2024 (4) TMI 874 - AT - Customs

Valuation of exported CD ROMS - Import of goods by availing excess export promotion benefits i.e. DEBP/DEEC Credits - intention of fraudulently obtaining excess DEBP/DEEC Credits, which were subsequently utilized for duty free import thereby causing loss of the Customs Duty - mis-declaration of value - suppression of facts - whether the duty foregone amount is liable to recovered from the respondents? - HELD THAT - The transaction value declared is fair and the exports are genuine, the second allegation that respondents are not eligible for the DEPB entitlements, automatically loses its sanctity. Since the issue is no longer res integra, the instant revenue s appeals can not be sustained. The department s appeal does not allege that the licences had been cancelled by the Additional Directo rGeneral of Foreign Trade in the instant case. Clearly, the facts are on record that the DGFT has not cancelled the DEPB credit scrips and same were valid in the eyes of law. The DGFT has still not cancelled or modified the DEPB licences already granted. So it is clear that DGFT does not agree with the contention of the department. The allegation of the revenue that the exports have been misdeclared and DEPB scrips have been sought for and obtained fraudulently and imports have been made using invalid DEPB scrips, cannot be agreed upon. If it is the case of the department that DEPB scrips are fraudulently obtained by the respondents, It would have been appropriate that the department and customs authorities should have taken steps to get the DEPB scrips cancelled by making reference to the DGFT authorities who issued the scrips. Without taking any such action, to say that the DEPB scrips issued by competent authorities are invalid and fraudulently obtained is not proper and legal. The Hon ble Bombay High Court in the case of PRADIP POLYFILS PVT. LTD. VERSUS UNION OF INDIA 2004 (1) TMI 93 - BOMBAY HIGH COURT considered the scope of jurisdiction of the customs authorities to question the validity of DEPB licences and held Once the licensing authorities have held that the export product is covered under the DEPB Scheme and have issued the DEPB licence, it is not open to the Customs authorities to hold that the said export product is not covered under the DEPB Scheme and have issued the DEPB licence, it is not open to the Customs authorities to hold that the said export product is not covered under the DEPB Scheme. As valid DEPB scrips have been used for import of the goods by the respondents, there are no reason for demand of duty or confiscation of the goods, or imposition of penalties. In the light of this, no valid grounds have been brought out to interfere with findings of the Ld. Adjudicating authority. There is no infirmity in the impugned orders and they need to be upheld - appeals filed by the revenue are dismissed.

Summary

Issues Involved:
1. Overvaluation of exports for excess DEPB/DEEC Credits.
2. Validity of DEPB credits and corresponding duty recovery.
3. Applicability of prior judgments and circulars.
4. Jurisdiction and authority of customs in questioning DEPB licenses.

Summary:

1. Overvaluation of exports for excess DEPB/DEEC Credits:

The Revenue challenged the orders passed by the Additional Director General, D.R.I (Adjudication), Mumbai, and Commissioner of CUSTOMS-Ahmedabad, alleging that various companies overvalued their exports of CD ROMs to fraudulently obtain excess DEPB/DEEC Credits, causing loss of Customs Duty. Investigations revealed that M/s Adani Exports Ltd. and its Directors, in conspiracy with M/s Padmini Polymers Ltd., exported junk CDs declared as software at grossly over-invoiced values under DEPB/DEEC scheme to defraud the exchequer. The DEPB credit of Rs. 11,92,05,000/- availed on the said fraudulent exports was re-determined, and only Rs. 72,22,967/- appeared admissible, making Rs. 11,13,82,022/- inadmissible. Show cause notices were issued to recover the differential duty u/s 28(1) of the Customs Act, 1962, along with interest u/s 28 AB and proposed penalties u/s 112 and 114.

2. Validity of DEPB credits and corresponding duty recovery:

The Adjudicating authority dropped the proceedings against the respondents, which the Revenue appealed against. The Revenue argued that the adjudicating authority erred by not considering the facts and distinguishing the case from the Colourtex case, where the Apex Court upheld the Tribunal's decision. The respondents contended that the issue was settled in their favor by prior decisions, and the goods exported were similar to those in the Colourtex, Crown International, and Advance Exports cases, where no overvaluation was found. They also argued that the DEPB licenses were correctly issued by the DGFT, and customs authorities could not deny the benefits.

3. Applicability of prior judgments and circulars:

The Tribunal observed that the issue of overvaluation was settled in favor of the respondents by the decisions in Colourtex, Crown International, and Advance Exports, upheld by the Hon'ble Supreme Court. The Tribunal noted that the declared FOB value was within the acceptable range as per Circular No. 69/97-Cus dated 08.12.97, which did not require market enquiry if the value was within 150% of the AR-4 price. The Tribunal found no reason to interfere with the adjudicating authority's findings, as the declared transaction value was fair and the exports genuine.

4. Jurisdiction and authority of customs in questioning DEPB licenses:

The Tribunal referenced the Bombay High Court's decision in Pradip Polyfils Pvt. Ltd., which held that customs authorities could not question the validity of DEPB licenses issued by the DGFT. The Tribunal concluded that the DEPB scrips used for import were valid, and there was no basis for demanding duty, confiscating goods, or imposing penalties.

Conclusion:

The Tribunal upheld the adjudicating authority's orders, finding no infirmity in them and dismissing the Revenue's appeals. The declared transaction value was accepted as fair, and the respondents were entitled to DEPB benefits as per the DGFT's certification. The appeals filed by the Revenue were dismissed.

(Pronounced in the open court on 09.04.2024)