2017 (8) TMI 500 - AT - Customs

DEPB Benefit - job-work - suppression of facts - N/N. 32/97 - Held that - the DEPB scheme did not envisage grant of duty credit only on the value addition portion, in a situation where the import content did not suffer incidence of customs duty. Therefore goods imported with full customs duty exemption or goods with NIL rates of customs duty cannot then become eligible for DEPB credit when processed and resultant product reexported even if there is value addition in the export product. The appellant has imported goods with full exemption from customs duties under Notification No.32/1997-Cus, which is a specific exemption to goods imported for execution of an export order for jobbing. Amongst various conditionalities of that notification, there is a requirement that the imported goods are utilized only for the discharge of export obligation and that FOB value of the resultant products exported is at least 10% more than the CIF value of the goods imported. We therefore find that the Notification No.32/97 is a beneficial provision to facilitate such processes involving jobbing without creating the need for the job worker in India to suffer incidence of customs duties on the imported goods. Precisely due to the requirement that import content of export goods have to necessarily suffer incidence of customs duty for claiming DEPB credit, the said notification No.32/97-Cus also laid down that DEPB was not applicable to export of a commodity or product, interalia, manufactured and or exported by a 100% EOU or by an unit in a free trade zone or export processing zone etc. In fact, even in the case of export of goods of foreign origin, DEPB is made inapplicable, unless the goods have been manufactured or processed or on which similar operations have been carried out in India. CBEC in their Circular No.26/2002 dt. 16.5.2002, which unequivocally clarified that once the party has availed the benefit of Customs Notification No.32/97, then they become disentitled to DEPB benefit and that the facility available under N/N. 32/97 and 34/97 (DEPB scheme) are exclusive and independent of each other - Both these circulars have been issued based on complaints or detection of ineligible availments of both the N/N. 32/97 and N/N. 34/97 (DEPB/drawback) noted by CBEC. Hence these circulars will definitely have retrospective effect. Demand upheld - penalty reduced to ₹ 10,00,000/- - decided partly in favor of appellant.

Summary

Issues Involved:
1. Irregular claim of DEPB benefit.
2. Non-declaration of job work in export documents.
3. Impropriety of adjudication during the pendency of a writ petition.
4. Validity of DEPB credit claim on value addition.
5. Applicability of CBEC circulars to the case.

Detailed Analysis:

1. Irregular Claim of DEPB Benefit:
The appellant imported goods under Customs Notification No.32/97 without paying customs duties, meant for job work and re-export. The department alleged that the appellant irregularly claimed DEPB benefit on such exports by not declaring the job work in export documents and filed DEPB shipping bills instead of those under Notification No.32/97, availing ineligible DEPB credit. The adjudicating authority denied the DEPB benefit, demanded ?87,26,869/- towards irregularly claimed DEPB credit along with interest, and imposed a penalty of ?20 lakhs under Section 114 (i) of the Customs Act, 1962.

2. Non-Declaration of Job Work in Export Documents:
The appellant argued that the DEPB credit was claimed only on the value addition due to job work and not on the total export value. The export and import policy allowed value addition to be considered for determining DEPB credit rate. The appellant submitted sample export invoices and shipping bills to support their claim. However, the tribunal found that the appellant declared the entire invoice value for DEPB, not just the value addition, and did not indicate the job work in any export documents.

3. Impropriety of Adjudication During Pendency of Writ Petition:
The appellant contended that the impugned order should be set aside as it was passed despite a pending writ petition in the High Court of Madras. The tribunal noted that the writ petition challenged the vires of certain Board circulars, while the adjudication was limited to the DEPB credit issue. The tribunal found no impropriety in the adjudication proceeding as the appellant did not attend personal hearings.

4. Validity of DEPB Credit Claim on Value Addition:
The DEPB scheme aimed to neutralize the incidence of customs duty on the import content of export products. The tribunal highlighted that DEPB eligibility presupposed that the import content in the export product had suffered customs duty. Since the appellant imported goods duty-free under Notification No.32/97, they were not entitled to DEPB credit, even if there was value addition. The DEPB scheme did not envisage duty credit solely on value addition when the import content did not suffer customs duty.

5. Applicability of CBEC Circulars to the Case:
CBEC Circular No.26/2002 clarified that availing DEPB benefit after importing goods duty-free under Notification No.32/97 was not permissible. The circulars stated that the DEPB and duty-free import benefits were exclusive and independent. The tribunal noted that these circulars, addressing ineligible availments, had retrospective effect and confirmed the denial of DEPB benefit to the appellant.

Conclusion:
The tribunal upheld the adjudicating authority's order denying DEPB benefit and confirming the demand of ?87,26,869/- along with interest. However, the penalty under Section 114 (i) of the Customs Act was reduced to ?10,00,000/-. The appeal was disposed of accordingly.