Availability of DEPB benefit - Authority to decide issues relating to DEPB

PJ/Case Laws/2011-12/1153

Case: King Exports v/s Commr. of Cus., Amritsar

Citation: 2011 (266) ELT 388 (Tri-Del)

Issue:- The Allegation of the department without evidence is not sustainable. The DGFT has a final say in matters related to exports.

Brief Facts:- The benefit of DEPB was denied to the appellant-assessee by the Revenue on the allegation that the DEPB was obtained fraudulently by mis-declaration of exported goods and contravened the requirement of Notification No. 34/97-Cus, dated 07.04.1997. The Adjudicating Authority disallowed the DEPB benefit and also imposed Redemption fine of Rs. 60 lakhs in lieu of confiscation since goods were exported and were not available for confiscation. Penalty under Section 114A of the Customs Act, 1962 was also imposed.

Hence, the appellant is in appeal before the Tribunal. It was noted that proceedings initiated against 13 others for the cause of buying DEPB scrips in question from the appellant were dropped on the ground that there was no allegation in the show cause notice either directly or indirectly about involvement of these noticees in the commitment of offence by the present appellant.

Appellant’s Contentions:- Appellant contended that DEPB scrips in question were earned by them against export of appropriate description of goods exported. In this regard, the minutes of the DEPB Committee of the DGFT meeting holding the impugned goods to be drawbar after technical consultation was produced. Further, the appellant relied upon Chapter 2 of the FTP, 2002-09 and submitted that DGFT was the Authority to decide the issues relating to licence/certificate/permission under the Export/Import policy an their decision is final on such issues. Attention was also drawn to various technicalities of the drawings produced as evidence to show that the description of the impugned goods was of the nature and description as depicted in the drawings.

Further, appellant submitted that the samples of their finished goods were drawn by the Revenue and sent to DGFT for clarification which was given vide letter dated 25.10.04. Certificate issued by the Engineering Export Permission Council dated 28.09.04 was also produced certifying the impugned goods as drawbars.

It was submitted that the goods were exported and the Customs Authorities had not drawn any samples from export consignment therefore, there cannot be any arbitrary arbitration under any suspicion or surmise brushing aside the decision of DGFT which is the only Authority to decide on export issues in terms of Export-Import policy. In the absence of any sample drawn by Customs, DGFT opinion is binding on the Customs Authority. It was also submitted that Neither the customs classification nor the HSN classification brings the goods to the class of ball mount when nature and description of the goods does not prove to be ballmount. It was also submitted that Customs classification had no role in respect of grant of DEPB scrips by DGFT which remained in tact without cancellation by that Authority even after adjudication.

Further, the appellant have relied upon the certificate issued by National Institute of Secondary Steel Technology dated 30.09.2004 wherein it was concluded that the drawing produced by the appellant at relevant place was related to draw bar only and its usage was also explained.

Clarification issued by the Institute for Auto parts Technology which is a UNDP/UNIDO Assisted with Punjab Government projects wherein it was specified that the said goods were drawbars.

It was also submitted that when the co-noticees who were purchasers of DEPB scrips and user thereof succeeded before the Adjudication officer finding no mala fide in respect of transfer of genuine DEPB scrips by the appellant, then this appellant cannot be held guilty of obtaining such scrips. The description of goods does not speak against the appellant. The DEPB scrips were not obtained under fraud or mis-representation against Revenue. It was submitted that had the DEPB scrips been obtained by fraud, beneficiary of the scrips would have been de-barred to make use thereof.

It was also submitted that the appellant were manufacturer of drawbars for a long time and the invoices were issued for the draw bar exported. There was no dispute by the Revenue about the process of manufacture of goods and the nature and the description thereof till export. Post export adjudication without any contrary evidence is a futile exercise made to raise demand arbitrarily.

Reliance was placed on PTC Industries Ltd v/s UOI [2010 (252) ELT 42 (All)], Blue Water Foods & Exports Pvt Ltd v/s CC [2010 (251) ELT 305 (T)] and Top Man Exports Ltd v/s CC [2007 (208) ELT 353 (T)].

Respondent’s Contentions:- Revenue contended that DEPB claim made by appellant was by misdeclaration of the description of goods contravening the terms of Notification No. 34/97-Cus dated 07.04.97. The goods exported were ball mount and not drawbars. Once the characteristics of the goods changes DEPB benefit is not admissible. It was submitted that In Adjudication, cogent evidence was relied upon which showed the procurement of ball-mounts from various manufacturers which were tractor parts falling under heading 8708. But the goods were declared as drawbars falling under heading 7318.10 to take the benefit of DEPB. Statements of the partner as well as of the supplier-company were relied upon which stated that the ball mount were procured by the name of the goods were changed. The clarification by DGFT was not on the basis of the samples taken under any panchnama for which that cannot be relied upon.

Reliance was placed on Sheikh Mohd. Omar v/s CCE [AIR 1971 SC 293] and Om Prakash Bhatia v/s Commissioner [2003 (155) ELT 423 (SC)]. Reliance was also placed on Euresion Equipment and Chemicals Ltd v/s CC [1980 (6) ELT 38 (CAL)].

Reasoning of Judgment:- The Tribunal held that there is no evidence on record to show that at any time Revenue had collected any sample of exported goods except the sample sent to DGFT. Before, during and after export, no samples were collected for technical testing by Revenue. Now it is revealed that Revenue has made any enquiry from the importer about the goods exported to him. Revenue had not controverted the reliance placed by the appellant on various examination reports and opinions of different institutions. Revenue has not found any fault with the finished goods of the appellant in which they were dealing for many years. The Export-Import policy had made specific provision for declaring the DGFT as an authority to have final say on the issues relating to export, as per Policy extract depicted by appellant. The minutes of the DGFT meeting remain uncontroverted by the Revenue.

Further it was held that Revenue had not sought any technical reports or literature from tractor manufacturers about the description of the goods exported by the appellant.

The Stand of the Revenue is only an allegation without proof thereof. In the absence of any proof, it was held that the opinion of DGFT cannot be vitiated and Revenue did not challenge opinion of DGFT. Suspicion however grave may not be a substitute of proof. No scope to deny benefit to appellant. Adjudication order, therefore, not proper and is accordingly set aside.

Decision:- Appeal allowed with consequential relief.

Comment:- This decision has far reaching effect. The allegation of the department without any evidence has no force. If the revenue contends something then it has to be supported by evidence. The second and important point is that DGFT has final say in the case of exports and imports.

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PJ/Case Laws/2011-12/1153

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