2006 (9) TMI 48 - AT - Customs

Customs lacks jurisdiction to restrict DEPB credit based on mis-declaration, Tribunal rules in favor of appellants

The Tribunal held that Customs Authorities lacked jurisdiction to restrict DEPB credit and re-classify goods based on alleged mis-declaration of chemical ... Demand and Penalty – Exports of Shrimps – Alleged that Misdecleration regarding source of shrimps and also use of preservatives by appellant – After satisfied DGFT authorities dropped the proceedings and not DEPB credit Issues:1. Jurisdiction of Customs Authorities to restrict DEPB credit.2. Mis-declaration regarding source of exported goods and use of chemicals/preservatives.Analysis:Issue 1: Jurisdiction of Customs Authorities to restrict DEPB creditThe appellants, engaged in fish processing and export, claimed DEPB rates at 4% or 5% under the DEPB Scheme. The Customs Authorities, after investigation, issued a Show Cause Notice restricting the DEPB credit to 2% due to alleged mis-declaration of chemical usage. The Commissioner passed an order re-classifying the goods under a lower DEPB rate, imposing duties, interest, and penalties. The appellants argued that only the DGFT has the power to vary DEPB credit, not Customs, citing a Tribunal decision and a favorable order from the DGFT. The Tribunal held that since the DGFT dropped proceedings against the appellants, the Customs' demand for lower credit was unjustified. The impugned order was set aside, and the appeals were allowed.Issue 2: Mis-declaration regarding source of exported goods and use of chemicals/preservativesIn another case, the appellants exported shrimp products, claiming a DEPB credit rate of 10% under Public Notice 55. Detailed investigations revealed alleged mis-declaration of the source of shrimps and non-use of prescribed chemicals/preservatives. The Commissioner re-classified the goods under a lower DEPB rate, imposing duties, interest, and penalties. The appellants relied on a favorable DGFT order upholding their claim to higher DEPB credit. The Revenue argued that mis-declaration justified the Customs' actions. The Tribunal, after examining the DGFT's order, found in favor of the appellants, as the DGFT dropped all proceedings against them, maintaining their entitlement to higher DEPB credit. The Commissioner's order was set aside, and no penalties were upheld due to the unsustainable duty demand.In conclusion, the Tribunal's judgments in both cases emphasized the importance of proper authority in varying DEPB credit and the significance of evidence in determining mis-declaration, ultimately ruling in favor of the appellants based on the findings of the DGFT and lack of sustainable duty demands.