2009 (6) TMI 871 - AT - Customs

DEPB scheme - valuation - gross over-invoicing of exports - confiscation - redemption fine - penalty -

Summary

Issues Involved:
1. Allegation of over-invoicing of exports by M/s. Swati Industries.
2. Denial and recovery of DEPB benefits.
3. Confiscation of goods and imposition of penalties.
4. Validity of confessional statements and their retraction.
5. Legal authority for recovering DEPB benefits in cash from the exporter.

Detailed Analysis:

1. Allegation of Over-Invoicing of Exports by M/s. Swati Industries:
The primary allegation against M/s. Swati Industries was that they indulged in over-invoicing their exports to fraudulently avail higher benefits under the DEPB scheme. The Directorate General of Revenue Intelligence (DRI) conducted searches and inquiries, leading to statements from the partners and employees of M/s. Swati, admitting to over-invoicing. However, the Tribunal found that the market inquiry conducted did not conclusively support the allegation of over-invoicing. The declared FOB value was within the permissible limits, and no contemporaneous exports at lower prices were evidenced.

2. Denial and Recovery of DEPB Benefits:
The Commissioner denied DEPB benefits amounting to Rs. 47,91,107/- and ordered its recovery in cash, including the appropriation of Rs. 25,00,000/- already deposited by M/s. Swati. The Tribunal found that neither the show cause notice nor the adjudication order specified the legal provision under which this recovery was sought. It was noted that the Customs Act, 1962, does not provide for the recovery of DEPB benefits in cash from the exporter if the DEPB scrips have been transferred to others. The Tribunal cited previous decisions supporting this view and held the demand illegal.

3. Confiscation of Goods and Imposition of Penalties:
The Commissioner ordered the confiscation of goods valued at Rs. 2,73,79,457/- and imposed penalties on the partners of M/s. Swati. The Tribunal found no basis for the confiscation or penalties, as the evidence of over-invoicing was not substantiated. The market inquiry did not conclusively prove over-invoicing, and the declared FOB values were within the permissible limits.

4. Validity of Confessional Statements and Their Retraction:
The confessional statements of the partners and employees of M/s. Swati were retracted, claiming they were obtained under duress and threat of arrest. The Tribunal considered the circumstances, including the freezing of the bank account, and found the retractions credible. The Tribunal referred to the Supreme Court's rulings, emphasizing that confessions obtained through threat or coercion are not admissible. The Tribunal concluded that the statements were not voluntary and lacked probative value.

5. Legal Authority for Recovering DEPB Benefits in Cash from the Exporter:
The Tribunal highlighted that the Customs Act, 1962, does not authorize the recovery of DEPB benefits in cash from the exporter if the scrips have been transferred. The Tribunal stated that the Customs Authorities could pursue the cancellation of DEPB scrips with the DGFT but could not recover the duty from the exporter. The Tribunal set aside the demand of Rs. 47,91,107/- as illegal and without authority.

Conclusion:
The Tribunal allowed the appeals filed by M/s. Swati and its partners, setting aside the confiscation of goods, penalties, and the demand for recovery of DEPB benefits in cash. The Tribunal emphasized the lack of conclusive evidence for over-invoicing and the inadmissibility of coerced confessional statements.