2026 (3) TMI 46 - AT - Customs

Export benefit entitlement: Customs cannot cancel Let Export Orders or deny DEPB while licensing authority scrips remain valid.

Customs authorities may verify export declarations but cannot cancel Let Export Orders or deny DEPB benefits while valid DEPB scrips issued by the ... Exclusive jurisdiction of the licensing authority (DGFT) to determine DEPB eligibility - prohibition on Customs denying export benefits granted by DGFT without reference - re-assessment under Section 17 of the Customs Act confined to pre-export / live consignments and self-assessment verification - cancellation of Let Export Orders by higher officer requires exercise of statutory revision (Section 129D) and not suo moto action - self-assessment regime and availability of appeal under Section 128 - limitations on recovery of DEPB-related liabilities prior to insertion of Section 28AAA - HELD THAT:- It is not in dispute that the Appellant has been issued with/is in possession of DEPB scrips issued by the DGFT for Telecom Towers exported by them. There can be no doubt with the factual and legal proposition that the goods once cleared for export by the Customs authorities, the DEPB benefit for the goods exported is granted by the DGFT. Viewed in this context, we find force in the submission of the Appellant that the power to question or deny DEPB benefit for items exported solely rests with the DGFT and not with the Customs authorities. We accept this basic contention for more than one reason. The Customs Department denying benefit of DEPB to a particular item despite there being a valid and subsisting DEPB scrip issued by the DGFT for the item as in this case, in effect, amounts to questioning the validity of the very DEPB scrip issued by the latter and hence, as rightly argued by the Appellant, the proper legal course perhaps to be adopted by the Respondent would have been to address the DGFT for cancellation of DEPB benefit by setting out the facts as to why the benefit extended was incorrect or as to why the product in question does not qualify for higher DEPB benefit. Eschewing this procedure, initiating proceedings unilaterally for denying/restricting the benefit as done in this case, is to our mind, clearly impermissible in law. From the above, we note that the contention of the appellant is right inasmuch as the classification adopted by the appellant (i.e., 7308 2011) and the one proposed by the Revenue (i.e., 7308 2019) for the same description as per the Customs Tariff Act, 1975; the Tariff also does not have words like electricity transmission line tower or telecom tower since it is common for both. The competent authority, viz., DGFT- the licensing authority has not acted on the reference (SCN) made by the Customs department to deny higher DEPB benefit claimed and availed by the Appellant for restricting the DEPB benefit as alleged in the reference, we have no hesitation to hold that the proceedings initiated, that culminated in the impugned Order is wholly mis-conceived and hence unsustainable. Though we intend allowing the Appeal on this ground alone, we feel it appropriate to record our observations in respect of other issues which were stoutly contested by the Ld. Counsel for the Appellant during the course of hearing. In terms of Section 51 of the Act, the Proper Officer will permit clearance and loading of goods for exportation if the Duty assessed had been paid. In all the cases covered by the 564 Shipping Bills, Let Export Orders had been issued only after being satisfied with the assessment, needless to say that the Let Export Orders have been passed by the Proper Officers in discharge of their quasi-judicial functions. Hence, as rightly contended by the Counsel for the Appellant, if the Commissioner, on review, found the Order improper, he could have exercised the revisionary power vested in him under Section 129D of the Act and directed the lower adjudicating authority to file an appeal to Commissioner (Appeals) with a prayer for setting aside the LEOs. Re-assessment under Section 17 of the Customs Act confined to pre-export / live consignments and self-assessment verification - It is clear from the provisions of Section 17 of the Act that re-assessment envisaged therein related to ‘export goods’ prior to export and not after export. Therefore, the Respondent clearly exceeded in his jurisdiction in ordering re-assessment of goods which was already exported. Our conclusions above find support from the decision of Co-ordinate Mumbai Bench of CESTAT in Bimal P. Shah Vs CCP [2024 (9) TMI 1809 - CESTAT MUMBAI] wherein identical issues arose for consideration. Though the case pertained to import of goods, the conclusions arrived at therein equally apply to the facts of this case. As we have held above, that only the licensing authority- DGFT is alone competent to say whether DEPB benefit claimed and obtained by the Appellant at the rate termed as higher by the Respondent was correct or not, any decision relating to allegation of mis-declaration or intention to claim higher rate would be within the jurisdictional domain of DGFT alone. Therefore, the impugned Order of the Respondent holding that the license was obtained through mis-declaration suffers from serious legal infirmity and hence, unsustainable. Limitations on recovery of DEPB-related liabilities prior to insertion of Section 28AAA - In this case, no data is available as to how many scrips were used by the Appellant and how many scrips were sold by the Appellant for use by third parties despite the SCN stating in Para 39 that it was proposed to recover inadmissible amounts of DEPB utilized by the Appellant and others. Further, exports took place during the period from Febraury-2008 to September-2011, much before the insertion of Section 28AAA of the Act effective from 28.05.2012. Therefore, in this case, in the absence of any recovery proceedings under Section 28AAA of the Act against the Appellant relating to DEPB scrips sold and utilized by third parties, no demand would survive. To conclude, we hold that the Respondent lacked authority to initiate proceedings for cancellation of LEOs and re-assessment in the absence of action by the DGFT with reference to the DEPB scrips issued to the Appellant; no reassessment order could be issued under Section 17 of the Act dehors review proceedings under Section 129D of the Act; and assessments could be reopened under Section 17 of the Act only for live consignments and not for goods that are exported. This apart, we do not find any other issue/s requiring decision or order. In the result, the Appeal is allowed and the Order of the Respondent is set aside. Issues: Whether the Customs authority could cancel Let Export Orders and reassess/export consignments and deny DEPB benefit without the DGFT having cancelled or modified the DEPB scrips; and whether reassessment under Section 17 of the Customs Act, 1962 is permissible for goods already exported.Analysis: The Tribunal examined the legal framework governing export benefit determination and reassessment: DGFT is the licensing authority empowered to grant, modify or cancel DEPB scrips and thus to determine entitlement to DEPB rates; Customs authorities may verify declarations but cannot unilaterally deny or modify DEPB benefit while a valid DEPB scrip remains subsisting. The Tribunal observed precedent establishing that Customs must refer suspected irregularities to the licensing authority rather than substitute its own decision on eligibility. The Tribunal analysed Section 17 and related provisions as amended for self-assessment and concluded that reassessment under Section 17 applies to live consignments or to verify self-assessment in accordance with the statutory scheme, and does not authorise reopening or reassessing goods after export where the shipping bills were assessed and Let Export Orders issued. The Tribunal also noted that cancellation of Let Export Orders by the Commissioner without exercising proper revisionary procedure under Section 129D, and without DGFT action on the referred scrips, was beyond the respondent's authority.Conclusion: The Customs authority acted without jurisdiction in cancelling Let Export Orders and directing reassessment and confiscation in respect of the exported goods while valid DEPB scrips issued by DGFT remained unmodified; reassessment under Section 17 could not be validly ordered for goods already exported and Let Export Orders could not be suo motu cancelled by the Commissioner in the absence of DGFT action.