2011 (8) TMI 924 - AT - Customs

DEPB benefit - Misdeclaration of value - Circular No. 69/97-Cus. dated 8-12-1997 - whether the DEPB rate is to be applied on the PMV or the benefit should be capped at 50% of PMV which is what the Public Notice Issued by DGFT envisages - the public notice issued by DGFT should prevail over the circular of CBEC which is not very clear on the point whether the rate is to be applied on PMV or benefit is to be capped at 50% of PMV - When the adjudicating officer himself is confused about this the exporter cannot be penalized for such discrepancy. No benefit that is accruing to the exporter on account of the mis-declaration comes out - Appeals are allowed

Summary

Issues Involved:
1. Mis-declaration of FOB values and Present Market Values (PMV) for export goods.
2. Eligibility and calculation of DEPB benefits.
3. Legality of confiscation and penalties imposed under the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Mis-declaration of FOB values and Present Market Values (PMV) for export goods:
The Revenue alleged that the appellants mis-declared the FOB values and PMV of export goods to claim undue DEPB benefits. The investigation revealed discrepancies between the declared PMV and the actual market value. The adjudicating officer determined a lower PMV than declared by the appellants, leading to the conclusion that the FOB value should have been declared at the local market price. However, the tribunal found this approach legally baseless, stating that exporters are free to sell goods at a profit. The order fixing FOB value to be equal to PMV was set aside due to lack of legal basis.

2. Eligibility and calculation of DEPB benefits:
The DEPB benefits were to be granted based on the FOB value of the goods exported, with a restriction that the benefit should not exceed 50% of the PMV as per Public Notice No. 10/97. The tribunal noted that the confusion arose from a misinterpretation of CBEC circulars, particularly para 5 of CBEC's circular 77/2002-Cus, which led to the incorrect understanding that DEPB benefits should be restricted to 20% of the PMV. The tribunal emphasized that DEPB benefits are granted by DGFT and should be based on the public notice issued by DGFT rather than the CBEC circular. It was also noted that the DGFT had not revised the DEPB benefits, indicating disagreement with the impugned order.

3. Legality of confiscation and penalties imposed under the Customs Act, 1962:
The Revenue proposed confiscation of goods and imposition of penalties under Sections 113(d) & (i) and 114(i) & (iii) of the Customs Act, 1962. The tribunal found that the entire case was based on a wrong understanding of facts and law, particularly the misinterpretation of DEPB benefit calculations. The tribunal concluded that no case warranting confiscation of goods under Section 113(d) and (i) was made out, as the goods were not available for confiscation and no excess DEPB benefit was demonstrated. Consequently, the penalties imposed under Section 114(i) and (iii) were also deemed unsustainable.

Conclusion:
The tribunal allowed the appeals and set aside the Order-in-Original, concluding that the appellants could not be penalized for discrepancies arising from a wrong understanding of the expressions and legal provisions by the adjudicating officer. The tribunal emphasized that the DEPB benefits should be calculated based on the public notice issued by DGFT, and the FOB value should not be equated with the PMV without legal basis.