TaxTMI 
TaxTMI 
2025 (3) TMI 1259
X X X X Extracts X X X X
X X X X Extracts X X X X
....D/EXPORT/TKD dated 24.09.2021 2. C/50004/2022 Mr. Mitesh Kothari 06/2021/L.Y/COMMR/ICD/EXPORT/TKD dated 23.09.2021 3. C/50005/2022 M/s Pan Parag India Limited 06/2021/L.Y/COMMR/ICD/EXPORT/TKD dated 23.09.2021 4. C/51201/2022 Mr. Mitesh Kothari 06/2021/L.Y/COMMR/ICD/EXPORT/TKD dated 23.09.2021 2. The facts of the case which culminated into the said orders, succinctly, are as follows: 2.1 An investigation was initiated based on the information about certain exporters i.e. M/s Pan Parag India Ltd. and M/s Kothari Products Ltd. that they were defrauding Government by misusing the Export Incentive Scheme namely, Duty Free Import Authorization [DFIA] Scheme. Under this scheme, exporters were under obligation to indicate the technical characteristics, quality, specification and value of the essential oils used in the manufacture of pan masala/gutkha in their shipping bills at the time of export and thereafter applying for the DFIA licences under Chapter 4 of the Foreign Trade Policy 2004-09 and FTP 2009-2014. Notification No. 40/2006 dated 01.05.2006 also specifies the similar conditions that if perfumes, essential oil/aromatic chemical are the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts. In order to obtain DFIA license, it was mandatory to mention the characteristic of the essential oil/aromatic chemical/perfumes in order to avail the concession under DFIA scheme. 3.2 Para 4.55.3 Handbook of Procedure [HBP] Vol. 1 (2004-09) and sub-clause (i) of Notification No. 40/2006-Customs dated 01.05.2006 and of Notification No. 98/2009-Cus. dated 11.09.2009 also specifies the similar conditions, that, if perfume/essential oil/aromatic chemical are the inputs of the export produce, the exporter shall give a declaration with regard to technical characteristics, quality and its specification in their shipping bills at the time of export. In the light of the same, exporter is bound to show nexus between the essential oil/perfume/aromatic chemicals actually used in the manufacture of export goods and the essential oil/perfume finally imported against the said exports (i.e. the DFIA license) 4. In view of the above observations, department formed an opinion that non-disclosure of the technical specifications of the ingredients used in the exported goods was consciously done by the appellant to avail wrong benefit of DFIA scheme. This amounts to violation of provision of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....show cause notice is not with respect to any item imported by the appellants and it is purely with respect to the items exported i.e pan masala/gutkha. As far as the export items are concerned, admittedly, no prohibition or restriction has been brought on record no even alleged by the department. Para 4.32 and 4.55 of HBP not being of procedure does not dealt with exportability of a product. Both these paragraphs (4.32/4.55 of HBP) are silent to the effect that pan masala/gutkha cannot be exported if the technical characteristics of the inputs used in manufacture thereof are not declared on shipping bills. The only consequence for the said non-compliance can be the denial of benefit in the form of DFIA scrips. The said denial still will not effect exportability of the finally manufactured goods. Although these paragraphs of Procedure of Hand Book non-compliance whereof have been alleged could have led to following consequences: (a) The DFIA licenses on post export basis may not have been issued by DGFT or (b) With respect to issue licenses, transferability should not have been endorsed by DGFT or (c) DGFT may issue SCN under FTDR Act, 1992 for canc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tember 2011, the appellants exported pan masala and gutkha from ICD TKD, IGI Airport, New Delhi and JNCH Nahva Sheva under the DFIA, SION based export incentive scheme. As per para 4.55/4.32 of the HBP also in terms of SION norms number E-94 and E-105 the appellants were required to disclose, in the shipping bills at the time of export, the technical characteristics, quality and specification of the natural essential oil used in the manufacture of exported goods pan masala and gutkha. The Customs Notification No. 40/2006 dated 01.05.2006 and Notification No. 98/2009 dated 11.09.2009 are corresponding notifications for imports. The importers under the DFIA scrips were meant to allow the import of the inputs that were to be used for manufacture of pan parag and Gutka. The appellants never used various natural oils, such as sandalwood oil, geranium oil, mint oil, vetiver oil, kerwa oil, etc., to manufacture export products. They used synthetic essential oil which they procured locally. From the documents seized from appellant premises, department observed and formed opinion that the Appellant deliberately did not declare the technical characteristics of the essential oil on the Shippi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r and Shri Mitesh Kothari have not disputed that they did not declare the technical characteristics on the shipping bills or any technical characteristics before DGFT. Also, the Suppliers of the essential oil admitted during the investigation that they did not supply natural essential oil. Instead, they supplied "synthetic essential oil", Exporters never produced any evidence to disprove it. 12. As regards the relevancy of Notifications No. 40/2006 and 98/2009 to the present case, it is submitted that the adjudicating authority has correctly referred to the decision that Hon'ble Delhi High Court in Collector of Customs Vs. Kothari Foods and Fragrance Pvt. Ltd. -2019 (366) ELT 474B which accepted Revenue's contention that a reading Exemption Notification No. 40/2006-Cus and paragraph 4.55.3 of the HBP makes it clear that these declarations are required if the inputs enumerated in paragraph 4.55.3 are imported under the DFIA licenses. 13. Finally, ld. Special Counsel submitted that DGFT Kanpur had issued SCN dated 18.07.2012 to the appellant under Section 13 of the Foreign Trade Development & Regulation (FTD&R) Act, 1992, wherein it was, inter alia, alleged that the techn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vy Scheme was claimed but it has not connection with the benefits of DFIA Scheme. (ii) The appellant companies obtained the DFIA licence from Directorate General of Foreign Trade (DGFT) subsequent to the impugned exports; (iii) The appellant transferred these licences to third parties with the approval from DGFT authorities; (iv) The impugned show cause notices deals with shipping bills for export of pan masala and gutkha and the Bills of Entry for import of any item or utilization of any DFIA licence issued by the DGFT has not been questioned in the present show cause notice; (v) While exporting pan masala and gutkha the appellant exporter declared in the shipping bill itself that they shall be claiming DFIA for import of corresponding inputs; (vi) The technical characteristics of various inputs used in manufacture of the export products more importantly essential oils were not declared on the shipping bills as were otherwise required in terms of para 4.55 of HBP 2004-2009 read with Condition No. (i) of Notifications No. 40/2006 and 98/2009; (vii) Despite the said admitted lucane (at point (v) & (vi) above) the exports were not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e quality, technical characteristics and specifications as the materials used in the said resultant product." The perusal makes it clear that this condition of both the notifications is relevant for duty free import of inputs such as essential oils. It becomes clear that the notification is not applicable for exports at all. 18. In the present case, the show cause notices have been issued with respect to the exports made by appellants. Apparently and admittedly no exemption from duty has been claimed on such exports. Further these notifications require that the product manufactured out of these imported inputs i.e. the Resultant Product should have same quality, technical specifications and characteristics as that of the imported materials used in the said resultant product 19. In the present case we observe that the Revenue/department has failed to produce any evidence to prove that the exported goods were the resultant goods and were not of same quality, technical characteristics and specifications as those of the inputs used in the said resultant product. It becomes clear that there is no evidence to support the violation of Condition No. (i) of both the notifications (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d parties. Even the duty free imported inputs can also be transferred to the third parties. The appellants obtained DFIA post impugned exports and have also sold the said DFIA to the third parties. Such third parties could make duty free imports of the inputs. 23. Further though the technical specifications of the impugned inputs were not mentioned on the Shipping Bills while exporting the goods manufactured by the appellant. But apparently and admittedly no objection was raised at the relevant time and the goods were cleared. Hon'ble Supreme Court in the case of Titan Medical System Pvt. Ltd. Vs. Collector-2003 (151) ELT 254 (SC) has held that in the absence of any action taken by the licensing authority, revenue cannot take any action that too on the allegations of misrepresentation/suppression on part of assessee. Thus we are of the opinion that non-compliance of condition of DFIA/Notifications in the shipping bills could affect the duty free import of inputs but shall have no effect on export of products for which there is no evidence that the export goods were "resultant products" as mentioned in 4.55 of HBP. 24. Now coming to the law that regulate exports....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 40/2006 dated 01.05.2006 and Notification No. 98/2009 dated 11.09.2009 for the purpose of duty free import of inputs can render the export goods as "Prohibited Goods" For the purpose, we look into the definition of "Prohibited goods means goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with." Apparently there was no condition on the export of pan masala and gutkha. The condition which is alleged to have been violated is the condition of import. Thus, it is clear that based on impugned allegations freely exportable pan masala and gutkha cannot be called as prohibited goods. Above all, appellant has availed no benefit out of alleged non-declaration. 26. Whether the order of confiscating the impugned export goods would still hold good? For the purpose we look into Section 113(d) of the Customs Act under which the adjudicating authority has ordered confiscation : "113 Confiscation of goods attempted to be improperly exported etc. - The foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....technical characteristics of inputs by the appellants in their shipping bills while exporting their manufactured pan masala/gutkha. Consequent thereto, DGFT had issued a show cause notice dated 18.07.2012 under Section 13 of FTDR Act, 1992 proposing cancellation/modification of licences as were issued and also proposing imposition of penalty in terms of Section 11 of FTDR Act, 1992 alleging that the technical characteristics, quality and specifications of essential oils used in the export product had not been mentioned on the shipping bills in contravention of para 4.55.3 of HBP 2004-09, therefore, suppressing the facts from the licensing authority. The joint DGFT vide order dated 14.12.2023 modified the licences issued by deleting inputs light natural essential oils, the technical clarifications whereof were not declared in the shipping bills, from the list of eligible imports and also imposed a penalty as was proposed 15.12.2015 ordered the deletion of the import item "essential oil" at the time of endorsement of the transferability of the DFIA and also imposed penalty of three lakhs on the exporter and its Director. The appellate authority has confirmed the said order vide its o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rectorate of Revenue Intelligence amounts to nothing but jeopardy. The appellant cannot be penalized again for the same alleged act. 31. Finally it is observed that once it has been established on record that the Revenue has not challenged any assessment of imports under Bill of Entries nor has raised any issue of short levy of duty on account of illegal claim of exemption notification and now when the issue is with respect to export, on which no exemption from duty has been claimed, it has wrongly been held that the appellant has violated the conditions of the Customs Notification No. 40/2006 and that of 98/2009 at the time of export. We reiterated the findings that the conditions of importability of import cannot be applied to 'exportability of finished goods'. There is nothing on record produced by the department to show that the pan masala and gutkha were otherwise exported contrary to any prohibition imposed under FTDR Act or under Customs Act. The violation of the conditions of importability of inputs/raw material are, therefore, held highly insufficient to hold that the goods exported are prohibited and the export thereof is improper specifically when there is no evidence....