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TMI Blog2025 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,00,000/- has also been imposed on the appellant under section 112(a) and 112(b) of the Customs Act read with section 111(o) of the Customs Act. 2. Customs Appeal No. 297 Of 2006 has been filed by Sunil Wadhwani, Director of the appellant, to assail the order dated 31.01.2006 passed by the Commissioner which has imposed a penalty of Rs. 2,00,000/- upon him under section 112 of the Customs Act. 3. The appellant is engaged in the manufacture of audio cassettes, video cassettes and CDs. The appellant is also engaged in the sale of products for home consumption as well as exports outside India. In the year 1994, the appellant sought to import certain capital goods required for the manufacturing of products under the Export Promotion Capital Goods Scheme in terms of the Import Policy 1992-1997. 4. The EPCG License No. P/CG/2133756 dated 29.12.1994 [EPCG License dated 29.12.1994 imposed an obligation on the appellant to export products worth USD $2,482,135 within five years from the issuance of the License. The appellant also furnished a bank guarantee of Rs. 1,06,07,000/- equal to 100% of the duty saved. The appellant claims that it manufactured CD-RO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled the balance export obligation within the stipulated time and informed DGFT, which by an order dated 27.05.2003 discharged the appellant from the liability under the bank guarantee dated 27.06.2001 for Rs. 2.55 crore and the letter of undertaking dated 16.01.1995 as the entire export obligation under the EPCG License dated 29.12.1994 had been fulfilled. 7. It needs to be noted that earlier, the Directorate of Revenue Intelligence had conducted an investigation regarding over-valuation of exports made by Sundram Exports and issued a show cause notice dated 04.12.2000 to the appellant and Sundram Exports, amongst others, proposing to confiscate the capital goods imported by the appellant under the EPCG License and proposing a duty demand on the ground that CDROMs exported by the appellant through Sundram Exports were over-valued and should not be counted towards the fulfillment of export obligation. The show cause notice also proposed to demand customs duty in respect of capital goods imported under the second EPCG License dated 06.07.1994. 8. The appellant and Sunil Wadhwani, Director of the appellant, filed replies to the show cause notice and denied that customs duty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the order dated 31.01.2006 passed by the Commissioner in respect of the EPCG License dated 29.12.1994 issued to the appellant is reproduced below: "41.12 M/s. Super Cassette Industries Ltd. attempted & succeeded to fraudulently avail benefits under EPCG scheme against the goods which were exported under DEPB scheme, when they submitted details of export of US$ 2483877/- (uncluding US$ 19,45,600.00 FOB value of the CD ROM's exported by M/s. Sundram Exports Pvt. Ltd. & M/s. Netcompware Pvt. Ltd.) in appendix 10C claiming fulfillment of export obligations against US$ 2482135.00 required to be fulfilled under the EPCG Licence P/CG/ 2133756 dated 29.12.94 to DGFT on 03.07.1998 and requested to discharge the Bank Guarantee and LUT which was accepted by DGFT and their bank guarantee was released vide letter dated 10.05.1999. M/s Super Cassette Industries Ltd. claimed and availed benefits under EPCG Scheme of the said export of CD ROMs being declared as "Supporting Manufacturer" in the Shipping Bills. M/s Super Cassette Industries Ltd. being the actual importer of the capital goods under EPCG Scheme on its own could not fall under the category of "Supporting Manufacturer" as only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 111(O) of the Customs Act, 1962 and they have rendered themselves liable to penal action under Section 112(a) & (b) of the Customs Act, 1962. In addition interest on said duty is also recoverable." (emphasis supplied) 10. In respect of the EPCG License dated 06.07.1994 issued to the appellant, the Commissioner found that the appellant had discharged the obligation and the relevant portion of the order is reproduced below: "41.13 Similarly, against export obligation of US$ 61,33,526/- under EPCG licence no. P/CG/2133308 dated 06.07.94, they made export of US$ 58,72,385/- which included US$ 6,53,600/- on account of CD ROM's exported by M/s. Sundram Exports Pvt. Ltd. but later on M/s. Super Cassette Industries Ltd. decided not to include the value of CD ROM's exported by M/s. Sundram Exports Pvt. Ltd. and they fulfilled export obligation within extended period without including the FOB value of CD ROM's. Since in this case the substitution of exports of CD ROM's in question by other exports for fulfillment of export obligation was made by them within the original validity period of export obligation before submission of their case to DGFT for discharge of export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e acts of omission and commission which have rendered the goods liable to confiscation under Section 111(0) of the Customs Act, 1962. ***** XV ***** (v) I impose a penalty of Rs. 2,00,000/- (Rupees Two Lakh Only) on Shri Sunil Wadhwani (noticee No. 7) under Section 112 of the Customs Act, 1962." (emphasis supplied) 13. The confirmation of demand of Rs. 47,38,817/- on the appellant in respect of EPCG License dated 29.12.1994 with interest and penalty and with an option to the appellant to redeem the goods on payment of redemption fine of Rs. 11 lakh and imposition of penalty of Rs. 2 lakhs on Sunil Wadhwani has been assailed in these two appeals. 14. Shri B.L. Narasimhan, learned counsel for the appellant assisted by Shri Rubel Bareja made the following submissions: (i) The export obligation under the EPCG License dated 29.12.1994 had been fulfilled by the appellant within the time granted by DGFT and so the duty demand is not sustainable; (ii) The DGFT, by a letter dated 10.05.1999, redeemed the bank guarantee and the letter of undertaking furnished by the appellant and released the appellant of any further export obligation in 1999. Subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . vs. State of Tamil Nadu and others [2004 (3) SCC 1] ; and (iv) The department need not prove with precision, and proof by preponderance of probability is sufficient. In this connection reliance has been placed on the decision of the Kolkata Bench of the Tribunal in Arjun Sah vs. Commissioner of Customs (Prev.), Patna [2021 (375) E.L.T. 241 (Tri.-Kolkata)] . 16. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 17. What transpires from the aforesaid factual position is that two EPCG Licenses were issued to the appellant for import of certain capital goods under the Export Promotion Capital Goods Scheme in terms of the Import Policy 1992-1997. 18. The first EPCG License is dated 29.12.1994. It imposed an obligation on the appellant to export products worth US $2,482,135 within five years from the date of issue of the EPCG License. 19. The second EPCG License is dated 06.07.1994 under which the appellant was obliged to fulfill export obligation of USD $6,133,526 by 05.07.1999, which period was initially extended by DGFT upto 05.07.2000 and later upto 31.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exports made through Sundram Exports was fulfilled by the appellant within the extended period of time granted by DGFT. 24. In respect of EPCG License dated 06.07.1994, the Commissioner accepted the plea of the appellant and discharged the appellant from the obligation. 25. The dispute is with regard the EPCG License dated 29.12.1994. As noticed above, the appellant had initially fulfilled the export obligation after including the exports made through Sundram Export and DGFT by a letter dated 10.05.1999 confirmed that the appellant had fulfilled the export obligation. After the appellant came to know that the export of CD-ROMs made by Sundram Exports was being disputed by the Directorate of Revenue Intelligence, the appellant made further exports after the initial time granted by DGFT was extended upto 31.03.2002, and fulfilled the export obligation after excluding the exports made by Sundram Export. In respect of this License, the Commissioner did not accept the plea of the appellant that it had fulfilled export obligation since the appellant had earlier written to DGFT that it had fulfilled its export obligation and DGFT by a letter dated 10.05.1999 had discharged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015-20, the Union Government, in order to promote exports of Indian handicrafts, had introduced MEIS. With the avowed objective of providing impetus to such exports, the Foreign Trade Policy provided incentives for exports of notified goods and products and the calculation of corresponding rewards. In terms of MEIS, the exporters were also provided duty credit scrips which were transferable. Those duty credit scrips could be used for payment of basic customs duty, additional customs duty, and central excise duties on domestic procurement of inputs or goods. For the purposes of implementation of MEIS, a Public Notice was issued by the DGFT specifying the eligible countries to which exports could be made for availing benefits under the scheme. The Delhi High Court examined the provisions of the Foreign Trade (Development and Regulation) Act, 1992 [the FTDR Act] alongside the Foreign Trade Policy as well as the Foreign Trade (Regulation) Rules, 1993 [the FDTR Rules] and made the following observations: "104. As we read the various provisions enshrined in the FTDR Act alongside the FTP as well as the FTDR Rules, we find ourselves unable to recognize a right that may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A would have to be preceded by the competent authority under the FTDR Act having come to the conclusion that the instrument had come to be incorrectly issued or illegally obtained. The procedure for recovery of duties and interest would have to be preceded by the competent authority under the FTDR Act having so found and the power to recover duty being liable to be exercised only thereafter. 107. Section 28AAA would thus have to be interpreted as contemplating a prior determination on the issue of collusion, wilful misstatement or suppression of facts tainting an instrument issued under the FTDR Act before action relating to recovery of duty could be possibly initiated. A harmonious interpretation of the two statutes, namely, the Customs and the FTDR Acts leads us to the inescapable conclusion that the law neither envisages nor sanctions a duality of authority inhering in a separate set of officers and agents simultaneously evaluating and adjudging the validity of an instrument which owes its origin to the FTDR Act alone. It is these factors, as well as the role assigned to the DGFT which perhaps weighed upon courts to acknowledge its position of primacy when it come to the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be, noted that the licensing authority has taken no steps to cancel the licence. The licensing authority has not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs Authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf." 31. It, therefore, clearly transpires from the aforesaid judgment of the Delhi High Court in Designco that custom authorities cannot go behind the benefits availed, in the absence of any adjudication having been undertaken by DGFT. In other words, an action for recovery of benefits claimed and availed would have to necessarily be preceded by an order of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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