2016 (5) TMI 774 - HC - Customs

Validity of SCN dated 28th March 2014 and 19th February 2015 - Export of frozen boneless buffalo meat - Availed export incentives for the export of frozen buffalo meat under Duty Exemption Pass Book Scheme ( DEPB ) and Vishesh Krishi and Gram Upaj Yojena ( VKGUY ) - Contravention of provisions of the ITC (HS) read with Export (Quality Control and Inspection) Act, 1963 the 1992 Rules and Order issued vide S.O. 203 dated 15th January 1993 - Confiscation in lieu of redemption fine and imposition of penalty. Appellant submitted that in respect of the very same issue which forms the subject matter of the impugned SCNs, the Dy. DGFT passed a detailed adjudication order exonerating the Petitioners from any violation of the FTDR Act or the FTR Rules. Therefore, on the same set of allegations no further SCN could have been issued by Respondent No. 1, pointed out that the alleged violation of the Act as mentioned in the SCN is consequent upon the purported violation of the FTDR Act, of which the Petitioners had been exonerated by the DGFT after a detailed enquiry. Therefore, the very exercise of issuing the impugned SCNs stood vitiated. Held that - the impugned SCNs do not refer to alleged violations of the Act that are not consequential upon the alleged violations of the FTDR Act or FTR Rules. As already noticed, this aspect has already been examined thoroughly by the Dy DGFT while passing the order dated 24th September 2012. In fact, as can be seen from the body of the order, the Dy DGFT during the course of those proceedings consulted the Customs authorities and sought their clarifications on various aspects which have been referred to hereinbefore. Respondents are unable to point out any portion of the impugned SCNs which is any different from the SCN and the consequent adjudication order passed by the Dy. DGFT. In the circumstances, the impugned SCNs issued to the Petitioners, more than one and half years after the Dy DGFT exonerated them of the very same allegations, is nothing but a harassment of the Petitioners and an abuse of the process of law. Therefore, the SCN dated 28th March 2014 issued by the Commissioner, Central Excise, Noida and the SCN dated 19th February 2015 issued by Commissioner of Customs (Export), Navi Mumbai, Maharashtra and all the proceedings consequent thereto are quashed. - Decided in favour of petitioner

Summary

Issues Involved:
1. Validity of the show cause notices (SCNs) issued by the Commissioner of Customs.
2. Alleged violation of the Foreign Trade (Development and Regulation) Act (FTDR Act) and Foreign Trade (Regulation) Rules (FTR Rules).
3. Alleged contravention of the Customs Act, 1962.
4. Entitlement to export incentives under the DEPB and VKGUY Schemes.
5. Jurisdiction and authority of the Directorate General of Foreign Trade (DGFT) versus Customs authorities.

Detailed Analysis:

1. Validity of the Show Cause Notices (SCNs):
The petitioners challenged the SCNs dated 28th March 2014 and 19th February 2015 issued by the Commissioner of Customs, Noida, and the Commissioner of Customs (Export), Navi Mumbai, respectively. The court noted that these SCNs were issued based on the same allegations that had already been adjudicated by the Deputy Director General of Foreign Trade (Dy. DGFT), who exonerated the petitioners of any violations under the FTDR Act and FTR Rules. The court held that issuing SCNs on the same grounds amounted to harassment and abuse of the process of law.

2. Alleged Violation of the FTDR Act and FTR Rules:
The SCNs alleged that the petitioners violated the FTDR Act and FTR Rules by not complying with the statutory provisions concerning the export of frozen buffalo meat. The court observed that the Dy. DGFT had already conducted a detailed inquiry and concluded that the petitioners had not violated any conditions of the export policy or committed any fraud under the DEPB/VKGUY Schemes. Therefore, the Customs authorities could not re-adjudicate the same issues.

3. Alleged Contravention of the Customs Act, 1962:
The SCNs also alleged that the petitioners contravened the Customs Act by exporting goods without valid veterinary health certificates and making incorrect declarations. The court found that these allegations were consequential upon the purported violations of the FTDR Act, which had already been addressed by the Dy. DGFT. The court cited the Supreme Court's decision in Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi, emphasizing that if the licensing authority (DGFT) had not questioned the transactions, the Customs authorities could not refuse exemptions based on alleged misrepresentations.

4. Entitlement to Export Incentives under DEPB and VKGUY Schemes:
The SCNs sought to recover customs duty equivalent to the DEPB/VKGUY credits availed by the petitioners, alleging wrongful availment of export incentives. The court noted that the Dy. DGFT had already examined and dropped all charges against the petitioners, confirming their entitlement to these incentives. Therefore, the Customs authorities had no basis to demand the recovery of these benefits.

5. Jurisdiction and Authority of DGFT versus Customs Authorities:
The court highlighted that the DGFT is the competent authority to issue, suspend, or cancel licenses under the FTDR Act and FTR Rules. The Customs authorities' role is limited to verifying the correctness of the exporter's declarations regarding the description, quality, and F.O.B. value of the export products. The court reiterated that any alleged misrepresentation should be addressed by the licensing authority (DGFT), not the Customs authorities.

Conclusion:
The court quashed the SCNs dated 28th March 2014 and 19th February 2015 issued by the Commissioner of Customs, Noida, and the Commissioner of Customs (Export), Navi Mumbai, respectively. The court held that these SCNs were issued on the same grounds already adjudicated by the Dy. DGFT, amounting to harassment and abuse of the process of law. The writ petitions were allowed, and all proceedings consequent to the impugned SCNs were quashed.