AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 1806
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....CG Licence No. & Date Bill of Entry No. & Date Value of imported capital goods (Rs.) Duty Foregone (in Rs.) 1 (i) 3530002103 dated 07.11.2006 (i) 399894 dated 21.11.2006 2,34,18,444 66,87,709 2 (ii) 3530002105 dated 07.11.2006 (ii) 399653 dated 16.11.2006 1,04,02,288 29,88,418 (iii) 353987 dated 11.12.2006 3 (iii) 3530002669 dated 07.06.2007 (iv) 493028 dated 27.06.2007 4,36,571 1,12,903 4 (iv) 3530002608 dated 30.04.2007 (v) 410818 dated 14.05.2007 1,95,73,800 44,52,236 TOTAL 5,38,31,103 1,42,41,266 3. Appellant got the imported goods cleared from Customs on execution of bond binding the Appellant to pay the differential duty with interest in case the export obligation stipulated under the said notification was not fulfilled. In terms of the condition stipulated in the four EPCG licences, the Appellant was required to export goods valued at Rs. 11,39,30,128/- to fulfill the export obligation. 4. The officers of Directorate of Revenue Intelligence (hereinafter referred to as "DRI") gathered specific intelligence that the Appellant has fraudulently obtained Export Obligation Discharge Ce....
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....1.12.2006 and 410818 dated 14.05.2007; iv. demand the differential duty amounting to Rs.1,41,28,363/- (Rupees One Crore Forty One Lakhs Twenty Eight Thousand Three Hundred and Sixty Three only) in respect of goods imported vide the said 4 bills of entry Nos. 399894 dated 21.11.2006, 399653 dated 16.11.2006, 353987 dated 11.12.2006 and 410818 dated 14.05.2007 along with appropriate interest in terms of condition No. 2 & 4 of the notification No. 97/2004-Cus. dated 17.09.2004 read with Section 143(3) of the Customs Act, 1962; v. hold the impugned goods imported and cleared vide the said 4 bills of entry Nos. 399894 dated 21.11.2006, 399653 dated 16.11.2006, 353987 dated 11.12.2006 and 410818 dated 14.05.2007, with a total assessable value of Rs.5,33,94,532/-, liable for confiscation under Section 111(d) and 111(o) of the Customs Act, 1962 and impose penalty on the Appellant under Section 114A and also under Section 114AA of the Customs Act, 1962 separately; vi. adjust the amount of Rs.1,41,28,363/- (Rupees One Crore Forty One Lakhs Twenty Eight Thousand Three Hundred and Sixty Three only) already paid by the Appellant voluntarily, against the liabilities ar....
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.... ii. Held that the cancellation of the bond executed by the Appellant at the time of import with the Office of the Commissioner of Customs, Custom House, Tuticorin and Office of the Commissioner of Customs, Custom House, Chennai against the above four EPCG Licences as null and void for the reason that the EODCs were obtained by fraudulent means and for non-fulfillment of the conditions of the bond under Section 143(3) of the Customs Act, 1962; iii. denied the concessional duty exemption benefit claimed for the said four EPCG Licences of the Appellant and availed under the Customs Notification No. 97/2004-Cus dated 17.09.2004 in respect of the bills of entry Nos. 399894 dated 21.11.2006, 399653 dated 16.11.2006, 353987 dated 11.12.2006, 410818 dated 14.05.2007 and 493028 dated 27.06.2007; iv. ordered the Appellant to pay the differential duty amounting to Rs.1,12,903/- (Rupees One Lakh Twelve Thousand Nine Hundred and Three only) pertaining to the one Bill of Entry No. 493028 dated 27.06.2007 filed at Custom House, Chennai and Rs.1,41,28,363/- (Rupees One Crore Forty One Lakhs Twenty Eight Thousand Three Hundred and Sixty Three only) pertaining to the four bills....
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....khs only) under Section 114AA ibid on the Appellant in respect of imports made through Tuticorin Customs Commissionerate. 8. The appellant has preferred the present appeal assailing the impugned order dated 31.03.2017. 9.1 The Ld. Advocate Mr. Mayavan Gopinath appeared and argued for the Appellant and submitted that the Appellant had already paid the duty along with interest against EPCG License No. 3530002608 dated 30.04.2007 and acknowledgement has been received from Customs and as regards EPCG License No. 3530002669 dated 07.06.2007, the Appellant settled the dues under Amnesty Scheme as per Public Notice No.2/2023 dt. 01.04.2023 issued by the DGFT, New Delhi for a total value of Rs. 54,81,901/- and the Regional Authority, Coimbatore had also issued Final Duty paid Regularisation Letter dt. 03.11.2023 and therefore, these two Authorisations and relevant findings of the LAA in the impugned order may be deleted in the Appeal Proceedings and the Appellant withdraws its pleadings before this Tribunal, and resultantly this appeal proceedings may be restricted to the issues of facts and law against the two licenses Nos. 3530002103 & 3530002105 both dated 07.11.2006. 9.2 He co....
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....utes dt. 18.06.2015 of the high-level meeting of the DGFT and DRI on the issue of Third-Party Exports. Thereafter, the DGFT reviewed the Third-Party Exports under EPCG Scheme and also amended the HBP vide para 5.10(d) thereof by incorporating new conditions thereby regulating the Third-Party Exports for an orderly and seamless exports without any confusion. As many export trade bodies including FIEO raised doubt about the applicability of para 5.10(d) of Hand Book on third party exports, the DGFT intervened and subsequently issued a Policy Circular No.3/2015-2- dt. 02.09.2015 making the issue abundantly clear and putting the controversy on Third Party Exports to rest. In other words, the provisions on Third Party Exports that existed before 31.03.2015 under para 9.62 would remain unaltered and the amended version under para 5.10(d) of HBP would be applicable from 01.04.2015 onwards only. v. Subsequently, the JDGFT, Madurai had restored the EODC Order dt. 15.07.2014 vide its Order dt. 02.06.2016 issued from F.No.35/DRI/EPCG/AM16/3275. Thus, the entire process of enquiry by an SCN, Adjudication, Appellate Proceedings and restoration of EODC order confirm that the sponsoring ....
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....eas the domestic turnover of the Appellant for AM-13 & AM-14 stood at Rs.55.67 Cr. and 54.31 Cr. He averred that when the domestic turnover of Cotton Yarn at Rs.54.31 Cr. was higher than the export turnover during the relevant period of exports, it is fully covered under the Minutes of the high-level meeting dt. 18.06.2015 which took a liberal view that the goods have been manufactured using the imported capital goods but exported within that turnover even through Third Party Exports. 9.8 He argued that there is no revenue loss or even double benefit availed by either the Appellant or the Third-Party Exporter in the export obligation completed by the Appellant against the two EPCG licences for the following reasons: - i. The LAA has not highlighted any evidence of double benefit against the 24 Shipping Bills of Exports taken in to account by the Joint DGFT, Madurai while issuing the EODC dt. 15.07.2014. ii. The ultimate Third-Party Exporters of the licensee have not availed similar benefits under EPCG Scheme for those shipping bills accounted for in the export obligation of the license against the two EPCG Licenses bearing Nos. 3530002103 and 3530002105 both da....
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....12 (281) ELT 241 (TriMum.)] 9.12 On the issue of penalty, the Ld. Advocate submitted that the Appellant had availed third party export benefit under the bonafide belief that they were eligible as per the existing policy and procedures that existed before 14-2015 and similar such benefits were also availed by all the exporters holding EPCG licenses in the country. In this regard, he relied on the judgment of Hon'ble Supreme Court in the case of Bata India Ltd., vs CCE, Bangalore [Civil Appeal No. 6010 of 2014 decided on 15.04.2015] to submit that wherever exemptions are availed under bonafide belief, no penalty can be imposed against such assessee. 9.13 He further submitted that the mandate for third party export transaction under EPCG licence that existed before 01-04-2015 had some ambiguity and this was later on corrected in the HBP vide para 5.10(d) and in such a fluid conditions of the procedures, no penal action can be contemplated whatsoever as held by the Hon'ble Supreme Court in the case of CCE, Jaipur vs Shree Rajasthan Syntex Ltd. [2015 (318) ELT 626 (SC)] which is squarely applicable to the Appellant's case where the legal position and interpretation of the un-amend....
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....d.; Shri Shisir Choudhary, Authorised Signatory of M/s. Kewalram Textiles P. Ltd. and Shri Ashok Ojha, authorised signatory of M/s. Damodhar Industries Ltd. as evident from the statements made by all the persons mentioned above read with the e mail printouts showing transaction of the documents with Shri Kishore and service bills raised by M/s. Nandkishore Impex, Tirupur which were seized from the Appellant vide Mahazar dated 07.04.2015. 10.4 She contended that the Appellant had violated FTP 2002-2007, in as much as Chapter 5 of the Policy stipulates that export goods should have been manufactured by the EPCG license holder or specified Supporting Manufacturer in case of Merchant Exporter, that the goods so produced can be exported directly or through the third party. If the Merchant Exporter is the importer of Capital Goods, the name of the supporting manufacturer is to be indicated in the shipping bills, but in such cases conditions provided in the condition sheet makes it explicitly clear that the authorization holder shall fulfil the obligation imposed on the authorization and discharge the stipulated EO through the capital goods installed in the supporting manufacturer's fa....
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....d AR reiterated that DGFT vide order dated 11.4.2016, while setting aside the Order-in-Original of DGFT Madurai dated 03.11.2015 had said that: ".....as the provisions under Customs Act, 1962 and FT (D&R) Act, 1992 operate independently, DRI / Customs could have proceeded against the party based on the evidences available with them, under Customs Act, 1962 as the EODC had already been discharged under FTP/HBP". 10.9 It was further submitted by Learned AR that the CA had agreed in his statement that he had certified Form ANF 5B and Appendix 26A for the said EPCG Licenses without verifying the ledger accounts and hence, as mentioned above, the EODCs are obtained by submitting falsified documents containing Shipping Bills of unrelated exporters which contained the endorsement of impugned License number, which are not at all manufactured by using the capital goods imported vide the impugned EPCG Licenses. She submitted that the Appellant have mis-used the Customs Notification No. 97/2004 dated 17.09.2004, read with Customs Circular No. 30/2005 dated 12.07.2005 and discharged the bond executed with the Commissioner of Customs, citing the falsified/impugned EODC and therefore....
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....ns of the FTP and Customs Notification. This Circular issued for regularising the exports already made as a measure of regularising the Exports which is squarely applicable to the facts and circumstances of the Appellant. Hence, this Circular does not support the revenue's stand. [Emphasis Supplied] iv. That the Department has not come out with new findings on the violation of Customs Notification No. 97/2004 and para 9.62 of the FTP on Third Party exports especially when the Shipping Bills shown in the EODC orders contained the name of the Appellant company along with its EPCG Licence number which is not in dispute at all even in the O-I-O and in the Appellate Order dt. 11.04.2016 of the Addl. DGFT, New Delhi issued u/s. 15 of the FT [D&R] Act, 1992 restoring the EODC order dt. 15.07.2014 by the JDGFT, Madurai who had earlier cancelled the same pending preliminary enquiry. v. That the case laws relied by the department are not applicable to the facts and circumstances of the applicant in view of the settled principles of law highlighted in the written submissions filed in the Memorandum of Appeal. vi. That the ratio of the Judgements of the Trib....
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....and Commissioner of Central Excise, Jaipur Vs. Shree Rajasthan Syntex Ltd - 2015 (318) E.L.T. 626 (SC) and other case laws circulated which would prove that the case laws relied by the department would have no relevance in the case of the Appellant. That the Policy Circular No. 3/2015-20 dt. 02.09.2015 quoted above has put an end to all such issues by the DGFT Authorities and hence, no further proceedings would survive in a relief-oriented orders of the DGFT which is also supported by the Circular No. 120/1995 dt. 23.11.1995 of the Customs quoted above. ix. As desired by the Tribunal, copy of two shipping bills filed wherein the name of the Appellant and its EPCG License number are mentioned satisfying the stipulations of FTP vide Para 9.62 and the Customs Notification No. 97/2004 vide Para 4c thereof. x. Neither the FTP vide Para 9.62 nor the Customs Notification No. 97/2004 have been violated by the Appellant. This is the undisputed facts of the case. The counter of the department does not have any merit both on facts and in law. 12. We have carefully heard both sides and examined the appeal records and considered rival submissions of the appellant and the Re....
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....ty Commissioner of Customs or Assistant Commissioner of Customs binding himself to fulfil export obligation on FOB basis equivalent to eight times the duty saved on the goods imported as may be specified on the licence, or for such higher sum as may be fixed by the Licensing Authority, within a period of eight years from the date of issue of licence, in the following proportions, namely :- S. No. Period from the date of issue of licence Proportion of total export obligation (1) (2) (3) 1. Block of 1st to 6th year 50% 2. Block of 7th to 8th year 50% Provided that where the duty saved is not less than Rs. 100 crores, or where the licence is issued to units in the agri export zone as may be notified by the licensing authority, the export obligation shall be fulfilled within a period of twelve years from the date of issue of licence in the following proportions, namely :- S. No. Period from the date of licence Proportion of total export obligation (1) (2) (3) 1. Block of 1st to 10th year 50% 2. Block of 11th and 12th year 50% .... .... .... 3. Where the goods specified i....
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....made by an exporter or manufacturer on behalf of the licence holder by exporting the same product and in such cases, inter alia the shipping bills shall indicate name of both the third party and the licence holder; or (d) making supplies of manufactured product in terms of paragraph 5.4 of the Foreign Trade Policy; or (e) export of other goods manufactured by the importer; (ii) in relation to importers rendering services, means, receiving payments in freely convertible foreign currency for services rendered through the use of capital goods: Provided that in respect of units holding licence both as manufacturer- exporter and service provider, the export obligation may be fulfilled either by export of products specified in sub-clause (i) or by receiving payments in freely convertible foreign currency for services rendered through the use of such capital goods. Provided further that in respect of Group Company as defined in paragraph 9.28 of the Foreign Trade policy where licence has been issued to any one of such Group Company, the export obligation may also be fulfilled by export of manufactured goods by any other company(s) belonging to ....
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.... 4 EPCG licenses, though they had no business transactions with the actual exporters and thus, the Appellant fabricated the declarations and undertakings submitted for obtaining EODC before the JDGFT Office, Madurai. iii. It was further alleged that the appellant has indulged in a conspiratorial arrangement for obtaining Shipping Bills and submitting before DGFT to get the EODC with one Kishore, FT Consultant of Appellant and MD of M/s. Nandhshiv Impex P. Ltd., along with K.Veeramani, Finance Manager of Appellant, Shri Somasundaram, GM of M/s. Thirumathi Muthamal Textiles, Viralimalai; Shri S. Suresh Kr, Chartered Accountant of Appellant; Shri Pitcaimani, ED of M/s. Palani Vijay Cottspin P. Ltd.; Shri Shisir Choudhary, Authorised Signatory of M/s. Kewalram Textiles P. Ltd. and Shri Ashok Ojha, authorised signatory of M/s. Damodhar Industries Ltd. as evident from the statements made by all the persons mentioned above read with the e mail printouts showing transaction of the documents with Shri Kishore and service bills raised by M/s. Nandkishore Impex, Tirupur which were seized from the Appellant vide Mahazar dated 07.04.2015. iv. Thus, the Appellant had violated F....
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.... filing for EODC shows that the goods exported by the third-party should be manufactured by License Holder using the capital goods imported against the EPCG License. x. The NOC by the third-party exporter at the time of filing for EODC shows that the third-party exports shown towards fulfillment of Export Obligation against EPCG Licenses should be manufactured by using the Capital Goods imported under the said Licenses. xi. DGFT vide order dated 11.04.2016, while setting aside the Order-n-Original of DGFT Madurai dated 03.11.2015 had said that ".....as the provisions under Customs Act, 1962 and FT (D&R) Act, 1992 operate independently, DRI / Customs could have proceeded against the party based on the evidences available with them, under Customs Act, 1962 as the EODC had already been discharged under FTP/HBP". xii. The CA had agreed in his statement that he had certified Form ANF 5B and Appendix 26A for the said EPCG Licenses without verifying the ledger accounts and hence, the EODCs are obtained by submitting falsified documents containing Shipping Bills of unrelated exporters which contained the endorsement of impugned License number, which are not at al....
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....rted capital goods are meant to manufacture 'yarn' as is the case here, by export of 'yarn', the license holder can discharge his export obligation. As we read the Notification, there is no implicit condition that the 'yarn' has to be manufactured only by the capital goods imported and not by other similar capital goods. The words 'same products capable of being manufactured' is significant. ii. export of same products manufactured in different units of the license holder or iii. through third party exports which are made by an exporter or a manufacturer on behalf of license holder (Appellant) by exporting the same product and in such cases, the shipping bills shall indicate the name of both the third party and the license holder. The words "Same product to be exported on behalf of the license holder" has been interpreted by the Department that "same product" means that which is manufactured only by imported capital goods leading to the dispute in this appeal. Thus, from the above, it emerges that in case of third party exports what is essential is the shipping bills shall indicate the name of both the third party, the license number and name of the license hol....
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.... nor did he consider the clarification issued by DGFT vide Policy Circular No. 3/2015-20 dated 02.09.2015. The adjudicating authority should have referred the matter to DGFT Headquarters before re-opening the closed (EO discharged) case. It can, therefore, be concluded that the RA, Madurai took the decision of opening the case based on preliminary report of DRI without waiting for the outcome of the DRI investigation. 6. Further as the provisions under the Customs Act, 1962 and FT(D&R) Act, 1992, operate independently, the DRI/Customs could have proceeded against the party based on the evidence available with them, under the Customs Act, 1962 as the EODC had already been discharged under FTP/HBP. 7. THE Hon'ble SUPREME COURT OF INDIA in its order dated 27.10.2015 in Civil Appeal Nos. 554, 658, 1587, 1589 of 2006, an Writ Petition (Civil) Nos. 27 of 2008, 343 of 2009, 246 of 2010 in appeal filed by DGFT and others in the matter of Kanak Exports and Ors., inter-alia stated as under: "108. We may, in the first instance, make this legal position clear that a delegated or subordinate legislation can only be prospective and not retrospective, unless rule ma....
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.... 6 After hearing the exporters Dr. John Joseph, Additional Director General DRI (Hqrs.) stated that DRI takes action only if Capital Goods are not installed or sold out and if there is forged shipping bills/documents submitted for discharge of Export Obligation. However, ADG, DRI assured the representatives that concerned DRI officers in Coimbatore will be advised suitably. He further advised the exporters to approach ADG(DRI), Chennai in case of undue harassment, who will definitely look into the matter or they may write to him directly. 7. The DGFT opined that some exporters have used forged shipping bills for issue of EODC which came to the notice of DRI. He was sure that most of the exporters were clean but there are a few black sheep who do not abide by the law of the land and it is because of them that the bonafide exporters also suffer. He advised the trade bodies to identify the unscrupulous elements and take suitable action against such exporters (including termination of their membership) so that bonafide exporters do not suffer. 8. After deliberation the following decisions were taken: i. DRI should not pass any oral instructions to the EPCG au....
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....ing manufacturer for fulfillment of the export obligation against the EPCG authorization in question. (ii) Proof of having dispatched the goods from authorization Holder's factory premises to the ultimate exporter/port of export viz. (a) ARE 1 certificate issued by Central Excise / Tax invoice for export prescribed under the GST rules with due authentication by the Customs verifying the exports along with the shipping bill number, date and EPCG authorization number or (b) Invoice duly incorporating the relevant EPCG authorization number & date at the time of dispatch in case the unit is not registered with Central Excise / GST. (iii) Lorry Receipt (LR) /Logistical evidence for transportation of goods from the premises of the authorization holder to the third party/port of export. (iv) An undertaking from the 3rd party on a stamp paper, declaring that the products exported for fulfillment of EO by them on behalf of the license holder as per details given in the statement of exports, were manufactured by the license holder. (v) Financial evidence for having received proceeds through normal banking channel from third party exporter's account to the ....
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....oms department does not have any jurisdiction to sit in judgment over the EODC issued by the DGFT. 21. To support this contention learned counsel placed reliance upon the decision of the Supreme Court in Titan Medical Systems and the decision of the Delhi High Court in Design Company. 22. In Titan Medical Systems the Supreme Court held: "13. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement, for issuance of a licence, that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing au....
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....ve 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 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." 29. In view of the similarity of the issue dealt in the above case and the present case, the ratio of th....