2025 (5) TMI 2017 - AT - Customs

Classification and valuation of the imported goods in a Bill of Entry or export goods in a Shipping Bill - Entitlement to MEIS scrips - proper officer - confiscation under section 113(i) - imposition of penalties under section 114 and 114AA - HELD THAT - There is no dispute about any material particulars in the Shipping Bills and only difference of opinion is regarding the classification of exported goods. The declaration in the Shipping Bill was as per the understanding of the exporter and consistent with the views of the Development Commissioner the Assistant Commissioner who issued the Sanction Order for the EOU and the Central Excise Officers who signed/retained the ARE 1 ER-2 Form. DRI took a different view in the SCN. The declaration in the Shipping Bills does not become false or incorrect simply because DRI takes a different view of the classification. No exporter has an obligation to conform to any future views of any officer of DRI Audit Preventive etc. Penalty under section 114AA therefore cannot be imposed anyway in the matter regardless of the merits of the classification. To sum up (a) After the goods are exported the only options available to the Revenue to modify the assessment of the Shipping Bills are an appeal before Commissioner (Appeals) under section 128 or a Show Cause Notice under Section 28. Show Cause Notice under section 28 can be issued only to recover duties not levied not paid short levied short paid or erroneously refunded and not for any other purpose. The appeal under section 128 has no such restriction. (b) The re-assessment of the Shipping Bills in this case is without any authority of law. (c) Classification of goods is a part of assessment and it is the opinion of the exporter or the proper officer. (d) No exporter has any obligation to anticipate any views of DRI audit or preventive officers regarding the classification of the goods or to conform to them. The exporter fulfils his obligation once he files the Shipping Bills classifying goods as per his understanding. (e) Section 113 (i) does not render any goods liable to confiscation simply because DRI audit or preventive officers hold a different opinion about the classification. (f) Penalties under Sections 114 and 114AA also cannot be imposed simply because DRI audit or preventive officers have a different view of the classification of goods. (g) In this case there is no evidence that the MEIS scrips were obtained by collusion wilful misstatement or suppression of facts or that they were utilised. Thus the impugned order is set aside. The assessee s appeal is allowed and Revenue s appeal is dismissed. The Cross Objection filed by the assessee in Revenue s appeal are also disposed of. The assessee will be entitled to consequential relief if any.

Summary

The core legal questions considered in this judgment include:

(1) Whether the Customs authorities had the legal authority to re-assess export Shipping Bills after the goods had already been exported, specifically by changing the classification of the goods;

(2) The proper legal framework and limits governing assessment, re-assessment, and modification of export Shipping Bills under the Customs Act, 1962;

(3) The validity of the demand for recovery of duty under section 28AAA of the Customs Act based on alleged wrongful availing and utilization of MEIS (Merchandise Export from India Scheme) scrips;

(4) The applicability of confiscation under section 113(i) of the Customs Act on exported goods based solely on disputed classification;

(5) The imposition of penalties under sections 114(iii) and 114AA of the Customs Act on the exporter and its partner based on the alleged misclassification and misuse of MEIS scrips;

(6) The jurisdictional interplay between Customs authorities and the Directorate General of Foreign Trade (DGFT) regarding classification and MEIS scrips;

(7) The evidentiary and procedural requirements for imposing demands and penalties in such cases.

Issue-wise Detailed Analysis:

1. Authority to Re-assess Export Shipping Bills Post-Export

Legal Framework and Precedents: The Customs Act, 1962 defines "assessment" as including classification and valuation of goods (Section 2(2)) and mandates self-assessment by importers/exporters with supervisory power vested in the proper officer to verify and re-assess (Section 17). The Act explicitly restricts re-assessment powers to the proper officer and prescribes procedural safeguards including speaking orders (Section 17(5)). The Supreme Court precedent cited establishes that once a proper officer exercises jurisdiction over assessment or re-assessment of a particular Bill of Entry or Shipping Bill, other officers are precluded from exercising jurisdiction over the same (Commissioner of Customs vs. Canon India Pvt Ltd.).

Court's Interpretation and Reasoning: The Tribunal found that the Show Cause Notice (SCN) and impugned order did not specify any statutory authority under which the re-assessment of already exported Shipping Bills was undertaken. The Tribunal emphasized that once goods are exported, they cease to be "export goods" and the exporter ceases to be an "exporter" (Sections 2(18), 2(19), 2(20)). Consequently, no further assessment or re-assessment of such Shipping Bills is permissible. The Tribunal held that the only remedies available post-export are appeals under Section 128 or modification requests under Sections 149 or 154, but not re-assessment by a different officer without statutory authority.

Key Evidence and Findings: The SCN was issued by the Directorate General of Revenue Intelligence (DRI) without citing any relevant statutory provision authorizing re-assessment after export. The Commissioner's order similarly lacked reference to any such authority.

Application of Law to Facts: The Tribunal concluded that the re-assessment of the Shipping Bills by DRI and confirmation by the Commissioner was without legal authority and thus invalid.

Treatment of Competing Arguments: Revenue argued that the classification could be re-examined and duties recovered under Section 28AAA; however, the Tribunal clarified that Section 28AAA applies only to recovery of duty where scrips have been cancelled by DGFT and after utilization, which was not established. The assessee contended that the assessment was final and cannot be reopened, which the Tribunal upheld.

Conclusion: Re-assessment of export Shipping Bills after export without statutory authority is impermissible and the impugned re-assessment was invalid.

2. Classification of Exported Goods and Its Legal Significance

Legal Framework and Precedents: Classification is an integral part of assessment under the Customs Act. However, classification is a matter of opinion and can vary between exporter and Customs authorities. The Tribunal referred to the principle that differing views on classification do not render the goods liable to confiscation under Section 113(i).

Court's Interpretation and Reasoning: The Tribunal noted that the assessee's classification of 'Engineered Quartz Stone' under CTI 68159990 was supported by multiple authorities including the Development Commissioner, Assistant Commissioner, Central Excise officers, and GST authorities. The DRI and Commissioner took a different view, classifying it under CTI 68101990. The Tribunal held that a difference of opinion on classification does not make the goods liable to confiscation or justify penalties.

Key Evidence and Findings: Documentary approvals, sanction orders, excise forms, export proofs, and GST returns supported the assessee's classification. No evidence was found that the goods did not correspond to the Shipping Bill declarations.

Application of Law to Facts: Since classification is subjective and part of assessment, the Tribunal declined to interfere with the assessee's classification in the absence of legal authority for re-assessment post-export.

Treatment of Competing Arguments: Revenue's contention that the classification was incorrect and that this justified confiscation and penalties was rejected as it would lead to an untenable situation where any difference of opinion could trigger confiscation.

Conclusion: Classification differences do not render exported goods liable to confiscation under Section 113(i) nor justify penalties under Sections 114 and 114AA.

3. Demand and Recovery under Section 28AAA for MEIS Scrips

Legal Framework and Precedents: Section 28AAA empowers recovery of duty where export incentives such as MEIS scrips have been wrongly availed and utilized. However, recovery is contingent upon the scrips being cancelled by DGFT and their utilization being established. The Foreign Trade Policy places classification authority with DGFT.

Court's Interpretation and Reasoning: The Tribunal found no evidence in the SCN or record that the MEIS scrips were cancelled by DGFT or that they were utilized by the assessee. There was no allegation or proof of collusion, wilful misstatement, or suppression of facts. The Commissioner rightly dropped the demand under Section 28AAA.

Key Evidence and Findings: The SCN lacked any assertion or evidence of cancellation or utilization of scrips obtained by wrongful means.

Application of Law to Facts: Without proof of cancellation and utilization, no recovery under Section 28AAA is sustainable.

Treatment of Competing Arguments: Revenue's submission that MEIS scrips were wrongly availed was not supported by evidence; the Tribunal upheld the Commissioner's decision to drop the demand.

Conclusion: Demand under Section 28AAA was not sustainable and rightly dropped.

4. Confiscation under Section 113(i)

Legal Framework and Precedents: Section 113(i) provides for confiscation of export goods that do not correspond in value or material particulars with the entry made in the Shipping Bill. However, differing classification opinions do not constitute a discrepancy in goods themselves.

Court's Interpretation and Reasoning: The Tribunal held that since the goods exported corresponded to the declarations in the Shipping Bills, and the dispute was only about classification, confiscation was not justified. The Commissioner's note that goods were liable to confiscation was not sustained.

Key Evidence and Findings: No evidence that the physical goods or their value differed from the Shipping Bill declarations.

Application of Law to Facts: Mere difference of opinion on classification does not trigger confiscation.

Treatment of Competing Arguments: Revenue's attempt to equate classification difference with grounds for confiscation was rejected.

Conclusion: Confiscation under Section 113(i) was not warranted.

5. Imposition of Penalties under Sections 114 and 114AA

Legal Framework and Precedents: Section 114 penalizes acts or omissions rendering goods liable to confiscation under Section 113. Section 114AA penalizes knowingly or intentionally making false or incorrect declarations in material particulars.

Court's Interpretation and Reasoning: Since the Tribunal found no grounds for confiscation and no evidence that the declarations were false or incorrect in material particulars, penalties under Sections 114 and 114AA could not be sustained. The exporter is not obliged to anticipate or conform to the views of DRI or other officers regarding classification.

Key Evidence and Findings: The declarations were consistent with approvals and accepted by multiple authorities. No evidence of fraud or intentional misstatement was found.

Application of Law to Facts: Penalties cannot be imposed merely because of a difference in classification opinion.

Treatment of Competing Arguments: Revenue's demand for penalties was rejected as unsupported by evidence or legal basis.

Conclusion: Penalties under Sections 114 and 114AA were not sustainable.

6. Jurisdiction and Role of DGFT versus Customs Authorities

Legal Framework and Precedents: The Foreign Trade Policy and DGFT have exclusive authority over classification for export incentives such as MEIS. Customs authorities do not have locus standi to interfere with MEIS scrips except as provided under the Customs Act.

Court's Interpretation and Reasoning: The Tribunal recognized that classification for MEIS purposes is under DGFT's jurisdiction. The SCN did not show that DGFT had cancelled any scrips, undermining Revenue's case for recovery.

Key Evidence and Findings: Absence of DGFT cancellation or action on scrips.

Application of Law to Facts: Customs authorities cannot act independently to recover MEIS benefits without DGFT's prior cancellation or action.

Treatment of Competing Arguments: Revenue's reliance on Customs Act provisions was limited by the absence of DGFT action.

Conclusion: DGFT's role is paramount in MEIS matters, limiting Customs' recovery powers.

7. Procedural and Evidentiary Requirements for Demands and Penalties

Legal Framework and Precedents: Section 28 requires pre-notice consultation and timely issuance of show cause notices for recovery of duties. Section 17 mandates speaking orders for re-assessment. Appeals under Section 128 provide remedy against assessment orders.

Court's Interpretation and Reasoning: The Tribunal found that the SCN and impugned order lacked statutory basis for re-assessment, did not establish misuse of scrips, and failed to comply with procedural safeguards. The proper remedy for Revenue was to file appeals or issue SCNs within the statutory framework, not to re-assess post-export without authority.

Key Evidence and Findings: No evidence of procedural compliance or statutory authority for re-assessment post-export.

Application of Law to Facts: The impugned actions were procedurally and substantively flawed.

Treatment of Competing Arguments: Revenue's procedural lapses and lack of evidence undermined its case.

Conclusion: Demands and penalties based on such flawed procedures cannot be sustained.

Significant Holdings:

"The re-assessment of the Shipping Bills in this case is without any authority of law."

"Once the goods are exported, there cannot be any assessment or re-assessment thereafter."

"Classification of goods is a matter of opinion of different persons and a difference of opinion does not render the goods liable to confiscation under Section 113(i)."

"No exporter has any obligation to anticipate or conform to the views of DRI, audit or preventive officers regarding classification of goods."

"Demand under Section 28AAA is sustainable only if MEIS scrips are cancelled by DGFT and are shown to have been utilized, and obtained by collusion, wilful misstatement or suppression of facts."

"Penalties under Sections 114 and 114AA cannot be imposed merely due to difference of opinion on classification."

"The only remedies available after export are appeal under Section 128 or modification under Sections 149 or 154; re-assessment without authority is impermissible."

The Court ultimately set aside the impugned order, allowed the assessee's appeal, dismissed the Revenue's appeal, and disposed of cross objections, granting consequential relief to the assessee.