TaxTMI 
TaxTMI 
2025 (6) TMI 368
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....section 114(iii) and section 114AA of the Customs Act. The amount of drawback under rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 has been dropped. 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 with Lagoon Trading LLC, Lagcy Trading LLC, and Royal Readymade Garments based in U.A.E. 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 responsible for undertaking shipping as per the instructions of the buyer. According to the appellant, the buyer used to instruct the ap....
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....sued inter alia proposing to demand ineligible benefit availed under the FMS equivalent to Rs. 1,58,44,432/- under section 28AAA of the Customs Act with interest. It also proposed to impose penalties under sections 114AA and 114 (iii) 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. 1,58,44,432/- with applicable interest; (c) Dropped the demand of Duty Drawback; (d) Penalty on the appellant under sections 114AA and 114(iii) of the Customs Act. 10. Mr. Naveen Bindal, learned counsel for the appellant 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 made only after the Directorate General of Foreign Trade DGFT, which is the concerned regional authority, initiates action for cancellation of the instrument but adjudication can take place only after the instrument has been cancelled by DGFT. In the present case, t....
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....at 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 of invalidity by the DGFT. The relevant portion of the judgment of the Delhi High Court is reproduced below: "104. As we read the various provisions enshrined in the FTDR Act alongside the FTP as well as the FTDR Rules, we find ourselves unable to recognize a right that may be said to inhere in the customs authorities to doubt the issuance of an instrument. We, in the preceding parts of this decision, had an occasion to notice the relevant provisions contained in the FTDR Act and which anoint the DGFT as the central authority for the purposes of administering the provisions of that statute and regulating the subject of import and exports. The FTP 2015-20 in unequivocal terms provides ....
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....ld 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 agents simultaneously evaluating and adjudging the validity of an instrument which owes its origin to the FTDR Act alone. It is these factors, as well as the role assigned to the DGFT which perhaps weighed upon courts to acknowledge its position of primacy when it come to the interpretation of policy measures referable to the FTDR Act as well as issues of classification emanating therefrom. 108. This clearly flows from what our High Court held in Simplex Infrastructure when it approved the view expressed by the Gujarat High Court in Alstom India and which had held that export benefits claimed and enjoyed pursuant to approvals granted as per the provisions of the FTDR Act could not be review....
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....: "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 Authority initiates action for cancellation of an instrument but the matter may be decided only after the instrument has been cancelled by DGFT." (emphasis supplied) 16. The impugned order, therefore, is without jurisdiction as the DGFT has neither cancelled the instrument nor even initiated proceedings for cancellation of the instrument. 17. This apart, the impugned order has relied upon the statement of Imran Mirza, the proprietor of the Freight Forwarder, that the manual amendments in the copies of the shipping bills were made by him in his own handwriting on the directions of the appellant and that to endorse the said manual amendments, he had forged the signatures of the Customs Supe....
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....g 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 relevance for the purpose of proving the facts which they contain." 20. After examining various judgments of the High Court and the Tribunal, the Tribunal observed as follows: "28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable, then the statements made under section 14 of the Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only whe....
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....g 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 partly true. Insofar as the transaction between the exporter and the overseas buyer is concerned, if the goods are sold on FOB basis, the title shifts to the buyer. It is also true that once the Let Export Order is issued, the exporter may not have control over the goods. However, it also needs to be noted that insofar as the scrips under the Focus Market Scheme are concerned, the exporter will be entitled to these scrips if and only if the goods reach the destination market and not otherwise. The only beneficiary under this Scheme is the exporter. It is not the overseas buyer or the freight forwarder or the Shipping Line. Paragraph 3.20.3 of the Handbook of Procedu....