TaxTMI 
TaxTMI 
2006 (5) TMI 210
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....ned in the DEPB Schedule. The idea is that the exporter uses various inputs, which have suffered duty in the manufacture of export product. Hence, after his export performance, he is given some credit, which is entered in the Pass Book. Later, this credit can be utilized by the exporter for payment of import duty on goods imported. There is also a provision to transfer the DEPB licence for consideration. The transferee, in that case, would be entitled to use the credit. The DEPB Scheme is also governed by a Notification No. 34/97-Cus., dated 7-4-1997. This is the gist of the DEPB Scheme. There is what is known as Standard Input-Output Norms (SION). Since the DEPB credit is meant for neutralizing the incidence of duty on the inputs used in the export product, norms have been fixed as to how much input should be used for a certain output. In the present case, the exporters/appellants exported Marine Products claiming classification under DEPB schedule D-2 @ 5%. Investigations revealed that chemicals and preservatives mentioned in SION have not at all been used in the export product. In such circumstance, the Customs authorities are of the view that the credit under DEPB Schedule D-2 ....
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....ies have limited role of verification of description and value at the time of exports and not to sanction the amount of credit in the Pass Book. (vi) The impugned orders of the Commissioners are contrary to Circular No. 15/97-Cus., dated 3-6-1997 issued by the Ministry of Finance (DR, GOI) in which it has been categorically stated in para-2 that "the role of the Customs authorities should be confined to verification of correctness of exporter's declaration regarding description, quantity and export value and it will be for the licensing authorities granting credit to ensure that credit is permitted by them at the correct rate notified by the DGFT." (vii) The Board Circulars are binding on the departmental authorities as per the following decisions:- (a) K.P. Verghese v. ITO, 1981 (131) ITR 597 (S.C.) (b) Ranadey Micronutrients v. CCE - 1996 (87) E.L.T. 19 (S.C.) (c) Paper Products Ltd. v. CCE- 1999 (112) E.L.T. 765 (S.C.) (d) CCE v. Dhiren Chemical Industries Ltd. - 2002 (139) E.L.T. 3 (S.C.) (viii) Based on the DRI's investigation, the matter was informed to the DGFT authorities. The DGFT initiated proceedings agai....
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....s under the DEPB Scheme. To a specific query from the Deputy Commissioner, Kochi, regarding the usage of inputs as per SION for items under D-2 and D-3, it was clarified that all inputs were not necessary to be used in processing establishments and they would have been used at some stage after landing. After holding discussions at length, it was finally agreed that the Customs authorities would classify various products under D-2 and D-3 based on a declaration to be given by the exporter. In the EXJM Policy 2002-03, the requirement of declaration was dropped and status quo ante as it existed as on November 11, 1998 was restored. (xiv) There is no condition either in the EXIM Policy or in the SION that the preservatives and chemicals have necessarily to be used by the processor/exporter in his factory. Sodium tripolyphosphate and Sodium metabisulphate are often used by the fishermen and aquaculture farmers, who supply the marine products to the exporters, including the appellants. Accordingly, the purchase and utilization of the preservatives and chemicals at the factory of the exporter is not reflected in the records maintained by them. These preservatives and chemicals ar....
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.... relied upon by the Hon'ble Supreme Court in the case of Union of India v. Sampat Raj Dugar -1992 (58) E.L.T. 163 (S.C.) (c) CC, Bombay v. Sneha Sales Corpn. - 2000 (121) E.L.T. 577 (S.C.) In view of the above, duty and interest demanded are not maintainable in law since the concept of 'Deemed Importer' is not tenable in law. Further, the provisions of Section 113 or Section 114 of the Customs Act, 1962 do not deal with DEPB and, therefore, cannot be invoked. (xvii) The Show Cause Notice alleges violation of Section 11 of Foreign Trade (Development and Regulation) (FTDR) Act, 1992. Under Section 2(g) of the said Act, "Licence" means a licence to import or export and includes Customs Clearance Permit and any other permission issued or granted under the Act. Under Section 3(3) of the said Act, "All goods to which any order under sub-section (2) of Section 3 applies shall be deemed to be goods, the import or export of which has been prohibited under Section 11 of the Customs Act, 1962 and all the provisions of that Act shall have effect accordingly. In the instant case, the DEPB Credits granted to the appellants do not come within the definition of a "Licenc....
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....ld have exported the product in accordance with the Customs Act and the DEPB Scheme. Hence, the Shipping Bills presented at the time of export constitute the foundation for claiming credit of duty at a later stage. If there is any misdeclaration at the time of export, then automatically the consequential benefits, based on the said exports, will also be nullified. (ii) As per para 7.43 of Handbook of Procedures, before allowing the exports against DEPB, the Customs shall verify that the details of the exports as given in the DEPB are as per the records. In the present case, the credit is available as under:- Sl. No. Description DEPB rate Product Group: Fish & Fish Products 1. (Product Code : 66) Dried Marine Products, Live Crustaceans, aquarium or ornamental fish and fish and marine products including frozen meat thereof not covered under Sl. No. 2 below. 2% 2. Processed, preserved and frozen fish and crustaceans, mollusks and other aquatic invertebrates (excluding those covered under Sl. No. 1) 5% For the product under Sl. No. 2, the rate was reduced to 4% from 1-4-2001. A reading of the entries reveal that if no ....
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.... earlier." (viii) In the DEPB Scheme, DEPB credit is given only after export is made. The question whether the export has been correctly made or not and whether the Customs duty had been paid correctly or not, is a matter, which falls within the exclusive domain of the Customs Department. Moreover, the DGFT cannot examine the correctness of the entries made in the shipping bill presented at the time of export. (ix) The fact that the Customs Department has jurisdiction to initiate proceedings for recovery of duty is clear from the following judgments:- (i) Kamath Packaging Ltd. v. UOI - 1991 (55) E.L.T. 304 (Kar.) (ii) Kamath Packaging Ltd. v. UOI - 1992 (61) E.L.T. 548 (Kar.) (iii) Jacson Thavera v. Collector of Cus., Cochin - 1987 (27) E.L.T. 121 (iv) Jacson Thavera v. Collector of Customs & Central Excise - 1992 (61) E.L.T. 343 (S.C.) (v) Sheshank Sea Foods Pvt. Ltd. v. UOI - 1996 (88) E.L.T. 626 (S.C.) (vi) Raj Exports v. National Aluminium Co. Ltd. - 1996 (87) E.L.T. 349 (Ori.) (x) The appellants have stated in the Shipping bills that they have used preservatives as per SION. In that case, they sho....
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....r and found that no preservatives and chemicals mentioned in the SION have been used, they initiated action against all the appellants and informed the DGFT also. It is seen that the DGFT authorities are having powers under the Foreign Trade (Development and Regulation) Act and exercise quasi-judicial powers. In other words, the issue of reducing the DEPB credit from 5% to 2% on account of the facts revealed in the DRI investigation was very much before the DGFT authorities and the said authorities, after examining the entire issue, have dropped the proceedings against the appellants. As far as the present appeals are concerned, it was learnt during the hearing before the Tribunal that excepting in one case, the proceedings have been dropped. Let us see the findings of the DGFT in respect of one such case. The JDGFT, Cochin, has passed an OIO dated 7th December 2005, in respect of M/s. Baby Marine Products. The following observations in the said order are relevant :- "Normally, DEPB rate is fixed in respect of the export products covered by SION. However, in certain cases, the DEPB rates have been fixed for certain categories of export products broadly classifying the item....
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....nt of India has also not issued any instructions to strictly verify whether inputs have been used in the proportion indicated in the SION. When this issue was raised by the Customs, a meeting was held by the DGFT in Cochin. The learned Advocates have referred to this meeting in their submission before the Tribunal. It is learnt that the preservatives are normally used at various stages right from the catching of the fish. Moreover, the Government of India has considerably diluted the requirement of the use of the items according to SION. In fact, they had gone to the extent of saying that even if a meager percentage of chemicals/preservatives are used, that is sufficient. The stand of the Government is very clear as can be seen from the Circular No. 45/2003-Cus., dated 4-6-2003. Even the requirement for giving declaration about the usage of chemicals/preservatives in the shipping bill has been withdrawn w.e.f. 1-4-2002 under DEPB Scheme. The Circular 45/2003 is reproduced below :- Fish (processed, preserved and frozen) and fish products - Exports under DEPB - Clarifications Circular No. 45/2003-Cus., dated 4-6-2003 F.No. 605/19/2002-DBK Government of India Ministry o....
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.... issue was, therefore, discussed with DGRI, DGFT and Associations in details. In this regard, investigations conducted so far by DGRI/Customs has revealed two types of situations. Whereas in some cases DRI/Customs has completed investigations and issued show cause notices on the basis of their findings, in other cases the investigations are nearing completion. The two types of situations are :- (i) where no preservatives/chemicals were actually used by the preserving unit or anybody else in the export product; and (ii) where only a meagre percentage of chemicals/preservatives were used. 5. The issue has been examined afresh in the Board and it has been decided that in cases where the investigations carried out by DRI/Customs clearly prove that no chemicals/preservatives were at all used in the export product at any stage, in all such cases proceedings against the exporters shall continue and the matter would be adjudicated as usual on merits. In cases where there is evidence that the sea-food exporter had used only a meagre percentage of chemicals/preservatives in the export product, keeping in mind the general practice being followed by sea-f....