AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 276
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.... of drawback under rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 has been dropped, but penalties have been imposed upon the Proprietor of the appellant under section 114(iii), 114AA and section 114AB of the Customs Act. 2. The appellant is engaged in the manufacture and export of Ready Made Garments. It entered into contracts for supplying Ready Made Garments [the Goods] to UAE, Sudan, Senegal, UK, Afghanistan, Armenia, Azerbaijan, Kazakhstan, Ethiopia, Germany, Myanmar under drawkback Focus Market Schemes. To encourage exports to remote markets, the Government introduced the Focus Market Scheme [FMS], designed to offset higher freight costs borne by buyers. Under the FMS, exporters often offer reduced prices to customers in designated countries like Panama. This approach ensures competitiveness by partially absorbing the elevated freight costs, aligning with the objectives of the FMS. As per the contracts, the appellant was required to supply the goods on the prices stated in the agreement on FOB terms and to a place notified by the buyer. In terms of the contract, Concorde Shipping & Logistics India [the Freight Forwarder] was solely responsi....
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...., Imran Mirza stated that he had himself amended the Shipping Bills at the direction of the exporters. 8. A show cause notice dated 24.01.2020 was issued inter alia proposing to confiscate the goods and demanding ineligible benefit availed under the FMS equivalent to Rs. 4,14,06,583/- under section 28AAA of the Customs Act with interest. It also proposed to impose penalty under section 114AA, section 114(iii) and section 114AB of the Customs Act on the appellant. 9. The adjudicating authority passed the impugned order : (a) Holding the Goods liable for confiscation under section 113(d), (g) and (i) of the Customs Act, but refrained from imposing any redemption fine; (b) Confirmed recovery of Rs. 4,14,06,538/- with applicable interest; (c) Dropped the demand of Duty Drawback; (d) Imposed penalty on the appellant under section 114AA, section 114(iii) and section 114AB of the Customs Act. 10. Shri Ashirwad, learned counsel for the appellant assisted by Shri Virat Sharma, made the following submissions: (i) The show cause notice issued under section 28AAA of the Customs Act is without jurisdiction. This is for the reason that a demand under this section can be ma....
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....t or suppression of facts exist and in the present case this fact has been proved beyond doubt. 12. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 13. The first issue that arises for consideration is whether jurisdiction under section 28AAA of the Customs Act could have been invoked without the DGFT having initiated process for cancellation of the license and whether adjudication could be done as the DGFT did not cancel the instrument. 14. This issue was examined by the Delhi High Court in M/s Amit Exports. The Delhi High Court held that it was not possible to recognize a right that may be to said to inhere in the customs authority to doubt the issuance of the instrument. After referring to the FTP 2015-20, the Delhi High Court held that it provides in paragraph 2.57 that it would be the decision of the DGFT on all matters pertaining to interpretation of policy, provisions in the handbook of procedures and so it would be impermissible for the customs authority to deprive a holder of the instrument the benefits that can be claimed, absent any adjudication of declaration....
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....ensue if such a position were countenanced, in our considered opinion, if the validity of an instrument issued under the FTDR Act were to be doubted on the basis of it having been obtained by collusion, wilful misstatement or concealment of facts, any action under Section 28AAA would have to be preceded by the competent authority under the FTDR Act having come to the conclusion that the instrument had come to be incorrectly issued or illegally obtained. The procedure for recovery of duties and interest would have to be preceded by the competent authority under the FTDR Act having so found and the power to recover duty being liable to be exercised only thereafter. 107. Section 28AAA would thus have to be interpreted as contemplating a prior determination on the issue of collusion, wilful misstatement or suppression of facts tainting an instrument issued under the FTDR Act before action relating to recovery of duty could be possibly initiated. A harmonious interpretation of the two statutes, namely, the Customs and the FTDR Acts leads us to the inescapable conclusion that the law neither envisages nor sanctions a duality of authority inhering in a separate set of officers and agent....
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....een illegally obtained. We have already held that the reference to a proper officer in Section 28AAA is for the limited purpose of ensuring that a certificate wrongly obtained under the Customs Act could also be evaluated on parameters specified in that provision. However, the said stipulation cannot be construed as conferring authority on the proper officer to question the validity of a certificate or scrip referable to the FTDR Act." (emphasis supplied) 15. In this connection, it may also be important to refer to the TRU letter dated 01.06.2012 highlighting the budget changes on the eve of the enactment of the Finance Act, 2012. The relevant portion of the letter is reproduced below: "11.2 Recovery of duty in case of instrument issued under Foreign Trade (Development and Regulation) Act: Section 28AAA has been inserted in the Customs Act through Section 122 of the Finance Act, 2012 to provide for recovery of duties from the person to whom an instrument such as credit duty scrips was issued where such instrument of law, action for recovery of duty can be initiated under the said provision. Field formations are advised to issue demands as soon as DGFT/concerned regional Autho....
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....e interests of justice, except where the person who tendered the statement is dead or cannot be found. In view of the provisions of subsection (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of sub-section (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of r....
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....ned counsel for the appellant submitted that the goods were exported on FOB and therefore, once the goods are put on board the vessel, the title of the goods is transferred to the buyer. Learned counsel also submitted that after the Let Export Order is issued, any amendment made by the Freight Forwarder cannot be attributed to the appellant as an exporter has no control over the goods and it is the responsibility of the Shipping Line to ship the goods to the foreign buyer. Learned counsel relied on the CBIC Circular dated 28.02.2015, the relevant portion of which is reproduced below: "6. In the case of clearance of goods for export by manufacturer exporter, shipping bill is filed by the manufacturer exporter and goods are handed over to the shipping line. After Let Export Order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bill is filed by the manufacturer exporter and place of removal would be this Port/ICD/CFS." 24. The submission of the learned counsel for the appellant is....
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....iii) of the Customs Act. The appellant claims that it was a bona fide exporter who exported goods in terms of the contract on FOB basis. The title of the goods passed to the buyer as soon as the Let Export Order was issued and the appellant was not responsible for any changes that may have been made in regard to the destination port. Section 114AA provides that if a person knowingly or intentionally makes, signs or uses or causes to be made, any material particular, in the transaction of any business for the purposes of the Customs Act, shall be liable to a penalty not exceeding five times the value of goods. The Principal Commissioner has relied upon the statement made under section 108 of the Customs Act that the changes were made on the instructions given by the appellant. This statement, for the reasons stated above, cannot be relied upon as evidence. Thus, penalty under section 114AA of the Customs Act could not have been imposed upon the appellant. 27. Section 114(iii) of the Customs Act provides that any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113 of the Customs Act ....