2007 (11) TMI 271 - AT - Customs

Allegations with regard to overvaluation of the goods to claim DEPB credit - wilfully procured inferior fabric from the market and than at the time of export deliberately overpriced the same at Rs. 60/- per metre - final assessment of the Shipping Bills above at a value of Rs. 16 per metre for DEPB purposes was rightly ordered in impugned order penalty of Rs. 5, 20, 000/- has been rightly imposed u/s 114(i) and 114(iii) of the Customs Act appeal dismissed

Summary

Issues Involved:
1. Overvaluation of goods to claim DEPB credit.
2. Non-cooperation with adjudication proceedings.
3. Mis-declaration of goods' quality and value.
4. Application of market value for DEPB purposes.
5. Imposition of penalty under Customs Act, 1962.

Detailed Analysis:

1. Overvaluation of Goods to Claim DEPB Credit:
The Commissioner of Customs, Cochin confirmed allegations of overvaluation of goods by the appellant to claim DEPB credit under Sl. No. 43(a) of Product Group Code 89 of DEPB Schedule. The appellants declared the value of 2,40,000 yards of Poly Poly Fabrics at Rs. 1,33,96,883/- and claimed DEPB credit of Rs. 14,73,657/-. However, investigations revealed that the goods were of inferior quality and damaged, leading to a revaluation at Rs. 16 per meter for DEPB purposes. The Commissioner relied on the findings from the Special Investigation Branch, chemical tests, and market verification to conclude that the FOB value was artificially inflated.

2. Non-cooperation with Adjudication Proceedings:
M/s. Siddharth Exports did not respond to the Show Cause Notice and failed to appear for personal hearings despite multiple intimations. This non-cooperation was noted by the Commissioner, who proceeded with the adjudication based on available records and submissions.

3. Mis-declaration of Goods' Quality and Value:
Samples tested by the Custom House Lab and Textile Committee, Kannur, indicated that the goods were low-quality fabrics made entirely of polyester with a weight per linear meter ranging from 18.7 to 21.7. Market verification by jurisdictional Central Excise authorities revealed that the actual market value of the fabrics was between Rs. 7 to Rs. 13 per meter, contrary to the declared value of Rs. 60 per meter. The Commissioner concluded that the appellants deliberately overpriced the goods to avail higher DEPB benefits, establishing mens rea.

4. Application of Market Value for DEPB Purposes:
The Commissioner applied the Present Market Value (PMV) principle, as clarified by CBEC Circular No. 77/2002-Cus. and Circular No. 69/97-Cus., to restrict DEPB credit to 50% of the PMV. The goods were assessed at Rs. 16 per meter for DEPB purposes, considering the market value and additional charges for transportation and other incidentals.

5. Imposition of Penalty under Customs Act, 1962:
The Commissioner imposed a penalty of Rs. 5,20,000/- on M/s. Siddharth Exports under Section 114(i) and Section 114(iii) of the Customs Act, 1962, for wilful procurement and overvaluation of inferior quality fabrics. The adjudicating authority followed the correct procedure in fixing the value for DEPB purposes and upheld the penalties imposed.

Judgment:
The Tribunal, after considering the submissions and evidence, upheld the Commissioner's order. The Tribunal referenced the President's Bench decision in the case of M/s. Olympia Overseas, which dealt with similar issues of overvaluation for DEPB benefits. The Tribunal found no merit in the appeal and rejected it, affirming the findings of mis-declaration and overvaluation, and the imposition of penalties. The judgment emphasized the importance of adhering to the principles of natural justice and the legislative intent behind the DEPB scheme to prevent misuse by unscrupulous exporters.