2009 (9) TMI 476 - HC - Customs

Customs Officers' Jurisdiction Upheld in DEPB Credit Case

SRAVANI IMPEX P. LTD. Versus ADDL. DIR. GENERAL, DRI., CHENNAT

SRAVANI IMPEX P. LTD. Versus ADDL. DIR. GENERAL, DRI., CHENNAT - 2010 (252) E.L.T. 19 (A. P.) Issues Involved:1. Jurisdiction of Customs Officers to issue show cause notices.2. Validity of DEPB credit claims.3. Allegations of fraudulent over-invoicing and illegal foreign exchange remittances.4. Confiscation of goods and penalties under the Customs Act.5. Role of DGFT vs. Customs authorities in DEPB scheme enforcement.Detailed Analysis:1. Jurisdiction of Customs Officers to Issue Show Cause Notices:The court examined whether the Customs officers had the authority to issue show cause notices regarding DEPB credits and related penalties. The petitioner argued that only the DGFT had jurisdiction over DEPB credits, citing Circular No. 15/97 and various case laws, including Union of India v. Asian Foods and Commissioner of Customs, Mumbai v. Vishal Exports Overseas Ltd. However, the court noted that DEPB credits are akin to customs duty exemptions and that Customs officers have the power to investigate and demand repayment of fraudulently obtained credits under Section 28(1) of the Customs Act.2. Validity of DEPB Credit Claims:The petitioner claimed DEPB credits based on export incentives. The court highlighted that the DEPB scheme required exporters to file shipping bills and obtain Bank Realization Certificates (BRCs) as proof of export proceeds. The Customs officers' role included verifying the correctness of declarations in shipping bills. The court found that fraudulent over-invoicing and false declarations in shipping bills justified the Customs officers' actions to demand repayment and impose penalties.3. Allegations of Fraudulent Over-Invoicing and Illegal Foreign Exchange Remittances:The show cause notices alleged that the petitioner inflated export values to fraudulently claim DEPB credits and used illicit channels to remit foreign exchange. The court emphasized that fraudulent activities, such as over-invoicing and illegal remittances, violated the conditions of the DEPB scheme and justified the issuance of show cause notices by Customs officers.4. Confiscation of Goods and Penalties under the Customs Act:The court examined the provisions of the Customs Act, including Sections 113, 114, and 111(d), which deal with the confiscation of goods and imposition of penalties for improper exportation. It held that goods entered for exportation with false declarations are liable for confiscation, and personal penalties can be imposed on those responsible. The court cited various judgments, including Om Prakash Bhatia v. Commissioner of Customs, Delhi, to support its findings.5. Role of DGFT vs. Customs Authorities in DEPB Scheme Enforcement:The court clarified that while the DGFT issues DEPB licenses, Customs authorities have the power to verify declarations and demand repayment of fraudulently obtained credits. The court noted that the DGFT's role is limited to issuing and canceling licenses, whereas Customs authorities are responsible for ensuring compliance with customs laws and regulations. The court distinguished the present case from others cited by the petitioner, where there were no allegations of fraud.Conclusion:The court dismissed the writ petitions, holding that the Customs officers had jurisdiction to issue the show cause notices and demand repayment of DEPB credits obtained through fraudulent means. The court emphasized that the petitioner must respond to the show cause notices and that the observations made in the judgment were limited to the legal premise of jurisdiction. The petitioner's request for leave to appeal to the Supreme Court was also rejected.