated that "Arrangement of Export Order/ Import contract on request from Ahmedabad", "ARRANGEMENT OF EXPORT ORDERS AND/ORDER IMPORT CONTRACTS OF DIFFERENT ENTITIES". This indicated the fact that the import and export transactions in CPD by AEL and the other 5 companies were artificial transactions created with an ulterior motive to avail of the Target Plus schene benefits and are not normal business transactions, as, had it been so then there would not be any cause for arranging of import and export orders and that too 3n the request from Ahmedabad. It was also mentioned - under BOTH EXPORTS/IMPORTS FROM DUBAI that 'Value addition/even delition - within 0.25%4/50% profit adjustment - Discretion on item Rakesh in consultation with Mr.Bhavik". Further, under the ISSUES PENDING it is mentioned that "VALUE ADDITION AT EVERY LOCATION OTHER THAN DUBAI - LE. AT DARSHAN CO. LOCATIONS". It was therefore alleged that though the CPD were imported and exported on the same day to different destinations and different parties, AEL and the other 5 companies were showing a value addition of 5% to 10% which was merely on paper and clone so as to be eligible for the benefits of the Target Plus Scheme and therefore, the inflated value of the CPD declared at the time of its export is liable to be rejected. 5.0 The value of CPD declared by AEL and others at the time of export was examined in the light of the evidences of circular trading of the same sets of diamonds (between the interrelated parties) with value addition of 5% or 10% each time and the e-mails narrated and discussed at para 8 and 9 of the notice. The declared value of the CPD needs to be viewed in light of the provisions of Section 14 of the Customs Act, 1962, which reads as: (a) General provisions of Section 14 of the Customs Act, 1962: Section 14 of the Customs Act, 1962 provides Valuation of goods for purposes of assessment - " For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the lime being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where (a) the seller and the buyer have no interest in the business of each other ; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale (b) Applicability of Section 14 to export valuation : SC judgement in case of Om Pral•:ash Bhatia : In terms of Section 14 of Customs Act read with the judgment of Supreme Court in the case• of M/s Om Prakash Bhatia Vs. Commissioner of Customs, Delhi reported at 2003 (ELT) 423 (SC), the provisions of Section 14 ibid are mutatis mutandis applicable to export consignments also. 5.1.1 In terms of the provisions of Section 14 of the Customs Act, 1962 the prerequisites for valuation of export goods are as follows: a) there should be a sale in the normal course of international trade;
- 59. • 67 b) the sellerand buyer have no relationship and have no interest n business of each other; c) the price is the sole consideration for the sale or offer for sale. As the requirements of Section 14 of the Customs Act, 1962 are not fulfilled for the reasons of the evidences submitted in the notic and reproduced above abox e, tli value of the CPD declared at the time of export by AEL and others were not acceptably: as it did not represent the true and correct value of the export goods and therefore, were liable for rejection. Further the agency commission paid /payable to the overseas agents fo - exports of CPD as brought out in para 14 of the notice is required to be deducted for arriving at the correct FOB value of Exports, in terms of Para 4A.5 of the HOP to the FTP 2004-2009. The fact regarding the payment of commission to various overseas firms for exports of CPD, was knowingly and tactfully hidden from the Customs, Banks (issuing Bank Realisation certificates) as well as DGFT, and the same tantamount to suppression of facts and true FOB value on the part of the all the si:. companies. The value thus arrived at after deducting the agency commission as illustrated in Annexure Q also brings forth the fact that the value addition of :3% as• required during 2004-05 and 10% as required in 2005-06, for eligibility under Target Plus Scheme as per Note 5 to para 3.7.3 of the FTP, 2004-2009 has not been achieved. 6.0 Investigations also revealed that M/ s. Adani Exports Ltd and c thers misdeclared the FOB value of their exports of CPD in as much as they had suppr•2ssed the Commission paid and payable to their overseas agent from the Customs as is evident from the following: The relevant documents pertaining to the remittance of commission by the above companies were collected from the relevant banks in India viz. UCO Bank , IndusInd Bank, etc. The banks also submitted copies of the Agency Agreements entered into by AEL and their group companies, with the overseas agents along with the details of amount of commission remitted and the details of the export invoice in respt ct of which the commission was being remitted. It was seen that there was agency agreement between AEL and their group companies with the following overseas firms: Comm % Firm to whom Agreeme as per S1 Name of Exporter Commission paid nt dtd. Agmnt Sinta Impex Pte Ltd, 15/01/2 1 Midex Overseas Ltd Singapore 005 2.30 Sinta Impex Pte Ltd, 15/04/2 2 Adani Exports Ltd Singapore 004 2.00 Aditya Corpex Pvt 26/11/ 2 3 Ltd Al Shahad Gold & 004 4.00 Jewellery, Dubai Aditya Corpex Pvt Gudami International, 24/11/2 4 Ltd Singapore 004 4.00 Wajilam Exports Pvt Ltd, 15/04/2 5 Adani Exports Ltd SG 004 8.00 Bagadiya Brothers Sinta Impex Pte Ltd, 15/01/2 6 Pvt Ltd Singapore 005 4.25 Hinduja Exports Pvt Chokshey Diamonds LLC, 24/12/2 7 . Ltd Dubai 004 4.25 0' '.:Vinduja Exports Pvt Gudami International, 20/12/2 .1 Singapore 004 4.25 • • Wiutiny of these agency agreements revealed ,-;..alm6st /similarly worded, and entered into on the ' Ahmedabad. 6.1.1 In terms of the agreements AEL and the other 5 to the agents. The details of the commission remitted by that all the agreements were stamp papers purchased in firms were paying commission AEL and other 5 firms against
- 60. S.No. 1 3 4 5 L 68 • their e:giort shipmentsof CPD, as informed by their respective banks are detailed in Aiinexure-J to the notice. The number of shipping bills/invoices against which commission has been paid by AEL and the other 5 firms till date as received from the banks are summarized below : Name of the Exporter Name of Bank No. of Shipping Bills/Export Invoices against which Commission remitted Amount of Commission (in US $) M/s. Adani Exports Ltd UCO Bank/Indusind Bank 31 853544.00 M/s.Aditya Corpex Pvt Ltd UCO Bank 52 2498995.19 M/s.Bagadiya Brothers Pvt Ltd Indusind Bank 11 503160.38 M/s.Hinduja Export Pvt Ltd Indusind Bank 132 2277894.95 M/s.Midex Overseas Ltd UCO Bank NA 708043.83 6.1.2 The activity of import of CPD and their subsequent re-export by AEL and the other 5 companies were carried out from the bonded warehouse premises at Mumbai. The activity in the bonded warehouse premises had been permitted to them by the Customs, Mumbai in terms of the provisions of Chapter 4A.19 of the FTP, 2004-2009 (Chal3ter 4.59 of the EXIM Policy 2002-2007 during 2004-05). Therefore, the import and export of CPD by AEL and the other 5 companies from the bonded warehouse premises are governed by the provisions of Chapter 4 of the FTP and the Handbook of Procedures, 2004-09. Para 4A.5 of the H9P, 2004-09 deals with Agency Commission and stipulates that : "The exporter availing the scheme of gold/silver/platinum jewellery are allowed to pay commission. The value addition shall be calculated after deducting agency commission. Wherever such agency commission is paid, the value addition shall be correspondingly increased by the percentage of agency commission". It was stated that as per the aforesaid provisions of the FTP the value addition has :o be arrived at after deducting the amount of agency commission. Therefore, the arno Ant of commission payable or paid by AEL and the other 5 firms to their overseas agent companies as detailed in Annexure J & Q shall be liable to be deducted from the export value for arriving at the correct FOB value for the purpose of value addition for Target Plus benefits. The details of payment of agency commission are as per Annexure J & Q to the notice, @ 2% to 8%, by the Indian firms will require re- determination of the FOB value declared in respect of the exported CPD so as to determine the actual value addition achieved in respect of the CPD being exported by Adani arid their group/associate companies. The re-determination would require deducting the amount of commission paid/payable by AEL and the 5 other firms from the value of exports. The value arrived at after such deduction of commission would more closely reflect the value addition achieved by AEL and their group/associate companies for their so called export of CPD. This indicates that the prescribed value addition of 5% or 10% as required by the FTP for bonded warehouses as well as the Target Plus scheme in the Exim Policy for the year 2004-05 and 2005-06 respectively had not been achieved and therefore, AEL and the 5 other firms are not eligible to get the benefit of the Target Plus scheme in respect of these consignments on this ground alone, for having failed to achieve the requisite value addition. It was also mentioned that inspite of repeatedly asking for the details of commission paid by AEL and others, AEL failed to provide the same. However after a lot of persuasion and on calling for the said information from Shri Rajesh Adani, Managing director of AEL, they vide their letter dated 22.11.2006 vaguely replied that they have not maintained any separate accounts for the overseas commission paid. They further stated that nonetheless, they had been able to gather certain details from different sources and gave some part ial details of commission paid by AEL and some of its group companies as under : FS ;.N 371Year- 1 Name of the exporter - 1Name of the Agent Commission
- 61. • 69 Paid. (in US$) F_ 2._ 2004-05 Adani Exports Ltd. Wajilam Exports 17,72,100 Sinta Impex 4,76,399 3. Al Anood 5,11,596 4. 2004-05 Jayant Agro Organics Ltd. 1-1i-lingos Co. Ltd. 7,13,692 5. 2004-05 Midex Overseas Ltd. Sinta Impex 12,27,620 --H 6. 2004-05 Bagadiya Brothers Pvt. Ltd. Sinta Impex 5,03,160 Despite being repeatedely asked, AEL failed to furnish the details of the commission paid/payable by them. Shri Rajesh Adani, Group Managing Director of AEL in his statement recorded on 11/1/2007 undertook to furnish the details of the commission within 2 days but he has failed to do so, even after two reminders dated 25.01.2007 and 08.02.2007. And that It was too far fetched to believe that and the other 5 companies despite being contractually bound to pay commission to their overseas agents for export of CPD during 2004-05 and 2005-06 were not in possession of the details of the commission paid and payable. The details of the commission were last called for during January, 2007 when the accounts for the financial years 2004- 05 and 2005-06 would have been finalized and the amount of commission paid would have been reflected in their books of accounts as well as making provision in the accounts for the amount of commission payable. Despite this AEL and the otter 5 firms rather than coming forward with the details of the commission avoided to furnish the requisite details. This non submission of the details of the commission has to be viewed in light of the fact that AEL and the other 5 firms were maintaining shipping bill/invoice-wise details of the amount of commission payable, the ckla of which was recovered from the computers seized from the premises of AEL during the course of the searches carried out on 24-25/1/2006. Additionally, AEL claimed to be not in possession of the details even in respect of the commission already paid. Thus AEL and the other 5 firms have suppressed the fact of commission being paid and payable to overseas agents in respect of the export of CPD. The above details of the commission submitted by AEL were not complete is borne out by the details of commission paid which were received from the banks in India through which the commission was remitted to the overseas firms. The summary of the commission paid by AEL and the other 5 firms are as below. Name of the Exporter Overseas buyer Overseas firm to whom commission remitted Date on which commission remitted Amount oft Commit,sion remitted (US$) Adani Exports Limited Kamsun Development International, Hong Kong Sinta Irnpex, Singapore 11/3/2005 476399 /- Adani Exports Limited Gudami International Pte Ltd, Singapore Wajilam Exports, Singapore 21/7/2005 377145/- Hinduja Exports Pvt Ltd Mine Gold & Jewellery, UAE Chokshey Diamonds, UAE 31/3/2005 924101.39 Hinduja Exports Pvt Ltd Mine Gold & Jewellery, UAE Chokshey Diamonds, UAE 27/10/2005 103923'4 - .17 Hinduja Exports Pvt ..1141-, Planica Exports Pte Ltd, Singapore Gudami International Pte Ltd, Singapore. 31/3/2005 314561.39 PAdity4: Corpex Pvt Ltd. Emperor Exports Pte Ltd, Singapore. Gudami International Pte Ltd, Singapore 31/ 3/2005 314463.6 Aditya. C9!•pex Pvt Ltd . _ , Emperor Exports Pte Ltd, Singapore. Gudami International Pte Ltd, Singapore 25/8/2005 1153984 72 .Aditya Corpex Pvt Ltd Al Shahad Gold & Jewellery, UAE 26/10/2005 1030546 87 Midex Overseas Sinta Impex, Singapore 8/3/2006 708043.83
- 62. 70 • irnit 2d 3agadiya Brotl,ers Pvt Ltd. 1)Swebhani Exports, UAE, 2) Gracious Exports Pte Ltd, Singapore. Sinta Impex, Singapore 31/3/2006 503160.38 6.1.3 Despite there existing agency agreements with different overseas firms for payment of commission AEL and the other 5 companies did not declare the details of commission payable by them in any of the shipping bills/ GR /SDF filed by them for export of CPD during 2004-05 and 2005-06, even though there is a specific requirement for giving details of commission, in the shipping bills/ GR /SDF. The detai s of commission were also not declared in any of the export invoices, which were presented to the Customs authorities at the time of filing of the shipping bills. During investigation it was found that the details of commission paid /payable were not declared to the banks as well while submitting the export documents for getting remittance of the export proceeds, nor the fact of commissions paid/payable was brought to the notice of the banks while obtaining the Certificate of export and reali2ation (BRCs) from the banks, and as such these details were not reflected in the BRCE; issued by the banks, which are ultimately supplied by the exporters to DEFT. The Certificate of export and realization has been prescribed under the EXIM policy at Annexure 22A as "BANK CERTIFICATE OF EXPORT AND REALISATION", FORM NO.1 and based on this certificate of realization of export proceeds the export benefits under various schemes are granted by the DGFT. At column (12) of the said certificate the exporter is required to declare the "Commission/Discount Paid/Payable". Further, the exporter is also required to declare and affirm to the correctness of the particulars/facts declared by them in the aforesaid certificate. Based on such affirmation of the particulars and facts and after verification of the documents submitted by the exporter, the banks certify the following:- 1) This is to certify that 2) FOB actually realized and date of realization of export proceeds 3) We have also verified that the 4) This is to certify that we have certified the amount of the Commission paid/payable, as declared above, by the exporter i.e. (in figures and words) with G.R. Forms and found to be correct. In these cases, neither AEL nor the other 5 companies declared to the banks regarding the commission having been paid or being payable, nor has the commission being paid/payable been declared in any of the documents submitted to the Customs, RBI and banks. The certificate of export and realization issued by the banks were based on such documents wherein the fact of commission paid/payable was deliberately suppressed by AEL and the other 5 firms. Therefore, the certificate of export and realization has been obtained by AEL and others from the different banks by i-sorting to suppression of facts. At the same time AEL and others have also suppressed the fact of commission paid/payable from the Customs authorities at the time of export of the CPD. Additionally AEL and others have also suppressed the fact of commission paid/payable from the DGFT while submitting their claim for the benefits under the Target Plus scheme. Therefore, AEL and others have violated the provisions of the FTDA, FTDR and the Customs Act, 1962 in as much as they have not declared the fact of commission paid/payable either to the Customs authorities, the banks (which issued the certificate of export and realization), the Reserve Bank of India and the Director General of Foreign Trade. As per AP (DIR Series) Circular No.12 dtd.9/9/2000 issued by the Reserve Banc of India, remittance of agency commission is allowed subject to the condition that the amount of commission has been declared on the GR/SDF form and accepted by the Customs authorities. Failing to declare the provision of the commission on the GR/ SDP, remittances thereof may be allowed after adducing satisfactory reasons by the exporter for the same. No such reason has been assigned by AEL and their .1 , group/associate companies for non declaration of the commission in any of the documents including the GR/SDF. 6.1.4 One of the banks through whom the commission was being remitted to the overseas firms is the Development Credit Bank Ltd, Ahmedabad. Shri A.V. Kamat, Regional Manager - Operations in his statement recorded on 26/ 10/2006 wherein he inte-alia stated that the commission to be paid was not declared by M/s. Adani Experts in the GR forms (Shipping Bill); that as per guidelines issued by the Reserve Bank of India from time to time where the commission has not been declared on the L
- 63. • 71 GR/SDF form, remittancemay be allowed after satisfying the reasons adduced by exporter for not declaring the commission on export declaration form, provided a valid agreement/written understanding between the exporter and/or beneficiary for payment of commission exists. Shri Kamath stated that M/s Adani Exports Ltd had submitted an agency agreement dtd.15/ 4/2003 between them and M/s Kamsun Development International, Hong Kong and based on this agency agreement, they had on the instruction of M/s. Adani Exports Ltd remitted an amount of USD 43,126.45 on 29/3/2004 to M/s. Kamsun Development International, Hong Kong. However, Shri Kamath stated that M/s. Adani Exports Ltd should have given the reasons for not incorporating the amount of commission to be paid in the GR. Shri Kamath further stated that since the commission was paid subsequent to the realization of the expor proceeds and issue of the BRC therefore, the commission paid was not reflected (ri thy.• BRC issued to M/s. Adani Exports Ltd., by their bank. 6.1.5 Siddharth Oza, Manager of UCO Bank, Ahmedabad in his statement date( 6/11/2006 interalia stated that the commission to be paid was not declared by Adani Exports Ltd, M/s. Aditya Exports Pvt. Ltd. and M/s. Midex Overseas in the GR form!. (Shipping Bill). Shri Oza stated that as per guidelines issued by the Reserve Bank ol• India from time to time where the commission has not been declared on the GR/SDI- form, remittance may be allowed after satisfying the reasons adduced by the exporter for not declaring the commission on export declaration form, provided a valid agreement/written understanding between the exporter and/or beneficiary for payment of commission exists. Shri Oza further stated that M/s. Adani Export:. Ltd. M/s. Aditya Exports Pvt. Ltd. and M/s. Midex Overseas had not given any reason for not incorporating the amount of commission to be paid in GR forms. Shri Oza stated that initially they issue non realized BRC and on realization of export proceeds realized BRC is issued. Since the commission was paid subsequent to the realization cf the export proceeds and issue of the BRC therefore, the commission paid by M/s. Adani Exports Ltd, M/s. Aditya Exports Pvt. Ltd. and M/s. Midex Overseas was not rell.N.ted in the BRC issued to these parties by their bank. 6.1.7 The pattern of payment of agency commission was also of the dubious nature in as much as • M/s. AEL exports CPD to M/s. Kamsun Development International, Hong Kong and is also paying commission to M/s. Kamsun for its expos is of CPD to M/s. G.A. International, Dubai. Whereas M/s. G.A. International, Dubai was owned by Shri Vinod Shantilal Shah, the brother of the directors of Adani Export as well as the director of A dani Global FZE, Dubai and Adani Global Pte Ltd, Singapore and with uhorn Adani Exports Ltd. and their group companies have been dealing over the years. Thus paying commission to a third party for exports to heir own company is beyond comprehension. • Further AEL was also paying commission to M/s. Kamsun Developrient International, Hong Kong for exports to M/s. Gudami International, Singapore, at the same time M/s. Gudami International was being paid commission by M/s. HEPL for its exports to M/s.Planica Exports Pte Ltd, Singapore. M/s. Gudami International was also being paid commission by M/s. Aditya Corpex Pvt Limited for exports of CPD to M/s. Emperor Exports Pte Ltd, Singapore. As already brought out above, the director of Gudami International is Ms. Mary Joesph, the employee of M/s. Adani Global Pte Ltd, Singapore. Further, Shri Chang Chung Ling another Director of Gudami International is also the Director of M/s. Adani Global Ltd, Mauritius and Adani Global Pte Ltd, Singapore which are the wholly owned subsidiaries of AEL. In addition to the above, Shri Joseph Selvarnalar another Director of Gudami Internaitonal is also a Director of Adani Global Pte Ltd, Singapore. Therefore, it is evident that Gudami International was in fact owned/controlled by AEL through its overseas subsidiaries Adani Global Pte Ltd, Singapore. Despite this they are paying commission to M/s. Kamsun Development International, HK for exports to their own company - Gudami International, Singapore. • Similarly M/s. Al Shahad Gold & Jewellery, Dubai to whom M/s. Adani Export Limited, exports CPD, was being paid commission by M/s. Aditya
- 64. 72 • Corpex Pvt Ltd.a firm owned by AEL though its General Manager (Imports) Shri Saurin Shah, who is a Director of Aditya Corpex Pvt Ltd. • Also, M/s. Chokshey Diamonds, Dubai, to whom M/s. Adani Exports Limited, Ahmedabad exports CPD, was being paid commission for exports to M/s. Mine Gold 86 Jewellery, Dubai by M/s. Hinduja Exports Pvt Ltd, another firm which was owned by AEL through its Deputy General Manager Shri Samir Vora, who was a Director of M/s. Hinduja Exports Pvt Ltd. • Aditya Corpex Pvt Ltd a firm owned by AEL was paying commission to Gudami International, Singapore another firm owned/controlled by AEI, through the employees and Directors of its overseas subsidiaries Aclani Global, Singapore and Mauritius. • Hinduja Exports Pvt Ltd another firm owned by AEL was paying commission to Gudami International, Singapore another firm owned/controlled by AEL through the employees and Directors of its overseas subsidiaries Adani Global, Singapore and Mauritius. Thus, the firm which was importing CPD from Adani group was also purported to be the agent for another overseas buyer as no firm would disclose another potential buyer of the same commodity for merely commission. Additionally, the overseas firms to whom commission was being paid by AEL and others were all being managed, controlled and operated by AEL through its overseas subsidiaries Adani Global FZE, Dubai and Adani Global Pte, Singapore. The import and export of CPD in the name of the other 5 firms A iz. HEPL, MOL., ACPL, JAOL and BBPL was also being done by AEL only. Despite this these firms i.e. HEPL, MOL., ACPL, JAOL and BBPL were paying commission to the overseas firms under the control of AEL. Further, the respective contracts under which the exports of CPD are shown to have been affected by AEL and others did not indicate that the orders were procured through any agent. Additionally the export invoices also did not indicate that the exports were on account of any agent. 6.1.8 During the searches conducted at the various office premises of AEL on 24/1/2006 hard disks of some of the computers found there were withdrawn for further investigation. The data contained on some of these computers was subsequently copied by taking a backup of the same under panchnama. The scrutiny of the data contained in the computer of one Shri Joseph James, an employee of M/s AEL, the back-up which was taken under panchanama dated 18-03-2006 it was found to contain a folder named "SUDIIAKAR". Which was found to contain a file named "EXP_COM" in the folder "DIAMOND/REMIT". The said file contained correspondence by AEL to various banks for remitting commission to their overseas agents. The summary of the commission remitted / sought to be remitted to different overseas agents on various dates, as c:etailed in the said file is as follows:- dame of the Overseas kgent Bank through commission remitted % of Commission Amount of Commission (US$) Najilam Exports Pte Ad, Singapore Indusind Bank UCO, Ahmedabad and 1) 3% FOB 2) 8% FOB of of 45,08,187/- Sinta Impex, Pte Ltd, Singapore Indusind Bank UCO, Ahmedabad and 1) 2% FOB 2) 3% FOB of of 33,03,642/- riuclami International, Singapore Indusind Bank UCO, Ahmedabad and 1) 4% FOB 2) 5% FOB of of 36,32,640/- Excel Global Ltd, Dubai Indusind Bank UCO, Ahmedabad and 4% of FOB 44,13,626/ . PINI,1 Trading, Hong Indusind Bank and 3% of FOB 33,23,528p
- 65. • 73 Kong UCO, Ahmedabad- Kamsun Development International, Hong Kong Indusind Bank, UCO, DCBL, SBI, PNB, Canara, BOI, Andhra Bank, Ahmedabad 3% of FOB 20,78,692/- Tanb Trading Estt, Dubai UCO Bank, Ahmedabad 8% of FOB 5,99,950/- TOTAL -- 2,18,60,265L- Another file named "COMM" found in the said sub-folder "DIAMOND/REMIT" of the folder named "SUDHAKAR" contained the details of the commission paid to the agents shipping bill/invoice wise. It was seen that commissions were being paid to the various agents for exports to the overseas buyers of diamonds as detailed below: S.No. Name of the Overseas firm to whom goods exported Name of the overseas agent to whom commission is paid 1 Little Hearts Creation, Hong Kong Kamsun Development International, Hong Kong 2 Kamsun Development International, Hong Kong Sinta Impex, Singapore 3 G.A.International, Dubai. Tanb Trading Estt, Dubai 4 Gudarni International, Singapore Wajilam Exports Pte Ltd, Singapore The Directorate of Forensic Science, Gandhinagar forwarded the document:. recovered from the hard disk of Shri Vipul Desai, which was seized during the cours( of the searches carried out on 24-25/1/2006. Among the documents submitted b) them there were flow chart diagrams contained in Excel worksheet files named as `DIAM', and (DIACHART'. One of this flow chart diagrams showing flow of commission paid to various overseas companies is reproduced below. .; . 'DIAMOND COMMISSION FLOW •'.-... .;<.•';;;#14-4.4.!•:7":. ' ;'.' • SINGAPORE' A 41151111MINIANIWF s., I(GUdain1 international Pte 'Ltd.) .-: • ;TT SINTA (Kamsun Dev. Intl Ltd.)
- 66. Daboul Trading Co. 74 • ShriVipul Desai, Officer Banking of AEL during the course of his statement recorded on 19/2/2007 stated that the chart pertained to diamond commission flow however, these charts were not prepared by him but by Shri Sudhakar Nair, Junior Assistant (Banking) who had resigned from their company about 1 1/2 years back. He stated that he had asked and confirmed with Shri Rajesh Nair, of their banking department over telephone, regarding the above said documents having been prepared Shri Sudhakar Nair. The flow chart diagram indicate that the payment of commission was an Integral part of the export of CPD by AEL and the other 5 firms and the aspecI of commission was pre-decided. Despite this, AEL and the other 5 firms had been suppressing the aspect of commission being paid/ payable to their overseas agents in respect of the export of CPD during 2004-05 and 2005-06. The above flow chart also revealed that the commission paid by AEL and its group/associate companies to various overseas companies was returned by these overseas companies to the Adani group/associate companies situated overseas in Singapore and Dubai, viz. M/s. Dabcul Trading Co. and M/s. G.A. International as under: (a) AEL and its group companies show payment of commission to M/s. Arihant for exports to M/s. Excel Global Ltd., Dubai and to M/s. Prestige for exports to M/s. Leo International LLC, Dubai. The so called commission paid to these companies is paid back by them to M/s. Daboul Trading Co., Dubai, which is owned and controlled by AEL and or their group companies. (b) Similarly the payment of commission shown by AEL and its group/associate companies to Wajilam and Sinta for their exports to Gudami International Pte. Ltd., Singapore and Kam sun develeopment Intl., Singapore, respectively wais returned by these companies to G. A. International and Daboul Trading Co., respectively, as can be seen from the above flow chart. 6.1.9 It was observed that commission was being paid to the so called agent firms which were either the suppliers of CPD to AEL and the other 5 companies or firms to whom AEL and the other 5 companies export CPD. For instance PNJ Trading, Little Heart Creations, Excel Global Ltd, UAE are all suppliers of CPD to AEL and the other 5 companies. Whereas Kamsun Development International, Gudami International are firms to whom CPD is being exported by AEL and the other 5 companies. The details of commission paid to various agents indicate the practice unheard of in the normal cours< of business and which is beyond the normal business practice adopted by prudent businessman in as much as: (a) It is seen that AEL is paying commission to M/s. Kamsun Development International, Hong Kong) for their exports to M/s. Little Hearts Creation, Hong Kong and at the same time they are paying commission to M/s. Sinta Impex, Singapore for their exports to M/ s. Kamsun Development International, Hong Kong. It is too far fetched that when they are already dealing with Kamsun as their agents they are also paying commission to Sinta for their exports to Kamsun. Ib) Further, M/s. G.A. International is a firm owned by Shri Vinod Shantilal Shah who is also a director of M/s.Adani Global FZE, Dubai and Adani Global Pte Ltd, Singapore. Shri Vinod Shantilal Shah is also the brother of Shri Rajesh Adani and Shri Gautarn I/ •
- 67. 75 Adani, the Directorsof AEL. AEL has been importing and exporting various commodities to G. A. International over the years. Despite this it is seen that for their exports to M/s. G.A. International AEL is paying commission of M/s. Tanb Trading Estt., Dubai, which belies all comprehensions. It is also seen that AEL was into the exports of diamond:, since 2003-04 and during that period also they had shown exports of diamonds to Kamsun. Then it is quite unnatural that they would enter into an agreement in 2004-05 with Sinta Impex ar d pay commission to Sinta Impex for their exports of diamonds to Kamsun. 6.1.10 Scrutiny of the agency agreement revealed that all the agreements were almost similarly worded, and entered into on the stamp papers purchased in Ahmedabad. Th main features of the agreement common to all the firms are as below:- SCOPE OF SERVICES 1) The agent shall procure orders for Precious Stones and Diamonds to b,. supplied by AEL (Or their group/associate companies as the case may be) from different parts of the world. The agent shall be entitled to book order3 directly from any part of the world. 2) After procuring the orders Agent shall forward the same to AEL (Or their group/ associate companies as the case may be) for execution and if in order, AEL (Or their group/associate companies as the case may be) shall attend to such order promptly. 3) Agent shall collect the orders executed by AEL (Or their group/associate• companies as the case may be) and carry out follow up activities with the buyers with respect to payments. It is clearly understood that Agent shall be solely responsible for collection of payments for the said orders after AEL (0i their group/ associate companies as the case may be) has executed the ordct mailed by Agent in connection with sales outside India. SPECIAL TERMS AND CONDITIONS AEL (Or their group/associate companies as the case may be) agrees to treat Agent's clients as proprietary to Agent and binds not to solicit such clients for any business on behalf of organizations or individuals related to P.EL - unless written consent is given from the officers of Agent. II) AEL (Or their group/associate companies as the case may be) agrees that the business envisaged hereunder shall be channeled by Agent through this agreement. III) Agent agrees to treat AEL(Or their group/associate companies as the case may be) clients as proprietary to AEL and binds itself not to solicit such clients for any business on behalf of organizations or individuals related to Agent unless written consent is given from the officers of AEL or b:r its parent organization. CONSIDERATION (Common to AELJMOL/AEPLLBBPL1 In consideration of the services to be rendered by Agent w Subject to the guidelines issued by Reserve Bank of India from time to t mc, AEL will pay commission for orders procured by Agent at the rates fixed from time to time. The amount of commission payable in respect of orders procured will be 3% (varies upto 8%) of sales amount on FOB basis. The amount of commission payable for each order shall depend upon order value, volume of business over a period; payment terms and such other factors as may be mutually agreed. b) AEL shall pay aforesaid commission to Agent or to any other party nominated/specifically requested by Agent. c) The commission payable under this Agreement becomes payable only on realization of sale consideration/payments of orders executed by AEL (Or their group/ associate companies as the case may be). CONSIDERATION: (In the agreements between HEPL and Chokshey Diarnonds Dubai and Gudami International, Singapore_) In consideration of the services to be rendered by Agent • (c) i) Whereas HEPL is eligible for certain incentives as per the Policy of the Indian
- 68. 76 • Government, the Commissionpayable for the services rendered is partially linked with that of the availability of the Incentives to HEPL. And therefore :he Commission is payable in two phases, one at the time the sales are affected and other at the time of availability of the Incentives to HEPL. It is further stated that the Agent shall not be eligible for second phase of Commission in the absence of availability of the said Incentives. :1) Subject to the guidelines issued by Reserve Bank of India from time to time HEPL will pay commission for orders procured by Agent at the rates fixed from time to time. The amount of commission payable in respect of orders procured will be 1.75% of sales amount on FOB basis in the first phase and 2.5% of sales amount on FOB basis on receipt of the said incentives in the second phase as stated above. The amount of commission payable for each order shall depend upon order value, volume of business over a period; payment terms and such other factors as may be mutually agreed. ii) HEPL shall pay aforesaid commission to Agent or to any other party nominated/specifically requested by Agent outside India. Such agreements for payment of commission to the overseas agents based on the incenti,re received by the Indian companies from the Indian government are unheard of in the normal course of business and belie all comprehension. 6.2.1 The above details are for commission already paid by AEL and their group/associate companies to their overseas agents as per the information made available by the banks and AEL. However, it cannot be said that no other commissions were paid. Moreover, the payment of commissions were not restricted to the above transactions, since as per the agency agreements entered into with the overseas firms by AEI, and their group/associate companies one of the conditions agreed upon is that the Incian firms agrees to treat Agent's clients as proprietary to Agent and binds not to solicit such clients for any business on behalf of organizations or individuals related to the Indian firms. Therefore, in respect of any and all exports to the firms whose orders are shown to have been procured by the Agent, AEL and their group/associate companies would have to pay commission to the respective agents. The details of the agents and the overseas firms whose orders have been procured by them as indicated by the commission already remitted are as below: S.No Name of Exporter Name of Overseas Buyer Firm Firm to whom Commission paid Agreement dtd. L L Adani Exports Ltd Kamsun Development International, HK. Sinta Impex Pte Ltd, Singapore 15/04/2004 2 Adani Exports Ltd Gudami International, Singapore. Wajilam Exports Pvt Ltd, Singapore 15/04/2004 3 Adani Exports Ltd G.A.lnternational, Dubai (owned by the brother of the directors of Adani Export) Kamsun Development International, HK 15/04/2003 4 Adani Exports Ltd Gudami International, Singapore Kamsun Development International, HK 15/04/20C3 5 Midex Overseas Ltd NA Sinta Impex Pte Ltd, Singapore 15/01/2005 6 Aditya Corpex Pvt Ltd Al Shahad Gold & NA Jewellery, Dubai 26/ 11/2004 7 Aditya Corpex Pvt Ltd Emperor Exports Pte Ltd, HK Gudami International, Singapore 24/11/2004 8 Bagadiya 1) Swebhani Inc, Dubai, 2) Gracious Sinta Impex Pte 15/01/2005
- 69. • 77 Brothers Pvt LtdExports, Hong Kong. Ltd, Singapore 9 Hinduja Exports Pvt Ltd Mine Gold & Jewellery, Dubai Chokshey Diamonds LLC, Dubai 24/12/2004 I-- 10 Hinduja Exports Pvt Ltd Planica Exports Pte Ltd, Singapore. Gudami International, Singapore 20/12 / 2004 In terms of the agreement between AEL and the other 5 firms with the overseas agents, it evolves that commission was payable by AEL and the other 5 li--ms respect of the so called clients brought by these agents. The amounts of commission payable as per the terms of the contracts have been worked out (Details as Per Arinexure Q attached) and are as summarised as below:- 1)ADANI EXPORTS LIMITED: 2004-05 No. of SBs Total Value of exports (US$) % of Amt of Commission Commission (US$] Gudami 276 280373944.5 3% 8411218.34 Kamsun 114 111109553.5 2% 2222191.07 Others 822 859135437 0 TOTAL 1212 1250618935 10633409.41 2005-06 No. of SBs Total Value (US$) % of Amt of Commission Commission (US$) Gudami 191 186984436.5 3% 5609533.09 Kamsun 82 81597587.38 2% 1631951.75 Others 3 994294.68 - 0 TOTAL 276 269576318.5 7241484 .84 2) HINDUJA EXPORTS PVT LIMITED 2004-05 No. of SBs Total Value (US$) % of Amt of Commission Commission (US$) Mine Gold 145 147856590.7 1.75% 2587490.34 Planica 57 56150154.03 1.75% 982627.70 Others 69 40210924.59 - 0 TOTAL 271 244217669.3 3570118.04
- 70. 78 • 2005-06 No. of SBs Total Value (US$) %of Amt of Commission Commission (US$) Planica 205 246344565.5 1.75% 4311029.9 Others 249 284729053.4 - 0 TOTAL 454 531073618.9 4311029.9 3)ADITYA CORPEX PVT LIMITED 2004-05 No. of SBs Total Value (US$) % of Amt of Commission Commission (US$) Emperor 52 36717549.09 4% 1468701.96 Others 149 113383447- 0 TOTAL 201 150100996 1468701.96 2005-06 No. of SBs Total Value (US$) % of Commission Amt of Commission (US$) Emperor 98 110907622.7 4% 4336898.72 Others 177 190892845.1 - 0 TOTAL 275 301800467.7 4336898.72 4) BAGADIYA BROTHERS PVT LIMITED 2004-05 No. of SBs Total Value (US$) % of Commission Amt of Commission (US$) Gracious 14 14683953.23 4.50% 660777.90 Swebhani 22 22656898.62 4.50% 1019560.44 A TOTAL 36 37340851.85 - 1680338.34
- 71. • 79 6 2.2 ShriOmi Bagadiya, Director of M/s. BBPL in his statement dtd.7/3/2006 after seeing Schedule 12 regarding Direct Expenses for the financial year 2004-200,5 which reflected payment of Rs.6,93,96,987.00 as Brokerage, Rs.1,92,020.00 as Expense s. Rs.9,24,719.00 as Insurance expenses and Rs.7,992.00 as Supervision charges in respect of Diamond Trade, stated that the brokerage was to be paid to Sinta Impex Pte Ltd, Singapore however, the same had not yet been paid. Shri Bagadiya further stated that this amount was to be paid as per the instructions of Shri Devcn Mehta of HEPL as export brokerage in respect of CPD. Shri Bagadiya also stated that it was for HEPL to arrange and send the said amount to the party in Singapore. Similarly, Shri Narottam Somani, Director of M/s. Midex Overseas Limited tendered, among other documents, journal voucher dtd.31/3/ 2005 in respect of their Ahmedabad branch which showed an amount of Rs. 7,60,03,380/- debited to the account of M/s. Sinta Impex Pte Ltd, Singapore as being 'brokerage and commission (foreign)'. He stated that he had no idea about the said entries as no brokerage and commission (foreign) had been paid from the account of Midex overseas Ltd., lndorc. This amount had been paid from the account of Midex Overseas Ltd., Ahmedabad which was absolutely under the control of Shri Samir Vora. It was also evident that the commission was being paid subsequent to the export of the CPD and therefore, provision was being made in the books of account ;or the amount of commission payable. These facts corroborate the details of the commission payable as shown above at table No. 1 to 6. Thus from the above it is evident that in case of the exports by the India companies to the aforesaid overseas companies where agency agreements 1% ere existence the commission was paid /payable and therefore the same has to be deducted from the FOB value of exports (which have also been shown on the higher side by fraudulantely showing value addition of 5% / 10%) to arrive at the actual value addition. Thus as detailed in Annexure Q the value addition was not achieved as far as exports to (i) Kamsun Development international, HK., (ii) Gudami Internadonal, Singapore, (iii) G.A.International, Dubai, (iv) Emperor Exports Pte Ltd. HK, (A ) Swebhani Inc, Dubai, (vi) Gracious Exports, Hong Kong, (vii) Mine Gold & Jeweller} , Dubai, (viii) Planica Exports Pte Ltd, Singapore. 6.2.3 It was also seen that commission was being paid by AEL and group companies in respect of their exports to M/s. Kamsun Development International, M/s. Gudarni International, M/s. G.A.International, M/s.Emperor Exports Pte Ltd, M/s. Graciotv; Exports, M/s. Mine Gold and Jewellery and M/s. Planica Exports Pte Ltd. and that the commissions were also being paid to, among others, M/s. Gudami International, M/s. Kamsun Development International, M/s. Al Shahad Gold and Jewellery an( Chokshey Diamonds. However, all the firms to whom the exports were being made and. in respect of which the commissions are shown to paid were managed and controlled by AEL only, as detailed above. Therefore, the very nature of the so called commission is doubtful. 6.2.4 Among the data retrieved by the DFS from the hard disc of the computer i use with Shri Vipul Desai of AEL which was seized during the course of the search of the office premises of AEL, "Shikhar", Navrangpura, Ahmedabad on 24/1/2006 was Excel worksheet file named "DIA_FOB". Scrutiny of the data contained in the said file revealed that the same contained the month wise details of Commission paid/pavab]c by AEL towards their exports of CPD during April, 2004 to November, 2004. The summary of the details contained in the said file are as below: Month Buyer Total FOB Value of Export (US$) % of Commission payable COMIlliS3i0/1 payable / pai d (US$) April'04 1) Leo Diamonds, Dubai, 2) Gudami International, Singapore, 3) G.A.International, Dubai, 4) Excel Global, Dubai 23181690.0 7 8% 1,854.53 May:04 1) Leo Diamonds, Dubai, 2) 41062941.4 8% 3,285,03 Gudami International, Singapore, 3) 4 5 5
- 72. 80 • G.A.International, Dubai, 4) ExcelGlobal, Dubai ,ine'04 1) Leo Diamonds, Dubai, 2) 73087240.3 8% 5,846,979 Gudami International, Singapore, 3) 0 G.A.International, Dubai, 4) Excel Global, Dubai, 5) Kamsun Development International, Hong Kong. uly'04 1) Gudami International, 81384408.6 8% 6,510,753 Singapore, 2) 6 G.A.International, Dubai, 3) Excel Global, Dubai, 4) Kamsun Development International, Hong Kong. ugu:it' 1) Gudami International, 116576767. 8% 9,326,141 4 Singapore, 2) 22 G.A.International, Dubai, 3) Excel Global, Dubai, 4) Kamsun Development International, Hong Kong. ;eptem 1) Gudami International, 125895400. 8% 10,071,632 )er'04 Singapore, 2) 27 G.A.International, Dubai, 3) Excel Global, Dubai, 4) Kamsun Development International, Hong Kong 5) Al Shahad Gold & Jewellery, Dubai 6) Chokshey Diamonds, Dubai. )ctolier 1) Gudami International, 126674279. 8% 10,133,942 04 Singapore, 2) Kamsun 59 Development International, Hong Kong 3) Al Shahad Gold & Jewellery, Dubai 4) Chokshey Diamonds, Dubai, 5) Crown Diamonds, Dubai. Novemb er'04 1) Gudami International, Singapore, 2) Kamsun 148959992. 83 8% 11,916:799 Development International, Hong Kong 3) Al Shahad Gold & Jewellery, Dubai 4) Chokshey Diamonds, Dubai. TOTAL 736822720. 58,945,316 38 It is seen from the above that AEL was paying a commission of 8% of the FOB value of the CPD exported by them to different overseas firms. This quantum of commission paid/payable has to be viewed in light of the fact that during 2004-2005 AEL was exporting the CPD showing a value addition of 5% i.e. the export price was about 105% of the import value. This 5% markup over the import price would therefore, be inclusive of the value addition and the profit element of AEL. However, though there was a markup of only 5% over the import price, AEL was seen to be paying commission @ 8% of the FOB value of the CPD exported. This would mean that the CPD imported by AEL at 100 was being exported by them at 96.60. The revealing fact that any businessman would sell for export an imported product in the normal course of international trade at a loss and that too not once or twice but repeatedly is quite unbelievable. Accepting the same to be true would lead to the conclusion that the 1rue and correct value at which the CPD are being exported was the FOB value
- 73. • 81 less the amountof commission paid/payable. The commissionwa being deducted fro; n the FOB value only for the purpose of ascertaining the true and correct value of the export goods and the deduction of commission is not in any way an attempt to rc- determine the export benefits, if any, sought to be claimed by AEL. Further, it has already been explained at para 11 of the notice that how the value addition of 5% to 10% as shown by AEL and its group /associated companies was artificially shown 0 paper only. 6.2.5 It was alleged that the value addition claimed in respect of the CPD exported by AEL and the other 5 firms was required to be re-determined by deducting the amount of commission paid/payable from the FOB value of the CPD exported. Consequently, the amount of commission, ranging from 1.5% to 4.5% of the FOB value, being paid/payable by AEL and the other 5 firms when deducted from the declared FOB of the exported CPD would clearly result in the value addition being less than 3"/0 as required under the bonded warehousing conditions as well as under the Target Plus scheme. 7.0 From the documents seized during the search and those obtained from banks, etc. it was observed that the terms of payments in respect of the imports were most] st through letters of credit issued for 180 to 365 days or shown to be D.A. for 60 to 90 days. Whereas the terms of payments for exports are D.A. for 60 to 90 days. As brought out in para 8 to the notice most of the companies to whom AEL and its group companies had exported CPD were established in and around September 2004 and were new to the business, however the Indian companies did not insist for L/cs from them or payment against documents and instead the terms of payments were settled at D.A. for 60 to 90 days, even though each export consignment was worth crores of rupees which establishes the nexus between the Indian companies and the oversew.; companies. For imports, AEL and their group/associate companies opened Len ers of Credit of normally 180 days or 365 days. Another method of financing for the import:; in case of imports on D.A. terms of 60 to 90 days adopted by AEL and thei:- group/associate companies was External Commercial Borrowings -Buyers Credit (BC) of about 365 days. In case of Buyers credit AEL and their group/associate companies obtain loans from overseas branches of Indian banks and the payments are made to the suppliers of AEL and their group/associate companies by the overseas bank:;. The interest for the loan was obviously borne by AEL and their group/associate companies. Prima facie this mode of payments seems to be innocous. Howeve - in a number of cases it was observed that though the imports are made against D.A. of 60 to 90 days, the payments were made to the overseas companies prior to the expiry oc D.A. terms, mostly within a month of imports, by resorting to external commercial borrowings in the form of buyers credit from overseas bank, for which the India]. companies had to pay interest @ LIBOR + 0.5%. To avail of the buyers credit facility. they had also to obtain letter of comfort from the Indian banks, for which they Fad tc pay the bank charges for the same as well as make a fixed deposit of 100'' and thereby their funds are blocked. It was also observed that the invoices for imports submitted to the Indian Customs at the time of imports are showing terms of payments as D.A. for 60 to 90 days, however while submitting these invoices to the banks at the time of obtaining buyers credit/ letter of comfort, they were manually manipulated to change the terms of payments from "D.A. of 60 to 90 days" t) "Al SIGHT" by overwriting the original terms of payments. It is beyond comprehension that why the Indian companies had to make pre-payment when the terms of payments are for credit of 60 to 90 days, and that too by resorting to external borrowings for which they had to bear interest. The details of such instances where the payments for ..mports are made much before the credit period of 60 to 90 days had expired is as per Annexure P. From the details as mentioned in Annexure P it was evident that in most of the cases where the terms of payments are "D.A. of 60 to 90 days" pre- payments are made within one month of the date of invoice/imports and in many cases even within a couple of days from the date of invoice/ imports. Similarly in case ..... . where the imports were against L/cs. for say 180 days or 365 days it was also observed that in most of the cases the overseas companies in whose favour the L/cs ,..'4•, ",- 2.___ •-• were opened, discounted the same immediately. There seems nothing wrong in the ..).1 %/ / . beneficiaries discounting the L/cs for making funds available to their company, but .' .5. . it:;:, -,-, at appears apparently wrong in the present arrangement between the Indian t 4:-.,. i . ..: ,,?c . pries and the overseas companies was the fact that as per the terms of the Lies. ( ;..... '...the interest for discounting of the L/cs. was borne by the Indian companies, which in • :.' fad should have been borne by the overseas companies in the normal courie of business, as the terms of payment for the Indian companies is 180 days or 365 days by Lie. The details of instances where L/cs. are discounted immediately after the 7 are
- 74. 18/11/ 2004 114127 4.54 850118. 32 16/02/ 2005 01/12/ 2004 104420 3.39 01/12/ 2004 16/11/ 2004 07/12/ ' 2004 07/12/ 2004 19/02/ 2005 01/12/ 2004 21/11/ 2004 643833. 40 746362. 95 20/02/ 2005 02/12/ 2004 22/11/ 2004 07/12/ 2004 07/12/ 2004 07/12/ 2004 745434. 56 959523. 37 02/ 12/ 2004 16/02/ 2005 90 90 18/11/ 2004 25/11/ 2004 1028948 .23 23/02/ 2005 03/12/ 2004 963386. 14 856799. 33 07/12/ 2004 03/12/ 2004 23/02/ 2005 25/11/ 2004 771399 7.59 7645548 .58 31/12/ 2004 07/12/ 2004 02/10/ 2004 110083 7.30 90 90 02/10/ 2004 02/10/ 2004 156418 7.14 11- 15/10/20 04 PBW- 551/568 07/12/ 2004 31/12/ 2004 1269179 .52 762708. 45 PBW-564 31/12/ 2004 07/ 12/ 2004 02/10/ 2004 4967224 .97 493612 6.61 25/02/ I 82 opened and in most cases within 3 to 7 days was revealed from the details contained in work Sheet titled "LCRECORD" and "41E900400", forwarded by FSL under their letter dated 17.02.2007. It was also observed that in most cases the funds thus 1.;enerated by making prepayments (by Indian companies) by availing buyers credit facility or by discounting of L/ cs. in the name of the overseas companies, were immediately returned to the Indian companies showing payments towards the export of CPI) by the Indian companies. Some of such dubious transactions were illustrated Ott Annexure R. Scrutiny of the documents and study of the trend of payments shown to be made for imports and exports of CPD revealed that this practice of making payments in advance was cleverly adopted by AEL and its group/associate companies to arrange for the funds for the so called overseas importers of CPD so that these overseas companies can show the remittances of the exports made by the Indian companies. This was all the more evident from the fact that as soon as the payments were made by the Indian companies to the overseas companies by resorting to pre- payments in this fashion, the said amount was immediately remitted back to the Indian companies, showing payments towards the exports of CPD by the Indian ompanies. This was evident from the following illustrations: Value Date (Date on which payment made by Indian Compan .Y) Due date as per terms of payment 1NV.VAL UE (USD) CYCLE Date receipt of fund in India DAYS PARTY /Suppl ler used for receiving payment by AEL towards their Export INV.N 0. Inv Date Value (USD) Date Export Invoice No. 01/ 10/20 04 PEN/512 06/12/ .264- I TAND (1EL 5 6 5 2004 05/ 10/20 04 PBW/524 07/12/ 14/02/ 2005 779767. 263- TAND AEL ')69- 2004 12/ 10/20 04 PBW/553 1212522 .62 126431 6.95 TANA AEL PBW/530 06/ 10/20 04 273- TANA AEL 06/ 10/20 04 02/12/ 2004 PBW/532 22/11/ 2004 20/02/ 999360. 279- TANA AEL 11/10/20 04 PBW/549 265- TANn AEL 24/09/20 04 PBW/481 105861 .)74- TANA AEL 2.05 PBW/518 04/10/20 04 1065082 275- TANA AEI, 749192. I 62 18/10/20 04 10/12/ 3 2004 PBW-571 1177246 231- TAN I1 AEL 07/10/20 04 10/12/ 3 2004 31/12/ 2004 07/12/ 2004 PBW-538 1268701 239- TAM; AEL 10/12/ 3 2004 233- TNNA 04 10/12/ 14/10/20 04 1252097 230 .'TANU 01 - 2004 90 19/10/20 04 PBW-577 759201. 10/12/ 3 2004 10 90 08./9.3_1_ 237026 26 05 04 03 1291297 GOLD 108-
- 75. • 83 STAR 1 GSF2005 .69 2005 2005 3 27/04 3.00 ::005 _ . GOLD ; 1 -1-- 06- STAR GSF 23/02/ 2005 1331132 .07 90 24/05/ 2005 04/03/ 2005 1 2622429 .76 237026 3.00 4 GOLD STAR 110- GSF 27/02/ 2005 1268849 .66 90 28/05/ 2005 07/03/ 2005 8 2 AEL/AH/G M/046/04 6767311. 09/03' 84 .2005 GOLD STAR 111- GSF 27/02/ 2005 1288456 .00 90 28/05/ 2005 07/03/ 2005 8 2 AEL/ND/G M/080/04 317112 4.47 09/03) 1?005 GOLD STAR 112- GSF 01/03/ 2005 1291433 .42 90 30/05/ 2005 07/03/ 2005 r 8 4 384781) 1.31 - _1_ _ 3848739 .08 __ fn STAR 018- STAR 06/03/ 2005 1199497 .64 90 04/06/ 2005 15/03/ 2005 8 1 AEL/PBW/ PD/931/20 04-05 31/ 12/20 04 125000 0.00 2/04 11005 STAR 053- STAR 20/03/ 2005 1197740 .40 90 18/06/ 2005 23/03/ 2005 2397238 .04 r 125000 0.00 From the illustration at Sr. No. 4 it can be seen that AEL had shown imports (if CPD for a total value of US$ 3848739.08 from M/s Gold Star, UAE under their invoice Nos. 110-GSF and 111-GSF both dated 27.02.2005, and 112-GSF dated 01.03.200`.. As per the terms of payment of 90 days the said invoices were due for payment ( ,1 28.05.2005 and 30.05.2005. However, inspite of this, AEL avails the facility of buyer's credit from SBI, Bharine against these invoices and made payment on 07.03.2005, i.e. 82/84 days before the due date, even though they had to bear interest for the sank Moreover this transaction was not so innocuous as it appeared as it can be seen that these funds were immediately returned to AEL on 09.03.2005 showing payments towards exports of CPD by AEL under their invoice Nos. AEL/AH/GM/046/04 and AEL/ ND/GM/080/04 for a total value of US$ 3847861.31. 7.1.1 Such unscrupulous flow of funds between the Indian companies and the overseas suppliers and the overseas buyers were further corroborated by the e-mail communications between the offices of Adanis in India, UAE and Singapore. The financial flow as evidenced from the mails and the authenticity of which was als,) corroborated by the documents received from the banks in India are illustrated as per Anncxure L attached. A few transactions are enumerated below :- I. AEL had made payment of US$ 2463658.57 to M/s. Gold Star FZE, UAE on 17/2/2005 showing payment towards their imports of CPD under i No.094-GSF/AEL/B/04 dtd.8/ 2/ 2005 and 095-GSF/AEL/B/04 dtd.8/2/2005. The very same day these funds were transferred by M/s Gold Star FZE to Mh. Gudami International, Singapore - US$ 2386570.57 and US$ 77088/- to M/s. Mine Gold and Jewellery, UAE. M/s. Gudami International in turn remitted back the same amount of US$ 2386570.57 on the very same day i.e.17/2/2005 to M/s. AEL showing payment towards the exports of AEL to M/s Gudami International under Invoice No. AEL/PBW/PD/709/0.1 dtd.17/11/ 2004, AEL/PBW/PD/748/04 dtd.24/11/2004 and AEL/PBW/PD/775/04 dtd.1/12/ 2004. II. AEL had made payment of US$ 4745836.15 to M/s. Seven Star, Hong Kong on 24/3/2005 showing payment towards their imports of CPD under invoice No. 042-Seven dtd.18/ 10/2004, 065-Seven dtd.27/ 12/2004, 050-Seven dtd.29/10/2004 and 051-Seven dtd.29/10/2004. The very same day i.e. on 24/3/ 2005 these funds - US $ 4745836.15 were transferred by M/s Seven if Stars to M/s. Gudami International, Singapore. A further amount of US:-; 1858106.85 was also transferred to M/s. Gudami International by M/s. Adani Global Pte Ltd, Singapore on 31/3/2005. M/s. Gudami International, Singapore in turn remitted this total amount of US$ 6603943.00 iUS :.; 2 2 20
- 76. 84 • 4745836.15 + US$1858106.85) back to AEL on the very same day i.e. 31/3/2005 showing payments towards the exports of AEL to M/s Guclami International under Invoice No. AEL/ PBW/ PD/ 1017/ 04 dtd.20/01 /2005, AEL/PBW/PD/832/04 dtd.13/12/2004, AEL/PBW/PD/625/04 dtd.28/10/04, AEL/PBW/PD/969/04 dtd.10/ 1/05 and AEL/PBW/PD/970/04 dtd.10/01/2005. III. M/s.Aditya Corpex Pvt Ltd had on 11/1/2006 made a payment of US $ 1999765/- to M/s. Tanb Trading, UAE. This amount was transferred by M/s. Tanb Trading, UAE to M/s. Gracious Exports Pte Ltd, Singapore. M/s. Gracious Exports in turn remitted back this amount to M/s. Aditya Corpex Pvt Ltd on the very same day i.e.11/1/2006 showing payment towards the exports of AEPL under Invoice No.1120/ACPL/PBW/ 05-06 dtd.1/6 /2005 and 1121/ACPL/ PBW/05-06 dtd.1/ 6/2005. IV. M/s. Hinduja Exports Pvt Ltd had remitted an amount US$ 4,227,093.05 to M/s. Gold Star FZE, Dubai showing payment towards their imports under invoices 133-GSF/HEPL/B/05, 134-GSF/HEPL/B/05 dtd.3/7/05 & 138- GSF/HEPL/B/05 dtd.7/ 7/05 which was received by M/s. Gold Star on 3/10/2005. Further, an amount of US $ 2,499,984 was remitted by Mjs. Hinduja Export Pvt. Ltd to and received by M/s. Daboul Trading, Dubai on 3/10/2005 and US$ 9,59,928.07 was remitted by Hinduja Exports and received on 3/10/2005 by M/s. Spectrum Trading, UAE towards import invoice No.140-STF/DIA-2005 dtd.7/ 7/ 2005. Thereby a total amount of US$ 7,687,005.12 was remitted by M/s. Hinduja Exports Pvt. Ltd to the overseas firms. It is seen from the Email dtd.5/ 10/2005 of Ms. Mary of Adani Global Pte, Singapore (RUD- 29/ 412-413) that an amount of US $ 7,719,961/- was transferred and received on 4/10/2005 by M/s. Gudami International, Singapore in the following manner: US $ 4,220,000 from the account of M/s Gold Star FZE, US $ 2,499,984 from the account of M/s Daboul Trading and US $ 999,977 from the account of M/s Spectrum Trading. What this indicates is that the amount remitted by M/s Hinduja Exports Pvt Ltd to these overseas firms was subsequently transferred to M/s. Gudami International, Singapore. Further, out of the said amount of US$ 7,719,961/- thus transferred to tile account of M/s Gudami International, Singapore, an amount of US$ 7,706,925.16 was r,,mitted back in the name of M/s. Gudami International, Singapore on 4/10/2005 to NI/s.Hinduja Exports Pvt Ltd on 4/10/2005 i.e the same day, showing payment towards their export invoices HEPL/ 122/PBW/05-06 to HEPL/ 128/PBW/05-06 and the balance amount of US$ 11800/- was paid to ICICI bank towards term loan charges by M/s. Gudami International, Singapore. 7.1.2 The officers of UCO Bank and Development Credit Bank Limited, Ahmedabad wore luestioned regarding prepayments by AEL and the other 5 firms. Shri A . V.Kz math, the Regional Manager (Operations) of Development Credit Bank Limited w as shown Invoice No. 108/GSF/04 dtd.24/2/2005 of M/s. Gold Star FZE, Ajman under which CPD was imported by AEL. The payment terms as per the said invoice was at "SIGHT". The buyers credit extended by Bank of India, Paris to AEL for payment of the above invoice was from 7/3/2005. Shri Kamath was shown another c )py of the same invoice no. 108/GSF/04 dtd.24/2/2005 of M/s. Gold Star FZE, AO-nail which was presented to the Customs authorities by AEL. The payment terms as per this copy of the invoice was 90 days. In the light of the above Shri Kamath was . asked whether the amount due after 90 days as per the invoice could be pre-paid to . hic h he stated that the amount could be pre-paid on the condition that the parties to agreement should give it in writing for pre-payment and agree to the bankers .r, 'c.)ndit on that appropriate interest applying LIBOR prime rate for the early payment period would be deducted from the invoice value. N. 3 s ' - . ._ • • Similarly, Shri Siddharth Oza, Manager of UCO Bank, Ahmedabad was shown t,, :4Sice No.279 dtd.18/06/2005, Invoice no. 281 and 282 both dated 23/06/2005 of Daboul Trading Co. (L.L.C.), Dubai for the import of cut and polished diamonds om 11/s. Daboul Trading Co. (L.L.C.), Dubai. He stated that the payment terms as mentioned in the invoice was at "SIGHT" in all the three invoices. He was also shown another copy of Invoice No. 279 dtd.18/06/2005 and invoice no. 282 dated 23/06/2005 of M/s. Daboul Trading Co. (L.L.C.), Dubai issued to M/s. Adani Exports Ltd., filed along with Bill of entry by M/s. Adani Exports Ltd before the Air Customs, N.I timbal wherein the terms of payment are mentioned as 90 days. The buyers credit :tended by State Bank of India, Manama to M/s. Adani Exports Ltd for payment of
- 77. • 85 the above importinvoices on 06/07/2005. When asked whether the amount due after 90 days could be pre-paid, Shri Oza stated that the amount could be pre-paid on the condition the parties to the agreement should give it in writing for pre-payment and agree to the bankers condition that appropriate interest applying LIBOR prime rate the early payment period will be deducted from the invoice value of the bill. SI- ri 07a stated that M/s.Adani Exports Ltd had not submitted any such agreement for pre- payment of the invoice value. Shri Oza further stated, on the basis of documents, that Adani Exports had borne the interest in the above case for the period of pie payment. Shri Oza stated that in respect of other companies no such instance of prepayment without deducting the applicable interest had been observed in their bank. This kind of instances of prepayment had taken place only in the case of Mj:;. Adani Exports, M/s. Aditya Corpex pvt. Ltd. and M/s. Midex Overseas. 7.1.3 Apart from the fact that AEL and the other 5 firms were making payments respect of their imports much before the due date as mentioned in the invoices presented before the Customs, the above cited instances also clearly bring out the fact that AEL and the other 5 firms were resorting to manipulation of the invoices to facilitate such pre-payments. While the invoices presented to the banks show th.at the terms of payment are on SIGHT basis, the invoices presented to the Customs show that the terms of payment are either 45 days D.A or 60 days D.A or 90 days D.A. R therefore, can be said that even the banks were mislead by AEL and the other E. firms into facilitating their prepayments to their overseas firms. It clearly emerges from the above that the entire trade in CPD was being financed and funded by AEL and its group companies only. The funds generated by AEL and others either through discounting of Letter of Credits by the ow.rseas companies or Short Term External Commercial Borrowings (Buyers Credit) were used to finance their imports as well as their exports in as much as the funds remitted overseas showing payments towards their imports were transferred to the accounts of their so called overseas buyers which were in turn utilized for showing payments to AEL and others for its exports. It was alleged that there did not take place any genuine trade between AEL and its group companies with the overseas firms. The overseas firms in UAE/Singapore and Hong Kong were merely used to facilitate the to and fro movement of CPD and finances from India to Overseas and back, thereby creating trade volumes for AEL and its group companies. Further it was also seen that in a number of cases the remittance is received back from the same bank to which remittance was made by the Indian companies. The overseas importers and exporters were maintained their accounts in the same banks so as to facilitate easy transfer of funds. 7.1.4 The details of the bank accounts of overseas companies to whom the remittances were made and from whom the remittances were received with respect to import and exports of CPD, as revealed during investigations are as under : Sr.No 1 2 Name of the Overseas Party Importer/ Exporter Overseas Bank Bank Ace() No. Crown Diamonds, UAE Exporter/ Importer ABN Amro Bank, Dubai 22348425 Swebhani INC Importer ABN Amro Bank, Dubai NA 3 anb Trading, UAE Exporter Bank of Baroda, Dubai 300549-0( ' Daboul Trading, UAE Exporter Bank of Baroda, Dubai 117035-0( 5 .1 Shahad Gold & Jwellery, UAE Importer Bank of Baroda, Dubai NA • 7 Daboul Trading, UAE Exporter Bank of India, Singapore 3591.3301 0 A International, UAE Importer Bank of India, Singapore 358715201 8 tine Gold, UAE Importer Bank of India, Singapore 3591.2501 ?old Star, UAE Exporter Bank of India, Singapore NA unt 1 01 01 01
- 78. 86 • D ,Ltd., UAE Importer National Bank of Ras- Al NA Khaimah, Dubai KVK Diamond Exporter/Im National Bank of Ras- Al 890-0056- porter Khaimah, Dubai 630 It was seen that the accounts of the overseas companies who were shown as expor.ers of CPD to the Indian companies and also of those companies shown as importers of CPD from the Indian companies were opened in the same bank. It was also cbserved that though Daboui Trading and Gold Star, who are shown to be the major exporters of diamonds to the Indian companies, are based in U.A.E., their accounts were opened with Bank of India, in Singapore and mostly all the remittances by the Indian companies showing payments towards their imports of CPD from Daboul ''radiiig and Gold Star were credited in these accounts and immediately transferred to the accounts of other Singapore based companies to whom the Indian companies had shown exports of diamonds and the said amount was used to show payments to the Indian companies for their exports. (a) AEL made payment of usd 3903295.58 to M/s. Gold Star, FZE and M /s. Daboul Trading LLC, Dubai for the import of CPD against their invoice no. 02-GSF (USD 842781.20) , 1113-DBL (USD 1114266.56) , 1006-DBL (USD 1054117.70) & 1016 -DBL (USD 892130.12). This payment was made / credited in the bank of Gold .;tar and Daboul Trading with ther Bank of India, Singapore on 15/02/2005 (Gold ;tar) and on 17/02/2005 (Daboul Trading). Against this payment, the amount of USD 390%89.80 was remitted back by Labdhi International, UAE to AEL on 17/02/2005 from the same Bank of India, Singapore towards their export of AEL to Labdhi International vide invoice no. AEL/GM/060-058/04. (b) AEL made payment of usd 5674135.95 to M/s. Gold Star, FZE UAE for the import of CPD against their invoice no. 060-GSF (USD 874923.88) , 072-GSF (USD 191979.20) , 073-GSF (USD 1204355.65), 075-GSF (USD 1193345.67) & 074-GSF (USD- 1209531.55). This payment was made / credited in the bank account of Gold Star with the Bank of India, Singapore on 02/02/2005 & 03/02/2005. Against this payment, the amount of USD 5161054.45 was remitted back by Labdhi International, UAE to AEL on 07/02/2005 from the same Bank of India, Singapore towards their expor: of AEL to Labdhi International vide invoice no. AEL/GM/046-049/04. -.1.5 The kind of transactions above also corroborate the fact that the diamonds ;;Ilown to be exported to the Singapore based companies were traded in a circular inanner by re-exporting the same to the Indian companies, through Dubai based companies. Therefore the funds remitted by the Indian companies to Dubai based companies were credited into the accounts of these companies opened in Singapore Dank:; to facilitate easy transfer of funds to the Singapore based companies to whom the exports of CPD were shown. Which was further supported by the e-mail correspondence mentioning that these accounts were also opened and operated by the employees of the Adani group of companies based in Singapore and Dubai. 2.1 A scrutiny of the records recovered from the premises of M/s. MOL and the detailss/documents of inward/ outward remittances and the copies of SWIFT messages received from various banks also indicated that the funds remitted by MOL to various overseas companies, showing payments towards their imports of CPD were immediately returned to them, showing them as either advance remittance or payments towards exports of CPD made by MOL to various overseas companies. It was also cbserved that in almost all the cases the overseas remitting banks were the same 10 which the funds were remitted by MOL, showing payments for their imports. The tollov,ing is for the purpose of illustrations:- A) MOL had imported CPD from M/s. Crown Diamonds, Dubai vide Invoice No. CD-017/2005, CD-18/2006 and CD-019/2005 all dtd.6/3/2005. The payment amounting to US $ 2994419.33 in respect of these imports was made to M/s. Crown ')iamond by MOL on 10/5/2005 through UCO bank, Ahmedabad and the payment 'vas made to A/c No.22348 425 of M/s. Crown Diamonds with ABN Amro Bank, Dubai, as is evidenced from the SWIFT messages of the banks. Against the said amount remitted by MOL, immediately on 12.5.2005 an amount of US $ 2995000.00 as received from the ABN Amro Bank, Dubai on account of M/s. Swebhani. Inc, 10 11
- 79. a: 87 Dubai, in theaccount of MOL with UCO bank. This remittance was shown as advant e remittance by UCO bank vide their ARR No. 104/05 The CPD imported by Crown, under the above invoices were subsecuently exported by MOL to M/s. Swebhani Inc, Dubai vide invoice No. PBW-MID-03-00 PBW-MID-03-002, PBW-MID-03-009, PBW-MID-03-010, PBW-MID-03-011 and PBW- MID-03-012 all dtd.9/3/2005 and totally valued at US $ 37,62,551.99 the documents for which were negotiated through ICICI bank, Ahmedabad Subsequently against the above receipts of US $ 2995000.00, MOL obtained Foreign Inward Rernttamc Certificate (FIRC) from UCO Bank, on the strength of which the said amount of US $ 2995000.00 , received from the ABN Amro Bank, Dubai, on account of M/s. Sw.tbhani Inc, Dubai, was adjusted by ICICI Bank, showing as receipt of remittance towards the above invoices. B) MOL had imported CPD from M/s. Crown Diamonds, Dubai vide Invoice No. CD/FZ/020/2005, CD/FZ/021/2005, CD/FZ/022/2005 all dtd.9/3/2005. The payment amounting to US $ 2961477.63 in respect of these imports was made to Mh. Crown Diamond by MOL on 17/ 5/2005 through UCO bank, Ahmedabad and the payment was made to A/c No.22348 425 of M/s. Crown Diamonds with ABN Arm o Bank, Dubai, as is evident from the SWIFT messages of the banks. Against the said amount remitted by MOL immediately on 19.5.2005 an amount of US $ 2960000.00 was received from the ABN Amro Bank, Dubai on account of M/s. Swebhani Dubai, in the account of MOL with UCO bank. This remittance was shown as advanc e remittance by UCO bank vide their ARR No.105/05. The CPD imported under the above invoices were subsequently exported 1...y MOL to M/s. Swebhani Inc, Dubai vide invoice No. PBW-MID-03-012 dtd.9/3 /2005, PBW-MID-03-014 dtd.10/3/2005, PBW-MID-03-015 dtd.10/3/2005 and PBW-MID- 03-016 dtd.10/3/2005 and totally valued at US $ 39,48,535.33, the documents for which were negotiated through ICICI bank, Ahmedabad. Subsequently against tl,e above receipts of US $ 2960000.00, MOL obtained Foreign Inward Rem ttam e Certificate (FIRC) from UCO Bank on the strength of which the said amount of US $ 2960000.00, received from the ABN Amro Bank, Dubai, on account of M/s. Swt!bhaiii Inc, Dubai, was adjusted by ICICI Bank, showing as receipt of remittance towards Ike above invoices. C) MOL had imported CPD from M/s. Crown Diamonds, Dubai vide Invoice No. CI)/FZ/016/ 2005 dtd.2/3/ 2005, CD/FZ/023/2005 dtd.9/3/2005, CD/FZ/024/2005 dtd.9/3/2005, CD/FZ/025/2005 dtd.11/3/2005, CD/FZ/026/2005 dtd.11/3/2005 and CD/FZ/027/2005 dtd.11/3/2005. MOL made the payment amounting to US $ 4957137.55 in respect of these imports to M/s. Crown Diamond on 20/5/2005 through UCO bank, Ahmedabad and the payment was made to A/c No.22348 425 of Ws. Crown Diamonds with ABN Amro Bank, Dubai, as is evidenced by the SWIFT messages of the banks. Against the said amount remitted by MOL, immediately on 24.5.2005 an amount of US $ 4957137.55 was received from the ABN Amro Banh. Dubai on account of M/s. Swebhani Inc, Dubai, in the account of MOL with UCO bank. This remittance was shown as as advance remittance by UCO bank vid, the r APR No.109/05. The CPD imported under the above invoices were subsequently exported by MOL to M/s. Swebhani Inc, Dubai vide invoice No. PBW-MID-03-016 dtd.10/3/2005, PBW-MID-03-024 dtd.12/3/2005, PBW-MID-03-025 dtd.12/3/2005, 030 dtd.14/3/2005 and PBW-MID-03-031 dtd.14/3/2005 and totally valued a-. US $ 52,58,198.60, the documents for which were negotiated through ICICI bank, Ahmedabad. Subsequently against the above receipts of US $ 4957137.55. MOL obtained Foreign Inward Remittance Certificate (FIRC) from UCO Bank on the strength of which the said amount of US $ 4957137.55, received from the ABN Amro Banl:, Dubai, on account of M/s. Swebhani Inc, Dubai, was adjusted by ICICI Bank, showing as receipt of remittance towards the above invoices. The above transactions clearly indicate that : - 1) The CPD imported from Dubai by MOL were immediately exported back to Dubai. 2) The funds remitted by MOL to CrDwn were immediately received back in the name of Swebhani, and that too frori the same bank to which the funds were remitted in the first instance by MOL. 7.2.2 The dubious nature of the transactions becomes clear from the various e-mails of Shri Sudhakar of Adani Global to Shri C.E. Mahadevan, DGM (Finance) of Adan , •
- 80. 88 • recovered fromthe premises of Midex. The relevant part of the e-mail dtd.12/5/2005 is reproduced below: "From: Sudhakar To : Shankar CC : Mahadevan Sent : Thursday, May 12 2005 12..55 PM Subject : Payment from Crown Dear Sirs, M/s. Swebhani Inc. has remitted US $ 2,995,000.00 to Midex A/c with UCO 3ank Value 11/05/ 2005. This is for Information please. Kindly acknowledge. From : C.E. Mahadevan— To: Sudhakar Sent : Thursday, May 12, 2005 2.27 PM Subject: Re: Payment from Crown In respect of the following payments there were no details of invoices.(.) Please ensure in future remittances that the invoices NOs. are mentioned in the messages. In its absence the fund cannot be traced and appropriated towards the party and shall delay receipt of funds. The details of invoices are already with Mr. Sudhakar which may be provided to the remitter. Ask the remitter to incorporate the invoice no. in all remittances. Regards Mahadevan From: Sudhakar To : C.E .Mahadevan Sent: Thursday, May 12 2005 4.28 PM Subject : Payment from Crown Dear Sirs, We are adjusting payment from crown as follows: 1. US $ 257,365.82 against I. No. PBW-MID-03-001-05 2. US $ 360,476.76 against I. No. PBW-MID-03-002-05 3. US $ 693,006.54 against I. No. PBW-MID-03-009-05 4. US $ 593,488.66 against I. No. PBW-MID-03-010-05 5. US $ 1035349.27 against I . No. PBW-MID-03-011-05 6. US $ 55312.95 against I. No. PBW-MID-03-012-05 (part) US $ 2,995,000.00 Kindly confirm the above Regards K. Sudhakar May 12, 2005" Thus it becomes clear that the funds remitted by Midex to Crown, Dubai were i nmediately remitted back to Midex showing as payments from Swebhani, through the ABN AMRO Bank, Dubai. Which indicates that :- a) The diamonds were shown to be supplied to Midex by Crown of Dubai. b) These diamonds were exported by
- 81. • 89 Midex to Swebhaniof Dubai. c) The amount paid by Midex to Crown was used to mai:e remittance to Midex for their exports to Swebhani. This showed the artificial nature the transactions entered in to by Midex with the overseas firms. 7.2.3 That in each case the funds remitted overseas was returning back immediately and was accounted for towards the export invoices of Midex. However, in each of the instance it was also seen that some of the funds were shown to be towards part payment of one or two invoices. Thus the funds were to be returned back irrespectii e of whether as full payment or as part payment. It was observed that the teams payments for exports by AEL, Midex and other group companies to the overseas companies was 60 to 90 days D/A. Assuming but not accepting that the remittances were being made by the overseas buyers so as to liquidate their outstanding positions with Midex, a prudent businessman would have sought and obtained a prepayment discount from Midex and in the absence of any such incentive there cannot be any logical reason for Swebhani remitting funds before the due date for payment of invoices wherein the payment terms are 90 days D/A. It would have been a believable and acceptable transaction if any prepayment discount or incentive was given by Midex. However, there did not exist any such terms allowing for discount or incentiv,.! on prepayment of the bills. Neither do the records of Midex indicate any such discount or incentive having been given to Swebhani. In the absence of this, it was too far fetched to believe that Swebhani would prepay the bills by almost one month. On Ow contrary such prepayment only substantiates the fact that the transactions between Midex and Swebhani were not at arms length and that funds were merely circulated to facilitate further similar transactions resulting in higher volumes for Midex with a view to avail of the benefits under the Target Plus scheme. 7.2.4 The above such transactions were not restricted between Midex and Swebhani. Similar transactions were also noticed between Midex and Seven Stars, Midex and At Khayal Al Dhahabi Jewellery LLC, Dubai. The details of the similar transactions wa:. given as per Annexure L attached to the notice. The illustrative transactions be :weeny these firms are given below a) Midex had imported CPD from M/s. Pooja Exports, Hong Kong vide htvoict No. 072/2005-06 dtd.21/3/2005 and 075/2005-06 dtd.22/3/2005. The payment amounting to US $ 2976580.76 in respect of these imports was made to M/s. Pooja Exports by Midex on 20/5/2005 through UCO bank, Ahmedabad and the payment was made to A/c No.612-801-2850-9 of M/s. Pooja Exports with Wing Lung Bank Ltd. Hong Kong as is evidenced by the SWIFT messages of the banks. Against the said amount remitted by Midex, immediately on 24.5.2005 an amount of US $ 29,76,278.97 was received from the Wing Lung Bank Ltd, Hong Kong on account of M/s. Seven Stars, Hong Kong, in the account of Midex with ICICI Bank. The CPD imported under the above invoices were exported by Midex to M/s. Seven Stars, Hong Kong vide invoice No. PBW-MID-03-057 dtd.18/3/2005 and l'13W- MID-03-058 dtd.19/3/2005 and totally valued at US $ 24,08,242.59 the documents for which were negotiated through ICICI Bank. The above amount of L.'S $ 29,76,278.97 received on 24/5/2005 from the Wing Lung Bank Ltd, Hong Kong, on account of M/s. Seven Stars, Hong Kong, was adjusted towards the payment of above invoices of Midex. b) Midex had imported CPD from M/s. K.V.K. Diamond, Dubai vide Invoice No. PD-Oil dtd.11/3/205, PD-012 dtd.14/ 3/ 2005 and PD-013 dtd.14/3/2005. The payment amounting to US $ 4749195.88 in respect of these imports was made to ;v1/s. K.V.K. Diamonds, Dubai by Midex on 07/ 6/2005 through ICICI Bank, Ahmeditbacl and the payment was made to A/c No.890-0056-630 of M/s. K.V.K. Diamonds, Dubai with the National Bank of Ras Al Khaimah, Dubai as is evidenced by the SWIFT messages of the banks. Against the said amount remitted by Midex, immediately on 09.06.2005 an amount of US $ 47,49,030.63 was received from the National Bank of Ras Al Khaimah, Dubai on account of M/s. Al Khayal Al Dhahabi Jewellery 1,LC. /IV Dubai, in the account of Midex with ICICI Bank. • : The CPD imported under the above invoices were exported by Midex to M/ Al -40 ; „Khayal Al Dhahabi Jewellery LLC, Dubai vide invoice No. PBW-MID-03-027 L;41.14/3/2005, PBW-MID-03-028 dtd.14/3/2005, PBW-MID-03-029 dtd.14/ 3/2005, dtd.15/3/2005 and PBW-MID-03-037 dtd.15/3/ 2005 and totally „„wallied at US $ 50,44,172.01. The above amount of US $ 47,49,030.63 received on --z-z:1-;.:::!OP/06/2005 from the National Bank of Ras Al Khaimah, Dubai, on account of hl/s.
- 82. 90 • Al K1-..ayalAl Dhahabi Jewellery LLC, Dubai, was adjusted towards the payment of .ihove invoices of Midex. 7.2.5 Similarly scrutiny of the records withdrawn from the premises of M/s. Adani .:,xports and the details/documents of inward/ outward remittances and the copies of SWIFT messages received from various banks also indicated that the funds remitted ')y Aditya Corpex Pvt Ltd. to various overseas companies, showing payments towards - heir imports of CPD were immediately returned to them, showing them as payments owards exports of CPD made by Aditya Exports to various overseas companies as detailed in Annexure -L. This becomes abundantly clear by the following illustrations:- (a) Aditya Exports had imported CPD from M/s. Mohd. Al Qari Gold & Jewellers Tradi:ig, Dubai vide Invoice No. 155/MAQ/ACP/PB/005 and 156/MAQ/ACP/PB/005 )oth dated 12/06 / 2005. The payment amounting to US $ 2489589.30 in respect of hese imports was made to M/s. Mohd. Al Qari Gold & Jewellers Trading in their bank A/c Pao. 048110069 with National Bank Dubai, UAE on 12/07/2005 by State bank of ndia Chicago through buyers credit opened by Aditya Exports. Against the said :amount remitted by Aditya Exports, immediately on 13.07.2005 an amount of US $ :2461345.71 was received from National Bank of Dubai, UAE from account of M/s. D. J. Limited, Dubai, in the account of Aditya Exports with UCO bank. The CPD imported by Aditya Exports from M/s. Mohd. Al Qari Gold & Jewellers 'Pradi-lg, Dubai under the above invoices were subsequently exported to VI/ s.D.J.Limited, Dubai vide invoice No. 1163/ACP dated 25/01/2005 & 1166/ 1165 1168 / ACP all dtd.27/01/ 2005 totally valued at US $ 2461345.71 the documents or which were negotiated through UCO bank, Ahmedabad. (b) Aditya Exports had imported CPD from M/s. Mohd. Al Qari Gold & Jewellers Tradi zg, Dubai vide Invoice No. 091/MAQ dated 18/01/2005. The payment amounting to US $ 901557.22 in respect of this import was made to M/s. Mohd. Al sari Gold & Jewellers Trading in their bank account no A/c No.048110069 with National Bank Dubai, UAE on 18/07/2005 by Bank of India Jersey through buyers :redit taken by Aditya Exports. Against the said amount remitted by Aditya Exports, immediately on 18/07/ 2005 an amount of US $ 901311.19 was received from M/s. D.J. Limited, Dubai, in the account of Aditya Exports with UCO bank. The CPD imported by Aditya Exports from M/s. Mohd. Al Qari Gold & Jewellers Trading, Dubai under the above invoice were subsequently exported by to M /s r.).J.Limited, Dubai vide invoice No. 1177/ACP dated 31/01/2005 valued at US $ )0 1 3 1 1 . 19 the documents for which were negotiated through UCO bank, Ahmedabad. (c) Aditya Exports had imported CPD from M/s. Mohd. Al Qari Gold 84 Jewellers Trading, Dubai vide Invoice No. 92 / MAQ / ACP/ PB / 004 , 089/ VIAQ/ACP/PB/004 and 090/MAQ/ACP/PB/004 all dated 18/01/2005. The payment amounting to US $ 2283413.97 in respect of these imports was made to M./s. MohcL. Al Qari Gold & Jewellers Trading in their account with Arab Bank for Invst and Fgn Trade, Sharjah on 18/07/2005 by Bank of India, Jersey through buyers credit opened by Aditya Exports. Against the said amount remitted by Aditya Exports, immediately on 18.07.2005 an amount of US $ 2206363.31 was received from Emperor Exports and Gracious Exports both of Singapore from their account with Arab Bank for Invst and Fgn Trade, Sharjah in the account of Aditya Exports with UCO bank. The CPD imported by Aditya Exports from M/s. Mohd. Al Qari Gold & Jewellers Trading, Dubai under the above invoices were subsequently exported to M/s. Emperor Exports, Singapore and Gracious Exports, Singapore totally valued at US S 2206363.31 the documents for which were negotiated through UCO bank, Ahmedabad. 7.2.6 This financial manipulation shows that whatever the fund remitted by the Indian importers to overseas bank account of Consignors showing it as an import remit lance was immediately returned back (either on the same day or next day) from the same overseas bank in the bank account of Indian exporter showing it as export proceeds. It is not merely a coincidence that the accounts of the companies to whom remittances are made by Aditya are having their accounts in the same bank as the companies who are remitting the funds to Aditya.
- 83. • 91 7.2.7 That thefunds remitted overseas to the different firms based at Dubai. Singapore and Hong Kong were immediately returned back to AEL was evidenced from the data recovered from the computer hard disc of Shri Vipul Desai of AEL, by Directorate of Forensic Science, Gandhinagar. In two Excel worksheet files named "41E90400" and "LCRECORDI" there is a worksheet named 'CYCLE' and within the worksheet the same was titled as Day-to-Day Diamond Statements from I /10,"2004, Financial Cycle. The said worksheet contained the details of the imports of CPD by AEL during October, 2004 to November, 2004, name of the overseas supplier firm, invoice value, LC number and date, name of the Letter of Credit opening and discounting bank in India and overseas, usance period of the LC, date of discount of the LC, date of credit of the amount at Dubai and the date of credit of the amo int at Ahmedabad, the total number of days and remarks. It was seen from these details that the LC opened in favour of the overseas firms were discounted within 2 to 6 da3s and after its credit at Dubai (in the overseas supplier firms account) the same was returned to AEL and credited at Ahmedabad within 4 to 19 days. The target days a; per the said worksheet was 4 days and wherever the period of 4 days is exceeded, tli reasons were given in the remarks column. The remarks vary from due to Saturday/Sunday, due to Dubai closed, due to strike in Europe etc. However, the fund cycle for remittance overseas to different firms and its subsequent repatriation back to India from different firms was also managed and controlled by AEL. In the normal course of trade where the seller and buyer are not related to each other or (lc not have any control over each other it would not be possible for the Indian firm to control and regulate the flow of funds as is seen in the instant case. A few instan,.;es of discounting of L/cs are listed below as illustration :- 1) LC IM LC03604000043 dtd.5/ 10/2004 was opened by the Development Credit Bank Limited, Ahmedabad for 365 days in favour of M/s. Daboul Trading LLC, Dubai. This LC was in respect cf the import of CPD by AEL from Daboul Trading under Invoice No 834- DBL/PD/2004 dtd.25/9/2004. The payment terms as per the said invoice was 365 days from the date of Airway Bill. The said IX was discounted by Daboul Trading LLC, Dubai with Bank of India, New York on 07/10/2004 i.e. within 02 days of the opening of the LC. Further, the amount obtained by Daboul Trading on discounting of the LC was credited to them on 8/10/2004. This amount was thereafter returned back and credited to AEL in Ahmedabad on 9/10/2004. This shows that the entire transaction right from the opening of the LC by AEL to the amount being returned to them was completed in just 04 days. 2) LC No. 04152041M0050712 dtd.26/ 10/2004 was opened by state Bank of India, Ahmedabad for 180 days in favor of M/s. Daboul Trading LLC, Dubai. This LC was in respect of the import of CPI) by AEL from Daboul Trading LLC under invoice No. 953-DBL/PD/2004 dtd.26/10/2004 and 954-DBL/PD/2004 dtd.26/ 10/2004. The payment terms as per the said invoice was 180 days from the da, e of Airway Bill. However, the said LC was discounted by Daboul Trading LLC, Dubai with Bank of India, New York on 29/10/2004 i.e. within 03 days of the opening of LC. Further, the amount obtained by Daboul Trading on discounting of the LC was credited to them on 30/10/2004. This amount was thereafter returned back and credited to AEL in Ahmedabad on 2/11/2004. This shows that the entire transaction right from the opening of the LC by AEL to the amount being returned to them was completed in just 07 days. 3) LC No. 00091MLU00403138 dtd.26/10/2004 was opened by InduEind Bank Limited, Ahmedabad for 365 days in favour of M/s. Tanb Trading, UAE.. This LC was in respect of the import of CPD by AEL from Tanb Trading under , Invoice No.229-AEL/TT!04 dtd.29/09/2004 and the payment terms as per the invoice was 365 days from the date of airway bill. The said LC was however discounted by Tanb Trading with Bank of India, New York on 29/10/2004 i.e. within 03 days of the opening of the LC. Further, the amount obtained by Tanb Trading on discounting of the LC was credited to them on 30/10/2004. This amount was thereafter returned back and credited to AEL in Ahmedabad on 2/ 11/2004. This shows that the ent ire transaction right from the opening of the LC by AEL to the amount being returned to them was completed in just 07 days. 41 LC No. SPN/AEL/ 115/2004 dtd.31/ 12/2004 was opened by
- 84. 92 • Allahabad Bank, Ahmedabadfor 360 days in favour of M/s.Daboul Trading Co, Dubai. This LC was in respect of the import of CPD by AEL from Daboul Trading under Invoice No.1133-DBL/PD/LC/2004 and 1134-DBL/PD/LC/2004 both dtd.22/ 12/ 2004. The said LC was however discounted by Daboul Trading Co, Dubai with the State Bank of India, Frankfurt on 5/01/ 2005 i.e. within 05 days and the amount was credited in Dubai on 06/01/ 2005. Further, the same amount was remitted back to AEL in India and credited to them on 7/01/2005. The entire transaction involving opening of LC, its discounting in Dubai and subsequent return of funds back to AEL was completed in 07 days. 7.2.8 When Shri Vipul Desai, Officer, Banking of AEL in his statement on 19/2/2)07 stated that this document contained the details of the Letter of Credits, the name of the IC opening Bank, the LC discounting bank, the name of the firm in whose favour the 1,C was opened, the date of discounting, the date of credit at Dubai, the date of credit at Ahmedabad etc.; that this document was prepared in a Microsoft Excel worksheet file by him based on the format given to him by Shri Mahadevan. The details in the said worksheet file were prepared and entered by him however, the details in respect of the columns titled as " Discounted Date", "Credit at Dubai", "Credit at A'bad", "Total days" and "Remarks" were entered by him, most of the time, base-I on the details given to him by Shri C.E. Mahadevan; that he also used to send the said Excel worksheet file by Email to Shri Rakesh Shah, who was incharge of Adani Global, Dubai, Shri Sunil Shah, who was incharge of Adani Global at Singapore, as well as copy to many others at Dubai and Singapore and the details in respect of the Column 'Credit at Dubai' used to be entered by them and the worksheet was inailtd back to him. Shri Vipul explained one entry: - The Entry at Sr.No. 1 is in respect of LC No. IMLC03604000042 dtd.1/10/04 for US$ 3804000.00 opened by DCB hank in favour of M/s. Daboul Trading towards two invoices of value 1269454.74 US$ and 133 924.64 US$ wherein the LC is for 365 days. The due date of the bills is 20/9/2005. This LC was discounted from Bank of India, New York on 4/10/2004, cared ted at Dubai on 5/10/2004, credited at Ahmedabad on 6/ 10/2004 and the total days involved is 5 days. Thus the L/ c which was opened for import of diamonds from Daboul Trading, for a period of 365 days was discounted and the credit of the same was taken at Ahmedabad within 5 days. Similarly all the Letters of Credit opened for imports of diamond were discounted and the credit of the same was taken at Ahmedabad within 4 to 7 days as can be seen from the above worksheet shown to him. Shri Vipul explained another entry as below : The entry at Sr.No.1 is in respect of buyers credit opened by Bank of India Jersey for which the Letter of Comfort was issued by ICICI Bank, Ahmedabad. The Buyers credit was opened at the request of Adani Exports Ltd. for payment of invoice No.982-DBL for 1105480.90 US$, inv vice No.981-DBL for 1102329.44 US$ and invoice No.990-DBL for 1093810.44 US$ for imports of Cut and Polished diamonds from M/s. Daboul Trading. The Buyers credit was opened on 17/11/2004 and the value received at Ahmedabad was on 19/11/2004 and the total days involved are 2 days. Similarly in the said worksheet details of buyers credit opened for payment of imports of diamonds are shown. 7.2.9 The above fact of prepayment towards import of CPD and receipt back of the fund towards export of CPD by M/s. Adani Group of Companies was also confirmned by F.;hri C.E.Mahadevan in his statement recorded on 20/03/2007. He confirmed that the details mentioned in the Excel work sheet, as discussed in para 15.18 of the notice, was prepared by Shri Vipul Desai, Officer (Banking) of AEL who was working under him in the Banking department of AEL. He explained entry at Sr.No. 1 in the said Excel work sheet as below : "The Entry at Sr. No. 1 is in respect of LC No. IMLC03604000042 dtd.1/10/04 for US$ 3804000.00 opened by DCB bank in favour of 1V1/s. Daboul Trading towards two invoices of value 1269454.74 US$ and 1334924.64 US$ for imports of CPD wherein the LC is for 365 days. The due date of the bills is 20/9/2005. This LC was discounted from Bank of India, New Yon( on 4/13/2004 and the amount credited to the account of M/s. Daboul Trading Co LLC, DuI'ai on 5/10/2004. Further as seen from the column "credit at Ahmedabad" pay nent for the exports of CPD by AEL was received on 06/10/04 and therefore within 5 days of opening of the L/c, the amount showing payment for exports of CPD by their company was received by the Precious Metal Desk. Similarly all the Letters of Cre lit opened for imports of diamond were discounted and the credit for the payments
- 85. 93 of exports ofCPD made by the Adani group of companies was received back within 4 to 7 days of opening of the L/cs, as can be seen from the above worksheet shown to him. On being asked to elaborate on the remarks as to "Credit at Dubai", "Credit at A'bad", in the above details shown to him he stated that "Credit at Dubai" means the date of credit into the bank account of the overseas party, as intimated to them by their Dubai office and "Credit at A'bad" means the date on which the amount is received in the account of their companies for payments of exports of diamonds, which as seen from the above worksheet was received within 4 to 7 days of opening the L/c. Further, regarding availment of buyer's credit, he explained one entry as below: "The entry at Sr.No. 2 is in respect of buyers credit opened by Bank of India Jersey for which the Letter of Comfort was issued by ICICI Bank, Ahmedabad. The Buyers credit was opened at the request of Adani Exports Ltd. for payment of invoice No.991-DBL, for 1089591.70 US$ and invoice No.992-DBL, for 1093487.73 US$ for imports of Cut and Polished diamonds from M/ s. Daboul Trading. His attention was drawn towards Sr.No. 2 & 3 of Annexure 'A' to his statement according to which the above two invoices was dated 07/11/2004 and the payment terms was 90 days DA, accordingly the due date for payment of the invoice is 5/2/2005. However, the Buyer's credit was opened on 19/11/2004 and the payments were made by AEL. On being asked to explain the columns "the value received at Ahmedabad" which in this case was on 23/11/2004 and "Cycle days" which in this case was 04 days, he stated that as mentioned above in case of L/cs "the value received at Ahmedabad" would mean receipt of payments by their companies for export of CPD, which in the above case is 23/ 11/ 2004. Similarly the column "Cycle days" involved means the number of days between the date on which the buyers credit was taken and the date on which the payment for exports were received by the Indian companies." Further, regarding manipulation in the terms of payment in the import invoice presented to the bank from "60/90 days" to "at sight", he stated that they in the banking department had not changed the terms of payment on the invoices, but when ever they received the invoices for payments from the Precious Metal Desk, headed by Shri Sameer Vora, the terms of payments were already changed to "AT SIGHT" from "60/90 days". On being asked he interalia deposed that no discount was paid by the overseas companies for the prepayments made by them. On being further asked he stated that for import of commodities other then precious metals and diamonds their company didnot make prepayments by availing buyer's credit. 7.3.1 Shri Vipul Desai was mailing a excel worksheet to Shri Rakesh Shah, who was incharge of Adani Global, Dubai, Shri Sunil Shah, who was incharge of Adani Global at Singapore, as well as copy to many others at Dubai and Singapore is corroborated by the excel worksheet tided `_,D215' recovered from his computer hard disk by the Directorate of Forensic Science. This worksheet contained similar details of Lies / Buyers Credit as detailed in worksheet titled 41E90400 and LCRECORD 1 mentioned above. In the said worksheet it was mentioned at Row No.4 that "Details of No. 2,4,7,8,12,13,14,15,19 to be given by A.bad office", at Row No.5 "Details of No. 5,6,9,10,11,16,18,20 to be given by Dubai office" and at Row No.6 "Details of No. 2,17,21 to be given by Dubai/ A,bad office as per arrangement". Which was further corroborated by the text of a document recovered from the computer hard disk of Shri Vipul Desai by the Directorate of Forensic Science. The contents of the said document is reproduced below : "Madam Mary / Mr.Sunil / Mr.tejal Today onwards, We have introduce Excel sheet for daily update buyers' credit data for immediate availably of credit information in various party A/c. Every day I will forward the excel sheet to Dubai and Singapore office, you please insert the data in the same sheet for the related party A/c. and forward the same through email. Buyers' credit data is starting from ROW No. 442". And also by the instructions of Shri C.E. Mahadevan, Deputy General Manager, Banking of AEL Ahmedabad communicated to Tejal Desai, Sudhakar and Manoj Nair of Adani Global, UAE vide e-Mail dtd.17/4/2004, which very clearly reveal the nature of the transactions. The said e-Mail is reproduced below :- " From: " mahadevan" < mah ad evan@ad anigroup. corn> To: "Tejal Desai" <adaniglobal@,adani-global.com> •
- 86. 94 • Cc: <sudhakar@adani-global.com>, "ManojNair" <manoj@adanigroup.corn> Subject: CONTRACTS PERMANENT ARRANGEMENT FOR EXPORTS Date: Sat, 17 Apr 2004 11:56:54 +0530 REFERS TO OUR DISCUSSION ON THE SUBJECT AS PER THE UNDERSTANDING U ARE TO SEND IMMEDIATELY CONTRACT FOR OUR 3 EXPORT SHIPMENTS FROM INDIA ALREADY EFFECTED COMMUNICATED BY MANOJ. your imports SECONDLY CONSIDERING THE VOLUME OF USD 14 MN PER MONTH IT WILL BE IDEAL FOR YOU TO CONSIDER SENDING A. IN RESPECT OF EXCEL GLOBAL DUBAI - TWO CONTRATS EACH FOR USD 5 MN EVERY SATURDAY TO RECEIVE HERE BY MONDAY FOR OPERATION. b. SIMILARLY TWO CONTRACT S EACH OF 5 MN FROM LEO FOR OUR EXPORTS FROM INDIA THIS MAY PLEASE BE CONSIDERED FOR ISSUANCE EVERY SATURDAY. WE SHALL SEND A MESSAGE FOR SUCH EXPORT ORDERS EVERY THURSDAY AS DESIRED BY YOU. REGARDS MAHADEVAN" 7.3.2 From the above communication it can be seen that AEL had a pre-determined business volume target of US $ 40 Million every month and this was to be achieved by showing import of US$ 20 million from Excel Global and exports to M/s. Leo D:axnonds of US$ 20 million, i.e. US$ 5 million every week form each company. It is very important to note that only the volumes in terms of value was under consideration and neither the goods, the quality nor the quantity was given any importance. That irrespective of the goods the volume of the business in terms of VALUE and the importance attached to this can be gauged from the fact that the entire transactions were entered into and created solely with a view to show incremental exports to be able to avail export benefits under Customs Act as well as the benefit of Target Plus Scheme. Shri Mahadevan in his statement dated 5/ 1 /2007 evasively replied that he suggested Mr. Tejal Desai, at Dubai, by this mail, for sending two contracts each for the value of USD five(5) millions towards import of cut and polished diamonds by Adani Exports Ltd from Excel Global, Dubai every Saturday so that the exports made arc having proper contracts for submission to the banks on every Monday and similarly, he had also suggested to send them two contracts each of USD five millions for the exports of cut and poliShed diamonds to Leo Diamonds, Dubai. 7.3.4 The communications of Shri Savan Patel of Adani Global to Shri Bhavik Shah, Shri N.R.Nayak, Shri Vipul Desai, Shri C.E.Mahadevan of AEL Ahmedabad and to Shri Rakesh Shah of Adani Global, UAE. by E-Mails recovered by the DFS, Gandhinagar from the Hard disks of the mail server of AEL is reproduced below for ready reference (A) " From: "savan patel" <savan@adani-global.com> To: "Vipul Desai" <vipul@adanigroup.com> Cc: "mahadevan" <mahadevan@adanigroup.com>, "Nayak" <nayak@adanigroup.com>, "bhavik" <bhavik@adanigroup.com>, <rakesh@adani-global.com> Subject: Re: EXCEL GLOBAL LIMITED
- 87. 95 Date: Wed, 5Oct 2005 15:55:36 +0400 Dear Vipul Please transfer daily 3 to 4 mio to RAK Excel A/c and STOP remitting to UAB A/C. Regds Sayan" (B) From: "rsagar" <rsagar@adani-global.com> To: "Smshah" <smshah@adanigroup.com>, "Mary" <mary@adanigroup.com> Cc: "rao" <rao@adani-global.com>, <savan@adani-global.com> DEAR SIR, TODAY WE REMIT US$ 2,000,000.00 TO EMPEROR EXPORT-OCE3C BANK FROM DABOUL TRDG. AND US$ 2,000,000.00 TO GRACIOUS EXPRT-UOB BANK FROM TANB TRADING. IT IS FOR YOUR INFORMATION. THANKS AND REGARDS RAJESH SAGAR ADANI GLOBAL FZE DUBAI JANUARY 08, 2006 nFrom: "Rajesh Sagar" <rsagar@adani-global.corn> To: <mary@adanigroup.corn> Cc: <smshah@adanigroup.corn> Subject: gracious-ocbc Date: Sat, 5 Nov 2005 11:09:38 +0400 Organization: mail.adani-global.corn DEAR SUNILBHAI AND MDM MARY I RECEIVED HERE ADVISE FROM GRACIOUS-OCBC BANK RECEIVED US$ 2,998,360/- FROM CROWN DIAMOND ON 27/10/2005 AND US$ 2,926,098/- FROM CROWN DIAMOND ON DT 28/10/2005 IN WHICH YOU USED US$ 2,925,623.95 ON 02/11/2005 BUT TILL YOU DO NOT SEND ANY E-MAIL FOR US$ 2,998,360/- SO, PLS CONFORM THE RECEIVED AMOUNT US$ 2,998,360/- AND WHICH DATE YOU USED THE SAME THANKS AND REGARDS RAJESH SAGAR ADANI GLOBAL FZE DUBAI (D) From: "rsagar" <rsagar@adani-global.com> To: "Smshah" <smshah@adanigroup.corn>, "Mary" <mary@adanigroup.corn> Cc: "rao" <rao@adani-global.corn>, <savan@adani-global.com> •
- 88. 96 • "rakesli" <rakesh@adani-global.com>, <nayak@adanigroup.corn>, "mahadevan"<mahadevan@adanigroup.corn> K/A SUNILBHAI AND MADAM MARY WE REMITT US$ 1,773,959.31 TO GRACIOUS UOB BANK FROM MINE GOLD(DUBAI EXCHANGE) ON 20/1/06 AND US$ 1,725,187.33 TO GRACIOUS OCBC BANK FROM MINE GOLD(DUBAI EXCHANGE) ON 22/01/06 IT IS FOR YOUR INFORMATION. THANKS AND REGARDS RAJESH SAGAR ADANI GLOBAL FZE DUBAI JANUARY 22, 2006 LEI From: "rsagar" <rsagar@adani-global.corn> To: "Smshah" <smshah@adanigroup.corn>, "Mary" <mary@adanigroup.corn> Cc: "rao" <rao@adani-global.com>, <savan@adani-global.com>, "rakesh" <rakesh@adani-global.corn>, <nayak@adanigroup.corn>, "mahadevan" <mahadevan@adanigroup.corn> K/A SUNILBHAI AND MADAM MARY WE REMITT US$ 1,452,261.00 TO GRACIOUS OCBC BANK FROM TANB TRDG. IT IS FOR YOUR INFORMATION. THANKS AND REGARDS RAJESH SAGAR ADANI GLOBAL FZE DUBAI JANUARY 23 , 2006 All such e-mails are detailed in Annexure 'M' and are relied upon in this r.otice. 7.3.5 Shri C.E.Mahadevan, the Deputy General Manager (Banking & Finance) of AEL in his statement stated that as Deputy General Manager, Banking & Finance of M/s. Adani Enterprises (erstwhile M/s. Adani Exports Ltd.) he looked after the receipt and payment of exports and imports of M/s. Adani Exports Ltd. (AEL) and the other five group / associated companies. Shri Mahadevan under his statement dated 4/1/2007 was shown an annexure containing details of the 18 instances of remittances made by the Indian companies to the overseas suppliers in Dubai/Singapore/Hongkong for import of cut & polished diamonds, gold etc. and the consequential remittances made by the overseas buyers to the Indian companies for the exports of diamonds made by the Indian companies. Similarly under statement dated 6/1/2007 he was shown an annexure containing similar details of 19 Instances of remittances made by the Indian companies to the overseas suppliers in Dubai/Singapore/Hong Kong for import of cut & polished diamonds, gold etc. and the consequential remittances made by the overseas buyers to the Indian companies for the exports of diamonds made by the Indian companies. Shri Mahadevan was also shown the corresponding e-mails, the interbank SWIFT messages and other documents received from the various banks. He explained a few transactions on an
- 89. 97 illustrative basis, andtwo such transactions explained by Shri Mahadevan are reproduced below: (1) As per email dated 05/12/2004 from Sudhakar to Bhavikbhai, and other documents shown to me, AEL had made a remittance of US $ 7645223.58 to M/s. "anb Trading, UAE, against their invoice Nos. Tr-265 dated 18.11.2004, TT-272 dated 22.11.2004, TT-273 dated 22.11.2004, TT-275 dated 25.11.2004, TT-274 dated 25.11.2004, TT-269 dated 21.11.2004, TT-264 dated 18.11.2004 and TT-263 dated 16.11.2004 through buyer's credit of US $ 7645223.58 for their imports of cut & diamonds. The said payment was made on 01/12/2004 and 02/12/2004, through Andhra Bank, Ahmedabad (Indian bank) and the said remittance was received in Bank of Baroda, UAE (overseas Bank). It is also seen from the said details that on 06.12.2004 (i.e. within 4 days of the receipt of remittance) an amount of US $ 7713997.59 was remitted to M/s. AEL, showing remittance towards invoice Nos. PBW/ 512 dated 01/10/2004, PBW/524 dated 05/10/2004, PBW/553 dated 12/10/2004, PBW/530 dated 06/10/2004, PBW/532 dated 06/ 10/2004, PBW/549 dated 11/10/2004, PBW/481 dated 24/09/2004 and PBW/518 dated 04/10/2004 for export of cut and polished diamonds made by AEL to M/s. Chokshey Diamonds, IJAE. The said remittance was also received from Bank of Baroda, UAE (Overseas Bank). Thus it is seen that as against the remittance of US $ 7645378.58 made on 01/12/2004 and 02/12/2004, by M/s. AEL to Tanb Trading an amount of US $ 7713997.59 was received back by them from the same bank on 06/12/2004 (i.e. within 4 days of the remittance made by them.). (ii) As per email dated 28/04/2005 from Mary Joseph to Rakesh, Bhavikbhai, Sudhakar and others and CC to himself and others shown to him, an amount of US $ 999977.50 was transferred from Twinklediam, Hong Kong to Gudami on 28/04/2005 and an amount of US$ 834843.65 was transferred from Adani (AGPL) to Gudami on 28/04/2005, accordingly total amount transferred to Gudami was US $ 1834821.15. On very same date i.e on 28/04/2005, the same amount of US $ 1834821.15 was remitted by Gudami to Adani Exports towards export of CPD by Adani Exports to Gudami. The details of export invoices of M/s Adani Exports are as shown in the E mail message. 7.3.6 Shri Mahadevan confirmed that the illustrations in Annexure A to his statements dated 4/ 1/ 2007 & 5/ 1/2007 are of remittances, as per the corresponding c-mails for their imports of gold or diamonds and the same e-mail also mentions Payments to their companies towards their exports of gold articles and diamonds. Shri Mahadevan in his statement dtd.5/1/07 stated that he had been dealing with Mr. Rakesh Shah of M/s. Adani Global Limited, FZE, UAE, Mr. Sunil Shah, Branch Head of Adani Global Pte Ltd., Singapore through e mails & telephones since last eight to ten years; that he had also been dealing with Mr. Tejal Deasi at Dubai through E mails and telephones since last one to two years; that he had also communicated with Mr. Sudhkar, Mr. Manoj Nair etc. through emails regarding remittances relating to import and export of cut and polished diamonds, gold etc. Shri Mahadevan was also shown various Emails which was confirmed by him. The above facts of remittances in respect of the 34 transactions were also confirmed by Shri Bhavik Shah, Senior Vice-President of M/s.Adani Agro Pvt Ltd, Ahmedabad in his statement recorded on 08-01-2007. 7.3.7 It was therefore alleged that the finances of the overseas firms were also being managed and controlled by AEL only. The inflow and outflow of funds in the accounts of the overseas firms were also being regulated and managed by AEL only. What wais also apparent from the above mail communications was that it was the volumes in terms of value which was the only important factor and neither the goods, its quality or quantity, its supplier or buyer was an issue. Apart from this the other aspect which is noteworthy is that huge amounts were being remitted - transferred- outside India on a daily or twice a week basis and these amounts are apparently not related to any particular imports or documents. 7.4.1 The banks through which the export documents of AEL and their group/associate companies were negotiated, were called upon to submit the documents submitted by AEL and their group/associate companies as well as the SWIFT messages relating to the inward remittances towards export proceeds of CPD of these companies. On scrutiny of the SWIFT messages received from the banks it was seen that in atleast 102 cases, the payments against export of CPD by Indian firms •
- 90. 98 • were made byfirms other than the overseas importing firms. The details of the firms involved in these 102 transactions (ANNEXURE-K) are summarized as under: S.No. Name of Indian Exporting Firm Overseas Buyer Firm which made remittances on behalf of the buyer 1 M/s. Adani Exports Limited Kamsun Development International 1) PNJ Trading, HK 2) Little Hearts Creation, HK. 3) Tanb Trading Est., Dubai. 4) Top Rich, HK 5) Daboul Trading, Dubai. 2 M/s. Adani Exports Limited Al Shahad Gold & Jewellery 1) Leo Diamonds, Dubai. 2) Excel Global Ltd, Dubai. 3 M/s. Midex Overseas Limited Kim Ting Ind. Ltd, HK M/s.Global Enterprise. 4 M / s.Bagadiya Brothers Pvt Ltd. Wingate Trading, HK Top Rich, HK _, 5 M/s. Jayant Agro Organics Ltd. Seven Stars, HK Little Hearts Creation, HK 6 M/s. Jayant Agro Organics Ltd. K.V.K Diamonds Little Hearts Creation, HK 7 M/s. Hinduja Exports Pvt Ltd. Harshdiam, HK 1) 4Cs Diamond Distributor, HK 2) Jewel Trade, Dubai. 8 M/s. Hinduja Exports Pvt Ltd. Orchid Overseas, Singapore 1) Orchid Overseas, Dubai. 2) Sphere Trading, HK. 9 ...._ F) M/s. Hinduja Exports Pvt Ltd. Planica Exports, Singapore Gudami International, Singapore M/s. Hinduja Exports Pvt Ltd. Sphere Trading, HK Global Enterprises, HK. These cases are only illustrative because the identity of the actual remitter was indicated only where the SWIFT message was sent in MT103 format. In a majority of the cases the SWIFT messages received from the banks were in MT202 format, which did not contain the identity of the actual remitter. 7.4.2 In majority of the 102 cases, it was noticed that the firm which had remitted funds on behalf of the overseas buyer was also the supplier of CPD to the Indian exporting firm. The nature of the relationship between the third party overseas firms who have remitted the funds (not being buyers) and the Indian firms are as below: S.No. Namc of Indian Exporting Firm Firm which made remittances on behalf of the other buyers Relation with the Indian firm 1 M s. Adani Exports Limited PNJ Trading, Hong Kong Supplier of CPD
- 91. 99 2 M/s. AdaniExports Limited Little Hearts Creation, Hong Kong. Supplier of CPD 3 M / s. Adani Exports Limited Tanb Trading Est., Dubai. Supplier of CPD 4 M/s. Adani Exports Limited Top Rich, Hong Kong Supplier of CPD 5 M/s. Adani Exports Limited Daboul Trading, Dubai. Supplier of CPD 6 M / s. Adani Exports Limited Leo Diamonds, Dubai. Buyer of CPD 7 M/s. Adani Exports Limited Excel Global Ltd, Dubai. Buyer of CPD 8 M/s. Midex Overseas Limited M/s.Global Enterprise. Supplier of CPD 9 M/s.Bagadiya Brothers Pvt Ltd. Top Rich, Hong Kong Supplier of CPD 10 M/s. Jayant Agro Organics Ltd. Little Hearts Creation, Hong Kong Supplier of CPD 11 M/s. Hinduja Exports Pvt Ltd. 4Cs Diamond Distributor, Hong Kong. Supplier of CPD 12 M / s. Hinduja Exports Pvt Ltd. Jewel Trade, Dubai. Buyer of CPD 13 M/s. Hinduja Exports Pvt Ltd. Orchid Overseas, Dubai. Buyer of CPD 14 M/s. Hinduja Exports Pvt Ltd. Sphere Trading, Hong Kong. Buyer of CPD 15 M/s. Hinduja Exports Pvt Ltd. Gudami International, Singapore Buyer of CPD 1.6 M/s. Hinduja Exports Pvt Ltd. Global Enterprises, Hong Kong. No known direct relation. The following is an illustration from the above table: (i) AEL had imported CPD from M/s. PNJ Trading, Hong Kong vide Invoice No.PNJ030981 dtd.27/8/2004 for which a payment of US $ 929067.70 was made by M/s AEL on date 6/1/2005 and 3/ 9/2004. These very CPD were exported by AEL to M/s. Kamsun Development International, Hong Kong under Invoice No.AEL/PBW/PD/386/2004-05 dtd.1/9/2004. The SWIFT message dated 2/12/2004 received from State Bank of India in respect of the export remittance received by AEL for the above exports, indicated that an amount of US $ 959847/ - being the payment, in respect of the exports to Kamsun under the above mentioned invoice, was remitted by M/s PNJ Trading, Hong Kong on behalf of M/s Kamsun Development International, Hong Kong. It shows that the amount remitted to M/s. PNJ Trading, Hong Kong by AEL towards their above imports was returned to them by M/s. PNJ Trading, Hong Kong, showing it as payment towards exports of CPD by AEL to Kamsun Development International. Thus the same amount remitted by AEL was immediately returned to ihem. • (ii) In the case of Midex it was seen that they had imported CPD from M/s. .:Ilobal Enterprises, Hong Kong vide Invoice No. GT-08 dtd.3/9/2005 for which a
- 92. 100 • payment of US$ 1889392.71 was made by M/s Midex. These CPD was exported by Midex to M/s. Kim Ting Ind Ltd, Hong Kong vide Invoice No.PBW-MID-08-131-05 and PBW-08-132-05 both dtd.8/9/2005. The SWIFT message dated 18/10/2005 received from ICICI Bank, Ahmedabad in respect of the export remittances received by Midex for its above exports to Kim Ting Ind. Ltd., indicates that an amount of US$ 2079041.51 (including 10% value addition) showing the payment in respect of the exports to Kim Ting under the above mentioned invoices, was made by M/s. Global Enterprises, Hong Kong on behalf of M/s. Kim Ting Ind. Ltd, Hong Kong. It was clearly indicative of the fact that the amount remitted to M/s. Global Enterprises by Midex towards their imports, was returned to Midex by M/s. Global Enterprises, Hong Kong, showing payments towards exports of Midex to Kim Ting. 7.4.5 The details of 102 such transactions unearthed during the investigations are as per Annexure K attached. The detailed discussion reflecting the to and fro movement of funds between the AEL and their group/associated companies with the overseas supplier firms and their immediate return to AEL and/or their group/associated companies, from the exporting firms, on account of the importers of CPD, exposes the fraudulent nature of the transactions entered into by AEL and their group/associated cotnpanies. It reveals that these circular import and export transactions of CPD were entered in to by AEL and their group/associated companies solely for the purpose of creating volume of business so as to be able to reap the undue benefits of the Target Plus scheme extended by the Government. It is unheard of in the normal course of International Trade or for that matter any trade that the supplier of the goods makes payment on behalf of the buyer of the goods. It also reflects the artificial nature of the transactions. This is better explained by the above transaction of Midex with Global Enterprises, Hong Kong and Kim Ting Ind Ltd, Hong Kong. The fact that Global Enterprises remitted funds on behalf of Kim Ting Ind Ltd establishes the fact that both these Hong Kong based firms were known to each other. Despite this rather than Kim Ting Ind Ltd, Hong Kong buying CPD from Global Enterprises a firm located in Hong Kong, which was known to them they imported the same from an Indian company at a price which was higher by 10 %, when the same set of diamonds imported from Global Enterprise were exported to Kim Ting. This clearly indicates that the so called imports of CPD and their subsequent exports are nothing but a sham - transactions created merely to hike the value of export goods abnormally and thereby to avail of the benefit of the Target Plus scheme by creating volumes. 7 4.6 The observations of the Hon'ble Supreme Court in the case of M/s Om Prakash Bhatia Vs. Commissioner of Customs, Delhi reported at 2003 (ELT) 423 (SC) is relevant to the present issue. The Hon'ble court had at para 19 observed that: "If the goods are easily available in the market, then it would be difficult to arrive at the conclusion that a foreign buyer - a prudent businessman would pay ten times more than the prevailing market price of readymade clothes, particularly, in the days where information is easily available through Internet or various other sources". 7.4.7 Among the documents retrieved from the computer hard disk of Shri Vipul Desai, Officer Banking, AEL, Ahmedabad and forwarded the Directorate of Forensic :science, Gandhinagar were forwarded - 1) A worksheet named as DJ file and 2) Email dtd.20/ 10/2005 of Shri Vipul Desai to Shri Darshan Jhaveri. On examining the contents of the said worksheet and the said Email, it was seen that large amounts of money were paid/ transferred from GSA A/C to different parties on behalf of different parties. The amounts paid over a period ranging from 26/ 1/ 2005 to 29/12/2005 as detailed in the worksheet named DJ are summarized as below :- _ 3.No. Name of the Firm on whose account amount paid from GSA A/C Name of the firm to whom paid Amount paid (US$) 1)Al Shahad Gold 81, Jewellery, UAE 2) Daboul Trading, UAE 3) Tanb Trading, UAE 4) G.A.International, UAE 5 Gudami international, Kamsun Development International, Hong Kong 5,22,73,189.41
- 93. 101 Singapore 9 G.A. International,UAE Global Enterprise, Hong Kong 20,00,000/- 3 1)Daboul Trading, UAE. 2) D.J.Exports, UAE. 3) Queen Jewellery, UAE Little Hearts Creation, Hong Kong 1,67,50,000!- 4 Queen Jewellery, UAE Twinklediam, Hong Kong 20,00,000/- 5 1)G.A.International, UAE 2) Excel Global, UAE. Sphere Trading, Hong Kong 88,75,000/- The remittances as stated in the above table are also corroborated by the Email dtd.20/ 10/2005 of Shri Vipul Desai, Officer, Banking department of AEL, Ahmedabad. The said Email is reproduced below for easy reference : "vipul desai" <vipul@adanigroup.com> (RUD 66/101) 'ro : "Darsan Jhaveri" <darsanjhaveri@hotmail.com> Subject: Date: Thu, 20 Oct 2005 17:32:36 +0530 Dear Darsan Bhai Following payment is by dubai office , which is not given in your statement. please confirm. PAID TO KAMSUN BY DEBITING GSA A/C 26-01-2005 AL SHAHAD-BOI-S'PORE - 450,000.00 KAMSUN DEVELOPMENT 29-03-2005 DABOIJL-BOB - 1,386,191.10 KAMSUN DEVELOPMENT 10-04-2005 GAINT-BOB - 317,844.00 KAMSUN DEVELOPMENT 03-05-2005 DABOUL-BOB - 973,450.47 KAMSUN DEVELOPMENT 04-05-2004 DABOUL-UAB - 850,000.00 KAMSUN DEVELOPMENT 09-05-2005 TANB-BOB - 1,476,014.92 KAMSUN DEVELOPMENT TANB-BOB - 1,197,218.40 KAMSUN DEVELOPMENT 19-05-2005 DABOUL-BOB - 1,350,412.48 KAMSUN DEVELOPMENT DABOUL- - 1,920,217.42 KAMSUN DEVELOPMENT 24-05-2005 DABOUL-BOB - 1,165,583.04 KAMSUN DEVELOPMENT DABOUL-BOB - 1,263,428.39 KAMSUN DEVELOPMENT 26-05-2005 DABOUL-BOB - 2,380342.22 KAMSUN DEVELOPMENT DABOUL-BOB - 994,598.70 KAMSUN DEVELOPMENT 30-5-2005 DABOUL-BOB - 2,337,289.61 KAMSUN DEVELOPMENT DABOUL-BOB - 2,498,004.92 KAMSUN DEVELOPMENT 02-06-2005 DABOUL-BOB - 871,777.00 KAMSUN DEVELOPMENT DA13OUL-b013 - 971,678.87 KAMSUN DEVELOPMENT 34-10-2005 GAINT-HSBC - 25,000.00 KAMSUN DEVELOPMENT •
- 94. 102 • 24,729,051.54 PAID TO KAMSUNINTL FOR IT'S BILL -2005 DABOUL-BOB 1,300,805.78 INV AEL/PBW/PD/618/04-05 1,300,805.78 regards vipul desai Apart from the above during June-July, 2005 an amount of US $ 5,50,10,000/- received from Little Hearts Creation, Hong Kong was credited to GSA A/C on account of M/s. Gudami International, Singapore, M/s.Adani Global, Singapore, M/s. Gracious Exports, Singapore, M/s.Emperor Exports, Singapore and M/s.Orchid Overseas, Singapore. It was mentioned here that the firms mentioned in the above table, on whose account the amounts have been paid/transferred, from GSA A/C, are the UAE based suppliers of CPD (Except for Gudami International) to AEL and the other 5 firms. At the same time the firms to whom the amounts were paid in the above manner were all the Hong Kong based buyers of CPD from AEL and the other 5 firms. This indicates that the amounts remitted by AEL and the other 5 firms to their overseas suppliers of UAE are in turn transferred/paid to the Hong Kong based firms enabling them to remit the amount back to AEL for their purchases of CPD from AEL and the other 5 firms. 8.0 The payment in respect of the imports were mostly through letters of credit or D.A. for 60 To 90 days. For financing these imports AEL and their group/associate companies opened Letters of Credit of normally 180 days. Another method of financing for the imports in case of imports on D.A. terms of 60 to 90 days adopted by AEL and their group/associate companies is External Commercial Borrowings -Buyers Credit (BC) of about 365 days. In case of Buyers credit AEL and their group/associate companies obtained loans from overseas branches of Indian banks and the payments were made to the suppliers of AEL and their group/associate companies by the overseas banks. The interest for the loan was obviously borne by AEL and their group/associate companies. In a number of cases it was observed that though the imports were made against D.A. of 60 to 90 days the payments were made to the overseas companies prior to the expiry of D.A. terms, mostly within a month, by resorting to external commercial borrowings in the form of buyers credit from overseas bank, for which they had to pay interest @ LIBOR + 0.5%. To avail of the buyers credit facility they had to obtain letter of comfort from the Indian banks for which they had to make a fixed deposit of 100% and thereby their funds were blocked. It was also observed that the invoices submitted to the banks at the time of obtaining buyers credit/ letter of comfort were manually amended to change the terms of payments from D.A. of 60 to 90 days to "AT SIGHT". It is beyond comprehension that why do the Indian companies had to make pre-payment when the terms of payments are for credit of 60 to 90 days, and that too by resorting to external borrowings for which they had to bear interest. However scrutiny of the documents revealed that this practice was adopted to fund the remittance of the exports made by the Indian companies in as much as the payments received by the overseas companies were immediately remited back to the Indian companies for their exports, as can be seen from the following: (i) That the LCs/BCs are being discounted by the overseas firms is supported by the data contained in a file named "DIADISC" contained in the subfolder named "IMPORT" in the folder named "SUDHAKAR" in the "C Drive" in the computer of employee of AEL. Similar details were also contained in the Excel worksheet files named as "41E90400" and "LCRECORD" retrieved by the Directorate of Forensic Science from the computer hard disc of Shri Vipul Desai of AEL. In the said files the details of the import invoices, the name of the supplier firm, the LCs/BCs, the date of discount and the discounting banks were mentioned. 8 1.1 A few cases of discounting of the LCs/BCs are illustrated below: 1. LC 0317FLC0050/ 2004 dtd.19/7/ 2004 was opened by the :.:anara Bank, Ahmedabad for 180 days in favour of M/s. Daboul Trading LLC, Dubai. This LC was in respect of the import of CPD by AEL from Daboul Trading under Invoice No.483-DBL. The payment terms as per the said invoice was 180 days from the date of Airway Bill. The said LC was
- 95. 103 discounted by DaboulTrading LLC, Dubai with Bank of Baroda, Dubai on 22/ 7/ 2004 i.e. within 03 days of the opening of the LC. 2. LC No.SPN/AEL/88 dtd.16/7/2004 was opened by Allahabad Bank, Ahmedabad for 360 days in favor of M/s. Adani Global FZE, Dubai. This LC was in respect of the import of CPD by AEL from Adani Global FZE under invoice No. AEL/ALLAHA-DIA/LC/535/ 2004 dtd.17/7/2004. The payment terms as of the said invoice was 360 days from the date of Airway Bill. However, the said LC was discounted by Adani Global FZE, Dubai with State Bank of India, Sydney on 21/7/2004 i.e. within 05 days of the opening of LC. 3. LC No. SPN/AEL/ 122 dtd.19/ 1/2005 was opened by Allahabad Bank, Ahmedabad for 360 days in favour of M/s. Gold Star FZE, Dubai. This LC was in respect of the import of CPD by AEL from Gold Star FZE under Invoice No.066-GSF/AEL/B/04 dtd.16/ 1/2005 and the payment terms as per the invoice was 360 days from the date of airway bill. The said LC was however discounted by Gold Star FZE, Dubai with State Bank of India, Frankfurt on 24/1/2005 i.e. within 05 days of the opening of the LC. 4. LC No. IMLC03604000042 dtd.1/10/2004 was opened by Development Credit Bank, Ahmedabad for 365 days in favour of M/s.Daboul Trading Co, Dubai. This LC was in respect of the import of CPD by AEL from Daboul Trading under Invoice No.791-DBL/PD/2004 dtd.20/9/2004. The said LC was however discounted by Daboul Trading Co, Dubai with the Bank of India, New York on 4/10/2004 i.e. within 03 days and the amount was credited in Dubai on 5/ 10/2004. Further, the same amount was remitted back to AEL in India and credited to them on 6/10/2004. The entire transaction involving opening of LC, its discounting in Dubai and subsequent return of funds back to AEL was completed in 05 days. 5. Buyers Credit was obtained by AEL on 7/ 10/2004 from SBI, Belgium for payment of Invoice No.PNJ-031013 dtd.12-11-2004 of M/s.PNJ Trading, Hong Kong. The buyers credit was utilized and M/s.PNJ Trading was paid on 7/12/2004 (i.e. within 25 days), however, the terms of payment as per the said invoice was 90 days. The amount paid to M/s. PNJ Trading, Hong Kong was thereafter returned to AEL on 10/12/2004 i.e. within 03 days. 3.1.2 Scrutiny of the import documents and the documents pertaining to the 3utward remittance in respect of the imports also revealed that the payment terms mentioned in the contracts as well as the invoices were not adhered to. For instance - the payment terms of invoice No.Star-038-IND/2005 dtd.13/3/2005 of M/s. Star Impex FZE, Ajman for supply of CPD to M/s. Hinduja Exports Pvt Ltd is 90 clays DA. However, HEPL obtained a Buyers Credit from the State Bank of India, Los Angeles, USA through UTI Bank Ltd, Ahmedabad. The value date (payment date) as per the said Buyers Credit is 31/3/2005 i.e. 18 days from the date of shipment. Apart from the issue of why HEPL should prepay M/s. Star Impex FZE by obtaining credit (especially when no discount is given by Star Impex for prepayment), this also raises questions as to the relevance of the terms of payment as mentioned in the invoices. 3.2.1 In the course of the investigations statements of officials of some of the banks which had handled the import and export documents of AEL and its group companies were recorded. The statement of Shri Ananth V. Kamath, The Regional Manager 'Operations) of Development Credit Bank Ltd, Ahmedabad was recorded. Shri Kamath was shown Import Invoice No.021-STF/DI dtd.9/2/2005 of M/s. Spectrum Trading FZE, Sharjah under which CPD were imported by M/s.Hinduja Exports Pvt Ltd. The ,eims of payment as per the said invoice was at "SIGHT". The buyers credit obtained 'or payment of this invoice was from 30/8/2005 to 1/2/2006 and the value date i.e. the date on which the overseas firm M/s. Spectrum Trading FZE was to be paid was 30/8/2005. In the light of the above Shri Kamath was asked as to how a invoice dated )/2/2005 to be paid at "SIGHT" was being paid on 30/8/2005 i.e. almost after 6 months. Shri Kainath stated that the documents were presented to them by M/s. Hinduja Exports only on 29/ 8/ 2005 and they had acted on their request and extended necessary Letter of Comfort for their availing buyers credit from Bank of India, London. When Shri Kamath was asked whether it was normal for a "sight" document of being paid after 6 months, he stated that it could be paid either by availing buyer's credit or by mutual agreement between the buyer and seller for extension of the due date. Shri Kamath further stated that M/s. Hinduja Exports had not submitted any document showing their supplier having extended the due date. •
- 96. 104 I 8.2.2 Shri Kamathwas shown Invoice No. 108/GSF/04 dtd.24/2/2005 of M/s. Gold Star FZE, Ajman under which CPD was imported by AEL. The payment terms as per the said invoice was at "SIGHT". The buyers credit extended by Bank of India, Paris to AEL, for payment of the above invoice was from 7/ 3/ 2005. Shri Kamath was shown another copy of the same invoice no. 108/GSF/04 dtd.24/ 2/ 2005 of M/s. Gold Star FZE, Ajman which was presen►tcd to the Customs authorities by AEL. The payment terms as per this copy of the invoice was 90 days. In the light of the above Shri Kamath was asked whether the amount due after 90 days as per the invoice could be pre-paid to which he stated that the amount could be pre-paid on the condition that the parties to the agreement should give it in writing for pre-payment and agree to the bankers condition that appropriate interest applying LIBOR prime rate for the early payment period would be deducted from the invoice value. 8.2.3 Shri Siddharth Oza, Manager, UCO Bank, Ahmedabad which handled the import and export documents of AEL, ACPL and MOL during the recording of his statement was shown a letter dtd.5/ 7/ 2005 of M/s. Adani Exports Ltd. submitted to UCO Bank, Ahmedabad in respect of Invoice No.279 dtd.18/06/2005, Invoice no. 281 and 282 both dated 23/06/2005 of M/s. Daboul Trading Co. (L.L.C.), Dubai for the import of cut and polished diamonds from M/s. Daboul Trading Co. (L.L.C.), Dubai. He stated that the payment terms as mentioned in the invoice was at "SIGHT" in all the three invoices. Shri Oza's attention was further drawn to the buyers credit extended by State Bank of India, Manama to M/s. Adani Exports Ltd for payment of the above import invoices on 06/07/ 2005. He was also shown another copy of Invoice No. 279 dtd.18/06/2005 and invoice no. 282 dated 23/06/2005 of M/s. Daboul Trading Co. (L.L.C.), Dubai issued to M/s. Adani Exports Ltd., filed along with Bill of entry by M/s. Adani Exports Ltd before the Air Customs, Mumbai. After seeing the said invoices and comparing it with the invoices submitted by their bank to DRI earlier, Shri Oza stated that both the invoices were same except for the terms of payment. While the terms of payment as per the invoice submitted by them was at "SIGHT", the terms of payment are 90 days as per the invoices filed with the Customs. When asked whether the amount due after 90 days could be pre-paid, Shri Oza stated that the amount could be pre-paid on the condition the parties to the agreement should give it in writing for pre-payment and agree to the bankers condition that appropriate interest applying LIBOR prime rate for the early payment period will be deducted from the invoice value of the bill. Shri Oza stated that M / s.Adani Exports Ltd had not submitted any such agreement for pre-payment of the invoice value. Shri Oza further stated, on the basis of documents, that M/s. Adani Exports had borne the interest in the above case for the period of pre payment. Shri Oza stated that in respect of other companies no such instance of prepayment without deducting the applicable interest had been observed in their bank. This kind of instances of prepayment had taken place only in the case of M/s. Adani Exports, M/s. Aditya Corpex pvt. Ltd. and M/s. Midex Overseas. 8.2.4 The few instances were illustrated to prove the case in point. The payments towards imports on the whole reveal that 1) AEL and the other 5 companies weare making pre-payments even when the terms of payment give them a credit period ranging from 60 days to 180 days. This pre-payment becomes all the more dubious when viewed in light of the fact that no incentive by way of discount or reduction of the invoice amount was given to them for making such pre-payments. 2) The import payments also revealed that AEL and the other 5 companies were making payments to the overseas suppliers of CPD much later than the due date as per the payment terms stated in the import invoices. It was observed that there were a number of cases where the payment made was delayed by almost 6 months. Further, no interest was charged or penalty levied by the overseas suppliers for such late payments. That the above manner of payments of the imports was a norm in so far as AEL and the other 5 companies in India and the overseas suppliers were concerned is clearly indicative of the fact that the overseas buyers/suppliers were being controlled and managed by AEL. Apart from establishing the control of AEL over the overseas firms this also strengthned the fact that AEL and the other 5 companies were making payments overseas only when the remittances for their exports were to be received by them. This is proved by the instances illustrated above and as detailed in Annexure-L to notice, where in the remittances made overseas by AEL were immediately remitted back to them by the overseas firms towards the exports of AEL. There was no adherence to the payment terms agreed upon and as mentioned in the invoices also is a clear indication of the lack of sanctity attached to the terms
- 97. 105 and conditions whichproves that these terms and conditions were merely on paper and it was for AEL to decide and make payments as per their convenience. Which shows the dubious nature of the transaction, created by AEL with intent to generate high export turnover and to avail benefit of Target Plus scheme. 8.3. The contracts under which the CPD were being imported and exported by AEL tip the other 5 companies were also examined. All the exports of CPD by all the six firms were purportedly under a contract with the overseas firms of Dubai, Hong Kong and Singapore. The contracts were all similarly worded and for sake of illustration, the contract No. GIPL/AEL/PD/ 13/2004-05 dated 10/11/2004 between AEL and M/s. Gudami International Pte Ltd, Singapore [RUD- 50] is reproduced below :- "Purchase Order No .GIPL/AEL/ PD / 13L2004-05 Agents 1. Description 2. Rate 3. Total Quantity 4. Total Amount 5. Terms of Payment 6. Shipments 7. Partial Shipment 8. Insurance : Cut & Polished Diamonds. : US $ 25 to US $ 2000 per carat : 30 to 100,000 Carats (+ / - 5 %) : US $ 15,000,000.00 (+ / - 5 %) : Up to 180 days D.A. (CNF Basis) : November/ December 2004 : Allowed : Covered by Brinks/Carrier's 9. Collection bank charges outside India at importer's account 10. A set of non-negotiable documents to accompany with the air consignment. The contract is for supply of Cut and Polished Diamonds by AEL to M/s Kamsun. However, the contract does not in any manner indicate anything about the quality, size or variety of the diamonds which are to be supplied by AEL. Whereas in so far as Cut and Polished Diamonds are concerned the most important aspect of the diamonds based on which they are normally transacted are the cut of the diamond, the colour of the diamond, the clarity of the diamond, the size of the diamond etc. for the reason that the value of the diamond is based on these parameters. Even the rate at which the CPD are to be supplied by AEL to Kamsun as well as the terms of payment are also very vague. As is seen that the contract is for a total amount of US$ 50 lakhs (+/- 5%) against which the total quantity to be exported was in the range of .3000 to 50,000 carats (+/- 5%). Thus any quantity between 3000 to 50,000 carats can 'ae exported but the total value would remain US$ 50 lakhs. Such terms are vague and reflect the absence of any requirement of quality and at the same time it shows that only the value of the export was important in as much as the same was necessary for achieving quantum of exports so as to be eligible for the benefits of target plus scheme. :3.3.1 The contracts under which the CPD were imported by AEL and the other 5 companies were also similar in their contents. Contract No.20/4/DTCP/DIAMONDS/04 dtd.20/4/2004 between AEL and Daboul Trading Co I'LLC), Dubai: "PRODUCTS: CUT AND POLISHED DIAMONDS Q UANTITY IN CARAT RATE/ PER CARAT AMOUNT IN USD ,..,. ra TO 65000 Us $ 10 TO us $ 2800 US $ 8,000,000.00 SHIPMENT : BY AIR ON OR BEFORE 30.06.2004 PARTIAL SHIPMENT PERMITTED. TERMS OF PAYMENT : BY AN IRREVOCABLE LETTER OF CREDIT PAYABLE AT UPTO 180 DAYS FROM BILL OF EXCHANGE/AIRWAY BILL DATE. CHARGES : OUTSIDE INDIA TO OUR ACCOUNT. SHIPMENT FROM/TO ANY HONG KONG/DUBAI AIRPORT TO •
- 98. 106 MUMBAI AIRPORT". • 8.3.2The activities of imports and exports of CPD were undertaken under bond as per Para 4A 18 of the FTP 2004-09. The imported goods were entered into a bond register bond No. wise, for each consignment and the exports were consequently made from the same CPD against the same bond No. to fulfill the export obligaition under Bond. It was seen that in all the cases of imports and exports against each bond the import contracts were filled prior to the date of filing of export contracts. Thus the export contracts were filed to suit the requirement of the imports already made, which was unheard of in normal course of business where the export contracts should have been received first and accordingly the orders/contracts for imports should have been filed according •to the CPD to be exported. This is corroborated by mail dated 17/ 4/ 2004 of Shri C.E.Mahadevan, Deputy General Manager (Banking) of AEL where in Shri Mahadevan asked Shri Tejal Desai, of Adani Global, UAE to send copies of contracts for the goods which have already been exported. "Subject: CONTRACTS PERMANENT ARRANGEMENT FOR EXPORTS Date: Sat, 17 Apr 2004 11:56:54 +0530 REFERS TO OUR DISCUSSION ON THE SUBJECT AS PER THE UNDERSTANDING U ARE TO SEND IMMEDIATELY CONTRACT FOR OUR 3 EXPORT SHIPMENTS FROM INDIA ALREADY EFFECTED COMMUNICATED BY MANOJ. your imports SECONDLY CONSIDERING THE VOLUME OF USD 14 MN PER MONTH IT WILL BE IDEAL FOR YOU TO CONSIDER SENDING A. IN RESPECT OF EXCEL GLOBAL DUBAI - TWO CONTRATS EACH FOR USD 5 MN EVERY SATURDAY TO RECEIVE HERE BY MONDAY FOR OPERATION. b. SIMILARLY TWO CONTRACT S EACH OF 5 MN FROM LEO FOR C)UR EXPORTS FROM INDIA THIS MAY PLEASE BE CONSIDERED FOR ISSUANCE EVERY SATURDAY. WE SHALL SEND A MESSAGE FOR SUCH EXPORT ORDERS EVERY THURSDAY AS DESIRED BY YOU. REGARDS MAHADEVAN" 8 3.3 All the contracts for import and export were similarly worded and all the contracts were arranged for by AEL only. This is evidenced and explained by the document recovered by the Directorate of Forensic Science, Gandhinagar from the computer hard disk of Shri Vipul Desai, Officer, Banking of AEL. In the said document under 'BOTH EXPORTS/IMPORTS FROM DUBAI' - ARRANGEMENT OF EXPORT ORDERS AND/ORDER IMPORT CONTRACTS OF DIFFERENT ENTITIES' it was mentioned that "Arrangement of Export Order/Import contract on request from Ahmedabad - Same day/Max. Next Day - Some advance planning shall be attempted at Ahd'. Further, it was mentioned that "Maintenance of Export Order/Import Contract Format throughout, of independent parties - All have to look different in any case". It is abundantly clear from the above that the contracts under which the CPD were imported and exported by AEL and the other 5 companies were all arranged by AEL only as per their convenience and requirements. It appeared that :- a) M/s. AEL and the other 5 companies indulged in circular transactions of CPD i.e. the same sets of CPD were repeatedly imported and exported with a view to boost the overall turnover so as to achieve the incremental growth of over 100% to enable them to avail the benefits of the Target Plus Scheme. b) The CPD imported by AEL and the other 5 companies were re-exported without carrying out any process carried out on them and the CPD
- 99. 107 were re-exported inthe same form in which they were imported. The only activity carried out in bond was boiling for cleaning and /or seving for sorting them into different size range and/or sorting according to clarity i.e. PK 3 , PK4, etc. c) The value addition of 5% during 2004-05 and 10% during 2005-06 was artificially shown to be achieved to keep in tune with the target plus scheme, though in fact no real intrinsic value addition was achieved. d) The import and export of CPD by AEL and the other 5 companies was all carried out with the different firms based in Dubai, Singapore and Hong Kong and which were directly/indirectly controlled, owned and operated by AEL through the personnel of its wholly owned subsidiaries M/s.Adani Global 147E, Dubai and M/s.Adani Global Pte Ltd, Singapore. e) AEL and the other 5 firms had paid commissions ranging from 2 to 8% to different overseas agents for their exports and the fact of the commission being paid/payable was suppressed from the Customs in as much as they were not declared in either the shipping bills or the export invoices. Additionally, the fact of the commission being paid was also suppressed from the banks and the DGFT in as much as the commission was separately paid and therefore, the same was not reflected in the GR/SDF forms or the Bank Certificate of realizations. The commission thus paid is required to be deducted from the FOB value of the exported goods for the purpose of calculation of value addition. 8.4 In the light of the above it was alleged that the AEL and the other 5 firms had inisdeclared the value of the CPD at the time of export. Though the CPD were re- exported in the same form in which they were imported without any real or intrinsic value addition, AEL and the other 5 companies showed a purported value addition of 5% during 2004-05 and 10% during 2005-06. The purported value addition of 5% during 2004-05 and 10% during 2005-06 shown was only to maintain conformity with the requirement of the Target Plus Scheme and had no nexus with the CPD exported by them. Further, the import and export of the CPD by AEL and the other 5 companies were transactions with the different overseas firms based at Dubai, Singapore and Hongkong which were owned, controlled and operated by AEL through its subsidiaries and therefore, all the transactions pertaining to CPD between AEL and the 5 companies with the different overseas firms were all transactions between firms which had an interest in each other and hence, on this ground alone the declared value is liable to be rejected under the provisions of Section 14 of the Customs Act, 1962. Since the CPD exported by AEL and the other 5 companies were in the same forin in which they were imported without any real and intrinsic value addition, the value declared at the time of export is liable to be rejected as not reflecting the true and correct value. The CPD exported by AEL and the other 5 firms therefore, needs to be redetermined. The true and correct value so re-determined would be equivalent to the value of the CPD imported by AEL and the other 5 companies, without prejudice to the genuiness of the value of such imports. 9.0 LEGAL PROVISIONS IA) It is provided under Section 3 (3) of Foreign Trade (Development and regulation) Act, 1992 that : "All goods to which any order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly." 1B) It is provided under Section 11(1) of Foreign Trade (Development and regulation) Act, 1992 that: "No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made there under and the export and import policy for the time being in force." IC) It is provided under Rule 11 of the Foreign Trade (Regulations) Rules, 1993 I hat : •
- 100. 108 "On the importationinto, or exportation out of, any Customs ports of any goo*, whether liable to duty or not, the owner of such goods shall in the Bill of Entry or the Shipping Bill or any other documents prescribed under the Customs Act, 1962 (52 of 1962) , state the value, quality and description of such goods to the best of his knowledge and belief and in case of exportation of goods, certify that the quality and specification of the goods as stated in those documents, are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe a declaration of the truth of such statement at the foot of such Bill of Entry or Shipping Bill or any other documents." (D) It is provided under Rule 14 of Foreign Trade (Regulation) Rules 1993 that: "(1) No person shall make, sign or use or cause to be made, signed or used any declaration, statement of documents, for the purpose of obtaining a license or importing any goods knowing or having reason to believe that such declaration statement or document is false in any material particular." (El It is provided under Rule 14(2) of Foreign Trade (Regulation) Rules that : "No person shall employ any corrupt or fraudulent practice for the purpose of obtaining any license or importing or exporting any goods". (F1 Section 2(41) of the Customs Act,1962, defines value as " Value in relation to any goods means the value thereof determine in accordance with the provision of sub section (1) of Section 14; Section 14 of the Customs Act, 1962 provides Valuation of goods for purposes of assessment. - (11 For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where (a) the seller and the buyer have no interest in the business of each other ; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill or bill of export, as the case may be, is presented under section 50; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub- section in respect of imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), if the Board is satisfied that it is necessary or expedient so to do it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value, (;..) For the purposes of this section - (a) "rate of exchange" means the rate of exchange - determined by the Board, or (it) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency; (b) "foreign currency" and "Indian currency" have the meanings respectively assigned to theni in clause (m) and clause (q) of section 2 of the Foreign Exchange Regulation Act, 1999. Section 16 of the Customs Act, 1962 provides Date for determination of rate of duty and tariff valuation of export goods. -
- 101. 109 (i) The rateof duty and tariff valuation, if any, applicable to any export goods, shall be the rate and valuation in force, - (a) in the case of goods entered for export under section 50, on the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51; (b) in the case of any other goods, on the date of payment of duty. (2) The provisions of this section shall not apply to baggage and goods exported by post. Section 17 of the Customs Act, 1962 provides Assessment of duty. - (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer. (2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed. (3) For the purpose of assessing duty under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker's note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information. (4) Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty. Section 50 of the Customs Act, 1962 provides :- Entry of goods for exportation. - (I) The exporter of any goods shall make entry thereof by presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export )n the prescribed form. 2) The exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents. section 51 of the Customs Act, 1962 provides:- Clearance of goods for exportation. - Where the proper officer is satisfied that any goods entered for export are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under this Act in respect of the Name, the proper officer may make an order permitting clearance and loading of the goods for exportation. Section 113 of the Customs Act, 1962 provides Confiscation of goods attempted to be .mproperly exported, etc. - The following export goods shall be liable to confiscation :- (d) any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; •
- 102. 110 (i) any goodsentered for exportation which do not correspond in respect of value or• any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77; Section 114 of the Customs Act, 1962 provides Penalty for attempt to export goods improperly, etc. - Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable, - (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act. (iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater. 9.1.1 TARGET PLUS SCHEME The intelligence indicated that the parties exporting CPD by resorting to over- valuation of the goods under Para 4A 18 of FTP 2004-09 are likely to apply for the benefit under the Target Plus Scheme. The office of the Directorate General of Foreign Trade (DGFT), Zonal Office of Mumbai under the Ministry of Commerce were requested to provide details of the applications made by parties under the Target Plus Scheme under DRI, Mumbai's letter dated 27th January 2006 to provide details of the applications under Target Plus Scheme for export of Cut and Polished Diamonds. 9.1.2 The Foreign Trade Development Officer, DGFT, Mumbai forwarded the list: of the applications made in Appendix 17D for the issuance of licence under Target Plus Scheme containing interalia the applications of the following three parties a) M / s Bagadiya Brothers Pvt Ltd (ii) M/s Jayant Agro Organics Ltd and (iii) M/s Midex Overseas Ltd (iv) M/s Adani Exports Ltd and (v) M/s Aditya Corpex Pvt Ltd . It was further informed by DGFT that their office had not received any application under Target Plus Scheme by M/s Hinduja Exports Pvt Ltd. From the details submitted by Joint DGFT, Mumbai , it was clear that the following parties had applied to DGFT for issue of licence under the Target Plus Scheme. Sr.No Name of the Party DGFT File No Year for which benefit applied Amount of Benefit claimed (Rs) 01 M/s Adani 03/98/72/09 2004-05 498,18,68,901/- Exports Ltd /AMO7 02 M/s Aditya 03/98/72/14 2004-05 60,39,16,691/- Corpex Pvt Ltd /AMO7 03 M/s Bagadiya 03/98/72/74 2004-05. 29,49,06,055/- Brothers Pvt Ltd /AMO6 04 M/s Midex 03/98/72/ 44 2004-05 32,78,57,143/- Overseas Ltd /AMO6 05 M/s Jayant Agro 03/98/72/52 2004-05 14,75,05,385/- Organics Ltd /AMO6 On being called upon all the above companies' alongwith M/s. Hinduja Exports Pvt. Ltd., vide their letters dated 21.06.2006, submitted copies of applications made to DGFT, Mumbai for issuance of licence under the Target Plus Scheme. According to the said applications, M/s Hinduja Exports Pvt Ltd had also applied for licence claiming a benefit of Rs. 44,01,40,505/- for the exports affected in 2004-05. Thus in all Target plus benefits to the tune of Rs. 679.62 Crores was claimed by the AEL and its group companies for the year 2004-05.
- 103. Percentage incremental growthDuty Credit Entitlement (as a °A) of the incremental growth) 20% and above but below 25% 25% or above but below 100% 5% 10% 15% (of 100%) 100% and above 111 Scrutiny of the applications made by the parties indicated that these parties had applied for grant of Licence under the Target Plus Scheme, including, the exports of Cut and Polished Diamonds for the relevant year. 9.] .3 The export of Cut and Polished Diamonds by these parties was not eligible towards the FOB value of the eligible exports due to the exclusions given in Para 3.7.5 read with Para 3.7.3 of the Target Plus Scheme . The relevant provisions of the FTP 2004-09 are discussed below: Para 3.7.1. of the Foreign Trade Policy-2004-2009 states that: "The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for a duty credit based on incremental exports substantially higher than the general annual export target fixed (Since the target fixed for 2005-06 is 17 %, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year)." Para 3.7.2. of the Foreign Trade Policy-2004-2009 states that "All Star Export Houses (including Status Holders as defined in para 3.7.2.1 of Exim Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange of Rs 10 crores in the previous licencing year are eligible for consideration under the Target Plus Scheme." Para 3.7.3. of the Foreign Trade Policy-2004-2009 states that The entitlement under this scheme would be contingent on the percentage incremental growth in FOB value of exports in the current licencing year over the previous licencing year, as under: NOTES:- (1) Incremental growth beyond 100% will not qualify for computation of duty credit entitlement. 12) For the purpose of this scheme, the export performance shall not be transferred to or transferred from any other exporter. In the case of third party exports, the name of the supporting manufacturer/ manufacturer exporter shall be declared. ,3) Exporters shall have the option to apply for benefit either under the Target Plus Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the ..otal eligible exports shall be taken into account for computing the percentage ncremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para 3.8.2. ;4) All exports including exports under free shipping bill verified and authenticated by Customs and Gems& Jewellery shipping bills but excluding exports specified under para 3.7.5, shall be eligible for benefits under the Target Plus Scheme (5) In respect of export of Cut & Polished diamonds only those shipments would be taken into account for computation of eligible exports under the scheme where a minimum of 10% value addition has been achieved. Para 3.7.4. of the Foreign Trade Policy-2004-2009 states that Companies which are Star Export Houses as well as part of a Group company shall have an option to either apply as an individual company or as a Group based on the growth in the Group's turnover as a whole. (For the purpose of this scheme the •
- 104. 112 definition of GroupCompany' as given in Chapter 9 will be applicable. Furthermo, only such companies of the Group as are Star Export Houses will be considered). If a Group company chooses to apply based on the export of one or more of its individual Star Export House companies, the entitlement would be calculated considering the export performance of the applicant company during the previous licencing year and current licencing year. It shall be necessary that the adjusted export performance of all the Star Export House companies of the Group during the current licencing year does not fall below the combined performance of all Star Export House companies of the Group in the previous licencing year. In case the Group chooses to apply based on the overall growth in Group's turnover (i.e the turnover of all the Star Export House companies) , any one of the Star Export House companies of the Group may file an application on behalf of all the Star Export House companies of the Group. Para 3.7.5. of the Foreign Trade Policy-2004-2009 states that The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the scheme: a. Export of imported goods covered under Para 2.35 of the Foreign Trade Policy or exports made through transshipment. b. Export turnover of units operating under SEZ/EOU/EHTP/STPI/ BTP Schemes or products manufactured by them and exported through DTA units. c) Deemed exports (even when payments are received in Free Foreign Exchange and payment is made from EEFC account). d) Service exports. e) Rough, uncut and semi polished diamonds and other precious stones, f) Gold, silver, platinum and other precious metals in any form, including plain and studded jewellery. g) Export performance made by one exporter on behalf of another exporter. Para 3.7.6. of the Foreign Trade Policy-2004-2009 states that The Duty Credit may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS), classification of Export and Import items, for their own use or that of supporting manufacturers as declared in Aayaat Niryaat Form' Import of agricultural Products listed in Chapter 1 to 24 of ITC (HS) Classification of Export and Import items except the following shall be allowed: (i, Garlic, Peas and all other Vegetables with a Duty of more than 30% under Chapter 7 of ITC (HS) Classification of Export and Import items. (ii) Coconut, Areca Nut, Oranges, Lemon, Fresh Grapes, Apple and Pears and all other fruits with a Duty of more than 30% under Chapter 8 of ITC (HS) Classification of Export and Import items. (iii) All spices with a Duty of more than 30% under Chapter 9 of ITC (HS) Classification of Export and Import items (except Cloves). (is) Tea, Coffee and Pepper as per Chapter 9 of ITC (HS) Classification of Export and Import items. (v) All Oil Seeds under Chapter 12 of ITC (HS) Classification of Export and Import itc ins. Further, Natural Rubber as per Chapter 40 of ITC (HS) Classification of Export and Import items shall also not be allowed for import under the Scheme.
- 105. 113 Import of alledible oils classified under Chapter 15, shall be allowed under the scheme only through STC and MMTC. Para 3.7.7. of the Foreign Trade Policy-2004-2009 states that Additional customs duty/excise duty paid in cash or through debit under Target Plus shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. Para 3.7.8. of the Foreign Trade Policy-2004-2009 states that Government reserves the right in public interest, to specify from time to time the category of exports and export products, which shall not be eligible for calculation of incremental growth/ entitlement. Further the Government shall have the right to change the eligibility criteria and rate of entitlement under the scheme effective from the date of notification of this policy. Similarly, Government may from time to time also notify the list of goods, which shall not be allowed for import under the duty credit entitlement certificate issued under the scheme. 9.) .4 In accordance with the para 3.7 of the Foreign Trade Policy 2004-2009, Central Board of Excise and Customs issued Notification No.32/2005-Cus dated 08.04.2005 providing full exemption from payment of Customs duties and Additional duty on import of any goods subject to certain conditions. The said notification also interalia debarred following categories for calculation of export performance or for computation of entitlement under the Target Plus Scheme; (i) export of imported goods covered under para 2.35 of the Foreign Trade Policy or exports made through transshipment; (ii) Export turnover of units operating under SEZ/EOU/EHTP/STP/BTP; Schemes or products manufactured by them and exported through DTA units; (iii) deemed exports (even when payments are received in Free Foreign Exchange and payment is made from EEFC account); (iv) service exports; (v) exports of rough, uncut and semi-polished diamonds and other precious stones (vi) exports of gold, silver, platinum and other precious metals in any form, including plain and studded Jewellery; (vii) Export performance made by one exporter on behalf of another exporter. Para 2.35 of FTP 2004-09 deals with the Export of imported goods as under: Export of Imported Goods Goods imported, in accordance with this Policy, may be exported in the same or substantially the same form without a licence/certificate/permission provided that the item to be imported or exported is not mentioned as restricted for import or export in the ITC (HS). The export of CPD by these companies made with effect from 01.04.2005 will not be eligible for the benefit of the Target Plus Scheme by virtue of Notification No. 18/2005 dated 20.02.2006 issued by DGFT, New Delhi. The text of the said Notification is reproduced below: "DGFT NOTIFICATION NO. 48/2005 dated 20.2.2006 Amendment in Target Plus Scheme (TPS) some items excluded from it's purview S.O.(E) In exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 read with paragraph 1.3 and paragraph 3.7.8 of the Foreign Trade Policy, 2004-2009, the Central Government hereby makes the following amendments in the Target Plus Scheme, for the exports effected during 01.04.2005 to 31.3.2006, of the Foreign Trade Policy, 2004-2009, as amended from time to time: •
- 106. 114 1. In Note4 of Para 3.7.3, the words 'and Gems & Jvwellery Shipping Bills' are deletiO. 2. In Para 3.7.3, Note 5 is deleted. 3. In Paragraph 3.7.5 (b), the words 'or Supplies made to such units' are inserted after the word Schemes. 4. Existing Para 3.7.5(e) is substituted by the following - Diamonds and other precious, semi precious stones'. 5. Existing Sub-Para 3.7.5(g) is renumbered as 3.7.5(k). 6. In Para 3.7.5, the following shall be inserted after sub para 3.7.5(f) (g) Ores and Concentrates, of all types and in all forms. (h) Cereals, of all types. (i)Sugar, of all types and in all forms. (j) Crude / Petroleum Oil & Crude / Petroleum based Products covered under ITC HS codes 2709 to 2715, of all types and in all forms. 7. This will take eiit;ci_ for exports from 01.04.2005. This issues in public interest. Sd/- (K. T. CHACKO) Director General of Foreign Trade and Ex Officio Additional Secretary to the Government of India (Issued from F. No. 1/94/180/172/AM06/PC.I)" In view of point 4 of the above Notification, Para 3.7.5(e) of the FTP 2004-2009, which earlier read as " Rough, uncut and semi polished diamonds and other precious stones" was replaced with 'Diamonds and other precious, semi precious stones'. Therefore CPD which were earlier permissible for calculation of export performance or for computation of entitlement of Target Plus scheme will not be allowed for calculation of export performance or for computation of entitlement of Target Plus scheme for exports made on or after 01.04.2005. None of the above six companies filed their application with DGFT for issue of licence under the benefit of Target Plus scheme for their exports made during 2005- 2006. In view of the above notification they would not be eligible for the benefit of the Target Plus scheme for the period after 31.03.2005. They are not eligible for the benefit of Target Plus scheme for the years 2004-05 and 2005-06, even without the amendment, in vie: of the findings as detailed in the notice and also in view of the fact that in 2005-06 an Cne six companies have mostly exported CPD, and as per the above mentioned Notification No. 48/2005 dated 20.02.2006 of DGFT the exports of diamonds with effect from 01.04.2005 will not be eligible for benefit under the Target Plus Scheme. On being called upon, AEL vide their letter dated 02.02.2006 had forwarded the details of the exports affected by all the six companies during 2001-02 to 2005-06 (upto January 2006). Accordingly the details of incremental exports shown to be achieved by the six companies and the consequential Target Plus benefits of Rs. 218.16 Crores likely to be claimed by them for exports in 2005-06 is worked out as per Annexure S. The same is tabulated as under: Sr.No Name of the Party Year of export for which benefit to be claimed Approx. Amount of Benefit likely to be claimed (Rs in Crores) 01 M/s Adani Exports Ltd 2005-06 NIL 02 M/s Aditya Corpex Pvt Ltd 2005-06 43.69 03 M/s Bagadiya Brothers 2005-06 30.57
- 107. 115 Pvt Ltd 04 M/sMidex Overseas Ltd 2005-06 46.98 05 M/s Jayant Agro Organics Ltd 2005-06 19.18 06 M/s. Hinduja Exports Pvt. Ltd. 2005-06 77.74 Total: 218.16 It was alleged that the said parties conspired to fraudulently organize circular trading in Cut and Polished Diamonds by manipulating export prices of CPD showing an artificial 10% value addition in order to show incremental exports to fraudulently obtain credits unde the Traget Plus Scheme. This was done with the intention to later utilize the duty credit scrips so obtained from the DGFT against incremental exports under the Target Plus Scheme for payment of duty on imports to be effected later. The facts disclosed during the investigation established ongoing conspiracy to evade customs duty on future imports by artificially inflating the value of exports and resorting to circular trading in order to show incremental exports under the Target Plus and thus obtain scrips under the scheme to be used for payment of import duty. 9. L.5 Analysis of the import/export activities the above six companies/ firms relating to the imports and exports of CPD during 2004-05 and 2005-06 and the evidences collected in course of investigation were alleged to have revealed that:- (i) The activities undertaken by the firms on the imported diamonds under Section 58 of Customs Act, 1962 as described above do not constitute any change in its form. It was also clear that the license did not permit any manufacturing activity in the warehouse. It also appears that the above activities did not constitute manufacture under the Customs Act or as defined under the Foreign Trade Policy 2004-09. It may be mentioned that the definition of "manufacture" as per para 9.37 in the Foreign Trade Policy 2004-09 stresses on bringing into existence a new product having a distinctive name, character or use. In the aforesaid case no such new product comes into existence. (ii) the export of Cut and Polished Diamonds imported under Para 4 A 18 of the FTP 2004-09 was in the same or substantially the same form. This was confirmed by Shri Lumesh Sanghvi, Manager of AEL in his statement dated 31.1.2006 and by Shri Sameer Vora, DGM of AEL in his statement dated 02-02-2006. (iii) On scrutiny of the applications made under Appendix 17-D for Target Plus Entitlement for the year 2004-2005, it is observed that all the six companies in their applications declared interalia in para VI(a) of the declaration-cum- undertaking that the export of imported goods covered under para 2.35 of the FTP 2004-09 or exports made through transshipments have not been taken into account for calculating the value of exports. (iv) Perusal of sub clause (a) of the Para 3.7.5 of the FTP 2004-09 indicates that export of imported goods covered under Para 2.35 are excluded. Para 2.35 allows export of imported goods in the same form or substantially the same form. A harmonius reading of Para 3.7.5 with Para 2.35 of the FTP 2004-09 would mean that cases where imported goods are exported in the same or substantially same form they are not allowed for calculation of export turn over under the Target Plus Scheme. (v) The description of goods of all the imports by these six parties have always been Cut and Polished Diamonds falling under CTH 710239. And the exports of these six parties are also always Cut and Polished Diamonds falling under CTH 710239. Both the import and the export product falls under the category of "Diamonds, Whether or not worked, but not mounted or set' - Non Industrial -Others" effectively meaning that there is no new product arising in the process undertaken under bond by these six parties. (vi) As detailed in the notice and especially in para 5 and 9 all the six companies resorted to circular trading of the same set of CPD through the •
- 108. 116 group/associate companies ofAEL to artificially boost the export turn ovAIP Therefore the import-export transactioas entered into by the Indian companies cannot be treated at arms length and therefore on this count also the value declared by them for exports is required to be rejected. (vii) The value addition of 5% to 10% shown to be achieved by all the six companies has been fraudulently shown on paper only without any substance as discussed aptly in this show cause notice and especially in para 10 above. (viii) In view of the above, the declared FOB value of the CPD exported by all the six companies by showing value addition of 5% to 10% did not reflect the true and correct value of the exported goods and therefore the same cannot be accepted as transactional value under Section 14 of the Customs Act, 1962. (ix) The fact of commission paid /payable on the exported CPD by all the six exporters to the overseas companies had been knowingly and wilfully suppressed by them from the Customs as well as DGFT authorities. This commission paid / payable is required to be deducted from the FOB value, especially to arrive at the correct value addition in terms of para 4A.5 of the HOP of FTP/HBP 2004-09. (x) On deduction of such commission paid/payable as detailed in Annexure J & Q the value addition which has been shown to be achieved fraudulently, is also reduced well below the level of 5% in 2004-05 and below 100/0 in 2005-06, as required under para 3.7.3 of FTP 2004-2009 for availing the benifit under the Target plus scheme, And therefore the import and export of Cut and Folished Diamonds by M/s AEL and other five companies for the year 2004-05 and 2005-06 were not eligible towards incremental exports for the benefit of Target Plus Scheme. 10.0 In view of the discussion above and the material evidences on record, similar allegations were leveled against all the six companies and their Directors, i.e.: (a) M/s Adani Exports Ltd. and its director Shri Rajesh Adani (b) M/s. Aditya Corpex Pvt Ltd and its directors Shri Deven Mehta and Shri Saurin Shah (c) M/s. Hinduja Exports Pvt Ltd and its directors Shri Deven Mehta and Shri Samir Vora d) M/s. Bagadiya Brothers Pvt Ltd and its directors Shri Omi Bagadiya (e) M/s. Jayant Agro Organics Ltd and its Managing Director Shri Vithaldas Gokaldas Udeshi and (f) M / s Midex Overseas Ltd and its Director Shri Narottam Somani. It was alleged that; by their acts and omissions they have (i) misdeclared the value of export goods in terms of the provisions of Section 14 of Customs Act, 1962 (inflating the export value of the export goods), and thereby filed the declaration of value as required under Section 50 of Customs Act, 1962 read with Section 11 of FTDR Act, 1992 and Rule 11 & 14 of FT(Regulation) Rules, 1993 which was incorrect. (ii) resorted to mis-declaration of the value of export goods in the corresponding export documents before the designated authority which falls within th, ambit of "illegal export" as defined under Section 11H(A) of the Customs Esc, 1962 and the act on the part of the "Consortium" construes as "Smuggling" as defined under Section 2(39) of the Customs Act, 1962. The goods valued as per column 3 & 4 of the Table 'A' below during 2004-05 and 2005-06 (as declared by them respectively); so exported by the respective firm by resorting to mis-declaration in terms of quality and value render these goods liable for confiscation under Section 113(i) of the Customs Act, 1962. (iii) by doing so, they have made themselves liable to penal action under Section 114 of Customs Act, 1962. (iv) through their Directors indulged in misdeclaration, while filing bill of entries, shipping bills and other documents before the Customs and DGFT with an intent to obtain DFCE/TPS under FTP from the office of the Jt. DGFT Mumbai and made, signed and/or used declarations, statements by suppressing /mis-representating facts to the said authority for obtaining DFCE/TPS. (v) through its Directors entered into conspiracy with certain parties/people
- 109. 117 based in Dubai,Singapore and Hong Kong etc. to cause dubious import and export of Cut and Polished Diamonds, to take undue benefits of the Target Plus Scheme under Foreign Trade Policy. entered into a MOU ( through their group company or on their own with other noticee company) or arranged to transfer their export performance knowingly and with ulterior motive of obtaining undue benefit accruing to other company. (I) entered into a MOU ( through their group company or on their own with other noticee company) by virtue of which, it was agreed that the benefits of Target Plus Scheme accruing on account of incremental exports would be gassed on to M/s Adani Exports Ltd or their group company. The ultimate beneficiary of the DFCE/TPS would be the Adani Group of companies. The confidentiality clause in the MOU's clearly bring out the clandestine nature of arrangement right from the stage of physical activities of import and export till the actual availment of benefits on the issue of license. (viii) mis-declared the value addition of 5% and 10% in as much as activities of the Assortment, Boiling, Sieving and Repacking without any manufacturing/ processing or change in form of the CPD cannot by any stretch of imagination contribute to such value addition. Further, even these processes too were not carried out on all the CPD imported and re-exported by them. The CPD were exported in the same form in which they were imported and thereby mis-declared and inflated FOB value of the CPD and at the same time they have failed to declare the correct FOB value of exports. (ix) resorted to circular trading activity in the import and export of CPD by re- importing the same lot on more than one occasion to artificially boost export turnover and despite the existing agency agreements with different overseas firms for payment of commission by M/s AEL and their group of companies failed to declare the details of commission payable by them in any of the shipping bills/GR/SDF filed by them to the Customs for export of CPD during 2004-05 and 2005-06 resulting in mis-declaration of the FOB value to tile emelt' of the commission payable which is otherwise required to be deducted. him' the export value for arriving at the correct FOB value of the exported goods amid therefore have made themselves ineligible for the benefits of Target Plus scheme, if claimed by them amounting to a sum detailed to column I; 0 of the Table 'A, above. (x) The' ai live 1)ireetors were alleged to have indulged personally in the 11..11.11dent and manipulative practice and entered into the criminal -.pit at v with :several person of India and overseas to cause import and l'N.11.+Cl. of L• ri ), involved themselves into mis-declaration of export value of ) durilig the iteriod 2004-05 and 2005-06; indulged into dubious imports :111([ expo. is to take itiulite brnefits of the Target Plus Scheme under Foreign trade y It was known to them and they had reasons to believe that for the sap] < ot aventioti of %,ariotts provisions of Customs Act, 1962 and FTDR Act/1•11'. Hie CH-) exported by them were liable to confiscation under Sec !too 113 of Customs Act, 1962 and thereby made themselves liable to per wider Section i 1.1 of Customs Act, 1962. Table 'A' Benefit Benefit if claimed claimed I ilitFk ilib iiii iiii, 1 Pat I y Mont( 1 .)tio.i M. • - M/s Achim 1,:xix.rts I I 1 Ltd 01_':i.) . ;. f,.6266616582 t 11936363495 • Declared crores) crores) 2004- 05 2005-06 2005-06 498.19 0.00
- 110. 118 2 M/s Hinduja Exports P.Ltd (HEPL) 10641509000 22588069667 44.01 • 77.74 3 M/s Aditya Corpex P. Ltd. (ACPL) 6623081000 11313747006 60.39 . 43.69 4 M/s Bagadiya Brothers P. Ltd. (BBPL) 1627830000 2962620000 ,.. 29.49 30.57 5 M/ s Jayant Agro Organics Ltd. pAop 2017890000 5443690000 14.75 19.18 6 M/s Midex Overseas Ltd. (MOLT 3293353280 8498612966 32.79 46.98 80470279862 62743103134 679.62 218.16 10.1 M/s Adani Exports Ltd (Now Adani Enterprises Limited) and the five other companies along with its directors were called upon to show cause to the Commissioner of Customs, CSI Airport Mumbai (vide Corrigendum to the SCN dated 20.08.2007) as to why:- i) the FOB values declared during 2004-05 and during 2005-06 in respect of the CPD exported by them, as detailed in Table-A, should not be rejected and the same be redetermined under the provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation Rules. ii) Consequent to such redetermination the value of the CPD at the time of its import, as detailed in Annexure -AA, BB, CC, DD, EE, FF to the Show Cause Notice, should not be accepted as the true and correct value of the CPD exported in respect of the six companies M/s Adani Exports Ltd (AEL), M/s Hinduja Exports P. Ltd (HEPL), M/s Aditya Corpex P. Ltd. (ACPL), M/s Bagadiya Brothers P. Ltd. (BBPL), M/s Jayant Agro Organics Ltd. (JAOL) and M/s Midex Overseas Ltd. (MOL) respectively. iii) The cut and polished diamonds of assorted variety during 2004-05 and during 2005-06 (declared FOB value as per Table A above) exported by them in contravention of the provisions of Section 14 8s 50 of Customs Act, 1962 and Rule 1185 14 of FT Rules, 1993, should not be confiscated under Section 113(i) of Customs Act, 1962. However the goods are not available for confiscation. (iv) why penalty should not be imposed upon them under Section 114 of the Customs Act, 1962 for the contraventions as detailed above. Each of the noticees was required to state specifically in his/her written exolanittion, whether they wish to be heard in person, by the Adjudicating Authority, Le Commissioner of Customs, Chhatrapati Shivaji International Airport, Sahar, M11'111)01 /11)0 099, before the case was adjudicated. WRITTEN SUBMISSIONS 11.1.1 M/s HEPL on their behalf and on behalf of their directors Shri. Deven Sliri Samir Vora filed reply dated 28.11.2007. They submitted that the cvntentions raised and actions proposed against them are untenable in law. They it.t-thrt- stilted that the allegations and contentions raised in the show cause notice identical to those raised against the M/s Adani Exports Ltd. (M/s AEL) (now M/s /: • Esiterpriaes lad) ouncl that they arc adopting M/s AEL reply dated 26.10.2007 — and submission made therein as part of their reply. 11.1.2 M/s ACPL on their behalf and on behalf of their director Shri. Saurin Shah filed the reply dated 28.11.2007. It was submitted that the contentions raised and action proposed against them are untenable in law. It was stated that the allegations and contentions raised in the show cause notice were identical to those
- 111. 119 raised against theM/s Adani Exports Ltd. now M/s Adani Enterprises Ltd (M/s AEL) and that they are adopting M/s AEL reply dated 26.10.2007 and submission made therein as part of their reply. It was also submitted that show cause notice has been issued wrongly to Shri Devan Mehta, in the capacity of Director of M/s ACPL, who is not their director. 11.1.3 M/s BBPL on their behalf and on behalf of their director Shri Omi Bagadiya filed reply dated 28.11.2007. It was submitted that the contentions raised and action proposed against them are untenable in law. They stated that they have entered into Memorandum of Understanding with Shri Devan Mehta, Director of M/s HEPL an Adani Group Company to render assistance to achieve the requisite turnover through exports of CPD under the Target Plus Scheme. They stated that they have executed Power of Attorney in favour of Shri Deven Mehta of M/s HEPL. They further stated that pursuant of MOU and Power of Attorney the entire imports and exports of CPD handled by M/s HEPL and would be the proper persons to respond to the various allegations made in show cause notice. Vide letter dated 25.07.2012, M/s BBPL have adopted the reply dated 26.10.2007 filed by M/s AEL. 11.1.4 M/s JAOL on their behalf and on behalf of their director Shri Vithaldas Gokaldas Udeshi filed the reply dated 30.11.2007. It was submitted that the action proposed against them and contentions raised in the show cause notice are unsustainable in law. They further stated that they have entered into Memorandum of Understanding with Shri Devan Mehta, Director of M/ s HEPL which is an Adani Group Company, to render assistance to achieve the requisite turnover of exports under the Target Plus Scheme. They stated that they have executed Power of Attorney in favour of Shri Deven Mehta of M/s HEPL. And Letter of Authority in favour of Ms P.V. Reny and Shri Manish Shah of M/s HEPL. They further stated that pursuant of MOU and Power of Attorney the entire imports and exports of CPD handled by M/s HEPL and would be the proper persons to respond to the various allegations made in show cause notice. Vide letter dated 25.07.2012, M/s JAOL have adopted the reply dated 26.10.2007 filed by M/s AEL. 11.1.5 M/s MOL on their behalf and their director Shri Narottam Somani filed the reply dated 28.11.2007. They submitted that the contentions raised and actions proposed against them are untenable in law. They stated that they have entered into Memorandum of Understanding with Shri Devan Mehta, Director of M/s ACPL an Adani Group Company to render assistance to achieve the requisite turnover through exports of CPD under the Target Plus Scheme. They stated that they have executed Power of Attorney in favour of Shri Saurin Shah and Shri Vishwas Shah of M/s ACPL. And Letter of Authority in favour of Ms P.V. Reny. They stated that pursuant of MOU and Power of Attorney the entire imports and exports of CPD handled by M/s ACPL and they would be the proper persons to respond to the various allegations made in show cause notice. Vide letter dated 25.07.2012, M/s MOL have adopted the reply dated 26.10.2007 filed by M/s AEL. 11.1.6 M/s Adani Exports Ltd. (M/s AEL) (now M/s Adani Enterprises Ltd) and their Managing Director Shri Rajesh Adani filed the reply dated 29.10.2007 ( as amended by their letter dated 14.02.2012) and submission made therein as part of their reply. At the outset they denied all the allegations contained in the show cause notice. They requested personal hearing and cross examination of witnesses. 11.2.1At the outset, the allegations contained in the show cause notice were not admitted by them. It was denied that the FOB value of the goods exported by them was not correct and denied that the FOB value declared by the Company was liable to be rejected under Section 14 of the Custom Act, 1962. It was also denied that the said were liable for confiscation at all or that the noticees were liable for penalty • iincike.Section 114 of the said Act. / • It was contended that the Notice contains various allegations which travel 1i6yond the provisions of Section 14, which are ex-facie irrelevant for the purposes of Sedtion 14 of the said Act. That the scope of enquiry under Section 14 is based on the .04kavkang e es: - • • • -- -la) The value for the purposes of exports, under Section 14 is a deemed value, which is the price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of exportation in the course of international trade where the buyer and the seller have no •
- 112. 120 interest in thebusiness of each other and the price is the sole • consideration; (b) The Notice refers to Customs Valuation Rules, which presumably mean the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as "the Valuation Rules"), which as the title itself indicates, are applicable only in respect of goods imported into India. At the material time, there were no Valuation Rules for goods exported out of India. Section 14 of the said Act is the only provision. dealing with the valuation of goods exported out of India and the said Section, is based on the concept of deemed value, being the price for delivery at the time of exportation in the course of international trade; (c) while the issue involved in the present case is the determination of the value of the said goods exported by the Company, the Notice contains various other allegations which have no bearing on the issue at all. This is beclause Section 14 is not connected and/or linked to all or any of the following:- • Section 14 is neutral to the origin of goods; • Section 14 is not related to processing or manufacturing activity, and the deemed value there under is required to be determined with reference to the price for delivery at the time and place of exportation, in the course of international trade; • Section 14 deals with determination of value, and has nothing to do with Value Addition, and "value" under Section 14 is completely distinct from "Value Addition", as more particularly set out in detail hereinafter; • Section 14 is also unrelated to the issue whether or not the goods exported are in the same or substantially the same form as imported; • Section 14 does not require determination, either in law or on facts, of eligibility of the exports under any export incentive scheme of the Government of India including the Target Plus Scheme ("TPS"). The tests laid down under Section 14 are summarized, as per binding precedents, the following are the tests in accepting or rejecting the declared value of export goods: (i) Where it is shown that the value declared is either higher or lower than the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of exportation in the course of international trade i.e. where the allegation is that the value declared is inflated (overvaluation), the burden lies on the Department to show that there are contemporaneous exports, of identical or similar goods, which have taken place at or about the same time at prices lower than the value declared by the Company; there was no over-valuation of the export value on their part, since contemporary exports of identical / similar goods by others were at or about the same price at which the exports were made. Exhibit-"A" to the submission, are the evidence of contemporary exports of such or like goods, which were at or about the same price as ours. Physical examination of the goods shows that the goods were substandard or inferior or not of the same quality as per the value declared and, in the absence thereof, the allegation of overvaluation cannot be sustained; (iv) Expert examination or market enquiry should show that the correct price of the goods exported was lower than the value declared in case where the allegation is that of overvaluation; (v) The declared value must be accepted where the entirety of the sale proceeds of export has been realised in foreign exchange by the exporter, which admittedly is the actual position in the present case.
- 113. 121 And none ofthe above tests or conditions applicable was found to be existing in the present case. As per Section 14, value is based on the price at which the goods are sold in international trade. The value under Section 14 is not based on (i) whether or not any manufacturing process was carried out, or (ii) whether or not there was any value addition done by or in the hands of the exporter. The provisions of Section 14 are simple and admit of no ambiguity on this account. An exporter can, in the first place, import goods and, thereafter, export the same goods at a higher price, without doing anything with or in relation to the goods. Accordingly, for the purposes of Section 14, the limited issue to be addressed is whether the value declared is based on the correct price as prevalent in the international trade. If the answer is in the affirmative, and such price has been actually realised by the exporter, no other consideration arises. 11.2.2 That the Company, AEL, had already undertaken import and re-export of CPD under bond in the years 2002-03 and 2003-04, when there was no TPS. There was no allegation at all in the Notice that the price declared by the Company in the Shipping Bills is not the value and/or the deemed value of the said goods under Section 14 of the said Act. The Notice alleges that there was circular trading of the same set of diamonds without any value addition and, therefore, the value of the said goods exported by the Company must be re-determined on the basis of the CIF value of the said goods when imported into India. There are fundamental legal differences between valuation and value addition. Valuation ---i Value Addition Determination under Section 14 of the Customs Act Determination as per formula prescribed in the Foreign Trade Policy. This is a deemed value concept related to the selling price of goods in the international market. This is to ascertain the net foreign exchange inflow into the,country. This is based on the price at which such or like goods are offered for sale at the time and place of exportation in the course of international trade that the buyer and seller are not related, and the price is the sole consideration. This is calculated on the basis of a formula, whereby the difference between the CIF value of imported goods and the export goods is divided by the total FOB value of the export goods multiplied by 100 to arrive at the percentage gain in foreign exchange by the country. Need not be based on the actual price of the transaction since it is based on deemed value contract. Based on the actual amounts of the CIF value and FOB of each transaction. Jurisdiction lies with Customs Authorities. Jurisdiction lies with Authorities under the Foreign Trade (Development Regulation) Act, 1992. It was submitted that the Notice, in the instant case, confuses between valuation and value addition. Since enquiry in the Notice is limited to the determination of the value under Section 14 of the said Act, the re-determination thereof on the ground that there has been no value addition is without and/or in excess of authority of law and therefore, the Notice is ab initio null and void. It was further contended that in any view of the matter, Section 14 of the said Act is applicable where goods are dutiable. •
- 114. 122 "'dutiable goods' meansany goods which are chargeable to duty and on which duty has not been paid" The Hon'ble Supreme Court in Associated Cement Companies Limited vs. Commissioner [2001 (128) ELT 21 (SC)] held that where goods are exempted from duty of customs, the same are non-dutiable goods. And in the present case, CPD exported by the Company are not dutiable goods as the same do not appear in the Second Schedule to the Customs Tariff Act, 1975 ("CTA"). It was submitted that where the goods were non-dutiable, the provisions of Section 14 shall not apply. In case of goods exported from bonded warehouse, this is also clear from the provisions of Section 69 of the said Act whereunder a proper Officer has the power to determine the rate of duty, and therefore, consequentially the value, but where there is no rate of duty prescribed, there is no independent power for determining the value of the goods exported from bonded warehouse. Admittedly, there is no duty of customs levied on export of CPD and therefore, there is no power to determine the value thereof under Section 14 read with Section 69 of the said Act. The Notice is, therefore, without jurisdiction and violation of Section 14 o the said Act. 11.2.3 It was submitted that the Company AEL, was a merchant exporter and engaged in the business of trading in agro-products, petroleum and petrochemicals, vegetable oils, coal & coke trading, Iron Ore, Textile Products, Ferrous and Non Ferrous Metals and precious metals including diamonds. The Company was recognised as an Export House by the Government of India in 1991. The Company had been awarded prizes for being the highest foreign exchange earner in the private sector in the country. Various other awards were also granted to the company for its export performance. The Company had grown from export house to the highest category amongst status holders, as a "Premier Trading House", which requires the minimum export turnover of Rs. 10,000 Crores. In the year 1997, the Company set up a 100% subsidiary in Mauritius called Adam Global Ltd., which in turn set up two 100% subsidiaries called Adani Global FZE, UAE and Adani Global PTE Ltd., Singapore (hereinafter respectively referred to as "AGFZE" and "AGPL"). Being 100% subsidiaries, these entities support the Company in its international business. The function of AGFZE and AGPL was to look after its own international business and also work in coordination with the Company in the Company's International businesss. The Company had diversified in various businesses and promoted Mundra private port and SEZ at Mundra, gas distribution, power generation, trading and transmission, ICDs, handling and logistical support to Agro industry, Real estate, Coal mining, Retail, Ship Owning and Chartering, Ship Breaking and Repairs, etc. The total. turnover (sales) of the Company during the last three financial years has been as under: Year Turnover (Rs. In Crores) 200()-07 9742.33 2005-06 9156.43 2004 -05 13417.80 The Group turnover of all the businesses reached Rs.15355.35 Crores in the year 2006-07. The Company being a merchant exporter explored new markets and new commodities depending on the opportunities available in the global trade. Based on commercial considerations and commercial expediency, the Company at different times focused on different products so as to achieve maximum growth and profits. The details of new products started and exited are as per Exhibit-B. The economic policies of the Government is an important factor which world over influences business decisions. Whenever the Central Government had announced the export-import policies, the objective had been, to provide impetus to export and boost exports particularly by status holders, such as Premier Trading House. The Company started export of CPD in 1994 and had been a Member of the Gem and Jewellery Export Promotion Council (GJEPC) since 2001. In 2001-02, the Company re-entered the diamond business and exported rough diamonds worth Rs.83 Crores. In the year, 2002-03, the Company also exported CPD to the tune of Rs.20 Crores. Thus the Company was familiar with the diamond business, and did not entere into the same for the first time in 2003-04. Company obtained a License for bonded warehouse
- 115. 123 under Section 58of the said Act which was issued to them on 02.07.2003. The import and export of CPD was undertaken by the Company in terms of paragraph 4A.18 of the Foreign Trade Policy then in force, which is for ready reference reproduced herein: "4A.18 Private/ Public Bonded Warehouses may be set up in SEZ /DTA for import and re-export of cut & polished diamonds, cut & polished coloured gemstones, uncut & unset precious & semi-precious stones. Import & re-export of cut & polished diamonds & cut & polished coloured gemstones will be subject to achievedment of minimum value addition of 5%" In the year 2003-04, the Government -of India, as part of the FTP announced Special Strategic Package for status holders. One of the benefits conferred on the status holders, as part of the Special Strategic Package, was to grant duty free entitlement certificate based on an incremental grown in exports of more than 25% in the year 2003-04 compared to the exports in the previous year. Encouraged by the performance in 2002-03, the Company undertook exports of CPD of about Rs.1700 Crores (Approx.) in the year 2003-04. The Foreign Trade Policy (FTP) for 2004-09 was announced on 31st August, 2004 which contained the provisions relating to TPS. Between 1st April, 2004 and 31st August, 2004, there was no policy of the Government of India containing any such duty free incentive scheme for export, but nonetheless, the Company continued with all its efforts to export and between 1st April, 2004 and 31" August, 2004, the Company exported CPD worth US$ 337.66 million. The Company continued with exports of CPD in the year 2005-06. By this time, FTP was amended to provide for value addition by 10%, instead of 5% as mentioned in the paragraph quoted hereinabove. This was again based on commercial consideration, whereby notwithstanding the fact that value addition was less than 10% the Company continued to export CPD. The Company had continued its businesses in the import and re-export of CPD even after the TPS coming to end on 31.3.2006. For the purpose of expanding the diamond business, the Company entered into an agreement with M/s.Daboul Trading LLC, Dubai (Daboul/DTC) tied up with AGFZE alongwith M/s.Gudami International Pte Limited, Singapore (Gudami). This Agreement/Arragement with Daboul had been referred to in the statement dated 24.01.2006 and 02.02.2006 of Samir Vora and in the statement dated 31.01.2006 of Bhavik Shah. A copy of the said agreement is annexed hereto and marked as Exhibit- C. 11.2.4The two collateral issues were discussed: (A) Circular Trading (B) Processing (A) Circular Trading The Notice alleges that the same sets of CPD were imported and exported in a circular manner and to give a semblance genuineness to the import/export transaction, the weight of re-imported consignment was marginally varied by removing a few pieces of CPD and adding a few pieces of CPD from those exported from India, or in certain cases, by slightly varying the description. It was submitted that the allegation of circular trading was wholly misconceived and baseless for the following reasons: (i) The Department picked up at random one lot out of the whole consignment to show that the same goods have gone out and come into the country number of times. Each lot was only one part of the consignment. The total weight of the consignment , was much more than the weight of a single lot, and for the Department to allege •orrcular trading, it must be shown that the consignment as a whole was circulated a number of times for supporting allegation that the same set of diamonds were imported and exported. A lot of CPD cannot be isolated from the consignment as a whole. The value is determined for the consignment as a whole and not an individual lot. One lot imported under a different consignment was different from the other lot in another consignment as the goods differ in total weight, number of pieces, rate and size of the consignment as a whole as well as of the particular lot. The two lots belonging to two different consignments cannot be called as a same set of diamonds, notwithstandin- the fact that the weight of •
- 116. 124 (ii) The valueof the lot depends not only on the weight and description, but also on the number of pieces in each lot. The rate of each lot also varies. For example, it was alleged that the lot weighing 3,571.54 Carats under Invoice No.234-AEL/TT/04 dated 5th October, 2004 of the size 0.02-0.22 was re-imported as lot weighing 3,583.49 Carats under Invoice No.913-DBL/PD/2004 dated 11th October, 2004 of size 0.02- 0.22. A perusal of the invoices, however shows that, however, the value of the two lots is US Dollars 364297.08 and US Dollars 390600.41. This itself shows that the two lots were different, and not the same set of diamonds. (iii) As a matter of fact, the rate of CPD of the same size 0.02-0.22 in respect of all the consignments mentioned in Annexures-H and I to the Notice vary from US Dollars 102 to US Dollars 428 which has a difference of about 419.60%. With such a large difference in the value (rate) of each lot, it was impossible to conclude that the goods are the same set of CPD imported and exported in Circular Trading; (iv) In all these cases, the suppliers of CPD and the buyers of CPD were different and distinct entities. There was no allegation that there has been any inter se trading/transfer of the same set of diamonds from one overseas entity to another. To illustrate our point with reference to Sr. Nos. 1.1 and 1.2 of the table at page 90 of the Notice, there was nothing to show that, after the Company exported the goods received from M/s.Tanb Trading EST ("Tanb") to M/s.A1 Shahad Gold and Jewellery and M/s.Choksey Diamonds, the same were transferred to Daboul so as to enable Daboul to resend the same goods to the Company. And there was no evidence, and there cannot be any evidence to show that Tanb and Daboul are one and the same entities. (v) In several cases, having regard to the distances and travel time, it was humanly impossible for the same goods to have been sent to them as alleged. This was self- explanatory from the following instances:- (a) On page 259 of Annexure-H reference is made at Serial No.8 of an import of 372.59 carats of I) cut TLB PK diamonds. It was claimed that the said diamonds mentioned at serial No.8 were re-exported and again imported and the re-import as referred to in Serial No.9. The said contention was on the face of it misconceived. The diamonds mentioned at Serial No.8 were re-exported on 24-06-2004. The diamonds mentioned at Serial No.9 were imported on 21-06-2004. It was absurd to suggest the diamonds re- exported on 24-06-2004 were re-imported on 21-06-2004. (b) On page 5 of Annexure-I, it was claimed that the imported diamonds mentioned at Serial No.6 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.5. The said claim was plainly untenable. Serial No.5 shows that D cut. WH NATTS PK 7-8 diamonds were imported on 4th May 2005 and exported to Singapore on 9th May 2005. Serial No.6 shows that D cut WH NATTS PK 7-8 diamonds were imported from U.A.E. on 7-5-2005. It was inconceivable that diamonds which were exported on 9th May 2005 to Singapore could have been re-imported on 7th May 2005 from U.A.E. (c) On page 15 of Annexure-I, it was claimed that the imported diamonds mentioned at Serial No.5 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.4. The said claim is totally incorrect. The serial no. 4 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 19.05.2005 and exported to Singapore on 24.05.2005. Serial No. 5 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported from U.A.E. on 21.05.2005. It was inconceivable that diamonds which were exported on 24.05.2005 to Singapore could have been re- imported on 21-05-2005 from U.A.E. (d) On page 15 of Annexure-I it is claimed that the imported diamonds mentioned at Serial No.6 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.5. The said claim is totally incorrect. Serial No.5 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 21.05.2005 and exported on 26.5.2005 to Hong Kong. Serial No.6 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 26.05.2005 from U.A.E. It was inconceivable that diamonds which were exported on 26.05.2005 to Hong Kong could have been re- imported on 26.05.2005 from U.A.E. (e) On page 16 of Annexure-I it is clear that the imported diamonds mentioned at Serial No.11 were the very diamonds which were earlier imported as mentioned in Serial No.10. This is totally incorrect. Serial No.10 shows that F cut WH BUGGETS PK 2,3 Diamonds imported on 4.7.2005 were re-exported to Hong Kong on 6.7.2005. Serial No.11 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 7.7.2005 from Dubai. It was inconceivable that the diamonds which were exported to Hong Kong on 6.7.2005 could have been re-imported from Dubai on 7.7.2005. (f) On page 17 of Annexure-I it was clear that imported F/ cut White Tappers diamonds mentioned at Serial No.2 were the very diamonds which were earlier imported and re-exported as mentioned in Serial No. 1. This is totally incorrect. Serial
- 117. 4 ,:- 125 No.1 shows thatF/Cut White Tappers diamonds which were imported on 24.04.2005 were exported to Singapore on 26.04.2005. Serial No. 2 shows that F/Cut White Tappers Diamonds were imported on 24.04.2005 from Dubai. It was inconceivable that the diamonds which were exported to Singapore on 26.04.2005 could have been re-imported from Dubai on 24.04.2005. Several such instances in Annexures-H & I which on the face of it show that the claim made in those annexures that the same set of diamonds were re-imported and exported several times was clearly erroneous. The details of such instances are se' .. out in Exhibit-"D" (vi) This proves beyond doubt that the lot exported to Singapore could not have physically reached Dubai in time for it to be sent back to the Company. (vii) There was a wide variation in the number of pieces contained in the lot which were alleged to have been imported and exported in a circular manner. For the purposes of illustration, the weight of the two lots of size 0.0.2-0.12 exported by the Company at Sr. Nos. 1.1.1 and 1.1.2 of the table at page 90 of the Notice was more than the weight of lots of same sizes exported by us at Sr. No.1.4.2 and Sr. No.1.5.2 and which in turn, shows that there was a vast difference in the number of pieces in those lots. While each lot may have a range of size, more number of pieces means that in that particular lot, there were more diamonds of smaller sizes. It was therefore, irrational and illogical to allege, merely by reference to the weight and description that, the same set of diamonds were imported and exported in a circular manner. (viii) At the same time, it was not permissible to discount the difference in the weight of each lot, howsoever narrow or small. These are high value items and no difference in the weight is insignificant. Any difference in the weight per se also renders the lot and its value to be different. In the circumstances, it was submitted to have been proved beyond doubt that there was no circular trading as alleged or at all. (B) Processing: Sorting/Segregation: It was submitted unassorted cut and polished diamonds were imported and which are taken to their licenced private bonded warehouse since 2003, where the same were subjected to the following processes: a. Boiling: - Impurities such as dirt and grease were removed from the imported diamonds by boiling the same in a boiling unit consisting of water and chemicals. The removal of such impurities enhances the clarity and improves the appearance of the diamonds and thereby their commercial value increases. b. Sieving: A device consisting of sieve plates which are drilled with number of holes was used to sort the unassorted lots. c. Assorting/Grading: This process was carried out manually by skilled labour and the assortment was done based on the 4 Cs namely Colour, Clarity, Carat and Cut. This process was the most important stage of determining the final value of the diamonds. d. Weighment: of the assorted lots was carried out using high precision weighing scales. e. Packing: was carried out after classification of the diamonds in different lots. Unassorted cut and polished diamonds were imported to India for carrying out the above processes, since skilled labour required for carrying out such processes was available in abundance at low cost in India compared to other countries. The fact that the carrying out of the said processes results in value addition of 5% and above is also acknowledged by the Gem & Jewellery Export Promotion Council (sponsored by the Ministry of Commerce, Govt. of India). The assortment therefore, is a genuine commercial activity. 11.2.5The Notice, however, proceeded that the activity of assortment cannot result in the value addition to the extent of 5% or 10% and on this wrongful assumption, it was alleged that the value of the CPD exported by the Company had been artificially inflated. It was internationally well known that value price of the diamonds depend on 4 Cs - colour, carat, cut and clarity. Grading diamonds into lots of different qualities has a direct bearing on their price. The Company submitted that there was no one to one or direct or proportionate relationship between the cost of assortment and the increase in the price of the CPD post assortment. The price of diamond in the international market does not depend upon the cost of mining the diamond In- cutting •
- 118. 126 the diamond orsorting the same. In any of the activities related to diamond industry, sorting with the mining of diamonds until the setoff diamonds in any piece of jewellery, can one say that the sale price of diamond shall vary depend upon the cost involved at each stage. There was no relation between the sale prices of diamonds and the cost incurred at each stage related to the diamond industry. It was contended the author of the Notice or the investigating agency was not an expert in the diamond industry. Neither the simplicity of the operation nor the cost of assortment will determine the sale price of the diamonds in the market. It appears that the processes have been dismissed as not resulting in value addition merely because the same do not appear to be complex and are simple operations. However, it was overlooked that assortment required skill and expertise and the resultant enhancement in the price of the diamonds was manifold which cannot be related or compared to the cost of assortment. And therefore, it was submitted that there had been no artificial inflation in the value of CPD exported by the Company, and that the same had been exported at prices which commensurate with the price in the international market. It was further submitted that they were engaged in the business of export of diamonds for more than 15 years. In the year 2003 we applied for, and were granted, a licence under Section 58 of the Customs Act 1962 to set up private bonded warehouse for carrying out processes of boiling, sieving, assorting, weighing and packing of imported cut and polished diamonds and for re-export thereof after such processes. By Public Notice No.11/98 dated 04.08.98, the Commissioner of Customs at Sahar International Airport, Mumbai stipulated the procedure to be followed with regard to the import of cut and polished diamonds into private bonded warehouses and for their export from such warehouses by achieving a minimum value addition of 5%. And that they had been importing unassorted cut and polished diamonds which are taken to their licericed private bonded warehouse, where the same are subjected to the processes as detailed above. The Central Board of Excise and Customs had by Circular No.40/ 1999-CUS dated 28.06.1999 clarified that the aforementioned activities were allowed to be carried out in private/public bonded warehouses in respect of imported cut and polished diamonds. The said circular also acknowledges that the carrying out of such processes would enable the exporters to achieve a minimum value addition of 5%. The fact that the carrying out of the said processes results in value addition of 5% and above is also acknowledged by the Gem & Jewellery Export Promotion Council (sponsored by the Ministry of Commerce, Govt. of India) in its various letters addressed to the Commerce Ministry. And that as per the procedure set out in the Public Notice No.11/98 the imported cut & polished diamonds were subjected to examination on the basis of first check appraisement system. It was only after such first check examination that the out of charge was granted by the proper officer and the goods were then taken to the private bonded warehouse. As regards the procedure for the export of the cut and polished diamonds after the carrying out of the aforesaid processes of boiling, sieving, assortment etc. the public notice stipulates that the export consignment shall be presented to the Jewellery appraisal for examination and assessment and that the examination and valuation of the goods has to be done under the first check appraisement system. It was only after such examination and valuation that the goods were allowed to be exported. In fact in respect of each of the exports made by us the Exchange Control Declaration (G.R.) Form No.BA bears the export value verification of the customs appraiser. Each such verification made and endorsed on the said declaration by the customs appraiser establishes that the export value declared in the shipping bills had been verified and found to be correct by the customs appraiser. And further the remittance of the full export value declared in each case and verified by the customs appraiser were duly received in all cases. 11.2.6 It was further submitted that the principal contention in the notice was that the overseas buyers were related to them and that there was mutuality of interest between the overseas buyers and them and therefore, the export invoice value was liable to be rejected under section 14 of the customs Act 1962. The allegation was denied by them however for the sake of argument it was submitted that the even if allegation of relationship between them and the foreign buyers was correct it was not a ground to adopt the import value of the cut and polished diamonds as the export value of the diamonds which were exported after carrying out the processes such as boiling, sieving, assortment etc. And if their export invoice value had to be rejected on the ground that the foreign buyers were related to us, then the value to be adopted under
- 119. 127 section 14 shouldbe the value at which contemporary exports of cut arid polished diamonds were made by others. It was further argued that there was no over-valuation of the export value on their part and that contemporary exports of identical / similar goods by others were at or about the same price at which we had effected the exports. And that the evidence relied upon in the notice to alleged inter-relationship between them and the overseas buyers did not relate to all the overseas buyers. And for the overseas buyers there did not exist any basis for contending that they were related and, the price at which the diamonds were exported to these buyers has necessarily to be accepted. And if the export price to them is acceptable under Section 14 of the Customs Act 1962, the same price would also apply in respect of the exports made to the other buyers in respect of whom the notice alleges mutuality of the interest. 11.2.7 It was submitted that the evidence relied upon in the notice to allege inter- relationship between them and the overseas buyers did not relate to all the overseas buyers. In fact the various allegations and evidence relied upon in the notice did not relate to and were not directed against the following overseas buyers: 1) Kwality Diamonds (HK) 2) Seven Stars 3) Jewel Trade - Free Zone 4) Wingate Trading 5) Martin Materials Co. 6) Sphere Trading 7) Harshdiam 8) Kim Tin Ind Ltd 9) Al Khayal Al Dhahabi Jewellery LLC 10) Swebhani Inc. And since in relation to the above said overseas buyers there did not exist any basis for contending that they were related to them. Accordingly, the price at which the diamonds were exported to these buyers was necessarily to be accepted. And once it was clear that there was no relationship between the said buyers and them and that therefore, the export price to them was acceptable under Section 14 of the Customs Act 1962, the same price would also apply in respect of the exports made to the other buyers in respect of whom the notice alleged the mutuality of the interest. 11.2.8The contention of the department that no manufacturing activity had been undertaken in the private bonded warehouses in respect of the imported diamonds was untenable. As it cannot be disputed that the processes of sorting, sieving, boiling result in value addition of minimum 5% which is evident from the Board's circular (Exh.G) and the letter of Gem & Jewellery Association (Exh.H) which clearly bear out that when imported cut and polished diamonds are subjected to the processes of boiling, sieving, assorting etc. there would be a minimum value addition of 5%. The fact that the cut and polished diamonds imported by them had been subjected to the processes of boiling, sieving, assortment, weighing and packing had been confirmed by the statements of Mr. Samir Vora, Deputy General Manager; Mr. Saurin Shah, Sr. General Manager; Mr. Kaushal Pandya, Office Assistant; Mr. Kamraj Pitamber Bodal, Office Assistant; Mr. Lumesh T. Sanghavi; all employees of AEL recorded by the Department. Regarding the allegation that the activities including assorting were carried out and completed within 2 to 4 hours even though each consignment ran into thousands of carats. It was submitted that there was no material or evidence led by the department to show that such assortment cannot be carried out within 2 to 4 hours by skilled labour conversant with the job. 1 1.2.9The contention in the notice is that the notices had resorted to circular trading of the cut and polished diamonds and that the same lot / set of diamonds which were imported and re-exported were again imported and re-exported several times. This conclusion is sought to be arrived at by means of tabulation of details of imports and exports in Annexures H & I of the Notice. In these Annexures the department has grouped together various imports of diamonds of identical/similar description and contended based on such identical/similar description that such imports are repeated •
- 120. 128 imports of oneand the same set of diamonds despite the fact that the weights and rates of imports in each such group vary. However, there were instances in Annex-ures-H & I showing that the dates of import/export shown in the annexures were such that the conclusion that same set of diamonds were re-imported and exported several times is clearly erroneous. The details of such instances set out in Exhibit-D to the submission. Further the CPD under import/export were examined by the officers of the department as per the procedure set out in the public notice No.11 /98 dated 04.08.98 so that at the time of import was that the goods were subjected to first check examination and valuation. Likewise the goods at the time of re-export were subjected to first check examination and appraisement. This would mean that when the goods are imported it would be ascertained on examination by the customs that the goods are mixed/unassorted lot of different types and sizes of diamonds. Similarly, at the time of export it would be ascertained and verified on examination by the Customs that the goods were assorted and carried value addition. The very fact that in each case of import the goods were found on examination by Customs to be mixed/imassorted of various types and sizes as per the invoice would show that these were not the very same assorted goods which had been earlier exported. 11.2.10The notice seeks to rely on statements dated 28th February, 2006 and 3rd January 2007 of Mr. Lumesh Sanghvi in support of the contention that there was circular trading of the cut and polished diamonds. It was submitted that no reliance can be placed on the said statement as the said statements were not voluntary statements and the same were retracted by Mr. Lumesh Sanghvi by affidavits dated 01.03.2006 and 04.01.2007, the copies whereof were annexed as Exhibits-J and K. Even otherwise there was nothing in the said statements to show that Mr.Lumesh Sanghvi had personal knowledge that there was circular trading of the diamonds as alleged. The statements merely record that Mr.Sanghvi was shown certain charts containing details of imports and exports prepared by the Department and the statement purport to record his interpretation and inference drawn from such charts. 11.2.11The Notice further contends on the basis of the flow charts recovered from the hard-disk of Shri Vipul Desai, Banking officer, AEL that these flow charts showed that they had planned a circular movement of the diamonds and that the imports and exports made by them correspond to the circular movement planned as per the said flow charts. The said flow charts relied upon in the notice did not bear correspondence to the actual imports and exports and consequently it cannot be concluded from the said charts that there had been circular trading of the diamonds as alleged in the notice. The department's case that the system as per the document recovered from the hard disk of computer of Vipul Desai was created and put in place in the year 2003. It was contended that the system allegedly created in 2003 was for claiming benefits of target plus scheme in as much as the TPS was not even in force in the year 2003 and the -same came into existence only in September 2004, and that the actual imports and exports made during the years 2004-05 and 2005-06 had no correspondence to what was alleged to have been planned in 2003 as per the said document. The next allegation in the notice in support of the charge of mis-declaration of the export value is that agency commission was paid to overseas agents for exports of cut and polished diamonds effected by them and that such commission had not been deducted for arriving at the correct FOB value of exports in terms of paragraph 4A.5 of the Handbook of Procedures 2004-09. The said contention in the notice is totally misconceived and legally unsustainable. It was contended there was nothing in section 14 which required that to arrive at value of the export goods there should be deducted from the price paid by the foreign buyer to the exporter any commission which the exporter might have paid to any overseas agent and there was no provision in the Customs Act 1962 which mandates the deduction of any commission paid to an overseas agent from such FOB value to arrive at the value under Section 14. Further as per the export invoices and the corresponding shipping bill and bank realization certificate that the entire FOB value as declared in the shipping bill had been paid by the foreign buyers. The contention in the notice that commission paid to the overseas agent was required to be deducted to arrive at the correct FOB value in terms of paragraph 4A.5 of the Handbook of Procedures was also misconceived. Under Section 14 the value of the export goods is the price paid by the overseas buyer to the exporter and the question of deducting from such value the commission paid to overseas agent by referring to para 4A.5 of the Handbook of Procedures cannot and does not arise. Further the said paragraph 4A.5 of the Handbook provides for deduction of agency commission for calculating the value addition in respect of exports of gold/silver/platinum jewellery. The provision for value addition of 5% in respect of re-
- 121. 129 export of cutand polished diamonds from private/public bonded warehouses which is contained in paragraph 4A.18 of the Foreign Trade Policy 2004-09 does not stipulate deduction of agency commission for arriving at the said valuation of 5%. Moreover, no commission had been paid to overseas agents during the year 2005-06 and therefore, the contention that if commission were to be deducted the value addition stipulated for the target plus scheme in 2005-06 was not achieved was clearly erroneous. 11.3.1It was submitted that the alleged intelligence received by the DRI that they had indulged in mis-declaration of FOB value and circular trading of CPD with intend to inflate the export turn-over to fraudulently avail the benefit of Target Plus Scheme was totally false and incorrect. The contention that there was a perceptible spurt in the import and export of CPD consequent upon the introduction of "incremental export promotions scheme" in 2003-04 and on the introduction of "target plus scheme" in 2004-05 was totally extraneous to and had no bearing upon the question of determination of the export value of the CPD exported by them under section 14 of the Customs Act 1962 which was the issue in the notice. That there was nothing abnormal if in response to an export promotion scheme introduced by the Government of India with import incentives there was a rise in the country of exports of CPD. In fact, the target plus scheme in para 3.7.1 of the Foreign Trade PoIicSr 2004-09 itself states that the objective of the scheme was to accelerate growth in exports by providing incentives in the form of import duty credit based on incremental exports. The rise in exports / imports in response to the target plus scheme in fact shows that the objective of the scheme was achieved and therefore, to draw any adverse inference from the rise of exports in response to the target plus scheme was totally misconceived. That imports of CPD showed rise in particular from Dubai and Hongkong was again flicn IL to appreciate. The imports of CPD into India increased not merely from Dubai .ind I longlcong but also from other countries. While the imports of CPD from Belgium was IN.163.33 crores in 2002-03 the same increased to Rs.468.55 crores in 2003-04 ,111(1 to Rs .528.08 in 2004-05. Likewise , the figures of imports from all countries show ,:it the imports of CPD from all countries put together increased from Rs.2155.15 ( to' in 2002-03 to Rs.4417.10 in 2003-04 and further to Rs.11514.46 crores in tiS, The contention in the notice that imports from Dubai and Hongkong showed .1 pen cjiiive spurt on the face of it was incorrect. That even assuming that the ontriition that imports from Dubai and Hongkong alone showed a perceptible rise was correct, it was difficult to understand as to how that had any bearing upon the issue of determination of the value of CPD exported by under the said section 14. the contention that there was a spurt in exports to Hongkong, UAE and Singapore only in 2004-05 and 2005-06 was also incorrect and irrelevant. The exports to Belgium increased from 2941.42 (`000 carats) in 2003-04 to 4373.26 ('000 carats) in 2004-05 whereas exports to Hongkong in fact decreased from 9315.75 (1300 carats) in 2003-04 to 8030.55 (`000 carats) in 2004-05. The data compiled by the Department of Commerce for the years 2003-04; 2004-05 and 2005-06 were Annexed ked as Exhibit- it was submitted that the same would show that increase in exports of CPD from India had taken place to various countries and not just to Hong Kong, Singapore and iJAF, as contended in the notice. And that the mere fact that there was rise in exports of CPD to these countries cannot lead to the conclusion that the value of exports made by them was inflated. That the exports increased not only in value terms and but also in terms of quantity. 11.3.2A comparison was made of the exports made by M/s AEL and the 5 firms to whom the notice is issued with 34 exporters from the Diamond Plaza Clearance Centre and contended on the basis of such comparison that their exports were about 3 time:: the total exports of the said 34 firms put together. It was submitted that the oppioach of the Department in picking up mere 34 exporters from Diamond Plaza and comparing with them to arrive at a conclusion that there was unprecedented owth in their exports is totally misconceived. The 34 exporters selected by the Dep;iri merit those who were exporting the CPD from bonded warehouses. Exports place from bonded warehouses were not the only exports of CPD from India. A huge 1:iyank of exports of CPD from India was otherwise than from the bonded warehouses. If figures of exports for CPD were compared with the total exports of CPD from India it would show that during 2003-04 their exports were 2.52% of the total t'N from India, and in 2004-05 it were 12.21% of the total exports from India and in •200; Ot, !heir exports were 9.18 % of the total exports from India. This would show •
- 122. 130 that the risein exports was in consonance with the rise in exports of CPD from India and there was nothing abnormal about it to warrant any adverse inference of over valuation against us. ' Further that the Annexure-N to the notice while comparing export figures for 2005-06 with those of the other 34 firms, the Department had taken the exports of the said 34 firms upto 31st October 2005, whereas their export figures upto January 2006 had been taken. Such a comparison cannot reflect the correct picture. By comparing the export figures of the 34 firms for a period of seven months with their export figures of 10 months the Department sought to project that their exports were abnormally high when compared to the exports of the said other 34 firms. This was most unfair and reveals a prejudiced mind. 11.3.3 It was submitted that Hinduja Exports Pvt. Ltd. had entered into Memorandum .of Understanding respectively with Jayant Agro Organics Ltd. and I3agadia Brothers Pvt. Ltd. under which Hinduja Exports Pvt. Ltd. assisted the said 2 parties to achieve the exports required to be achieved by them under the Target Plus Scheme and such assistance was rendered by Hinduja Exports Pvt. Ltd. for the consideration and upon the terms and conditions set out in the said Memorandum Of Understanding. Similar Memorandum of Understanding was entered into between Aditya Corpex Pvt. Ltd. and Midex Overseas Ltd. under which Aditya Corpex Pvt. Ltd. assisted Midex to achieve the exports required under the Target Plus Scheme and such assistance was rendered for the consideration and upon the terms and conditions set out in the Memorandum of Understanding. That such Memorandum of Understanding was perfectly legal and did not contravene the provisions of any law much less did it contravene the provisions of the Foreign Trade Policy and the Customs Act 1962 and there was not even any allegation in the notice that such memorandum of understanding was in contravention of the provisions of any law. The notice sought to create prejudice by using the word 'Consortium' when in fact there was not even an allegation in the notice that the Memorandum of Understanding entered with 3 parties was in any way in contravention of any law. That each of the said 3 parties was a public limited company which had its own separate and independent legal existence and each one of the said 3 parties was legally competent to enter into Memorandum of Understanding with Hinduja Exports Pvt. Ltd./ Aditya Corpex Pvt. Ltd. and such transaction was at arms length between each of the said 3 parties on one hand and Hinduja Exports Pvt. Ltd. / Aditya Corpex Pvt. Ltd. on the other. The contention that Adani Exports Ltd., Aditya Corpex Pvt. Ltd., Hinduja Exports Pvt. Ltd. and said 3 parties attained growth in volume of imports and exports of diamonds which even regular and big time diamonds could not was apart from being incorrect was also irrelevant to the issue in the notice. As not only did their exports increase, but the total exports of CPD from India from all other exporters put together had increased during in this period. The word "Consortium" had been used indiscriminately and without understanding the true meaning and legal effect thereof. The word "Consortium" does not mean anything illegally or illicit. The word "Consortium" does not mean the parties ,are "related" as understood for the purpose of the said Act and said RuleS. The allegation of "Consortium" was therefore, meaningless in context of the provisions of the said Act and the said Rules. 11.3.4 The contention that Adani Exports Ltd. achieved unprecedented growth in itsexports from Rs.377.44 crores in 2003-04 to Rs.4838.53 crores in 2004-05 after the introduction of the incremental promotion scheme and that such increase was mainly achieved through export of Cut & Polished Diamonds was totally incorrect. That out of the exports of Rs.4838.53 crores in 2003-04 exports of Rs.3373.26 crores (70%) was of products other than CPD. This would show that there had been overall growth of exports of various commodities in 2003-04 and not just of CPD as wrongly alleged in the notice. In fact the export turnover of CPD in 2003-04 was only 22% of their total turnover in 2003-04 which was Rs.6782.64 crores. As regards the year 2004-05 the export of CPD accounted for only about half of the total exports and the rest of the exports were of studded jewellery of Gold, articles of Gold and other products which were not covered under the Target Plus Scheme. The conclusion sought to be drawn in the notice that there was abnormal rise in export of CPD to avail the benefit of Target Plus Scheme is unwarranted and that there was nothing wrong in achieving increase in exports of CPD on the introduction of the Target Phis Scheme, since the objective of the scheme itself was to boost the incremental growth of exports.
- 123. 131 11.3.5 The factthat Jayant Agro Organics Ltd. diversified its exports by commencing exports of CPD after the introduction of the Target Plus Scheme would not lead to the conclusion of overvaluation of exports. It was perfectly legitimate for an exporter to diversify its exports and to seek the benefit of a scheme introduced by the Government. Further, apart from the exports of CPD, Jayant Agro Organics Ltd also had sizeable exports of other goods for which they had already been granted Duty Free Credit Entitlement Certificate (DFCE) under Target Plus Scheme. 11.3.6 The fact that Bagadia Brothers Pvt. Ltd. diversified its exports by commencing exports of CPD after the introduction of the Target Plus Scheme would not lead to the conclusion of overvaluation of exports. That the increase in exports achieved by Bagadiya Brothers Pvt. Ltd. in the years 2004-05 and 2005-06 was achieved not only by exporting CPD but other goods as well. And that the exports of goods other than CPD was higher. 11.3.7 The allegations that Midex Overseas Ltd. was never into the business of diamonds prior to 2004-05 was totally incorrect. Annexed hereto and marked as Exhibit-N is a copy of extract from Annual report 2003-04 of Midex Overseas Ltd, which shows sales of diamonds to the tune of Rs. 20.1.9 crores. And there was nothing wrong in Midex Overseas Ltd. undertaking exports of CPD in the years 2004-05 and 2005-06 after the introduction of the Target Plus Scheme. 11.3.8 The Directors of Ambitious Trade Link Pvt. Ltd. were Mr. Manish Shah and Mr. Nirav Bhow, neither of whom was a brother-in-law of Rajesh Adani. Hinduja Exports was prior to 10.09.2004 a partnership firm whose partners belong to the Gokuldas Group in Bangalore. This firm was converted into a Private Ltd. Company on 10.09.2004 by the said Gokuldas Group and the company was known as Hinduja Exports Pvt. Ltd. It was on 13.10.2004 that Mr.Devan Mehta and Mr.Samir Vora became Directors of the said company. The shares of the said company were transferred by the Hindujas in favour of Ambitious Trade Link Pvt. Ltd. on 26.08.2005. It could be seen that the exports of CPD achieved by Hinduja Exports during the year 2003-04 were exports with which the Noticee/Company had nothing to do. Those exports were effected when Adani Exports Ltd. had no control over Hinduja Exports. Further, it is portrayed in the notice that 95.62% of the total exports were of Gold and Diamond Exports. However, the exports of Gold had nothing to do with the Target Plus Scheme. The exports of CPD was to the extent of only 72% and not 95%. • 11.3.9 Mr.Sarnir Vora was never a Director either in Milestone Trade Link Pvt. Ltd or in Aditya Corpex Pvt. Ltd. Further, the partnership firm was taken over by Milestone Trade Link Pvt. Ltd. in only October 2004 and therefore, the increase in exports achieved by it in 2003-04 as compared to the exports of 2002-03 was at a time when the Company (AEL) were not in the picture. 11.3.10It was argued that there was no bar in law against an exporter diversifying its exports with a view to avail the benefit of an Export Promotion Scheme like Target Plus announced by the Government. As regards the contention that these companies had either stopped or reduced the exports of CPD after January 2006, it was submitted that the decision to stop / reduce the exports was a purely business decision which had no bearing whatever on the issue involved in the notice. And that MOL was trading in Rough Diamonds in the year 2003-04 and therefore, the extension thereof to the business of Cut and Polished Diamonds was based on commercial considerations. 11.3.11That the alleged interrelationship between Adani Exports Ltd., Hinduja Exports Pvt. Ltd., Aditya Corpex Pvt. Ltd, Jayant Agro Organics Ltd., Bagadia Brothers Pvt. Ltd. and Midex Overseas Ltd. was totally irrelevant and extraneous to the issue of determination of the value of exports made by these companies, which is the only issue in the Show Cause Notice. The alleged interrelationship between the Six exporters can have no bearing whatsoever on the value of the goods respectively exported by them. 11.3.12Mr. Devan Mehta, Director of HEPL being appointed as authorized signatory of BBPL and JAOL was of no significance and had no bearing on the issue of the export valuation with which the notice was concerned. There was nothing irregular or illegal in the said two companies BBPL and JAOL appointing Mr. Devan Mehta of HEPL as the authorized signatory of BBPL and JAOL. Such appointment as authorized
- 124. 132 signatory was inconsonance with the Memorandum of Understanding entered into by HEPL with BBPL and JAOL. As, HEPL was to render assistance to BBPL and JAOL for effecting the exports under the Target Plus Scheme and, therefore, to give effect to the said understanding BBPL and JAOL authorized Mr. Devan Mehta of HEPL as authorized signatory for the purpose of the imports and exports under the Target Plus Scheme. Similarly, there was nothing wrong in MOL appointing Mr. Saurin Shah and Vishwas Shah (director and authorized signatory respectively of Aditya Corpex Pvt Ltd.) as the authorized signatory of MOL because MOL had entered into an MoU with Aditya Corpex Pvt. Ltd. under which Aditya Corpex was to render assistance to MOL to carry out the exports under the Target Plus Scheme. That one of the directors of HEPL, Mr. Samir Vora was the brother-in-law of the director of AEL and that the other director Mr. Devan Mehta had business relationship with AEL since 1994 was in no way relevant to any of the issue including that of the valuation of the export goods. The further contention that the said two persons were appointed as directors of HEPL at the behest of AEL and that they did not have any financial stake in HEPL was equally irrelevant to the issue of the valuation of the export goods. Also that there was no requirement in law that a director of the company must necessarily have a financial stake in the company. Similarly, Mr. Rakesh Shah, one of the directors of Aditya Corpex Pvt. Ltd. was also the brother-in-law of the directors of AEL was totally irrelevant to the issue of the valuation of the goods exported by Aditya Corpex Pvt. Ltd. and AEL. It was settled law that close relationships between directors of two limited companies did not make the said two companies interrelated or one in the eyes of law. AEL and Aditya Corpex Pvt. Ltd. were both limited companies incorporated under the Companies Act, 1956 having distinct and separate legal entity and the mere fact that one of the directors in each was related as brother-in-law cannot make the two companies interrelated. For the same reasons the contention that Mr. Saurin Shah, Director of Aditya Corpex Pvt. Ltd is employee of AEL was also entirely irrelevant. It is settled law that there is nothing illegal or abnormal in there being directors /employees in two or more companies who are related or in one of such company assisting the other in the course of their respective business and also the same was entirely irrelevant to the issue of valuation of the goods exported by these companies. 11.3.13That the statement of Mr. Samir Vora to the effect that HEPL was previously a partnership firm which was taken over by Ambitious Trade Link Pvt. Ltd. and thereafter converted into a limited company was not accurate. Hinduja Exports was prior to 10.09.2004 a partnership firm which was converted into a private limited company on 10.09.2004. Subsequent to such conversion into a private limited company the same was taken over by the Ambitious Trade Link Pvt. Ltd. The contention that HEPL and Aditya Corpex Pvt. Ltd. were taken over by Ambitious Trade Link Pvt. Ltd. and Milestone Trade Link Pvt. Ltd. in view of the export house/trading house status of HEPL and Aditya Corpex Pvt. Ltd. and that assets or liabilities of HEPL and Aditya Corpex Pvt. Ltd. were not taken over. It was submitted the Export House/Trading House status of the said two companies was itself valuable for which the parties to the transaction agreed upon a consideration by way of commercial decision and with which the department can have nothing to do. Further, Mr.Samir Vora in his statement dated 2.2.2006 stated that both Hinduja Exports Pvt. Ltd. and. Aditya Corpex Pvt. Ltd were having export house/trading house status and they were entitled to good banking facility in view of their good track record and the consideration for their take over was decided keeping this in mind. However the averments that Mr. Rakesh Shah was a director in Ambitious Trade Link Pvt. Ltd. and that Mr. Samir Vora was Director of Milestone Trade Link Pvt. Ltd. were factually incorrect. 11.3.14That exports of CPD from all over India had shown rise in 2004-05 and 2005- 06 and the rise of exports was not only in the case of Adani Exports Ltd. and the other five companies. The share of Adani Exports Ltd. and the other five companies in the entire exports of CPD from India remained steady. However, the mere fact that Jayant Agro Organics Ltd., Bagadia Brothers Pvt. Ltd. and Midex Overseas Ltd. diversified their exports by entering into MoU with HEPL and Aditya Corpex Pvt. Ltd. would not lead to the conclusion that the value of such exports had been inflated. The further contention that it was not possible for AEL to achieve an increase in its turnover in 2005-06 and therefore, it achieved a rise in the exports of the other five companies was self contradictory. It was contended that if it was not possible for AEL to increase
- 125. 133 its own exportsturn-over it could not have also increased the turnover of the other five companies. The contention in the notice that AEL had arranged and managed the entire operation of imports and exports of CPD for the other five firms was of no consequence to the issue of valuation of the CPD exported by the other five firms. As in determining the value of the exports effected by other five firms what was relevant was whether the value at which the CPI) were exported was in fact the prevailing export price of contemporary exports by others as it was entirely irrelevant that the exports of the CPD of the said other firms had been arranged and managed by AEL. 11.3.16It was submitted that there was nothing in the statement dated 24.01.2006 of Mr.Deven Mehta to even remotely suggests that the value of the export goods had been inflated. Further, that there were certain inaccuracies in the said statement. The statement of Mr. Devan Mehta that BBPL were to make application to the DGFT for the issuance of DFCE certificate under the category of 15% entitlement was on the face of it wrong since under the policy the DFCE entitlement was never to the tune of 15%. Further, his statement that the list of supporting manufactures like Adani Wilmar Ltd would be put in the application under the Target Plus Scheme was also factually incorrect since there was no such mention in the MoU of putting the name of Adani Wilmar or any other firm as supporting manufacturer in the application. Similarly, his statement that goods would be imported by BBPL and transferred to the supporting manufacturer on high seas was not borne out by the MoU. Likewise his statement that as per the MoU the onus of adjusting the profit was of Adani Group was incorrect since there is no such mention in the MoU. It was submitted that Mr. Deven Mehta had in his statement dated 24.01.2006 categorically said "NO". Yet, the department had in the said statement proceeded to obtain from him information about the import and export of CPD with which on his own showing he was not conversant. That Mr. Devan Mehta also had no proper idea about the policy relating to the Target Plus Scheme would be evident from his answer to question No.23, in which he was asked as follows: "What according to you is the policy provision for clearance of imports under Target Plus Scheme in so far as the product group is concerned?" In reply to the said question, he stated that there was a provision in the Target Plus Scheme relating to broad nexus which requires correlation between value of products exported and value of products imported. This has been distorted so as to project that according to Mr. Devan Mehta there was no correlation between the value of product exported and the value of product imported under the so-called broad nexus in different groups permitted. There was no condition of broad nexus in Para 3_7.16 of the FTP. There was no relevance of the provision for broad nexus found in Para 3.2.5 of the Handbook of Procedures. There was nothing in the above provision which provided for correlation between the value of products exported and the value of the product imported as stated by Mr. Devan Mehta. However, Mr.Rakesh Shah was not director of Ambitious Trade Link Pvt. Ltd nor Mr.Samir Vora was director in Milestone Trade Links Pvt. Ltd. The statement of Mr. Devan Mehta that discussions for arranging incremental exports began before two and a half years in fact show that the discussions when initiated were not with reference to the Target Plus Scheme and were in fact independent of the said scheme. 11.3.17The Show Cause Notice refers to the statement dated 24.01.2006 of Mr. Samir Vora, however, it did not refer to the part of the statement in which it was stated that Daboul Trading LLC, Dubai was the main party who had approached M/s AEL with the proposal for import of unassorted diamonds. It was submitted that Daboul had access to large number of dealers and traders in CPD in the international market across the world. Daboul being aware that India had a large market for assortment of CPD and skilled and cheap labour for the same as compared to places such as Belgium, Israel etc., Daboul proposed to AGFZE that Daboul or its associates/nominees would send unassorted CPD to them or their nominees who would after assortment and other processes such as boiling would export the CPD to Daboul or its associates /nominees. The terms and conditions subject to which such imports and exports of CPD would take place were set out in contract between AGFZE, Daboul and Gudarni. I It was submitted that the statement of Mr. Samir Vora that Hinduja Exports Pvt. Ltd. was fully financed by Adani Exports Ltd was factually incorrect. Finances of
- 126. 134 Hinduja Exports Pvt.Ltd. were raised by borrowings from banks made by Hinduja Exports Pvt. Ltd. itself and further finance was also provided by Ambitious Trade Link Pvt. Ltd. which was holding company of Hinduja Exports Pvt. Ltd. It was also submitted that Ambitious Trade Link Pvt. Ltd. had a separate legal entity distinct from Adani Exports Ltd. 11.3.18That the statement of Mr. Saurin Shah that Aditya Corpex Pvt. Ltd. was taken over in the year 2003-04 was incorrect. The takeover took place only in October 2004, the increase in exports achieved by Aditya Corpex Pvt. Ltd. in 2003-04 as compared to export in 2002-03 were at the time when AEL was not in picture. Mr. Saurin Shah had in the said statement confirmed the fact that the processes of boiling, cleaning, sieving assortment and packing into different grades etc. had in fact been carried out in respect of the imported CPD. 11.3.19That Mr. Omi Bagadia, Director of Bagadia Brothers Pvt. Ltd. confirmed that in March 2005 they entered into the business of import & export of CPD. It appeared that since they were conversant with the CPD trade they entered into MoU with HEPL and no conceivable objection could be drawn to their diversifying into the export of CPD and for that purpose entering into an MoU with HEPL. He also confirmed that he was aware that activities of sieving, assortment etc. were being carried out on the imported CPD and that apart from CPD, they were also assisted in the exports of other goods by Hinduja Exports Pvt_Ltd. 11.3.20That Mr.Narottam Somani, Director of Midex Overseas Ltd. in his statement dated 13.03.2006 confirmed that in December 2004 they entered into the business of import & export of CPD. That since they had no experience in the trade of CPD they sought the assistance of Mr. Samir Vora for carrying out the exports and for achieving the desired export target by making genuine and legitimate exports. There cannot be any conceivable objection to their diversifying their exports and for that purpose seeking the assistance of Mr. Samir Vora. That the granting the Letter of Authority by Midex Overseas Ltd. in favour of Ms. P.V. Reny on the instruction of Mr. Samir Vora and the passing of the resolution authorizing Mr. Saurin Shah and Mr. Vishwas Shah for opening and operating the bank account for the purpose of the CPD trade was pursuant to and in consonance with the MoU and there could be no objection for the same. Arid, apart from the MoU in respect of CPD assistance was rendered to Midex Overseas Ltd. even for exports of other goods in respect of which there was no dispute of the export value and since assistance was rendered in the exports of CPD under the MoU no inference of overvaluation of exports of CPD would be drawn. 11.3.21Mr.Mehul Shah stated that the accounts of Jayant Agro Organics Ltd., Bagadiya Brothers Pvt. Ltd. and Midex Overseas Ltd. relating to CPD were being looked after by Mr. Vishwas Shah. This was in view of the assistance rendered to the said companies for carrying out the imports & exports of CPD in view of the MoU. That AEL rendered assistance to HEPL, ACPL and MOL by opening Letters of Credit for the import of unassorted CPD had no bearing on the question of the valuation of the export of CPD. There was proper accounting of the financial transactions between AEL on one hand and HEPL, ACPL and MOL on the other and that HEPL, ACPL and MOL repaid the amounts advanced by AEL upon receipt of the export remittance by them. 11.3.22Mr. Bhavik Shah stated that he was looking after the financial issues of HEPL, ACPL, MOL, JAOL and BBPL related to import & export of CPD. This was again in view of the fact that under the MoU assistance was to be rendered to the MOL, JAOL and BBPL for carrying out the imports & exports of CPD. And, the fact that AEL rendered assistance to HEPL, ACPL, BBPL and MOL by opening Letters of Credit for the import of unassorted CPD had no bearing on the qUestion of the valuation of the export of CPD. That HEPL, ACPL, BBPL and MOL repaid the amounts advanced by AEL upon receipt of the export remittance by them and, there had been proper accounting of the financial transactions between AEL on one hand and HEPL, ACPL, BBPL and MOL on the other. Mr. Bhavik Shah confirmed that Mr. Rakesh Shah of AGFZE coordinated the business of export and import with Daboul. This supports our submission that Mr. Rakesh Shah was the coordinator and the contact person between Daboul and AEL and / or its nominees. Mr. Rakesh Shah had in turn assigned part of the work to be undertaken by Ms. Mary Joseph who works under Sunil Shah, both employed with AGPL at Singapore. These three persons coordinated the import and export of CPD, follow up of payments and completion of all statutory and procedural formalities including banking.
- 127. 135 11.3.23Mr.Kaushal Pandya, officeAssistant, AEL in his statement dated 6.02.2006 confirmed the fact that the imported unassorted CPD were subjected to assortment and before being exported the same were presented to the Customs office for appraisement. This would clearly show that only after the appraisement, the value was carried out by the Customs officer and only upon such officer being satisfied about the value, the exports were effected. None of these assessments have been questioned and have attained finality. In view of the export value having been appraised and accepted by the proper officer of customs, the charge of overvaluation in the notice cannot survive. I1.3.24Mr. Kamraj Bodal, office Assistant, AEL in his statement dated 30-1-2006 confirmed that imported diamonds used to be subjected to the processes of boding, sieving, assortment and segregation as per quality etc. However, his claim that the export value in each invoice was arrived at by applying the following formula was not correct: Value of exports = import rate x 5% or 10% x weight of diamonds in carats. Exhibit-R, are the copies of export invoices which would clearly show that the aforesaid formula did not hold true in respect of the said export invoices. Besides, as an Office Assistant, Mr. Kamraj Bodal had no role to play in the commercial aspects including pricing or valuation of the consignments, and performed only executory roles. In fact, Mr.Karriraj Bodal had given a contradictory statement. On the one hand he stated that the export value was mentioned in the invoice by applying the above formula and on the other hand he stated that the value was decided by Mr. Lumesh Sanghvi. In view of this contradiction his version on the valuation should not be accepted. The formula claimed by Mr. Karnraj Bodal did not hold true in respect of several invoices. Similarly, Mr.Lumesh Sanghvi had himself denied having himself decided the export value of the CPD. 11.3.25The exports of the said firms were looked after by AEL would not by itself warrant the inference that the export value of the CPD was inflated. All the 5 entities were and continue to be independent private limited companies having their own business, in addition to the business of CPD undertaken with assistance from AEL. It was denied that AEL controlled and/or managed the entities. These entities were not dummies or bogus. These entities are real and did business of CPD with AEL or with the assistance of AEL. The undisputed fact is that the unassorted CPD imported by each of the said firms had been subjected to the processes of boiling; sieving, assortment etc. and such processes admittedly result in value addition of the exported CPD. In each of the cases of export by the said firms the export consignments were appraised and valued by expert appraiser of customs in terms of the customs public notice and such appraiser found the declared value to be correct and at no time the declared export value had been disputed by the appraiser and therefore it did not matter that the imports and exports of the said firms had been arranged by AEL. There was nothing objectionable in Mr. Vipul Popat, partner of CHA firm attended to the import and export of CPD of the said firms was introduced to the said firms by Mr.Devan Mehta of HEPL, because in terms of the MoU between HEPL and the said firms, HEPL was to assist the said firms in carrying out the imports and exports. It was strongly denied that the MoUs entered into with JAOL, BBPL and MOL were in any way fraudulent arrangements. The arrangement agreed upon was that HEPL would assist the said firms to achieve the export target under the Target Plus Scheme and that HEPL shall facilitate such exports in consonance with the provisions and Rules of the Foreign Trade Policy. Thus, the arrangement agreed upon between the parties was a legal one to achieve exports in accordance with the policy. There was therefore, nothing fraudulent about it. Further contenion that the MoU was a clandestine arrangement of transferring export performance from one company to another to artificially boost the export turnover of a company for availing the benefit of the Target Plus Scheme with the ultimate intention of transferring the benefit to Adani Group. This allegation was wholly without substance. The MOU was in consonance with the priorities of FTP and in particular Paras 3.7.5 and 3.7.6 thereof. It was submitted that there was neither anything clandestine nor illegal about the MoU. It would be clear from the Clauses of the MoU that HEPL would have rights as permitted in the policy for utilization of duty credit entitlement to be issued in favour of the exporter. Thus, the understanding and agreement was that HEPL shall have only such rights as would be permissible in the policy. The understanding and agreement was therefore a legal one. Thus, the a
- 128. 136 intention between allthe parites was very clear and that was not to violate any norms of the Policy. I1.3.26The contention that as per the statement of Mr. Rajesh Adani the imports and exports of CPD by HEPL, ACL, BBPL, JAOL and MOL were handled by persons of AEL was of no relevance to the issue of the export value of the CPD. Once it was clear that the unassorted CPD imported by each of the said firms were subjected to the processes of boiling, sieving, assortment etc. and that such processes result in value addition of the exported CPD and further that the export values in each case were appraised and accepted by the proper officer of Customs, it was immaterial that the said imports and exports of the said firms were handled by AEL. 11.4 It was contended that there was nothing in the sub-para 6.1 to 6.4 of the notice to warrant the heading "discrepancies in imports and exports". These paras reveal that AEL and the other firms had been granted permission by the appropriate customs authority for setting up bonded warehouses under section 58 of the Customs Act, 1962 to bring in imported CPD in the warehouses and to re-export them after carrying out the processes of boiling, sieving, assortment and packing. Such activity was permissible in terms of para 4A.18 of the Foreign Trade Policy. 11.4.1 It was denied that the buyers and sellers had any interrelationship and that one of them had interest in the business of the other and that there was circular trading and financial manipulation and mis-declaration of export value. There was no truth in the allegation and the same was totally unsupported or unsubstantiated. There was not an iota of evidence to show the existence of the factuals based on which mutuality of interest could be alleged. And there was nothing in Section 14 of the Customs Act, 1962 which required deduction of any commission paid to an overseas agent out of the FOB value received from the foreign buyers. Further, paragraph 4A.5 of the Handbook of Procedures required deduction of agency commission only in respect of exports of Gold/Silver/Platinum jewellery and not in respect of exports of CPD. 11.4.2 It could be seen that the allegation are totally unsubstantiated. Except for stating that there were transactions of sale and purchase with the overseas companies, and that some of the overseas companies were incorporated in and around the announcement of TPS, no factors, which are necessary to establish "interrelationship" have been stated. The word "interrelationship" has been judicially interpreted and means "mutuality of interest". The expression "mutuality of interest" is found in Section 14 of the said Act, which contains the expression "interest in the business of each other". No mutuality of interest was proved by the mere fact of buying and selling of goods and therefore, the fact that the overseas company either both from or sold to AEL cut and polished diamonds, or both bought as well as sold cut and polished diamonds in its transactions with AEL, did not establish any form or kind of "interrelationship". Further, just because of the overseas companies, which stated to be incorporated in or around September, 2004 did not and could not, in law, lead to any conclusion about interrelationship between those overseas companies and AEL. And that there was no common shareholding or directors or any other factors which could establish control of any form or degree by AEL over the overseas companies except AGFZE and Adani Global Pte Ltd. Accordingly, the facts as stated do not support the allegation of "interrelationship" between the overseas company and AEL and other five Indian companies. 11.4.3The allegation that some of the overseas companies based in Singapore shared common Directors would not be a ground to allege interrelationship between them and AEL and the other Indian companies. It was submitted that insofar as the law in India was concerned, based on the facts stated, there was no interrelationship between overseas company and AEL and the other five Indian companies. 11.4.5 The contention that two Hong Kong based companies (Kwality Diamonds and Seven Stars) and four UAE companies (Excel Global, Jewel Trade, Crown Diamonds and KVK Diamonds) were suppliers as well as buyers of CPD did not in any way lead to the conclusion that the said companies were interrelated to AEL or the Indian entities or that the foreign companies and the Indian Companies had interest in the business of each other. The goods which the foreign companies supplied were unassorted CPD and the goods which they purchased were assorted CPD. The supply of unassorted CPD by the foreign companies to them and the purchase of assorted CPD from them could by no stretch of imagination make them interrelated. The two sets of transactions were both on principal to principal basis where price was the sole consideration. In most of the cases, said two Hong Kong companies and four UAE
- 129. 137 companies had actedas suppliers of unassorted CPD and buyers of assorted CPD in different years and not in one and the same year. Kwality Diamonds had supplied CPD to AEL to the tune of Rs. 21 crores in the year 2004-05 whereas they purchased assorted CPD from AEL in the year 2005-06. Excel Global had supplied unassorted CPD to HEPL and JAOL in 2005-06 but did not made any purchases of assorted CPD in 2005-06. The purchases were in 2004-05 only from AEL. KVK Diamonds had only supplied unassorted diamonds to MOL. It is wrongly shown in the Show Cause Notice that KVK had also bought CPD from MOL. All the companies especially overseas were trading companies in the nature. Further, the above referred companies had not only bought and sold different goods, but had also traded with them in different years. 11.4.6It was pointed out that the table shown in paragraph 8.1 of the notice contained certain errors when compared to the records of the other entities relating to their business of CPD. Serial No.3 of the table showed that Excel Global had bought CPD from JAOL. However, JAOL had never sold CPD to Excel Global. Serial No 5 of the table shows that BBPL had sold CPD to Crown Diamonds which was not correct. Serial No.14 of the table showed Rose Trading as supplier to HEPL which was also incorrect. Serial No.22 wrongly shows that Spectrum Trading had supplied CPD to ACPL, as Spectrum Trading had never supplied CPD to ACPL. Serial No.15 shows Diamond Distributor as supplier to HEPL, whereas there was no such supplier as Diamond Distributor. Sr.No.34 of the table shows Emperor Exports Pte Ltd as buyer of AEL, however, AEL has never supplied CPD to Emperor Exports Pte Ltd. 11.4.7 Further, the contention that most of the overseas companies to whom exports were made by AEL and their groups/associated companies were owned and/or controlled, managed by the relatives and/or employees of AEL and or AEL's overseas group companies was totally false and unsubstantiated. No particulars, whatsoever were furnished of the alleged relatives/employees who were alleged to own / control / manage the overseas companies nor any evidence furnished in support of the said allegation. The contention that most of the overseas companies to whom CPD were exported by AEL and the other five companies, were opened in and around September 2004 i.e. when the Target Plus Scheme was announced. The notice in paragraph 8.1 gave a list of 21 such overseas companies; out of these 21 companies no exports were made by them to the following companies: A) Global Enterprises company B) PNJ Trading C) Top Rich Of the remaining 18 companies only six companies were formed during the period September to December 2004. The rest of the companies were formed much earlier ranging from 1988 to 2000. The contention in the notice that most of the overseas companies to whom exports were made were opened in or around September 2004 is plainly and patently false. The six companies which came into existence in or around September 2004 the process of incorporation which takes 2 to 3 months time would have started prior to the announcement of the Target Plus Scheme. It would be therefore, totally wrong to allege that those companies came into existence to coincide with the Target Plus Scheme. 11.4.81t was submitted that AEL was not concerned with the business activity of each of the individual entity. In terms of the agreement between AGFZE, Daboul and Gudami, the sellers of CPD and the buyers of CPD were nominees of Daboul. Therefore, it did not matter to their Company as to when the individual entity started business or closed down its business so long as the Company recovered the sale proceeds of the exports for which Daboul had guaranteed payment. The allegation that the entire business volumes of entities which are alleged to have closed down was achieved only with AEL and other 5 Indian entities was based on conjuctures and surmises. These entities were nominated by Daboul and on instruction from AGFZE, CPD were exported to the entitites in Hong Kong. A perusal of the documents attached to the letter dated 14.02.2007 of the Consulate General of India, Hong Kong, shows that out of the 5 entities which were alleged to have closed down the business, 4 of them were started by Ms.Nishaben Vijay Gandhi. In her application for business registration she had indicated the nature of business as import-export, trading and commission agent. It was therefore not permissible to conclude that the entire business was with AEL or other 5 Indian companies. No reasons were given for closing down of the business, but significantly the business appeared to have been closed down although the TPS continued until 31st March, 2006. It was submitted •
- 130. 138 that both thestarting and closing down of the business had nothing to do with TPS or the export and import of CPD. On enquiry with AGFZE and through them with Daboul, that Ms.Nishaben Vijay Gandhi closed down the business for personal and domestic reasons. 11.4.9 That there was no connection or relation whatsoever between Ms.Nishaben Vijay Gandhi, proprietor of Wingate Trading, Sphere Trading, PNJ Trading & Little Heart Creation and AEL or the other five Indian firms. There was no evidence to show any interrelationship between the said three overseas companies on the one hand and AEL and the other five Indian firms on the other nor was there anything to show that the overseas companies and the Indian companies had interest in the business of each other. And since the dates of incorporation and stoppage of business of Wingate Trading, Sphere Trading and PNJ Trading alleged in the notice are not substantiated, the contention in the notice that these companies came into existence in September 2004 and closed down suddenly was also not substantiated and must therefore, fail. The further contention that the business volumes of these three companies were achieved only with AEL and its groups/associated companies was also unsubstantiated and not supported by any evidence. 11.4.10F urther contention that while PNJ Trading Hong Kong supplied CPD to the Indian companies, Wingate Trading and Sphere Trading imported CPD with value addition from the Indian companies and it was alleged that this was quite unheard of in normal course of business. It was submitted that there was nothing wrong and abnormal about this. PNJ Trading supplied unassorted diamonds to the Indian companies. The Indian Companies supplied assorted diamonds after boiling, sieving, assorting etc. and it was absolutely normal that there would be value addition after the carrying out of these processes. That apart, while the import from PNJ Trading in 2004-05 was to the tune of Rs.99 crores, the export in 2004-05 to Wingate Trading and Sphere Trading was only to the extent of USD 16 Million. Further, there was no import from PNJ Trading in 2005-06 whereas there are exports to the tune of USD 138 Million to Wingate Trading and Sphere Trading.The contention that the address of Wingate Trading was the same as that of Kamsun Development International was unsubstantiated. The business registration of Wingate Trading, Hong Kong shows that the place of business was different from that of Kamsun Development International Ltd as given in their business registration which was Room 2406, Block-A, Perfect Mount Gardens, I Po Man Street, Shau Kei Wan, Hong Kong. Even assuming while denying that their addresses are same, how that could prove that the said companies were related to the noticee or the other five Indian Companies. And that it was quite common and there was nothing unusual in two independent companies sharing common premises. 11.4.11:Me contention that Global Enterprises supplied CPD to Indian companies whereas Kamsun Development International and Wingate Trading imported the CPD from_the same Indian Companies at a higher price was totally incorrect. Global Enterprises had not supplied any CPD to the Indian companies in the year 2004-05 whereas AEL had supplied assorted CPD to Kamsun in 2004-05. In 2005-06 the supplies made by Global Enterprise were to MOL whereas the imports made by Kainsun in 2005-06 were from AEL and the imports made by Wingate in 2005-06 were from ACPL and Bagadia Brothers. Further it must be borne in mind that what Global Enterprise supplied to MOL were unassorted CPD whereas the CPD imported by Kamsun and Wingate Trading from the Indian Companies were assorted CPD. This did net prove any alleged interrelationship between the overseas companies and the Indian companies. It is contented in para 8.2 (vi) of the notice that: "lnspite of these companies being newly established and new to the trade of CPD, they had shown an unprecedented volume of imports and exports of CPD with the Indian Companies and that too during a short span of over one year, which even the veterans in the business of CPD would have aspired to achieve." it was submitted that this was only an insinuation. It was not clear as to which companies are being referred to by the words "these companies". Paragraph 8.2 (i) to (v) is speaking about three companies viz. Wingate Trading, Global Enterprises and Kamsun Development International. Therefore, the Clause (vi) speaks of "these companies" it would refer to the said three companies. However, Clause (vii) states that the above facts were substantiated by the details of imports and exports of the +nble Liven in Clause (vii), which table refers to
- 131. 139 various other companiesapart from the said three companies. If what is referred to in Clause (vi) are the three companies Wingate Trading, Global Enterprise and Karnsun Development International then the contention that these were newly established was not correct. According to the department itself Kamsun Development was in business since 1998 and PNJ Trading since 2003. Further, the allegation in respect of Wingate Trading was not supported by any evidence. Clause (vii) of paragraph 8.2 states as follows: "the above facts are substantiated by the details of the imports and exports of CPD of these overseas firms as below:" The above facts would mean the facts in Clauses (i) to (vi). These clauses (i) to (vi) speak of the three Hong Kong Companies, whereas the table given in Clause (vii) refers to various other companies from UAE and Singapore. It could not be understood as to how the details of the UAE and Singapore companies can substantiate the facts alleged about the three Hong Kong companies. That apart it is not understood as to how it can be claimed that the UAE and Singapore companies referred to in the table under Clause (vii) were claimed to have been newly established. There was absolutely no evidence disclosed in the notice, such as the date of incorporation or starting of business of the said companies. Moreover, most of the 21 companies referred to in the table at page 42 to 44 of the notice were in existence since 1988 to 2000. 11.4.12In the notice the department attempted to project that the exports were made to 24 overseas companies and that out of these total exports the majority of exports were made to 8 companies in 2004-05 and to 7 companies in 2005-06 and out of these companies 5 companies were established only after September 2004 when the Target Plus Scheme was introduced. The list of companies given in the table given in para 8.2 (vii) is not the complete list of companies to whom exports were made. As regards the 5 companies who are said to have started business after September, 2004, it was reiterated that AEL and other 5 Indian companies exported the goods to the persons nominated by Daboul. The average of the total exports of these 5 entities during the period 2004-05 and 2005-06 was about 40% of the total exports, and the majority of the balance exports of 60% was to other entities established before September, 2004. Nonetheless, irrespective of the date of incorporation or establishment of the overseas entity / buyer to whom CPD was exported, these were independent entities which were not related to AEL or any of the other 5 companies, all the transactions between AEL and the overseas buyers were genuine. The mere fact that the major exports were made to certain overseas companies would not mean that the said companies were related to them or that they had interest in their business or vice versa. Under law even a sole buyer of all the goods of the seller cannot be said to be related to the seller merely because all the goods are sold to him. 11.4.131t was alleged that the total imports made from the overseas companies 79.4 % was effected only from 8 companies in 2004-05 and 84.74% was imported from 7 companies in 2005-06. It was submitted that this in no way established that the importers were related to the overseas companies or had an interest in their business. It was reiterated that the mere fact that the majority of business was with some of the overseas companies did not establish any interrelationship with them. The department furnished business registration records of overseas entities of Hong Kong and Singapore, at the same time, a report dated 30th May, 2006 received from the Consulate General of India, Dubai., UAE confirms that each of the overseas entities in • ., ( • ....UAE were independent and unrelated parties. That some of the Singapore based firms were sharing premises for registered office/residence did not establish interrelationship between the overseas firms and the Idtftan companies. As regards the registered office of Adani Global Pte. Ltd., at 3, ,/,*hicnton Way, No.19-08, Shenton House, Singapore, Adani Global Pte. Ltd. was paying cAb to the owner of the said premises. As regards Mr. Vinod Shantilal Shah, his ) ••"•'',-1 -esidence prior to November 2004 was at 75, Meyer Road, No.17/01 Hawai Tower, ) Singapore which was owned by him. After November 2004 his residence was not 75, Meyer Road, No. 17/01 Hawai Tower, Singapore. It is also contended in that some of the Singapore companies have common directors. It was submitted that this claim in respect of the following companies was not supported by any evidence: a) Gracious Exports Pte. Ltd. • *4 •
- 132. 140 b) Orchid OverseasPte Ltd. And even if the allegation of their being some common director amongst some of the overseas companies were to be correct that would not mean that the overseas companies were related to the Indian companies and the price charged by the Indian companies to the foreign companies could be rejected on that ground. Chang Chung Ling held only one (1) share of $1 in Adani Global Pte. Ltd., Mr.Chang Chung Ling transferred the solitary share of $ 1 held by him in Adani Global Pte. Ltd. in favour of Adani Global Ltd. Joseph Selvamalar was a mere non- executive director, not holding any shares in Adani Global Pte. Ltd. Thus the mere fact that Joseph Selvarnalar who was a director of Adani Global Pte. Ltd. without any share holding was also a director of Orchid Overseas Pte. Ltd., Emperors Exports Pte. Ltd and Gudami International Pte. Ltd. cannot lead to the conclusion that AEL was related to the said three companies or had any interest in their business. Further clarification was given that Joseph Selvamalar and Mary Joseph were one and the same persons. The real name is Joseph Selvamalar, but was popularly known as Mary Joseph. The impression formed in the show cause notice as if these two were different persons was incorrect. The fact that Joseph Selvamalar and Mary Joseph are one and the same persons however, makes no different to the submissions and/or to the conclusions. 11.4.141t was agreed that Mary Joseph was at the relevant time Director in Orchid Overseas Pte. Ltd., Emperor Exports Pte. Ltd and Gudami International. It was also true that Mary Joseph was until 25th August, 2005 Director of Adani Global Pte. Ltd. At the same time, while she holds shares in Orchid and Emperor, Mary Joseph had no shareholding in either Gudami or in AGPL. She was appointed as Director in AGPL for administrative convenience and expediency and help non-executive force, playing no role in the decision making or the business of AGPL. Mary Joseph had no shareholding in AEL and other five Indian companies and also she was not a Director in AEL and the other five Indian companies. Her being a common director in AGPL as well as three other Singapore companies did not make AEL and the other five Indian companies "related persons" within the meaning of Rule 2(2) of the Valuation Rules that any of the four Singapore entities in which Mary Joseph was a common director. The judgments/decisions were relied upon in support of their contention that a common director does not establish relationship, more so, in a case where the common director was not the common director in the buyer and the seller company, who were parties to the transactions i.e. AEL on the one hand and five other Singapore entities on the other hand, besides, the fact that such a director was a non-executive director appointed for administrative reasons only. Further, Mary Joseph was also a Director of Gudami International would not lead to the conclusion that Gudami International was directly/indirectly owned by AEL only. That the proposal in the notice to treat all transactions between AEL and the other Indian companies on one hand and Gudami International on the other as transactions between related persons wherein one had interest in the other was untenable in law. At the highest the department's allegation of their being mutuality of interest was only with regard to Gudami International on account of the fact that some directors/employees of Adani Global Pte. Ltd. were directors/authorized persons of Gudami International. While as submitted above, that was not sufficient to lead to the conclusion that Gudami International was owned by AEL and that therefore, the two were related, significantly there was no such allegation of common directors/employees with regard to the various other overseas companies in Singapore and Hong Kong to whom exports were made. Thus, the value at which exports were made to the other overseas companies could in no event be rejected on the ground of relationship with those companies. Once those values were to be accepted, the value at which exports were made to Gudami International also will have to be accepted since the two were comparable. Further, it was significant to note that the customs authority at Singapore and at Hong Kong where the assorted CPD were exported from India did not dispute the values at which the overseas companies imported the assorted CPD into Singapore and Hong Kong. Although the High Commission of India at Singapore had taken up the matter with the Singapore Customs Authority with regard to the value declared by the overseas companies in Singapore to Singapore Customs, the Customs authority at •
- 133. 141 Singapore has notdisputed the value. This shows that the value declared for export to Singapore is true and correct. 11.4.15It was also contended in the notice that one Manager/partner/director of the following UAE firms/companies was employee of AEL or brother of Director of AEL: a) Gold Star FZE b) Shine Jewellery c) Queen Jewellery d) Adani Global FZE e) G.A. International On the basis of which it was contended that the above UAE firms were related to/ controlled by AEL. Except Adani Global FZE, which was a subsidiary there was no relationship with the others. With Adani Global FZE also the fact that it was a subsidiary (stage two subsidiary/step-down subsidiary) did not mean that price was influenced by such a relationship. Adani Global FZE had no interest in AEL's business. Neither AEL nor any of the other 5 Indian companies effected any exports to either Gold Star FZE, Shine Jwellery, Queen Jewellery or Adani Global FZE. Thus, the alleged relationship of AEL with the said 4 companies was irrelevant to the question of export valuation and cannot be relied upon to reject the export value of assorted CPD exported by AEL and the other 5 Indian companies. On the contrary, import:, of unassorted CPD have been made from Gold Star FZE, Shine Jewellery, Queen Jwellery and Adani Global FZE and the department had not impugned or disputed the import value of the unassorted CPD imported from the said 4 companies. This conclusively establishes that the alleged relationship of AEL with the said 4 companies wan entirely irrelevant. Further, there was no allegation or evidence that any Manager/Partner/Director of the following UAE firms/ companies was employee or director or relative of director of AEL or any other Indian Company: a) Al Shahad Gold & Jewellery b) Choksey Diamonds LLC c) Crown Diamonds FZE d) Excel Global Ltd. e) Leo Diamonds LLC f) DJ Ltd. g) Jewel Trade FZE h) Mine Gold & Jewellery i) Swebani Inc. j) Al Khayal Dhadhabi Jewellery k) KVK Diamonds LLC There was no ground, whatsoever to reject the value at which the assorted CPD were exported to the above 11 UAE firms. The export value of exports to these firms must therefore be accepted. Once it was clear that there was no relationship between the above 11 UAE firms on one hand and AEL and the other 5 Indian companies on the other, and that therefore the value of goods exported to them has to be accepted, it must follow that the value of goods exported to GA International UAE has also to be accepted because the goods exported to GA International were "such or like" goods and at the same price as the goods exported to the said other 11 UAE firms. Consequently the fact that the director of GA International was brother of the directors of AEL was totally irrelevant. The fact that Mr. Vinod Shah a director of Adan, Global FZE, UAE alongwith Mr. Rakesh Shah, was also irrelevant because no exports have A been made to Adani Global FZE and on the contrary the value of imports made from Mani Global FZE has not been impugned or disputed in the notice. It was clarified that Rakesh Shah, who was Director of Adani Global FZE was a different Rakesh Shah and not a relative of the Director of AEL. 11.4.16Mr. Manoj Chandrashekaran Nair, the owner of Shine Jewellery, UAE was once upon an employee of AEL and thereafter the employee of Adani Global FZE was of no consequence or relevance since no exports were made to Shine Jewellery and on the contrary the value of imports made from Shine Jewellery have not been impugned or disputed in the notice. Likewise the contention that Mr. Sudhakar the owner of Queen Jewellery was an employee of AEL was also of no relevance since no exports were made to Queen Jewellery and on the contrary the value of imports mace from Queen Jewellery have not been impugned or disputed in the notice. •
- 134. 142 11.4.17That Mr. BhavikShah of Adani Agro Pvt. Ltd. used to be in touch with Mr. Sudhakar at Dubai, Ms. Mary at Singapore, Mr Rajesh Sagar of Adani Global FZE, Mr Rao of Adani Global FZE, Mr. Sayan Patel of Adani Global and others through email correspondence regarding confirmation of remittances sent and received with respect to import and export of CPD did not warrant the conclusion that the effective control of all these overseas companies was by AEL. As to how if Mr. Bhavik Shah remained in touch with some of the employees of Adani Global FZE or Adani Global Pte. Ltd regarding the position of remittances could be contended that the overseas companies were under the control of AEL. It was normal for AEL to be in touch with its employees in UAE and Singapore to give update of the various remittances. The contention that Mary Joseph and Sunil Shah were working in Adani Global Pte Ltd. Singapore and that Mr. Rakesh Shah was working with Adani Global FZE did not in any way prove relationship of AEL with the independent and unrelated Singapore and UAE companies to whom exports were made. The mere fact that the said employees of Adani Global coordinated with the overseas companies did not mean that AEL was related to or controlled the said overseas companies. Similarly, the contention that Mr. Bhavik Shah and Mr.Mahadevan and Mr. Samir Vora also used to communicate with the persons mentioned at para 8.8 could not lead to the conclusion that AEL was related to or controlled the overseas buyers. 11.4.18The firms Queen Jewellery, Shine Jewellery and Adani Global FZE of UAE were all firma which were directly/indirectly owned and controlled by AEL and that therefore, the transactions of AEL and the other 5 Indian companies with the said UAE firms cannot be termed to be at arms length was not only baseless but also entirely irrelevant to the question of valuation of the exported goods. As there were no exports to the said UAE firms and on the contrary the value of imports made from them was not challenged in the notice but was accepted. That the AEL was related to G. A. nternational was also immaterial because the exports made to G. A. International were at prices comparable to the exports made to unrelated UAE firms. 11.4.191t is contended that exports were being made to the following UAE firms and that the e-mails referred to in paragraph 8.11 would show that the exports, banking and finance of these UAE firms was being managed and controlled by AEL: a) Daboul Trading b) Al Shahad Gold and Jewellery c) Excel Global Ltd d) Mine Gold and Jeweller), e) Crown Diamond f) Tanb Trading g) Chokshey Diamonds LLC h) Leo Diamonds h. was submitted that a perusal of the e-mails set out in paragraph 8.11 would show that they had nothing to do with the exports to the above UAE firms and that therefore, the conclusion sought to be drawn in paragraph 8.11 with regards to the said UAE firms being controlled by AEL wass totally incorrect. (i) In the first e-mail dated 15th February, 2005, Mary Joseph is communicating the User Id and password of Gold Star FZE. Firstly, there were no exports made to Gold Star FZE and therefore, any alleged relationship between AEL and Gold Star FZE sought to be inferred from the said e-mail was of no relevance to the question of valuation of the exported CPD. Secondly, Gold Star FZE was based in UAE and for its own business reasons, it was desirous of opening an account in Singapore. However, since Gold Star FZE did not have the requisite staff in Singapore, Mary Joseph who was in Singapore at the instance of Mr Rakesh Shah of Adani Global FZE, merely rendered assistance to Gold Star FZE in opening an account in Singapore and by the mail in question the User ID and password was being communicated to Mr.Rakesh Shah for being further intimated to Global Star FZE. This e-mail in no way indicated that the UAE companies • , mentioned at paragraph 8.11 to whom exports were being made were • ::controlled by AEL. Nor did this email establish that the bank account of '77.:.go1d Star FZE was under the control/operation of AEL as. -In the next e-mail dated 20th January, 2006 of Vipul Desai it was stated that ‘. „ they were to start remittance for import of diamonds and that the first • k• • • /remittance would be made to Excel Global, Dubai from whom unassorted
- 135. 143 CPD were imported.This once again was in relation to sending payment in respect of import of CPD from Excel Global. This had no relation to the valuation of the export of assorted Diamonds. This e-mail did not in any way support the contention and conclusion that the eight UAT., firms to whom Diamonds were exported were being managed and controlled by AEL. (iii) The next email dated 5.10.2005 of Mr.Savan Patel of Adani Globai, Dubai to Mr. Vipul Desai of AEL, informing Vipul Desai that remittances for imports made from Excel should no more be made in Excel's Account in United Arab Bank but should be made to Excel's account in Ras al khiinas Bank. This was because Excel wanted the payment to be made in Ras al Khimas Bank and not United Arab Bank. This had nothing to do with the exports made to the 8 UAE firms mentioned in para 8.11 and did not lead to the inference that the said 8 UAE firms to whom exports were made were being controlled by AEL. (iv) The next email dated 5.10.2005 from Mr.Sudhakar by which he was informing the account number of Excel Global in RAK Bank so as to enable remittance to be made to that account for unassorted CPD imported from Excel Global. Once again this email had nothing to do with exports of assorted CPD made to the 8 UAE firms mentioned in para 8.11 and did not in any way lead to the conclusion that the said 8 UAE firms to whom exports were made were being controlled by AEL. (v) The next email dated 16.02.2005 written by Manoj by which he was intimating that no further payment should be made to the account of Shine Jewellery (in which Manoj was a director). Once again, there are no exports to Shine Jewellery and therefore, the said email had nothing whatever to do with the question of valuation of exports. The said email did not in any way indicate that the 8 UAE firms mentioned in para 8.11 to whom exports were being made were managed or controlled by AEL. It was further contended in the notice that since the said email was sent by Manoj using the email ID of Daboul Trading Company it would follow that Daboul Trading Company was controlled and managed by employees of AEL and further that Daboul and Shine Jewellery were interrelated and were under control of AEL. It was submitted that no exports were made to Shine Jewellery and, therefore, any alleged relationship with Shine Jewellery was irrelevant to the question of valuation of the exports. Secondly, to suggest that merely because Manoj used the email ID of Daboul it must follow that the Daboul was controlled by AEL was totally wrong. The mere fact that Manoj sent one email using email ID of Daboul did not establish that Daboul was controlled by Manoj. (vi) Next email dated 16.5.2005 from Sunil Shah informing that Gudami International had an account with Absa Bank and that Absa Bank had expressed inability to undertake transactions for a month and therefore, another account of Gudami International had to be opened. This email can in no way establish that the 8 UAE firms mentioned in para 8.11 to whom exports were made were being controlled by AEL. The contention that this mail established that even the bank account of Gudami International was opened by AEL only and that therefore, Gudami and AEL were related was incorrect. It was evident from the said mail that Gudami International had an account with Absa Bank, which was unable to undertake transactions for a month and for that reason Sunil Shah had to assist Gudami International to open an account in another bank. The further contention that Mary Joseph who was employee of Adani Global Pte Ltd was director of Gudami International and that therefore, Gudami International was directly/indirectly owned by AEL was also untenable as explained earlier. How merely because an employee of Adani Global Pte Ltd was director of •tt Gudami International that would make Adani Global Pte Ltd the owner of Gudami International, particularly when such employee of Adani Global Pte • !. :- • , • Ltd held no shares of Gudami International. • .;;.vii) The next email from Mr. Kaushal Kabra to Mr.Gautarn Adani this email 4 s • / , I discusses the transfer of shares in AEL to Daboul Trading and its cost ‘‘.1 / • • " implications are discussed and that this established that Daboul Trading ,: • belonged to / managed and controlled by AEL. The said contention is preposterous. Merely because there was a proposal by which Daboul was contemplated acquiring shares in AEL (which of course never materialized) would not mean that Daboul was owned/managed and controlled by AEL. Because someone contemplates buying shares in a company would not lead •
- 136. 144 to the inferencethat, that person belongs to or managed or controlled by the Company. It wa:; argued that none of the emails referred to above in any way establish that the 8 UAE companies to whom exports were made were controlled/ managed by AEL. And that in all the emails the email IDs "Adanigroup.com" and "Adani-global.com" belong tc Adani group of companies was of no relevance and had no bearing on the question of valuation of the exports to the said 8 UAE companies. 11.4.20Paragraph 8.14 of the notice referred to certain emails and on the basis of which the following conclusions are drawn: a) Gudami International, Singapore, who is a buyer of CPD from AEL was receiving funds from Dubai based firms to enable it to pay for its purchases from AEL. b) Funds were transferred from Gold Star, Daboul Trading, DJ Limited and Spectrum Trading to Gudami International and the funds so transferred to Gudami International were utilized to make payments on behalf of Orchid Overseas to Hinduja Exports Pvt. Ltd. for CPD exported by Hinduja Exports Pvt. Ltd to Orchid Overseas. c) Funds were transferred from Mine & Gold Jewellery, UAE to Gracious Exports Pte. Ltd., which in turn were transferred by Gracious Exports Pte. Ltd. to Planica Exports Pte Ltd. for making payments by Planica Exports Pte Ltd. to Hinduja Exports Pvt. Ltd. for CPD exported by Hinduja Exports Pvt. Ltd. to Panica Exports Pte. Ltd d) Funds were transferred by Tanb Trading UAE to Gracious Exports Pte. Ltd. who utilized the same for making payment to Aditya Corpex Pvt. Ltd. for exports of CPD made by Aditya Corpex Pvt. Ltd. to Gracious Exports Pte. Ltd. It was contended in the notice that on the five occasions the Singapore buyers to whom CPD were exported by them, funds were received by the Singapore buyers from the Dubai Companies to make payment for the CPD exported by them to the Singapore companies. It was further stated that the funds which the Dubai Companies transferred to the Singapore buyers were those which were remitted by them and the other five Indian companies to the Dubai Companies from whom the unassorted :.:PD were imported. In response to these contentions, it was submitted that the amount of payments received by AEL and the other five Indian companies from the Singapore buyers as reflected in the emails constituted a meager less than 1% of -he total payments received from the Singapore buyers by AEL and five other Indian companies. Further, after taking into account all the emails contained in Armextre-M to the notice, the total payments received from Singapore buyers from funds transferred to them by other overseas companies constitute a meagre 4.66 % of the total payments made by the Singapore buyers to AEL and the other five Indian companies. Thus, except for a 'mere 4.66 %, (which is also denied) the rest of the payments received from Singapore were not from funds transferred to Singapore buyers by other overseas companies. Secondly, that a small percentage of payments made by the Singapore buyers for exports made to them were out of funds transferred to them by other overseas companies cannot in any way have any bearing on the issue of the valuation of the exports. So long as Indian exporters have received payment of the full declared export value it was irrelevant that in respect of a small percentage of the payments made by the foreign buyers the funds for making such payments were received by them from other overseas companies. Thirdly, that a small percentage of the payments made by the foreign buyers to them were from funds transferred to them by other overseas companies cannot in any way establish any interrelationship between us and the foreign buyers. In the year 2004-05 from April 2004 till 18th August 2004 AEL received inward remittance of USD 14.52 crores for exports of assorted CPD made by them and as against this nc. outward remittance for imports of unassorted CPD was made by them. There was no question of any portion of the said inward remittance of USD 14.52 crores for experts made by us having come out of any outward remittance made against imports made by them. During the entire period from April 2004 to March 2005 the inward remittances for exports of assorted CPD made was throughout in far excess of the outward remittances against imports of unassorted CPD made by them. There can be no question of any portion of such inward remittance coming out of the outward remittance made by them. Even during 2005-06, from April 2005 till December 2005, the inward remittances for exports of assorted CPD made were in
- 137. 145 excess of theoutward remittances made by them against the import of unassorted CPD. It was only for a short period during January 2006 to March 200(i that. the outward remittances were in excess of the inward remittances. However, when the figures of the entire year 2005-06 were taken into account the inward remittances against exports of assorted CPD exceeded the outward remittances. Similarly, during 2006-07, the inward remittances were always in excess of the outward remittances. It was argued that the allegation in the notice that the inward remittances against exports of assorted CPD were out of the funds remitted by them abroad against import of unassorted CPD was baseless. Regarding the various emails received from Mary Joseph giving the details of movement of funds it was submitted that Mary Joseph being in Singapore was coordinating between the various overseas companies and AEL and following up with the overseas companies for the payments and was attending to procedural formalities, including banking. Thus, the mere fact that Mary Joseph by various emails was following up the payments and intimating the position about the movement of funds did not and cannot mean that she or AEL through her were controlling the various overseas companies. Keeping track and informing of the position of the payments from time to time can by no stretch of imagination mean that Mary Joseph was controlling the various overseas companies. It was submitted that the conclusion sought to be drawn that the email referred to pertained to export of CPD and that it showed that the import and export of CPD by the overseas firms in Dubai, Singapore and Hong Kong were under the control of AEL was untenable in law. Firstly, the authenticity of the email cannot be accepted in as much as it bears no date. It was inconceivable that an email which was alleged to have been received and retrieved from the Hard-Disk bears no date. Thus, no reliance can be placed on this email. Secondly, assuming while denying that the said email was authentic, in any event there was no reference to CPD in the said email. The notice proceeds on mere conjecture that the said email was in respect of CPD. The conclusion sought to be drawn in the notice from the said email that CPD was first exported by AEL to Gudami International in Singapore and from there sent to Al Shahad, Dubai and imported from Al Shahad Dubai was also untenable since there were no imports of CPD from Al Shahad, Dubai. Mary Joseph was merely coordinating with Singapore companies and accordingly she had helped/facilitated those companies to open their accounts with the banks with which Adani Global Pte Ltd. had banking facilities. Merely because she facilitated those companies to open accounts with banks by using the goodwill enjoyed by Adani Global Pte Ltd. with the said banks would not mean that Mary Joseph or AEL through Mary Joseph was managing and controlling the said Singapore buyers and it cannot be said that the transactions between AEL and the said Singapore buyers were dubious or that the said Singapore buyers were mere front companies for AEL. It was denied that the transactions were dubious or that there was circular movement, and this allegation of circular movement and, the funds remitted by the Indian firms to the overseas suppliers were in turn transferred to the overseas buyers and in turn returned to the Indian companies was clearly misconceived. It was also strongly denied that the transaction value of the consignments exported did not represent the true transaction value within the meaning of Section 14 of the Customs Act 1962. The full export value which was declared to the customs in respect of each export consignment had been realized and there was no allegation or evidence to the contrary. Apart from the aforesaid, the Singapore and UAE firms/companies were independent legal entities, and that they cannot explain inter se third party transactions. Only the parties making and receiving the payments can explain the business or the transaction with each other. Law does not compel a person to do the impossible. On a mere insinuation, the burden cannot be shifted on us. The onus lies ..on the department to show that the UAE Company making the payment to Singapore f • • 1letitity had sold CPD to the noticee and that the amount remitted by it to Singapore ,ZF was the same or out of the remittance received from AEL or other Indian entities. None of these facts have been established and therefore all the allegations are based on assumptions and presumptions. There was no correspondence between the Indian companies and the overseas companies with regard to remittance of funds and that this would indicate that the entire trade of CPD in India as well as overseas was controlled and managed by AEL is totally misconceived. Rakesh Shah, of Adani Global FZE, who was stationed at Dubai was coordinating with the overseas companies and following up the remittances. •
- 138. 146 Consequently the necessityof the Indian companies to correspond in this behalf with the overseas companies did not arise. Reliance was placed on the emails to show that (a) the overseas companies were being managed, controlled and operated by AEL and (b) the funding of the overseas companies was also under the management and control of AEL including that AEL controlled and operated the bank accounts of these overseas companies. It was submitted that the emails referred to relate to financial transactions bet ween the parties which represent inter-corporate short-term deposits, financial accommodation and financial assistance rendered by one party to another, which was totally independent of the transactions of sale and purchase of goods. The show cause notice sought to create a false impression as if the financial arrangements reflected in the emails were part of the circular trading alleged in the show cause notice and that the outflow and inflow of moneys was "managed" and "controlled" by AEL in order to indulge in circular trading. It was submitted that the financial arrangement between the parties was completely misunderstood and confused with the alleged circular trading. 11.4.21There was a tripartite agreement between three Groups, viz. DTC, Gudami and AGFZE, of which one part related to render financial support to each other or nominees of each other to meet short-term capital requirements, without having to borrow from external sources like banks and financial institutions which was not only cumbersome as it involved obtaining limits, providing collateral security, etc., but also was expensive on account of the interest payable. In the background of this tripartite agreement it became necessary for the parties to monitor the cash-flow. Based on the tripartite agreement, persons entrusted with the responsibility, reported the movement of funds from one account to another and these reports in the form of emails from either Mary Joseph, Sudhakar Nair or Rajesh Sagar and others have been mistaken to be evidence of control, management and operation of the overseas companies and their bank accounts by AEL. It was reiterated that each of these inputs were distinct and different legal entities owned, controlled and managed by laws of respective countries, their shareholders and board of directors with no common shareholding or director with AEL except in the case of AGPL and AGFZE which, were subsidiaries. And, although AGPL and AGFZE were subsidiaries, they were independent private entities. AGPL and AGFZE had their own independent businesses. AEL did not play any role in the day to day commercial transactions and business of AGPL and AGFZE, for which the decisions were taken by the respective Board of Directors of these two subsidiaries. The total income of AGPL and AGFZE in the years 2004-05 and 2005-06 as under: Year Company Income 2004-05 AGPL SGD 616 MN (USD 342 MN) 2005-06 AGPL SGD 1145 MN (USD 663 MN) 2004-05 AGFZE AED 930 MN (USD 258 MN) 2005-06 AGFZE AED 1107 MN (USD 308 MN) and the profits declared by both these companies of these two financial years was as below; lear Company Profits 2004-05 AGPL SGD 0.78 MN (USD 0.43 MN) 2005-06 AGPL SGD 1.38 MN (USD 0.77 MN) 2004-05 AGFZE AED 9.45 MN (USD 2.62 MN) 2005-06 AGFZE AED 12.33 MN (US 3.43 MN)
- 139. 147 AGPL and AGFZEhad business interest in trading in number of commodities and items with buyers and sellers all over the world, and in any such transaction, AEL was not at all involved and those transactions were directly between AGPL and AGFZE and buyers and sellers of third countries other than India. A list of dates and the names of some of the buyers and sellers of AGPL and AGFZE are mentioned in Exhibit-S hereto. The purpose of referring to these facts is to show that payments made by or received from AGPL and AGFZE represent genuine transactions made in the ordinary and normal course of business including in respect of transactions with AEL did not as if payments made to or received from AGPL and AGFZE were only related to import and export of cut and polished diamonds. The transactions referred to in the emails concerning financial reporting referred not only to transactions of cut and polished diamonds, but also a larger of number of other transactions which have nothing to do with the import and export of cut and polished diamonds. All other overseas companies were independent entities. Gudami was a limited company incorporated under the laws of Singapore. It had two directors viz. Chang Chung Ling and Mary Joseph. Gudami had varied interest in number of businesses which include Diamond, Textile Items, Iron Ore, Petro Chemical Products, Rubber Process Oil and Tug Boat. Gudami was an associate company of the Hi Lingo Group which is a group consisting of more than sixty companies which inter alia, own ships, ship yards, tar kers, etc. and with properties and assets in different countries. DTC was a legal entity incorporated under the laws of the United Arab Emirates. It was owned, managed and controlled by Nasser Ali Shaaban Ahli, who is a local citizen of U.A.E. DTC also dealt in a number of items and had regular transactions of sale and purchase with buyers and sellers located all over I he world. Same was the case with Tanb which had also got various other business interest and activities. None of these overseas companies were in any manner whatsoever, directly or indirectly owned, managed and controlled by AEL. The allegations in the show cause notice revealed a predetermined, prejudiced and pre judged mind which without any warrant or justification sought to establish a link which in reality did not exist, between the sale and purchase of cut and polished diamonds with the receipt payment recorded in the emails. These emails were sent with limited purpose of reporting the cash-flow position on account of the inter se agreement, between the parties, of rendering financial assistance to each other. AEL was not a party to such a financial arrangement. The role played by AEL was confined to receiving cut and polished diamonds, processing the same and sending it to the concerned parties, or their nominees. AEL was at all times only interested in securing its payments for the work done in India, and as a measure to secure its payment, AEL was assureci by joint venture that the funds (payments and receipts) would at all be so arranged with that AEL was never out of pocket. Precisely for this reason, as was evident from the record, AEL received an aggregate amount of US Dollars 145 MN even before it made the first payment on 19/08/04 which was US Dollars 7 MN. Accordingly, AEL ensured that as soon as AEL made the payment for the cut and polished diamonds, AEL would receive the payment towards export of cut and polished diamonds in a short period so as to minimize the risk and exposure. There was nothing sinister about the fact that soon after payments were made by AEL against import of cut and polished diamonds, AEL received the amount for the export of cut and polished diamonds on the same day or within a few days. There was nothing dubious about such an arrangement. Rather prudence and diligence required AEL to undertake strict financial management. AEL could not afford to carry a high risk and huge financial exposure giving effect that AEL played extremely limited role in contributing towards the process of cut and polished diamonds. It made no business sense for AEL to carry the risk by making full payment for the unassorted cut and polished diamonds imported into India and thereafter, be exposed to the danger of non-receipt of payment towards export of cut and polished diamonds, for a gain of 5% to 10%. Like any other reasonable business .:., Of man, AEL had to assure not only the gain of 5% to 10%, but also the recovery of the amount which it sent towards import of the cut and polished diamonds. With a view - •`. to exercise strict financial control, AEL prepared a plan for financial management such t :! that it secured itself within 4 to 7 days. The joint venture therefore, agreed that at all 4 times, the parties would endeavour to ensure that AEL was not out of pocket for more than 4 to 7 days such that within 4 to 7 days of receipt of payment from AEL towa-ds the import, remittance for export would be made to AEL. The notice also placed reliance on the document alleged to be recovered from the computer hard-disk of Mr. Vipul Desai, their officer, Banking Department to contend that a system had been created and put in place during the year 2003 to achieve pre-determined incremental turn over to avail the benefits of the target plus •
- 140. 148 scheme. The saidcontention based on the said document was not sustainable for more reasons than one. First of all, although said document had been relied upon in the notice, a copy thereof was not furnished to them although it was requested by them. The notice contends that the said document was recovered by the Director of Forensic :3cience, Gandhinagar. Secondly, it is the department's own case that the so- called system as per the said document was created and put in place in the year 2003. It was impossible to contend that the so-called system allegedly created in 2003 was for claiming benefits of target plus scheme in as much as the said scheme was not even in force in the year 2003 and the same came into existence only in September 2004. Thirdly, the actual imports and exports made during the years 2004-05 and 2005-06 bear no correspondence to what was alleged to have been planned in 2003 as per the said document. Fourthly, the conclusions sought to be drawn by the department based on the said alleged document were on the face of it untenable. The contention that the overseas firms were all created and put in place by AEL for the purpose of import and export of CPD was baseless. The overseas firms have been in existence much prior to the Target Plus Scheme and hence there was no question of they having been created by AEL for the purpose of import export of CPD under the Target Plus Scheme. The export orders/import contracts were arranged on request from Ahmedabad had no significance or relevance to the issue of valuation of the export CPD. The same format of export order/import contract of independent parties was maintained throughout although all the contracts looked different was meaningless and self contradictory. If all the contracts were in the same format they could not at the same time have looked differently. As a matter of fact, all contracts were not in same format. The sorting of the CPD was to be done at Dubai and items of particular consignment were to be withdrawn and items from a previous consignment were to be added and description changed at Dubai and that this was to be communicated to India to Shri Tejas and Shri Mahadevan as per pre-coded description and quantity was also not shown to be true. No statement of Shri Tejas had been recorded to corroborate this contention. Nor Mr. Mahadeven in his statement made arty such admission. As per the said document value addition/ deletion was to be within 0.25 % - 0.5% was also not shown to be true. That the imports/exports had not taken place as per the alleged system which was alleged to have been mentioned in the alleged document recovered from the hard disk of Mr. Vipul Desai. 11.4.22The emails and the documents allegedly retrieved from hard disc from persons such as Vipul Desai or C.E. Mahadevan are required to be examined and considered in the light of the Tripartite Agreement. Some of the emails referred to on pages 59 to 64 of the show cause notice, and on pages 70 to 79 thereof and pages 136 to 142 of the show cause notice, wherein it was also alleged that from the flow of funds it emerged that the entire trade in CPD was being financed and funded by AEL and its group companies only and that the overseas company in U.A.E., Singapore and Hong Kong were merely used to facilitate to and fro movement of CPD. It was therefore, alleged that there did not take place any genuine trade between AEL and its group companies with the overseas companies. An analysis of the emails and the documents purportedly retrieved from the hard disc of the computer/laptop revealed the following position: (I) Funds were transferred by parties to whom AEL had never made any payment, Mine Gold and Jewellery, U.A.E. had been only the buyer of cut and polished diamonds from M/s.Hinduja Exports Private Limited ("HEPL"), whereby it made payment to HEPL. AEL had never imported any goods from Mine Gold and therefore, the question of AEL remitting funds to Mine Gold did not arise at all. Accordingly, whenever Mine Gold transferred funds to another entity, it did so on its own account and out of its own funds. This negates the theory propounded in the show cause notice that AEL controlled the flow of funds; (ii) there were number of such examples like Mine Gold. In case of Labdlii which never sold any goods to AEL. Labdhi was a buyer of gold jewellery from AEL and therefore sent money to AEL on account of completely unconnected and unrelated transaction of gold jewellery/articles of good. As such, wherever the emails showed that Labdhi transferred funds to another overseas company, it had done so out of its own account and not on account of any funds received from AEL. Labdhi did not feature at all in the list of 45 overseas companies mentioned at pages 40 and 41 of the show cause notice. This was also true that all parties such as M/ s.A1 Shahad Gold and.Jewellery sold only gold bars to AEL which was an independent transaction, had nothing to do with cut and polished diamonds and therefore, the consideration paid by AEL for gold bars actually imported by AEL cannot be called as funding of cut and
- 141. 149 polished diamond's trade.Consequently, any transfer of funds by Al Shahad to another overseas entity was the result of the understanding between Al Shahad and the recipient with which AEL had nothing to do. Once AEL paid the consideration for the gold bars, what the seller of gold bars does with his money, was entirely the prerogative of Al Shahad and the Application of funds by Al Shahad cannot be given the colour of finance of diamond trade by AEL as the import of gold bars ty AEI., was totally independent of the import and export of cut and polished diamonds. (iii) So also payment of one entity for the documents of another entity was an inter se understanding between these two independent entities with which AEL was not at all involved. Merely because Mary was reporting the cash flow position as agreed to by the parties to the tripartite agreement, AEL could not be held responsible for the same; (iv) The emails also referred to payment made for transactions other than diamonds. For example, Gudami paid US Dollars 6,05,062.80 to M/s.Alcock Ashdown (Gujarat) Limited and AGPL paid US Dollars 25,30,000 to Agarwal Coal for some coal transaction out of the funds received by AGPL from Gudami. So also AGPL made payment to AEL for purchase of iron ore fines from AEL, which again had nothing to do with diamonds and therefore, consideration received by AEL on some other account cannot be alleged towards flow of funds for diamonds trade. (v) There are references in the emails to persons/parties such as M/s.Aramex International Exchange, M/s.Radha Baquer Trading LLC, M/s.Navy Irapex LLC, M/s.White Monitor General Trading LLC, M/s.Al Badrin Jewellery, M/s.Enezi Electrical in the emails and none of them have any relations to the subject matter of the present show cause notice, as was evident from the list of 45 parties mentioned at pages 40 and 41 of the show cause notice. It was argued that this reinforced their submission that the financial transactions reflected in the emails did not represent the flow of funds for the diamond trade as alleged in the show cause notice. The mails referred to a whole Iot of financial transactions which were beyond, outside and independent of the import and export of cut and polished diamonds which are subject matter of the present show cause notice. It was vehemently denied that AEL financed its imports as well as exports in the manner as alleged or at all. It was also denied that the funds remitted overseas showing payment towards import were transferred to the accounts of the overseas buyers which in turn were utilized for showing payment to AEL as was seen from the analysis of the emails referred to various other transactions as if the allegations in the show cause notice are assumed to be correct, there would be no explanation as to how could an amount of US Dollars 31,35,000 (approx.) would be used for making payment to M/s.Alcock Ashdown and Mis.Agarwal Coal and another payment of US Dollars 6,50,000 to Refco. All these payments aggregate to about US Dollars 32 Million and there was no explanation how this amount of US Dollars 32 Million (approx.) was replenished to maintain the alleged cycle of the alleged flow of funds. All this show that the allegations regarding flow of funds were false and bogus and could not be sustained. The emails have beeweren misread and misunderstood and chart have also been misconstrued and misleading allegations were made only to prejudice the adjudicating authority. To sum up, no relationship was established in law between the overseas entities and AEL and the other five Indian companies, otherwise also the allegation of relationship or interrelationship, as referred to in the notice was totally meaningless and out of context and it had no relationship whatsoever to the issue of valuation as contained in the show cause notice. The show cause notice proposes to redetermine the value of cut and polished diamonds exported out of India on the basis of the allegation that there was no value addition done in India, which allegation had no connection whatsoever with the allegation of interrelationship. 11.5 The Notice in para 9 referred to number of transactions to draw an adverse inference that all the transactions were artificial and represent circular trading of the sale of cut and polished diamonds with no value addition. The Notice also sought to draw the connection between the financial transaction and the physical movement of the goods represented by the transactions of import and export of cut and polished diamonds between the overseas company and AEL and other five Indian companies. It was submitted that transactions which had taken place in the normal course of business were misunderstood and the implications thereof misinterpreted. This was primarily because the basic nature and structure of the transactions was not considered. The basic structure of all these transactions was a Tripartite Agreement (hereinafter referred to as the said Agreement) between the Parties thereto for promoting the business in cut and polished diamonds. The Parties are Daboul Trading Company (DTC) represented by Mr. Nasser Ali Shaaban Ahli based in Di bai, •
- 142. 150 U.A.E., M/s.Gudami InternationalPte. Ltd., Singapore represented by Mr. Chang Chung Ling, AGFZE, UAE represented by Mr. Rakesh Shah. The salient features of the said Agreement are as under: (i) DTC. was responsible for procurement and disposal (sales and purchases) of cut and polisned diamonds and therefore, was responsible for deciding from whom the diamonds were to he sourced/procured and to whom were the same to be sold and the ultimate disposal thereof; (ii) Gudami was responsible for the financial arrangement of arranging for payments for the sales and purchases of cut and polished diamonds and consequently, responsible for ensuring timely payments which meant avoiding cash flow and/or liquidity problems, financial dealings, arranging short-term loan, etc.; (iii) AGFZE was responsible for arranging and/or organizing processing of cut and polished diamonds which involved inter alia, sorting and repacking and arranging for the shipment of the goods; (iv) AGFZE appointed AEL and its nominees (which in the present case, are the other five Indian companies) for carrying out the processing including sorting of the cut and polished diamonds; (v) To facilitate smooth movement of the goods in the import and export of cut and polished diamonds by AEL and its nominees, it was decided to sell unassorted/mixed diamonds of different sizes ranges and of different values to AEL and in turn, purchase the same, after processing/sorting from AEL and its nominees as directed by DTC, whc as aforesaid, was in-charge of procurement and disposal of the cut and polished diamonds. It was further agreed by the Parties that diamonds both in the case of sale to (import) and purchase (export) from AEL and its nominees would he at the inarket price. (vi) To safeguard the interest of AEL at all times, Daboul and Gudami undertook to AGFZE that AEL and its nominees shall not be exposed to any financial risk or liability arising out of non-payment of export proceeds and the three Groups undertook to ensure and arrange timely and prompt payment to AEL such that AEL at all times did not have a financial exposure greater than the amount it paid for the import of cut and polished diamonds; (vii) As was well known in all international trade irrespective of the commodities and the exporters, that Government of India offers export incentive, and since three Groups were aware that exports from India do attract export incentives, AEL was appointed for processing/ sorting in terms of the said agreement on the condition that AEL agreed to pay commission, as directed by DTC to the nominees of DTC. The noticee craved leave to refer to and rely upon the tripartite agreement. It was argued that when viewed in the light of the above tripartite agreement, all allegations in the show cause notice would fall in place. That there was nothing incriminating about the emails referred from pages 60 to 79 of the show cause notice. These emails are nothing, but cash-flow between the parties to the tripartite agreement or their nominees. The parties to the tripartite agreement not only had an inter se obligation, but also an obligation to AEL and its nominees to ensure that prompt payments were made and hence, to avoid any liquidity crunch or financial crisis, depending upon the situation at the relevant time, funding had taken place by one entity to another. These emails however had no relevance to the allegation of circular trading. There was absolutely no correlation or connection between the fund flow (which is a pure business decision based on the commercial expediency of the situation) and the physical transaction of sale and purchase of goods. The transfer of funds from one entity to another did not in any manner establish that the same cut and polished diamonds were sold and purchased by AEL or its nominees. They had given mulliple reasons that the theory of circular trading was ex-facie untenable. These reasons included the fact that each consignment was physically examined, both at the time of import as well as export. Each examination confirmed the declaration to be true and correct. All consignments imported consisted of unassorted/mixed diamonds, and all consignments exported, consisted of assorted diamonds and at no point were the goods found to be the same or identical. That merely because there might be insistence where money had been transferred from one entity to another, it did not mean that the transaction of sale and purchase of goods between two other entities, one or both of whom may not at all be involved in the transfer of funds, did not undertake a genuine transaction of sale and purchase of goods. The allegations in the show cause notice jumped to the conclusion that there was circular trading in that the same cut and polished diamonds have been exported and imported, only because
- 143. 151 of the emailsreferred to at pages 60 to 79 of the show cause notice. These emails are isolated and the transfer of money from one entity to another had nothing to do with the transaction of sale and purchase of goods. Further, the total financial transactions referred to in the emails at pages 60 to 79 of the notice constituted only 3% of the total number of transactions and hence, adverse inference drawn in the notice are devoid of merits. 11.5.1 It was denied that the analysis of import and export consignment of CPD made revealed that the same set of diamonds were imported and exported by the Indian companies with the overseas companies based at Dubai, Singapore and Hong Kong. The contention of circular trading was totally misconceived and baseless and untenable for the following reasons: ii) The Department picked up at random one lot out of the whole consignment to show that the same goods went out and brought in to the country number of times. Each lot was only one part of the consignment. The total weight of the consignment was much more than the weight of a single lot, and for the Department to allege circular trading, it must be shown that the consignment as a whole was circulated a number of times for supporting allegation that the same set of diamonds were imported and exported. A lot of CPD cannot be isolated from the consignment as a whole. The value is determined for the consignment as a whole and an individual lot. One lot imported under a different consignment was different from the other lot in another consignment as the goods differ in total weight, number of pieces, rate and size of the consignment as a whole as well as of the particular lot. The two kits belonging to two different consignments cannot be called as a same set of diamonds, notwithstanding the fact that the weight of the two lots may resemble or be close; [ii) The value of the lot depends not only on the weight and description, but also on the number of pieces in each lot. The rate of each lot also varies. This was evident from comparing the rates of different lots. For example, it was alleged that the lot weighing 3,571.54 Carats under Invoice No.234-AEL/TT/04 dated 5th October, 2004 of the size 0.02-0.22 was re-imported as lot weighing 3,583.49 under Invoice No. 913- DBL/PD/2004 dated 11th October, 2004 of size 0.02-0.22. A perusal of the invoices showed that, however, the value of the two lots was US Dollars 364297.08 and US Dollars 390600.41. Which shows that the two lots were different, and not the same set of diamonds. [iii) the rate of CPD of the same size 0.02-0.22 in respect of all the consignments mentioned in Ann.exures-H and I to the Notice varied from US Dollars 102 to US Dollars 428 which is a difference of about 419.60%. With such a large difference in the value (rate) of each lot, it was impossible to conclude that the goods were the same set of CPD imported and exported in Circular Trading; (vi) In all these cases, the suppliers of CPD and the buyers of CPD were different and distinct entitles. There was no allegation that there had been any inter se trading/transfer of the same set of diamonds from one overseas entity to another. To illustrate, with reference to Sr. Nos. 1.1 and 1.2 of the table at page 90 of the Notice, there was nothing to show that after the Company exported the goods received from M/s.Tanb Trading EST ("Tanb") to M/s.A1 Shahad Gold and Jewellery and M/s. Choksey Diamonds, the same were transferred to Daboul so as to enable Daboul to resend the same goods to the Company. Equally, there was, and there could not be any evidence to show that Tanb and Daboul were one and the same entity. It had been verified on enquiry, Daboul and Tanb were independent entities. Similarly, there was nothing to show or suggest that CPD imported by the Company at Sr. No 1.2 of the Table at page 90 through Daboul, after export to Choksey Diamonds, was returned/transferred to Tanb for enabling Tanb to export the same to the Company as was the false impression sought to be projected with reference to Sr. No. 1.3 of the table at page 90 of the Notice. 'vii) In several cases, having regard to the distances and travel time, it was humanly impossible for the same goods to have been sent to us as alleged. This is self- explanatory from the following instances:- s , . (a) On page 259 of Annexure-H reference is made at Serial No.8 of an import of 372.59 carats of D cut TLB PK diamonds. It was claimed that the said diamonds mentioned at serial No.8 were re-exported and again imported and the re-import as referred to in Serial No,9. The said contention was on the face of it misconceived. The diarr•onds mentioned at Serial No.8 were re-exported on 24-06-2004. The diamonds mentioned at •
- 144. 152 Serval No.9 wereimported on 21-06-2004. It was absurd to suggest the diamonds re- exported on 24-06-2004 were re-imported on 21-06-2004. (b) On page 5 of Annexure-I, it was claimed that the imported diamonds mentioned at Serial Nc.6 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.5. The said claim was plainly untenable. Serial No.5 shows that D cut WH NATTS PK 7-8 diamonds were imported on 4th May 2005 and exported to Singapore on 9th May 2005. Serial No.6 shows that D cut WH NATTS PK 7-8 diamonds were imported from U.A.E. on 7-5-2005. It was inconceivable that diamonds which were exported on 9th May 2005 to Singapore could have been re-imported on 7th May 2005 from U.A.E. (c) On page 15 of Annexure-I, it was claimed that the imported diamonds mentioned at Serial No.5 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.4. The said claim is totally incorrect. The serial no. 4 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 19.05.2005 and exported to Singapore on 24.05.2005. Serial No. 5 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported from U.A.E. on 21.05.2005. It was inconceivable that diamonds which were exported on 24.05.2005 to Singapore could have been re- imported on 21-05-2005 from U.A.E. (d) On page 15 of Annexure-I it is claimed that the imported diamonds mentioned at Serial No.6 were the very diamonds which were earlier imported and re-exported as mentioned at Serial No.5. The said claim is totally incorrect. Serial No.5 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 21.05.2005 and exported on 26.5.2005 to Hong Kong. Serial No.6 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 26.05.2005 from U.A.E. It was inconceivable that diamonds which were exported on 26.05.2005 to Hong Kong could have been re- imported on 26.05.2005 from U.A.E. (e) On page 16 of Annexure-I it is clear that the imported diamonds mentioned at Serial No.11 were the very diamonds which were earlier imported as mentioned in Serial No.10. This is totally incorrect. Serial No.10 shows that F cut WH BUGGETS PK 2,3 Diamonds imported on 4.7.2005 were re-exported to Hong Kong on 6.7.2005. Serial No.11 shows that F cut WH BUGGETS PK 2,3 Diamonds were imported on 7.7.2005 from Dubai. It was inconceivable that the diamonds which were exported to Hong Kong on 6.7.2005 could have been re-imported from Dubai on 7.7.2005. (f) On page 17 of Annexure-I it was clear that imported F/cut White Tappers diamonds mentioned at Serial No.2 were the very diamonds which were earlier imported and re-exported as mentioned in Serial No.l. This is totally incorrect. Serial No 1 shows that F/Cut White Tappers diamonds which were imported on 24.04.2005 were exported to Singapore on 26.04.2005. Serial No. 2 shows that F/Cut White Tappers Diamonds were imported on 24.04.2005 from Dubai. It was inconceivable that the diamonds which were exported to Singapore on 26.04.2005 could have been re-impor ted from Dubai on 24.04.2005. Several such instances in Annexures-H & I which on the face of it show that the claim made ir those annexures that the same set of diamonds were re-imported and exported several times was clearly erroneous. The details of such instances are set out in Exhibit-"D" (viii) This proves beyond doubt that the lot exported to Singapore could not have physically reached Dubai in time for it to be sent back to the Company. (ix There was a wide variation in the number of pieces contained in the lot which were alleged to have been imported and exported in a circular manner. For the purposes of illustration, the weight of the two lots of size 0.0.2-0.12 exported by the Company at. Sr. Nos. 1.1.1 and 1.1.2 of the table at page 90 of the Notice was more than the weight of lots of same sizes exported by us at Sr. No.1.4.2 and Sr. No.1.5.2 and which in turn, shows that there was a vast difference in the number of pieces in those 101.s. While each lot may have a range of size, more number of pieces means that in that particular lot, there were more diamonds of smaller sizes. It was therefore, irrational and illogical to allege, merely by reference to the weight and description that, ..the same set of diamonds were imported and exported in a circular manner. (74 At the same time, it was not permissible to discount the difference in the weight of each lot, howsoever narrow or small. These are high value items and no difference in the weight is insignificant. Any difference in the weight per se also renders the lot and its value to be different. In the circumstances, it was submitted to have been proved beyond doubt that there was no circular trading as alleged or at all.
- 145. 153 11.5.2It was furthersubmitted that the contention of the department that the very set of assorted diamonds exported by them were re-imported and that such circular trading took place several times was on the face of it unacceptable. As set out in the public notice No.11/98 dated 04.08.98 the procedure at the time of import was that the goods were subjected to first check examination and valuation. Likewise the goods at the time of re-export were subjected to first check examination and appraisement. This would mean that when the goods were imported it would be ascertained on examination by the customs that the goods were mixed/unassorted lot of different types and sizes of diamonds. Similarly, at the time of export it would be ascertained and verified on examination by the Customs that the goods were assorted and carried value addition. If the very assorted goods were re-imported the Customs would have on examination found that the goods were assorted and not mixed/unassorted of various sizes and types as per the invoice. In such event, the Customs would not have allowed clearance at all. The very fact that in each case of import the goods were found on examination by Customs to be mixed funassorted of various types and sizes as per the invoice would show that these were not the very same assorted goods which had been earlier exported. 11.5.3 Regarding the flow charts alleged to have been recovered from the hard disk of Mr. Vipul Desai, were not prepared by him and that the same had been prepared by their Ex-employee Mr. Sudhakar Nair who had resigned about one and a half years back. No statement of the said Mr. Sudhakar Nair was recorded by the Department. In the absence of any statement of the author of the said charts explaining the said charts and the reasons for preparing the same, it was not possible to craw any inferences from the said charts. At the same time it was denied that the imports and exports made by them correspond to the said flow charts. The same was attempted to demonstrate with figures as below that the imports and exports did not correspond to the said flow charts. (i) In the year 2004-05, the total exports made by them to Al Shahad Gold and Jewellery were to the tune of US $ 313 Millions and to Choksey Diamonds were to the tune of US $ 221 Millions. The exports made to Gudami International Pte. Ltd. were US $ 280 Millions. Now as per chart No.1 relied upon by the Department the exports made to these three buyers were supposed to have transferred to Mine Gold 8s Jewellery and then imported back to India by them from Daboul Trading Company. if this were to be so their total imports from Daboul Trading Company in 2004-05 should have been US $ 814 Millions, whereas it was only US $ 629.4 Millions. (ii) Similarly, the exports to Kamsun Development International Ltd. and imports from Kwality Diamonds did not correspond to the said flow charts. The exports to Kamsum Development in 2004-05 were US $ 111 Million, whereas the imports from Kwality Diamonds was US$ 5 millions. Thus the conclusion sought to be drawn from the flow chart No.1 that what was exported to Kamsun was re-imported through Kwality Diamonds was incorrect. (iii) In the year 2005-06, there were no exports to Al Shahad Gold & Jewellery or to Choksey Diamonds. Thus the contention sought to be raised in the notice based on chart l that the imports made from Daboul Trading were the very goods which had been exported by them to Al Shahad Gold & Jewellery and Choksey Diamonds was clearly untenable. The exports to Gudami International in 2005-06 were US $ 186 Millions as against which their imports from Daboul Trading in 2005-06 were US $ 3l 8 Millions, which again would show that the contention based on chart-1 that what was imported from Daboul were the very goods which were exported to Gudami was wrong. (iv) In 2005-06, exports of US $ 82 Million were made by them to Kamsun - -:,,,Development International, whereas there were no imports made from Kwality ie)/ iamonds. Thus, the contention raised on the basis of Chart-1 that what was exported 71 :Li Ito.Kamsun Development had been re-imported through Kwality Diamonds was clearly • • • E • / er;oneous. ' ; , 4. ,A;vi) If the exports made to Excel Global Ltd. and G.A. International were added to •, ‘. *:Z• ": • the exports made to Al Shahad, Choksey Diamonds and Gudami by taking into account Chart-2 the total of such exports would go to US $ 1103 Millions in 2004-05, whereas the import from Daboul Trading in 2004-05 was US $ 625 Millions. It wa3 thus clear that the imports and exports made by them did not bear any correspondence to the said flow charts. •
- 146. 154 As per charts1 &, 3 diamonds are supposed to have been first exported by them to :Kamsun Development International Pte. Ltd. and these diamonds supposed to have been transferred to PNJ Trading and Seven Star and then re-imported from PNJ Trading and Seven Star. That this was not correct can be demonstrated as below: 11.5.4Tlie first import of diamonds from PNJ Trading was vide invoice dated 04.05.2004. Whereas the first export to Kamsun Development International was vide invoice dated 04.06.2004. Thus the import from PNJ Trading took place before the exports made to Kamsun Development International. The question therefore of imports from PNJ Trading being of goods which were earlier exported to Kamsun Development International did not arise. In May 2004, the total imports from PNJ Trading were to the tune of US $ 2.9 Million, whereas there were no exports whatsoever to Kamsun Development International. Consequently it could not be said that what was imported from PNJ Trading were the goods which were exported to Kamsun Development International. Similarly, the imports from Sevens Star in April 2004 was to the tune of US $ 1.38 Million and in May 2004 US $ 1.19 Millions, whereas there were no exports whatsoever to Kamsun Development International in April and May 2004. Consequently the question of the diamonds imported from Seven Star being the ones earlier exported to Kamsun Development International would not arise. 11.5.5 There was no interse transaction between the overseas entitities. The absence of evidence to show interse transactions between the overseas entities was important because in the absence of such an evidence, the entire allegation of circular trading would fail and no support could be derived from the e-mails relating to the financial position when there were no transactions between the overseas entitities amongst themselves and it was incorrect and improper to reach the e-mails transfer of funds from one entity to another as relating to the sale and purchase of Cut and Polished Diamonds amongst themselves. The transfer of funds by one overseas entity to another had nothing to do with the sale or purchase of Cut and Polished Diamonds. The transfer of funds by one entity to another as seen from the e-mails cannot be equated with or related to the import and export of Cut and Polished Diamonds by them. It was argued and put to the department to strict proof of the reasons for the transfer of funds from one entity to another. It was submitted that the money flow by one entity to another had nothing to do with them and therefore, no adverse inference should be drawn against them when there was no evidence or material on record to show the sale and purchase of Diamonds amongst the overseas entities. And that the said flow charts relied upon in the notice did not bear correspondence to the actual imports and exports and consequently it cannot be concluded from the said charts that there had been circular trading of the diamonds as alleged in the notice. 11.5.6 Further it was argued that the conclusion of circular trading sought to be drawn from the alleged email of Asha was untenable since the very authenticity of the said email cannot be accepted for the reason that it had no date and that it. was inconceivable that an alleged email retrieved from the hard-disk would be without date. Further, there was no reference to CPD in the said email and the notice proceedE on a mere conjecture that the same is in respect of CPD. Also that since the presumption of circular trading itself was not sustainable in view of the explanation given hereinabove the conclusion sought to be drawn about the value addition being merely on paper must also fail. 11.5.7 It was submitted that the further contention in the notice that the email dated 3.8.2004 of Manoj Nair of Adani Global, UAE corroborate the facts of circular trading was totally misconceived and erroneous. There was nothing in the said email to even remotely suggest any kind of circular trading of CPD. 13y the said email Mr. Manoj Nair was merely indicating the stock of CPD with Adani Global. This email was in August :1004 when there was no Target Plus Scheme. It was strongly denied that AEL and the other five companies were indulging in artificial imports and exports transactions of CPD by circularly trading the same sets of CPD to show incremental :exports and availed the benefit of target plus scheme. 1.1.6. -With reference to value addition it was submitted that the processes set out *ere admittedly undertaken by them on the imported diamonds resulted in value 4ddition Reliance was placed on circular No.40/1999-CUS dated 28.09.1999 of the 'C$EC which clarified that the said activities which were allowed to be carried out in private/ public bonded warehouses in respect of imported CPD would enable the
- 147. 155 exporters to achievea minimum value addition of 5%. The fact that the said processes/activities result in value addition of 5% and above was also acknowledged by the Gem Jewellery Export Promotion Council, Ministry of Commerce in its various letters addressed to the commerce ministry. Once it was clear from the said circular and letters, that the said processes resulted in value addition, the contention of the department that the same did not amount to manufacturing processes was entirely irrelevant to the question of valuation of the exported CPD. Even otherwise, under the Foreign Trade Policy 2004-05 the term "manufacture" has been defined in paragraph 9.37 to include processes such as refrigeration, re-packing, polishing and labeling since it was admitted that after the processes of sieving, boiling, segregation/assortment the assorted CPD were re-packed, it was clear that they undertook manufacture within the meaning of that term as given in paragraph 9.37 of the Policy. The notice contests that the process of boiling was done only in 50% of the consignments and the sieving was done only in 25% of the cases. It was submitted that the process of boiling was basically required to clean the diamonds and therefore, the same might not be required in all cases. As clarified by Gem & Jewellery Association the most important stage of the process was the assortment of the diamonds which determines the final value. The undisputed fact is assortment had been carried out in all cases. Similarly the contention that sieving was done only in 25% cases was of no significance. Sieving was resorted to only where manual assortment would not be enough. The fact, however remains that assortment was done in all cases and as clarified by Gem & Jewellery Association this was the most important stage of the processing which determines the final value. And that the activities including assorting were carried out and completed within 2 to 4 hours was of no consequence. It was submitted that there was no material or evidence lead by the department to show that such assortment could not be carried out within 2 to 4 hours by skilled labour conversant with the job. 11.6.11t was submitted that there was no statement dated 31.01.2006. The statement of Mr. Lumesh Sanghvi recorded in January 2006 was dated 30.01.2006. That Mr. Lumesh Sanghvi had in statement dated 31.01.2006 stated that in order to arrive at the exact value each lots should be examined thoroughly and not in the casual manner within overall assorting period of 2 to 4 hours was factually incorrect. There was no such statement dated 31.01.2006, however assuming that the reference made is to statement dated 30.01.2006, it was submitted that there was no mention of inability to arrive at the value within the assortment period of 2 to 4 hours At the same time, Mr. Lumesh Sanghvi was not at all competent to comment upon the valuation of the CPD as his role was confined to the job of assortment and it was Mr. Samir Vora in consultation with Mr. Rakesh Shah who was in charge of valuation, receipt and placement of orders and dealing with the overseas parties. The question, therefore, of valuation of the exported CPD should have been put to Mr.Samir Vora. However, no question was asked to Mr.Samir Vora on valuation while recording his statements. The fact that each of the export consignments was examined and appraised by expert customs appraiser and, on such examination and appraisement by the customs appraiser, the declared export value was found to be in order. In the face of such examination and appraisement of value by the proper officer of the customs which was not questioned by the department in as much as no statement of any of the customs appraisers who examined and appraised the export consignments was recorded by the department, the allegation is, per se, baseless. Mr. Lumesh Sanghvi in his statement dated 7.2.2006 stated that activities of boiling, sieving , weighing assorting and re-packing had in fact been undertaken in respect of imported CPD by skilled assorters. Once it was clear that these activities had in fact been undertaken the inescapable conclusion would be that there would be value addition resulting from such activities as acknowledged in the Board Circular ‘; and the letters of Gem & Jewellery Association. As regards the carrying out of boiling in only 50% cases it has been already submitted that boiling was required for cleaning the diamonds and this cannot be necessary in all cases. Similarly Sieving was resorted to only where manual assortment would not be enough. However, assortment was .11 ,dne in all cases and as clarified by Gem & Jewellery Association this was the mosi: :Tritiportarit stage of the processing which determines the final value. The statement of Mr.Lumesh Sanghvi that he had never seen any purchase order placed by the buyers or purchase orders placed on the overseas suppliers and that he had not received any communication regarding quantities/qualities of CPD to be supplied, was of no significance. As Mr.Lumesh Sanghvi was not incharge of •
- 148. 156 receiving of thepurchase orders or placing of orders on the overseas suppliers and these matters were being looked after by Mr.Samir Vora and Mr. Rakesh Shah. 11.6.211 was submitted that as per the general trend in the international market for assorted CPD in the year 2005-06, there was increase in the value addition resulting from th., processes of assortment. Therefore, in respect of most of the export orders received, the assorted CPD could be supplied at prices which involved value addition of 10%. Such export orders were executed by the other five companies since their exports were under the Target Plus Scheme. As regards the past export orders and new orders for which an export price involving 10% value addition could not be realized, the same were executed by AEL since from 2005-06 AEL did not claim the Target Plus Scheme. The mere fact that in 2005-06 the exports of the other five companies were under the target plus scheme which required 10% value addition did not by itself mean that the export value was inflated only to achieve the 10% value addition and the fact that the full export value had been realized by the said five companies and therefore, there cannot be any question of overvaluation. 11.6.3 The reliance placed by the department on the statement of Mr.Lumesh Sanghvi that he was instructed by Mr. Samir Vora and Mr.Saurin Shah to ignore the question of true value and that the value addition of 10% had nothing to do with the true value of exports and that the export value had been overvalued was misconceived. As Mr. Lumesh Sanghvi was not concerned with the pricing of the export diamonds nor had the competence to decide on the pricing. His role was limited to supervising the processing activity only, even if he had been instructed by Mr. Samir Vora and Mr. Saurin Shah to dissociate himself with the question of valuation that was in keeping with the fact that his role was limited to supervising the processing activity only and he had no competence with regard to the question of valuation. Significantly, Mr. Samir Vora and Mr. Saurin Shah were not confronted with this statement of Mr. LumesA Sanghvi and no corroboration of the said statement of Mr. Sanghvi was sought from Mr. Samir Vora and Mr.Saurin Shah. Further, that the adverse inferences sought to be drawn from the statement dated 26.2.2006 of Mr. Lumesh Sanghvi were not justified in view of the fact that the said statement was retracted by Mr. Lumesh Sanghvi by his affidavit sworn on 01.03.2006, that the said statement was not voluntary and true. The alleged claim made in his said statement that normally the markei for CPD was, for the bigger diamond of higher value was not supported by any material or evidence. In fact the trade in smaller diamonds was also in abundance. Consequently the inference sought to be drawn that majority of exports and imports of AEL and other five companies were in low quality diamonds and were only to boost the export; is misconceived. 11.6.4 It was reiterated that once it was admitted by the department that the imported CPD were subjected to the processes of boiling, sieving, sorting, weighing and packing it was not open to the department to contend that there was no value addition on the ground that these processes did not bring about any change in the form of the CPD. The expression "change in form" was not restricted to physical shape and size alone. Assortment or making a uniform or homogenous lot out of a mixed lot was also "change in form". Board's circular dated 28-06-1999 and the letter of Gem & Jewellery Association clearly show that the said processes result in a minimum value addition of 5%. 11.6.5 Mr. Lumesh Sanghvi in his statements had stated that sometimes only sieving and boiling would be undertaken and no segregation would be done. Mr.Lumesh Sanghvi in his statement dated 07.02.2006 had categorically stated that after sieving boiling segregation of the diamonds was done, he had nowhere stated that no :;egregation would be done. His statement dated 28.2.2006 in which he stated that :sometimes only sieving and boiling would be undertaken and no segregation would be done has been retracted by him. However, when sieving was undertaken that itself „would result in segregation. It was therefore, a contradiction in terms to say that "although sieving was done there was no segregation carried out. The conclusion "0'. • drawn that even the minimum processes were not carried out on all the CPD imported ,• was plainly erroneous and untenable. • f-::'11.6.6:It was submitted that the conclusion sought to be drawn based on statements •or. TAi r.litiniesh Sanghvi, Mr. Kamraj Bodal and Mr. Kaushal Pandya that at the time of iinpQrt)the CPD were already sorted and segregated and therefore, not much sorting .r ,:9(1:7444.14-tquired was clearly wrong. There was nothing in the said statements to warrant --- `[tie conclusion that the CPD imported were already sorted and segregated. On the contrary, it was expressed and mentioned in those statements that the imported CPD
- 149. 157 were subjected tothe processes of boiling, sieving, segregation, weighing and packing. As regards the mode of packing referred in, it was submitted that the same was the normal mode of packing used in the diamond trade and it cannot be inferred from the mode of packing that the diamonds imported were already sorted and segregated. The contention in the notice that in some cases the assortment involved segregation of the diamonds merely into different size ranges or different grades of clarity and that such sorting was not much or detailed was totally misconceived. The segregation in accordance with the different grades of clarity was done by the use of eye glasses by skilled labour well versed in this behalf. The presumption in the notice that such assortment into different size ranges or different grades of clarity was not much important and was totally baseless and not supported by any material or evidence 11.6.7The email dated 17.4.2004 of Mr.Mahadevan being interpreted as that the value of goods exported declared at the time of export did not have any relevance to the export goods is thoroughly misconceived and totally erroneous by turning a blind eye to the explanation of the said email given by Mr.Mahadevan in his statement dated 5.1.2007. Mr.Mahadevan was Deputy General Manager (Banking) of AEI,. Being incharge of Banking matters, he used to attend to discounting with the bank of bills of exchange drawn on the overseas buyers for the price of the goods exported. As explained by Mr.Mahadevan in his statement with regard to the first portion of his email that while three exports shipment had taken place based on oral order, the written contracts for such exports shipments had not been received and the same were required to discount with the bank, the bills of exchange drawn on the foreign buyers for the price of the said three exports shipments. In absence of written contract the bank would not discount such bills of exchange. Therefore, he requested for the written contracts. As explained by Mr. Mahadevan to avoid such situation in future, of delay in receiving of the written export contracts required to discount with the bank the bills of exchange drawn on the foreign buyers, in the second portion of the said email he stated that after considering the exports made until Thursday of a week he would send a message for the written contracts for such exports to be sent by Saturday of that week, so that the bills of exchange drawn for the price of such exports could he discounted with the bank. Incidentally, it may be emphasised that the said email of Mr. Mahadevan was of April 2004 when the Target Plus Scheme was not even announced and therefore, it cannot be contended that the said email was indicative of inflating the export value to derive benefits under the Target Plus scheme. 11.6.8It was submitted that the contention that the imported diamonds were exported within a day or two of their imports was of no significance as the imported diamonds were unassorted and after subjecting them to the processes of boiling, sieving, assortment, weighing and packing the same were then exported. And that it was normal for the said processes to be carried out within a day or two and hence, no adverse inference could be drawn from the fact that the exports took place within a day or two of the imports. The further contention that the same set of diamonds were reimported within a day or two of their exports was a mere conjecture and not supported by any evidence. Similarly, the contention that diamonds exported to Hong Kong were reimported was again based on conjecture and not supported by any evidence. Similarly the contention that exports to Singapore were routed to LAE and reimported to India was also based on mere conjecture and not supported by any eviclen ce . It was argued as to how the general trends of exports of CPD from India to Singapore and exports of CPD from Singapore to UAE could in any way mean or establish that the export value of their exports was inflated or that the same set of diamonds exported from India to Singapore were re-imported into India from UAE. The contention that in 2003 exports of CPD from India to Singapore constituted 44.5% of the total exports of CPD from all over the world to Singapore had no relevance whatsoever, to the question of valuation of the CPD exported by them. Similarly, the contention that in the year 2004 the imports of CPD into Singapore registered a growth of 49% over 2003 and that imports from India constitute 58% of total imports of CPD into Singapore was again of no relevance to the question of determination of the export value of CPD exported by them. If at all these figures would merely show that exports of CPD as a whole from India to Singapore registered an increase in the year 2004. In fact there was overall increase in total exports of at! goods from India to Singapore in the year 2004 and 2005. While the percentage of growth of exports of CPD from India to Singapore was 23% in 2004-05 and 9.95% in 2005-06, the overall percentage of growth of all commodities from India to Singapore was 88.28% in 2004- •
- 150. 158 05 and '<;5.61%in 2005-06. If the rational of the department that increase in exports of CPD to Singapore after announcement of the Target Plus Scheme means that exports were overvalued is to be accepted, it would mean that exports of all goods to Singapoi e were overvalued in 2004. Similarly, merely because exports of CPD from India to Singapore increased in 2005 it did not mean that their exports were overvalued. The very fact that exports of other exporters of CPD to Singapore also increased in the years 2004 and 2005 would show that the rise in their exports was in keeping with the general trend in the business of CPD and not due to any overvaluation. In fact, not only did exports of CPD to Singapore showed a rise in 2004 and 2005 but exports of CPD to other countries such as Belgium, Israel, Japan and Thailand also increased. 11.6.9 That the email dated 3.8.2004 of Manoj Nair of Adani Global, UAE corroborate the allegation of circular trading was totally misconceived and erroneous. There was nothing in the said email to even remotely suggest any kind of circular trading of CPD. By the said email Mr. Manoj Nair was merely indicating the stock of CPD with Adani Global and moreover, this email was in August 2004 when there was no Target Plus Scheme. There was nothing abnormal or surprising about Adani Global FZE having a stock of CPD in the Dubai office. The said stock was of unassorted CPD and this was consistent with the fact that imports of unassorted CPD were being made from Adani Global FZE, UAE. The contents of so called stock statements have been misunderstood. AGFZE itself had exported CPD to AEL only in months of June and July, 2004. There were no exports by AGFZE to AEL thereafter. The stock statement which is dated 1st August, 2004, therefore, did not refer to the physical stock held by AGFZE, but it was only an intimation that the goods were ready for shipment to India lying wii h Daboul or its nominee and was communicated to AGFZE. It was reiterated that Daboul nominated / identified parties for shipment of unassoreted Cut and Polished Diamonds to India or Daboul itself exported the same to India. AGFZE was the coordinating agent and concerned with organizing the logistics of physical movement of CPD. It was in this context that the e-mail dated 1st August, 2004 was sent by eiGFZE to AEL. 11.6.10The contention based on the document recovered from the computer of Vipul Dc sai, that AEL had planned for the same day re-export of the imported CPD and that the letter of credit value should not be exceeded was unwarranted. There was nothing in the said document to show that the contents thereof related to the import and re- export of CPD. Further, there was not a single incident where the imported CPD were re. exported on the same day. Further, it appears from the said document that the same was of date 8th July 2003 when there was no Target Plus Scheme and the same was also irrelevant for the reason that the valuation of exports made in 2003-04 was nct disputed in the show cause notice. It cannot be said that the said document reated to import and export of CPD. Further, the said document under the heading "Issues pending - Darshan" was referring to companies at USA and Israel apart from Hong Kong. There were absolutely no exports of CPD to USA and Israel in 2004-05 and 2005-06 to which the show cause notice relates. Moreover, the import and export of CPD which is actually took place did not bear correspondence to what was stated in the said. document. The contention based on the said document that the same format of export order/import contract of independent parties was maintained throughout although all the contracts looked different was meaningless and self contradictory. 13.6.11It was further submitted that assuming while denying that the allegation of relationship between noticees and the foreign buyers was correct, that was not a ground to adopt the import value of the cut and polished diamonds as the export value of the diamonds which were exported after carrying out the processes such as boiling, sieving, assortment etc. It was argued that if their export invoice value was to be rejectee on the ground that the foreign buyers were related to them, then the value to bc adopted under section 14 has to be the value at which contemporary exports of cut and polished diamonds were made by others, which was not the case of the department in the Show Cause notice that contemporary exports of identical or similar goods were at prices which were lower than the prices at which they had exported the goods. [t was also not the case of the department in the Show Cause Notice that there were no contemporary exports of identical or similar goods. The department made no attempts whatsoever to ascertain the value of contemporary exports of identical or similar goods and merely proceeded to adopt the import value as the export value without indicating the provision of the Customs Act or the Valuation Rules pursuant to which the value is so determined. It was submitted that there was no over-valuation o the export value on their part and that contemporary exports of identical / similar
- 151. 159 goods by otherswere at or about the same price at which they had effected the exports. Exhibit-A collectively, as the evidence of contemporary exports which were at or about the same price as theirs was annexed to their submission. Even assuming while denying that the foreign buyers were related to them, in view of the evidence of contemporary exports at or about the same export price as theirs, there was no warrant in law for contending that they had over-valued their exports. The proposal therefore, in the notice to re-determine their export price at a lower level must necessarily fail. 11.7 The next contention in the notice that commission paid to the overseas agent was required to be deducted to arrive at the correct FOB value in terms of paragraph 4A.5 of the Handbook of Procedures is clearly misconceived. Firstly, the said paragraph 4A.5 had nothing whatever to do with determination of the value under Section 14 of the Customs Act 1962. Under Section 14 the value of the export goods was the price paid by the overseas buyer to the exporter and the question of deducting from such value the commission paid to overseas agent by referring to para 4,1.5 of the Handbook of Procedures does not arise. Perusal of the said paragraph 4A .5 of the handbook would show that the requirement of deducting the agency commission stipulated therein applies only to exports of Gold/Silver/Platinum Jewellery and the same had no application to exports of cut and polished diamonds. The said paragraph 4A.5 of the handbook provides for deduction of agency commission for calculating the value addition in respect of exports of gold/silver/platinum jewellery. The norms of value addition for exports of jewellery were prescribed under paragraph 4A.2.1 of the Handbook and it was for calculation of such value addition in respect of jewellery that the deduction of commission in terms of para 4A.5 was to be made. The provision for value addition of 5% in respect of re-export of cut and polished diamonds from private/public bonded warehouses is contained in paragraph 4A.18 of the Foreign Trade Policy 2004-09 did not stipulate deduction of agency commission for arriving at the said valuation of 5%. Para 4A.5 of the Handbook applies only to gold/silver/platinum jewellery and had no application to the re-export of cut and polished diamonds from bonded warehouses under paragraph 4A.18 of the Policy. The notice has proceeded on a total misreading and distortion of the provisions of the Policy and the Handbook. Further, that the agency commission paid to overseas buyer was required to be deducted to arrive at the value addition of 5% required by para 4A.18 (para 4.4.17 in 2004-05) of the Policy 2004-09 and the value addition of 10% required by the target plus scheme in 2005-06 by virtue of the said para 4A.5 of the Handbook of Procedure. It was further contended that if the commission is deducted that the said value additions were not achieved and therefore, the conditions of the target plus scheme in 2005-06 were not satisfied. As explained above, para 4A.5 of the Handbook had no application to the exports of cut and polished diamonds under para 4A.18 (para 4.4.17 in 2004-05) of the Policy 2004-09. Similarly, the said para 4A.5 had no application whatsoever to the target plus scheme. Moreover, no commission had been paid to overseas agents during the year 2005-06 and therefore, the contention that if commission were to be deducted the value addition stipulated for the target plus scheme in 2005-06 was not achieved is clearly erroneous. And that they had mis- declared the FOB value of CPD by suppressing the commission paid / payable to the overseas agent was totally misconceived as there was no requirement in law to deduct the commission for arriving at the FOB value. 11.7.11t was admitted that the agency commission was paid during the period 2004- 05, however no agency commission was payable and none was paid either because the agreements were effective in most cases upto 31-03-2005 and in the rest of the cases the same were terminated with effect from lm April, 2005. The reference to paragraph 4A.5 of the Handbook of Procedure 2004-09 to contend that as per paragraph 4A.5 of the Handbook the value addition can be calculated after deducting agency commission was totally misplaced. Firstly, the said paragraph 4A.5 had nothing whatever to do with determination of the value under Section 14 of the Customs Act 1962. Under Section 14 the value of the export goods Was the price paid by the overseas buyer to the exporter and the question of deducting from such value the commission paid to overseas agent by referring to para 4A. of the Handbook of Procedures does not arise. A bare perusal of paragraph 4A.5 of the Handbook would show that the requirement of deducting the agency commission stipulated therein applied only to exports of Gold/Silver/Platinum Jewellery and the same had no application to exports of cut and polished diamonds. The said paragraph •
- 152. 160 4A.5 of theHandbook provides for deduction of agency commission for calculating c value addition in respect of exports of gold/silver/platinum. jewellery. The norms of value addition for exports of jewellery were prescribed under paragraph 4A.2.1 of the Handbook and it was for calculation of such value addition in respect of jeweller), that the deduction of commission in terms of para 4A.5 has to be made. The provision for- value addition of 5% in respect of re-export of cut and polished diamonds from private/public bonded warehouses which was contained in paragraph 4A.18 of the Foreign Trade Policy 2004-09 did not stipulate deduction of agency commission for- arriving at the said valuation of 5%. Para 4A.5 of the Handbook applies only to gold/silver/platinum jewellery and had no application to the re-export of cut and polished diamonds from bonded warehouses under paragraph 4A.18 of the Policy. 11.7.2 It was submitted that there was delay on their part in submitting the details of cornmisrsion paid to the overseas agents which were eventually furnished on 22.11.2006, however the same were were not complete. It was submitted that they were handicapped in collecting the details of the commission paid since the department had seized their various documents and this impeded the process of collecting requisite data. In any event the entire question of payment of commission to the overseas agent was irrelevant to the determination of the question of export value. 11.7.3 It was argued that non-declaration of the commission in the shipping bills or the GRs/SDF was of no relevance to the question of determination of the export value and consequently such non-declaration of the commission did not amount to mis- declaration of the export value. Further, the commission in all cases was paid to the overseas: agents after realization of the exports proceeds and consequently the same did not figure in the bank realization certificates. Further, the commission paid to the overseas. agent was not required to be deducted for the purpose of calculating the value addition and it was not relevant to the claim for the Duty Free Credit Entitlement under the Target Plus Scheme. In fact, by Public Notice No.22/2005 dated 14.6.2005, the requirement to declare the commission while applying for the DF'CE was deleted from the application form Appendix-17-D. And that their application for DFCE was subsequent to the said public notice dated 14.6.2005. The question, therefore, of the non declaration of the commission amounting to violation of the provisions of FTDA, FTDR and Customs Act 1962 did not arise. 11 7.4 The RBI circular No.12 dated 9.9.2000 relied upon itself states that the authorized dealers may remit the commission even though not declared on the GR/SDF provided a valid agreement/written understanding between the exporter and the beneficiary of commission subsists and if the authorized dealer was duly satisfied in this behalf. There was no dispute that a valid agreement existed between them and the overseas agent for payment of commission and that the authorized dealers being duly sat.sfied in this behalf had validly allowed remittance of the commission. There had not been any objection either from the RBI. As explained by Mr.A.V. Kamat, Regional Manager of Development: Credit Bank Ltd. in his statement dated 26.10.2006 and by Mr. Siddharth Oza, Manager of UCO Bank in his statement dated 6.11.2006 the commission was paid subsequent to the realization of the export proceeds and issue of BRC and was, therefore, not reflected in the BRC and that since there existed a valid agreement with the overseas agent the remittance was allowed in terms of RBI guidelines. 11.7.5 It was denied that the payment of agency commission was indicative of dubious transactons of CPD. It was submitted that, the commission that was paid to Kamsun Development International for exports made to G.A. International was in respect of exports made in 2003-04 and not in respect of exports made in 2004-05 and 2005-06 which mere the subject matter of the present notice. Thus the said payment of commission to Kamsun Development International for exports made to G. A. International was of no relevance to the present notice. G. A. International was an independent legal entity and cannot be said to be their own company merely because the owner of G.A. International was brother of their directors. Commission was paid to Kamsun Development International for certain exports to G.A. International in 2003- 04 because that export business had been procured by Kamsun Development International. In fact, the payment of such commission to Kamsun Development International would show the independent nature of the transactions and would further show that just because the owner of G.A. International was brother of their directors would not mean that G.A. International was their company. In fact, in respect of exports of other commodities also like Textiles to G.A. International where
- 153. 161 such business wasbrought by an agent they had been in the past paying commission to the agent. 1.7.6 It was denied that Gudami International was their own company. The notice proceeds to assume that Gudami was their own company because their employee Mary Joseph was a Director of Gudami. Mary Joseph was a non-executive director polling no shares in Gudami. The shares of Gudami were held by Chan Chung Ling who, though was a director in Adani Global Ltd. Mauritius and Adani Global Pte. Ltd. Singapore, did not hold any shares in Adani Global Ltd. and Adani Global Ike. Ltd. Gudami International was, therefore, an independent legal entity and the business of xl)orts to Gudami International having been brought by Kamsun Development International, commission was paid to Kamsun Development International. The paement of commission to a third party for exports to Gudami International would show that the transactions with Gudami International were at arms length. Further, th:• commission which was paid to Kamsun Development International was for exports made in 2003-04 only and not for 2004-05 and 2005-06 to which the Show Cause Notice relates. Moreover, that it was their understanding and agreement with Daboul Trading that exports will be made to such parties as nominated by Daboul Trading and commission would be paid to such parties as indicated by Daboul Trading. 11.7.8It was submitted that payment of commission to Kamsun Development International for exports to Gudami was for 2003-04 whereas the commission paid to Gudami International for exports to Planica and Emperor was for exports in 2004-05. There was nothing abnormal about it. It was further submitted that since export business was brought by Al Shahad Gold & Jewellery through to Daboul, commission was paid to Al Shahad Gold & Jwellery. The mere fact that AEL was exporting CPD to At Shahad Gold & Jewellery did not mean that Al Shahad Gold & Jewellery cannot procure export business for Aditya Corpex Pvt. Ltd. Similarly, that Adani Exports Ltd. was exporting CPD to Choksey Diamonds did not mean that for exports business procured by Choksey Diamonds through Daboul for HEPL, HEPL could not pay commission to Choksey Diamonds. Similarly there was nothing wrong in Aditya Corpex Pvt. Ltd. and HEPL paying commission to Gudami International foi export business brought by Gudami International through Daboul. It was denied that payment of agency commission showed that the transactions of exports of CPD were dubious. The department's contention that it was unheard of in normal trade and business that a party to whom an export was made can be an agent fo: exports to other parties. It was submitted that except for the bald assertion in the notice there was no material to show that there was anything abnormal about it. And that it was perfectly possible and normal that if a party "X" was exporting goods to party. "Y" and if party "Y" was able to procure for "X" business of exports to other parties, "X" would pay commission to "Y" for such export business procured by "Y". It was also denied that the overseas firms to whom commissions were being paid were all managed / controlled and operated by AEL. The contention that the import and export by the other five firms viz. HEPL, MOL, ACPL, JAOL and BBPL was being done by AEL only and that yet these five firms were paying commission to overseas firms under control of AEL. It was argued that there was nothing wrong in the said five firms paying commission to overseas agents foi export business procured by the overseas agents. 11.7.911 was also denied that the amounts paid/payable as commission were dubious in nature on the ground that the exports contracts and invoices did not indicate that the orders were procured through an agent, as there was no requirement to indicate in the orders or the invoices that the exports orders were procured through an agent. There was nothing wrong in paying the commission to the agent and that the export orders and invoices did not reflect the procurement of the orders through an agent did not mean that the commission was not payable. The department itself in the notice has proceeded on the basis that agency agreements had been entered into and in fact the department's case was that the agency commission was required to be deducted from the FOB value. Thus, the department was adopting inconsistent and self contradictory stand by alleging on the one hand that commission was to be deduced from the FOB value and on the other hand contending that the payment of commission was dubious in nature. And the question of disclosing the same to the cri;toins also did not arise. • 11 7. OThe flow chart alleged to be recovered from the hard disk of Mr. Vipul Desai, o+' r five com ianies to various
- 154. IL overseas companies wasreturned by the overseas companies to Adani Group/Associated companies, viz. Daboul Trading and G.A. International was totally misconceived. Mr. Vipul Desai did not prepare the sais chart; Mr. Sudhakar Nair wli, ) had prepared the said chart was not examined, and no commission had been paid I.) Arihant and Prestige in 2004-05 and 2005-06 and therefore, the said flow chart did not reflect the true picture. And also that there was no evidence at all to show that. in accordance with the said chart the commissions paid to the overseas parties were transferred to Daboul Trading Co. and G.A. International. Further that no commissio.i was paid to Tanb Trading Estt. for exports made to G.A. International, and that the allegation was not supported by any evidence, and is denied. It was admitted that as per the agency agreement, Sinta Impex was nominee of Daboul and commission to be paid thereunder was for business brought by Sinta Impex through Daboul. 11.7.1 Ilt was argued that the term and condition that part of the commission would be paid to the overseas agents on the export incentives being received under t1-.c Foreign Trade Policy was a term and condition only in the case of the agreement entered into by HEPL with the overseas agents Choksey Diamonds and Guchuni International. There was nothing in law to prevent parties to an agreement from agreeing that the part of the consideration under the agreement would be payable upon happening of a particular event. This was a commercial term which the parties to the agreement were free to mutually decide upon. However, the said term arid condition had no bearing on the issue of valuation of the exported CPD raised in the notice. It was denied that all the firms to whom exports were made and in respect of which commissions were shown to be paid were all managed and controlled by AEL. 11.7.12As regards Excel worksheet alleged to have been recovered from the hard diA of the computer used by Mr. Vipul Desai, it was submitted that he had clearly said in his statement dated 19-2-2007 that the same was not prepared by him and that the same may have been prepared by Mr. Sudhakar Nair who was no more working with the company. No statement of Mr. Sudhakar Nair has been recorded. In any event, commission at 8% was neither paid nor payable in respect of exports made to Leo Diamonds and consequently the table in the said Excel Sheet was factually incorrect. The department's contention that if commission at 8% was deducted from the FOB value of exports it would mean that they had actually exported the goods at a loss. It was submitted that there was no evidence to show that the commission was payable or paid at 8% in all cases or in most of the cases. And that the purpose of an export incentive like Target Plus scheme itself was to enable an exporter to export at competitive price. Thus, even in those cases, where the commission paid or paya )1(' was 8% effectively there would not be a Loss if the export incentive was taken into account. And also that, as far as the FOB value was concerned, in arriving at FIJI; value the commission was not required to be deducted. Further, no commission vfaz.: paid or payable for exports of CPD made during the year 2005-06. 11.8 It was denied that the terms of payments for imports and exports were such as were meant to artificially boost the export turn over. It was further denied that then was any circular trading. The fact that the terms of payment in respect of imports were mostly through LCs for 180 to 365 days or DA for 60 to 90 days and the fact that. the terms of payment for exports were DA 60 to 90 days was accepted but it was; argued that it did not in any manner establish that there was circular trading or that the payments made to the overseas companies for imports of CPD were immediately returned to the Indian companies as payments for the export of CPD. It was reiterated that, in the year 2004-05 from April 2004 till 18th August 2004 AEL had received inward remittance of USD 14.52 crores for exports of assorted CPD made by them and, as against this, they had not made any outward remittance for import;; of unassorted CPD made. There was no question of any portion of the said inward remittance of USD 14.52 crores for exports made by them having come out of any outward remittance made against imports made by them. That during the entire period from April 2004 to March 2005 the inward remittances for exports of assorted CPD made by them was throughout in far excess of the outward remittances against imports of unassorted CPD made by them. That there was no question of any poi tiou of such inward remittance coming out of the outward remittance made by them. Even during 2005-06, from April 2005 till December 2005, the inward remittance: ,, fin exports of assorted CPD made were in excess of the outward remittances made by them against the import of unassorted CPD. It was only for a short period du g January 2006 to March 206 that the outward remittances were in excess ofl.he inward remittances. However, when the figures of the entire year 2005-06 are taken in to
- 155. 163 ccount the inwardremittances against exports of assorted CPD exceed the outward remittances. Similarly, during 2006-07 the inward remittances were always in excess ( if the outward remittances. Thus, the suggestion in the notice that the inward remittances against exports of assorted CPD were out of the funds remitted by them broad against import of unassorted CPD is baseless. Further contention in the notice hat although most of the overseas buyers to whom CPD were exported were established in and around September 2004 and were new to business yet they did not insist upon letters of credit being opened by the foreign buyers and instead agreed to IAA for 60 to 90 days and that this establish the nexus between noticees and overseas companies. It was argued that the said contention was totally misconceived and erroneous because, that most of the overseas companies were established in and wound September 2004 and were therefore new was factually incorrect; the notice ignored the statement of Mr. Samir Vora in which he had said that the business with the foreign companies was done through Daboul Trading Company, who in turn had a Tripartite Agreement with Gudami and AGFZE. And that they had long standing business relations with Daboul Trading Company and therefore there was no necessity to insist upon LCs from the foreign buyers. Similar allegation in respect of imports were also made that though imports k,ere on DA terms of 60 to 90 days, they had made payments to the overseas buyers before the expiry of the credit period by availing external commercial borrowing - buyers credit of 365 days. It was submitted that the there was a complete failure on the part of the department in understanding the economics of external commercial borrowings. While resorting to such external borrowings they had to pay interest at LIBOR + 0.5% to the foreign bank and charges to the Indian Bank, they in fact earned much higher interest on the amount deposited by them with the Indian bank. By resorting to such method of payment they earned by way of interest and did not incur ti-ty loss and this mode was resorted to as it was financially beneficial to them. The inference drawn in the notice that payment was made to the foreign suppliers before credit period expired by such external commercial borrowings was with intent to provide money to the foreign companies for being returned to them against the exports made by them was totally baseless and unwarranted. I 1.8.1 Further, in cases where the imports were against LCs with credit period of 180 days or 365 days the foreign suppliers had discounted these LCs with foreign banks i.nd received the amounts of the LCs and that for such discounting the interest was borne by them / paid to foreign banks and that thiswa not done in the normal course of business. It was submitted that except for the mere ips dixit of the department there is absolutely no material to support the contention that bearing of the interest by the buyer was not done in the normal course of business. It was asserted that where a buyer opens a letter of credit in favour of the supplier and there was a credit period it $k as normal in the course of business that the seller may discount the LC and receive the money from the bank which discounts the LC and the buyer would pay the interest to the bank. Where a long credit period such as 180 days or 365 days was agreed upon in normal course of business the seller may either load the interest element in the price and where he does not do so it was normal for the seller to discount the LC and for the buyer to bear the interest. This was normally also done in business of many other commodities. That this was normally done would be evident from copies of LCs in other commodities which are enclosed and marked Exhibit-U collectively. Thus, the contention in the notice that discounting of LCs by the sellers and bearing of interest by noticees lead to the inference that this was done to provide money to the foreign companies for returning the same back to them immediately was totally imaginary and baseless. 11.8.2 The Table set out at. page 138 of the notice that payments received by the foreign suppliers against unassorted CPD imported by them and the other Indian ti copwanies were returned back by the foreign buyers of the assorted CPD exported by t*m was imaginary and based on presumptions not supported by any evidence. The amounts shown in column 5 of the table as the value of the unassorted CPD imported differ from the amounts shown in column 12 of the said table as the value of the assorted diamonds exported by them. Secondly, merely because the dates of payment l'or the imports cited in table were within 2 to 20 days of the dates of the receipt of the payment of exports cannot by itself mean that the payment received by Indian companies for the exports was of the same amounts which were paid to the foreign companies for the import of unassorted CPD. In any event, where imports and exports 'A'Crte occurring side by side over a period of time there might be proximity in the dates letween navments for the imnorts and payments received for the exports. The fact •
- 156. however, was thatthe total payments received for the exports were far in excess of tl i. payments made for the imports and this fact was totally ignored in the noti.:+: completely demolishes the presumption made in the notice that there was circular movement of the funds. The illustration at serial No.4 of the table is also incorrect a.; the payment received in this illustration was for exports of Gold and had nothing to d,> with the exports of CPD. 11.8.3 With reference to illustration - (i) Illustration - I in paragraph 15.1 of the notice it was denied that AEL had mad,- payment of US $ 2463658.57 to Gold Star FZE, UAE on 17.2.2005 against invoice No.094 - GSF / AEL / B / 04 dated 8-2-2005 and 095-GSF/AEL/B/04 dated 8-2- 2005. The payments against these invoices were made by AEL on 6-2-2006 evidence of which was enclosed and marked as Exhibit-V. (ii) Similarly, the allegation in Illustration No.II that the payment of US :;; 4745836.15 made by AEL to Seven Star on 24.3.2005 was on the same day i.e. 24.3.2005 transferred to Gudami International was sought to be made on the basis of email dated 31.3.2005 as per Annexure-L to the notice. However, a perusal of thi;-; email dated 31.3.2005 did not support this allegation. As per this email dated 31.3.2005 an amount of US $ 4674396.89 (and not US $ 4745836.15) was received by Gudami International from Seven Star on 31.3.2005 (and not on 24.03.2005). Thus, not only the amounts were differing but also the dates were differing which show that the allegation in the said illustration No. II was incorrect. (iii) The allegation in Illustration No.III that Aditya Corpex Pvt. Ltd. had inade payment of US $ 1999765 to Tanb Trading on 11.1.2006 was incorrect. No such payment was made by Aditya Corpex Pvt. Ltd. It was apparent from Annexure-L that the said allegation was made on the basis of email dated 11.1.2006 which was reproduced at page 64 of the notice. There was nothing in this email to show that the amount of US $ 1999765 was paid by Aditya Corpex Pvt. Ltd. to Tanb Trading on 11.1.2006. Thus the conclusion sought to be drawn in the said illustration-Ill was incorrect. (iv) It was alleged in illustration No.IV that an amount of US$ 4220000 which WY.; transferred by Gold Star FZE to Gudami was the same amount which had been remitted by HEPL to Gold Star against imports made by HEPL from Gold Star. This allegation was made on the basis of email dated 5.10.2005 which was reproduced at page No.61 of the notice. It was submitted that there was nothing in this email to show that the amount of US $ 4220000 received by Gudami from Gold Star was the amount which HEPL had remitted to Gold Star for imports made by HEPL from Gold Star. Similarly, the further contention in illustration No. IV that HEPL had remitted amount of US$ 2499984 to Daboul Trading was also not correct. No such remittance has been made by HEPL to Daboul Trading nor was there anything in the said email to show any such remittance by HEPL to Daboul Trading. Thus the inference sought to be drawn in illustration No.IV was incorrect. It was submitted that Annexure-L to the notice contained factual error. It had presumed that certain payments were made by the Indian companies on the dates mentioned in Annexure-L when in fact payments were not made on those dates. In certain cases in Annexure-L it was wrongly shown that remittances were made from India to certain overseas parties when that was not the case. 11.8.4 It was argued that it was only in 244 number of cases that the payment terms for imports were varied from 60/90 days DA to payment at sight and these constitute mere 8% of the total imports. In any event there was nothing unlawful about this nor did it have any bearing on the question of the determination of export value. In fact, the Bank officers whose statements were referred to had themselves agreed that the . payment terms could be varied from 90 days credit to sight provided the parties agreed to the same. The very fact that the foreign suppliers subsequently gave invoices with the altered term of payment at sight to which we agreed would show that the variation had been agreed upon. As to the contention that there should have been deduction from 'the invoice value of the interest on the prepayment period, it was submitted that the charging of such interest was a matter of commercial decision made by the partie:. 'Even after making the prepayment there was no loss to them since they were earning higher interest on the amount deposited in the Indian Bank against whose letter of comfort the foreign bank gave the external commercial borrowing facility. •
- 157. 173 language, i.e. bothin Hindi and English but they were translated in English by the concerned officer. He also stated that since he had been visiting the DRI office for the few days ;rad on that day i.e. 30.01.2006, he was there from 9 am till midnight, therefore he had requested that the statement be continued on the next day. He did not remember whether he attended DRI office on 31.01.2006, however since the statement dated 30.01,2006 was again signed by him on 01.02.2006, he may have attended the DRI office on that day however he did not remember if any statement was recorded on I (.02.2006. Shri Lumesh Sanghvi was further questioned by the advocate for M/s AEL, in respect of statement dated 07/02/2006 recorded during investigation by the DRI officers. Wherein in reply to question 3 he had accepted that the work of assortment was undertaken by him, he added that by assortment he meant sieving, boiling and gradation purity wise, which he would keep ready, as he had a little knowledge of grading of the diamonds, and the assorter would check when he comes. Although he had a little knowledge about grading, he did not know about the market value. In the statement dated 07/02/06, a part of the answer to question no.3 states that only 25% of consignment were put to sieving. He was asked to explain the difference between sieving and grading. It was explained that sieving meant segregating as per size and grading means segregating as per colour, purity, size..., no two diamonds are the same and the value of any two diamonds will be different depending upon the quality, purity, colour; and may be the value of the graded diamonds should be more than the ungraded lot, but he was not sure and that there is a difference in the value of a uniform lot of diamonds from a mixed lot of diamonds. He informed that he had neither studied the provision of the Foreign Trade P ilicy of 2004-05 & 2005-06 and nor the provision of Target Plus Scheme of FTP. He had no idea about the Target Plus Scheme. That by the difference in value addition after 1/04 / 2005 could be to take advantage of some scheme in these five companies ether than M/s. Adani, he meant whenever you export, government gives some ncentive. He was not aware of any details of any particular scheme and just had a general idea. He further accepted that, as he had no knowledge about valuing diamonds, his statement that "1 have noted the difference in valuation many times" was incorrect. For the same reason he agreed with the advocate that his answer to Q.13 was not correct. Further questions by the advocate were in respect to the statement recorded on 28/02/2006. He informed that on or about 27/02/2006 he was called on telephone to lisit the DRI office on the next date, so he went on 28/02/2006. He did not remember whether summons was given before or after the recording of the statement, but he was given the summons on the same day. The Statement was recorded in the afternoon. He was asked that what he understood by the words "standing instructions" ith regard to loading of import value by 5% or 10% as mentioned in his statement dated 28/02/2006. To which he replied that he did not understand the meaning of the word "standing instructions''. And that he was grammatically weak in English. He could not communicate the answers properly. He was shown invoice no. 214 of 16/07/2005 of M/s Excel Global and invoice I-13 dated 26/07/05 of Spectrum Trading FZE which were referred to in his statement dated 28/02/2006 and was asked that on what basis of these two invoice (documents) could he conclude that lot no. 5 and lot no.6 were the same set of diamonds when he had stated that the diamonds had four different characteristics. To which he replied. "I ci.nnot say". He further accepted that on the basis of the documents alone or, weight alone it cannot be said that the diamonds are of the same set. There was a difference in the rate and weight of the two invoices shown to him. He also accepted that without ascertaining the purity and grade of diamonds, one cannot come to the conclusions that the diamonds were of the same set. Investigating Officer questioned that he had stated that there was a difference in the rate and weight of lot no. 5 & 6 of two invoices dated 16/07/05 and 23/07/05, the.difference in the rate was only $2 per carat and difference in weight was 18 carat. This was agreed by Shri Sanghvi. In another question by the Investigating officer lie agreed that though he had stated that without ascertaining the grade and purity of dicznonds one cannot come to conclusion that the diamonds are of the same set but the purity and the grade including cut and colour of lot no 5 of invoice dated 16,107/05 and lot no. 6 of invoice dated 13/07/05 were the same. He was shown the export invoice of Hinduja Export bearing No. 285 dated .2.5;07/2006 to M/s. Orchid Overseas/Singapore which showed that the diamonds E, Cut White PK-4 were exported at the rate of US$210 and another export invoice •
- 158. 174 bearing no 286also dated 21/07/06 to Orchid Overseas which showed that diamonds D-cut W-PK5 were exported at US$203 and after sieving the same. He was asked he still maintained that the same set of diamonds was imported under invoice dated 23/07/05 of Spectrum Trading FZE. To which it was replied that after assortment the diamonds were exported to Orchid and the rate thereof is different after assortment. He therefore cannot say that the same set of diamonds were imported by Hinduja under the invoice dated 23/07/05 of Spectrum Trading which is an unassorted lot of two grade of diamonds with a different rate. He was further shown two export invoices no. 318 & 319 both of Hinduja Export to M/s Planica Export relating to the import made under invoice no. 143 STF/ DIA-2005 dated 23.07.05 where lot no 6 was D cut white PK-4 of 725.63 carats exported at the rate of US$210 and lot no. 6 which was D-cut White PK-5 of 512.61 carats at the rate of US$195 and compare the same with two earlier export invoice bearing no. 285 & 286 of Hinduja in favour of Orchid which related to import from Excel under invoice dated 15/07/05 which shows lot no. 5 of D-cut W-PK5 of 487.5 carats at US$210 & lot No.5 of D-cut W-PK-5 of 733.67 carats at US$203. After comparing the 4 export invoice and the lot numbers with the same description he was again asked whether he still maintained that they were the same set of diamonds. In reply it was stated by him that after looking at the four export invoices of Hinduja, 2 in favour of Orchid and 2 in favour of Planica, he cannot say that the diamonds imported by Hinduja were the same set of diamonds imported under the invoice of Excel and Spectrum, since the weight and rate and size of the diamonds covered by lot no 5 of invoice 285 and 286 were different from diamonds of lot no. 6 of invoice no 318 & 319 in terms of quality and rate. And agreed with the advocate that his statement that diamonds imported from Excel Global and Spectrum Trading are of the same set, was incorrect. In reply to the question put up by the advocate for the notice, that why had 1w said repeatedly in his statement that he had been shown different invoices or the sante set of diamonds imported in his statement dated 28/02/2006; he stated that he used to go to the DRI office for nearly 20 days before his statement on 28/02 / 2006 war; recorded. Each time they were pressurizing him to say that the same set of diamoncls were imported, he was told that he will not lose anything if he agreed, to write. Regarding Annexure A & B to his statement dated 28/02/2006; he stated that department officer had prepared the annexure A & B. Maybe it was prepared by the officer recording the statement and it was shown to him after the statement war; recorded. Further that he did not verify the Annexures with respect to the document:; as he was told that annexure A &.B were prepared on the basis of the document:: seized from the company and he should accept the same in good faith and trust. The Annexures A, Bl, B2 and C to his statement dated 03/01/07 were also not prepared by him and the same were prepared by the DRI officer and he did not verif/ the invoice and documents in the annexure A, BI, BII & C to his statement. dated 03/01/07. He was shown few invoices with more or less the same weight and on the basis thereof he was pressurized to write that there was circular trading. He stated that nobody even with a experience of 25 years can conclude on looking at the document that they are the same set of diamonds, but this answer was not recorded by the officer. Certain affidavits dated 01/03/06 and 04/01/07 were shown to him and 1- c was asked to confirm that these were the retractions made by him, to which he replie d in affirmative. He stated that he complained to Samir Vora about the pressure white recording the statement, who directed him to meet the in-house legal officer Di-. Upadhyay of Adani who thereafter advised to prepare this affidavit of retraction.Aft making the affidavit of retraction he handed over the originals to Samir Vora. He was asked as to why he did not send the affidavit to DRI, to which he replied that he handed over the affidavit to Samir Vora and it was left to him to do the needful as required and he was not aware whether legally the affidavit was to be given to DRI or not. It was to be decided by Samir Vora. He was again questioned by the Investigating Officer. On being asked whether ii was true that he was a close relative of Gautam Adani, to which he replied that his father was first cousin of Gautarn Adani. He also accepted that he had joined Adani in 1995 as Asstt and was looking after banking activities till 2003 when he was assessing the job relating to export and import of diamonds. And that before the assessing job he had on being asked had said that he had little bit knowledge of diamond trade. S.I.0/ D.R.I observed that during 2004-05 export of diamonds worth about 3000 crores and 2005-06 diamonds worth of 6500 crores handled by him. 32.4 Cross-examination of Shri Kaushal D. Pandya
- 159. 175 Cross-examination of ShriKaushal Pandya was conducted on 07.04.2008. He was examined by Shri Vikram Nankani, Advocate in the presence of Shri lyer, SIO, I 'RI, Ahmedabad. It was interalia stated he was working in the Agro department of Adani Entp at Ahmedabad. That the instruction given by Mr. Lumesh Sanghvi to him were a fax which was written by hand. There was no formula indicated and whatever price was shown had simply to be typed. And that all the packages wereremoved from the imported consignments and segregated. In reply to question put in by the DRI officer. He informed that was the details conununicated to him by Mr. Lumesh Sanghvi had the buyers name and the description of the diamonds size, carat and the value; and that certain lots used to be removed by him from the imported diamonds as per instructions of Mr Lumesh Sanghvi and given for sorting depending upon the quantity required to be exported the next day, whereas the other lots would be given for sorting, depending upon which is ti‘e lots to be exported. Depending on the requirement the balance lots would be et moved for sorting. During the personal hearing held on 18.01.2011 Shri Naresh Thacker, Advocate oil behalf of M/s AEL and Shri Rajesh Adani, Director, M/s AEL appeared for hearing. A: the outset requested cross-examination of the officers who had recorded e;.aminiation report on some of the shipping bills of M/s AEL. For this purpose request was made to depute an officer in whose presence the advocate would like to choose some shipping bills and the officers who recorded their examination order. He relied _ipon some judgments to support his contention that even defence witnesses can also Je examined. As regards all cross-examinations that took place upto date, the advocate agreed that the questions and answers of such cross-examinations are already on record and there is no need to re-examine them, the Advocate agreed, even though there is a change in the adjudicating authority. After cross-examination the officers (who examined the export goods), the advocate would reappear for final hearing. He also reiterated the reply to the notice. The DIZI representative Shri S.N. lyer, SIO, DRI Ahmedabad also attended the hearing. 1'2.S Cross-examination of Shri Francis D'souza During Personal Hearing held on 03.08.2011, Shri Shri Francis D'Souza, I res entive Officer was cross-examined by Shri Vikram Nankani, Advocate for M / s A EL. It was interalia stated by Shri Francis D'Souza that he was posted at DPCC under the CSI, Airport Customs Commissionerate from November, 2003 to June, 2304, he used to work as per the examination order of the Appraising Officer in the import section and the export section as and when documents were marked to him. The physical examination of the goods was involved only to the extent of counting of the packages and the weightment of the packaged diamonds as and when specifically ordered by the AO. He also used to check the packing list and the invoices, whenever documents were marked for examination. He was asked by the Advocate for the notic-ee, whether he could recollect handling of export or import consignments of CPD of M/s. Adani Export during his tenure. However he stated that unless the documents ate presented before him he would not be able to comment on that. However original S;lEis were not available with the M/s. Adani Enterprises, the examination of Shri l~tcuteis D'Souza was concluded at this stage by the Advocate. lit reply to a questions by Shri S. N. lyer, SIO DRI, Ahmedabad Shri D'Souza, seated that he does not recall having examined export consignment of CPD where the import of the said export goods was also examined by him. He further stated that while examining the diamonds counting of the number of pieces was not done by him and that he was not the proper officer for checking the quality of the diamonds and he had not checked the same. He further stated that the proper officer for checking the quality of the CPD for the export consignments in respect of all the exports was the itssessing officer. 12 6 Cross-examination of Shri V.B. Patil, Appraising Officer During Personal Hearing held on 03.08.2011, Shri V.B. Patil, Appraising Officer was cross-examined by Shri Vikram Nankani, Advocate for M/s AEL. During the examination it was informed by Shri Patil that he was not posted et the DPCC during the relevant period. 12.7 During the Personal Hearing held on 01.12.2011 Smt S. S. Pali, Assistant '.otninissioner, Shri C.P. Singh, Assistant Director and Shr Y.K. Arora, Appraising, •
- 160. Officer were cross-examinedby Shri Vikram Nankani, Advocate for M/s AEL. The above said three officers were working as Appraising Officers during; the relevant period and were attending to the job related to assessment of the cxpot: documents. They were individually shown Shipping Bills which were received from AC/ PCCCC, and were assessed by them. In reply to a question regardint:, procedure followed for assessing the same; It was submitted by all of then' that Cie procedure for the assessment of the S/B followed is mentioned in Public Noticz: o. 1 1/ 1998 dated 04.08.1998, issued by the Commissioner of Customs(Airpa+ t). M umbai. 13.0 Personal Hearings were held on 17.01.2012 and on 14.02.2012 which ,vt-r( attended by the Advocates on behalf of all the noticees. During the Personal lit zirint, held on 01.12.2011 and 24.02.2012, the noticees agreed that though there xi:I:. change in the adjudicating authority, the records of the case including II1( submissions made earlier and the cross-examination proceedings till then, etc may be taken as submitted before the new adjudicating authority and there is no nee.,.1 fcy fresh submissions of the same. They also submitted a further submission dated 24.02.2012, wherein ii Ava reiterated by the noticees that there was no inflation of export value of the c.c.}.01 goods and consequently, there was no misdeclaration on value of export goods -wick :- Section 14 of the Customs Act, 1962 for the following reasons: (i) There was no evidence of contemporaneous export of goods et the lc,w( price, which is a mandatory prerequisite, before alleging inflation of export value. El- burden to prove overvaluation or inflation of value is on the Department. This Ji! (1(11 is required to be discharged with reference to value of contemporaneous exports ;it tlic lower value which is alleged to be the correct value. There is no evidence AA•hithio :v. '- cited in the show cause notice to this effect. In the absence of contemporaneous exports at the lower value of such or like goods, the allegation of inflating export v iliic is not sustainable. Reliance was placed on the following decisions: (a) Global Impex International vs. CC 2009 (243) ELT 68 (T) (b) Frost International Ltd. vs. Commissioner 2007 (216) E.L.T. A55 (S.C.) (c) Akshay Exports & Inds. vs. CC 2003 (156) E.L.T. 268 (Tri-Kolkata) (ii) AEL had produced evidence of contemporaneous exports of such or lilo• mod:. in Annexure 'A' to the reply dated 26th October' 2007 to the notice. When the Noti' ce has produced evidence of contemporaneous exports/imports, while the Depari mein failed to do so, the evidence of contemporaneous exports produced by A E arc conclusive of the correct value as declared by AEL in the respective shipping Reliance was placed on decisions and the ratio whereof is applicable. both in :lie export or import of goods, in terms of Section 14 of the said Act. (a) CC, New Delhi vs. International Traders 2009 (239) ELT 290 (Tri.-Del.) (b). CC, Mumbai vs. Mahalaxmi Gems 2008. (231) ELT 198 (S.C.) (c) Ramkrishna Sales Pvt. Ltd. vs. CC, Ahmedabad 2008 (230) ELT 431 (Tri.- Ahmd.) (iii) It was reiterated that all shipping bills were duly assessed and the g, )0(13 physically examined, following procedure prescribed by the Public Notice 11 /98 dated 4th August, 1998 issued by the Commissioner of Customs, Airport, M or, ihai And that the same had also been admitted by the then Customs Officers t iz Mr. Francis D'souza, Preventive Officer, Mr. V.B. Patil, Appraising Officer, Shri C.P. Asstt. Director, DGCEI, Ms. S.S. Pali, Asstt. Commissioner of C. Ex. and Shri Y. N. Arora, Appraising during their cross examination in the present proccccliig:-:. Accordingly, the value in each case of the goods has been approved and accent:2d alter physical examination and upon such verification, the let export orders 1-.Lave b( passed - as such, the charge that export value has been inflated, or that !her, has
- 161. 177 been a misdeclarationof export value under Section 14 of the said Act was grossly incorrect. liv) There was no evidence of any export valuation or market enquiry about the actual value of the goods being lower than the value declared in the shipping bill. In relation to diamonds, in the following cases, declared values have been accepted and ihe allegation of overvaluation has been rejected, despite export valuation or market eaquiry. ta) CC vs. Mahalaxmi Gems 2008 (231) ELT 198 (S.C.) tb) Sahil Diamonds vs. CC '010 (250) ELT 310 (Tri.-Ahmd.) confirmed by the Honble Supreme Court vide Order dated 1.04.2010 reported in 2010 (257) ELT A22 (S.C.) (v) Based on the ratio of the above decisions, the transaction value in the present ilSe must also be accepted, more so when the export proceeds have been fully realized. In such cases, the transaction value cannot be discarded as held by the I lon'ble Tribunal in the following cases: (a) BBS Pens (India) Pvt. Ltd. V/s CC, 2002 (142) ELT 435 (b) Global Impex International V/s CC, Chennai 2009 (243) ELT 68 (ii) Circular No. 69J97-Cus dated 08.12.1997 Though the above Circular relates to DEPB claims, the principles contained therein are equally applicable to the present case. This Circular deals with verification of present market value (PMV) and the FOB value declared in the shipping bill. In the present case, there is no PMV since DEPB was not claimed. However, in relation to FOB value, Para 6 mentions that the enquiry must be completed and final view taken in 30 days failing which the declared value shall be deemed to be accepted. Admittedly, no enquiry was conducted in the present case and therefore, the declared FOB value ought to be accepted. (vii) All transactions in the present case are based on the arrangement contemplated by Paragraph 4A.18 of the Foreign Trade Policy 2004- 2009 as announced on 31st August, 2004, accordingly, consignments of un-assorted Cut and Polished Diamonds were imported and after carrying out the process in-bond, the :lame were exported. The processes which were carried out like boiling, sieving and sorting resulted in value addition. The Central Board of Excise & Customs ("CBEC") vide Circular No. 40/99 dated 28th June, 1999 has clarified that these processes resulted in value addition and were permissible to be carried out in private/bonded wai7ehouses set out in paragraph 8.13 of Exim Policy. 1997-2002 which is equivalent :o paragraph 4A.18 of Frp. viiL) It was therefore, submitted that the value declared by AEL was true and correct falue under Section 14 of the said Act and hence, the declaration of value as required tinder Section 50 of the said Act read with Section 11 of FTDR Act, 1992 and Rule 11 arid Rule 14 of the Foreign Trade (Regulation) Rules, 1993 is correct. 13.1.1 Since the value of the goods declared by was true and correct there was no inisdeclaration of value rendering the goods liable for confiscation under Section 133(i) of the said Act. Further there was no evidence to show that the quality declared in the t:htpping bill was incorrect or inferior to the value declared therein and as there was no export evidence or market enquiry on valuation, or on the quality and also the goods were physically examined in respect of each consignment and after verification of the declaration as to the description, quantity and value, the export thereof has been allowed under Section 51 of the said Act and therefore, absolutely no merit or substance in the allegation of misdeclaration of quality and value. The goods exported ly AEL, are therefore, not liable for confiscation under Section 113(i) of the said Act. •
- 162. With further referenceto clause (ii) of paragraph 21.1, the exports in ill( present case do not fall within the ambit of "illegal export" as defined in Section l - I I(at of the said Act. The export of goods out of bonded warehouse is freely permissitic terms of the provisions of paragraph 4A.18 of FIT. This paragraph 4A.18 pc.' ry it:: import of Cut and Polished Diamonds ("CPDs") as well, as permits exports of the :;aine item, viz. CPDs with value addition. There is therefore, no "smuggling" as defined ii t Section 2(39) of the said Act and consequently, the provisions of Section 11H(a) of said Act does not arise at all. 13.1.2 It was reiterated that AEL was not a part of any "consortium" and WI the Notice-es who were exporters and importers of CPDs were independent and legi I entities. Also, all the buyers and sellers of CPDs from and to AEL and ()the' Notii cc were independent of AEL (except for M/s. Adani Global Pte. Ltd., Singapore and iv: /e. Adani Global SZE which are 100% subsidiaries of AEL), and not controlled managed by AEL as there were no common shareholders and no common direct except in case of Joseph Selvamar and Chang Chung Ling, both Directors in AGVTI . None of the buyers and sellers were "related persons" within the meaning of Rule 2(..) of the Customs Valuation (Determination of Price of Imported Goods) Rulee,, 19F. ,3 (hereinafter referred to as the "Valuation Rules") as in force at the relevant time. The word "control" is however, defined in Section 2 (c) of the Securities and E,xcle.nee Board of India ( Substantial Acquisition of Shares and Takeover) Regulation. 1.99-. and the same is reproduced herein: Section 2 (c) "control" shall include the right to appoint majority of the directors of to c c it, ul the management or policy decisions exercisable by a person or persons oeting individually or in concert, directly or indirectly, including by virtue (= th. it shareholding or management rights or shareholders agreements or voting ogrecieelit or in any other manner. Explanation. (i) where there are two or more persons in control over the tare,t company, the cesser of any one of such persons from such control shall not be de•mied to be a change in control of management nor shall any change in the nature quantum of control amongst them constitute change in control of management: Provided that the transfer from joint control to sole control is eff, ..?(:t•cl in accordance with clause (e) of sub-regulation (1) of regulation 3. 13.1.3 The expression "same management" is also not defined either under the e.,tid Act or Valuation Rules. This expression is, however, defined in Section 370 (1E3) of We Companies Act, 1956. which is set out herein: Section 370 (1B) For the purpose of sub-sections (1) and (1A), two bodies corporate shall d :e d to be under the same management- (i) If the managing agent, secretaries and treasurer, managing director or 111:111. tp:"1- of the one body, or where such managing agent or secretaries and treasurer:, love firm, any partner in the firm, or where such managing agent or secretari‘.3 and Measurers are a private company, any director of such company is- The managing agent, secretaries and treasurers, managing director or 'nut n-c1 of the other body; or (b) A partner in the firm acting as managing agent or secretaries and treasure -s the other body; or (c) A director of the private company acting as managing agent or secret ee and treasurers of the other body; or (ii) If a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body; or (iii) if not less than one-third of the total voting power with respect to any mat tev relating to each of the two bodies corporate is exercised or controlled by tl- c ionic individual or body corporate; or (iv) If the holding company of the one body corporate is under th.: :;irric: management as the other body corporate within the meaning of Clause (i). clau (i i) or clause (iii); or
- 163. 179 ) If oneor more directors of the one body corporate while holding whether by themselves or together with their relatives, the majority of shares in that body corporate also hold, whether by themselves or together with their relatives, the majority of shares in the other body corporate. It will therefore, be seen that neither the definition of "control" nor the definition (.1 "same management" applies to any of the 45 parties with whom AEL has had t ransactions covered by the present Show Cause Notice. The allegation that these 45 parties, who are actually third parties, except the two 100% subsidiaries as aforesaid, tae "controlled" and "managed" by AEL is therefore, ex facie false. 13.1.4 It was denied that the Company had suppressed or misrepresented facts to the licensing Authority, viz. the Office of the Joint DGFT, Mumbai by making, signing and/or using declaration, statement with intent to obtain DFCE/TPS under FTP. It 1.,.as denied that AEL through its director Rajesh Adani or otherwise indulged in tuisdeclaration while filing Bills of Entry or shipping bills or other documents before the Customs and/or DGFT with the above stated intent. It was submitted that the Applications for the year 2004-05 were pending with Joint DGFT, Mumbai, and AEL had not made any application for the period 2005-06. Besides, this charge cannot be adjudicated under the Customs Act, because the making, signing and/or using declarations, statements, by suppressing/misrepresenting facts to the Joint DGFT, Nttimbai for obtaining DFCE/TPS shall be examined and/or considered by the said authority. Reliance was placed on Titan Medical Systems Pvt. Ltd, vs. CC, New Delhi 2003 (151) ELT 254 1'3.1.5 With reference to clause (iv) and (vii) of paragraph 21.1 of the Notice, for the reasons applicable to clause (iv) of paragraph 21.1, these charges also cannot be adjudicated upon under the Customs Act. It is for the licensing authority to determine whether or not incremental exports have been made by the Applicants. This is also ..vident from the provisions of paragraph 3.7.3 of FTP, and in particular, Note (2) .hereof and also, paragraph 3.7.5 of FTP which contains the Target Plus Scheme 1"11)S") inter alia, provides that export performance made by one exporter on behalf of another, as per clause (g) shall not be taken into account for calculation of export performance or for computation of entitlement under the Scheme. It therefore, follows that whether the MOU between the entities referred to in the two charges under reply amount to transfer of export performance and whether or not these exports qualify for computation of entitlement shall be tested and determined by the Joint DGFT, Mitinbai, when dealing with the applications made by the respective exporters and hence, these charges cannot be the subject matter of the present adjudication. 13.1.6 The allegations in clause (v) of paragraph 21.1 of the above Notice that AEL Virough its directors entered into conspiracy with certain parties/people based in Dubai, Singapore and Hong Kong to cause dubious import and export of CPDs to take undue benefits of TPS were denied on the following reasons: (1) All imports and exports of CPDs were in accordance with law. AEL had a irtlid bonded warehouse license. AEL maintained all statutory records, which were c iecked and verified by the proper Officer from time to time. There was no allegation that these records were false or that the bonded warehouse did not exist; (ii) All consignments, whether for import or export, were physically els:arnined and the description, quantity and value declared in the shipping bills or the bills of entry, as the case may be, were verified following the procedure in Public Notice No. 11/98 dated 4th August, 1998. There was no "conspiracy" with parties/people based in Dubai, Singapore and iii?itg Kong, all the third parties were independent, were not "controlled" and " .41:kiaaged" by AEL. Goods have been physically exported and imported from and into All payments, whether received or made by AEL are towards valuable Ontideration for goods sold and delivered and vice versa and hence, there was niathstig "dubious" about the imports and exports of CPDs. With reference to the charge that there was misdeclaration of value addition of *Win as much as activities of assortment, boiling, sieving and repacking without any manufacturing/processing or change in form of the CPDs cannot by any stretch of imagination contribute to such value addition, is without substance and totally unsubstantiated. The CBEC Circular No. 40/99 dated 28th June, 1999 clarified that such activities were permissible in private/public bonded warehouses licensed for im3ott and export of CPDs and this would enable the exporter to achieve value •
- 164. addition norms ofminimum 5% as stipulated in the policy. DRI had not leo a 1V expert evidence or opinion but it was merely a general and sweeping statement a lade by a person who is neither qualified nor competent in the trade. The allegation t1 :al CPDs were exported in the "same form", in which they were imported are based on Ili( Statements dated 25th January 2006, 30th January, 2006, 28th February, 2006 and 3.. January, 2007 of Lumesh Sanghavi relied upon in the show cause notice. Thas, statements had been retracted by detailed Affidavits dated 1st March, 2006 ;-:ui,1 4c• January, 2007. In his cross-examination on 25.03.2008, Lumesh Sanghavi conli, inch that the activities of assortment, boiling, sieving and repacking were carried on I ii respect of all the consignments. It was on the assumption that CPDs were exported i,, the same form in which they were imported and that the FOB Value had been ii ill:, te, ) and that the value of CPDs at the time of export would be the same at; at. the tin, import. At the relevant time, AEL had engaged several orters and the fact that 1.1): activities were carried out is also borne out from the Panchnamas dated 30.01.2 .)0:.? relating to the search of the bonded warehouse, where stock was also found lying. Me processes were carried out and this assumption was neither true nor correct. 13.1.8 With reference to the allegation of circular trading activity Exhibit-ID o t.l c Reply dated 26th October, 2007 to the Notice was again submitted and the argukrim, reiterated. It was further submitted that the allegation of circular trading was U is, cl only on one factor i.e. the weight of each consignment which was represented in c ;r;, t. There were other factors also which distinguish one lot of diamonds from anothci. a: id these are cut, clarity and colour. While carats represent the total weight, the sicc of the diamonds in each lot constituting the total carat of the lot as a whole:, material for the valuation purposes. None of these other factors such as cut, cclour clarity and size have been considered to prove circular trading. The fact that t1 cr. v. no Circular Trading, was also supported by the record of cross-exatnination or 11.- Lurnesh Sanghvi and Mr. Karnraj Bodal wherein, both of them denied that the .3a,pe set of diamonds were imported and exported. As such, the allegation of ci, ci.: la,- trading is hollow and totally devoid of merits. The allegations in relation to payment of commission to overseas agcaL incorrect. Regarding non-declaration of the commission on the shipping bill. it reiterated that RBI vide Circular No. 12 dated 9th September, 2000 provide:: I remittance of commission was allowed after adducing satisfactory reason y the exporter to the authorized dealer. It therefore, follows that declaration of coionlis icii in the shipping bill was optional, and not mandatory and that, even if the comn is:ion amount was not declared in the shipping bill, remittance of commission was allow, d it the authorized dealer is satisfied by the reasons given by the exporter. As suel- declaration of commission in the shipping bill is not an offence under the said The further allegation that the commission paid or payable was to be from the export value for arriving at the correct FOB Value was also c; [vete unsustainable. Such an allegation was not at all supported by any provision 0! law either under the said Act or the FTP. Section 14 of the said Act which deals will, valuation of export goods does not provide for deduction of commission fr )n. the export value for arriving at the correct FOB Value and that there was no 3...ch provision in the FTP also. It was reiterated from their earlier submission that, commission was to be deducted in case of export of gold/silver/platinum jewc,le y for the purposes of arriving at the value addition, and not for the purposes of de tem it, the correct FOB Value as was evident from reading of paragraph 4(A).ti of Frt. r :act with paragraph 4(A).2.1 and 4(A).5 of the Handbook of Procedure ("HBP"), which to export of gold/silver/platinum jewellery and not to export of CPDs per say, vhicl, are not covered by either paragraph 4(A).2.1 or 4(A).5 of the HBP. As far as cxi .oil CPDs is concerned, the same are governed by the provisions of paragraph 4.,A) IA of TIT, which is a standalone provision. Paragraph 4(A).18 is not subject to 4 A) .2 i ai'd paragraph 4(A).5 of the HBP. As such, the charge in relation to commissien ii the sub-paragraphs under reply has no basis whatsoever. 13.1.9 It was submitted that since the provisions of Section 113(i) of the said A, t were not applicable, the provisions of Section 114 were also not applicable. As far 'is Shri Rajesh Adani was concerned, he was not involved in the day to day operation ,'iitl t he transactions of AEL. Shri Rajesh Adani had not signed any documents in r2lcatiun tc either export or import of CPDs, which are the subject matter of the present. N,,tice the application for claiming the benefits of TPS. Shri Rajesh Adani had 710. , i011C 0 omitted to do any act, the omission or commission of which allegedly reticle, c< •
- 165. I exported or importedby AEL liable to confiscation. There was absolutely 'to wi raw or justification for imposition of penalty on AEL, much less, on Shri Rajesh 13.1.10 Each of the annexures to the show cause notice were dealt by i he ni)tiee, ,, as under: Annexure-G In the first e-mail dated 18.10.2005, the comment is that funds sent by hidian Companies managed by AEL showing payment towards import of AEL immediately returned to Indian companies showing as receipt for export remittance is not col rect. because Orchid received payment from Gold Star FZE, which is a separate over entity and not from Indian companies managed by AEL. The same is the siAlation case of Gudami which received payment not only from another Singapore company but also from other overseas entities and not AEL managed Indian companies. In. fact it has received US $ 3 Lakhs from Express Money Transfer. It is therefore, t onchided that money received by Orchid and Gudami are from third parties in relatio i to thejr independent transactions which has nothing to do with AEL and other Indian en i!ic:;. Neither of the entities were managed by AEL as alleged or at all. The e-mails dated 19.11.2004 and 10.12.2004 contain mere inforinaton sent by one office to another and do not show circular trading or round tripping. The 4th e-mail dated 11.03.2004 merely contains the request by Mr.Bluivil: Shah to the respective overseas parties to retire the outstanding payment for the goods sold and delivered after following the prescribed procedure for export. in a.coord;Ince with law. This e-mail does not show any control or management by AEL on ovci-F.cas companies, and further comments are totally misleading. The request by the sell(' to the buyer for paying of outstanding dues is totally misunderstood. The 5th e-mail dated 22.01.2006 also contains mere information of remittal ke(: made by one company to another in relation to inter se transaction between which is not the subject matter of the show cause notice, and which do not krill part of Annexures- "A" to "FF" to the show cause notice. Merely because R. Sar,or communicated this information does not mean that AEL had transferred th funds from Mine Gold in Dubai to Gracious in Singapore. The fact that this e-mail contained the word " we" did not mean that Adani Global FZE made the payment, which also did not mean that R. Sagar was the authorized signatory of the bank account of Mine Gold. Mine Gold was an independent legal entity owned by Mr. Nasser Ali 3liaban Ahli. The shareholders of Mine Gold are Mr. Nasser Ali Shaban Ahli and Mrs. Naja,:i. So also the Director of Gracious are Chew Bee Choo and Mr. Rajendra Hiralal AEL was not a shareholder/Director of either Gracious or Mine Gold and there no common Directors. In relation to the 6th e-mail, which shows how the funds were transfc,Ted rr the accounts of overseas companies, from the accounts of other persons / and they were utilized to make the payment for the export of CPD from India Tb comment was mis-leading. There was nothing on record to support the same. The first payment of USD 0.55 Million was said to be received by Gudami from "Luinesli This was not borne out from the record. Lumesh also did not talk about any payment in his statements. The above are examples of how the various e-mails have been mis-interorctol and or misconstrued in the comments against each of them in Annexure-G. These mistakes or errors in understanding or interpreting the 119 e-mails c; n ty• summarized as under: i) All overseas entities (except in where Joseph Selvamar and Chang Chung Ling are the Directors) and Adani Global Pte Ltd, Singapore have no common shareholdet: or Directors with AEL or any of the other entities. c. u) .All payment from or to AEL or other 5 companies were made in relation te _ good , Sold and delivered and therefore, for commercial consideration, and repr, s,-:.itt ., the value of the transaction relating to sale and purchase of Cut and Polished • Diamonds. iii) AEL or other 5 Indian companies did not provide funds or used funds to finance any of the overseas entities, except made or received payment as aforesaid, for g )od:: sold and delivered and vice versa. •
- 166. 182 iv) There are45 entities involved in the various transactions covered by show cause notice, out of which only 8 were incorporated in 2004, after announcing of T irget Plus Scheme (TPS) and only 4 were closed down in 2006. This shows that onb v.Yry small number of companies were set up or closed down in the normal course of busint ss in the two years when the Target Plus Scheme (TPS) was in force. v) These e-mails referred to large number of unrelated and irrelevant transactions t ) the present show cause notice. Further these e-mails had been purportedly recovered by the Forensic depar.ment. There was no evidence of the author or the parties to the 119 e-mails which are part of Annexure-G. As and by way of illustration e-mail dated 14.04.2005 at. Sr No.19, purportedly sent by Ms. Mary, shows that the amount of USD '3.02 lvlillioa was transferred from Adani Global to Gudami on 19.04.2005. A plain reading uf thi:; mail shows number of discrepancies which are as under: How can an e-mail dated 14.04.2005 mention that funds have been 'transferred" on 19.04.2005 b) E-mail address of Mary is not there. It is therefore, the e-mails per se as well as the contents thereof are not genuine ar.d or are not true. Annexures-H & I These two Annexures to the show cause notice purport to show circular trading. The;e two Annexures contain details of consignments imported and exported, to allege hat there was no "incremental exports". The allegation that there was circular trading is e::-facie not sustainable. Apart from the reasons mentioned above, the Company enclosed two statements with nea -ly 200 examples to show that circular trading was not at all possible they once agan enclosed as Annexures-B & C of earlier submission. For the sake of arguments, reference was made to Section 20 of the said Act: "Re -importation of goods:- If goods are imported into India after exportation there Irma, such goods shall be liable to duty and be subject to all the conditions and ressictions, if any, to which goods of the like kind and value are liable or subject. on the importation thereof." A plain reading of Section 20 shows that there was nothing illegal and illegitimate for the goods exported from India being imported into India. There was also no such bar or prohibition under the Foreign Trade Policy (F.T.P.) or any other law for the time be ng in force. Reliance was also placed on the decision of Hon'ble Tribunal in Filaments India Ltd Vs. C.C., New Delhi 12000 (123) ELT 9541, wherein the Hon'ble Tribunal held that even though goods were exported from India at higher price such 4- 4, • gpods upon re-importation into India must be valued on the basis of contemporaneous ;,iUe of goods imported into India under Section 14 of the said Act. The ratio of this decision shows each of the two events covered by the said namely; import and export, are_ta be treated as independent transactions and therefore, the allegation of circular tga0i.ilig was incorrect and improper. • There are provisions of para 2.35 of Foreign Trade Policy which contemplates export of goods imported into India in the same form. The purpose of referring to both Sections of the said Act and para 2.35 of the Foreign Trade Policy is not with a view to claim the benefit thereof, but merely to show that having regard to the Scheme of the said Act and the Foreign Trade Policy, there was nothing illegal about re-importation of goods eN.ported from India and vice versa, which would attract the provisions of Section 113 o : the said Act and consequently Section 114 thereof. It was therefore submitted that in view of Annexures-I & II to the present submission, there was no circular trading. Annexure-J & Q : Commission lhere was nothing incriminating or illegal regarding commission paid in each case as can be seen from the following factors:
- 167. 183 (;) Commission paidto 4 out of 7 parties, who had no transaction of either buying et selling with the Noticees; (ii) The Commission paid was extremely small or negligible amount, for example; AEL has paid commission of USD 2.76 Million against total export of 12.38 Million which works out to 0.22%. The Commission paid by other noticees was as per annexure-D hereto. urther it was not uncommon that the buyers in one transaction introduce other buyers either to the same seller or to the other seller. In such event, the buyer introducing the new buyers would be paid commission as reward for generating business for the seller. Therefore, there was, nothing incriminating or illegal or teiusual in case of payment of such commission. Annexure-Q to the SCN contained details of commission payable, but not paid. The details contained therein are of no reference, since till date no such commission had been paid as correctly recorded in Annexure-Q. Aanexure-K Deals with payments made and / or remitted by third parties against export made to different buyers, for example, Annexure-K refers to exports by Hinduja Exports Pvt Ltd (HEPL) to Harshdiam, Hongkong whereas payment was made by ,ICS )iamonds. In order to appreciate these allegations, it was necessary to analyse the facts set out in Annexure E enclosed along with this submission. Merely having the account in the same bank does not give rise to any offence. , lust because one Indian party made payment to a person outside India, and few days thereafter, another party outside India makes payment of more or less the same amount to another Indian party, did not mean that there was a circular flow of money. When the payment was made by one Indian party to the party outside India such payment was towards consideration payable for the goods sold and delivered by the seller to the buyer which transaction was actual based on the physical movement of goods from one country to another and not a paper transaction. Once the amount r :,mitted from India and deposited in the bank account, there was nothing on record to show that the person outside India receiving such payment had transferred payment to outside India having account in the same bank for the purpose of remittance by one party to the other person in India. In the two instances, there was nothing on record to show that Gold Star and Dabhol Trading LLC transferred the amount into account o Labdhi International to enable Labdhi International to make the payment to AEG i.e. the source of funds remitted by Labdhi International to AELwas not known and therefore cannot be presumed that Labdhi International made payment of the same amount which was remitted by AEL to Gold Star and Dabhol Trading LLC. There was also gap of 2 - 3 days in the two payments, i.e., one by AEL to Gold Star / Dabhol Trading LLC and other by Labdhi International to AEL. Besides, there were no tr,insaction in relation to Cut and Polished Diamonds between Labdhi International th any of the noticees herein. Aiin(xure- L 84M Annexure-M refers to 313 e-mails tendered under Report dated 2.01.2007 of Directorate of Forensic Sciences. A perusal of the said report shows that the Hard Disks had only paper seals, while retrieving the data, no software which prevents tampering data had been used. It was further contended that there were number of discrepancies and / or defect in the alleged print outs of so called e-mails such as absence of dates etc. A note containing the discrepancies in the various e-mails mentioned in Annexure-M, was annexed and marked as Annexure-F. Annexure- P On this basis of Annexure containing reference to 348 transactions to show prc,payment of amounts to sellers of Cut and Polished Diamonds, it was alleged that ..0y making payments before time, to the sellers, AEL had facilitated flow of funds to the * buyers of Cut and Polished Diamonds. Whereas all Annexure-P demonstrates, is the me_ hat AEL undertook advantage of interest arbitrage because of the difference in I he rates of interest in India and overseas. The rate of interest in India was, at the iatvant time, higher than the rate of interest outside India. On account of the liar king facilities enjoyed by AEL in India, AEL was in a position to make a fixed oeposit of the amount payable to the foreign seller. Based on this fixed deposit, the •
- 168. 184 foreign branch ofthe Indian bank made payments to the foreign seller. on th- it, date, the foreign branch, recovered the amount from the Indian bank, which 'va ; • already holding fixed deposit by way of security. The interest charged by the foreign branch of the Indian bank for the period for which it financed the payment. 1,, tl foreign seller, i.e. the period between the due date and the date of payment to a foreign seller. This amount of interest paid by the Indian bank to its foreign In-wiCi was lower than the interest payable / paid by the Indian bank to AEL on the fixed deposit. Thus AEL earned a higher amount of interest on the fixed deposit corn part 1 to the amount of interest it paid on the financial accommodation by the foreign bran( It to the seller. This was purely a commercial transaction for a valuable consideratie known as buyer's credit and playing on interest arbitrage is very eornino) international financial markets and there was nothing unusual or abnormal alio' t such transactions undertaken by AEL. Annexure- R The content of Annexure "R" is the same as Annexure "P" except that in a:,c )f Annexure "R", 324 transactions have been listed to show discounting of the LC b' fo. the due date by the seller. In this case, it was the sellers who discounted ilic L' being the beneficiaries there under. These transactions are also based on col-note, ei.11 considerations as such transactions are undertaken in the normal course of 1.r.v4ii-i.c!;;; by beneficiaries under the LC depending upon the interest rates prevalent from lime .o time. Besides, as set out in the reply to the Show Cause Notice, AEL was in Iiidy concerned with doing the job work and earning value addition for the procc:::ilig activities carried out by it under bonded warehouse in terms of the said Circula 1`,o. 40/99 dated 20.06.1999. It was, therefore, in the interest of AEL to ensure that ..I1( re was no breakdown in the cash flow position and it was in AEL's interest to monii.oi prompt receipt of payments for export so as to keep the exposure of financial rises the minimum. It was concluded that AEL undertook processing activity as recognii;.(1 ;Hid permitted under Circular No. 40/99 dated 20.06.1999 issued by CBEC; (i) On account of the above activity, AEL achieved value addition; (ii) The FOB value declared in the shipping bills is true and correct under !ir.ution 14 of the Customs Act, more so, in view of evidence of contemporaneous export; and absence of any other material such as export (panel determination or market en, iwr)) to justify reduction of the FOB; (iii) The FOB value is the transaction value and was duly verified at the ti n( of export by the proper officer in terms of Public Notice No. 11/98 dated 04.08.1(.198 also confirmed by the customs officers during cross examination; (iv) No benefit under TPS has been received and there is no misrepresent:Wm' or mis-declaration, which are charges, which anyways, the DGFT alone h.a .3 the jurisdiction to deal with; (v) The provisions of Section 113(i) are not applicable and therefore, no penalty imposed on the company or its Managing Director; :40 !: • • • • r f . 7314.0:. The written Reply to the SCN by noticees dated 26.10.2007 was forwardel W 4191-Atiniedabad inviting their comments thereon. The comments v,'C re recei,-e, l f ni A./brief of the same is produced below: their comments to the reply by the notices it was submitted that in 21)0 t-04 the DGFT floated a benevolent scheme titled "Incremental Export Promotion Seb.ine" for the benefit of the so called Star Trading houses/status holders. The clienie provided for incentive equal to 10% of the total Incremental Exports in 2003-04 over their exports in 2002-03, provided the incremental growth was atIcast 25'!(). .Adarti Export Ltd and its group/associate companies who were general traders exporting various commodities from grains to textiles and had export turn over of over Rs 400 Cr ores in 2002-03 for all the companies put together boosted their exports many fold:.• as is evident from the following details. COMMENTS OF DRI
- 169. A -1 0 Rise wer 1. previouS 185 Year Adani Exports Ltd. Hinduja. Exports Pvt. LTd. Aditya Corpex Pvt. Ltd. Midex Overseas Ltd Total (of'' Adani Group) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) 2002-03 377.44 4.15 2.68 28.26 412.53 2003-04 4838.53 694.07 426.63 244.60 6203.83 % Rise over previous year 1181.93 16624.58 15819.03 765.53 1403.85 In 2003-04, the exports of the above four companies saw a sudden boost ,of over 1,181% in case of Adani Exports Ltd., 16,624% in case of Hinduja Exports Pvt. iAd., 15,819% in case of Aditya Corpex Pvt. Ltd and 765% in case of Midex overseas Ltd. A major chunk of this export performance was achieved through export of plain gold jewellery, gold medallions, Rough Diamonds, Cut and polished Diamonds and third party exports. i 4.1.2 Smelling large scale misuses of the Incremental Export Promotion scheme l)GFT vide Notification No. 28/2003 dated 28.01.2004 and Public Notice No. 40 (Z.EEE-03) dated 28.01.2004 clarified that the exports of precious metals in any form iicluding plain jewellery, & Rough uncut and semi polished diamonds and third party exports would not be permitted for counting towards FOB entitlement under the scheme. Aggrieved by this Notification Adani Exports Ltd. approached the Hon'ble I-kigh Court of Gujarat by filing SCA No. 1676/2004 and consequent to the order of the 1- on'ble High Court of Gujarat, both Adani Exports Ltd. and the DGFT are in appeal l-tfore the Honble Supreme Court, which matter is still pending. .3 The DGFT, w.e.f. 01.09.2004 floated a new scheme titled "Target Plus Scheme" akin to the Incremental Export Promotion Scheme. This scheme also offered incentive tc the status holders and offered Export incentive from 5% to 15% based on the percentage of incremental exports achieved. The Studded Gold Jewellery along with C 86 Polished diamonds were permitted to be counted for the computation of export witie for availing incentive under the "Target Plus Scheme". Adani Exports Ltd., once atain grasped the opportunity and again achieved a whooping export performance to the tune of Rs. 14,336.14 Crores, which many a big export house would aspire to achieve. This time Adani Exports Ltd. added two more companies to its kitty and the export performance was achieved in the name Adani Exports Ltd. and five of its group associate companies as under. • lani 'orts .d. Hinduja Exports Pvt. Ltd. Aditya Corpex Pvt. Ltd. Midex Overseas Ltd Jayant Agro Organics Ltd. Bagadiya Bros. Pvt. Ltd. Total (of Adaiii Group) ',s. In rs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) (Rs. In Crs.) 377.44 4.15 2.68 28.26 412.53 B38.53 694,07 426.63 1 244.60 209.17 200.57 6413.00 0938.80 1481.37 874.35 503.05 538.57 417.57 14336.14 26.08 113.43 104.94 105.66 157.48 108.19 23.55
- 170. year % Rise over 2002-03 2798.1535,595.66 35525.00 1680.07 Adani Exports Ltd. managed to achieve over 100% incremental Exports in 200.1-4 over the exports of 2003-04 for all the five companies to achieve the maximum belie iit of 15% incentive as prescribed under the Target Plus Scheme for incremental exi over 100%. The figures for the increase in exports in 2004-05 when compared witli tl le exports of 2002-03 as above, the % increase in the exports is all the more T T (d boggling. 14.1 4Again DGFT, on being brought to notice of the misuse of the scherw, vi lc notification No. 27/2004-09 dated 23.02.2005 amended Para 3.7.5 (f) to read I hi's: "Gold, Silver, Platinum and other precious metals in any form including plain and studded jewellery". Thus excluding the export of Studded gold jewellery f, on. di: - purview of Target Plus Scheme. Further vide Notification No. 48/2005 d:d 20/02/2006, the exports of diamonds and other precious, semi precious stones wT also removed from the list of export items entitled for Target Plus scheme. Ancl vi Jc Notification No. 57/2005 dtd. 31/03/2006 the "Target Plus Scheme" was abolished le; all the exports with effect from 01.04.2006. Thus the genesis of the fraudulent c.xport!: of cut and polished diamonds, gold jewellery and gold Medallions by AEL a; d group/associate companies by indulging in circular trading and artificial Mem. 3( II the value addition, to artificially boost their export turnover dates back to the yrar 2003-04, when the Incremental Promotion Scheme was introduced and therefore h" defence of the noticees, at any stage, that the figures or the mails or the amount. the parties referred to does not pertain to the period of the Target Plus Schema or to gold/gold jewellery and not cut and polished diamonds, should be vievced in this perspective. It was also mentioned that the case as a whole is to be viev,,c.1 from the perspective of the fraudulent intention of the exporters to artificially beD:.4 their export turn over by way of circular trading of the same sets of dial-non:Is. to achieve disproportionate incremental exports to avail undue benefits of Target 1 'Ins Scheme, 14.1.5The unprecedented volume and value of imports and exports by the Not; :c. ns compared to the value of exports by the other top 35 exporters, also needs to be gi t) a consideration while arriving at a conclusion that the importers and exporters v (*Ye interrelated and were hand in glove in the fraudulent design of the Noticec to ;wail undue Target Plus benefits. Ample evidences had been adduced in the SCN tt. slow that the overseas importers and the exporters were interrelated and hand in glo the Indian companies and that there was circular trading of CPD between then'. 1'w-a 8 & 9 of the SCN refers. 14.1.6It was submitted that looking to the huge size of the individual consignments running into thousands of Carats, no contemporaneous exports by kin3 other exporter, having the same volume of consignment could have been to ip.1 to draw a comparison. Moreover the stray instances brought forwarded by the lo!iece to show comparable prices, vide Exhibit A to their reply, also cannot be decnieJ bc contemporaneous in view of the fact that the "Range Converted" shown in 5 O- dle Exhibit A has no basis. Therefore the range of diamonds shown to be c:(pi Tied could not be said to be comparable with the size (range) of diamonds expoTtc,1 11 ----them. Also the Noticees have not drawn any reference to their export consig)inient:. • ,-- w.ith which they were attempting to compare the said prices. Moreover in the ',411ibit A there is no reference to the quantum of exports per consignincin. an, - country to which the same were exported, to draw any comparison. Thus a Trier: talw,lation giving some instances of prices without any reference to the size t ,'• the diarrionds exported, quantum of exports, country to which the exports were li taidc, cannot make them comparable prices. Their contentions that Section 14 is also not applicable in this case as th( (21)1) exported by them as the same are not dutiable. Various courts, including the 1+ rible Apex court have held in a number of cases that in case of export fraud, :5( ctionli comes into play and is applicable. The Honble Apex court's judgment in case t ,f (tit) Prakash Bhatia [ 2003 (155) ELT 423 (SC)] is aptly applicable in this case, wire, cili it is held that, mode for determining the value of the goods provided under Section 14 of the Customs Act, 1962 is required to be followed even if no duty is payable. INIcy cover in the said judgment the Honble court has also held that, when mat gin1.)f pi °lit
- 171. ; manner. • •:44% 141.9 Reference was invited to Annexure N of the SCN which gives details of the = 4. - t : exports of CPD by the Six AEL group of companies as compared to the other top 34 ;,, exporters. The details are summarised as follows: 187 ippears, on the face of it unreasonable, it is for the exporter to establish that it was a true export value stated in the shipping bill 141.1.7 The submission of the noticees that they were already into the business of export of CPD since long and that their sudden spurt in the exports of CPD was not misplaced. The noticees admitted that their exports of rough diamonds was only to the tune of Rs. 83 Crores in 2001-02 and exports of CPD was a meager Rs. 20 Crores in 2002-03. Therefore a quantum jump of over 8400% in the export of CPD to Rs. 1700 Crores in 2003-04, as claimed by the noticees, themselves, cannot be viewed without any circumspection. And there was every reason for the noticees to suddenly bolster heir export of CPD, by circular trading in a similar fashion. The Incremental Promotion Scheme introduced in 2003-04 entailed a benefit of duty credit scrip equal to 10% of the incremental exports by an exporter over their exports in 2002-03. The contention of the notices that their exports of CPD were purely on business considerations and had nothing to do with the benefit under the Target Plus Scheme. Ii was contended that during April 2004 to August 2004, when there was no policy of Government containing such duty free incentive scheme, their exports of CPD continued and they had exported CPD worth USD 300 Million during this period. liere the noticees are making a clever attempt to hide the fact that the benefits under the "Incremental Export Promotion Scheme", introduced in 2003-04 continued in 2004-05 also and the new FTP 2004-09 came to be issued in September 2004, u hereunder the new "Target Plus Scheme" akin to the earlier "Incremental Promotion Scheme" was introduced, which was made effective from 01.04.2004 and therefore the exports of CPD by the noticee during April 2004 to August 2004 were made eligible under the new "Target Plus Scheme. Moreover the total exports of CPD for the entire group/associate companies of Adanis was to the tune of Rs. 7924.35 Crores in 2004- 03 i.e. approx USD 1800 Million, as compared to USD 300 Million during April 2004 to August 2004, as claimed by the noticee. Thus during September 2004 to March 2005 i.e. within a period of 7 months, after the introduction of Target Plus Scheme, they exported CPD showing a value of over USD 1500 Million. 14.1.8Para 4A.18 of the FTP 2004-09 as promulgated in September 2004 laid down that the import 86 re-export of Cut & Polished diamonds from a private or a public bonded ware house would be subject to achievement of minimum value addition of 5(v.i. This Para remained unchanged in 2005-06 also. However in the MT 2004-09 (RE 2005-06) Note 5 was inserted in Para 3.7.3 which laid down that "in respect of export of Cut & Polished diamonds only those shipments would be taken into account for computation of eligible exports under the scheme where a minimum of 10% value addition has been achieved". Para 4A.18 remained unchanged in 2005-06. Therefore Adani Exports Ltd. who had already decided to shift its export turn over to other group a::sociate companies for availing Target Plus Benefit, continued to export with a value actdition of 5%, just like other exporters in the trade of CPD. The quantum of exports of CPD by AEL in 2005-06 also dwindled to Rs. 1193.64 Crores from Rs. 5626.67 Crores in 2004-05. However as regards the other group/associate companies they started showing value addition of 10% to meet the requirement of eligibility under the carget Plus Scheme. It is also highly circumspective that when Adani Exports Ltd. and tn. en the other exporters in the trade of CPD could achieve only 5% value addition how the other group/ associate companies were able to achieve 10% value addition in 2005- especially when the so called activities of sorting and grading carried out in bond wire the same. This itself goes to prove that the value addition of 5% or 10% was .arificially shown and therefore the value of the exports as declared by Adani Exports td, and other noticees was incorrect and not acceptable, more so in the light of the 7,fact that the same sets of CPD were exported and re-imported for export in a cyclic • ', ''‘`liktfs44ARYOF EXPORTS OF CPD BY TOP 40 EXPORTERS 7.% 2003-2004 2004-2005 2005-2006 Oct. 2005) (up to 31st Quantity (Carats) Val. Crs) (in Quantity (Carats) Val. Crs) (in Quantity (Carats) Val. Crs) (in
- 172. 188 Total of all40 Exporters 5152813.70 3835.48 1,52,02,493 10920.40 1102948 21,89,38 Total of other 34 firms,/ Cos. 35,93,343.62 2587.07 40,79,072 2996.05 Total of AEL and its 5 group Cos. 1559470.08 1248.41 1,11,23,421 7924.35 88,40,09 4.21 7.50 6.71 221)0.(?!) .i447.10 Thus from the above it transpires that the total exports of the 34 majoi lirrn:; dealing from DPCC was consistent during the period 2003-04 to 2005-06 and ti-a( their exports reduced from Rs. 2996.05 Crores in 2004-05 to Rs. 2266.95 Crores 2005-06 (fall of about 24%). Whereas the exports of Adani Exports and it:; othc r Iii r group companies which was only Rs. 1248.41 Crores in 2003-04 suddenly shot upto to Rs. 7924.35 Crores in 2004-05 (a boost of 534%), whereas their exports in 2005-0' , marginally reduced to Rs. 6447.10 Crores as compared to 2004-05, but was highet 416% as compared to 2003-04. It is pertinent to mention that in 2004-05 ald i!i 2005-06 the total exports of Adani Exports Ltd. and their 5 group companies; Nva.: about 3 times the total export of all the other 34 firms put together. Site unprecedented growth in the exports achieved by the Adani Group of companic:.wa unheard of in the diamond business and even the top 34 exporters who were vet.•.:ran.; in the field could not even get any where near to the quantity and value of exports b%- AEL &. its group companies. 14.1.10 Adani Exports Ltd. & its group/associate companies in 2004-05 (dui incr, a span of only 7 months - Sept'04 to March'05) had exported over 111.23 Lac Cat at; of CPI) whereas during 2005-06 the quantity exported was 88.40 Lac Carats. Al ains.-.. this the total qty of the other 34 exporters put together in 2004-05 was only 40.7') Carats in 2004-05 and 21.89 Lac Carats in 2005-06. Such unprecedented want (, r exports of CPD by Adani group is also a clear indication of circular trading, be( a ..m• generally CPD are not re-sold in the market like gold and other precious met lb.. simply due to the fact that once embedded in the jewellery they cannot be remove, I undamaged. Their submission that their export of CPD continued even oiler 31.03.2006 when the TP scheme was withdrawn, was Rs. 955 Crores winch is meager when compared to the whooping export of Rs. 7924.35 Crores of t ) exported in 2004-05 and Rs. 6447.10 Crores in 2005-06 made by the Adani groui, . The exports of rough diamonds as claimed by them are only to the tune of Ns. 8 ; Crores in 2001-02 and exports of CPD was a meager Rs. 20 Crores in 2002-0:3 and 1Z:-. 948 Crores in 2006-07. Thus by their own admission it is apparent that the export i CPD by Adani's & its group/associate companies suddenly show an unpreced?riteJ spurt during 2003-04 to 2005-06 and especially in 2004-05 and 2005-06, whi,A) already elaborated in the SCN was achieved by Circular trading of the same diamonds. 14.2.1 The noticees are refereeing to some tripartite agreement between (1) l`/:. Daboul Trading Company, LLC, (ii) M/s. Adani Global, FZE and (iii) M/s. Gt dami International Pte Ltd., Singapore. It was stated that the copy of the said agrectucro_ was never produced before DRI during the investigation. The said agreeme. produced before adjudicating authority in reply to the SCN is only on a plain nipc - and also does not seem to be ratified with any authority either in UAE or Singopor( Normally such contracts are on stamp papers and ratified with appropriate locol authorities. Therefore the authenticity of the said agreement is doubtful. vc' r. accepting without admitting that such an agreement existed, it only goes to prove: ttuo. -the entire overseas trade of imports and exports of CPD in the name of dine! ein. parties was managed and controlled by the Adani group/associate companies based ill UAE and Singapore. Kind attention is invited to Para 8.5 (b) of the SCN wherein - t Lia:; been clearly brought out that Ms. Mary Joseph, the employee of Adaiii Global )tA , Singapore is the Director of M/s. Gudami International. This fact has also been admitted by Shri Bhavik Shah, Senior Vice-President of M/ s. Adani Agro Pvt I ,td , Ahmedabad under his statement recorded on 8/1/2007 and Shri Rajesh Adani, the Group Managing Director of AEL, in his statement dtd.11/ 1/2007. 14.2.2 Also the e-mails listed at Sr. No. IV in Para 8.11 of the SCN clearly sho-Ass control of Adani group over Gudami International, in as much as the decisicti P.-- opening a bank account of Gudami International is taken by Adani Group. The 3 tali reproduced at S. No. III of Para 8.11 of SCN shows that even the email ld of 'MI .otil
- 173. 189 'trading is beingused by Shri Manoj, the employee of Adani Group. The e-mail at S. No. V of Para 8.11 of the SCN also shows that M/s. Daboul Trading LLC, UAE belongs ,o / is managed and controlled by AEL, through its employees who are made the directors of the company. It was evident from the Mail of Shri Kushal Kabra of AEL to Shri Gautam Adani, the Chairman of AEL, wherein the transfer of shares to Daboul Trading and its cost implication were discussed. It was also mentioned that UBS is a leading global wealth manager, a leading, global investment banking and securities firm, and one of the largest global asset managers, with headquarters in Zurich and Switzerland. And it was also not disputed that Adani Global FZE is a subsidiary of Adani Exports Ltd. 14.2.3 Various statements of Shri Lumesh Sanghvi, wherein he has stated how the entire process of assortment would be completed in 3 to 4 hrs and re-exported within a day or two. He also stated that how he doubted the value addition of 5% or 10% being charged on the value of the imported diamonds but he continued to load the value of 5% / 10%, as instructed to him by Shri Sameer Vora of AEL, irrespective of the correct value of the diamonds exported. It is also pertinent to mention that in 2005-06 Adani Exports Ltd., who could not have achieved the desired volume of ecperts to claim the benefit of Target Plus Scheme, continued to show value addition of 5% whereas the value addition for the other five companies was shown at 10% It is also to be noted that other exporters from Diamond Plaza Mumbai continued to show value addition of 5%. Shri Rajesh Adani MD of AEL was confronted with this fact during the recording of his statement dated 11/1/2007 he vaguely replied that AEL had pending orders and so they continued to export at value addition of 5% whereas it was not economically viable for other companies to export at value addition of 5% and so the value addition was shown at 10%. Here also Shri Rajesh Adani is talking of c:ports by value addition of 5% or 10% and he also does not say that the diamonds were exported as per their value in the international market, as is attempted to be -.hown in their reply. All throughout their reply a limp attempt is being made to cinphasis upon the adjudicating authority that they could have achieved value addition of 5% and that their exported value is genuine. In this context statement dated 02.02.2006 of Shri Samir Sevantilal Vora, is also relevant, wherein on being specifically asked about the reason for the value addition of exports up to 31.3.2005 5% over and above the import value and with effect from 1.4.2005 the value addition of the exported cut and polished diamonds rose to about 10% over the import ;due specially when the process carried out by them on the imported diamonds up to ::;1.3.2005 and after 31.3.2005 was the same, he explained that the decision to increase the value addition from 5% to 10% was commercial decision taken by Shri Saurin Shah in consultation with Shri Rajesh Adani and the same was communicated to Shri Lumesh Sanghvi who prepared the export invoices accordingly; that in some cases the value addition continued to be 5%. 14.2.4 Further that it is amply brought out as to how the export value was finalized by artificially adding 5% or 10% to the import value of the diamonds, the statements of Shri Lumesh Sanghvi and Shri Kamraj Bodal clearly shows how the imported diamonds were received, already sorted into different packets lot wise as per invoice, having different description and how each packet/ lot was only sorted into two different sizes or two different grades, which shows that the imported CPD did not undergo much sorting or any other such processes as claimed by AEL and the other S companies and re-exported in substantially the same form. It would be a different tale if, say a mixed lot of diamonds say of different cuts, colours, clarity and size would have been imported and than assorted into diamonds of various cut, clarity, colour and size. Thus the allegation made in the notice that Adani Exports Ltd and others, could not have achieved value addition of 5% or 10% as claimed by them is well founded and the allegations of artificiality of the export value, and the exports as such is also more pronounced when the fact of Circular Trading of the same set of diamonds, is also taken into consideration. Also the fact that the so called Indian as well as the overseas importers and exporters of diamonds were all managed and entrolled by Adani Exports Ltd., speaks volumes about the fraudulent nature of ,irtiports 86 exports. Also the various MOUs signed with the Indian companies for achieving the export turnover in their name and thereafter using the benefit of the Target Plus Scheme (on payment of certain % of the exports) also throws ample light on the intentions of Adani Export Ltd., to abuse the Target Plus Scheme. 14.2.5The meager payments made to the master assorter of Rs. 10,000/- per month irrespective of the quantity of diamonds imported / exported and daily wages of Rs. •
- 174. 190 200/- paid tothe piecemeal assorters brought by him also reflects on the skill ci work force employed by the noticees and the genuineness of the so called activity ol assortment being carried out by them. When the job of assortment of Diamonds in such huge quantity was involved it would have been natural for the companies to permanently employed highly skilled work force in sufficient numbers. But here as it appears one so called master assorter with a meager pay of Rs. 10,000/- per niauth was employed and some piecemeal assorter were employed only to show that the activity of assortment was being under taken by them. 14.2.6 It was stated that the noticees were trying to hide behind the back of Cti:-:;tom officers who had examined the import /export consignments, in a vague ;Menu d to show that their import consignments were unassorted and that their (`.port consignments were assorted and had achieved value addition. In this regard in Pon. 11.4 of the SCN it is brought out to show how different packets/lots containing sanic variety of diamonds were imported and re-exported after just showing them as sorted into two different sizes by the simple process of sieving or into two different gracle-=;. In statement dated 03.01.2007 Shri Lumesh Sanghvi had clarified that the vari,.,iy o' diamonds with clarity PK are the lowest quality of diamonds as far as clarity is concerned and normally the diamond labs do not grade diamonds with clarity to .'c) than PK3. Therefore the so called activity of sorting carried out on the iinporteC diamonds was only a farce and an attempt to dupe the Custom officers. 14.3.1 Further contention of the noticees that the statements dated 28.02.2006 kind 03.01.2007 of Shri Lumesh Sanghvi were not voluntary and retracted by affidavit:: dated 01.03.2006 and 04.01.2007 is far from truth. The fact that the :;0 affidavits were never tendered to the DRI authorities nor any retraction was flied b:. Shri Lumesh Sanghvi which was evident from letter F.No. DRI/AZU/INQ-15/2ti0:. dated 14.05.2008 of ADG, DRI, Ahmedabad addressed to the Commissioner oi Customs, Airport, Mumbai, enclosing a copy of the letter dated 23.04.2008 of Dep it: Director, DRI, Mumbai. The so called affidavits of retraction were 11('Ve, communicated to the DRI officers and especially to the investigating officers who had recorded the statements. The noticees had also not produced any evidence of havin:.. delivered such affidavits. Without admitting the fact that the above statements wet, refracted, it is to state that there are number of judgments of the various eaurt. • including the Honble Apex court of India, wherein it is held that a statement recorded under section 108 of the Customs Act, 1962 before a Customs officer is acImissibl• inspite of it being retracted. In the above statements Shri Lumesh Sanghy) ha. . categorically stated that he also felt that the same set of diamonds were imported 1..n.! exported over 8i, over again. In the record of cross examination of Shri Luinesh Sitripin by the Advocate for the noticees, before the adjudicating authority where in it ha.; brought on record by DRI officer that the father of Shri Lumesh Sanghvi was th.• cousin brother of Shri Gautam Adani, CMD of Adani Exports Ltd. It is thc7clor- requested that any averments made by Shri Lumesh Sanghvi, even during his ei os.; examination should be viewed in this context. During the cross examination o! :7;11, i Lumesh Sanghvi the advocate made a limp attempt to show that he had no linowlectg, regarding diamonds. This should also be viewed in light of the fact that he was close relative of the Adanis as well as the fact that as per the various statements or i Samir Vora and Shri Lunmesh Sanghvi, he was the sole incharge of all the activitic ; relating to import and export of diamonds for all the companies. Now the trying to take a plea that Shri Lumesh Sanghvi had no knowledge regarding cliam IC1'., is misplaced in view of the fact that he was made the sole in charge for all companies for all the activities relating to the import and export of CPD under 1:-)n.1 and he had handled the exports of CPD worth about 8000 Crores in 2004-05 and 6500 Crores in 2005-06. Shri Lumesh Sanghvi in his statement recorded ancler Section 108 of the Customs Act, 1962 had also claimed that when no assorters Vie; available, he did the work of sorting of diamonds. Even if it is assumed that ;3111-i Lumesh Sanghvi did not have much knowledge about diamonds, the fact that 'le wi, s made the over all in charge for the imports and re-exports of CPD under Bond by ATA and its group /associate companies goes on to prove that the entire activity of im port and the re-export of the same after showing them as sorted, was a farce and Jnly carried out in a cyclic manner to artificially boost export turn over to avail the ben I 3 of Target Plus Scheme. Else, had the business been genuine they would have recrilited experts in the trade to look after and undertake the activities of sorting. It was evident from the various flow charts recovered from the Hard Disk of 311 ;-i Vipul Desai. While not denying the fact that the said flow charts existed, the noti;e( s are trying to falsify the claim of the investigation regarding circular trading by givinv;
- 175. 191 some values ofimports and exports by some of the companies depicted in the :hare:. The fact remains that Adani Exports Ltd had meticulously planned ihe i (-col; (I- trading of the diamonds imported and exported by them and in this reference the said flow charts were prepared showing how the consignments exported by AEL or group associate companies would be circularly traded by showing transfer from one overseas importer to the other overseas exporter. It was not necessary hat the same pattern would and should have been followed in each case o..rnport.r and exporter. The fact that such circular trading as depicted in the flow charts had beei planned and executed. The document recovered from the computer hard disk c Sh.li Vipul Desai, Officer, Banking Department of AEL, Ahmedabad and as (Lsctised in Para 8.22 of the SCN clearly bring forth the "SYSTEM" as put in place by AEI. its 1, ) how the entire transaction in the CPD was a well thought out, premeditated and p.c - determined exercise for indulging in fraudulent import and exports of CI'D w.iIi ail intention to defraud the government exchequer by availing of undue export benefits The noticees without denying the authencity and the contents of the said doe( uncle. simply state that"lt is impossible to contend that the so called system allegedly c -ea..telt in 2003 was for claiming benefits of Target Plus Scheme in as much 1: s the scheme was not in force in the year 2003 and the same came into existence only in September 2004." To say the least there seems to be a lame attempt by the noticees divert the attention of the adjudicating authority to the fact that in the year 20 .13-0,t the 'Incremental Promotion Scheme" which was akin to the Target Plus Sehein-2 w,:e. introduced and under the said scheme also, the export of CPD was permissible ior the benefits under the scheme. It is not out of place to mention that AEL were one the major beneficiaries of the said Scheme and in a similar fashion they 1,.ad sliokee exports of CPD worth 1465.27 Crores and Gold jewellery to the tune of 168.83 Croret and showed to have achieved an export turnover to the tune of Rs. 4838.53 Crol en compared to Rs. 377.44 Crores in 2002-03. Thus the "SYSTEM" put in p1 Ace I:v the noticees in 2003 for circular trading of CPD was extended and used by thet i i.n 2.004- 05 and 2005-06 also to accomplish their fraudulent motives. 14.3.2The activity of import of CPD and their subsequent re-export by AE L the other 5 companies were carried out from the bonded warehouse premises t Mu eibni as permitted to them in terms of the provisions of Chapter 4A.19 of the 1,-rp, - 2009 (Chapter 4.59 of the EXIM Policy 2002-2007 during 2004-05). Therefore, the provisions of Chapter 4 of the FTP and the Handbook of Procedures, 2004-09, gpverti the import and export of CPD by AEL and the other 5 companies from the bonded warehouse premises. Consequently the value addition as prescribed under Fara ,1 A. I t; of the Hand Book of Procedure has to be achieved. Similarly the Provisioi (s of Par:'. 4A.5 which stipulates that "Whenever such agency Commission is paid, the :Ate addition shall be correspondingly increased by the percentage of commis:; on paid-. would also consequently follow. Therefore, the import and export of CPD by API awl the other 5 companies from the bonded warehouse premises are governed b:, the provisions of Chapter 4 of the FTP and the Handbook of Procedures, 200,1-09. Accordingly, the value addition has to be determined in terms of the provisions o • the' said chapter. 14.3.3 The allegations made in the notice regarding funding of the overseas fin» well as the inter-relationship between the overseas firms and the control of AEL e•er these firms are substantiated by way of evidences - Email between the enif(loyce s AEL and the overseas firms. These evidences are those which are within the ktiowl(All. Le, of the noticee and therefore, the department is not obliged and neither it possible to come out with all the facts which are strictly within the knowledge of the notii cc. 14.3.4 The noticees by pointing out some stray incidents (as per their Exhibit - DI. arc claiming that the instances of Circular Trading cited in Annexure H 1 of the n',ticc are not tenable, out of about 1000 instances of circular trading indicated in P. tanc:;t1ri: 11 and about 2000 such instances in Annexure I, the noticees have tried to lI iw eetne 48 instances of Annexure H and some 139 instances of Annexure I, in a vague attempt to show that the allegation of Circular trading as raised in the SCN is ffilsiti c(1 :ii-J-lowever in few cases as highlighted by the noticees in Exhibit -D to their reply, s( 'mistakes had inadvertently crept in Annexure H & I to the notice. In the ilifitair,:et; highlighted by the noticees it so happened that the lots of diamonds with the :‘;itric *description and size range but having different weights were inadvertently niei- y.ccl together and hence the noticee could contend that the imports were shown even pi is r •
- 176. 192 to he dites of exports. However in the invoices there was no reference to number of pieces :n each lot or the whole consignment. And that the department has painstakingly been able to prove thousands of instances of circular trading having the same description of the diamonds, same size range and near about the same weight as brought out in Annexure H & I of the SCN. The noticee is also trying to mislead tl- e ad udicating authority by saying that the rate of CPD of the same size 0.02 to 0.22 varies from USD 102 to USD 428. However, the fact that though the size range is the sa lie, ?he description/ quality of the diamonds are different and therefore the difference in prices and the rates of the CPD with the same description and size range VA,S varied marginally, with a view to give semblance of genuineness. The noticees while not denying the fact that the flow charts existed, they are trying to falsify the claim of the investigation regarding circular trading by giving some values of imports ar.(l exports by some of the companies depicted in the charts. The fact remains that Adani a',xports Ltd had meticulously planned the circular trading of the diamonds imported and exported by them and in this reference the said flow charts wcre pi epared showing how the consignments exported by AEL or its group associate compa lies would be circularly traded by showing transfer from one overseas impor_ei- ti the other overseas exporter. It is not necessary that exactly the same pattern would and should have been followed in each case of importer and exporter. 14.3.5 To expect the investigating agency to prove how the goods exported to one c unpany were transferred to another company is a misnomer and an attempt to mislead the adjudicating authority. Therefore the so called plea that the investigation has not alleged any inter se trading /transfer of the same set of diamonds from one overseas entity to another, is misplaced and a lame attempt to mislead the E•djudicating authority. The noticees do not appear to have a plausible argument in their defense and therefore they are making vague attempts to mislead the adjudtcating authority. The Table under Para 9.8 of the SCN clearly brings forth as to how different lots of diamonds having the same description and size are impor.ed, e-xpor,ed and re-imported in a cyclic manner. t4.3.ti hi 2005-06 since Adani Exports Ltd., could not have achieved the desired iolunie of exports to claim the benefit of Target Plus Scheme, continued to show value Additton of 5% whereas the value addition for the other five companies was shown at 10% and that other exporters from Diamond Plaza Mumbai continued to show value addition of 5%. All throughout a limp attempt is being made to emphasis upon the adjudicating authority that they could have achieved value addition of 5% and that their exported value is genuine. In this context, statement dated 02.02.2006 of Sltri ;arnir Sevantilal Vora, is also relevant, wherein he explained that the decision to increase the value addition from 5% to 10% was commercial decision taken by Shri t3aurin Shah in consultation with Shri Rajesh Adani and the same was communicated to Sltri Lumesh Sanghvi who prepared the export invoices accordingly; that in some cases the value addition continued to be 5%. The allegations of artificiality of the expert value, and the exports as such are also more pronounced when the fact of CircAlar Trading of the same set of diamonds is also taken into consideration. Also the fact that the so called Indian as well as the overseas importers and exporters of diamonds were all managed and controlled by Adani Exports Ltd., as highlighted in the SCN, speak volumes about the fraudulent nature of imports & exports and intentions of Adani Export Ltd., to abuse the Target Plus Scheme. The meager payments made to the master assorter of Rs. 10,000/- per month irrespective of the quantity of diamonds imported / exported and daily wages of Rs. 200/- paid to the piecemeal assorters brought reflects on the skill of the work force employed ty the noticees and the genuineness of the so called activity of assortment being carried out byihem. When the job of assortment of Diamonds in such huge quantity was involved --it'would have been natural for the companies to have permanently employed aighly ,skilled work force in sufficient numbers. 14.4.1 The contention of the noticees that the statements dated 28.02.2005 and 03.01.2007 of Shri Lumesh Sanghvi were not voluntary and retracted by affidavits dated 01.03.2006 and 04.01.2007 is far from truth. The fact that the so called affidavits were never tendered to the DRI authorities nor any retraction was filed by Shri Lumesh Sanghvi is evident from letter F.No. DRI/AZU/INQ-15/2005 dated 14.05.2008 of ADG, DRI, Ahmedabad addressed to the Commissioner of Customs, Airport, Mumbai, enclosing a copy of the letter dated 23.04.2008 of Deputy Director, Mumbai. Thus the so called affidavits of retraction were never communicated to th: DIU officers and especially to the investigating officers who had recorded the
- 177. 193 statements. The noticeeshave also not produced any evidence of having delivered such affidavits. The record of cross examination of Shri Lumesh Sanghvi by the Advocate for the noticees, before the adjudicating authority may be referred wherein it has been brought on record by DRI officer that the father of Shri Lumesh Sanghvi was the cousin brother of Shri Gautam Adani, CMD of Adani Exports Ltd. It is therefore requested that any averments made by Shri Lumesh Sanghvi, even during his cross examination should be viewed in this context. During the cross examination of Shri Lumesh Sanghvi the advocate has made a limp attempt to show that he had no knowledge regarding diamonds whereas he was the sole in-charge of all the activities relating to import and export of diamonds for all the companies. Now the noticees Laying to take a plea that Shri Lumesh Sanghvi had no knowledge regarding diamonds, :s misplaced in view of the fact that he was made the sole in-charge for all the companies for all the activities relating to the import and export of CPD under bond and he had handled the exports of CPD worth about 8000 Crores in 2004-05 and over 6500 Crores in 2005-06. Shri Lumesh Sanghvi in his statement recorded under Section 108 of the Customs Act, 1962 has also claimed that he even did the work of sorting of diamonds. Even if it is assumed that Shri Lumesh Sanghvi did not have much knowledge about diamonds, the fact that he was made the over all in-charge tex- tile imports and re-exports of CPD under Bond by AEL and its group /associate companies goes on to prove that the entire activity of import and the re-export of the same after showing them as sorted, was a farce and only carried out in a cyclic manner to artificially boost export turn over to avail the benefits of Target Plus Scheme. Else, had the business been genuine they would have recruited experts in the trade to look after and undertake the activities of sorting. 1.1.4 2 The activity of import of CPD and their subsequent re-export by AEL and the ()thee 5 companies were carried out from the bonded warehouse premises at Murnbai. The activity in the bonded warehouse premises has been permitted to them by the Costoins, Mumbai in terms of the provisions of Chapter 4A.19 of the FTP, 2004-2009 (C hapter 4.59 of the EX1M Policy 2002-2007 during 2004-05). Therefore. the provisions of Chapter 4 of the FTP and the Handbook of Procedures, 2004-09, govern the import and export of CPD by AEL and the other 5 companies from the bonded warehouse premises. Consequently the value addition as prescribed under Para 4A.18 Ot the Hand Book of Procedure has to be achieved. Similarly the Provisions of Para 4A.5 which stipulates that "Whenever such agency Commission is paid, the value addition shall be correspondingly increased by the percentage of commission paid", would also consequently follow. Therefore, the import and export of CPD by AEL and the other 5 companies from the bonded warehouse premises are governed by the provisions of Chapter 4 of the FTP and the Handbook of Procedures, 2004-09. Accordingly, the value addition has to be determined in terms of the provisions of the said chapter. 14.4.3 From the details of imports it is evident that the increase in the imports of CI'D into India in 2003-04 over the imports in 2002-03, is mainly attributed to the increase in imports from Hong Kong & U.A.E. The increase in the imports of CPD into India in 2004-05 and 2005-06 was also mainly due to the increase in imports from Hung Kong 84 U.A.E. The import of CPD from other countries was negligible as compared to the Imports of CPD from Hong Kong & U.A.E. The noticees plea that the imports from other countries had also increased holds no water. The imports of CPD by AEL and its associate/group companies was also mainly from UAE and Hong Kong. Similar trend was also observed in case of exports. The increase in the export of CPD from India in 2004-05 & 2005-06 over the exports in 2002-03, mainly attributed to the increase in exports to Singapore, Hong Kong & U.A.E. Also the export of CPD to other countries was negligible as compared to the exports of CPD to Singapore, Hong Kong & U.A.E. Thus the noticees plea that the exports to other countries had also increased has no consequences. Thus the exponential growth in the export and imports of CPU to specified countries, to which AEL & its group/associate companies hail made imports and exports clearly shows that is sudden growth in the exports and 4 imports was due to the sudden rise in imports and exports of CPD achieved by AEL and its group/associate companies by resorting to circular trading. l‘1..4.4 The noticees are taking a plea that their exports are compared with the other 34 exporters operating from bonded warehouses only, and their exports was only 10%, 17% and 13% of the total exports from India, while comparing the all India figures of .xports, the other Top 34 exporters put together could achieve only 6.85%, 6.60% and 4.61% of all India exports in 2003-04, 2004-05 and 2005-06 respectively. It was also
- 178. 194 mentioned that themajor exports by Adani group in 2004-05 was after ti announcement of Target Plus Scheme in September 2004, whereas the other e.,.po-; el s had been exporting from the beginning of 2004-05. Further, it was incorrect te that in Annexure "N" the export figures for 2005-06 of Adani group are taken t 11 January 2006 whereas those of other 34 exporters are up to 31.10.2005. The fiv or( for exports for Adani group are also taken only up to 31.10.2005. 14.4.5 The noticees also wrongly state that the export of Studded Gold Jewellery not covered under the Target Plus Scheme. In fact when the Target Plus Scheme was introduced in September 2004 Studded Gold Jewellery was included in the permissible for exports. It was only in February 2005 when the DGFT came 1 o 1;•icw about the large scale misuse, by way of Circular Trading of Gold in the guise of exports of studded jewellery, it by Notification No. 27/2004-09 dated 23.02.2005 arnenclecl Para 3.7.5 (1) to read thus: "Gold, Silver, Platinum and other precious metals in ai'y form including plain and studded jewellery". It is also to mention that all the hottec,.'s in their applications made to the DGFT for obtaining DFCE certificates tinder the Target Plus Scheme have included the value of exports of studded jewellerir i.t the value of their total exports and have also contended that since their exports of stud&d jewellery was prior to the issue of the notification, they have not excluded these fig, ir.:s from their total export figures. That out of total exports of Rs. 10938.80 Crore:. Aclani Exports Ltd. in 2004-05 the exports of CPD and studded jewellery togl!ilier account for Rs. 7787.25 Crores, i.e. 71%. Similarly the other noticees have also achieved the major chunk of their export turn over through export of CPD jewellery. 14.4.6 It is not the case of the department that an exporter cannot diversify its c x port products. Adani Exports Ltd. with intent to misuse the Target Plus benefits entered into a secret MOU with these three companies, through its associate companie.i, in which companies also the relatives/employees of Ada.n.is were the directors. The :.re.-et MOU (i) provided for entire operations of exports to achieve the desired growth in tic export turn over to enable them to claim the benefit of the target plus scheme, to lx handled by Adani Group; (ii) benefit of Target Plus scheme to accrue to Aclani Groilp o' Companies and (iii) these three firms would be paid commission @ 2% to 2.5% of 1:C.T3 Admittedly the entire incremental growth in the exports of these three companies wa:. achieved by exports of CPD and studded Jewellery. Thus AEL, right from the ince] aka , of the scheme had fraudulent intentions and had planned to achieve unprecedent ed export turn over by circular trading of CPD and therefore also roped in companies into their fraudulent scheme. It was admitted by the notices thai "Apparently, it would have not been possible for M/s Adani Exports Ltd. to achieve 111- required increase in turnover to approx. Rs. 22000 crores in 2005-06 in order le the benefit of Target Plus Scheme. Therefore, M/s. AEL appeared to have achieve, ' • h, desired turn over in 2005-06 by means of a rise in the export of C&P diarioncl through its other five group / associate companies". 14.4.7 The little inconsistency in the statement of Shri Samir Vora or any SI iti Cie •et Mehta attempted to be highlighted does not turn the tables against the show calls notice. Further, various averments made by the noticees only lead to the conch that admittedly the entire business of so called import & export of CPD in the all the six companies, including the financial arrangements was managed. eonti-o lc I. and handled by AEL through its Indian as well as overseas group/associate corn panic:: and its employees. 14.4.E, The contention in the notice that the FOB value of exports was artificially fiN.e, 1 by adding 5% or 10% over the value of the imports, as mentioned in the statemim t r f Shri kamraj Bodal, who prepared the export invoices, is attempted to be folsiiicC 1. bringing about some stray instances of some invoices as per Exhibit R. At the cots( I the instances quoted in Exhibit R are far too few and far apart when compared to tl total number of export consignments. Further the value addition of 5% or artificially shown to be achieved as per the instructions given by Shri Sarnir Vora ae 1 has also been admitted by Shri Lumesh Sanghvi who handled the entire import export of CPD from the bonded premises of all the companies. It is also not displitri by the noticee that in all cases of export, the value addition of 5% or 10% as Lb,- may be had been shown to be achieved. The noticees have no option but to admit that so called import and e:.liort it CPD for all the six companies was managed, handled and controlled by "1.'bc
- 179. 195 interrelationship between thebuyers and sellers, mutuality of interest between them, circular trading of CPD to artificially boost the export turn over and the artificial value addition achieved for the exported diamonds, all together proves the mis-declaration of the export value and therefore the value of exports declared does not contemplate at iliTflti length transaction in terms of section 14 of the Customs Act, 1962. 11.4.9 The noticee have also ignored the fact of the commonality of the Directors of the overseas firms with whom they have engaged in the so called import and export of CPD. They have also overlooked the fact that Shri Joseph Selvamalar, the Director of M/s. Orchid Overseas Pte Ltd, Singapore, M/s.Emperor Exports Pte Ltd, Singapore and M/s.Guclami International Pte Ltd, Singapore is also a Director of M/s.Adani Pte Ltd, Singapore. They have also ignored the fact that Shri Chang Chung Ling, the Director of M/s Gudami International, Singapore is also a Shareholder Director of M/s Adani Global Ltd, Mauritius and M/s Adani Global Pte, Singapore which are the wholly owned subsidiary of AEL. They have also ignored the fact that Shri Joseph Selvamalar and Shri Chang Chung Ling are the directors of M/s Adani Global Pte, Singapore and /or Adani Global Ltd, Mauritius along with Shri Vinod Shantilal Shah, brother of the Chairman and the Managing Director of .AEL. M/s Adani Global Ltd., Mauritius is the wholly owned subsidiary of AEL, Ahmedabad and Adani Global Pte Ltd. and Adani Global FZE are the wholly owned subsidiaries of Adam Global Ltd, Mauritius. However, it is preposterous that a person who is addressed as Ms. Mary Joseph (a female) and a person Mr. Joseph Selvamalar (a male) are contended to be one and the same. The Consulate General of India, Dubai had forwarded the details of the manager/partner/ Director of the UAE based firms, which shows that Mis.AEL/AGFZE are controlling/running the operations of the above mentioned Dubai firms through their employees. It is not and cannot be a mere coincidence that the employees of AEL/AGFZE are in those very firms with whom the so called import/export of CPD has been orchestrated. And the fact of the overseas firms being the supplier as well as the buyers has to be viewed in light of the evidences .stablishing the fact that they were all managed and controlled by AEL. The details of the incorporation of the companies with whom AEL and the other 5 firms made imports and exports of CPD were forwarded by the Consulate i=ieneral of India, Hong Kong and Dubai, it is not relevant whether AEL had made no exports to a few firms when it is a matter of record that these firms had supplied CPD to AEL and the other 5 firms. The noticee have referred to the so called agreement between AGFZE, Daboul and Gudami which itself is suspect. The contention that the entire business volumes of these entities were achieved only with AEL and the other 5 Indian firms is based on evidences, the plea of the noticee that the same is based on onjectures and surmises is not tenable. They have but for denying the evidences not come forward with any evidences to prove the contrary. The dates of incorporation and the dates of their stopping of business are based on the evidences forwarded by the Consulate General of India, Hong Kong. The business addresses of M/s.Wingate Trading, M/s.Global Enterprises and M/s.Kamsun Development International are based on the report forwarded by the Consulate General of India. The fact of both firms operating from the same premises has to be viewed in the light of the fact that while M/s. Global Enterprise sells CPD to the Indian firms, the other two firms import CPU from the Indian firms rather than buying the same from the firm operating along with them from the same premises. The noticees have not come forward with any evidence to refute the charges leveled in the notice. It is not a mere coincidence that so many firms and the directors of these firms share a common address. These evidences point to the fact that these firms are all belonging to the same group of persons. Additionally the establishment of most of theae firms coincides with the commencement of the Target Plus Scheme.The noticee have not denied that Shri Joseph Selvamalar, the Director of M/s. Orchid Overseas Pte Ltd, Singapore, M/s.Emperor Exports Pte Ltd, Singapore and M/s.Gudaini International Pte Ltd, Singapore is also a Director of M/s.Adani Global Pte Ltd, • Singapore. They have also not denied that Ms. Mary Joseph, the employee of Adani Global Pte, Singapore is the Director of M/s. Gudami International. They have also not reSuted that Shri Chang Chung Ling, the Director of M/s Gudami International, Singapore is also a Shareholder Director of M/s Adani Global Ltd, Mauritius and M/s Acaui Global Pte, Singapore which are the wholly owned subsidiary of AEL. It is clear (real the above that M/s. Orchid Overseas Pte Ltd, Singapore, M/s.Emperor Exports Pie Ltd, Singapore and M/s.Gudami International Pte Ltd, Singapore are all firms gowned/ controlled by AEL through its overseas subsidiaries. Once the fact of the overseas firms being operated and controlled by AEL is proved, the transactions •
- 180. 196 bctweea these firmsand AEL cannot be termed as transactions in the normal e..)uts&. of international trade or transactions at arms length. The inference sought t) be drawn by the noticee as regards the acceptance of values by the Customs Autharit3 and Hong Kong and Singapore is not tenable as the facts and circumstzuices (Iv Circular Trading of the same set of CPD was not within the knowledge of th( SC authorities. Therefore, the values declared in respect of these transactions are 1ia- )1( for rejection. 14.5.1 The noticee have also sought to ignore the fact that M / s. Gold Star, M /s Shine Jewellery, M/s. Queen Jewellery, M/s. Adani Global FZE and M Is G.A.International are all firms from whom the CPD were shown to be imported xv..!re owned by the employees/relatives of AEL. The CPD imported from these comp:-lie:. were exported to other firms in Hong Kong, Singapore and Dubai with a value acid it of as required under the Target Plus Scheme. The value addition shown was despit" , h, • fact that no activity was carried out on the CPD which could have resulted in the --a addition claimed. It is not the case that the employees of Adani Global coordino _e(1 with the overseas companies. They were in-fact the Directors/owners of these overs.a companies. It is also significant that the noticee have not denied the fact that Ms Mary Joseph is a Director of M/s.Gudami International. It is has also bee) , conveniently overlooked by the noticee that it is not merely Ms. Mary Joseph or vii Rakesh Shah, there are other employees of AEL/AGPL who are also th, Director/Partner/Manager of various other overseas firms with whom the so c'.1c, imports/exports of CPD have been undertaken. 14.5.2 The Contentions of the noticee are based on the premise that th provisions of Section 14 of the Customs Act, 1962 are not applicable. However , th,! provisions of Section 14 are applicable to export goods also. This has also been ttpl .e1,1 by the Honble Supreme Court in the case of Om Prakash Bhatia Vs. Commissicrier Customs, Delhi reported at 2003 (ELT) 423 (SC). In terms of the provisions of 14 of the Customs Act, 1962 the declared price shall be value of the export ,;a0(' where the seller and the buyer have no interest in the business of each other. This • not so in the instant. The inter-relationship of the Indian firms and the overseas Gin are very relevant for determining the nature of the transaction and the value >f tl. export goods and the evidences as detailed in the show cause notice have dealt; established the inter-relationship between the overseas firms and AEL and other:. me contents of the e-mails mentioned at Para 8.11 are self explanatory. They very clear Iv show that the funds are being transferred at the behest of AEL. These finch: much pertain to the CPD import-exports as is evident from the mails. These arc I tt o few emails mentioned in the show cause notice, the numerous other mails arc rc lie d upon in the show cause and form part of the relied upon documents. The eon syli tic n of the noticee that AEL had no exports to M/ s. Gold Star FZE and M /s. S Jewellery and therefore, the emails are of no relevance also does not hold water. It is a fact that AEL and the other 05 firms had imported CPD from these firms. The ;•Itia .s are only evidencing the fact that the transactions with these firms are not al ; rri.s length and that these firms are among those controlled and managed by AEL. Mue negation of the evidences is not sufficient, the noticee have failed to explain how I le:;e evidences do not have bearing on the issue on hand. Whatever explanations have ')e• put forth by the noticee with regard to these emails are at too frivolous to )e acceptable. 14.5 3 It is significant that the noticee admitted to the flow of funds, betweer t:w Dubai and Singapore based firms. The notice has clearly brought out the fact that Oic remittances made to their suppliers are in turn transferred to the buyers of the "retie and these same funds are used by the buyers to make remittances to the noticcc contention of the noticee that such flow of funds between the overseas in constituted a meager 3.8% is without substance. The cases cited in the show Rost notice are illustrative in nature. The details of all such instances of financial flo,v are forming part of the notice as annexures and relied upon documents. In any co sc it is a settled law point that the department is not required to prove its case iA tth mathematical precision. All that it requires is the establishment of such a degie«if probability that any prudent man, on its basis, believes in the existence of the fad in issue [Collector of Customs, Madras & Ors. v. D. Bhoormall, 1983 (13) ELT 1546 While referring to the said decision, a similar view was taken in the case of Hash Amulakh Jogani Vs. UOI reported at 2009 (241) ELT 348 (Bom). The allegations Tuicle in the notice regarding funding of the overseas firms as well as the inter-relatic isliip between the overseas firms and the control of AEL over these firms are substan ial ell by way of evidences — Email between the employees of AEL and the overseas 'in is.
- 181. • 197 These evidences arethose which are within the knowledge of the noticee and therefore, the department is not obliged and neither was it possible to come out with all the facts which are strictly within the knowledge of the noticee. The contention that payments made by the overseas firms out of the funds remitted by AEL does not have any bearing on the issue of valuation of exports is not tenable. The valuation would be an issue for any buyer only when he is to pay for the same from his own pockets. The evidences narrated in the notice establish that the overseas firms were merely paying for the so called purchases of CPD out of the funds provided to them by AEL and therefore, this cannot be equated with a normal transaction in the course of international trade and neither are they at arms length transactions. The transactions were merely created for boosting the export turnover of AEL and the other 5 firms with t view to avail of undue benefits under the Target Plus scheme. The attempt of the i&oticec to justify their transactions on account of the disparity between their outward i-c mittances and the inward remittances is not tenable. 14.5.4 The noticee has not addressed the issue that Ms. Mary Joseph who is an employee of M/s.Adani Global, Singapore is also the Director of M i's.Gudami International, Singapore. Neither have the noticee addressed the fact that Ms. Mary Joseph was controlling the bank account of M/s.Gold Star FZE, UAE in as much as she was holding the User ID and Password of the said bank account. The noticee are al:so conspicuously silent about the fact that the same Ms. Mary Joseph is also handling the funds of the other overseas firms - for instance M/ s. Gracious Exports, Singapore and M/s. Planica Exports, Singapore, Ms. Mary Joseph in on e mail is informing that funds have been received in M/s. Gracious Exports from M/s. Mine Gold dz. Jewellery, the said funds were in turn transferred to M/s. Planica Exports who in turn used it to pay M/s. HEPL for their imports. This in no way can be construed as mere coordinating between various companies as contended by the noticee, the co- ordination would end immediately after the payment is made by the employee's company to the other company. What the recipient company does with the funds is solely its business. However, it is AEL through Ms. Mary Joseph which decides what the recipient company does with the fund - in the instant to recycle it back to HEPL. It is also surprising that the Singapore based firms which are shown to be indulging in transactions running into millions of dollars needed the goodwill of Adani Global, Singapore to establish bank accounts. This in itself is indicative of the fact that these ,v. re not established firms engaged in normal business activity whom the banks could • -epose faith in for such huge financial transactions but were firms which assumed colossal proportions only because of their so called import/export of CPD with AEL. It is also astonishing that these Singapore firms shown to be engaged in trading activity to the tune of millions of dollars did not even have the requisite staff to even open their hanks accounts and needed the manpower of Adani Global for even this small task. 14.5.5 The contention of the noticee regarding the authenticity of the email has no substance. Merely because there is no date in the printout of email retrieved from their computers would not in any way lower the evidentiary value of the same. It may be appreciated that the emails and data which have been relied upon in the notice have all been retrieved by an independent agency - Directorate of Forensic Science, C andhinagar (DFS) - which is recognized even by the Courts of Law. 14.3.6 Merely because the full values have been declared and the same was realized cannot be taken to mean that the declared values were correct. The remittances for 14-43,:.chases by the overseas firms are to be made out of the funds transferred to them `b•i 4Et. and therefore, the overseas firms or for that matter any firm would not be -dietiveliad with the value of the goods, this cannot be equated with a normal . !,-..trr?.. .ition in the course of international trade and neither are they at arms length ..iti4i4ctris. The fact of the funds remitted by AEL to the overseas firms being Wigef: rged to other firms who in turn remitted it back to AEL has been dealt with in • 'd cil 41 the notice and supported by evidences recovered from the hard disks of AEL — 4,.s..14,411 as documentary evidences submitted by the banks in India. Though the SiTicpzipore and UAE firms may be different legal entities, the evidences establish the fact that these firms were all managed and controlled by AEL. Mere contention not supported by any evidence deserves to be thrown out ab inito, particularly so when the contention is contrary to the evidences on record. 14.5.7 While it may be true that AGPL and AGFZE were also engaged in other business activities, the same does not in any way alleviate the evidence on record h establishes beyond a shadow of doubt the fact that AEL through AGI'L and ,1C P:?2 managed and controlled other overseas firms with whom they orchestrated a
- 182. 198 sham of importand export of CPD with a view to avail of undue benefits nuclei- the Target Plus Scheme. The fact that Gudami, Daboul Trading, Tanb Trading are env:kiged in various business activities, as contented by the noticee, does not in any prove t.h;ii.t they were not in cohorts with AEL in the so called import-export of CPD carried out only with a view to avail of undue benefits under the Target Plus Scheme. At the ;au is time evidences have been brought on record to show that Gudami International w,is owned /controlled by AEL through AGPL. It is incontrovertible that Ms. Mary Jce;eph an employee of AGPL is the Director of Gudami International. The Consulate Gcrei al of India, Dubai had forwarded the details of the manager/partner/Director of the IJAE based firms, from which it can be clearly seen from that M/s.AEL/AGFZE: are controlling/running the operations of some the Dubai firms through their employers. It is not and cannot be a mere coincidence that the employees of AEL/AGFZE :arc in those very firms with whom the so called import/export of CPD have 1'c .:n orchestrated. The very arrangement of financial management under the so called ,toint venture as per which the parties would endeavour to ensure that within 4 to 7 days of receipt of payment from AEL, the parties would make remittance to AEI, i•: toe farfetched. While it may be prudent on the part of AEL to make such an arran gen' c) it. it is beyond any stretch of imagination that the overseas parties - purported tr) bC independent - would be a party to an arrangement which benefits only AEL. 14.5.8 The noticees have been supplied with all the documents relied upon. Jo al( notice under due acknowledgment. The contention of the noticee that the export/import contracts were arranged on request from Ahmedabad lima cu• significance or relevance to the valuation of the export CPD does not stand in the f cc of the evidences on record. It was mentioned that the exports of gold jel,vellery ane import of Gold bars by AEL is a issue which has been separately dealt with in anctliei investigation of similar nature involving circular trading and in respect of whiel separate SCN No.DRI/AZU/INQ-06/2006 dtd.11/09/2009 has been issued. For tin limited purpose of this notice it is sufficient to state that these same firms figure al investigation of circular trading orchestrated by AEL to avail of undue benefits the Incremental Growth Scheme, the predecessor to the Target Plus Scheme. 14.5.9 The so called Tripartite Agreement is a fig leaf conjured by the noticee to r -0,7c and explain their mis-deeds. The very terms of the so called agreement in fact lc id ti; only one conclusion - that it is too farfetched to even be believable. The contentioe el the noticee itself exposes the fact of the so called Agreement being nothing but a put forth by the noticee to justify their acts. It cannot be a mere coincidence that a! per the so called Agreement, AEL and the other 05 firms came to be appointed h sorting and export of the CPD only during the currency of the Target Plus Sc - erne This is corroborated by the dates on which the licences under Section 58 o th.• Customs Act, 1962 were granted to AEL and the other 05 firms. Except for AEL c: hick was granted permission during July, 2003 all the other 05 firms were granter' permission during November, 2004, February, 2005 and March, 2005. Even ;tsstj minr but not accepting the so called Agreement to be true, it is totally unbelievable thai AGFZE had appointed firms which were not at all in the business of CPD. Except M Adani Exports Ltd. and M/s. Hinduja Exports Pvt. Ltd., the other 04 firms had en tcrci I into the business of imports and exports of CPD only after September 2004 wheel the Target Plus Scheme was announced. Even M/s. Adani Exports Ltd. and M/s. iij:t Exports Pvt. Ltd did not have any substantial volumes of exports of CPD is 20C3-0,1 . The only logical explanation for the so called appointment of these firms is that tl cc selection was for the singular reason that all the firms were Status Holders whit'' •vv a pre-requisite for being eligible to the benefits under the Target Plus Scheme. As regards parties to the so called Agreement, various evidences elaborately discussed in the notice clearly establish the fact that Daboul Trading and Gudarei International were firms controlled/managed by AEL through AGFZE and AGM, wlir) are wholly owned subsidiaries of AEL. The so called Agreement between Gudami and AGFZE if assumed to be true would mean that the same was entered inf kw the benefit of the parties to the agreement. However, unbelievably the parties 1.0 tl,e, Ito-called agreement undertook to ensure that AEL and the other 05 firms who ticitent from the trade in CPD, are not exposed to any financial risk or liability. This is 1.ol ally unheard of in any form of trade. The very terms of the so called Agreement furtlie:s the case made out in the notice that the entire so called import/export of CPD b r‘E.L and the other 05 firms was nothing but a sham. The noticee have failed to cunt revert any of the evidences and have on the contrary have come up with a creative fignie!it in the name of Tripartite Agreement.
- 183. 199 14.5.10 Their contentionthat the CPD were physically examined both at the time of import as well as export and at no point of time the CPD were found to be the same identical is not tenable. The CPD subjected to examination at the time of import and subsequently at the time of export would be the same. Since the CPD imported and exported do not have any markings it would not be possible at the time of physical incamination to correlate the goods and be able to conclude that the exported CPD and the imported CPD are identical. It is only on the strength of the evidences unearthed in the course of the investigation it has been established that the same set of CPI) was being circularly traded in. The examination at the time of import and export is with ► eference to the goods viz. CPD and the fact of their being assorted or unasserted has ot no relevance. 14.6.1 The flowchart were recovered from the computer hard disk of the employee of AEL. The said flowchart were prepared by another employee of AEL. Despite this, they have sought to disown the said flowchart on the grounds that the statement of Shri Sudhakar Nair, the author of the flowchart had not been recorded. Merely because the statement of the author of the flowchart has not been recorded does not in any way lessen the evidentiary value of the flowchart, particularly so when the flowchart in itself speaks volumes. The movement of the goods as indicated in the flowchart has been amply established by way of evidences; in fact the very import and export documents of AEL and the other 05 firms confirm and establish the authenticity of the said flowchart. Therefore, the contentions of the noticee that their imports are not in consonance with the flow chart are not acceptable. 14.6.2 The evidences bring out the inter transfer of funds between the overseas firms wbich can lead only to one conclusion i.e. the inter transfer of goods between the o‘erseas firms. The inter transfer of funds can only be on account of the transfer of goods between the firms. The emails referred to in the notice establish the fact of transfer of funds between the overseas firms. In addition, it cannot be said that there is no evidence of transfer of goods between the overseas firms. 1-1.6.3 The noticee wish to disown their own employee for the reason that his .ititernent of truth exposes the artificial nature of the so called import/export of CPD. :Mari Lumesh Sanghvi is the only person said to have knowledge regarding the quality and grades of diamonds a fact which was also confirmed by Shri Samir Vora, Deputy ;mead Manager, AEL in his statement dtd.2/2/2006. Therefore, the contention that Shri Ltunesh Sanghvi was not competent to comment upon the valuation of the CPD is not sustainable. In fact Shri Samir Vora, who the noticee contends was the person iacharge of the valuation, has himself stated that only Shri Lumesh Sanghvi was Laving knowledge of the quality and grades of diamonds. Further, Shri Lumesh :-atighvi in his statement dated 7/2/2006 and 28/2/2006, Shri Kamraj Pitambar Etotial, Office Assistant of AEL in his statement dated 30/1/2006 and Shri Kaushal Fatidya, Office Assistant of AEL in his statement dtd.6/2/2006 have all said that that only one metal box was received against one bill of entry and that the metal box contained different packets of imported diamonds wrapped lot wise in a plain white paper and on each packet endorsement i.e. 1,2,3 etc (lot No. as per invoice) and carats (v.,eight) with pencil was written on each packet as per the lot no. mentioned in the ir voice. Therefore, the imported CPD did not require any detailed sorting before their consequent exports for the reason that they were already sorted at the time of import into India. The CPD were merely segregated into diamonds with two different size ranges or two different grades of clarity. This can in no way said to be a process and neither does this activity add value to the goods. It is quite surprising that Shri Ltuniesh Singhvi had never seen any purchase order of the overseas firms nor had he ever received any communication regarding the quality/quantity of the CPD to he sppolied. It is inexplicable that the only person with some knowledge of diamonds and supposed to be handling the so called assorting of CPD is unaware of the details about the quantity and quality of the CPD to be exported. 14.6.4 While it may be true that there was an increase in the value addition in the international market during 2005-2006, it is too farfetched to believe that such an increase was exactly the same as required under the Target Plus Scheme. Additionally, the noticee have also not explained how the value addition on account of assortment Abled during 2005-2006 when the same processes viz. sieving, boiling, assorting was being undertaken on the CPD. The DRI is not in possession of any retraction and hence is not in a position to comment on the same. The noticee has attempted to confuse the issue of change in form as per the FTP in the context of the Target Plus
- 184. 200 Scheme and valueaddition as per the Board's Circular. As per the Board's circ !liar, 11 value addition can be on account of sieving, boiling, assortment. However, the :;aine has got no relevance to the aspect of change in form. For the purpose of the Tared Plus Scheme the exports under para 2.35 i.e. goods exported in the sani 01. - substantially same form, are excluded. 14.6.5 The explanation put forth by the noticee with reference to the dtd.17/ 4/2004 of Shri Mahadevan is superficial. These do not even remotely refs r to any bill. discounting with the banks. Further, Shri Mahadevan informs that they via Id be sending a message for such export orders as desired by you i.e. their staff in t OE. The explanation of the noticee is totally contrary to the contents of the email. regards the contention of the noticee that this email is of April, 2004 when the Target Plus Scheme was not announced, it is pertinent to note that the exports of gold jewellery and import of Gold bars by AEL under the Incremental Growth Scheme. the predecessor to the Target Plus Scheme is a issue which has been separately dealt w-th in another investigation of similar nature involving circular trading and in respect which a separate SCN No.DRI/AZU/INQ-06/2006 dtd.11/09/2009 has been issued, The attempt of the noticee to brush away the contents of the said c tnai dtd.3/8/2004 of Shri Manoj Nair is not maintainable. Shri Manoj Nair, an employee o: AEL stationed in Dubai at that point of time is informing Shri Lumesh Sanghvi artc: others in India as well as in UAE regarding the stock position of CPD. As per the se called Agreement, AEL were merely the assorters of the CPD belonging to De bolt' Trading. In such a case why should the Dubai office be seeking the instructions of AEL in India regarding the stock of CPD. The emails relating to the moveme'it of funds sufficiently prove the case made out regarding inter-relationship of the in and the control of AEL over these firms. Annexure 'K' to the notice details instance: of the payments made to the Indian firms by one firm on behalf of the other. let i:; um( that the system for circular trading was put in place in the year 2003 and the TArr.;e1 Plus Scheme came into existence only in 2004. However, the fact that the said syst of circular trading has been used for availing undue benefits under the Target Flu: Scheme has been brought out at length in the notice on the basis of the overwhelirone evidences. As regards contemporaneous value, it is to note that CPD being such n commodity wherein no two diamonds can be identical, the question of aclootio;. contemporary value of exports does not arise. 14.7.1 The contention of the noticee that the provisions of Chapter 4A.5 of the HO' ' are not applicable is not tenable. The noticee have applied for and were grante, permission for carrying out their activity in the bonded warehouse premises b. Customs, Mumbai in terms of the provisions of Chapter 4A.19 of the FTP, 2004-2,00" (Chapter 4.59 of the EXIM Policy 2002-2007 during 2004-05). Therefore, the and export of CPD by AEL and the other 5 companies from the bonded wareho itir• premises are governed by the provisions of Chapter 4 of the FTP and the Handbook Procedures, 2004-09. Accordingly, the value addition has to be determined in term ef. the provisions of the said chapter. Para 4A.5 of the HOP, 2004-09 deals with Agency Commission and stipulates th;.At u The exporter availing the scheme of gold/silver/platinum jewellery arc allowed to ha:: commission. The value addition shall be calculated after deducting agent commission. Wherever such agency commission is paid, the value addition shah correspondingly increased by the percentage of agency commission". 14.7.2 The noticee contended that there was a delay on their part in submitting th details of the commission paid by them to their overseas agents as their records V.,CFC seized by the department. This is not maintainable. These details were not cora aiticA in the records seized by the department and therefore, the noticee was asi.red submit them. They have despite giving assurances time and again failed to come forward with the requisite details regarding payment of commission of the overseas agents. 14.7.3 The noticee has referred to the statement of the bank officials, however, it appears they have conveniently ignored the fact that Shri Kamat of Developnic-.it Credit Bank had stated M/s. Adani Exports Ltd should have given the reasons fol incorporating the amount of commission to be paid in the GR. They have at tio point of time given any reason for such not mentioning of commission being paid/payable. %.1 the outset the payment of commission needs to be appreciated in the light of the o called Tripartite Agreement. Assuming the so called agreement to be true, it is not forthcoming why AEL should be paying commission to the overseas firms. As pee It to
- 185. • 201 no called Agreementand as contended by the noticee, it is Daboul Trading which is responsible for the procurement and disposal of the diamonds. Therefore, there is no reason for AEL and the other 05 firms should be paying commission to the overseas ilia's. It is also seen that the so called agreement, which has not been placed on record by the noticee is being twisted around to support the justifications put forth by the noticee. On one hand the noticee contends that Daboul Trading is responsible for procurement and disposal of the diamonds and on the other hand they claim that they pay commission to the overseas firm nominated by Daboul Trading. Now why should An be paying commission to the firms nominated by Daboul Trading. if any commission was to be paid, it would be Daboul Trading who would be required to do so. The contentions and explanations of the noticee are too preposterous to even be considered. Looking to the huge volume of the CPD import/export undertaken by AEL and the other 5 firms it is beyond comprehension as to how AEL was able to identify the transaction in which agency commission was payable and how the same was being paid by them. This also needs to be appreciated in view of the fact that when AEL was called upon to submit details of the commission paid by them, they despite being given ample time failed to do so. This indicates that even they are not able to identify the agent in their transactions. When there is no mention in the export orders or invoice of there been an agent, it is not clear as to how AEL was identifying the transactions through an agent and paying commissions, therefore, the charge that the very nature of the commissions is dubious. There is no contradiction in the stand of the department as regard the dubious nature of the commissions and the requirement of deducting commissions from the FOB value. Both are two different issues. The evidences unearthed in the course of the investigation have led to the conclusion that commissions are being paid to Kamsun Development, Tanb Trading. The noticee when called upon to produce details failed to do so and therefore, their mere denial and negation of the facts is unsubstantiated and hence not maintainable. The contention that Sinta Impex was being paid commission for business brought by them through Daboul Trading is inconsistent with their earlier contentions regarding the so called ipartite Agreement and therefore, required to be rejected outright. The moot issue as regards payment of commission by HEPL to Chokshey Diamonds and Gudami international is why should HEPL be doing so when they are - as contended by the noticee - merely a nominee of Daboul Trading as per the so called Tripartite Agreement. Any commission, if at all payable would have been on the part cf Dahoul Trading and not HEPL. 1,1.7.4 The Excel worksheet recovered from the hard disk of Shri Vipul Desai has _wen sought to be rejected by the Noticee on the grounds that the same was prepared Icy Shri Sudhakar Nair an ex-employee. They have further denied that no commission is paid or payable as indicated in the said worksheet. At the outset it is pertinent to note that the worksheet has been recovered from the computer hard disk of the employee of AEL. The said worksheet has also been prepared by another employee of AEL. Despite this, they have sought to disown the said worksheet on the grounds that the statement of Shri Sudhakar Nair, the author of the worksheet has not been recorded. Merely because the statement of the author of the worksheet has not been recorded does not in any way lessen the evidentiary value of the worksheet, I,articularly so when the worksheet in itself speaks volumes. 14.7.5 The contentions of the noticee is not supported by any evidences, even assuming the so called Tripartite Agreement to be true does not in any way explain the fact of the exports made on DA terms. The so called Tripartite Agreement does not anywhere talk about Daboul Trading being a guarantee to the payments from the oilier firms with whom the noticee was dealing. Further, as already stated none of the documents filed by the noticee indicate that their so called import and export of CPA was in terms of the so called Tripartite Agreement or that the import/export of CPD was on the account of Daboul Trading. 1.1 7 4-t 14.7.6 The pre-payments made by resorting to external commercial borrowings were returned back to the noticees as payments towards their exports. The fact that noticee was in the bargain, earning on the interest difference does not in any ir: dilute the evidences regarding the circular flow of finances between the noticee and tlie overseas firms. The discounting of the LCs by the overseas firms and the interest being borne by the noticee has to be viewed in the light of the fact that the amount so olthunecl by discounting of the LCs much before their due date are being immediately returned to the noticee. The noticee has not explained as to why the terms of payment were being manipulated. It is in the light of these manipulations, the pre-payment by noticee and the subsequent receipt towards their so called exports has to be
- 186. examined. Rejection ofthe evidences merely by adducing reasons of proximity of doU,L,ak is not sufficient to discard the evidences. Therefore, the contentions of the noticee required to be rejected. The contention that the foreign suppliers had given allerccl invoices is not factually correct. Such manipulation of the terms of payment al the whims and fancy of the noticee are indicative of the dubious nature of the transao ions where no sanctity is attached to any document or terms contained in the docum•Nits. The contention of the noticee that they were earning higher interest on the arnou it deposited in the Indian banks against whose letters of comfort the 'foreign bank had given the external commercial borrowing facility has no relevance to the issue on hand. It is also a fact that irrespective of prepayment on part of the noticee, !bey would have continued to earn such interest. There is also no merit in the contention of the noticee that the receipts are in excess of the payments being ignored. The -0.1-y existence of the so called Tripartite Agreement is in itself suspect. The contentions of the noticee built around this so called agreement would therefore, have to be examined accordingly. Seeking shelter behind the so called agreement, the notices attributed many actions to the said agreement. However, the same are baseless one not supported by any material evidence. 14.7.7 "The contention of the noticee that these transactions represent only iWow 10% of the total imports and in respect of the other 90% there is no evidence. i hoi tenable". At the cost of repetition it may again be appreciated that the clepartrm n. i • not required to prove its case with mathematical precision. The noticee has sought • downplay the prepayment by almost 20 to 29 days and also claimed that the disc cp.ire would have been negligible. To understand the implication in its entirety the amo involved needs to be seen, which in the particular instance is US$ 29,95,000 i.e. approximately Rs.11,98,00,000/- @ Rs.40 per US$). This is only one of many s._ien instances involving amounts which are substantial by any means. Further, not et. has attempted to brush away the instance cited as one stray case of delayed pays n t which is not so; the instance cited is only illustrative. 14.7.3 It was agreed that apparently there was a mis-match in the dal.c ; • import and export. However, the noticee have not addressed the issue of the payinel .1 made by ACPL to Mohammed Al Qari immediately being returned back to them Iron) M/s.D.J Ltd. and other similar instances. The noticee have also not addressed thc facts emerging from the data contained in the documents recovered from the hard of Shri Vipul Desai i.e. the cyclic movement of funds between the Indian firms am! ke overseas firms based ad Dubai, Singapore and Hong Kong. The instances narnit( d the notice are not exhaustive but only illustrations to highlight the manner in the funds remitted by the Indian firms are being immediately sent back as remittal-lc towards the exports of AEL and the other 5 firms. 14.7.9 As regards the contention of the noticee regarding the mails not bemire, ► dates and hence the same not being authentic, the emails referred to and relied upon in the notice were recovered by the Directorate of Forensic Science, tlandltinar.a.i• (DFS). By merely questioning the authenticity of the emails without any subsutii, c , he noticee are casting aspersions on the credentials of the DFS, which is neither )ironer nor sustainable. Further, regarding the 102 instances where payments have been received from firms other than the overseas importing firms are also supported 1.1y WI.: data received from the banks. The nature of the transactions has been clear 11 si out in the notice. These transactions only go to highlight the relationship lictwe,:.11 hC Indian firms and the overseas firms. These transactions assume sip-lit- l( Ant proportions when viewed in light of the fact that the finances of the overseas ii rr is arc also controlled by AEL, as has been brought out in the notice. The attempt !)f- the noticee to brush away the above said transactions is not tenable. The explanation these transactions being related to the so called tripartite agreement is ; not maintainable. 14 8.1 The noticee have arrived at the figure of 3.8% based on the :Imo! nits mentioned in the emails recovered in the course of the investigation and relied tt pon in the notice. They are but a few which was possible to be recovered. Therefore, it a knot be said inferred that they represent the entire transactions. The evideneci between the employees of AEL and the overseas firms are those which are 1%itliiik the knowledge of the noticee and therefore, the department is not obliged and mailer it was possible to come out with all the facts which are strictly within the knowlcclule Of the noticee. 14.8.2 It has been established by evidences that all the CPD imported and subsequently exported were not subjected to the process of assorting, sieving, b, aim;
- 187. 203 (lc. These factshave also been admitted to by Shri Lumesh Sanghvi in his statements recorded under Section 108 of the Customs Act, 1962. Further, it has also been admitted by Shri Sanghvi and Shri Sameer Vora in their statements thal. the CPD mported by them was in the same or substantially the same form in which it was imported, which fall within the category of goods described in para2.35 of the FTP. I Ionce the value addition claimed by the noticee is clearly artificial and only with a view to qualify for the Target Plus Scheme. As regards the contention of the noticee regarding the resultant new product, it is stated that it is not the contention that a new resultant product is the requirement. The issue is when the import CPD and the export CPD are the same or substantially the same goods, the value addition of 5% during 2004-2005 and 10% during 2005-2006 is not justified, particularly when even the so called processes of assorting, boiling, sieving were not undertaken on all the import goods. The evidences brought on record in the course of the investigations have established that the CPD at the time of import were already sorted and packed corclingly. The contentions of the noticee in their reply have been discussed in detail as above. The noticee have apart from denying the charges leveled in the notice not come forward with any evidence to refute the substantial evidences on record and discussed in the notice. They have also sought to attribute many of the actions to the so called Tripartite Agreement. However, the very existence of the so called agreement doubtful. The evidences brought on record are those which have been recovered fJ cam the computers of the noticee and are in the form of documents and emails. These documents and emails consist of correspondences between the employees of the noticee in India and at Dubai, Singapore and Hong Kong. Based on these evidences the notice has clearly established that the noticee have orchestrated the circular trading of CPD for achieving abnormal incremental export volumes solely for the purpose of claiming benefits under the Target Plus Scheme. It has been established that the same set of CPD were circularly traded in and despite not being subjected to any process, the noticee was claiming value addition to the extent required under the Target Plus Scheme. Therefore, the value of the CPD exported claiming the artificial value addition is clearly indicative of the overvaluation of the exported CFD and is tlierefore, liable for rejection. REBUTTAL BY NOTICEES 1!3.0 A copy of comments by DRI on the written reply to the SCN was supplied to the noticees to give them an opportunity to explain their stand and to follow the Principles of Natural Justice. In response to comments on the Reply by Noticees (AEL) and duly adopted by all the notices to the SCN, filed by DRI, the following was submitted by and on behalf of M/s AEL. On going through it was found that most of it was reiteration of the submission dated 26.10.2007; however the arguments which are not forming part of earlier submission are reproduced in the succeeding paras. IS 1.1 It was submitted that to bring out the clear unambiguous and unequivocal admission on the part of DRI that there was no conclusive evidence of circular trading, the admissions as extracted from these comments were reproduced: (i) Para 28.1 (iv) : - To expect the investigating agency to prove how the goods exported to one company were transferred to another company is a misnomer and an attempt to mislead the adjudicating authority. (ii) Errors admitted in the entries in Annexure H & I, after the same had been pointed out in reply to the SCN. The admission of these errors show that there were many lots of the same size and description and quantity and therefore these cannot be called as "errors", but admission of the fact that the different lots of the same of approximately of the same size and description were being imported and exported, meaning thereby actually calling these as "errors" DRI has admitted that there is no circular trading. (iii) Since the CPD imported and exported do not have any markings it would not be possible at the time of physical examination to correlate the goods and be able to conclude that the exported CPD and the imported CPD are identical. The emails recovered in the course of investigation and relied upon in the notice to expose the fact of the circular movement of goods •
- 188. and funds arenot and have not been claimed to be the entire s evidences. • 15.1.21,_ was submitted that the investigation was based on false intelligence reriert. which had no legal basis and/or sanctity whatsoever.It was denied that AEL's Writ, a-._!!• of over Rs.400 Crores in 2002-03 was meager and that AEL grabbed the is extended by the Ministry of Commerce in the form of Target Phis Scheme ("TI'S"1 boosted its exports manifolds as alleged or at all. TPS was not largesse but ave Ned object of TPS was to boost exports, and upon export performance, and pun satisfaction of the other terms and conditions thereof, an exporter was entitled tc t benefit there under.The export turnover was increased on account of the credihil ty and market reputation of AEL and all the exports were genuine. By referring tc I be percentage increase, DRI sought to create only prejudice, which cannot be the basis in law for characterising such genuine exports, against which the foreign exchange a id sale proceeds have also been received, as misuse of TPS. It was denied that the Notification issued by DGFT, withdrawing the benefits of TPS on certain cominod,ti.!s was issued as it had noticed misuse of the scheme, as alleged or at all. It was de nice! that AEL and/or other Noticees had indulged in fraudulent exports of CPDs gold jewellery and gold medallions by indulging in Circular trading and artificial increirle it value addition, as alleged or at all. However, insofar as the gold jei,vellcry concerned, the issue first arose under Show Cause Notice C.No.V111/10/56/200 5 (:11:; Adjn/7950 dated 18th November,2005 issued by the Commissioner of Custom s. Bangalore. It was alleged that AEL and/or its supporting manufacturer P.ijcsli Exports Limited ("REL") imported duty free gold, but as against the obligation to e',.eori gold jewellery, failed to export gold jewellery. It was alleged that what was expurte, was gold in rough form, which did not qualify as jewellery. It was also alleged that th. gold jewellery export from India to Dubai was re-melted and returned to India iii th form of gold bar to take the advantage of TPS. By an Order No. 1/2007 dated 31 January, 2007 the Commissioner of Customs, Bangalore was pleased to drop th same. On review, the Department filed an Appeal to the Hon'ble Tribunal, and by a Order reported at 2009 (243) ELT 115 (Tri.-Bang.) the Hon'ble Tribunal was pleat,e,1 to dismiss the Department's Appeal. Against the Order of the Hon'ble Tribunal, Department has filed an Appeal to the Hon'ble High Court of Karnataka being Cm: out Appeal No. 20/2009, which was pending hearing and final disposal, but there ‘.1 it.!; stay of the Order of the Hon'ble Tribunal. It was submitted that not only the i--sti7. invohed in relation to the export of gold jewellery different and distinct from (le nresent case, but the allegations made against the Noticee No. 1 therein had 1.ce rejected by the Learned Adjudicating Authority as well as the Hon'ble Tribunal. 1)F I. Ahmedabad issued two Show Cause Notices bearing F.No.DRI/AZU /INQ-06 006 dated 11th September, 2009 to AEL and bearing F.No.DRI/AZU/INQ-12/2009 c i.tf d 31st December, 2009 to Intercontinental, India with the same allegations as inane the Show Cause Notice mentioned above relating to Bangalore. These two Notice:,. al c pending adjudication. Besides, some of the exports of gold jewellery made by AEI. ore provisionally assessed and in view of recovery of Customs duty in respei t eilt low advanced licenses against which, such provisionally assessed exports arc affect( AEL filed Writ Petition in the Honble Gujarat High Court being SCA No.6674 cif 10 I 1, wherein by an interim Order dated 30th June, 2011 the Hon'ble Gujarat I ligh has granted interim reliefs. It is therefore, submitted that the exports of gold je,ve11( ry and gold medallions are different from the issues involved in the present case. and therefore, all references thereto in the comments under reply arc irrelevant and hi.v( no bearing to the issues involved in the present case and may be ignored. 15.1.3 It was denied that there was any fraudulent intention on the pari e. vu exporters to artificially boost their export turnover by way of Circular tradinE. 1" 1 he same set of diamonds to achieve disproportionate incremental exports to avail man,. benefit of TPS. The theory of Circular trading was not only false, but also absurd awl irrational in the facts of the present case as has been set out in detail in the 7.c , k the show cause notice and the written submissions filed by AEL. 15.:..4 With reference to, Section 14 of the Customs Act, 1962 which cle?.11- determination of value of each consignment with reference to the price at which or like goods, are ordinarily sold or offered for sale, for delivery at the time and of importation or exportation, as the case may be, in the course of international ;.rade. Such price is deemed to be the value under Section 14. Therefore, the price (Ie.:hired can be rejected only in accordance with Section 14 and the deemed value ther:ol be determined there under. When there is no evidence to reject the price der:lanai°, , in respect of each consignment under Section 14, viewed as a whole also, the col ici
- 189. 205 remains the same.Having not succeeded in dislodging the price declared in respect of each consignment by adducing legally admissible evidence in accordance with Section .1.4 of the said Act, it is thereafter not open to allege fraudulent intention to artificially boost the export turnover on the basis of hypothetical and imaginary theory of Circular trading, which ex facie is unsustainable for the detailed reasons set out in the reply to the show cause notice as also the written submissions filed by AEL. Except col making bald and sweeping allegations that importers and exporters are "inter related" and are "hand in glove" in the "fraudulent design" to avail TPS benefits, there are absolutely no legally sustainable grounds or reasons for rejecting the price declaration in respect of the consignments. The CIF value of none of the consignments of CPDs imported into India had been disputed. Rather CIF price of each consignment of import has been accepted and made the basis of assessment for each consignment cf export by proposing to reject the value addition from the FOB Value declared in eat li shipping bill. Once the CIF Value of each consignment of import of CPDs was accepted and/or not disputed, the total CIF Value of imports of all Six Companies aggregating to US$3058.59 Million was also accepted and/or not disputed meaning thereby there was no Circular trading, but separate and independent imports of 2667 no. of consignments of imports, and thus the question of Circular trading would not arise, because it was not the same set of CPDs, which are re-imported. It was submitted that the allegation of Circular trading was demolished on the Department's own admission and case. 1:3.1.5 The contention that there were no contemporaneous exports is belied by Exhibit-A to the reply. Even, the Department had accepted that there are 34 other exporters of CPDs who exported 40,79,072 carats of CPDs aggregating to Rs.2,996.05 Crores in 2004-05 and 21,89,387.50 carats aggregating to Rs.2,266.90 Crores in 2005-06. When compared with the values of these consignments exported by other unrelated exporters, the FOB Value declared by AEL and other Noticees was comparable and therefore, the same cannot be rejected under Section 14 of the said Act. And that the contention that Section 14 was not applicable is a legal submission. Section 14 applies to dutiable goods and therefore the contention that since the goods are not dutiable, the provisions of Section 14 are not applicable. The judgment of the l-lcn'ble Supreme court in Om Prakash Bhatia vs. Commissioner 2004 (155) ELT 423 is tot applicable in the facts and circumstances of the present case. l5 1.6 Further, the Duty Free Entitlement Certificate Scheme expired on 3151 March, 2004 and no extension was granted. The new Foreign Trade Policy was announced on 31,August, 2004. During April, 2004 and August, also, AEL exported CPDs worth USD :337.66 million, it totally establishes the bonafides of AEL beyond doubt. That the exports of CPDs were not undertaken to defraud the Government or artificially boost the same to take advantage of TPS. Just because in the subsequent months from September, 2004 to March, 2005 AEL exported CPDs to the extent of USD 1,500 million, did not mean that the earlier exports are to be discredited. These exports made between April, 2004 and August, 2004 as well as during the year 2005-06 aggregating to USD 600 million prove beyond doubt the bonafides of AEL and shows than: there was no fraudulent intention of exporting the goods by artificially boosting the turnover by way of Circular trading or otherwise, as alleged or at all. The exports made by Noticees including AEL were genuine and bonafide, the comparison of the total exports of the Noticees with other unrelated 34 firms/companies is unwarranted and unjustified. Merely because the other 34 unrelated exporters did not have the same growth as the Noticee, would not mean that the Noticees are to be penalized it was submitted that it was not correct to say on the part of DRI that the Triparute Agreement was never produced during the investigation. References have brer. made in the reply to the show cause notice to the statements of individuals recorded during investigation, wherein they have referred to the arrangement between Mani, M/s. Daboul Trading Company (DTC) and M/s. Gudami International Pte. Ltd. .("()ti:laini"). References to these statements have once again been summarized herein: • Name of the Date of the Persons Statement Samir Vora 24.01.2006 Extract from the Statements Para 2 at page 7: On being asked to explain the various steps in the diamonds business, I state that our overseas agents, mainly, M/ s. Dabhol Trading 11,C, Dubai send
- 190. 206 us the proposalfor the unassorted diamonds. S arnir Vora 02.02.2006 Para 1 (point 2 & 3) at page 8 : Thereafter orders for import would be placed and Sh. Rakesh Shah of M/ s. Adani Global FZE would corordinate for export of cut 86 polish diamonds from Dubai. Similarly when export are made to various parties in Dubai, Sh. Rakesh Shah coordinate. 13havik Shah 31.01.2006 Para 2 at page 9 : On being asked, I state that I keep in contact with Mr. Tejas Chokshi of M/s. Dabhol Trading Co. LLC Dubai regarding financial transaction of import & exports of above companies. On being further asked I state that one Shri Rakesh Shah, Employee of Adani Global FZE, Dubai coordinates for the business of import & exorts of gold, gold jewellery &articles & Cut & Polished diamonds with dabhol trading co. & also keep in contact with him. And merely because one person is a common director between Adani Global Pte. Ltd., Singapore and Gudami, does not make them or with AEL a related person within tae meaning of Rule 2(2) of the Customs Valuation Rules, 1988 (hereinafter referred to as the "Valuation Rules"). This legal position is well settled in the following amongst other, cases: (i) 2008 (222) ELT 84 (Tri.-Mumbai)-Lloyds Metals & Engineers Ltd. Vs. CC E. Nagpur (ii) 2004 (164) ELT 191 (Tri.-Chennai)-Prasiddha Trading Corporation Vs;. (.'C. Coimbatore (iii) 2002 (143) ELT 244 (SC)-Alembic Glass Industries Ltd. Vs. CCE & Cus. (iv) 2000 (115) ELT 489 (Tribunal)-Daewoo Motors India ltd. Vs. CC, I c‘x Delhi (v) 2002 (150) E.L.T. 1144 (Tri. - Mumbai)- Commr. of C. Ex. & Gus. Aurangabad Vs. Pinnacle Exports Pvt. Ltd. - Maintained in Suprcmc• Court as reported in - 2008 (226) E.L.T. A142 (S.C.)] As such,.merely because Merry Joseph was a common Director, it does not mean that Gudami is a "related person" since AEL does not hold any shares in Gudami. 15.2.1 References to the email dated 16th June, 2005 sent by Sunil Shah, emails dated • 16th February, 2005 and another undated mail from Kaushal Kabra merely give information regarding closing down of Absa Bank and therefore. Sunil Shah was ▪ rlit.ely sharing information that Absa Bank had asked Adani to make alterm tive arrangement and temporary instructions not to make the payment in the accour.t Shine Jewellery FZE with Bank of Baroda, Dubai respectively. The contents of the email dated 16th June, 2005 are not inculpatory and it does not in any manner snow any "control" by AEL over Gudami. Further, the email sent by "Manoj" of Dabhol OTC and there was no reason to infer that said "Manoj" was Manoj Nair, who Wi.IS the employee of Adani Global. Manoj is a common name in India, and hence no adverse inference can be drawn. The contents of undated email of Kaushal Kabra have been.
- 191. • 207 misunderstood. DTC wantedto acquire shares of AEL, but being a listed Company, AEI, advised DTC that it could transfer only less than 5% of the shares. To the question by DTC whether AEL could introduce DTC to bankers for financing this purchase of 4.99% shares of. AEL, in view of the longstanding relations AEL had with various bankers, Kaushal Kabra was seeking to inform the Company of its implications, so that in turn, DTC could be informed about the offer of UBS. Neither the email dated 16th February, 2005 nor the undated email, in any manner whatsoever, prove that the exports or imports made by AEL and other Noticees are not genuine. The allegation that DTC was controlled and managed by AEL is meaningless since AEL had only imported goods from DTC and the CIF Value of all such imports has riot been questioned or challenged. 15.2.2 it was argued that the instances set out in Exhibit-D were not stray incidences. Annexure-H to the show cause notice covers approx 1000 lots and Annexure-I thereto covers approx 2000 lots. Exhibit-D, which is also now resubmitted with reasons and reinarks as Annexures-II and III to the Written Submissions, shows that in respect of 48 lots of Annexure-H and 139 lots of Annexure-I, the charge of Circular trading, on the face of it, do not survive. Even if Entry 11 is removed and placed on page 3 of A nnextire-1, after Serial No. 9, the charge of Circular trading must stay. The contention that there are only 13 lots which were split (separated) into different lots is also incorrect. The reliance on Statement dated 6th February, 2006 of Kaushal Pandya is inappropriate inasmuch as none of the examination reports revealed that imported diamonds were wrapped lot-wise in different packets of plain white paper and each such packet had an endorsement of the nos. 1, 2, 3, etc. as per the invoice and carats lw eight) written with pencil. The conclusion, therefore, based on the Statement of Kaushal Pandya that the imported CPDs did not require sorting before export is incorrect and false. The statement of none of the sorters has been recorded. Lumesh Sarighvi in his Statement dated 28.02.2006 also refers to engaging of sorters. This clearly shows that sorting was done, and undertaken by sorters who were engaged by Noticees. The further contention that one import consignment would be exported as two different consignments, and upon receipt of such export consignments, the `overseas employees" of Adani Group would again merge them into different lots is a aire conjecture and surmise. Except for the bold statement, there is nothing on record to establish or show including amongst the series of emails relied upon in the :•;liow Cause Notice, that employees of AEL/Adani Group outside Indian split or merge Cl]) consignments. The allegation of Circular trading is based on further assumption tlmt the weight was varied marginally by adding or removing a few pieces from each lot. There is absolutely not an iota of evidence to this effect, but a mere suspicion, which cannot take the place of proof. Instead of treating lots with different weights as different consignments altogether, it is being presumed that the weight is being marginally varied by adding or removing a few pieces from each lot. It is denied that the Department has painstakingly been able to prove thousands of instances of Circular trading having the same description of the diamonds, same size range and ',ear about the same weight as brought out in Annexures-H and I, which as aforesaid, and in the reply as well as in the Written Submissions, full of discrepancies, errors and mistakes which ex facie render the story of Circular trading unbelievable.The Statement of Lumesh Sanghvi dated 3rd January, 2007 also does not support the case of Circular trading. Lumesh Sanghvi, in his cross-examination on 25th March, 2008, admitted, upon looking at the documents (invoices) that there was no Circular Trading. 15.3. I The comments of DRI that the rate varies because of the difference in the description/quality of the diamonds amount to an admission of the fact. The following almissions on the part of DRI all of which have been sought to be camouflaged by Y .fit leging that these factors have been created to give a semblance of genuineness for of E:F leia*It of an answer on merits: - s•s::t r There is a difference in the weight of different lots; .:-! • 4a) There is a difference in the clarity of the different lots; • t 4- r ) ' ' ts* ; There is a difference in the rate, and thereby the value of different lots; 4r/ * There is a difference in the description/quality of the diamonds and - therefore, the variation in the rate of CPDs. • ...13.:W • 15.3.2The statement that "to expect the investigating agency to prove how the goods ea poctect to one company were transferred to another company is a clear admission of a serious fact. The very essence and fundamental fact of circular trading is to show a cc.mplete chain of the same goods passing from one hand to another and ultimately,
- 192. landing up inthe same hands. It is absurd to suggest that without the chain i)1+,, established, circular trading can be established. By its very concept and definition, • circular trading requires every link in the chain to be proved and/or establisqe0. To say that the investigating agency cannot prove how goods exported by one corni,a iy were transferred to another, is a clear and unequivocal admission of failure to 1:reec circular trading without showing that the same goods exported by one comortny rc transferred to another company, there is no circular trading. As such, the atle{-,ation of circular trading is based only on assumptions and presumptions. Further the admission of errors on the part of DRI once again totally demolishes the thetry o circular trading. A new and a desperate case to cover up the absence of evidence o. circular trading is sought to be made out in the comments to the reply. The Hof )1( Supreme Court in Oryx Fisheries Private Limited V/s Union of India reported in I!()] (266) ELT 422 (S.C.) held that SCN is the basic document for the charges klgaill I h( Noticee and therefore the new and fresh charges outside the SCN cann.::t 13, entertained at this stage. 15.4.1The reference to e-mail from Asha to Mary is inappropriate for the followtri: reasons : (i) The e-mail is undatedThere is no reference to Asha in any n 1.h statements relied upon in the SCN, and no one from .AEL ha:: I2,!c, questioned about who is Asha and what was her relationship to IVA, (-- its subsidiaries (ii) There is no proof of actual communication or transmission of this i lad from Asha to Mary or any other person (iii) There is no proof of reply to this e-mail (iv) There is no proof to establish the truth of the contents Ma:amt.:11 t. having got the data in relation to all the exports and imports. DI-:I in ; not been able to show whether at all AEL made any shipments of C1'1)1 Gudami and thereafter contemporaneously imported the same 01 i ..1 Shahad, Dubai. As a matter of record, there is no import of CPD a:. from Al Shahad by AEL or any other Noticee, and therefore, the cot t, m of email are on the face of it unreliable and false. It was submitted that, for reasons aforesaid, the e-mail under reference it; n,,t at all admissible in evidence and/or has no evidentiary value. The quantum of or t of AEL and other Noticees does not establish circular trading as alleged or at :ill. ail) the allegation to this effect, is based on conjectures and surmises. 15.4.2Para 4A.6 of VIP (2004-2009) contains the formula for calculation el al, to addition. The only two elements for determining value addition are F013 price a CIF price. The Noticees have entered into transactions in accordance with I'ara 'IA. ' :; of the FTP where the value addition prescribed was 5% in 2004-2005 and 10 in 2005-2006. To attribute value addition as a function of cost or the manufacturilig of processing activity is incorrect. FOB value is related to the price in the ce..trrie oi international trade. As such, irrespective of the cost incurred by the export :r ci irrespective of the nature and extent of processing or manufacturing octiN undertaken by the exporter, there can be value addition. Para 4A.18 of the FIT (1 c:. not prescribe the mode of achieving the value addition. As long as, the exporter command a price in the international market, and actually realises the sank i , 1-ir• form of FOB price, which is over and above the CIF price by at least 5% or 10°4. case may be, the conditions of Para 4A.18 are satisfied. The Noticee:; has • tic claimed that the value addition is attributable to the cost and/or the mrr:•reie incurred by them in India. The Noticees have also not claimed that the value cl.lil on is attributable only to the cost of undertaking the processing by them. Value .(',1 is only a condition precedent for doing business. It is a non-tariff barrier. In of .words, if an exporter wants to operate under Para 4A.18 i.e. in the Private Bonded Morehouse, it is a condition of this statutory compliance that he can only um:1,0:14e ,,such transactions where the exporter is able to command a price from the buyer in the -ctitirse of international trade which ensures compliance with the condition of vAlje addition. Value addition is therefore a condition of the transaction between the bt et and the seller in the course of international trade, reflected in the form of F' )13 IT lie:, and nothing to do with the actual costs and expenses incurred by the seller (es.r.oi ; et ). Accordingly, to say that no value addition was achieved by relying on the :itatetlicilt of Luinesh Sanghvi or any other person to show that no or miniscule proce:,sii g A:L:3 undertaken by AEL/Noticees, does not further the case of the investigating tigenr.:y. Because the buyer agreed to pay a higher price to the seller after 1.4.2005,
- 193. 209 a condition precedentby the seller to achieve statutory compliance, it does not rnean that the value addition was false or artificial, especially when full FOB value has been realised by the exporter. 15.4.3 As to whether, sorters of diamonds must be permanently employed or not and whether they should be paid Rs.10,000/- per month or more are all commercial decisions based on business considerations. In any case, DRI has no'. led any evidence to show or establish only one market practice in this regard. 15.4.5There was no question of Noticees trying to hide behind the back of customs officers who had examined the consignments. Such a submission is totally immature. The customs officers have duly performed all the statutory duties and obligations. Flaying done so, the Noticees are entitled to rely on the actions of the customs officers and the implications arising therefrom. Just because physical examination of the ci insignments and the examination reports destroy the case of DRI regarding circular trading, it does not mean that the DRI can discount or dilute the effect of the statutory extimination reports. 1: i.4.6 Lumesh Sanghvi had shown proof of communication of retractions which are on record. It was therefore not known how the Deputy Director, DRI in his letter dated 2:1.4.2008, claimed that the affidavits of retractions of Lumesh Sanghvi were not communicated. In any case, the statements of Lumesh Sanghvi must be read alongwith the depositions during the cross-examinations and when read together, it tvould be clear that there was no admission of either Circular Trading or artificial value addition by Lumesh Sanghvi and the contents of his statements are not true. l'o discredit Lumesh Sanghvi, merely because he happens to be a distant cousin of the Aitani family is not legally justifiable. Lumesh Sanghvi was not declared hostile and hi!refore his deposition during the cross-examination cannot be ignored. 15.5.1There was no pre-meditated and pre-determined exercise of indulging in fraudulent import and export with an intention to defraud the Government. The ' SYSTEM" file had not been disclosed to the Noticee, and hence reliance thereon is in breach of principles of natural justice. Instead of dealing with the fact as to how can a document prepared in 2003 be relevant for something which came into existence in September 2004, the DRI has merely called it a "lame attempt" due to lack of an answer either in law or on facts. The reference to incremental Promotion Scheme of 2003-04 to make allegations in relation to TPS which was introduced six months after the expiry of the earlier scheme, is totally out of context. No case of circular trading of CPD was made in 2003 and therefore the question of extending the same t.o 2004- 05 and 2005-06 does not arise at all. As a matter of fact, DRI has not made any fillegations in relation to circular trading of CPD during 2003-04 and therefore the k) 1 !egad on of extending the same in 2004-05 and 2005-06 does not arise at all, when the first place, circular trading is not alleged to have taken place in 2003-04 15.5.2'rhe statistics in relation to total exports from one country to another and vice- vi!rsa imports are totally irrelevant in the facts and circumstances of the present case, when each of the consignments have been exported and imported in accordance with law. Any comparison of the statistics of the countries involved cannot lead to any inference regarding any fraudulent intention on the part of the parties to the transactions which are the subject matter of the SCN, and no adverse inference can be drawn against them and all the transactions by the Noticees were genuine. Hence, all insinuations based on annual exports or imports of countries as a whole between them or comparison with other 34 exporters in India, details whereof are given in Aanexure "N" to the SCN, cannot be the basis for making unfounded allegations of circular trading or of fraudulent exports against AEL or the other Noticees allegedly fcrming the consortium as each of them have duly followed the due process of law in aking exports and imports and therefore, jointly or severally, AEL and other Noticees cannot be said to have formed the Consortium for any illegal purpose or at all in the .ACINI There is no consortium and each company had undertaken its own transactions. Irliete was no sharing of profits and the MOU's are legal contracts. 15.5.3It is alleged that AEL managed and controlled its group / associate companies •in India and the overseas companies without understanding the true meaning and le effect of these words. Except for the 2 subsidiaries, when the Department has not succeeded even in showing that the parties are "related persons", within the meaning of the statutory definition in Rule 2(2) of the Valuation Rules, the question of passing the more stringent tests of establishing control and management, does not arise at all. Even in the 2 cases of entities in Singapore, 1 common employee or 1 •
- 194. common director doesnot mean that AEL directly, or through its subsidiaTy Singapore, managed and controlled the other entities in Singapore. All the transactions of imports and exports were at arms length. There is absolutely tioilting on record to show that the amounts remitted to India belong to or were fund( (.t AEL. In view of the admissions made by the investigating agency in its commer I s to Para 28(i), (vii), there is also no circumstantial evidence, much less °yet wheliaing evidence against AEL. The so called and alleged circumstantial evidence in the pre:tent case, admittedly does not establish every link in the chain such that it points only to one possibility, and therefore, the allegations of either circular trading or management and control, by AEL are wholly unwarranted and unjustified. 15.5.4 The investigating agency admitted that the statement of Kamraj Bodal i. r ut correct, and therefore, not reliable. The allegation that the other Indian noticecs id the overseas entities merely acted as "dummies" is not made in the SCN. The f of the matter is that all the entities are independent and undertake business of !hen own. 13.6.1 The allegations related to common directors, management and control by ,11‘',L registered office being the residential address and the status of Mary Joseph on(' Chang Chung Ling, and others. As regards the 5 names, 3 of whom are alleged to ly employees of Adani Global FZE, I the Director of Adani Global PTE Ltd. as well a:: brother of Chairman and MD of AEL and the last also alleged to be the brotirr iv concerned, it is denied that Rajendra Prasad Nair, was an employee of Mani (3lobai FZE. It was submitted that Rakesh Shantilal Shah is not the brother of the Chair inLu', and MD of AEL. Vinod Shantilal Shah is the brother, but M/s.G A international i unrelated to AEL, as the same belongs to Shri Vinod Adani in his personal Cary teat} and there are no common • shareholders between the two. Assuming that t hr persons are employees, that does not mean that AEL manages and control ; M/s.Goldstar FZE, Shine Jewellery and Queen Jewellery. AEL does not own an,• shares in any of these 4 entities, nor does AEL control the appointment of As such, the question of control or management by AEL of any other oycrso:.1 ; companies does not arise at all. The undated e-mail from Kaushal Kahl a is interpreted and/or mis-construed. This mail is only talking about a situation •ylien J)aboul had approached AEL for investment into the shares of AEL but which did net subsequently materialize. As such, the undated e-mail is of no conse( in whatsoever. A certificate from the Chartered Accountants viz. l<SI ASSOCIATES, certifies who the present shareholders and directors of Dabhoul ar, :1 therefore, the allegation that AEL controls and manages Dabhoul or that Dabboal is under the "ownership control" of AEL is totally devoid of merits. A common direct' r a common employee and a director does not establish relationship or Arlic management and control as defined in Rule 2(2) of the Valuation Rules. IVIary Jose1,11 carries the last name as Selvamalar, and Joseph is her middle name and there -cm ,: there are no 2 persons, but one person whose correct name is Ms.Mary losej)1, Selvamalar. The mere fact that one employee is one of the directors in i::tet:lier company cannot be the basis for drawing adverse inference. The SCN do not titane out a case to allege that AEL controls and manages the overseas entities whc;). admittedly does not have any shareholding or voting rights or power to appooit directors. 15.6 2 Further, merely because the overseas firms were suppliers as well as hove s. does not mean that the same are managed and controlled by AEL or Lu-c inter-r.:1 Ali •(I It was denied that the tri-partite agreement between Adani Global FZE, Dplpheul and Gudami were suspect. And that the dates of incorporation and the dates of stopoinE,:. businesses by some of the entities cannot by any stretch of imagination lead ti , adVerse conclusion against AEL. The relationship with Dabhoul or for that aLttun-. any other party to the transactions covered by the present SCN were on prineinal to principal basis and where the buyer and seller have no interest in the business (if. ci.eli other and price is the sole consideration of the transaction. 15.6.3TPS was announced with the objective of boosting exports, and therebn e incremental growth in exports by AEL and other noticees cannot be consider a3 artificial, as alleged or at all. The mere fact that exports of CPD increased clown.; P:3 does not mean that the same are not genuine, more so, when the same ha', c h-cn certified to be true by the proper officers of customs, including during the examination. 15.6.4The burden lies on the prosecution to show that these payments by •nie overseas entity to another overseas entity were without consideration Lu-K1 for no
- 195. 211 ...:ommercial reasons. Thisburden has not been discharged by the investigating agency. It was legitimate to infer that 2 business entities between Dubai and Singapore may have their own transactions and until and unless the investigating agency rules out completely any such possibility, no adverse inference can be drawn against AEL. Some of the buyers of the Noticee referred to in the e-mails are the recipients of funds from some of the suppliers to the Noticee, does not mean that such buyers and such suppliers cannot inter se have any transactions between themselves. Where the said suppliers have made payments to the said buyers, it is presumed that the same have been made in the normal course of business. The reliance on judgment of the Hot-Chic Supreme Court in Collector V/s D.Bhoormull - 1983 (13) ELT 1546 is totally mis- placed. In that case, the party relying on certain evidences / documents regarding :acquisition of contraband and notified goods covered by Section 123 of the Customs Act where the burden of proof is on the person and not the Department, was unable to prove the authenticity or genuineness of such documents. In the present case, ;-;ection 123 is not applicable. The burden is therefore on the investigating agency and hence assuming that mathematical precision may not be required, even then the probability in case of circumstantial evidence must point only to one possibility of c ommission of the crime. None of the e-mails referred to in the SCN unequivocally establish "funding" by AEL or "control" by AEL. The statement that valuation Mould he an issue for any buyer only when he is to pay for the same from his own pockets is vithout substance inasmuch as there is not an iota of evidence on record that the buyer had not paid of his own account for the goods exported by the Noticees / AEL. li is denied that the overseas firms were paying for the CPD exported from India to them out of funds provided by AEL and therefore such a transaction cannot be equated with a normal transaction in the course of international trade as alleged or at all. The payments made by AEL/Noticees are for goods actually bought and sold. Each payment was valuable consideration for goods sold and delivered in accordance with the contract between the parties and therefore, the allegation that buyers did not pay from their own pocket is ex facie absurd.Each show cause notice is to be adjudicated tat its own allegations and not with reference to another notice as held by the Hoit'bie Supreme Court in GSFC Vs Collector of Central Excise [1997 (91) ELT 3 (S.C)]. 15.6.5 It was denied that e-mail dated 30.12.2005 showed any control by AEL over the funds. The allegation on the basis of the e-mail dated 30.12.2005 presumes many things such as, Gracious Exports received money from Mine Gold and Jewellery ivithout consideration and on the directions and under instructions of AEL, and -;iitiilarly, the further assumptions that AEL directed Gracious Exports to transfer the noney to Planica Exports without consideration. However, e-mail dated 30 12.2005 sssi merely to share and impart information regarding cash flow which was necessary tOi AEL to monitor its own exposures in the CPD transaction. The discrepancies in the e-mails have not been denied by DRI and therefore, the truth of the contents thereof need to be independently proved. The Hon'ble Supreme Court in Narbada Devi Gupta ]3irendra Kumar [2003 (8) SSC 7451 held that the truth of the contents of a document also need to be established. This is more so since the hard disk was sealed enly by paper at the time of seizure. The report of the Directorate of Forensics is also ague inasmuch as he does not identify the security software used for retrieving the Ltda. There is nothing on record to rule out the tampering of the hard disk or the data therein. 15.6.6 Bank Accounts were opened not on the basis of goodwill but on the basis of introductions by an existing customer. Bank Accounts were not opened by employees of Adani Global Pte Ltd. The word "we" had been mis-construed as the mail was written as reporting on behalf of the parties who had opened the accounts and therefore "we" did not mean Adani Global Pte Ltd. The Bank Accounts were indeed 0 wiled by each of the companies separately on their own and Mary Joseph was only communicated the fact thereof. 1.5.6.7 Any party to the transaction would put forth its conditions before entering into the transaction. After the parties have mutually agreed, each party is entitled to the benefits (rights) and the obligations there under and hence there is no question of benefit accruing only to AEL. There was no re-cycling of funds. All the transactions wre normal and were undertaken in the usual course of business. AEL did not trust the funds to remain with the overseas firms for more than the time required by AEL, for large amounts and the fact that funds were remitted into foreign accounts over waich AEL had no control shows that these transactions were independent and undertaken in the normal course of business. •
- 196. Z. L. 15.6.8AEL inits reply to show cause notice - para 192 stated that copy of th: documents (RUD 30(1)) had not been disclosed to them although the same had • referred to in para 8.22 of the SCN. As these documents were not disclosed. no reliance whatsoever can be placed against AEL/Noticees. The burden lies en 11- department to record the statement of the person relevant for investigation. When )1;1 did not find Tejas to be relevant for recording his statement, the question of producing witness does not arise. 15.6.9 if it was admitted that AEL made payment to Mine Gold & Jewellery, it fo'lo.•,,::; that Mine Gold & Jewellery, made payment to third parties like Gracious Export!, .11 their own account and for reasons known only to these two, for which AEL cannot be held responsible. So also, AEL was not responsible for payment by Gracious Expo' t:-; to Planica. The e-mail dated 30.12.2005 has been explained. As aforesaid. the -;( dated 11.9.2009 relating to gold jewellery has no bearing on the issues involved it. tic present case, and at present, the issues referred to therein stand settled in favour of the Noticees in view of the Order of the learned Commissioner and that of the Hi»Clile Tribunal. The e-mail referred to in Para 8.16 of the SCN from Ms.Asha to Mary Jo :ci)11 is again mis-interpreted. The said email does not make any reference to consigniur of CPD. It is a matter of record that AEL and other Noticees have not imported '2 )1i, from Al Shahad. When the fact of the matter is that AEL/Noticees have not pitrci,1:.ed CPD from Al Shahad, the question of any shipment received by Gudami to be deLvei ca.l Emperor / Orchid and in turn to Al Shahad does 'not arise at all. On the otlic hand, Al Shahad has received CPD exported by AEL and not the other way are..o, u1 There is nothing to show the truth of the contents of this e-mail and therefore all inferences drawn on the basis thereof are unsustainable. The comments seek to g, beyond the allegations in the SCN by referring to transactions relating to impoi gold bars and export of gold jewellery and therefore, these comments are to be rc.j. 4. C because the issue therein is whether or not the Noticees exported gold jewellery. 15.7.1 As long as the tri-partite agreement exists, the collective wisdom of the Irrrtic thereto cannot be questioned. Any business which is closed when it become:: III does not mean that the business itself was not legal or proper. DPI ha I foil opportunity to verify the tri-partite agreement, and having not done so, it is not epca 10 them to comment thereon. 15.7.2The retraction of Lumesh Sanghvi is on record and therefore non-rebott.i.1 thereof shows that the contents thereof are true and correct. The CBEC Circular al o is a matter of record and fully supports the case of the Noticees. The CBEC til.ir confirms that when processes mentioned therein are carried out provisions -10 )a; 2.35 of ETP are not applicable. 15.7.3It is incorrect to say that the CPD examined at the time of import and c: 1x rt were the same. The declarations with regard to the consignments at the tune 01 import and export in the Bills of Entry and Shipping Bills respectively, is different al id therefore, the examination which takes place with reference to the declaration tria.k each time confirms the fact that the same goods were not part of circular tradinl;. 15.7.4AEL had furnished all details about the commission paid by them and Lli, rt was no failure to furnish the details with regard to payment of commissions .1 I In views of the investigating agency cannot be substituted for commercial wisdom of t hi parties and therefore payment of commission in the circumstances mentioileo ti- ei,:ii cannot lead to any adverse inference. 15.7.5 lt was not for AEL to explain the payments made to the Account of Da .)11.».,1 Trading in Bank of India at Singapore. These payments were made under instiaeti, ,n cptA010,98/ m Dabhoul and as to why Dabhoul wanted such payments to be made at Siiirapar ;AMP • 0 ot be explained by AEL. However, no inference of circular trading can be allc.;(3,1 s.nr Cora e basis of such payments made by AEL under instructions from Dabhoul. ''be applies to payments made by any other entity such as MOL to Cree.vo. ,N.11 ,payinents made by one party to another are based on commercial considcrat kw:3 old .fl,pts is also the presumption which holds good until the contrary is proved 1 )y tbe ,i:,...,..ifivestigating agency. 15 7.6 AEL concluded that nothing in this written submissions shall be taken ti b • ail admission of any of the submissions made in the comments to the reply to the :•-C, 1 tit the DRI and all submissions which are inconsistent with and are contrary to Ngl-lai is stated herein are denied and reiterated all the submissions contained in reply to
- 197. 213 Show Cause Noticeand the written submission filed along with these response as if the same are part & parcel of these representation. 15.7.7 Further to their written submission dated 10.04.2012, M/s AEL vide their letter dated 10.04.2012 enclosed copies of two orders / judgements i.e. Order dated 15.06.2005 passed by the Hon'ble High Court of Karnataka in Writ Petition No.7256 of '2005 (GMRES) {Rajesh Exports Ltd Vs. Union of India and others}, and Final Order dated 31.05.2005 passed by the Customs & C. Excise Settlement Commission, New Delhi in the applications filed by M/s Padmini Polymers Ltd. and others. FINDINGS [6. I have gone through the voluminous records of the instant matter, including the Show Cause Notice, Replies filed by the Noticees, the Submissions made at the Het-wings, the Cross Examination Proceedings, the Comments of DR1 and Rebuttal, etc.... After going through the massive data (including numerous Annexures) carefully, nd judiciously sifting through the allegations, arguments of both Department and Noticees, and evidences, detailed in the earlier paras, I have come to the following conclusions and findings. 17. The main charge in the Show Cause Notice relates to the mis-declaration of value of the exported goods, cut and polished diamonds. It is alleged that the export value has been inflated. It is also alleged that several consignments of CPI) were imported from sellers in Dubai, Hongkong and Singapore and the same goods were eq3orted to buyers in Dubai, Hongkong and Singapore. It is alleged that all the foreign parties which either sold CPD or bought CPD from and to parties in India namely the Noticees are managed and controlled by M/s AEL. It is therefore alleged that since the same goods were exported after import into India, no processing was done in India and hence the value addition is artificial resulting in misdeclaration of the value of the export goods which was done with the sole intention of taking advantage of Target Plus Scheme. It is also alleged that Commission has been illegally paid for exports CPD resulting in misdeclaration of FOB as well as value addition required under Foreign Track Policy. It is therefore alleged that the value of the export goods is requires to be redetermined at the CIF Value of imported goods for all the consignments. It is itrther alleged that the export consignments of the CPD are liable for confiscation under Section 113(il of the Customs Act, 1962 and Noticees are liable to penalty under Section 114 of the Customs Act, 1962. •
- 198. • 214 1.'4. The mainNoticee, M/s AEL has denied misdeclaration of value of export goods. N /s AEL contends that processing of CPD was carried out in Bonded Warehouses in terms of the Circular No. 40/1999 dated 28.06.1999 issued by CBEC. M/s AEL also contends that all the parties/buyers and sellers, except two of its own subsidiaries in Dubai and Singapore, are not related and the transaction value must be accepted. It is the contention of AEL that except the two subsidiaries M/s AEL does not hold any share and there are no common directors in overseas entities with whom the transactions of buying and selling of CPD were undertaken. M/s AEL contends that merely because commission were not declared in the shipping bills, it does not mean commission cannot be remitted and that commission can be remitted in terms of RBI Circular No. 12/2000 dated 9.9.2000. M/s AEL has therefore denied that the export poods are liable for confiscation and also contended that penalties cannot be imposed on the Noticees. The other Noticees have adopted the submissions made by AEL. 19 Before dealing with the main issue of the valuation of export goods, it is necessary to deliberate on the background of the issue. In the Foreign Trade Policy of '..2004-09 (w.e.f. September 2004), Govt. of India announced the Target Plus Scheme. 'he scheme, in short, permitted for duty free import based on incremental exports to status holders like M/s AEL. To maximize the limit under TPS , M/s AEL acquired interest in Noticee No. 2 M/s Hinduja Exports Private Limited (HEPL) and Noticee No. 3 M/s Aditya Corpex Private Limited (ACPL) who in turn entered into MOU with other Noticees No. 4 to 6 to claim TPS benefits. Shri Samir Vora who is a relative of Adani !'ainily is a Director on Board of HEPL and Shri Saurin Shah, a senior officer of AEL is a Director of ACPL. These facts, alongvvith other circumstances to which. I have -eferred later on, show that Noticee Nos. 2 to 6 are managed and controlled by AEL and all operations and transactions by Noticee Nos. 2 to 6 have been in the instance of - 27:zz-Ais AEL. It is therefore clear that the intention from the very beginning was to take , • ::-----1 /:aali*itage of duty free import benefit by showing higher incremental growth in exports • tt rpi.);gh various entities. •A • 1 .% • • .1 •••••- :s • . • • 20. With the above intention, Noticee No. 1 to 6 applied for Bonded warehouse licenses. The activities of all the six Noticees in the Bonded warehouses was under the supervision of Shri Lumesh Sanghvi, a trusted representative of M/s AEL. Shri Lumesh Sanghvi in his statements dated 31.1.2006, 7.2.2006, 28.2.2006 and 3.1.2007 has not only admitted looking after the work of all Noticees but also admitted
- 199. 215 • that all consignmentswere not processed and in few cases only simple process like boiling, sieving and sorting were carried out. It is necessary at this stage to de al with the contention of M/s AEL that Shri Lumesh Sanghvi had retracted his statements ancl therefore no reliance can be placed on these statements recorded under Section 138 of the Customs Act, 1962. Shri Sanghvi claims to have retracted his statements dated 28.2.2006 and 3.1.2007 as not voluntary by two affidavits dated 1.3.2006 and 4 1.2007. However the fact remains that these two so called retractions were not received by DRI as confirmed by ADG, DRI vide letter No. DRI/AZU/INQ-15/2005 dated 14.5.2008. Hence the claims of M/s AEL these two affidavits were sent to DRI is npt acceptable. These affidavits have been produced for the first time in the reply dAted 29.10.2007 filed on 2.11.2007 by M/s AEL. Therefore these retractions are not accepted and have to be ignored. More so, because Noticees were given an opportunity to cross examine Shri Lumesh Sanghvi. The record of cross examination of Shri Lumesh Sanghvi held on 25.3.2008 does not show the statements were recorded under duress or the same were not voluntary. Moreover, his statements were also corroborated by statement of Shri Kamraj Bodal, who was also cross examined on the same date, and he has neither retracted his statement nor during cross examination said that the same are not voluntary. No doubt Shri Sanghvi in his cross examination stated that the process of boiling, sieving and sorting were carried out in all cases, but that appears to be an afterthought. There are a number of judgments of the various Courts/CESTAT, wherein it is held that statement recorded under section 10k, of the C _istoms Act, 1962 before a Customs officer is admissible inspite of it being retracted. In AGARWAL OVERSEAS CORPORATION Versus COMMR. OF CUS. (EP), MUMBAI 2009 (248) ELT 242 (Tri. - Mumbai); it is held that " The appellant's plea that the charge of over-invoicing has not been established conclusively as no erquiries fr-mi M/s. Craftmen and M/s. Puneel Traders have been made to know whether the goons were sold by them at the price stated in the invoice or not, hold that once Shri Sheth4i1_, Mukhia, Shri Kishan Unde and Shri Ashok Kumar Mukherjee have clear!y . • 0.flmittect of indulging in over-invoicing of goods and getting purchase invoices made at a price slightly lower than the FOB value without any retraction during the entire investigation proceedings, there was no need of making any further inquiry from M/s. Craftmen and M/s. Puneel Traders as what is admitted is not required to be proved. In this regard, I place my reliance on the decision of the Hon'ble Supreme Court in the case
- 200. 216 of C2E v.Systems & Components - 2004 (165) E.L.T. 136 (S.C.) wherein it has been c'early laid down that what is admitted need not be proved. I also place my reliance on the decision of the Supreme Court in the case of Surjeet Singh Chhabra - 1997 (89) E.L.T. 646 (S.C.) wherein it has been held that confessional statements recorded before Customs officer, though retracted, is an admission and binding since Customs officers are not police officers. Reliance is also placed on the decision of the Madras High Court in the case of Assistant Collector of Customs v. G9vinclasamy Ragupathy - 1998 (98) E.L.T. 50 wherein it has been held that confessional statements made under Section 108 of Customs Act, 1962 before the ct .stoms officers regarded as voluntary and not to be viewed with suspicion. Retraction of such confessional statements not effects its evidentiary value and when confession is retracted the burden is on the accused to prove that confession was made under threat and only if accused is able to prove that it was not voluntary then onus shifts to pr-tve that it was made voluntarily. The Madras High Court has relied upon the decisions of the Supreme Court - 1997 (89) E.L.T. 646 and 1997 (90) E.L.T. 241. In the present case, no evidence whatsoever has been brought by Shri Shah M. Mukhia that the statements were not voluntary and he has just written one line in his reply to the sh)w cause notice which was submitted more than two years after the date of recording statements that the statements were recorded under duress and coercion without bridging out what was nature or extent of threat etc. It is corroborated by the evidence of Sh-i Ashok Kumar Mukhetjee and Shri Kishan Unde who have also admitted over- rnvoicing and therefore the retraction is of no consequence. The nature of the statements '.re such that they cannot be doctored as the name of the Dubai purchaser and other:: car not be dictated by the Customs officers. Reference is also made to the decision of the :ujarett High Court in the case of Bipinbhai A. Patel v. State of Gujarat - 1998 (101) E.I. T. 254 wherein it was held that when the document itself provide such facts which could be proceed only from the person and which were later found corroborated by other evidence, then late retraction and vague statements of threat, inducement etc. does not render the original statement inadmissible in evidence. Retraction which comes months later alleging duress and torture does not effect the evidential value of the statement as has been held by the Supreme Court in the case of Haroon. Hctil Abdulla - 1999 (110) E.L.T. 309 (S.C.). The Delhi High Court has also in the case of Pran Nath Dhawan - 1984 (17) E.L.T. 12 (Del.) held that if the statements are •
- 201. 217 • retracted by thepetitioners such retraction is not determination of its involuntary character. It may only be one of the factors to be considered along with other factors in determining the question whether a statement was voluntary or not. In the present case, there is a very vague suggestion of recording of statement under duress and coercion that too alter two years from the date of statement and that also came in reply to show cause notice. On the other hand there is sufficient evidence in the form of statements of Shi i Kishan Unde and documentary evidence in the form of purchase/sale invoices of 11,1/ s. Metro Exporters Ltd., M/ s. Swikar Steel Products, M/s. Thapar Industnes and N'/ s. Mongomery Saddle Works who has sold like or similar products to M/s. Metro Exporters Ltd. for exports and the standard export quotation for bicycle spare parts issued by M/ s. Metro Exporters Ltd. which shows that the procurement price was heavily over-invoiced". (Para 20)[Emphasis added] It was only in his reply to the show-cause notice that Shri Mukha complained for the first time that his earlier statements had been recorded under duress, threat etc. He stated that his earlier statements were not voluntary. I find that no proof of duress, coercion or threat was produced by Shri Mukhia. Moreover, the retraction made through reply to show-cause notice after more than two years from the dote' of confessional statement is not a valid retraction " (Para 26) Similar views were also taken in ALOK GUPTA Versus COMMISSIONER OF CUSTOMS, NEW DELHI 2004 (170) E.L.T. 546 (Tri. - Del.) " In the statement under Section 108 of the Customs Act, the appellant has disclosed several details about the arrangements made for the import of the goods and under valuation. This shows that the appellant is the main person behind the import and he has arranged all the details, particularly, in regard to the under invoicing of the goods, by arranging for part payment of the goods in Singapore through his Uncle. Thus, the under invoicing and pajrnent of the differential value are appellant's arrangement. The later retraction of statement does not appear to affect the credibility of the detailed disclosure. The ? etradtion appears to be only an effort to get out of liability as contended by the learned SDR (Para 5) ln DIPEN ENTERPRISES Versus COMMISSIONER OF CUSTOMS, MUMBAI 2004 (164) E.L.T. 470 (TA. - Mumbai), the following observations were made., These statements of Shri A.K. Sheth have been claimed to have been retracted by him. i! was claimed that the statements dated 25-4-94 and 8-11-94 were retracted on 26-4-
- 202. • 218 c,4 and 9-11-94respectively and that the 'retracting letters' were sent to the investigators (SIIB, New Custom House, Bombay) under certificate of posting. The impugiteci order says that there was nothing on record to show that the appellants had retracted the statements dated 25-4-94 and 8-11-94. We have also found no evidence of an!' 'retracting letter' having been received by the departmental investigators. None of the officers in the investigating team (SIIB) was examined by the appellants to prove their point. We are also at a loss to understand as to why the appellants did not resort to an effective mode of dispatch which was acknowledgeable by the addressee. Aitiexure V' to the memorandum of appeal is a 'certificate of posting' bearing the postal date-seal on which the date is not legible. It has been claimed by the appellants that this document is evidence of their retracting letter dated 26-4-94 having been sent to the SHE?. Annexure to the memorandum of appeal is another 'certificate of posting which also carries a postal seal on which the date is not legible. It has been claimed that this document proves dispatch of the appellants' retracting letter dated 9-11-94 to the SIM By no stretch of imagination can a certificate of posting issued by postal authorities to tl-w sender be considered as evidence of receipt of the postal article by the addressee. Therefore, in this case, there is no sustainable evidence of any retraction of the stow merits dated 25-4-94 and 8-11-94. The statements have been rightly relied upon by the adjudicating authority." The circumstances are quite similar in the instant case. Shri Lumesh Sanghvi or Noticees could not present any evidence of delivery of the retraction of the statements which were earlier given by him voluntarily. Even during cross ext. mination Shri Sanghvi informed that he had given his retraction affidavit lo the Ii-gal department of his company which in no way amounts to submission before the investigating officer as the legal department of M/s AEL has also not produced any evidence regarding submission of retraction affidavit by Shri Lumesh Sanghvi. During .• • • • • • :* 7 . ••• ‘•• --; tlikeatitoercion was the reason for his earlier statements. Therefore, I find that Shri Sanghhvi never effectively retracted his statements as claimed by the Noticees and the evidence given by him can be relied upon in this proceedings. tb:e:boitrse of cross examination also, Shri Sanghvi could not explain as to why the toments given by him were not voluntary. He could not explain what kind of .0 • • Evea if the statements made during the cross examination of Shri Sanghvi is taken to be. true and correct, it still does not explain how the value addition of 5% in 2004-05
- 203. 219 • or 10°/0 in2005-06 was achieved. No break up or details of how the value addition has been achieved has been disclosed or submitted. It is strange to note that when the FTP increased the value addition from 5% to 10%, the exports showed the value addition of 10( 0 in 2005-06. It is noticed that M/s AEL continued to export the goods with 5% value addition, but other companies managed and controlled by it increased the value a ldition to 10% without any explanation, though the processes were identical in case Noticees. It is therefore clear that no processing was carried out by any of the six Not icees to achieve the value addition of 5% or 10% as the case may be. Ever if it is taken that processes of boiling, sieving and assortment were carried out, the Noticees have not shown how these simple process can result in value addition of 5% or 10% in the two respective years. Except for payment of Rs. 10,000 per month to Master A, ;sorter for all the companies together, irrespective of the quantity of diamonds, and payment of Rs. 200 per day to other assorters, no other expenses have been ircurred to justify the value addition. 21. There is another evidence to show that no processing was undertaken. Invariably all exports would take place within 3 to 4 days of their imports. Sometimes the exports would take place on the 2nd or 3rd day itself. There was standing inst ruction to load 5% prior to 31.03.2005 and 10% after 31.03.2005 over the import value irrespective of the actual value of the diamonds. This has also been confirmed by Sltri Lumesh Sanghvi in his statements who accepted that S/Shri Samir Vora and Saurin Shah gave instructions regarding loading of the value. S/Shri Samir Vora and SE urin Shah have also confirmed in their statements that they have given instructions re,?,arding each value addition in consignment. Thus the FOB value declared in the Slipping Bills by simply adding 5% or 10% to the CIF value is artificial and hence the export value which is not a correct value has to be rejected under Section 14 of the Customs Act, 1962. The Noticees in their defense have submitted that all the consignments were - • •.4.- • S4 - i44 d before the Let Export orders were passed and therefore the allegation that t; k.xt9dirt value has been inflated is not sustainable. The Noticees had cross examined , • • "-----dtt.tArt. of the five Customs Officers namely Mr. Francis D'souza-, Preventive Officer, • * C. P. Singh, Asstt. Director, Mr. S. S. Pali, Asstt. Commissioner and Mr. Y. K. Arora. Appraiser, who at the relevant time had assessed the shipping bills. The :a te „, • ; . t> • • •' • • Noticees have misinterpreted and misunderstood the outcome of cross examinations
- 204. • 220 of these officers.While these officers followed the examination process as per Public Notice No. 11/98 dated 4.8.1998 issued by the Commissioner of Customs, eiirport, Murnbai, they only verified that the goods conformed to the description, quantity and the value as declared in the shipping bills. They had not verified the value addition winch is a requirement of the Bonded warehouse license conditions and the FTP in tin-ms of para 4A.18. The Examination Report is therefore not conclusive of the question of value addition and correctness of declared transaction value. 23. Another defense of the noticees is that transaction value can be rejected only if tiere is evidence of contemporaneous exports of identical or similar goods at lower crices. Firstly, in case of diamonds, it is not possible to have evidence of identical or similar goods since each lot of diamonds varies from the other and valuation of diamonds which is based on carat, colour, cut and clarity cannot be compared. The roticees have referred to exports by other exporters of diamonds. However they have not been able to show that these consignments are identical or similar as far as the four characteristics and qualities of diamonds, without the details of which, these can r ot be called as contemporaneous or identical goods. Enough evidence is let in to establish the export values declared as the transaction value are not genuine and hence the same are liable for rejection. Further, in the absence of contemporaneous exports of identical goods, value has to be determined on a best judgment method. Though the Customs Valuation Rules for exports came into force in 2007 only, and exports concerned under the present Show Cause Notice are prior to 2007, the principles of the Valuation Rules can be adopted in the present case also under Best ,_:utigment principle; Section 14 of the Customs Act as applicable at the relevant time also permits recourse to deemed value and Section 14 applies to both exports and i -nports. While following the best judgment principle, having come to the conclusion that there was no processing or that only minor and simple processes were carried , • oi !/, Samir Vora and Saurin Shah. Hence the FOB value declared in respect of the t[ ' • ' .t& . iCPD. exports by the Noticees is to be rejected. tstl • 1..? • 24 zdso controls all the Overseas entities in Dubai, Hongkong and Singapore. This zillegation is supported by various evidences relied upon in the Show Cause Notice, .oirie of which are; ,,,taut; the export value must be discarded in view of statements of S/Shri Lumesh The SCN also alleges that M/s AEL not only controls Noticees No. 2 and 6 but
- 205. 221 • a) Eight entitiesbased in Hongkong and Singapore were set up soon after introduction of Target Plus Scheme. Of these, five were closed down soon after export of cut and polished diamonds were removed fromTarget Plus scheme in germs of DGFT Notification 48/2005 dated 20/ 2 / 2006. b) Ms. Mary Joseph Selva Malar was common director of M/s Adam Global Pte. Ltd, M/s Emperor Exports Pte.Ltd, Singapore, M/s Gudami International Pte. Ltd. And M/s Orchid Services Pvt. Ltd. c) There are large number of e-mails from Mary Joseph relating to Transfer of funds from or to bank account of entities situated in Dubai, Honkong and Singapore which e-mails were marked to the officers and employee of M/s AEL. These e-mails were recovered from Computer hard disk seized from the office premises of M/s AEL in Ahmedabad and retrieved by the Director of Forensic Sciences, Gandhinagar, Gujrat. On the basis of such evidences it is alleged that the FOB value declared in the Shipping Bills is not genuine on account of the control of M/s AEL over all the overseas parties involved in the transactions as buyers or sellers of CPD. Allegation of Circular trading is also made on the basis of said evidence. On the other hand, the noticees contend that there is no common share holding or Director between M/s AFL a.-id any of the overseas entities except the two subsidiaries of M/s AEL in Dubai and Singapore. It is also submitted by the noticees that Mary Joseph was monitoring the cash flow which M/s AEL wanted to know to secure itself about the realization of export proceeds since the risk undertaken by M/s AEL was higher as compared to the profits under transaction. Section 14 of the Customs Act inter-alia provides that the buyer and seller should have no interest in the business of each other. This requires 4.3j _a3-4 7:"±: uality of interest for the parties to be related for the purpose of section 14 o j ~ f the v, (± F (± , • sc? ,5 1 Act. At the relevant time there was no valuation rules applicable to exports. . I 1 . .) *.k1 sid.lx-nitted by the Noticees that applying the test of mutuality of interest, the 0: u-6) z) ertraro:/ /of control cannot be sustained only on the basis of the emails of the Mary It is further submitted that neither Shri Samir Vora nor Saurin Shah or Bhavik Shah or other responsible persons of AEL have been interrogated on the emails of Ms. Mary Joseph and, her statements were not recorded as she was in Singapore. M/s AEL has also pointed out that entries from the emails of Ms. Mary Joseph also
- 206. • 222 related to othertransactions, other than diamonds, and therefore contends that Ms. Mary Joseph was merely doing her duty of reporting from which no inference of having control over operations or business of the overseas entities can be drawn. The Notice alleges that the movement of the funds also establish circular trading of the same set cf diamonds. Annex 'H' and Annex 'I' to the Show Cause Notice give details of the i astances of alleged circular trading of the same set of diamonds for the imports and exports effected in 2004-05 and 2005-06. The Notice has also given illustrations in para 9.3. The three flow charts reproduced in para 9.5 to Show Cause Notice &so show the diamond flow from each of the entities in Dubai, Singapore and Hongkong to Mjs AEL, and back to them. Reliance is also placed on the statements of Shri umesh F..;alighvi dated 31.1.2006, 7.2.2006, 28.2.2006 and 3.1.2007 wherein after looking at the charts showing circular movement he admitted that the same set of diamonds were being imported and exported over and over again to achieve higher exports. The Noticees on the other hand have in exhibit 'D' of the reply of the Show Cause Notice set out illustrative cases to show that circular trading is not possible. Annex 'H' 86T of t ie Show Cause Notice gives clear trial of how one lot of imported diamonds was split into different lots for export, and diamonds of the same description, size and carats were re-imported subsequently by a different entity to a different entity. The number of times each lot of diamonds was involved in circular trading is illustrated in para 9.1 and 9.2 of the Show Cause Notice. At the same time the illustrations given by the oticees to show that circular trading is not possible also appear to be plausible. The contention of the Noticees is that conducting legal business operations to take the benefit of Government Scheme such as TPS is perfectly legitimate. While they clnducted their business operations under perfectly legal and valid MOU and Tripartite agreements, they vehemently denied any Circular Trading. The flow chart do suggest the circular movement but Shri Vipul Desai from whose computer the oi.+k Clii. krte was recovered in his statement dated 19.2.07 stated that these charts IA ere not • - pkiggiiied by him but by Shri Sudhakar Nair, Junior Assistant(Banking) who had left 'the company subsequently. No statement of Shri Sudhakar Nair has been recorded. It itt'cc:intended that these charts at best indicate a plan to inflate export growth and does not prove that same set of diamonds are rotated. The Show Cause Notice does not dispute the CIF value as declared in the bills of entry in respect of the six noticees, whereas at the same time allege Circular trading. The fact of the physical import and
- 207. 223 S exhort isalso not disputed. There are no identification marks or numbers in case of diamonds and assessments are made on the basis of the declaration made by the importer or exporter for each lot. Diamonds are freely permissible for import and export under Foreign Trade Policy. Assuming the same set of diamonds came and went out of India, there may not be any prohibition or violation, simply because of that, under the Customs Act or the Foreign Trade Policy. However, misdeclaration of value declared in the shipping bills is firmly established. The goods cannot escape the mischief of confiscation for the misdeclaration of the value of export goods. The artificial value addition has also contributed to the misdeclaration of value of the export goods. No processing was undertaken to achieve the value addition and the B value declared was incorrect. The simple process of boiling, sieving and sorting do not automatically lead to value addition of 5% or 10% which was mechanically axed by Shri Samir Vora and Shri Saurin Shah which is also confirmed by Shri Lu mesh Sanghvi. It was possible for M/s AEL to show artificial value addition because all the exporters and importers had conspired and connived together with M/s AEL to show incremental growth of exports through higher turnover and hence the difference between the FOB value of export goods and C1F value of import goods is not actual or real. Therefore, the FOB value of export goods is to be redetermined as the CIF value shown in Annex 'AA' to 'FF' of the Show Cause Notice. Thus the first and second charges and proposed action of rejecting the FOB value declared in respect of the exports of CPD and redetermining the value equivalent to the CIF value of imports, are confirmed. 25 The Notice also alleges that M/s AEL paid illegal commission to overseas parties for exports which also reduced the value addition. The argument of defense that commission has been paid in accordance with RBI circular, is no defense at all. It is for the Comptent Authority under FEMA to examine whether the commission was -1! temItted in accordance with law. It is relevant to the instant case to note that, when cdritmkssion is paid (which is not refuted), it is deductable from the FOB value and consequently the value addition falls below the limit prescribed under para 4A.18 of FtP. Paras 14.20 to 14.25 of Show Cause Notice bring out in detail that when the commission amount is deducted from FOB value, the value addition fails to reach the target of 5% or 10% as the case may be. The same has not been proved wrong by the defense. Hence this is one more reason for not accepting the FOB value declared by
- 208. • 224 the noticees. Italso means that the noticees do not fulfill the value addition criteria to be eligible for the benefit under TPS. Further, as mentioned earlier the FOB value are also redetermined equivalent to CIF values. Consequently also, the Noticees fail to fulfill the value addition criteria. It is also held earlier that the whole of the value addition is to be disallowed for reasons mentioned earlier. These are relevant factors for deciding eligibility under TPS. 2f. As the FOB value of the export goods are misdeclared, the said goods are also liable for confiscation under section 113(1) of the Customs Act, 1962. Though the goods are liable for confiscation as mentioned above, they are not available for confiscation. In a catena of decisions, it has been held that eventhough goods are not available, yet they are liable for confiscation, but redemption fine will not be imposable. Reliance is placed on the following decisions; S. Mohan, J.DADHA PHARMA PRIVATE LTD. Versus SECRETARY TO GOVT. OF INDIA, 2000 (126) E.L.T. 535 (Mad.) "Taking up W.P. No. 1857 of 1975, the order of the Additional Collector of Customs .4totes after levying a penalty of Rs. 2,000/ -, under Section 112 of the Act, 'since, however, show cause notice was not issued within 6 months of seizure of the goods although liable to confiscation are ordered to be released." In view of this order, it is :on tended that if the goods cannot be confiscated, no action can be taken under Section 112 of the Act. I am totally unable to agree. Section 110 as the marginal note itself will show, deals with seizure of goods (we are not concerned with the documents and things 2 •_prgently). This section occurs under Chapter XIII. However, Chapter XIV is the one • --u.413if4—peaks of confiscation of goods and conveyance and imposition of penalties. )qtiptz,..4 I states - 's• • - • .- ..1 ..,-),„1::crlio , 4 ,1Siowing goods brought from a place outside India shall be liable to confiscation." Clause (ci) of this section under which action is taken reads - `Any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary u. any prohibition imposed by or under this Act or any other law for the time
- 209. 225 being the force;" Section112 reads : - "Any person - (a) who, in relation to any goods, does or omits to do any act, with act or omission would render such goods liable to confiscation under Section 111.. .... (h) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which lie knows or has reason to believe are liable to confiscation under Section 111.. ..." (Para 13) "A careful reading of the sections would clearly show that it is the liability to confiscation that is spoken to and not the actual confiscation. Therefore, it would mean rhot the power to adjudicate upon for the imposition of penalty for improper importation, springs from the liability to confiscate, and not actual confiscation. This is because not ,n/y Section 110 occurs under a different chapter, but the purpose of that section relates urav ro seizure about which I have already noted. There again the words are "any goods (ire liable to confiscation under this Act." Merely because the department by reason of its inaction is not in a position to seize the goods, does not and cannot disable it adjudicating upon the liability for action under Section 111 read with 'ec'iorz. 112 of the Act. In other words, the language of both the sections above referred t, does not warrant the actual confiscation, but merely speaks of the liability of the goods being confiscated, This is the plain and most unambiguous meaning of the phraseology 'liable to confiscation' spoken to in these two sections". (Para 14) 1,, ;Dhasis added] am fortified in my conclusion by referring to Collector of Customs and Central Excise v. Arnrutalakshmi, AIR 1975 Mad., 43 and Munilalv. Collector, Central Excise, .•; •- •• Chandigarh, AIR 1975 Punj. and Haryana 130. In both these noses, though this line of interpretation has not been adopted, it has been categorically found that having reaard to the scope of these two sections viz. Section 110 on the one hand and Section 111 read ivi!h Section 112 on the other, being independent of each other, seizure is not necessary fol confiscation. This will be an added reasoning to any conclusion. Therefore, the second point raised by the petitioner also has to be rejected". (Para 15)
- 210. 226 COMMR.OF CUS. (EXPORTS),NHAVA SHEVA Versus SUNIL 1CAPUR 2008 (227) E.L.T. 476 (TH. - Mumbai) "We have examined the rival submissions. We find that the Respondents knowingly misdeclared the goods in the shipping bills in question and thus contravened the provisions of Section 50(2) of the Customs Act, 1962. 7 herefore, the goods are liable to confiscation and the Respondents are liable to penal action. However, since the impugned goods have been exported out of the country and are not available for confiscation, no redemption fine is imposable. In this connection, we rely on the Tribunal decisions in the cases of Best International and K. Karnala Bai cited supra in which it has been held that the goods which have already been exported out of the country are not available for confiscation and, therefore, cannot be confiscated and no redemption fine can be imposed on them". (paral 1) "As regards the imposition of penalty on the Respondents, we note that the Respondents were entitled to the DEPB credit of Rs. 5,00,278/- on the exports made. BO the same was denied to them due to the misdeclaration. The misdeclaration. was mode by the Respondents in the shipping bills in question on the instructions of the foreign buyer at Turkey to suit their (i.e. foreign buyers') requirement in order to bag the export order worth more than Rs. 2.50 cores. There was no ulterior motive on the part of the Respondents to derive any financial gain or benefit out of this. We also take note of the fact that the quality standards of the impugned goods were never questioned by the Turkish Customs Authorities, who detained them because of a wrong description. and subsequently allowed them to be cleared. Keeping in view the fact that no Customs revenue or Exim Policy angle is involved and there is no FERA violation, we are of the view that the denial of the DEPB credit of Rs. 5,00,278/- is adequate punishment to the Respondents and, therefore, it is not just and proper to impose further penalty on them. Consequently, we refrain from imposing any further penalty on the Respondents and their Director". (Para 12) (Emphasis arldezil BUSSA OVERSEAS 86 PROPERTIES P. LTD. Versus C.L. MAHAR, ASSTT. C.C., BOMBAY 2004 (163) E.L.T. 304 (Born.) ":;u5-sections (2) and (3) of Section 143 of the Customs Act read as follows : - "(2) If the thing is done within the time specified in the bond, the Assistant Collector of Customs shall cancel the bond as discharged in full and shall, •
- 211. 227 • on demand, deliverit, so cancelled, to the person who has executed or who is entitled to receive it, and in such a case that person shall not be liable to any penalty provided, in this Act or, as the case may be, in such other law for the contravention of the provisions thereof relating to the doing of that thing. (3) If the thing is not done within the time specified in the bond, the Assistant Collector of Customs shall, without prejudice to any other action that may be taken under this Act or any other law for the time being in force, be entitled to proceed upon the bond in accordance with law." The plain reading of sub-section (2) makes it clear that if the thing, which repaired to be done, is done within the time specified, then the Assistant Collector of Customs shall cancel the bond and return the same to the importer and thereafter the importer shall not be liable to penalty provided therein. Sub-section (3) on the other hand deals with cases where the importer fails to comply with the things set out in the bond wi'hin the time specified and in those cases, the Assistant Collector of Customs is not on'y entitled to enforce the bond but to take any other action permissible in accordance wilh the Act. Shri Chagla raised two-fold, contentions to urge that the show-cause notice issued in exercise of powers under Section 111 and Section 112 of the Act is not valid The first submission of the learned counsel is that the goods imported under 45 consignments were cleared for home consumption on the petitioners executing ITC bonds us required under sub-section (1) of Section 143 of the Act. The learned counsel urged tlice once the goods are cleared for home consumption, then the goods covered by the consignments cease to be imported goods in accordance with the definition of expression 'imported goods' under Section 2 of the Act and consequently such goods are not liable for 7.onfiscation. There is considerable merit in the submission of the learned counsel. The goods lose its character of imported goods on being granted clearance for home consumption and thereafter the power to confiscate can be exercised only in cases where the order of clearance is revised and cancelled Shri Chagla then submitted that the proceedings for imposition of penalty under Section 112 are not permissible if the yowls cannot be confiscated under Section 111 of the Act. The submission is not correct. Section 112 deals with the levy of penalty for improper importation of goods and Section 1 12(a) provides that any person who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section
- 212. • 228 11, or abetsthe doing or omission of such an act, is liable to a penalty. The power to impose penalty can be exercised not only when the goods are available for confiscation Eut when such goods are liable to confiscation. The expression 'liable to confiscation c'early indicates that the power to impose penalty can be exercised even if the goods are not available for confiscation. It is possible that the goods may be cleared for home consumption without the Customs Authorities being aware that the clearance is sought b.i 'suppressing the relevant facts or by producing documents which are not genuine. The mere fact that the importers secured such clearance and disposed of the goods and thereafter goods are not available for confiscation cannot divest the Customs Authorities of the powers to levy penalty under Section 112 of the Act.Shri Chagla relied upon the decision of Calcutta High Court reported in 2000 (123) E.L.T. 330 (Cal.) - 1976 Tox. L. R. 1E67 (Thomas Duff and Co. (India) Ltd. vs. Collector of Customs and others). The Cc lcutta High Court took the view in a case of export where a show-cause notice was is5ued as to why penal action should not be taken, that once the goods were exported anlior not available for confiscation, then the Customs Authority had no jurisdiction to iniliate the proceedings by issuance of show-cause notice for levy of penalty. It is not possible to share the view taken by the Calcutta High Court. The power to levy penalty 7.-; 110r dependant upon availability of the goods imported or exported. The power to levy per alty arises because the importer or exporter has done or omitted an act in relation to floo(L- and which renders such goods liable for confiscation. The power, in our judgment, to levy penalty is available once the Customs Authorities conic to the conclusion that the goods imported or exported were liable to confiscation because of act or omission on the part of the importer or exporter as the case may be. The power is not dependant upon the availability of the goods. It is ther4Ore not possible to accede to the submission of Shri Chagla that as the goods 1: .7 ;0,-cogONd by 45 consignments were not available for confiscation under Section II I of the Ay Li:: • . ANiiivustoms Department could not have commenced proceedings under Section 112 . • ' 42.15f•r 1 j30 for levy of penalty". (Para 7) [Emphasis added] • it„.z. .1.:/ •• - - BHAIRAV PRINTERS Versus COMMISSIONER OF CUSTOMS (I), MUMBAI 2002 (144) E.L.T. 560 (Tri. - Mumbai) Learned Counsel tries to argue before me about the legality of the imposition of the penalty as the goods are not factually available for confiscation which has been
- 213. 229 • admitted in theshow cause notice. He also vehemently states that without a specific finding as to the confiscability of the goods under Section 112 of the Customs Act, there cannot be imposition of penalty. He tries to cite certain decisions which I am not interested in looking into, because the section itself is very clear. Section 112 of the Customs Act says that only if the goods rendered themselves liable to confiscation under Section 112, penalty can be imposed. The fact that it should actually be present for confiscation is not reflected in that section. I, therefore, do not find it necessary to go into tl'at question. I reduce the penalty of Rs. 50,000/ to a nominal one, viz. Rs. 5,000/ - and dispose of the appeal on the above terms". (Para 2) 2'1 Another connected issue is regarding the Memorandum of Understanding (MOU) and tripartite agreement. I find that the arrangement made between AEL and th:ir Group/Associate companies and the other Indian companies through MOUs whereby AEL would arrange for the exports for these companies to achieve the desired tai get for availing benefits under the Target Plus Scheme and that the benefit of DFCE availed by these companies would go to AEL and AEL would pay them commission for their ithe other companies) exports is nothing but a scheme to fraudulently avail the benefits of export promotion scheme introduced by the government for the benefit of genuine exporters. The MoUs are nothing but an arrangement of transferring export performance from one company to another for availing the benefit of Target Plus Scl- erne. The most important aspect of the arrangements between these companies x‘ at-. that the benefit accrued to all the companies was to be utilized by AEL, which is supported by the MoU signed by these companies and also by the statements of directors of all of these companies recorded under section 108 of Customs Act, 1962 during investigation which are on record. The submission of the noticees that to expand the diamond business, M/s AEL ;,Ipproa'Fhed AGFZE to make a business plan for the development and growth of the cl4riond business and they did not intend to do mere job work, but wanted to sell - (export) portion of the incremental value addition resulting out of the procifssing/sorting. It was proposed that the Company would import mixed / unassorted diamonds, carry out the processes of boiling, sieving, sorting, etc through h bonded warehouse and export the same and the responsibility of sourcing/identifying parties who would send the diamonds for sorting and also the
- 214. 230 parties who wouldreceive the same, would be that of AGFZE. AEL also desired Euarantee of payment and a financial arrangement to be put in place which would carry minimum risk and financial exposure for the Company. M/s. Daboul Trading LLC, Dubai (Daboul/DTC) tied up with AGFZE alongwith AI/ s.Guclarni International Pte Limited, Singapore (Gudami). It was agreed upon among them that unassorted diamonds would be sent by Daboul and/or its nominees including Gudami and the Company could charge the market price after processing for eKport to Daboul and/or its nominees. AGFZE also informed the Company that there NA at, no risk to the Company since AGFZE had arranged with Daboul/Gudami to guarantee the payments for exports by the Company, provided the Company reciprocated in making prompt/timely payments for the imports. In their submissions AEL relied on this agreement. • However, in comments on reply to SCN by M/s AEL, DM, the investigating ai.,ency has submitted that "noticees refereeing to some tripartite agreement between (i) NI/s. Daboul Trading Company, LLC, (ii) M/s. Adani Global, FZE and (iii) M/s. Gliciarni International Pte Ltd., Singapore. However, the copy of the said agreement was never produced during the investigation. The said agreement as produced before th.- adjudicating authority in reply to the SCN is only on a plain paper and does not seem to be ratified with any authority either in UAE or Singapore. It is expected that such contracts on stamp papers and ratified with appropriate local authorities". It is observed that the noticees have resorted and have attempted to take shelter of the so called tripartite agreement. The strangest part of the agreement even if it existed was that the job of assortment was to be carried out by AEL or its nominees only, while AEL was not a party to the agreement. It clearly means that the agreement was only to further the interest of AEL. In reply, a vague attempt is made by the noticees in the manner which is reproduced below: "that it was not correct to say on the part of DR1 that the Tripartite Agreement v.-a:. never produced during the investigation. References have been made in the reply to the show cause notice to the statements of individuals recorded daring investigation, wherein they have referred to the arrangement between Adani, M/s. Daboul Trading Company (DTC) and M/s. Gudami International Pte. Ltd. ("Gudami"). References to these statements have been summarized :
- 215. Name of the Persons Dateof the Statement Extract from the Statements Para 2 at page 7: On being asked to explain the various steps in the diamonds business, I state that our overseas agents, mainly, M/s Daboul Trading LLC, Dubai send us the proposal for the unassorted diamonds. Samir Vora 24.01.2006 Para 1 (point 2 & 3) at page 8 : Thereafter orders for import would be placed and Sh. Rakesh Shah of M/s. Adani Global FZE would corordinate for export of cut & polish diamonds from Dubai. Samir Vora 02.02.2006 Similarly when export are made to various parties in Dubai, Sh. Rakesh Shah coordinate. Para 2 at page 9 : On being asked, I state that I keep in contact with Mr. Tejas Chokshi of M/s. Daboul Trading Co. LLC Dubai regarding financial transaction of import 86 exports of above companies. On being further asked I state that one Shri Rakesh Shah, Employee of Adani Global FZE, Dubai 3 1.0 1.2006 231 •
- 216. • 232 coordinates for thebusiness of import & exports of gold, gold jewellery & articles & Cut & Polished diamonds with daboul trading co. & also keep in contact with him. It clearly means that agreement was not produced before DRI during investigation. The contention is that in the "statements of individuals recorded during investigation, wherein they have referred to the arrangement between Adani, M/s. Daboul Trading Company (DTC) and M/s. Gudami International Pte. Ltd. ("Gudami"!". However a plain reading of what was averred in the statements, as summarized in the table above gives to understand that M/s. Daboul Trading LLC, Dubai sends proposals and are co-ordinated by Rakesh Shah, Employee of Adani Global FZE, Dubai for the business of import 8r, exports of gold, gold jewellery & articles & Cut & Polished diamonds with Daboul Trading Co. It is also pertinent to note that no reference was mAcie about M/s. Gudami International Pte. Ltd. in these statements. It therefore appears that the said contention of the defense was only an afterthought, an attempt to justify the action of AEL and other Indian companies which were nothing but a Ira udulent attempt to avail benefits extended by the government to exporters. 28. Another connected issue is regarding Customs duty exemption under the Target Plus Scheme. it has been brought out earlier that the intention from the very beginning was to take advantage of the duty free import benefit by showing higher incremental growth through various entities. 29 " 7: • 'The Customs duty exemption eligibility under Target Plus Scheme based on the : < :e • :I:Wile pertaining to the exports made in 2004-05 and 2005-06, comes to Rs. • ^- • 679.62 crores and Rs. 218.16 crores for 2004-05 and 2005-06 respectively. One of the requirement for being eligible for Target Plus scheme is the value addition of 5°,1 and 10% for the respective years. As mentioned earlier, FOB value has been rejected and it has been held that the value addition is less than 5% or 10% for the respective years.
- 217. 233 • Therefore, it isalso clear that the noticees are not eligible for the above mentioned Custom duty exemption benefit under Target Plus Scheme. 0. The Central Board of Excise & Customs has issued Notification 32/2005-Cus dated 8.4.2005 titled "Target Plus Scheme — Exemption to imports against a duty credit certificate issued thereunder." The relevant portions are; "In exercise of the powers conferred by sub-section (1) of section 25 of the Custcms Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the puhlic interest so to do, hereby exempts goods when imported into India against a duty c, edit certificate issued under the Target Plus Scheme in accordance with paragraph 3. 7 of the Foreign Trade Policy (hereinafter referred to as the said certificate) from, - (c, the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); and (b) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, - subject to the following conditions namely :- that the benefit under this notification shall be available only in respect of duly credit certificate issued under the said scheme to a Star Export House on the basis of incremental growth in FOB value of exports made during the financial year 2004-05 over the exports made during the financial year 2003-04"; (2) (3) (6) 12) The following categories of exports shall not be counted for calculation of export pei:rormance or for computation of entitlement under the scheme -
- 218. 234 export of importedgoods covered under para 2.35 of the Foreign Trade Policy or exports made though transhipment. (ii) (u) Export performance made by one exporter on behalf of another exporter. (3) 31. Customs duty exemption flows from the said notification, which interalia, stipulates certain conditions and criteria to be eligible for the duty exemption, such as incremental growth in FOB values of exports (Condition 1) and exclusion of export of imported goods covered under para 2.35 of FTP [Para 2(i)]. It has already been held that the value addition (condition 1) claimed is bogus. Further, from the statements of Shri Lumesh Sanghvi it is clear that in many shipments the CPD imported are not subjected to any processing and are exported in the same condition as imported. Hnce the exclusion clause under para 2(i) is also attracted. Thus the eligiblity conditions and criteria for the Customs exemption notification are not fulfilled by the Noticees and therefore they will not be eligible for the said Customs duty exemption under Target Plus Scheme. 32. Misdeclaration of value of export goods and attempt to avail illegally the benefit of customs duty exemption are offences under the Customs Act. Therefore, the duty exemption is also to be denied. The noticees are therefore not eligible for the • Customs duty exemption benefit of Rs. 679.62 crores for 2004-05. ,<<t F 1,4 '‘‘ As regards 2005-06, as per DGFT Notification No. 48/2005 dated 20.02 2006, t •leFID which were earlier permissible for calculation of export performance or for computation of entitlement of TPS will not be allowed for calculation of export performance or for computation of entitlement of TPS for exports made on of after 01.04.2005 (i.e., for 2005-06). Therefore the Noticees are in any case not eligible for the' benefit of Customs duty exemption under TPS for 2005-06. It is also noted that Nolicees have not claimed the benefit under TPS for the year 2005-06.
- 219. 235 • 33 In viewof the above, in the light of the offences under Customs Act such as mis-declaration of value of export goods, claiming of illegal value addition, attempt to avail Customs duty exemption benefit illegally etc, the goods exported are liable for confiscation, and all the Noticees are liable for penalisation and the said charge and proposed action for penalisation in the Show Cause Notice are confirmed. 34. It is clear that all the six noticees were involved in misdeclaration of FOB value of exports of diamonds with the clear intention to illegally obtain duty free benefits under Target Plus Scheme. The statements of Shri Lumesh Sanghvi and others bring out the preplanned modus operandi of boosting export values by adding 5% or 10% value without genuine value addition. The malafide intention and attempted fraud is clearly established. Therefore, Noticee No. 1 i.e. M/s AEL who is the main culprit and Noticees Nos. 2 to 6 who are abettors are held liable to penalty under Section 114 of the Customs Act, 1962. Noticee Nos. 9 and 10 Shri Samir Vora and Shri Saurin Shah had played a major role in planning the whole scheme to show artificial FOB values. Th 1-31 were reporting to Noticee No. 7 Shri Rajesh Adani. Therefore, all three are liable for penalty under Section 114 ibid. Noticee Nos. 8, 11, 12 and 13 have allowed themselves to act at the behest of M/s AEL and have performed acts which have rendered the export goods liable to confiscation under section 113(i), and hence they are also liable to penalty under Section 114 of the Customs Act, 1962. While deciding the quantum of penalty, I have considered all the relevant factors including the mit _gating factors such as that Cut and Polished Diamonds were freely importable/exportable, and that the Sale Proceeds of the exports have been realised. Ii is also kept in mind that no Customs duty exemption has been claimed yet, and • therefore no revenue loss has happened. It is also taken into consideration that I have held that the Noticees are not eligible for the Customs duty exemption under NotCleation No.32/2005 - Cus dated 08.04.2005, and hence the Noticees will not be eligible for any benefit under Target Plus Scheme. In this context, though the facts of the two cases are not identical, the ratio and logic of the judgement of the Hon'ble Mumbai bench of the Tribunal in the case of Commissioner of Customs Nhava Sheva Surul Kapoor, 2008 (227) ELT 476, quoted earlier at page 226 of this order, is relevant to certain extent in the instant case also. I have also considered the role played by the individuals when fixing personal penalty on the individuals.
- 220. 236 25. Thus inview of the above and in accordance with the detailed discussions and findings in the earlier paras, it is held that all the four charges and proposed actions vide the impugned Show Cause Notice are confirmed. ORDER 36. In view of the above, I order the following; i) FOB values declared during 2004-05 and during 2005-06 in respect of the CPD exported by the six companies M/s Adani Exports Ltd (AEL), M/s Hinduja Exports P. Ltd (HEPL), M/s Aditya Corpex P. Ltd. (ACPL), M/s Bagadiya Brothers P. Ltd. (BBPL), M/s Jayant Agro Organics Ltd. (JAOL) and M/s Midex Overseas Ltd. (MOL), as detailed in Annexure A, B, D, F, E & C to trie SCN respectively, are rejected for contravention of the provisions of Section 14 of the Customs Act, 1962. ii) FOB values declared during 2004-05 and during 2005-06 in respect of the CI'D exported by the six companies M/s Adani Exports Ltd (AEL), M/s Hinduja Exports P. Ltd (HEPL), M/s Aditya Corpex P. Ltd. (ACPL), M/s Bagadiya Brothers P. Ltd. (BBPL), M/s Jayant Agro Organics Ltd. (JAOL) and M/s Midex Overseas Ltd. (MOL) are ordered to be redetermined under the provisions of Section 14 of the Customs Act, 1962, to be the value of the CPD at the time of its import as detailed in Annexure AA, BB, DD, FF, EE &CC to the SCN respectively. iii) The cut and polished diamonds of assorted variety exported by them during 2004-05 and during 2005-06 [declared FOB value (i) above] are held liable to confiscation under Section 113 (i) of Customs Act, 1962 for contravention of the provisions of Section 14 & 50 of Customs Act, 1962 read with Rule 11 iii 14 of Foreign Trade (Regulation) Rules, 1993. However the goods are not available for confiscation. iv) A penalty of Rs.25,00,00,000/- ( Rupees Twenty Five CRORES only) is imposed on M/s Adani Exports Ltd (AEL)under Section 114 of the Customs Act, 1962. • v) A penalty of Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M/s Hinduja Exports P. Ltd (HEPL) under Section 114 of the Customs Act, 1962.
- 221. 237 S xi) A penaltyof Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M/s Aditya Corpex P. Ltd. (ACPL) under Section 114 of the Customs Act, 1962. vii) A penalty of Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M/s Bagadiya Brothers P. Ltd. (BBPL) under Section 114 of the Customs Act, 1962. viii) A penalty of Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M/s Jayant Agro Organics Ltd. (JAOL) under Section 114 of the Customs Act, 1962. ix) A penalty of Rs.2,00,00,000/- ( Rupees Two CRORES only) is imposed on M s Midex Overseas Ltd. (MOL) under Section 114 of the Customs Act, 1962. x) A penalty of Rs.1,00,00,000/- ( Rupees One CRORE only) is imposed on Shri Rajesh Adani, Managing Director, M/s Adani Exports Ltd (AEL)under Section 114 of the Customs Act, 1962. xi) A penalty of Rs.25,00,000/- ( Rupees Twenty Five LAKHS only) is imposed on Shri Deven Mehta, Director, M/s Hinduja Exports P. Ltd (HEPL) under Section 114 of the Customs Act, 1962. xii) A penalty of Rs.75,00,000/- ( Rupees Seventy Five LAKHS only) is imposed on Shri Samir S. Vora, Director,M/s Hinduja Exports P. Ltd (HEPL) ander Section 114 of the Customs Act, 1962. xiii) A penalty of Rs.75,00,000/- ( Rupees Seventy Five LAKHS only) is imposed on Shri Saurin Shah, Director, M/s Aditya Corpex P. Ltd. (ACPL) under Section 114 of the Customs Act, 1962. Kix!) A penalty of Rs.25,00,000/- ( Rupees Twenty Five LAKHS only) is imposed on Shri Omi Bagadiya, Director, M/s Bagadiya Brothers P. Ltd. (BBPL) under Section 114 of the Customs Act, 1962. :;v) A penalty of Rs.25,00,000/- ( Rupees Twenty Five LAKHS only) is imposed on Shri Vithaldas Gokaldas Udeshi, Managing Director, M/s Jayant Agro Organics Ltd. (JAOL) under Section 114 of the Customs Act, 1962.
- 222. 238 xvi) A penaltyof Rs.25,00,000/- ( Rupees Twenty Five LAKHS only) is imposed on Shri Narottam Somani, Director, M/s Midex Overseas Ltd. (M01.) under Section 114 of the Customs Act, 1962. This order is issued without prejudice to any other action that may be taken against the noticees; and/or any other person(s) concerned with the impugned goods under the Customs Act, 1962, or under any other law for the time being in force in the Republic of India. (P. M. SALEEM) COMMISSIONER OF CUSTOMS, CSI AIRPORT, MUMBAl. To, 1)M/s. Adani Exports Limited Adani House, Shrimali Society, Navrangpura, Ahmedabad. 2) M/s.Hinduja Export Pvt Ltd, 506, Dalamal House, 5th Floor, Nariman Point, Mumbai 400 021. 3) M/s. Aditya Corpex Pvt Ltd, 7G6, Raheja Centre, 214, ree Press Journal Marg Nariman Point, Mumbai - 400 021. 4) M/s.Bagadiya Brothers Pvt Ltd, BagadiyaMansion, Jawahar Nagar, Raipur - 492 001. 5) M,fs.Jayant Agro Organics Ltd Akhandanand, 38, Marol Co-op Ind. Estate, Off.M.V.Road, Sakinaka, Andheri (E), Mumbai -59. 6) Mjs. Midex Overseas Limited, 403/ 404, ApolloTradeCenter, 2-B, RajgarhKothi, GeetaBhawan Square, A.B.Road, Indore- 452 001. 7) Shri Rajesh Adani, Group Managing Director, M/s.Adani Exports Limited, Adani House, Shrimali Society, Navrangpura, Ahmedabad. 8) Shri Deven Mehta, Director of M/s.Hinduja Exports Pvt Ltd, 506, Dalamal House, 5th Floor, Nariman Point, Mumbai 400 021. 9) Shri Samir Vora, Director, M/s. Hinduja Exports Pvt Ltd, Adani House, Shrimali Society, Navrangpura, Ahmedabad. 10) Shri Saurin Shah, Director, M/s. Aditya Corpex Pvt Ltd, Adani House, Shrimali Society, Navrangpura, Ahmedabad. a
- 223. 239 • 11) Shri OmiBagadiya, Director of M/s. Bagadiya Brothers Pvt Ltd Bagadiya Mansion, Jawahar Nagar, Raipur - 492 001. 1'2) Shri Vithaldas Gokaldas Udeshi, Director of M/s. Jayant Agro-Organics Limited, Akhandanand, 38, Marol Co-op Ind. Estate, Off.M.V.Road, Sakinaka, Andheri (E), Mumbai -59. 13) Shn Narottam Somani, Director of M/s. Midex Overseas Limited 403/404, Apollo Trade Center, 2-B, Rajgarh Kothi, Gaeta Bhawan Square, A. B. Road, Indore- 452 001. 14) Shri Vikram Nankani, M/s Economic Laws Practice ( Advocates & Solicitors ), 109. A Wing, Dalamal Towers, Nariman Point, Murnbai - 400 021. Copy to:- 1. Chief Commissioner of Customs, Zone-III, CSI Airport, Mumbai. 2. P. A. to Commissioner of Customs (AP). ADG, DRI, Ahmedabad. 4. Joint Director, DGFT, Mumbai 5. Index cell. 6. Tax Recovery Cell : With a direction to take recovery measures if dues are not paid within a month in accordance with Board's latest instructions. 7. Prosecution Cell. DC/TCU. 0, AC / PCCCC 10. Master Copy. 11. Office Copy.