2015 (11) TMI 503 - AT - Customs

Confiscation and penalty Misdeclaration Overvaluation to claim higher DEPB rates Whether the provisions of sections 113(d) and 114 of the Customs Act, 1962 are invocable in the case of export under Duty Entitlement Pass Book (DEPB) scheme or not - Held that - DEPB scrip is issued by the field offices of the Director General of Foreign Trade on the basis of value and description of export goods in accordance with the scheme envisaged in Chapter IV of the Foreign Trade Policy for the relevant period. The Foreign Trade Policy is notified in exercise of powers vested with the Director General of Foreign Trade under Section 5 of the Foreign Trade (Development & Regulation) Act, 1991. We observe that, in relation to exports, a declaration under section 50 of Customs Act, 1962 in the form of shipping bill is filed before the goods are brought into the customs area for examination and clearance thereof as per section 51. Thereafter goods are loaded on the designated conveyance in accordance with its availability for taking out of India and, thus, completing the process of export. Generally, the verification of particulars filed in the shipping bill is exclusively in the hands of the proper officer of Customs whose reports are relied upon by other agencies and offices of the Government of India. Mandates and rules, if not complied with, amounted to goods being exported in contravention of prohibition under other laws and hence crystallizing the liability to confiscation under section 113(d) of Customs Act,1962. We would note that section 113(d) used the word prohibition whereas in clauses (c), (e), (f), (g) and (h) of section 113 the word prohibited qualified the goods liable for confiscation. The deletion of this qualifying phrase by Finance Act, 2003 without any changes in clause (d) would indicate that the word prohibition was not intended to be read as related only to prohibited goods. It is, thus, amply clear that prohibition referred to in other sections of the Customs Act, 1962 are not limited to those notified under section 11 of the same Act. Prohibition has a much wider connotation that traverses beyond Prayag Exporters. - misdeclaration of quantity, description or value with intent to claim benefits under schemes in the Foreign Trade Policy would bring such goods within the prohibition envisaged in the Foreign Trade (Development and Regulation) Rules, 2003 which allows section 113(d) and section 114 to be invoked for confiscation of export goods that breach these Rules. - Customs officers are empowered to invoke section 113(d) and 114 of Customs Act, 1962 in cases relating to export under claim for DEPB - Appeal disposed of.

Summary

Issues Involved:
1. Whether the provisions of sections 113(d) and 114 of the Customs Act, 1962 are invocable in the case of export under the Duty Entitlement Pass Book (DEPB) scheme.

Detailed Analysis:

1. Jurisdiction of Customs Authorities under Sections 113(d) and 114 of the Customs Act, 1962:
The primary issue to be resolved was whether Customs authorities have the jurisdiction to invoke sections 113(d) and 114 of the Customs Act, 1962 in cases relating to exports under the DEPB scheme. The appellant, M/s Rainbow Silks, had filed shipping bills for the export of "dyed fabrics made from 100% polyester filament yarn with embroidery," but upon examination, the goods were found to be "embroidered sarees, hemmed and ready to use." This misdeclaration was purportedly to secure undue benefits under the DEPB scheme.

2. Confiscation and Penalty:
The original authority, Commissioner of Customs (Export), Air Cargo Complex, Mumbai, adjudicated the matter, permitting export subject to DEPB entitlement being restricted to 6.6%. The goods were held liable for confiscation under Section 113(d) and were confiscated with an option to redeem on payment of a fine. Penalties were also imposed on the exporter and the Customs House Agent.

3. Contrary Tribunal Decisions:
The Single Member Bench noted conflicting Tribunal decisions regarding the jurisdiction of Customs authorities in such cases. Decisions in Kanhaiya Exports (P) Ltd and Texport India suggested that Customs authorities lacked jurisdiction, while decisions in Asian Exports and Ramesh Jain supported the legality of invoking sections 113 and 114.

4. Relevant Statutory Provisions and Supreme Court Decisions:
The Larger Bench examined the relevant statutory provisions, including Section 113(d) of the Customs Act, which deals with goods attempted to be exported contrary to any prohibition imposed by or under this Act or any other law for the time being in force. The DEPB scheme is governed by the Foreign Trade Policy, and compliance with the scheme's conditions is mandatory.

5. Interpretation of "Prohibition":
The Tribunal discussed the interpretation of "prohibition" under Section 113(d). The Hon'ble Supreme Court in Om Prakash Bhatia held that "prohibition" includes restrictions and conditions prescribed under any law, including the Foreign Trade Policy. The deletion of the phrase "dutiable or prohibited" from Section 113 by the Finance Act, 2003, further supported a broader interpretation of "prohibition."

6. Binding Effect of Supreme Court Decisions:
The Tribunal concluded that the decision in Om Prakash Bhatia, which was subsequent to Prayag Exporters, provided a detailed interpretation of "prohibition" and should be given primacy. The decision in Om Prakash Bhatia was reinforced by subsequent Supreme Court judgments, including Gurcharan Singh and GP Jaiswal, which upheld the jurisdiction of Customs authorities under Section 113(d) for misdeclaration intending to claim undue benefits under the Foreign Trade Policy.

Conclusion:
The Larger Bench decided that Customs officers are empowered to invoke sections 113(d) and 114 of the Customs Act, 1962 in cases relating to export under the DEPB scheme. The appeals were returned to the original bench for deciding on merits.

(Pronounced in Court on 13.10.2015)