DEPB benefit - whether can be fraudulent when claimed in DEPB Schedule before change?

PJ/Case Laws/2012-13/1000

Case:M/s KHANNA PAPER MILLS LTD Vs CC, AMRITSAR

Citation: 2012-TIOL-94-CESTAT-DEL

Issue:- Availability of DEPB benefit – change in DEPB schedule – export before change – whether duty can be demanded by denying DEPB benefit alleging fraudulent conduct?

Brief Facts:- Appellant exported writing and printing paper in rolls and reels claiming DEPB benefit against entry 459B of DEPB schedule. Exports were allowed after examination of the goods by the customs authority, the appellants sought for DEPB scrip from DGFT authority which was granted to them. Based on DEPB scrip issued to them the duty free imports have been made.

Show cause notices issued alleging that the goods exported by them were not "in cut sizes" and therefore the claim for benefit against entry 459B DEPB schedule has been wrongly claimed and the DEPB scrip were wrongly obtained and used for import of goods duty free and therefore, imported goods were liable for confiscation and that the duty on the imported goods was demandable and penalty imposable.

The Commissioner confirmed the demand of duty in both cases along with interest and imposed penalties. The Commissioner also held that the goods exported were liable for confiscation and imposed redemption fine in lieu of confiscation. Similarly, it was held that the goods imported were liable for confiscation and imposed fine in lieu of confiscation.

The appeals are filed by the Appellant before the Tribunal.

Appellant contention: - Appellants submits that the goods were exported after correctly declaring the description and claiming the benefit of DEPB under serial No.459B of the schedule and the customs authorities have examined the goods for the correctness of the description as per shipping bills and allowed clearance. Based on assessed shipping bills the appellants claimed the DEPB scrip from the DGFT authorities who after necessary verification issued the scrip. The imports have been made using the DEPB scrip validly issued by DGFT authorities. The Appellant submitted that “cut into sheets of various sizes” was made in the entry no. 459B only with effect from 27.01.06 hence the export made prior to 27.01.06 cannot be held to be misdeclared. The DGFT authorities' clarification to the appellants vide the letter dated 31.8.06 and the DGFT clarifications to the customs authorities vide letter dated 11.12.06 are to the effect that the amendment would be applicable only with effect from 27.1.06 and the goods exported by them reels/rolls prior to 21.1.06 were eligible for the DEPB benefit under serial no. 45913 of the DEPB schedule. He further submits that interpretation on the scope of the DEPB licence is within the jurisdiction of the DGFT authorities only. In support of this contention, learned advocate relies on the decision of the Hon'ble Bombay High Court in the case of Pradip Polyfils Pvt.Ltd. vs. Union of India reported in 2004 (173) ELT 3 (Born.) and decision in the case of Economics Traders (GUI.) Ltd. and anr. Vs. Union of India reported in 2006 (130) ECR 0418 - 2006 (104) ECC 0418.

Respondent contention:-Revenue submitted that the appellants have exported the paper declaring the products as if they were "cut to sizes"; the exports documents with such misdeclaration were submitted to DGFT and DEPB scrip were got issued; that using such invalid DEPB scrip fraudulently/wrongly obtained from DGFT, the appellants have imported goods without payment of duty. Therefore, the order of the confiscation of the exported goods and imported goods, demand of the duty on the imported goods and imposition of penalties should be upheld.

Reasoning of Judgment:- The Tribunal perused the description of serial no 459B of the DEPB schedule before amendment with effect from 27.1.06 and after amendment. And held on the facts of the case that the Tribunal is unable to agree with the view taken by the Commissioner that there was misdeclaration while exporting the goods and in getting DEPB scrip. The DEPB scrip have not been got cancelled through DGFT authorities. Further, DGFT authorities have clarified that the DEPB scrip are valid for exports made prior to 27.1.2006. Therefore, they do not agree with the findings of the Commissioner that the scrip are invalid. As valid DEPB scrip have been used for import of the goods, the Tribunal do not find any reason for demand of duty or confiscation of the goods, or imposition of penalties. In view of the above, the impugned orders are set aside and appeals are allowed with consequential relief as per law.

Decision: -Appeals allowed with consequential relief.

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PJ/Case Laws/2012-13/1000

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