2020 (2) TMI 234 - AT - Customs

Export of goods under DEPB Scheme - mis-classification of export products under the DEPB schedule with the intention of claiming higher DEPB credit - confiscation - redemption fine - penalty - HELD THAT - It is not in doubt that the goods were declared in a particular manner in the export documents and that they were cleared by the department officers after assessment and examination. As per the description given in the documents, the DEPB schedule under which they claimed credit matched. There is nothing on record to show that the duplicate set of invoices which they prepared for the overseas importers were presented before the customs officers. Only subsequent investigations by the DRI resulted in unearthing of the documents including the duplicate set of invoices - the First Appellate Authority has not considered this aspect or given any findings thereon. Confiscation - redemption fine - HELD THAT - During the relevant time Customs Act, 1962 extended to the whole of India Section 1(2) . There was no extra territorial jurisdiction to the Customs Act during the relevant period. A plain reading of Section 1(2), 2(19) and Section 113 shows that during the relevant period since the Customs Act extended only to the whole of India and not beyond, action under this act could be taken only within the country and not outside. Therefore, only the export goods, i.e., the goods which are to be exported could be confiscated. There was no provision to confiscate the goods which have already been exported. Therefore, in the present case, the First Appellate Authority was correct in setting aside the confiscation of the goods under Section 113 as this section did not provide for such confiscation - Since the goods cannot be confiscated under Section 113, the question of the order imposing a redemption fine under Section 125 also does not arise. Penalty - HELD THAT - The penalty under Section 114 is dependent upon the goods being held liable for confiscation under Section 113 this penalty also does not sustain. This is a fit case to be remanded to the First Appellate Authority with a direction to give a specific finding with regard to the mis-declaration of the goods by way of duplicate set of invoices and the consequences of such mis-declaration on the eligibility of DEPB credit at the rate claimed by the respondent - The impugned order is upheld to the extent of setting aside confiscation imposition of fine and penalties are cancelled - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Reclassification of exported products under the DEPB scheme.
2. Restriction of DEPB credit.
3. Liability of exported goods for confiscation under Section 113 of the Customs Act, 1962.
4. Imposition of penalties under Sections 114 and 114A of the Customs Act, 1962.
5. Validity of the First Appellate Authority's reliance on the DGFT letter.
6. Examination of mis-declaration through duplicate invoices.

Detailed Analysis:

1. Reclassification of Exported Products under DEPB Scheme:

The Revenue appealed against the reclassification of the exported goods from serial no. C-379 to serial no. 65/531 of the DEPB schedule. The original authority had confirmed this reclassification, but the First Appellate Authority set it aside, relying on a letter from the Directorate General of Foreign Trade (DGFT). The Revenue argued that the DGFT letter was misinterpreted as it pertained to standard input-output norms (SION) and not DEPB classification. The Tribunal noted that the First Appellate Authority erred in taking the DGFT letter as a basis for classification under the DEPB schedule.

2. Restriction of DEPB Credit:

The original authority restricted the DEPB credit from ?4,09,497/- to ?1,61,245/-. This restriction was based on the reclassification of the export goods. The Revenue contended that the First Appellate Authority failed to consider the correct application of the DEPB schedule and the implications of the DGFT letter. The Tribunal found that the First Appellate Authority did not properly examine the applicability of the DGFT clarification to the DEPB scheme.

3. Liability of Exported Goods for Confiscation under Section 113 of the Customs Act, 1962:

The original authority held the exported goods liable for confiscation under Section 113(h)(i) of the Customs Act, 1962. However, the First Appellate Authority set aside this confiscation. The Tribunal upheld the First Appellate Authority's decision, stating that Section 113 pertains to "export goods" and not "exported goods." Since the goods had already been exported, they could not be confiscated under this section.

4. Imposition of Penalties under Sections 114 and 114A of the Customs Act, 1962:

The original authority imposed penalties under Sections 114 and 114A on the respondent and its Managing Director. The First Appellate Authority set aside these penalties. The Tribunal agreed with this decision, noting that penalties under Section 114 depend on the liability of goods for confiscation under Section 113, which was not applicable in this case. Additionally, Section 114A pertains to duty short-levy or non-levy, which was not relevant as no duty was involved.

5. Validity of the First Appellate Authority's Reliance on the DGFT Letter:

The Revenue argued that the First Appellate Authority incorrectly relied on the DGFT letter, which was related to standard input-output norms and not DEPB classification. The Tribunal found merit in this argument, emphasizing that the DGFT letter did not pertain to the DEPB scheme and should not have been the basis for the First Appellate Authority's decision.

6. Examination of Mis-declaration through Duplicate Invoices:

The Revenue highlighted that the respondent issued two sets of invoices with different descriptions for customs and overseas customers, indicating a mis-declaration. The Tribunal noted that the First Appellate Authority did not consider this aspect and remanded the case for a specific finding on the mis-declaration and its impact on DEPB credit eligibility.

Conclusion:

The Tribunal upheld the First Appellate Authority's decision to set aside the confiscation, fine, and penalties. However, it remanded the case to the First Appellate Authority for a specific finding on the mis-declaration of goods through duplicate invoices and its consequences on DEPB credit eligibility. The appeal was allowed by way of remand.