2017 (3) TMI 1631 - AT - Customs

DEPB claim - denial on the ground that the article consisting of Steering and Shaft is a composite article and there is no entry under the DEPB scheme for the shaft and therefore, in terms of para 11 of the General Instructions for the DEPB rates, the DEPB claim has been denied - Held that - in terms of clause 11 of the General Instructions for the DEPB rates, the appellants are entitled to the lower of the two rates of DEPB. There is no mention of any Entry against which drawback has claimed in the export documents. In these circumstances, the show cause notice could not have given any specific reason for denial of drawback since the claim itself was vague - drawback rightly denied. Penalty on M/s. Kinetic Engineering Ltd. on account of claiming inappropriate DEPB - Held that - claim of DEPB is not totally inappropriate and the appellants are entitled to lower of the two rates. In these circumstances, penalty of ₹ 2 lakhs is excessive and the same is reduced to ₹ 20,000/- only. Penalty of ₹ 10,000/- has been imposed on other appellant in respect of same DEPB claim. I find that the same is excessive and the same is reduced to ₹ 5,000/- only. Appeal allowed in part.

Summary

Issues:
1. Rejection of DEPB claim and drawback claim by lower authorities.
2. Imposition of penalty on the appellants.

Analysis:
1. DEPB Claim and Drawback Claim Rejection:
The appellants, M/s. Kinetic Engineering Ltd. and Shri U.M. Nesarikar, filed appeals before the Tribunal challenging the rejection of their DEPB claim and drawback claim by the lower authorities. The Counsel for the appellant argued that the product exported, consisting of Steering and Shaft, was denied DEPB claim on the basis that the article was considered a composite article without a specific DEPB entry for the shaft. However, the Counsel contended that the shaft should be considered a seamless pipe, eligible for DEPB rates under Sr. No. 416 and 429 of the DEPB Schedule. The Tribunal found that the steering was covered under the DEPB Schedule, and the shaft, being a steel tube partly machined and welded to the steering, should also be eligible for DEPB benefits. Therefore, the appellants were entitled to the lower of the two rates applicable to the shaft as per para 11 of the General Instructions for DEPB rates.

2. Imposition of Penalty:
The Tribunal addressed the penalty imposed on M/s. Kinetic Engineering Ltd. and Shri U.M. Nesarikar for the DEPB claim. The penalty of ?2 lakhs on M/s. Kinetic Engineering Ltd. was considered excessive since the DEPB claim was not entirely inappropriate, and the appellants were entitled to the lower DEPB rates. Consequently, the penalty was reduced to ?20,000. Similarly, the penalty of ?10,000 imposed on the other appellant was also deemed excessive and reduced to ?5,000. The Tribunal allowed the appeals in favor of the appellants based on the above considerations, pronouncing the judgment on March 17, 2017.