2018 (12) TMI 1120 - AT - Customs

Tribunal overturns duty demands & penalties on transferees citing precedent & DGFT cancellation

The Tribunal allowed the appeals filed by the transferees, setting aside the demands of duty and penalties imposed on them. The decision was based on the ... Cancellation of DEPB scrips/DFIA licences on the part of transferees - N/N. 89/2005-Cus. and 40/2006-Cus. - Held that:- Tribunal in the case of Sumit Wool Processors and others vs. CC(Import)/(Export) [2015 (10) TMI 329 - CESTAT MUMBAI], has decided the issue in favor of the appellants, holding that the transferees in the cases had no knowledge of misrepresentation by the exporters. Confiscation of the goods imported by the appellants who are transferees of the licences/scrips does not arise - appeal allowed - decided in favor of appellant. Issues:- Allegation of overvaluation of exports by certain merchant exporters- Confiscation of goods imported by transferees of DEPB scrips- Cancellation of DEPB scrips/DFIA licences by DGFT- Applicability of previous Tribunal decision in similar casesAnalysis:1. Allegation of Overvaluation: The case involved an investigation by the Directorate of Revenue Intelligence (DRI) into the overvaluation of exports by specific merchant exporters. The exporters were accused of inflating the FOB value of their exports to obtain DEPB scrips/DFIA licenses, which were later sold to transferees. The appellants in this case were transferees who imported goods against these scrips, benefiting from duty exemptions under relevant notifications.2. Confiscation of Imported Goods: The impugned order confiscated the goods imported by the appellants and imposed duty and penalties on them. However, the appellants argued that they were unaware of any misrepresentation by the exporters, citing a previous Tribunal decision in a similar case where it was held that transferees with no knowledge of misrepresentation were not liable for confiscation of imported goods or payment of duty and penalties.3. Cancellation of DEPB Scrips: During the investigation, the DGFT canceled all the DEPB scrips/DFIA licenses ab initio. This action by the DGFT had a significant impact on the case, leading to further complexities in determining the liabilities of the appellants as transferees.4. Applicability of Previous Tribunal Decision: The appellants relied on a previous Tribunal decision involving Sumit Wool Processors and others, where it was held that transferees without knowledge of exporters' misrepresentation were not subject to confiscation of goods or payment of duty and penalties. The Tribunal in the current case found that the issue was identical to the one decided in the earlier case, leading to the allowance of the appeals filed by the appellants.In conclusion, the Tribunal allowed the appeals filed by the appellants, setting aside the demands of duty and penalties imposed on them. The decision was based on the precedent set by a previous Tribunal ruling and the specific circumstances of the case, including the cancellation of DEPB scrips by the DGFT.