2012 (11) TMI 209 - AT - Customs

Duty Free Import Authorization inflation in CIF value - Import of Printing Ink-Intaglio - alleged that Optically Variable Ink (OVI) imported by the respondent was a distinct product, used exclusively for printing of the currency notes by the subsidiaries of Reserve Bank of India and the respondent had imported such highly valued item against DFIA issued for import of printing ink used for printing on bags/sacks used for export of rice, thereby evading huge amount of customs duty allegation of the Revenue that the DFIAs have been obtained fraudulently Held that - Obviously, there appears to be a contradiction between the notification and the paragraph. Nevertheless, in such a situation what is required to be taken into account is the provisions in the exemption notification issued under Customs Act, 1962 and the Notification No. 40/2006 is very clear. Because the notification clearly says that in respect of resultant products specified in paragraph 4.55.3, the imported materials should be of the same quality, technical characteristics and specifications as the materials used in the resultant product. Having allowed export of motors with input specifications as bearing upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Fraud - in this case Shri. Lalit Jain, the broker, is seen to have used some forged letters for transferring the license from the exporter to the importer through the medium of shell firms, though the exporter does not appear to be complaining about it. The adjudicating authority has held that this issue is to be decided under laws other than Customs Act, it is not a matter to be adjudicated under the Customs Act. Such matter arises when agitated by any of the affected parties. He has held that the interest of Revenue has not been prejudiced by such impugned actions. We also note that DGFT which is concerned with the transfer of licenses has not taken cognizance of this matter. So we agree with the finding of the adjudicating officer. Revenue is directed to refund the amount and release the bank guarantee and bond to the respondents within four weeks of the communication of this order.

Issues Involved:
1. Inflated CIF Value of Printing Ink
2. Disproportionate Quantity of Imported Ink
3. Release Advices Issued on Fake and Forged Documents
4. Fulfillment of Policy and Notification Conditions
5. Chargeability to Duty and Liability to Confiscation
6. Liability to Cancellation of DFIAs
7. Conspiracy for Evasion of Customs Duty

Detailed Analysis:

1. Inflated CIF Value of Printing Ink:
The main allegation was whether the exporter, while applying for DFIA, inflated the CIF value of the printing ink to facilitate the imports of high-value OVI instead of the printing ink used in the export product. The adjudicating authority found that the printing ink imported under the DFIA licenses was covered as per the description given in the licenses. The DGFT's order supported the applicability of the DFIA scheme, and the Commissioner (Appeals) had previously allowed the benefit of DFIA to the respondents on identical facts.

2. Disproportionate Quantity of Imported Ink:
The issue was whether the quantity of ink imported was disproportionate to that mentioned in SION E-38. Initially, there was a mistake in calculating the quantity restriction based on 4 gm of printing ink for a 50 kg bag instead of 2 gm per bag. The Jt. DGFT reduced the quantity of ink accordingly, and the excess quantity was adjusted in subsequent licenses. The adjudicating authority found that the quantity and value restrictions were complied with, and there was no fraudulent use of the license.

3. Release Advices Issued on Fake and Forged Documents:
The contention was whether the Release Advices were issued based on fake and forged documents. The adjudicating authority noted that the broker, Shri Lalit Jain, used some forged letters for transferring the license from the exporter to the importer through shell firms. However, the DGFT, concerned with the transfer of licenses, did not take cognizance of this matter, and the interest of Revenue was not prejudiced.

4. Fulfillment of Policy and Notification Conditions:
The key issue was whether the conditions/provisions of policy and notifications regarding the nexus between export and import product were fulfilled. The Circular No. 46/2007-Cus. clarified that correlation of imported inputs to the export product is required only for products specified in para 4.55.3 of the Handbook of Procedures. The adjudicating authority found that the imported OVI, classified under Chapter 32, fit into the description of "printing ink" and complied with the restrictions in terms of quantity and value ceiling of the license.

5. Chargeability to Duty and Liability to Confiscation:
The issue was whether the goods imported under the above DFIA were chargeable to duty and liable to confiscation. The adjudicating authority found that the DFIAs were issued legally, and the imported OVI was covered under the description of "printing ink" in the licenses. Therefore, the exemption under Notification No. 40/2006-Cus. was available to the respondent, and the goods were not liable to confiscation.

6. Liability to Cancellation of DFIAs:
The question was whether the DFIAs issued were liable to cancellation under the provisions of Section 9 & 11 of the Foreign Trade (Development & Regulation) Act, 1992 read with Rule 10 of the Foreign Trade (Regulation) Rules, 1993. The adjudicating authority found that the Jt. DGFT had held the DFIAs to be legal, and there was no basis for cancellation of the licenses.

7. Conspiracy for Evasion of Customs Duty:
The issue was whether there was a conspiracy hatched by Shri Lalit Jain of M/s. Bhagya Laxmi Enterprises in collusion with the exporter M/s. SRHI and the importer M/s. SICPA for evasion of customs duty by misusing these licenses. The adjudicating authority found no evidence of such a conspiracy and upheld the legality of the DFIAs and the imports made under them.

Conclusion:
The adjudicating authority upheld the legality of the DFIAs and the imports made under them, finding no basis for the allegations of inflated CIF value, disproportionate quantity, issuance of Release Advices on fake documents, non-fulfillment of policy conditions, chargeability to duty, liability to confiscation, cancellation of DFIAs, or conspiracy for evasion of customs duty. The Revenue's appeal was dismissed, and the impugned order was upheld. The Revenue was directed to refund the amount and release the bank guarantee and bond to the respondents within four weeks.

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