2015 (10) TMI 2083 - AT - Customs

Utilisation of Excess credit limit, under DEPB Denial of benefit of exemption Notification No. 45/2002-Cus Importer imported consignment of Crude Palm Oil and cleared goods on basis of Telegraphic Release Advice (TRA), issued vide Customs House and Duty Entitlement Pass Book (DEPB) Licenses During investigation DRI found that importer had utilised excess credit, in violation of condition of DEPB License Adjudicating authority denied benefit of exemption Notification No. 45/2002-Cus and confirmed demand of duty, interest and imposed penalty Held that - objective of DEPB is to neutralise incidence of customs duty on import content of export product Purpose to grant duty credit against export product is to allow neutralise incidence of Customs duty on import content of export product Therefore, restriction to use DEPB credit is not beyond Policy and notification Hence, demand of duty alongwith interest on importer is sustainable Appellant purchased DEPB from open market and restriction of use was categorically mentioned therein Lapse on part of Customs authorities to mention same on TRAs, would not waive penal consequences on importer Hence, imposition of penalty on importer is warranted Appeal filed by importer dismissed Decided against Importer. There is no evidence available on record that Custom House Agents was aware of alleged irregularity Adjudicating authority observed that appellant has breached conditions of CHA Regulation, 2004 Hence, imposition of penalty on CHAs is not warranted In view of discussion, demand of duty along with interest and penalty on importer upheld However penalty imposed on CHA set-aside Appeal filed by CHAs allowed Decided in favour of CHAs.

Summary

Issues:
Violation of DEPB license conditions, demand of duty, penalty imposition on importer, penalty imposition on Custom House Agent (CHA), interpretation of exemption notification, restriction on use of DEPB credit, penalty imposition on third party selling license.

Violation of DEPB License Conditions:
The case involved an importer who utilized excess credit of Rs. 44,67,714 in violation of DEPB License conditions. The Directorate of Revenue Intelligence (DRI) detained goods imported by the importer due to this violation. The importer claimed exemption under Notification No. 45/2002-Cus but the adjudicating authority denied the benefit, leading to a demand of duty, interest, and penalties. The importer argued that they cleared goods based on TRAs issued by Customs House, Nhava Sheva, Mumbai, where DEPB license conditions were not mentioned. However, the tribunal found that the restriction on DEPB credit use was clearly stated in the DEPB license itself, contradicting the importer's claim of ignorance.

Demand of Duty and Penalty Imposition on Importer:
The tribunal examined the Policy and Hand Book provisions related to DEPB, emphasizing that the purpose was to neutralize customs duty on the import content of export products. The tribunal agreed with the Revenue's submission that the restriction on DEPB credit use was within the Policy and notification. Therefore, the demand of duty along with interest on the importer was deemed justified. The tribunal also upheld the penalty imposition on the importer, as the restriction on DEPB credit was explicitly mentioned in the DEPB license, even though not reflected on TRAs.

Penalty Imposition on Custom House Agent (CHA):
The tribunal considered the penalty imposed on the CHA for alleged breach of CHA Regulation. However, it found no evidence that the CHA was aware of the irregularity. As per the tribunal, the breach of CHA Regulation should be adjudicated under relevant provisions, and hence, the penalty on the CHA was deemed unwarranted.

Interpretation of Exemption Notification and Third-Party Involvement:
The tribunal clarified that the appellant's belief regarding exemption under the notification was not a valid defense, as the restriction on DEPB credit use was clearly stated in the DEPB license. The penalty imposition on a third party, who sold the license to the importer, was also discussed. The tribunal found no material against the third party and set aside the penalty imposed on them.

Conclusion:
The tribunal upheld the demand of duty, interest, and penalty on the importer, directing the appellant to pay the penalty within a specified period. The penalty on the CHA and the third party was set aside. The appeal of the importer was rejected, while a miscellaneous application for extension of stay was dismissed as infructuous.