2003 (9) TMI 378 - AT - Customs

Customs challenge to DEPB export credit eligibility under Serial 86/Product Code 83 fails; denial, confiscation and penalty set aside.

Customs authorities lacked jurisdiction to adjudicate entitlement to DEPB credit under Serial No. 86/Product Code 83; under the applicable policy and ... EXIM - entitlement for DEPB under Serial No. 86 of the product code 83 of the DEPB schedule - Grant of DEPB credit on pre-export - Jurisdiction of Customs authorities - Confiscation and penalty - Misdeclaration - liability for a penalty u/s 114(i) of the Customs Act, 1962 - HELD THAT:- In view of the policy, procedure instructions and the law, in the matter of DEPB, we cannot uphold the decision arrived at by the Commissioner to have impugned the exports and come to a finding that the exports made in this case were not entitled to DEPB under serial no. 86 of the Product Code 83 of the DEPB Schedule. Since all that was required, in the case was for the Commissioner to have reported the matter to the DGFT authorities and not sit in judgments over the grant and or determine entitlement of DEPB which were not within the jurisdiction of the Customs to do so. The order of determination of the eligibility or otherwise of DEPB as made in this case cannot be upheld. It is found that Foreign Trade (Regulation) Rules, 1993 issued vide Ministry of Commerce Notification No. GBR 791(E), dated 30-12-1993 have been issued under the powers confirmed by Section 19 of the Foreign Trade (Development and Regulation) Act, 1992 by the Central Government and not under the powers which would be exercised by the Central Govt. to issue an order under Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992, which would vide sub-section (3), would then deem then to be a prohibition under Section 11 of the Customs Act, 1962. Besides of Rule 14(1) and 14(2) of Foreign Trade (Regulation) Rules, 1993 on a plain reading, would cover declaration for obtaining a licence and import any goods and DEPB’s would not be covered by the word ‘Licence’ as defined in the Foreign Trade (Development and Regulation) Act, 1992. A claim for DEPB export would not be a declaration for import. In this view of the matter, the liability for confiscation of the goods, being prohibited goods, under Section 113(d) and/or 113(i), as brought out by the Commissioner cannot be upheld. Confiscation arrived at under Section 113(d) or/and 113(i) cannot be upheld. Ones goods are not found to be liable for confiscation, penalty under Section 114(i) of the Customs Act, 1962 cannot be sustained. The penalty imposed is required to be set aside. The order is set aside and appeal allowed. Issues:Misdeclaration of goods under DEPB Scheme leading to confiscation and penalty under Customs Act, 1962.Analysis:The case involved the misdeclaration of goods under the Duty Entitlement Pass Book (DEPB) Scheme, which led to the confiscation of goods and imposition of a penalty under the Customs Act, 1962. The appellants, engaged in the manufacture of Accelerated Graphic Processor (AGP card), exported the AGP card under the DEPB Scheme but faced allegations of misdeclaration by the Customs Department. The Commissioner found that the goods were not entitled to DEPB under the specified product code, leading to the confiscation of goods and imposition of a penalty of Rs. 9 lakhs under Section 114(i) of the Customs Act, 1962.Upon detailed examination, it was found that the Customs Department's role was limited to verifying the correctness of the exporter's declaration regarding the goods' description, quantity, and value at the time of export. The responsibility of determining the entitlement of DEPB credit rested with the licensing authorities, not the Customs. The Tribunal highlighted that the Customs could not sit in judgment over the decision regarding the quantum of DEPB credit to be granted, emphasizing the need to report any discrepancies to the DGFT for further action.Furthermore, the Tribunal noted that the description in the DEPB Schedule regarding 'PC Boards' did not have any qualifications or restrictions, potentially covering both plain/unpopulated and populated printed circuit boards. The Commissioner's finding that the exported goods were misdeclared as a fully assembled component of a computer system was deemed unsubstantiated, lacking clear evidence or expert reports to support the claim of misdeclaration.Additionally, the interpretation of Rule 14 of the Foreign Trade (Regulation) Rules, 1993 by the Commissioner was found to be incorrect. The Tribunal clarified that the liability for confiscation of goods under Section 113(d) and/or 113(i) of the Customs Act, 1962 could not be upheld in this case. Consequently, if goods were not deemed liable for confiscation, the penalty under Section 114(i) of the Customs Act, 1962 could not be sustained, leading to the setting aside of the penalty.In conclusion, the Tribunal set aside the order, allowing the appeal in favor of the appellants, emphasizing the importance of adhering to the prescribed procedures and responsibilities under the DEPB Scheme and Customs regulations to avoid misinterpretations and unjust penalties.