2015 (3) TMI 1213 - AT - Customs

Importers and Clearing House Agent win appeal, penalties dismissed. Good faith and DFIA reliance upheld.

USMS Saffron Co. Inc., Jani & Co. Versus Commissioner of Customs (Export), Mumbai and Vice Versa

The Tribunal allowed the appeals of the importers and the Clearing House Agent, setting aside the impugned order. It dismissed the Revenue's appeal for ... Denial of benefit of notification No. 98/2009-Cus dt. 11.9.2009 - demand of duty - imposition of penalty under section 114A and under Section 114AA of the Customs Act, 1962 - import of Saffron - assorted confectionary and biscuits - DFIA license - actual user condition - whether the import of Saffron under the subject DFIAs was eligible for exemption? - whether the DFIAs on the basis of which exemption was availed were subject to the condition that : (i) In respect of import against export of assorted confectionery, the quantity of Saffron actually used in the export product is mentioned in the shipping bills. (ii) The import of Saffron against the export of Biscuits is subject to the actual user condition with accountability of actual use on the on the export side? Held that: - the DFIAs have been issued and made transferable without putting any of the conditions on the face of the DFIAs. There is some merit in the contention that the duty free import is permissible on the basis of the DFIAs presented to the Customs when there is no allegation that the DFIAs were obtained on account of fraud committed by the importer. The importer is not responsible for the transfer conditions imposed by the DGFT on the licenses when they are transferred to the importers by the original license holder. If at all, the actual user condition on the body of the DFIA was mandatory for the licensing authority. No evidence whatsoever, of fraud committed by the importer has been brought on record. The assessing authorities also verified the license at the time of Customs clearance and found nothing wrong with the licenses - duty not demandable from the appellant and the benefit of notification No. 98/2009 admissible - the confiscation as well as penalties not sustainable. Imposition of penalty on CHA under Sections 112(b) and Section 114AA of the Customs Act, 1962 - Held that: - the job of the clearing agent is to prepare documents such as bill of entry properly and file the same along with supporting documents such as licenses wherever required. The document namely the DFIA presented to the Customs is not a document prepared by the CHA. This document is a license issued by the DGFT. CHA cannot be faulted for submitting documents issued by DGFT. The Customs also assessed the goods as per the DFIA issued by the DGFT. Therefore the CHA cannot be held responsible for mistakes, if any, in the document i.e. DFIA issued by the DGFT. No merit in holding the CHA liable to penalty under Section 112(b) of the Customs Act, 1962 because the CHA cannot be said to have dealt with the goods which he knows are liable to confiscation. Even the penalty under Section 114AA is not imposable on the CHA because the CHA has not made any false statement or produced any false document before the Customs. The CHA has merely presented the license which is issued by DGFT - imposition of penalty on CHA withheld. Appeal allowed - decided against Revenue. Issues Involved:1. Eligibility of import of saffron under DFIAs for exemption.2. Requirement of actual use of saffron in export products.3. Validity and transferability of DFIAs.4. Alleged fraud and misrepresentation in obtaining DFIAs.5. Role and liability of the Clearing House Agent (CHA).Detailed Analysis:1. Eligibility of Import of Saffron under DFIAs for Exemption:The main issue is whether the import of saffron under the Duty-Free Import Authorizations (DFIAs) was eligible for exemption under Notification No. 98/2009. The appellants argued that the DFIAs did not mandate the actual use of saffron in the export products or its mention in the shipping bills. The DFIAs were examined and allowed by the assessing authorities without any post-import actual user condition. The Tribunal found merit in the contention that duty-free import is permissible based on the DFIAs presented to Customs, as there was no allegation of fraud committed by the importer. The Customs authorities verified the licenses at the time of clearance and found no discrepancies.2. Requirement of Actual Use of Saffron in Export Products:The Revenue argued that the import of saffron against DFIAs issued for the export of assorted confectionery and biscuits required evidence that saffron was actually used in the export products. However, the Tribunal noted that the DFIAs were issued without such conditions explicitly mentioned. The Tribunal emphasized that the responsibility for endorsing such conditions lies with the licensing authority (DGFT), not the importer. The Tribunal found no evidence of fraud or misrepresentation by the importer regarding the actual use of saffron.3. Validity and Transferability of DFIAs:The Tribunal observed that the DFIAs were made transferable without any conditions on the face of the authorizations. The appellants presented evidence showing that similar DFIAs were issued by DGFT offices across various locations without the contested conditions. The Tribunal held that the importer cannot be held responsible for any omissions by the licensing authorities. The Tribunal also noted that the DGFT had not amended or canceled the DFIAs despite the Customs authorities taking up the matter with them.4. Alleged Fraud and Misrepresentation in Obtaining DFIAs:The Revenue alleged that the original license holders committed fraud by manipulating the import list to escape restrictions. However, the Tribunal found no evidence of fraud committed by the importer. The Tribunal distinguished the present case from others where fraud was established and licenses were canceled. The Tribunal held that the importer, as a transferee of the DFIAs, cannot be penalized for any alleged fraud by the original license holders.5. Role and Liability of the Clearing House Agent (CHA):The Tribunal examined the role of the CHA, M/s. Jani & Co., who was penalized by the adjudicating authority. The Tribunal found that the CHA's job was to prepare and file documents based on the licenses issued by DGFT. The CHA cannot be faulted for submitting documents issued by a competent authority. The Tribunal held that the CHA did not violate any regulations or make any false statements, and thus, penalties under Sections 112(b) and 114AA of the Customs Act were not sustainable.Conclusion:The Tribunal set aside the impugned order, allowing the appeals of M/s. USMS Saffron Co. Ltd and M/s. Jani & Co. The Tribunal dismissed the Revenue's appeal for higher penalties, holding that duty was not demandable, and penalties were not required. The Tribunal emphasized that the importers and CHA acted in good faith based on the DFIAs issued by DGFT, and any omissions by the licensing authorities cannot be attributed to them.