TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1169
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....character in a member of the 'Drones Club' between the wars with time and money as no burden at all. To find like confusion, though not as extreme as that of Monty's but over distinguishing between 'dry coconut' and 'copra', in a land that, arguably, is among the largest producers of the nut, and not only third only to Indonesia and Philippines but also, together with them, source of close to three-fourths of world output, is not cause for amusement but a sad commentary on the chasm between field and file; if that be the core of the dispute as the appellants suggest. 2. Three exporters, M/s KBN General Trading Co, M/s KBN General Trading and M/s MP Impex - the latter two being proprietorship concerns and the former, comprising Maqbool Siddiq Dhoki, Arbina Maqbool Dhoki and Kapil Mahesh Kothari, a partnership firm - had been supplying 'dried coconut' to purchasers in Pakistan and earning incentives such as drawback at 1% of FOB value and scrips for 5% of FOB value under the erstwhile 'Vishesh Krishi & Gram Udyog Yojana Scheme (VKGUYS) [EXIM Policy 2009-14]' as well as the extant 'Merchandise Export Incentive Scheme (MEIS) [EXIM Policy 2015-20]' in the relevant Foreign Trade Polic....
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....rmitted to be redeemed under section 125 of Customs Act, 1962 for restoration, as in the case of the exports under shipment, or in lieu of confiscation, for past consignments. Penalties imposed on the individual-appellants for various acts of omission and commission are cause of their cavil in their respective appeals. 3. The recourse to fine in lieu of confiscation of goods exported in the past, grounded on misdeclared value and erroneous RITC, was sought to be justified by reliance on decision of the Hon'ble Supreme Court in Navayuga Engineering Co Ltd v. Union of India and Anr [(2024) 20 Centax 566 (SC)] as well as that of the Hon'ble High Court of Madras in Visteon Automotive Systems India Ltd v. CESTAT, Chennai [2018 (9) GSTL 142 (Mad)] which, according to the adjudicating authority, has the added felicity of having been referred to by the Hon'ble High Court of Gujarat in Synergy Fertichem Pvt Ltd v. [2020 (33) GSTL 513 (Guj)] but, in doing so, the judgement of the Hon'ble High Court of Bombay in Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc [(2009) 248 ELT 122] appears to have been overlooked. We entertain no doubt about that which should prevail in the ....
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.... impose redemption fine on the goods already exported without which the illegality cannot be undone. Merely because the goods are not available does not mean that their illegality is regularized.' failed in prompting such reasonableness and rationale to temper his order for recovery under section 28AAA of Customs Act, 1962 which, subject to payment of fine and according to logic of his proposition, could not have subsisted together. For the context of circumstances in which 'fine' may not be imposed, the decision in re Finesse Creation Inc offers precedent decision from jurisdictional High Court. We are, thus, required only to ascertain the propriety of recovery of the amount sanctioned as scrip in the event that exporters are held as having exported ineligible goods. 4. Owing to the re-determination of ineligibility for scrips under the schemes in the Foreign Trade Policy (FTP), access to Rs. 5,13,62,533, of Rs. 6,01,11,233 and of Rs. 6,01,11,233, sanctioned on claims of M/s KBN General Trading, M/s KBN General Trading Co and M/s MP Impex respectively, was disallowed and ordered for recovery under section 28AAA of Customs Act, 1962. From the value having been re-determined, ....
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....xtent permitted insofar as the impugned codes are concerned. 6. Furthermore, it is interesting to notice that the expansion of 'ITC' in the finding supra is not identical. Strangely, in the operational portion of the order, it is 'RITC' that has been deployed. It is highly inconceivable that these are interchangeably deployable and is manifest of lack of application of mind. 'Tariff' is of significance only to levies with its genetic trace travelling back, with legal authority too, to the Schedules to Customs Tariff Act, 1975 adopting the Harmonized System of Commodity Description and Coding of the erstwhile Customs Cooperation Council (CCN) [now World Customs Organization (WCO)] as fount owing to which the legality of 'grandfathering' the Explanatory Notes in resolving classification disputes was affirmed by the Hon'ble Supreme Court in Collector of Central Excise v. Wood Craft Products Ltd [1995 SCC (3) 454]. As to utility in deciphering the descriptions in a convenience tabulation of licencing restrictions and conditions that, while imitative of the tariff - structured for identifying goods intended to be covered in tax policy or for assessment to duty - is, yet, open territo....
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.... 1962, must bear relevancy to the context in the principal statute and not to coordinate statutes, even if concerned with the import and export, that are intended to involve other jurisdictions in concomitant or consequential processing. The test of both 'value' and 'code', declared in the impugned shipping bills, must rest entirely within the framework of section 17 and section 51 of Customs Act, 1962, and to recovery of duty by recourse to section 28 of Customs Act, 1962 and/or confiscation of goods under section 113 of Customs Act, 1962 to be extended, for the purpose of section 125 of Customs Act, 1962, or section 28AAA of Customs Act, 1962, as consequence of determination of violation of 'any other law' by the jurisdictional authority under that law. Any other interpretation would confer 'prevail over' status to Customs Act, 1962 that only specific provisioning in parliamentary enactment may. 9. From the above, we may deduce that adjudgement of the 'octopi-like tentacled' reach of customs authorities in this dispute, over recast of 'code', appended to Foreign Trade Policy (FTP), and the value of goods exported, will have to pass the test of statutory competence endowed by C....
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....chedule to Customs Tariff Act, 1975, nor does, from the facts on record, prohibition under section 11 of Customs Act, 1962 attach to either of the impugned descriptions of the goods. We are now at liberty to turn to the submissions of the respective sides. 11. Learned Counsel for the appellants submitted that the scope for invoking section 28AAA of Customs Act, 1962 had been considered by the Hon'ble High Court of Delhi in Designco v. Union of India [2024 SCC OnLine Del 8163] placing emphasis on the pre-requisite of determination of deficiency by the licensing authorities for tainted procurement or ineligibility for possession of the instrument. It was further submitted that the bar of limitation would operate against recovery under that provision in much the same manner as section 28 of Customs Act, 1962 is. Placing reliance on the decision of the Hon'ble High Court of Madras, in Kwalitee Fabs v. Commissioner of Customs, and of the Tribunal, in Aquapharm Chemicals Limited v. Commissioner of Customs (Port) [2025 SCC OnLine CESTAT 2667], in KG Exports v. Commissioner of Customs (Export) [2025 SCC OnLine CESTAT 1781] and in Pelican Quartz Stone v. Commissioner of Customs (Preventi....
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....ally examined by us. There is no question of judicial discipline in such matters. The counsel relied upon this principle of judicial discipline by inviting our attention to the judgment of the Hon'ble Rajasthan High Court in the case of Welcure Drugs and Pharmaceuticals Ltd. v. Commissioner of Central Excise, Jaipur reported in 2018 (15) G.S.T.L. 257. There, the Hon'ble Rajasthan High Court concluded that the Revenue cannot seek to urge before that High Court that the view taken by four different High Courts approving the order of CESTAT has lost its persuasive value, particularly when the Special Leave Petitions against the view taken by four different High Courts were either not filed or filed but not entertained. Thus, the Tribunals have taken a consistent view and the Revenue could not succeed in having that set aside. It is in these circumstances, the Rajasthan High Court negatived the contention of the Revenue that the Tribunal under the jurisdiction of that High Court could have distinguished the orders and judgments of its Benches. That was found to be contrary to the judicial discipline. It is in these circumstances so also when there was a Larger Bench view of the Tribuna....
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.... escape notice that 'instruments' are substitutes for payment of duty on imported goods, and in pursuance of notification issued under section 25 of Customs Act, 1962 for operationalizing schemes that incentivize exports; the exporter and the importer may not be the same with import duties recoverable in the normal course from the 'person chargeable with duty' and it is only in circumstances allowing the importer to 'pass under the bar of being chargeable to duty' that the lack of jurisdiction thereby prompts proceeding further back in time and only in circumstances of such duty not being recoverable under section 28(1) of Customs Act, 1962 or under section 28(4) of Customs Act, 1962. This is logical conclusion from the exclusion of 'importer-exporter' from the schema of section 28AAA of Customs Act, 1962. Any other course of action manifests a finding on 'instrument' having been issued by competent authority to ineligible applicant which affords latitude to the 'proper officer' under section 28 of Customs Act, 1962 to choose between one or the other by manumission of 'person chargeable to duty' arbitrarily which is fraught with scope for misapplication of law except where proceedi....
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....ority to suspend or cancel a license, certificate, scrip or any instrument bestowing financial or fiscal benefits. Once it is held that the MEIS would clearly qualify as an instrument bestowing financial or fiscal benefits, the power to cancel or suspend would be liable to be recognized as being exercisable by the Director General on the licensing authority alone. It would thus be wholly impermissible for the customs authorities to either ignore the MEIS certificate or deprive a holder thereof of benefits that could be claimed under that scheme absent any adjudication or declaration of invalidity being rendered by the DGFT in exercise of powers conferred by either Rules 8, 9 or 10 of the FTDR Rules. The customs authorities cannot be recognised to have the power or the authority to either question or go behind an instrument issued under the FTDR in law. 106. Taking any other view would result in us recognizing a parallel or a contemporaneous power inhering in two separate sets of authorities with respect to the same subject. That clearly is not the position which emerges from a reading of Section 28AAA. Quite apart from the deleterious effect which may ensue if such a posit....
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....ss Book license could not be denied by the customs authorities on the basis of their own perception on the subject of appropriate classification. The Bombay High Court had held that as long as the licensing authority had desisted from either reviewing the grant or cancelling the license, it would be wholly impermissible for the customs authorities to deprive the importer or the exporter of benefits. The view expressed by the Gujarat, Allahabad and the Bombay High Courts stands reiterated in the two subsequent decisions of Autolite and Jupiter Exports. The principles culled out in the aforenoted decisions are in line with what the Supreme Court had succinctly observed in Titan Medical Systems (P) Ltd. Vs. Collector of Customs. We are thus of the firm opinion that it would be impermissible for the customs authorities to either doubt the validity of an instrument issued under the FTDR Act or go behind benefits availed pursuant thereto absent any adjudication having been undertaken by the DGFT. An action for recovery of benefits claimed and availed would have to necessarily be preceded by the competent authority under the FTDR Act having found that the certificate or scrip had been ill....
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....ecided may be perceived only in the context of the pleas, and grounds, preferred by Revenue. We are not privy to that either. As far as we are concerned, the Tribunal has adopted a consistent view on the lack of scope for invoking section 28AAA of Customs Act, 1962 by officers of customs without the pre-requisite of determination of ineligibility of scrips by the licensing authority. 16. It is contended that the value of the exported goods was below the declared value in the shipping bills and, consequently, in exercise of powers both under Customs Act, 1962 and for the purposes of administration of the Foreign Trade (Development & Regulation) Rules, 1992, re-determination was well within the ambit of the adjudicating authority. There can be no quarrel with the authority vested in 'proper officer' of customs to re-assess duty on 'export goods'; re-assessment, however, is not an exercise in isolation-it is the re-determination of either, or both of, 'rate of duty' and 'value' of impugned goods. Rate of duty is not relevant to the present dispute inasmuch as the impugned goods do not find fitment within Second Schedule to Customs Tariff Act, 1975 for which alone access thereto is ....
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....the significantly higher value compared to the market value of goods of like kind and quality at the time of export. (c) the misdeclaration of goods in parameters such as description, quality, quantity, year of manufacture or production.' of Customs Valuation (Determination of Value of Export Goods) Rules, 2007. It is evident from the impugned order that the value has been determined from ascertainment of local prices and admissions purportedly made by deponents in statements. From the Explanation supra, there can be no doubt that the rejection must be followed by sequential progression from rule 4 to rule 7 of Customs Valuation (Determination of Value of Export Goods) Rules, 2007. Such exercise was not carried out and the findings do not establish that computed value was in accord with rule 5 of the said Rules. In the circumstances, the determination of value of goods exported and, consequential, curtailment of drawback is not tenable. It is also evident from the submission of Learned Counsel that the recovery of drawback for the period prior to October 2017 is clearly beyond the scope of empowerment under the extant rules framed under section 75 of Customs Act, 1962. ....
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....toms Tariff Act, 1975 and the value by way of lack of cause to discard - in, and after, assessment and recovery of duties foregone, by way of scrip utilization, barred thereupon by lack of voiding by the issuing authority for having been obtained by one or more of the ingredients that justifies invoking of section 28AAA of Customs Act, 1962, it is also nothing if not logical for us to examine the Harmonized System of Nomenclature (HSN) [Harmonized Commodity Description and Coding System (HS) of the WCO] for the clarity on the distinguishment between 'copra' - which the adjudicating authority insisted the export goods to be - 'dry coconut' which appellants declared in the shipping bills. In addition to the exposition, such as it is and referred supra as lacking in validation, the impugned proceedings rested upon the class of suppliers of the impugned goods - all styled as 'copra' dealers - whose use of the goods for 'oil extraction' was sure pointer to 'copra' having been shipped out instead of 'dried coconut' as the Harmonized System of Nomenclature (HSN) offers distinction from the former being 'unsuitable for human consumption' and the latter, impliedly, being fit. We do not thin....
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.....resulting from extraction of vegetable or microbial fats or oils....' corresponding to heading 2306 in the Harmonized System of Nomenclature (HSN), varieties of 'oil cakes' are clubbed together thus 'of coconut or copra' corresponding to subheading 2306 50 therein emphasizing that, no matter the disaggregation of 'coconut' and 'copra', the final form, other than of coconut kernel consumed directly, is 'oilcake' which is not exactly inedible but, despite high protein content, unsuitable for human consumption owing to high concentration of dietary fibres making it eminently useful as cattle-feed. Thus, neither consumption by humans nor deployment in oil extraction is a suitable distinction between the two. Neither do the notes in section II nor those in chapter 8, which, at subheading levels, encompasses desiccated coconut, fresh and dried coconut in 'inner shell' and 'other' fresh and dried coconut, and chapter 12, specifying 'copra', provide exclusionary advice. It is on the strength of these descriptions, unclear in distinction to the 'coconut world' which holds no commercial acknowledgment of 'dried coconut', that the adjudicating authority has ventured to suggest....