2024 (9) TMI 511 - AT - Customs

Denial of benefit of Value Based Advance Licenses (VABAL) to the appellants-transferee of such Licenses - recovery of customs duty u/s 28, which was foregone on import on utilizing the VABAL Licenses - overvaluation of goods - penalty imposed on the appellants u/s 114A of CA - What exactly is the criteria for entitlement to duty free imports under a VABAL License, whether the value mentioned in licensee or the quantity mentioned in the license? - HELD THAT - The DGFT authorities have taken action on certain licenses, where they found it fit for taking further necessary action as per the merits of the case. In the three VABAL licenses, relating to the appeals before us there is no indication of such action for cancellation having taken by DGFT authorities or any information provided by Revenue that such an action was later taken by DGFT authorities. Thus, it is found that in terms of the CBEC instructions too, the impugned order directing the recovery of demand has no legal basis and is contrary to the directions contained in the aforesaid circular. Therefore, the impugned order confirming the duty on the appellants and imposition of penalty on them is not sustainable. The Tribunal in similar matter of the self-same appellant M/s Lark Chemicals Pvt. Ltd. 2019 (5) TMI 924 - CESTAT MUMBAI have held that inasmuch as the facts of the case establish that the VABAL license has not been obtained by fraud, the ratio of the COMMNR. OF CUSTOMS (PREVENTIVE) VERSUS M/S AAFLOAT TEXTILES (I) PVT. LTD. 2009 (2) TMI 75 - SUPREME COURT decided by the Hon ble Supreme Court in the case of licenses obtained forged documents does not apply for the case involving issue of amendment in the license. The three VABAL licenses relate to amendment in respect of quantity etc., which have been subsequently considered by the jurisdictional DGFT authorities. In the case of three VABAL licenses relevant to the present appeals necessary amendments have been issued as follows License No. P/K/491011 dated 31.03.1995, amendment was issued on 11.08.1995; License No. P/K/2145479 dated 19.07.1994, amendment was issued on 02.03.1995 and for License No. P/K/2145478 dated 19.07.1994, amendment was issued on 01.03.1995. Thus, it clearly proves that the jurisdictional DGFT/licensing authorities have not found the present three licenses to be a case involving forgery, where further action of cancellation of license etc. have been initiated. It is also found that in the case of Ajay Kumar Co. 2006 (4) TMI 377 - CESTAT, NEW DELHI , the Tribunal have held that if the scrips/licenses were valid at the time of import, then subsequent cancellation of the same on the ground of fraud etc. will not have bearing on the transferee appellant. In the case of Hico Enterprises 2005 (9) TMI 625 - CESTAT MUMBAI (LB) , the Larger Bench of the Tribunal has held that benefit of notification cannot be denied to the transferee on the ground of breach of conditions of the notification. The impugned order dated 31.01.2014 with regard to confirmation of adjudged demands along with interest and imposition of penalties are not sustainable - Appeal allowed.

Summary

Issues Involved:

1. Denial of benefit of Value Based Advance Licenses (VABAL) to the appellants-transferees.
2. Recovery of customs duty under Section 28 of the Customs Act, 1962.
3. Imposition of penalty under Section 114A of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Denial of Benefit of VABAL to Appellants-Transferees:

The appellants argued that even if a license is obtained by fraud or misrepresentation, it remains valid until canceled by the licensing authority. They cited precedents indicating that the benefit of a notification applies to the transferee if the license is transferable. The learned Authorized Representative for Revenue contended that the original license holder obtained the licenses through misrepresentation and fraud. The Tribunal noted that the CBEC Circular No. 23/96-Customs mandates that any overvaluation issues should be referred to the licensing authority for corrective action, rather than the Customs authorities denying the exemption themselves. The Tribunal concluded that the impugned order directing the recovery of demand lacked a legal basis and was contrary to the CBEC circular.

2. Recovery of Customs Duty under Section 28 of the Customs Act, 1962:

The Tribunal noted that the Commissioner of Customs confirmed the duty demand on the appellants, invoking the extended period under proviso to Section 28 of the Customs Act, 1962. The appellants contended that the demand was barred by limitation, citing the Larger Bench decision in Continental Foundation Jt. Venture Vs. Commissioner of Central Excise, Chandigarh-I. The Tribunal found that the CBEC Circular No. 23/96-Customs requires the Customs authorities to refer the matter to the licensing authority if there is a mismatch in declared unit value, rather than denying the exemption. The Tribunal held that the impugned order confirming the duty demand was not sustainable.

3. Imposition of Penalty under Section 114A of the Customs Act, 1962:

The Tribunal observed that the Commissioner of Customs imposed penalties on the appellants under Section 114A of the Customs Act, 1962. The appellants argued that penalties could not be imposed on them as transferees, citing various case laws. The Tribunal referred to the case of Ajay Kumar & Co., where it was held that if the licenses were valid at the time of import, subsequent cancellation would not affect the transferee. The Tribunal also cited the case of Hico Enterprises, where it was held that the benefit of notification could not be denied to the transferee on the ground of breach of conditions by the original licensee. The Tribunal concluded that the imposition of penalties on the appellants was not sustainable.

Conclusion:

The Tribunal set aside the impugned order dated 31.01.2014, holding that the confirmation of adjudged demands along with interest and the imposition of penalties were not sustainable. The appeals were allowed in favor of the appellants.