TaxTMI 
TaxTMI 
2025 (9) TMI 551
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....e Commissioner of Customs, Air Cargo Complex (Export), New Customs House, New Delhi under section 122 of the Customs Act 1962 [Act] deciding the proposals in the show cause notice dated 31.03.2008 [SCN] read with corrigendum dated 12.05.2008 and addendum dated 11.11.2008 issued by the Additional Director General [ADG] of the Directorate General of Revenue Intelligence, New Delhi [DRI]. The SCN was issued to 62 noticees and the impugned order decided the proposals in the SCN against them. These appeals filed by 21 appellants are before us; they assail the impugned order insofar as it pertains to them. The details of these are as follows: Bankers Sr.No. Appeal No. Party Name 1. C/50453/2023 Pankaj Chordia Vs. Commissioner Of Customs-New Delhi 2. C/50454/2023 Namit Gattani vs. Commissioner of Customs-New Delhi 3. C/50455/2023 Paresh Taparai vs. Commissioner of Customs-New Delhi 4. C/50456/2023 Narendra Singh vs. Commissioner of Customs-New Delhi 5. C/51730/2023 K M Ganes vs. Commissioner of Customs (General), New Delhi Chartered Accountant 6. C/50031/2023 Shri Kamlesh Khandelwal vs. Commissioner of Customs-New Delhi ....
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....ggrieved by the penalties imposed on them in the impugned order under section 114 (i) of the Act. (b) Chartered Accountant: Customs Appeal No. 50031 of 2023 is filed by Shri Kamlesh Khandelwal, Chartered Accountant on whom penalty was imposed under section 114 (i) of the Act. (c) Fifteen importers who imported goods using the DEPB scrips purchased from others. They are aggrieved by the demand of duty of customs under section 125 (2) of the Act and imposition of penalties under section 112 (a) and (b) of the Act. These are as follows: (i) Customs Appeal No. 51282 of 2023-Shri Sicpa India Pvt Ltd. vs. Commissioner of Customs ACC (Export), New Delhi. (ii) Customs Appeal No. 51313 of 2023-Baboo Ram Hari Chand vs. Commissioner of Customs, New Delhi. (iii) Customs Appeal No. 51314 of 2023-KLJ Polymers & Chemicals Ltd. vs. Commissioner of Customs, New Delhi (ACC Export). (iv) Customs Appeal No. 51315 of 2023-Micro Systems vs. Pr. Commissioner of Customs (Air Cargo Import), New Delhi. (v) Customs Appeal No. 51316 of 2023-Garg Polyspin Pvt. Ltd. vs. Pr. Commissioner of Customs (Air Cargo Import), New Delhi. (vi) Customs....
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....red in the goods which are manufactured and exported. Drawback is given either as per All Industry Rates [AIR] or as per Brand Rates. There is also a scheme of drawback of customs duty if imported goods are re-exported which is not relevant for to these appeals. Since drawback is a reimbursement of taxes, viz., excise duty, service tax and customs duty incurred on the inputs, one way is to actually calculate the amount of taxes and duty suffered and fix a drawback rate accordingly. This method is called the brand rate. The manufacturer who exports goods applies for a brand rate for his product and the drawback directorate fixes the rate of drawback for his particular goods. 6. For vast majority of the general goods, however, rates are fixed based on the average incidence of duties and taxes on the inputs and such rates are called AIR for drawback. These are usually indicated as a percentage of the Free on Board [FOB] value of the goods. The drawback schedule gives out the AIR for different categories of goods. Even if there is an AIR for goods, if a manufacturer had incurred more duties and taxes than what is provided for by the AIR, he may apply for a Special Brand Rate for his....
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....claring them to be goods manufactured without availing CENVAT credit in order to avail drawback as per higher AIR of drawback. Some inquiries were also conducted regarding the identity of the overseas buyers and they were also found to be non-existent in certain cases. 10. In view of the above, the conclusion of the DRI's investigation was that the three exporters - Minakshi, JAY ESS and Kanishka had mis-declared in Annexure I & II filed along with shipping bills and thereby availed ineligible drawback which was recoverable from them. 11. DRI also investigated the BRCs which the exporters had submitted and found that in many cases the foreign currency was deposited in their accounts by the exporters themselves claiming it to have been received through passengers' CDF. The currency so deposited was shown as remittances for the exports. Based on these deposits BRCs were issued by bankers. 12. DRI inquired into the CDF and the Foreign Exchange Management Regulation Act [FEMA] and the RBI Regulations and came to the conclusion that the exporters had, in violation of the RBI guidelines and the FEMA Regulations, deposited the foreign currency and obtained BRCs. The conclusion of....
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..... However, these scrips were issued neither by the Commissioner who adjudicated the matter nor by the ADG DRI who issued the SCN. They were issued by the DGFT. If at all, anything was found during the investigation by DRI which led it to conclude that the DEPB scrips were obtained from DGFT through fraud or mis-declaration, the proper course of action would have been to refer the matter to DGFT who could have taken a decision on whether the scrips were correctly issued or not. Nothing in the Customs Act gives either the ADG DRI or the Commissioner of Customs or any other Customs Officer the power to declare the DEPB scrips issued by the DGFT null and void. 18. The Foreign Trade (Development and Regulations Act, 1992) [FTDR Act] and the Rules made thereunder and the Foreign Trade Policy [FTP] also do not given either the DRI or the Commissioner of Customs the power to nullify or negate any scrips issued by the DGFT. Neither ADG, DRI who issued the SCN nor the Commissioner of Customs who passed the impugned order has any appellate or revisionary jurisdiction over the scrips or licences issued by the DGFT. 19. This issue was discussed at length by a bench of this Tribunal in M/s....
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.... a valid licence/DEPB issued by the licensing authority and presentation of the same at the time of import of the goods and at the time of filing the Bill of Entry. 32. The position would be totally different if the licence/DEPB scrip or TRAs have not been issued by the DGFT and the same have been found to be fake or forged. In such a situation, customs duty exemption would not be available either to the original licence holder or to the transferee importer". (emphasis supplied) 20. Therefore, even if the DEPB scrips were obtained by fraud or mis-representation, they were voidable by the DGFT which issued them; they were not void. DGFT did not void them. DRI decided on its own that they were ab intio null and void and issued the SCN and the Commissioner agreeing with it confirmed the demand of duty from the importers. Clearly, both the SCN as well as the impugned order were issued without authority of law in declaring the scrips issued by DGFT. The demand of duty under section 125 (2) 21. Section 125 of the Act provides for an option to pay fine in lieu of confiscation of goods. The adjudicating authority who confiscates the goods under the Act may, in ca....
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....ine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges, payable in respect of such goods. (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. Explanation. - For removal of doubts, it is hereby declared that in cases where an order under sub-section (1) has been passed before the date on which the Finance Bill, 2018 receives the assent of the President and no appeal is pending against such order as on that date, the option under said sub-section may be exercised within a period of one hundred and twenty days from the date on which such assent is received." 22. As can be seen section 125(2) of the Act is not a section under which duty can be demanded. Duty can be demanded only under section 28 of the Act. Section 125 only requires the adjudicating authority to provide an option to pay fine in lieu of confiscation. It is open to the owner of the goods, ....
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....dited as duty and remaining amount as credited as sale proceeds of the goods. 27. What section 125 contemplates is the situation where the goods are confiscated by the officer thereby vesting them in the Central Government and thereafter the owner of the goods, exercises an option to pay fine in lieu of confiscation. Once he pays the redemption fine under section 125, the goods can be redeemed and will no longer be the property of the Government but will became the property of the owner who redeemed the goods. In such case, if the goods are still to be cleared or some duty and other charges are payable on such goods, as per section 125 (2), the owner of such goods will have to also pay the duty. 28. There are some situations when redemption fine is recoverable from the person without he actually opting for such redemption. This happens in situations when goods were initially seized but were provisionally released on bond to the owner of the goods pending adjudication by the adjudicating authority. In such cases, the terms of the bond include that if the goods are finally confiscated, the owner of the goods would pay a fine in lieu of such confiscation. Therefore, in such an a....
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....ision of the DGFT and hold that the DEPB scrips were ab initio null and void. Therefore, the order of the Commissioner that the imported goods were liable to confiscation under section 111(d) and (o) (although he did not actually confiscate the goods or impose a redemption fine) cannot be sustained and deserves to be set aside. Consequently, the penalties imposed on the importers under section 112 (a) and(b) also cannot be sustained and, therefore, they need to be set aside. Bank Realization Certificates 31. It is the finding of the Commissioner and the allegation in the show cause notice that the exporters had obtained BRC from the banks without actually receiving the remittances through the banking channels. Instead, the exporters themselves had deposited the foreign currency in their own bank accounts and obtained the BRC. The foreign currency was deposited, according to the SCN, under the cover of several CDFs by the exporters. 32. At this stage, it would be pertinent to discuss what a CDF or the currency declaration form is. As per the FEMA, the Reserve Bank of India has the power to regulate the movement of the foreign currency into and outside India. RBI issued Fore....
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....hat BRCs were wrongly issued by the officials of the bank violating the guidelines/rules issued by RBI, it could have referred the matter to the RBI to consider and take appropriate action and also determine whether the BRCs issued by the banks were valid as per RBI guidelines or otherwise. 35. Instead, the ADG DRI and the Commissioner of Customs assumed the power to determine if the BRCs were correct or not without any authority of law. A few illustrations will make the position clear. 36. If, during the course of investigation of any case, the SHO of a Police Station, realizes that someone had smuggled gold into India, it is his duty to transmit that information to the customs authorities for appropriate action. He cannot step into the shoes of the Assistant Commissioner of Customs and confiscate the gold. 37. Similarly, if a Bank Manager, while processing papers related to an import, finds that the customs officers had cleared the goods in the Bill of Entry based on some mis-representation by the importer say, a wrong invoice, he can pass on that information to the Customs Officer for appropriate action. However, he cannot nullify or negate the clearance of the Bill of ....
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....ion; (k) any dutiable or prohibited goods imported by land in respect of which the order permitting clearance of the goods required to be produced under section 109 is not produced or which do not correspond in any material particular with the specification contained therein; (l) any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77; (m) any goods which do not correspond in respect of value or in any other particular] with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54; (n) any dutiable or prohibited goods transited with or without transhipment or attempted to be so transited in contravention of the provisions of Chapter VIII; (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in fo....
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....ion 113. The specific action of the bank officers is the issuance of BRCs violating RBI regulations. This penalty cannot be sustained, firstly for the reason that the ADG, DRI who issued the SCN or the Commissioner who issued the impugned order had no authority of law to decide the validity of the BRCs. Secondly, as per section 113 certain export goods are liable to confiscation and not exported goods. Export goods, as per section 2(19) of the Act, means any goods which are taken out of India to a place outside India. In other words, they are goods which are yet to be exported. The goods which have already been exported are not export goods as per section 2(19). Therefore, such goods are not liable to confiscation under section 113. In this case, even as per the allegations in the SCN, the goods had already been exported. Remittance for the goods so exported comes much at a later date. Goods will not became liable for confiscation under section 113 after they have been exported even if the remittance for the goods so exported have not been received or have not been received correctly. Therefore, the goods which have already been exported cannot be confiscated at all. Since section ....