TaxTMI 
TaxTMI 
2026 (3) TMI 1326
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....nd IT - Enabled Services' classifiable under Division 84 of the UN-CPC. 2. The factual matrix of the case is that the appellant is a wholly owned subsidiary of M/s. Metric Stream, Inc, USA and is engaged in the business of providing 'Information Technology Software Services'/'IT Enabled Services' related to 'Computer Programming', 'Consultancy and related Services' in terms of the Master Service Agreement with its parent company. The appellant had filed an application under Service Export from Indian Scheme with respect to 'Marketing Support Services' provided to the parent company. Based on the investigations by DRI, it appeared that the IT services provided by the appellant were not eligible for SEIS benefit in terms of Trade Notice No.4/2018. During the course of investigation, statement of Shri Rajesh Shetty, Chief Financial Officer of the appellant was recorded under Section 108 of the Act, wherein he admitted that they were not eligible for SEIS benefits in respect of 'Marketing Support Services' provided by their company and accordingly, voluntarily made payment of SEIS duty vide challan dated July 11, 2019 along with applicable interest. As the scrips were freely transfe....
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.... have perused the records of the case, the statutory provisions and the decisions cited by both the sides. 6. The submissions of the learned Counsel for the appellant is that they had correctly declared the services rendered by them as the 'Marketing Support Services' provided by them to their parent company falling within the definition of 'Marketing, Management and Consulting Services'. The main challenge by the learned Counsel was to invocation of the provisions of Section 28AAA of the Act as the said provisions could be invoked only where the scrips are obtained by collusion, wilful mis-statement or suppression of facts. To elaborate his arguments, he has submitted that in terms of Section 9 of FT(DR)Act, 1992 read with Rule 10 of FT(R) Rules, 1993, scrips could be cancelled, (a) where such scrips are obtained by fraud or suppression of facts or mis-representation; (b) where there is breach of conditions of the scrips; (c) for tampering with the license; or (d) for contravention of provisions of Customs or FEMA. In the present case, it is clear from para-12 of the order of DGFT that the scrips have been cancelled for the reason that can....
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....r Para 9.51(i) and Para 9.51(ii) of the policy shall be eligible for SEIS benefit. The notified services and rates of rewards are listed in Appendix 3D. SEIS is a reward computed based on the 'net' free foreign exchange realized and the percentage of this reward is specified in Appendix 3D of the FTP 2015-20. Benefit allowed under this scheme is 3% to 7% (as amended from time to time) as per nature of services supplied and the Scrips can be used for the payment of Custom duties on imports, payment of excise on domestic procurement, including capital goods and payment of service tax. The duty Scrips are freely transferable. The SEIS entitlements were as per Public Notice No. 03 dated 01/04/2015 (as amended by DGFT) issued by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce on all the list of services as in Appendix 3D therein. 8.2 Further, DGFT vide Trade Notice No. 04/2018 dated 25.04.2018 has noted that "the Appendix 3D does not mention any service as IT/ITeS Service and only has a positive list of the Services, with a CPC Provisional code which has been made eligible for claiming benefit under SEIS" and also clarified that "only the service c....
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.... such other scheme bestowing financial or fiscal benefits, which may be utilised under the provisions of this Act or the rules made or notifications issued thereunder. Explanation 2. The provisions of this sub-section shall apply to any utilisation of instrument so obtained by the person referred to in this sub-section on or after the date on which the Finance Bill, 2012 receives the assent of the President, whether or not such instrument is issued to him prior to the date of the assent. (2) Where the duty becomes recoverable in accordance with the provisions of sub-section (1), the person from whom such duty is to be recovered, shall, in addition to such duty, be liable to pay interest at the rate fixed by the Central Government under section 28 AA and the amount of such interest shall be calculated for the period beginning from the date of utilisation of the instrument till the date of recovery of such duty. (3) For the purposes of recovery under sub-section (2), the proper officer shall serve notice on the person to whom the instrument was issued requiring him to show cause, within a period of thirty days from the date of receipt of the notice, as to w....
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....uences thereof follow, the provisions section 28AAA of the Act are squarely applicable." 13. The contention of the appellant that provisions of Section 28AAA could be invoked only where scrips are obtained by collusion, wilful misstatement, or suppression of facts is prima facie but DGFT has cancelled the scrips for the reason that the claim was not proper is basically wrong as DGFT had cancelled the scrips on the basis of detailed investigation by DRI that the appellant had mis-stated their export service in the application filed before DGFT and has fraudulently obtained SEIS scrips. The order of DGFT specifically records that the documents establish that the services provided actually fall under 'Software Development' which are not listed in Appendix 3-D of FTP 2015-20 and hence the service was mis-stated as 'Marketing and Management Consultancy' which do not support the eligibility to avail the SEIS benefits. In that view, the scrips were deemed to have been cancelled and the demand for duty with interest was held to be confirmed. Thus the cancellation of Scrips void ab-initio by DGFT is conclusive that the instrument was never valid. 14. In support, we would like to refer....
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.... by a specific order pursuant to the investigation conducted by DRI and, therefore, the provisions of Section 28AAA have been rightly invoked to recover the customs duty. 16. The learned Counsel for the appellant has referred to the decision of the Apex Court in Titan Medical Systems Private Limited versus Collector of Customs, New Delhi [2003 (151) ELT 254 (SC)] however, we are afraid that the said decision is not applicable in the facts of the present case. The allegation in that case were limited to the extent that the value indicated by the appellant at the time of applying for license was very large than what was actually spent. Taking note of the fact that the licensing authority have not claimed that there was any misrepresentation nor any steps were taken to cancel the license, the Court quashed the show cause notice. Here the SEIS scrips issued to the appellant have already been cancelled by the DGFT and in such circumstances department was well within its power to initiate proceedings under section 28AAA to recover the Customs duty. 17. Similarly, reference to the decision of the Delhi High Court in M/s Amit Exports and M/s. Sharma International Vs. Union of India &....
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....rity on the proper officer to question the validity of a certificate or scrip referable to the FTDR Act." 19. The Division Bench very aptly emphasised the distinguishing feature in the concluding paragraph that in the absence of DGFT having ruled upon the issue of classification or having expressed any doubt with respect to the eligibility of the petitioners to claim benefits under the MEIS, it would be wholly impermissible for the respondent to take action against the petitioners. All the other subsequent judgements have relied on this decision of the Delhi High Court to say that where DGFT has neither cancelled the instrument nor even initiated proceedings for cancellation of the instrument, the Customs Authorities will not have any jurisdiction to proceed in terms of Section 28AAA. We are, therefore of the opinion that these decisions are of no benefit to the appellant as here the scrips have already been cancelled by specific order dated March 26, 2021 passed by DGFT and which remains unchallenged. 20. The learned Counsel for the appellant has also emphasised on the principle that merely claiming a different classification does not amount to suppression of facts and has r....
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.... that the confession, though retracted, is an admission and binds the petitioner, so there is no need to call Panch witnesses for examination and cross examination by the petitioner. In fact, it was clarified that once an admission has been made by the petitioner, the denial of right to cross examine the witnesses is justified as no prejudice can be pleaded by such a party. Reference is also invited to the principle reiterated by the Supreme Court in M/s Telstar Travels (P) Ltd. versus Enforcement Directorate [2013(9) SCC 549] 22. Now coming to the confiscation of the goods under Section 111 (m) and (o) and imposition of penalty under the various provisions, we find that in case of fraudulently obtaining of scrips and utilising the same for the import availing duty exemption, the appellant tried to evade customs duty has been considered by the Tribunal in the case of Fashion Accessories and it has been concluded that the goods are liable for confiscation under the said provisions. On the same analogy, the penalty imposed under Section 112(a)(b), 114AB and 114AA of the Act were held to be correctly imposed. In the present case, the appellant had misrepresented the facts before DG....