THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1),, AHMEDABAD vs. SHRI SANJAY KISHANLAL BISHNOI,, AHMEDABAD

These two appeals, filed by Revenue, have arisen from the common appellate order passed by the learned Commissioner of Income-Tax(Appeal), Ahmedabad dated 13.08.2021 for the assessment years 2014-15 and 2015- 16(common appellate order is for assessment year(s) 2011-12 to 2015-16), which appeals are in turn has arisen from the separate assessment order(s) dated 29.12.2016 for assessment year 2014-15 passed by learned Assessing Officer u/s 143(3) of the Income-tax Act, 1961 and the assessment order dated 30.12.2017 passed by learned AO for assessment year 2015-16 u/s 143(3) of the 1961 Act . & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi 2. The Revenue has raised following grounds of appeals in Memo of Appeal filed with Income Tax Appellate Tribunal, Ahmedabad, for assessment year 2014-15 :-

First, we shall take up appeal of the Revenue for Assessment year 2014-15. The brief facts of the case are that the assessee filed return of income on 31.10.2014 declaring total income of Rs. 40,40,202/-. Case was selected for framing scrutiny assessment, and notice under sections 143(2) and 142(1) were issued by the AO to the assessee. The assessee filed various details before the AO during the course of assessment proceedings. The background of the case is that in this case information was received from DDIT(Inv.) vide its letter no. DDIT(Inv.)- 1(1)/Ahd/BTC/DRI/2016-17 dated 30.08.2016,wherein it was informed that the Directorate of Revenue Intelligence(DRI) had carried out a search action in this case. It was found by DRI that the assessee had imported watermelon seeds from Sudan and Pakistan. During the search proceedings , it was revealed that the assessee had undervalued the imports of watermelon seeds and evaded custom duties. The AO called for the necessary information and other details/documents from the office of DRI Zonal Unit, Ahmedabad. The AO on detailed examination and analysis of documents and other details furnished by DRI, observed that it revealed that the assessee was indeed involved in the under valuation of imports of watermelon seeds. The assessee had remitted the purchase price as declared before the custom authority, through banking channel, but however, the excess purchase price over & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi and above the value declared before the custom authorities for payment of custom duty was paid to overseas suppliers through adjustments or through their local agents which were unaccounted and from undisclosed and unexplained sources. The AO observed that the DRI has carried out deep investigation and analysis of documents, email conversations and also after recording the statements of the assessee , had also issued show cause notice to the assessee. The AO reproduced the observations and finding given by DRI in its assessment order at page no. 3, which is reproduced as under:-

Following the above intelligence, a letter F. No. DRI/AZU/G1-I/INT-19/2014, dated 11.08.2014, was issued by the Additional Director General, Directorate of Revenue Intelligence, Ahmedabad, to the Commissioner of Customs (Imports), JNCH, Nhava Sheva, inter alia, requesting not to allow any clearance and to keep on hold all the containers lying/received of water melon seeds consignments at the port in the name of M/s. Bishnoi Trading Corporation, Ahmedabad. SEARCHES OF PREMISES OF M/S. BISHNOI TRADING CORPORATIO: 3. Acting upon the above intelligence, a search was conducted at the office premises of M/s. Bishnoi Trading Corporation, 46, 2nd Floor, 4D square Mall, Motera, Ahmedabad, Gujarat, in presence of independent panchas under Panchnama dated 12.08.2014 (RUD No.

Meanwhile, a letter F. No. DRI/AZU/GI-02/INT-19/2014, dated20.08.2014 (RUD No. 34) was issued by DRI, Ahmedabad Zonal Unit to the Customs, Nhava Sheva to provide the details of the consignments put on hold in respect of importers of watermelon seeds. Accordingly, a letter F. No. SG/Misc-113/2014-15/SIIB (I) JNCH, dated 28.08.2014 (RUD No. 35) was issued by the Depuyt Commissioner of Customs, SUB (1), JNCH, Nhava Sheva, to the Directorate of Revenue Intelligence (DRI), Ahmedabad Zonal Unit, Ahmedabad, informing that the clearance of a consignment of watermelon seeds (11x20' containers) imported by M/s. Bishnoi Trading Corporation vide Bill of Entry No. 6328451, dated 04.08.2014, was kept on hold following the instruction of DRI, Ahmedabad. ARREST OF SHRI OMPRAKASH KISHANLAL BISHNOI.

From the statements and documentary evidences available on record, it appeared that there were reasons to believe that Shri Omprakash Bishnoi, Authorised Person of M/s. Bishnoi Trading Corporation, Ahmedabad, had committed an offence punishable under Section 135 of the Customs Act, 1962, in as much as, he had knowingly indulged in the act of importing watermelon seeds from Sudan & Pakistan by resorting to undervaluation. It appeared that he had in this way imported around 4400 MTs of watermelon seeds by declaring the value as USD 300/350 Per MT before the Customs at the time of Import, whereas the actual price of which was in the range of USD 800 to 925 per MT. By the act of omission and commission on his part, he had indulged in the smuggling of imported goods which he knew or had reasons to believe that the said goods were liable to confiscation under Section III(m) of the Customs Act, 1962 and the goods so imported were to be treated as 'smuggled goods' as defined under Section 2(39) of the Customs Act, 1962. Therefore, Shri Omprakash Kishanlal Bishnoi was arrested on 01.10.2014 vide Arrest Memo dated 01.10.2014 (RUD No. 36)under the provisions of Section 104 of the Customs Act, 1962 and was produced in the Court of Hon'ble ACMM, Ahmedabad, on 9 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi 02.10.2014 and was sent to Judicial Custody. Hon'ble ACMM, Ahmedabad and Hon'ble Sessions Court, Ahmedabad rejected Bail applications filed by Shri Omprakash K. Bishnoi. Thereafter, Shri Omprakash K. Bishnoi filed a Bail Application before Hon'ble High Court of Gujarat which was pleased to grant regular bail to Shri Omprakash K. Bishnoi vide its Order dated (RUD No. 37)on execution of a personal bond of Rs. 1,00,000/- (Rupees One Lac only) with two local sureties of Rs. 50,000/- each and subject to the condition that the applicant shall deposit an amount of Rs. 35,00,000/- on or before 23.11.2014 and other Rs. 25,00,000/- on or before 22.12.2014 and fulfillment of other conditions (a) to (h) as mentioned in the order. SEIZURE OF CONSIGNMENT IMPORTED VIDE BILL OF ENTRY NO. 6328451. DATED 04.08.2014 AND ITS PROVISIONAL RELEASE. 7.1 During the course of statement dated 01.10.2014, Shri Omprakash K. Bishnoi, Authorised Person of M/s. Bishnoi trading Corporation, admitted that a consignment of watermelon seeds (total 11 containers) imported by M/s. Bishnoi Trading Corporation, Ahmedabad, was awaiting Customs clearance for which they had presented a Bill of Entry No. 6328451, dated 04.08.2014 before Customs, Nhava Sheva wherein they had declared the value before Customs as AED 1105.50 (equivalent to approx USD 300) whereas the actual transaction value of goods imported was 950 USD per MT. Thus, it appeared that the goods imported by M/s. Bishnoi Trading Corporation, Ahmedabad vide Bill of Entry No. 6328451, dated 04.08.2014, were in contravention to the provisions of Customs Act, 1962 and the said goods were liable for confiscation under provisions of Customs Act, 1962. Accordingly, a letter F. No. DRI/AZU/GI-02/ENQ-54(INT-19/14)/2014, dated 08.10.2014, (RUD No. 38) was issued to the Addl. Commissioner of Customs (Import), JNCH, Nhava Sheva, requesting to seize the consignment of watermelon seeds imported by M/s. Bishnoi Trading Corporation vide Bill of Entry No. 6328451, dated 04.08.2014. 7.1 Accordingly, the said consignment was put under seizure under Seizure Memo No. 15/2014, dated 13.10.2014, issued under F. No. SG/MISC-113/2014-15/SIIB (1) JNCH by the superintendent of Customs, SUB (I), JNCH, Sheva (RUD No. 39) Examination of the said goods were carried out under Panchnama on 13.10.2014 drawn at CWC Logistics Park - Hind, Terminal, Dronagiri Nod, Nhava Sheva, Raigad (RUD No. 40). 7.2 M/s. Bishnoi Trading Corporation, Ahmedabad, vide their letter dated 03.11.2014 (RUD No. 41) requested the Commissioner of Customs (Import), JNCH, Nhava Sheva, Raigad, for provisional release of the above said seized goods and a copy of the said letter was also endorsed to DRI, Ahmedabad. 7.3 A letter F. No. DRI/AZU/GI-02/ENQ-54(INT-19/14)/2014, dated 14.11.2014 (RUD No. 42) was issued by the Additional Director, DRI, Ahmedabad Zonal Unit to the Addl. Commissioner of Customs (Import), JNCH, Nhava Sheva, Raigad, inter alia, conveying that differential duty calculated on the seized consignment of 198 MT watermelon seeds imported by M/s. Bishnoi Trading Corporation, Ahmedabad, arrived at Rs. 28,57,969/- and provisional release of the said seized goods may be 10 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi considered subject to the conditions as the Addl. Commissioner of Customs (Import), JNCH, Nhava Sheva may deem fit including Furnishing of adequate Bank Guarantee/Security before the proper officer of Customs to safeguard revenue (including possible fine & penalty) as per Board's Circular 22/2004 - Cus., dated 03.03.2004 and also subject to clearance from other allied agencies like P.H.O. etc. 7.4 As per (icegate.gov.in) printout, the said Bill of Entry i.e. 6328451, dated 04.08.2014, has been assessed provisionally by the Customs, Nhava Sheva, on execution of Bond for Rs 1,16,61,596/- and Bank Guarantee of Rs 5,71,418/- (RUD No. 43). Accordingly, the said consignment is not covered in the instant Show Cause Notice and the same would be dealt with by the Customs Nhava Sheva separately.

Statement of Shri Sanjay Kishanlal Bishnoi, Proprietor of M/s.Bishnoi Trading Corporation, Ahmedabad - 380005 was recorded under Section 108 of the Customs Act, 1962 on 16.12.2014 (RUD No. 44) wherein he, inter alia, stated that he was the proprietor of M/s. Bishnoi Trading Corporation, 46, 2nd Floor, 4D Square Mall, Motera, Ahmedabad-380005. According to mutual understanding between him and his brothers, his eldest brother Shri Omprakash was looking after the activities related to import and export, Shri Mohan was looking after the activities of local trading and he was looking after the activity of unloading of goods i.e. wheat, millets etc. (at Gandhidham) that were sold by them to local persons for export purpose. 8.1M/s. Bishnoi Trading Corporation was owning a mortgaged office premises at 18, Satyamev Arcade, Chandkheda which was around 280 sq. feet carpet area; Besides that, the office premises of M/s. Bishnoi Trading Corporation at 46, 2nd Floor, 4D Square Mall, Motera, Ahmedabad, Gujarat - 380005 and a plot of land admeasuring around 1000 sq. yard in a scheme 'Swa Plots' Near Tapovan Circle, Motera- Gandhinagar Highway were jointly owned by them (three brothers); that those were also mortgaged properties. 8.2 Shri Mohan Bishnoi was authorized by M/s. Bishnoi Trading Corporation for the purpose of banking transactions whereas Shri Omprakash Bishnoi was authorized by M/s. Bishnoi Trading Corporation for effecting import- export related transactions; that they had authorized M/s. Palak Logistics, Mumbai for their activities at Nhava Sheva and M/s. Trinity Shipping, Gandhidham for their activities at Gandhidham; that the said authorizations were given by Shri Omprakash Bishnoi being authorized signatory of M/s. Bishnoi Trading Corporation; 8.3 His eldest brother Shri Omprakash Bishnoi was looking after all the activities like contacting, communicating, negotiating etc. with their overseas suppliers of watermelon seeds through their e-mail id. btcfeeds@yahoo.m and he was looking after the activities related to imports of watermelon seeds and its subsequent trading in local market, therefore, he was not in position to state in that matter; that after carefully going through the statements of Shri Omprakash Bishnoi dated 12.08.2014 and 01.10.2014, he believed that whatever was stated by Shri Omprakash Bishnoi would be true and correct and he agreed with the facts stated by Shri Omprakash Bishnoi in his statements dated 12.08.2014 and 01.10.2014 recorded before DRI, Ahmedabad; that since Shri Omprakash Bishnoi & Shri Mohan 11 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi Bishnoi were authorised by him and have carried out activities on behalf of M/s. Bishnoi Trading Corp, he was full responsible for the liability arising out of the activities /acts done by both of his brothers; that he was willing to pay the duty evaded on account of the acts done by his brothers Shri Omprakash and Shri Mohan. MODUS OPERANDI ADOPTED FOR EVASION OF CUSTOMS DUTY. 9.1 In view of the evidences and facts discussed in the foregoing paras, it appears that Shri Omprakash Bishnoi, Authorised Signatory of M/s. Bishnoi Trading Corporation, Ahmedabad - a trader of watermelon seeds - started a firm in the name of M/s Bishnoi Trading Corporation, wherein his younger brother Shri Sanjay Bishnoi was made the proprietor. Shri Omprakash, thereafter, hatched a plan to import of watermelon seeds by resorting to undervaluation and declaring less value before the Customs, with an intention to evade payment of Customs duty. Shri Omprakash was interacting with the overseas suppliers with regard to negotiation of price and other import related activities, and the unit price and other terms & conditions of imports were finalised by Shri Omprakash only. After negotiation with the overseas suppliers regarding the actual price of the watermelon seeds, it was decided between them that a separate invoice would be made showing the transaction value as USD 300/350 approx, for the purpose of seeking clearance from Custom, which amount would be sent to the overseas supplier through banking channels, whereas the amount over and above the declared price would be sent through other channels like payment from Dubai or directly at Sudan or to the representative of the overseas supplier in India or through a person called Shri Paresh. Shri Omprakash then used to obtain the fabricated documents from the overseas supplier showing less value for the watermelon seeds and cause presentation of the same to Customs at the port of Import for Custom clearance. As per the understanding between the importer and the overseas suppliers, the overseas suppliers used to issue a proforma invoice/execute a sales contract of full negotiated value and apart from the other conditions, the proforma invoices/ sales contracts also contained conditions related to payment and amount to be shown in commercial invoices, which they raised on the importer once they had received the payment over and above such determined value of commercial invoices. 9.2 As per the modus adopted, payments against CAD were the only payments made by them through bank. The advance payments and payments of the remaining/balance amount was always remitted by the importer to the respective overseas suppliers in Dubai / Sudan, by way of channels other than normal banking channels or through Shri Paresh Seth (alias Paresh Kothari). 9.3 In the manner discussed herein above, Shri Omprakash Bishnoi, Authorised Signatory of M/s Bishnoi Trading Corporation, hatched a plan for evasion of the lawful revenue due to the Government Exchequer by way of importing watermelon seed from Pakistan and Sudan and clearing them through JNCH, Nhavasheva at grossly undervalued prices. DISCUSSION OF THE EVIDENCES OF THE CASE. & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi 10.1 From the facts narrated in the foregoing paras and the material evidences available on record in the form of email correspondences, proforma invoices & sale contracts executed between Shri Omprakash Bishnoi, Authorised Signatory of M/s BTC and the overseas supplier depicting negotiated actual transaction value along with payment terms; correspondence between them regarding release of payments over and above the value declared before the Customs and the confessional statement of Shri Omprakash Bishnoi and Shri Sanjay Bishnoi, it appears that Shri Omprakash Bishnoi of M/s BTC, Ahmedabad had resorted to gross under valuation in the imports of Watermelon Seeds in connivance with the overseas suppliers with intent to evade payment of Customs duty in contravention of the Customs law. The gross undervaluation and mis-declaration of value, is evidenced from the following evidences on record: 10.2.1 Statements of Shri Omprakash Bishnoi dated 12.8.2014 & 1.10.2014, along with documents explained therein, wherein he admitted that he had imported watermelon seeds by resorting to undervaluation and also revealed and admitted the actual transaction value of each consignment of watermelon seeds imported by him in the name of M/s Bishnoi Trading Corporation, Ahmedabad. He also admitted to have paid the differential value, over and above the value declared before the Customs at the time of import, to the overseas supplier through Shri Paresh or by way of channels other than banking channels. Statement of Shri Sanjay Bishnoi dated 16.12.2014, wherein he had admitted that Shri Omprakash was the person who was dealing with the said goods right from negotiation with the overseas supplier till the payment of the differential amount and the import of watermelon seeds in India and also stated that the statement of Shri Omprakash with regard to the import of watermelon seeds would be correct in respect of the imports made in the name of his firm l.e. M/s. Bishnoi Trading Corporation. He also admitted that the said firm was opened by his brother Shri Omprakash in his name. 10.2.2 One of the e-mail correspondences between e-mail ID: alphaagriproduct@hotmail.com (Mr. Yassir of M/s. Alpha Agricultural Processing) with M/s BTC at their e-mail id: btcfeeds@yahoo.in on 18.04.2014, wherein the price for the 'watermelon seeds' was negotiated and final deal was confirmed at USD 840/PMT for 180 MT (10X20 FCL) FRUD No. 141: another email dated 9.1.2014 with the same supplier, wherein they had finalized the deal at USD 950/PMT for (5X20 FCL) on 09.01.2014; another email correspondence dated 14.2.2014 with M/s. Alpha Agricultural Processing, wherein they had finalized the deal at USD 925/PMT for 88 MT (5X20 FCL) on 14.02.2014 and the same consignment was imported vide Bill of Entry No. 4885733 dated 12.03.2014 at JNPT on undervalued rate at USD 300 PMT and the remaining amount USD 55000 (@USD 625 PMT X 88 MT) was paid through channels other than normal banking channel; another email correspondence dated 25.6.2014 with the same supplier, wherein Shri Omprakash had confirmed the transfer of their payment of 10X20 FCL i.e. Total payment of USD 890-300 = 590X180= USD 106200 on 25.06.2014 through channels other than normal banking channel (RUD No. 5). 10.2.3 One of the email correspondences between e-mail ID: info@3frk.orp- sd.com (Mr. Mohmmed Huron of M/s. Africorp - International Co., Ltd.) and M/s BTC at their 13 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi e-mail Id: btcfeeds@yahoo.in on 06.11.2012, wherein the price for the watermelon seeds was negotiated and final deal was confirmed at USD 875/PMT for 18 MT and the same consignment was imported vide Bill of Entry No. 8469665 dated 12.11.2012 at JNPT on undervalued rate at USD 350 PMT (RUD No. 8). 10.2.4 An e-mail correspondence between e-mail ID: amanpsheth@gmail.com (Mr. Paresh Seth of M/s. Aagam Import and Export) and M/s. BTC at their e-mail Id: btcfeeds@yahoo.in on 07.05.2014, wherein the price for the 'watermelon seeds' was negotiated and final deal was confirmed at USD 910/PMT for 108 MT (6X20), (RUD No. 13). 10.2.5 One of the Proforma Invoice No. ATR/PI/22/2014, dated 04.02.2014, of M/s Alpha Agriculture Processing Co, Sudan, for 180 MTS of Watermelon seeds which were negotiated with them @ USD 850 Per MT C&F, Nhava Sheva (RUD No 6). The Commercial Invoice prepared by them was @ 300 USD per MT and a quantity of 176 MTS of watermelon seeds was imported by them, vide bill of Entry No. 4972295 dated 21.3.2014 against the said Proforma invoice by declaring the value as USD 300 per MT before the Customs, whereas the actual negotiated value was USD 850 per MT. 10.2.6 An email conversation with Shri Naresh Dadia, who was a broker and dealt with the agricultural Products (RUD No. 11). In the said conversation Shri Omprakash had requested for the price of the watermelon seeds and also negotiated the price of the watermelon seeds for 20 container (108 MTS) @910 USD per MT during July, 2012 and Shri Naresh Daida had confirmed the deal with payment condition as "Invoice payment 350/MT will be paid by bank (CAD) and other payment will be paid against copy of B/L and phytosanitary certificate..........” Also clarification was asked for making one invoice of the actual value and another with price of USD 350 per MT. The price of the watermelon seeds was finalized at the actual rates however a separate invoice was prepared showing the value of USD 300-350/MT for presenting the same before Customs and the differential amount was sent to the overseas supplier either through Shri Paresh of Sudan or by any other non-banking channels. 10.2.7 An email conversation of Shri Omprakash Bishnoi of M/s Bishnoi Trading Corporation with Shri Paresh, a broker of watermelon seeds (RUD No. 13): Through the said conversation they had confirmed the price for import of 108 MTS of watermelon seeds through Shri Paresh @ USD 910/MT CNF Nhava Sheva during May, 2014. Shri Omprakash in his statement dated 1.10.2014 has categorically admitted that the said price was the price of the watermelon seeds prevalent at the material time. 10.2.8 One of the email conversation with Shri Vinesh H Mehta (RUD No. 15) wherein Shri Omprakash had informed Shri Vinesh that they had just talked to Shri Divyesh Harilal Mehta (i.e. brother of Shri Vinesh Harilal Mehta) and he had confirmed the deal of watermelon seeds for home consumption for qty 3 x 20' fcl 54MT with price of 885 /MT CNF Nhava Sheva. It was also informed to Shri Vinesh that USD 310 / MT would be made by CAD (Cash against Document) through any reliable bank and the 14 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi payment of USD 575/MT X 54 MT = USD 31050 would be made in Dubai and had requested Shri Vinesh to send the Pl. Shri Vinesh Mehta vide his email conversation had also informed them that they can supply watermelon seeds to India and agreed to their targeted price of USD 885 per MT CNF Nhava Sheva. Shri Omprakash in his statement has confirmed that they had imported 54 MTS of water melon seeds from Divyesh Harilal Mehta @ USD 885 per MT and that the said price was the price of the watermelon seeds prevalent at the material time. He also accepted that the said consignment was imported by them vide Bill of Entry No. 3952175, dated 01.07.2011, through Nhava Sheva 10.2.9 An email conversations with a company called M/s. Lafia Co, Sudan (RUD No. 18), who had offered to sell watermelon seeds to them. In the said conversation, Shri Omprakash had narrated the practice that they were following with various buyers like M/s. Alborakawi International, M/s Alpha Agriculture Processing, M/s Aagam Export Import, M/s Africorp International, wherein the invoice would be made by USD 300/MT CNF and payment of which would be made as transfer against original document by bank to bank and the other payment i.e. USD 700/MT CNF would be transfer to the overseas supplier against receipt of original shipping documents, Shri Omprakash in his statement also confirmed that once they received the original shipping documents their person would give them the payment either in Sudan or in Dubai in USD or Dirham or in Sudanese pound or any other arrangement as per their convenience. Shri Omprakash also admitted that this was the practice that they had followed in respect of the consignments of watermelon imported by them in the name of M/s Bishnoi Trading Corporation. 10.2.10 One of the email conversations with Shri Mohamad Badwai Ibrahim Osman of Emeco Group, (RUD No. 20) wherein M/s. BTC had negotiated and finalized the purchase of watermelon seeds @ USD 865/MT and initially they had ordered for 2 containers and thereafter the purchase/import from them continued in the name of their firm M/s. Osman Ahmed Musaad Enterprise. Shri Omprakash in his statement dated 1.10.2014 accepted that the deal was done in March, 2011 and that it was the actual price of watermelon seeds prevailing at the material time. 10.2.11 One of the contracts made by M/s BTC with M/s Alpha Agriculture Processing, Sudan for import of 180 MTS of watermelon seeds at USD 890 Per MT in May, 2014 (RUD No. 22). Shri Omprakash accepted that the said 180 MTS of watermelon seeds were imported by them from M/s Alpha Agriculture Processing vide Bill of Entry No. 6056750, dated 08.07.2014 and that USD 890 was the actual transaction value of the 180 MTS of watermelon seeds imported by them vide Bill of Entry No. 6056750 dated 08.07.2014. He also admitted that the said price was the price of the watermelon seeds prevalent at the material time. 10.2.12 A purchase contract made by M/s. BTC with M/s. Lafia Investment Co Ltd, Sudan (a broker of watermelon seeds), for import of 126 MTS of watermelon seeds at USD 1000 Per MT CNF Nhava Sheva in July, 2014 (RUD No. 23). In the said contract the terms of payment is clearly mentioned "against copy of B/L" & "CAD". The CAD amount is the amount that was declared before the Customs and the amount mentioned against copy of B/L is the amount over and above the declared price that 15 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi had to be paid to the supplier on receipt of copy of B/L. Shri Omprakash in his statement has admitted that he had negotiated and finalized a deal for import of 126 MTS of watermelon seeds at USD 1000 and that the said price was the price of the watermelon seeds prevalent at the material time. 10.2.13 An Email conversation with Shri El Sayed of M/s Albarakawi of Sudan (RUD No. 29).wherein they had finalized a price of USD 870 CNF Nhava Sheva, for 3 containers of watermelon seeds in June, 2011 and Shri Omprakash had requested Shri El Sayed of M/s Albarakawi to provide him with the proforma Invoice and the Contract letter. Shri Omprakash has accepted that the said price was the price of the watermelon seeds prevalent at the material time. 10.2.14 An email conversation with Shri Niraj Mehta of M/s Aknan International, Sudan (RUD No. 31), wherein Shri Omprakash had provided them with the calculation wherein he had exported guar gum to them and he had to receive the payment against the same; that he wanted to adjust the said payment against the differential payment that he had to make in respect of import of watermelon seeds i.e. he had to pay USD 45450 as the differential amount @ USD 505 which was over and above the declared price, whereas he was to receive payment of Rs 10,84,800/- from them. The balance was to be sent to them for which their agent had provided him with an exchange rate of USD=56.70 INR. This evidences that the differential value in respect of watermelon seeds imported by them was sent to the overseas supplier either by way of cash in Sudan or adjusted against export payment or sent to them from Dubai. 10.2.15 The admission by Shri Omprakash in his statement that the said imported watermelon seeds were sold in the local market at around Rs 60 to Rs 72 per kg, whereas the sale invoice was prepared in the range of Rs 25/- to Rs 32/- also corroborates that the said goods were undervalued at the time of import.

From the facts discussed in the foregoing paras and material evidences available on record, it transpires that M/s. BTC had imported watermelon seeds from various overseas suppliers, and had resorted to undervaluation, by suppressing the actual transaction value in the invoices and the documents filed before the Customs Authority at the time of Imports, with an intent to evade payment of appropriate customs duty leviable thereon. The price declared by the importer before the Customs Authority for clearance of the said imported consignments of watermelon seeds was only part amount paid by M/s. BTC to various overseas suppliers for the imported consignments of watermelon seeds and it is evident from the records that there were excess payments to the overseas suppliers against the import of impugned watermelon seeds, which was not declared before the customs though the same was part of the transaction value. Thus, the value declared by the importer before the Customs authorities as mentioned in the invoices and in the import documents cannot be treated as correct transaction value in terms of the provisions of Section 14 of the Customs Act 1962 read with Rule 3 of the Customs Valuation (Determination of value of the imported goods) Rules, 2007. In terms of the provisions of the Section 14 read with Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the transaction value of the 16 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi imported goods is the total amount actually paid or payable for the said imported goods. Thus, in cases where total amount paid or payable can be ascertained, the correct transaction value shall be a sum total of all such amounts and the same will be determined under Rule 3(1) ibid. In terms of the provisions of Rule 11 of the Customs Valuation (Determination of value of the imported goods) Rules 2007, the importer is required to furnish a declaration disclosing full & accurate details relating to the value of the imported goods along with other documents & information including the invoice in respect of the actual transaction price. However, in the instant case, the importer had furnished wrong declarations, statement & documents to the Customs while filing of Bills of Entry thereby suppressing the actual transaction value with an intention to evade Customs duty leviable thereon, by adopting the modus as detailed hereinabove. The fact of undervaluation has been categorically admitted by Shri Omprakash Bishnoi, Authorised Signatory of M/s. Bishnoi Trading Corporation, Ahmedabad in his statements recorded under Section 108 of the Customs Act, 1962 which is duly corroborated with the documentary evidences discussed herein above and also confirmed in the statement of Shri Sanjay Bishnoi, Prop, of M/s. BTC. Thus, there is a reasonable doubt regarding the truth & accuracy of the values declared by the importer and the actual transaction value of such imported goods can be gathered from the evidences discussed herein above. Thus, the declared value in respect of the said imported consignments of watermelon seeds merits rejection under Section 14 of the Customs Act, 1962 read with Rule 12 of the Customs valuation (Determination of value of the imported goods) Rules 2007. In the instant case, evidences available, as discussed hereinabove, indicate that the invoices produced by the importer before the Customs Authority at the time of clearance of the imported goods, did not indicate the true and correct transaction value of the said goods and there are various evidences, as discussed herein above, indicating the true, correct and actual transaction value of all the consignments imported from various overseas suppliers by the importer, and cleared under the various Bills of Entry filed by the importer (RUD No. 45)as mentioned in Annexure 'A' to this SCN, 12. It appears that the invoices raised by overseas suppliers on M/s. Bishnoi Trading Corporation, Ahmedabad, which were submitted before Indian Customs in respect of the goods imported by them, did not indicate the true and correct value of the said goods in as much as the same were much lower than the actual transaction value as detailed above. The evidences regarding undervaluation of said imported goods recovered during the course of investigation and the actual transaction prices admitted by Shri Omprakash Bishnoi in his statements dated 12.8.2014 & 01.10.2014, further appear to corroborate the undervaluation in the said imports. The same is also corroborated by the fact of remitting of the differential amount over and above the declared price to the overseas suppliers through channels other than banking channels as discussed hereinabove which was not included in the value declared before the Customs. In respect of the said consignments which were admittedly undervalued, the declared value by the importer before the designated authority of Customs cannot be treated as true transaction value as per Section 14 of the Customs Act, 1962 read with Rule 3(1) of the Customs Valuation Rules 2007. Since the price paid or payable is available in the instant case on the basis of actual 17 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi proforma invoice or email correspondence or as stated by Shri Omprakash in his statement and the chart prepared by him as discussed herein above, recourse is taken to the provisions of Section 14(1) of the Customs Act, 1962 read with Rule 3(1) of the Customs Valuation Rules, 2007 as applicable for re-determining the value of the said consignments cleared vide Bills of Entry filed by the importer as mentioned in Annexure -'A' to this SCN.

From the above, it appears that the importer in connivance with the overseas supplier had willfully mis-declared the value of the watermelon seeds before the Customs authority at the time of import with a view to evading the applicable customs duty. The correct and actual transaction value of the watermelon seeds imported by them was also suppressed at the time of filing of Bill of Entry by presenting an invoice of a much lower value than the actual value of the imported watermelon seed. Thus, it appears that the applicable customs duty liability had not been discharged by the importer by way of wilful misstatement and suppression of facts and therefore, the differential customs duty is liable to be recovered by invoking the provisions of the extended period of limitation under Section 28(4) of the Customs Act, 1962 (erstwhile proviso to Section 28(1) of the Customs Act, 1962).

In view of the facts discussed in foregoing paras and material evidence available on record, it transpires that the importer had declared the total assessable value of imported watermelon seeds/assessed by the customs authority as Rs. 8,27,07,841/- only (as detailed in Annexure-'A' to this notice) at the time of seeking of clearance of the goods in the corresponding Bills of Entry, as against the actual transaction value (assessable value) of Rs. 21,30,68,444/- and suppressed the value amounting to Rs. 13,03,60,603/- from the Customs, resulting in evasion of Customs duty amounting to Rs. 4,71,06,107/-, as detailed in Annexure- 'A' to this notice. Therefore, the above declared/assessed value is required to be redetermined as mentioned in Annexure- 'A' to this SCN, under Section 14 of the Customs Act, 1962 on the basis of price paid or payable in accordance with Rule 3(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

In view of the facts discussed in the foregoing paras and material evidences available on record and the deposition of Shri Omprakash Bishnoi, Authorised Signatory Of M/s. Bishnoi Trading Corporation, Ahmedabad & Sanjay Bishnoi, Proprietor of M/s Bishnoi Trading Corporation, Ahmedabad, it appears that the importer has contravened the provisions of Section 46(4) of the Customs Act, 1962 in as much as they intentionally mis-declared the value of the Watermelon Seeds imported by them by suppressing the true and actual transaction value while filing the declaration seeking clearance at the time of the importation of the impugned goods. This act on the part of importer had rendered the goods, as detailed in Annexure-'A' to this SCN liable for confiscation under the provisions of Section III(m) of the Customs Act, 1962.

It also appears that M/s. Bishnoi Trading Corporation had deliberately mis- declared the value of goods by willful mis-statement and suppression of the facts in contravention of various provisions of the Customs Act, 1962 and Rules made there under as discussed above with intent to evade payment of Customs duty. Therefore, 18 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi the differential Customs duty amounting to Rs. 4,71,06,107/- as shown in Annexure- 'A' to this notice, lawfully payable on the watermelon seeds imported by them is liable to be recovered from the importer M/s Bishnoi Trading Corporation, Ahmedabad (Gujarat) under Section 28(4) of the Customs Act, 1962 (erstwhile proviso to Section 28(1) of the Customs Act 1962) along with applicable interest under Section 28AA of the Customs Act, 1962 (erstwhile Section 28 AB of the Customs Act 1962). The said acts of omission and commission on the part of the M/s. Bishnoi Trading Corporation have rendered themselves liable for penalty under the provisions of Section 114A/112(a) & 114AA of the Customs Act, 1962. The said goods, as detailed in Annexure-'A' to this SCN and which is not physically available for seizure is required to be held liable for confiscation under the provisions of Section III(m) of the Customs Act, 1962.

In view of the discussion in foregoing paras, it further appears that Shri Omprakash Bishnoi, Authorised Signatory of M/s. Bishnoi Trading Corporation had actively involved himself in the conspiracy of mis-declaring the value of the watermelon seeds imported by them in the name of M/s. Bishnoi Trading Corporation, Ahmedabad with the aid of Shri Sanjay Bishnoi, Proprietor of M/s. Bishnoi Trading Corporation and the overseas suppliers. Shri Omprakash was instrumental in opening a firm in the name of his brother and engaged in importing the goods that he had reason to believe were liable to confiscation. Shri Omprakash was also instrumental in manipulation/fabrication of information, documents presented before the Customs authorities with an intent to evade payment of Customs duty lawfully leviable on the actual transaction value. Shri Omprakash in connivance with other co-noticees and the overseas supplier imported watermelon seeds at grossly undervalued price knowingly & deliberately as detailed in preceding paras for his personal enrichment. He was also responsible for transmitting the differential value of the impugned imported goods, over and above the declared value, directly to the suppliers either at Dubai/Sudan or to the representative of the overseas supplier in India, and in this way he had settled the clandestine/illicit account of the importer with overseas suppliers. This fact has been corroborated by the evidences as detailed in preceding paras. He had full knowledge about the mis- declaration of the value of the goods at the time of their importation and had knowingly and consciously failed to declare the correct and actual value before the Customs authorities at the time of import with the sole intention to evade payment of customs duty. Shri Omprakash had indulged in the activities relating to undervaluation and mis-declaration in the imports of watermelon seeds by M/s. Bishnoi Trading Corporation, Ahmedabad which resulted in evasion of huge amount of Customs duty. Further, during the course of investigation, it was revealed that Shri Omprakash was the main beneficiary of the profit earned in the sales of said imported watermelon seeds. All the aforesaid acts of omission and commission on the part of Shri Omprakash and Shri Sanjay have rendered the impugned imported goods liable for confiscation under Section III(m) of the Customs Act, 1962. Further, Shri Omprakash had consciously dealt with the said goods which he knew or had reasons to believe, were liable to confiscation under the Customs Act, 1962. Thus, Shri Omprakash Bishnoi and Shri Sanjay Bishnoi have rendered themselves liable for penalty under Section 112(b) & 112(a) of the Customs Act, 1962 respectively. Shri 19 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi Omprakash and Shri Sanjay have knowingly and intentionally made, signed and fabricated documents as discussed in detail hereinabove, which were presented to the Customs authorities which they knew were false and incorrect in respect of the value of the imported goods. Hence, the said acts on the part of Shri Omprakash and Shri Sanjay have rendered them liable for penalty under Section 114AA of the Customs Act, 1962 also. However, since M/s. Bishnoi Trading Corporation is a Proprietorship concern, no separate penalty is proposed on Shri Sanjay Bishnoi. PAYMENT OF DUTY/DIFFERENTIAL DUTY: 18. As per the directions of the Hon'ble High Court of Gujarat vide its Order dated 18.11.2014, M/s Bishnoi Trading Corporation has made a payment of Rs. 35,00,000/- vide challan No. 3292, dated 24.11.2014 and another payment of Rs 25,00,000/- vide challan No. 2982, dated 19.12.2014 towards the differential duty on account of the undervaluation in the import of watermelon seeds. (RUD No. 46).

Now, therefore, M/s. Bishnoi Trading Corporation (IEC No. 3708002261), 46, 2nd Floor, 4D square Mall, Motera, Ahmedabad, is hereby called upon to show cause to the Principal Commissioner/Commissioner of Customs (Imports), JNCH, Nhavasheva- 1, having his office at Jawaharlal Nehru Custom House, Nhavasheva, Taluka- Uran, District - Raigad, Maharashtra - 400 707-as to why:- i. The assessable value of Rs. 8,27,07,841/- declared by them at the time of clearance of goods in respect of 4403.02 MTs of Watermelon Seeds', imported by them under Bills of Entry mentioned in the Annexure-'A' to this show cause notice should not be rejected and re-determined as Rs. 21,30,68,444/- (Rupees Twenty One Crores Twenty Five Lacs Sixty Five Thousand Sixteen Only), as detailed in Annexure- 'A' to this show cause notice, under subsection (1) of Section 14 of the Customs Act, 1962 read with the Rule 3(1) and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, as applicable. ii. 4403.02 MT watermelon Seeds, with redetermined value of Rs. 21,30,68,444/- as detailed in Annexure-'A' to this show cause notice which have been cleared and not available for seizure should not be held liable for confiscation under the provisions of Section III(m) of the Customs Act, 1962; iii. Differential Customs Duty amounting to Rs. 4,71,06,107/- (Rupees Four Crore Seventy One Lac Six Thousand One Hundred and Seven Only), on 4403.2 MT watermelon Seeds with re-determined value of Rs. 21,30,68,444/-, covered under the Bills of Entry mentioned in Annexure-'A' to this show cause notice, should not be demanded and recovered from them under Section 28(4) of the Customs Act, 1962 [Erstwhile proviso to Section 28(1)] along with applicable interest under Section 28AA (erstwhile Section 28AB) ibid; iv. An amount of Rs. 60,00,000/- (Rupees Sixty Lac only) already paid by them towards the differential duty liability, (as detailed under preceding paras) should not be adjusted against their differential duty liability as mentioned in para (illi) above. & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi v. Penalty should not be imposed on them under Section 114A/112(a) of the Customs Act, 1962 for their acts of commission and omission discussed hereinabove; vi. penalty should not be imposed on them under Section 114AA of the Customs Act, 1962 for their acts of commission and omission discussed hereinabove; The documents relied upon in the present Show Cause Notice are as listed at Annexure-Z' and a Compact Disk (CD) containing scanned copies thereof are attached with this Show Cause Notice."

On examining the details, material, SCN, it is quite evident that you have been involved in the undervaluation of your imports. The modus operandi adopted by you was such that with the understanding with the overseas suppliers a commercial invoice of lesser purchase value was sent by the overseas parties, which was presented 22 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi before the customs authority for custom- clearance. Another proforma Invoice for the full and agreed value of imports was sent by the overseas suppliers which was as per the negotiations with them. It is also noticed that the amount of imports declared before the customs authority would be sent to the suppliers through Banking channels and the amount of money over and above the declared value was sent to the overseas supplier either directly or from Dubai or adjusted against export or handed over to the representatives of the overseas supplier in India. The DRI also had given it's observations and finding in it's SCN dtd 18.02.2015. The relevant portion of the SCN is a reproduced as under for ready reference. "Shri Omprakash Bishnoi when confronted with above evidences admitted that he was the Authorised signatory of M/s. Bishnoi Trading Corporation and that he was negotiating with the overseas supplier for import of watermelon seeds through telephone and also through emails even though he was not the proprietor. He also admitted that the actual transaction values of the Watermelon Seeds imported by him in the name of M/s. Bishnoi Trading Corporation, were as per the proforma invoice/email conversation, sales contract etc. which were retrieved during the course of the search at their office premise. He also revealed that after negotiation for the price of watermelon seeds, the overseas supplier was requested to send a proforma invoice for the full value. A separate commercial invoice for USD 300-350 along with the import documents, would be sent by the overseas supplier at the time of import and the same would be presented to the Customs for assessment. He admitted that the amount which was declared to the customs at the time of Import would be sent to the overseas supplier through banking channels and the value over and above the declared value was sent to the overseas supplier either directly or from Dubai or adjusted against the export of some other product or handed over to the representative of the overseas supplier in India. He also admitted that they have imported watermelon seeds by declaring the value as USD 300-350 PMT, whereas the actual transaction value of the watermelon seeds during the relevant period was ranging between USD 800-900 PMT. In view of the evidences and facts discussed in the foregoing paras, it appears that Shri Omprakash Bishnoi, Authorised Signatory of M/s. Bishnoi Trading Corporation, Ahmedabad -a trader of watermelon seeds started a firm in the name of M/s. Bishnoi Trading Corporation, wherein his younger brother Shri Sanjay Bishnoi was made the proprietor. Shri Omprakash, thereafter, hatched a plan to import of watermelon seeds by resorting to undervaluation and declaring less value before the Customs, with an intention to evade payment of customs duty. Shri Omprakash was interacting with the overseas suppliers with regard to negotiation of price and other import related activities, and the unit price and other terms & conditions of imports were finalised by Shri Omprakash only. After negotiation with the overseas suppliers regarding the actual price of the watermelon seeds, it was decided between them that a separate invoice would be made showing the transaction value as USD 300/350 23 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi approx. for the purpose of seeking clearance from Custom, which amount would be sent to the overseas supplier through banking channels, whereas the amount over and above the declared price would be sent through other channels like payment from Dubai or directly at Sudan or to the representative of the overseas supplier in India or through a person called Shri Paresh. Shri Omprakash then used to obtain the fabricated documents from the overseas supplier showing less value for the watermelon seeds and cause presentation of the same to Customs at the port of Import for Custom clearance. As per the understanding between the importer and the overseas suppliers, the overseas suppliers used to issue a proforma invoice/execute a sales contract of full negotiated value and apart from the other conditions, the proforma invoices/sales contracts also contained conditions related to payment and amount to be shown in commercial invoices, which they raised on the importer once they had received the payment over and above such determined value of commercial invoices. From the facts narrated in the foregoing paras and the material evidences available on record in the form of email correspondences, proforma invoices & sale contracts executed between Shri Omprakash Bishnoi, Authorised Signatory of M/s. BTC and the overseas supplier depicting negotiated actual transaction value along with payment terms; correspondence between them regarding release of payments over and above the value declared before the Customs and the confessional statement of Shri Omprakash Bishnoi and Shri Sanjay Bishnoi, it appears that Shri Omprakash Bishnoi of M/s. BTC, Ahmedabad had resorted to gross under valuation in the imports of Watermelon Seeds in connivance with the overseas suppliers with intent to evade payment of Customs duty in contravention of the Customs law. The gross undervaluation and mis-declaration of value, is evidenced from the following evidences on record:" From the above finding and examination of documents provided by the DRI – it is amply clear that the undervalued amount of imports of watermelon seeds i.e. The amount over and above the declared value, paid by you was unaccounted and from undisclosed sources. Such unaccounted payment is worked out at Rs. 1,49,58,868/- (Pl. refer the chart above). You are requested to show-cause why the amount of Rs. 1,49,58,868/- should not be treated as unaccounted, undisclosed and unexplained investment and added to your total income u/s. 69C of the I.T. ACT. On verification of details furnished by you during the course of assessment proceedings it is noticed that you have shown imports of 712 MT. of watermelon seeds during the F.Y. 2013-14. However during the investigations/search carried out by the DRI in your case it is revealed that you have imported 514.8 MT. of watermelon seeds from the overseas suppliers. You are requested to explain the discrepancy in respect of quality of watermelon seeds imported by you. & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi On further verification of monthwise sales furnished by you it is seen that the average sale price of watermelon seeds has been shown at Rs. 30/- Kg. However during the investigation and statements recorded by the DRI, you have accepted that you were selling the watermelon seeds in domestic marked for sale price ranging from Rs. 60/-kg. to Rs. 72/-kg. To sum-up, it is observed that you were indulged in undervaluation of the imports, making payments to the overseas suppliers the value of purchases not declared before the customs authority by way of adjustments, through Dubai or to the representative of such suppliers in India as brought out by the DRI in their SCN. As stated above, it is also noticed that you have also under-reported the sale-price of watermelon in your Profit & Loss Account. All there defects clearly indicate that your books of Accounts are not reliable and acceptable. The accounts maintained by you are found to be incorrect and incomplete. In view of the defects as stated above, it is proposed to reject the Books of Accounts, Books results and estimate the Gross Profit ratio at 2% as against the GP. Of 0.34% declared by you."

The G.P. Rate of 2% was upheld to be applied by ld. CIT(A) on the turnover of water-melon seeds instead of total turnover as was applied by the AO. While applying the aforesaid rate of GP of 2% on turnover of water-melon seeds, the ld. 29 & 297/Ahd/2021 AYs:2014-15 & 2015-16 Sh. Sanjay Kishanlal Bishnoi CIT(A) observed that the AO himself has applied the GP rate of 2% on turnover of water-melon seeds instead of total turnover in other years and not on the total turnover of the assessee which included the other commodities. Thus, ld. CIT(A) confirmed the additions to the tune of Rs. 5,64,015/- (subject to verification by the AO) during the impugned assessment year on account of application of GP rate of 2% on turnover of watermelon seeds , as against the addition of Rs. 3,72,73,680/- made by the AO. ii) The ld. CIT(A) deleted two separate additions of Rs. 1,80,69,095/- each in assessment year 2014-15 , by holding as under:

With regard to the ground of appeal

The appeal of the Revenue for assessment year 2014-15 is partly allowed for statistical purposes.

Our decision for assessment year 2014-15 shall apply mutatis mutandis to assessment year 2015-16 as facts are almost similar , except that the AO adopted peak cash deficit in ay:2015-16.The assessee filed cash flow statement before ld. CIT(A) incorporating opening cash balance/ deficit, which was not submitted before the AO. No remand report was called by the ld. CIT(A) , and there was a breach of Rule 46A of the 1962 Rules. The cash flow submitted before ld. CIT(A) has not stood the verification by the AO. Rule 46A is not empty formality. Thus, the matter is restored to the file of ld. CIT(A) for fresh adjudication after giving opportunity of being heard to both the assessee and the AO. We order accordingly.