TMI Blog2011 (8) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... The First Appellant is a partnership firm. The second Appellant is the Managing Partner of the firm. The first Appellant is an exporter of stainless steel utensils. It claims DEPB benefit against such exports and such benefit is proportional to the FOB value of goods exported. Revenue has made out a case that during the period 2002-03 to 2004-05 the FOB values and "Present Market values" for export goods were mis-declared by the Appellants on the higher side to claim undue DEPB benefit. 2. Para 7.36A of Public Notice No. 10/97 (P.N.), 97-2002 dated 21-5-1997 provides that the amount of Credit entitlement rate, in respect of export products whose DEPB rate is 15% or more, shall not exceed 50% of the PMV of the goods. 3.The following Circulars of CBEC are relevant: (i) CBEC's circular 69/97-Cus dated 08-12-97; (ii) CBEC's circular 27/2000-Cus dated 05-04-2010; 3.1 Extracts from CBEC's circular 69/97-Cus dated 08-12-97 is reproduced below: "1. As you are aware para 7.36A of Public Notice No. 10/97 (P.N.), 97-2002 dated 21-5-1997 provides that the amount of Credit entitlement rate, in respect of export products whose DEPB rate is 15% or more, shall not exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual Review of the Exim Policy 1997-2002, para 7.36A of the Handbook of Procedure, Vol. 1 has been amended with effect from 1-4-2000 to the effect that PMV declaration shall not be applicable for products for which value cap exist irrespective of the DEPB rate of the product. 3. In view of the above, it has been decided by the Board that for all products exported under DEPB Scheme, wherever FOB value cap has also been notified along with DEPB rate, PMV will not be verified by the Custom House. Circulars mentioned in the first para above shall also stand amended to this effect." 4. Revenue conducted investigations about the cost of the goods exported and also about sale price of similar goods in the local market, and also purchase price of some of the goods bought by them from local market and exported. They ascertained the present market value of the goods manufactured in the factory of the Appellant at Rs. 65.80 per Kg. They also found that some of the exported goods were bought by them at a price of Rs. 70 per Kg but the goods were exported at a price of Rs. 123 per Kg. Based on such facts Revenue issued a Show Cause Notice proposing action as proposed in para 34 of SCN which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. 7. For understanding the dispute and the confusion in the SCN and O-in-O a few points have to be noted. These are,- (i) FOB value and PMV are different. FOB is the value at which goods are sold to the buyer abroad. PMV is the value of the export goods in local market. (ii) DEPB benefit is to be granted by applying the rate prescribed for the commodity on the FOB value of goods exported. (iii) If such benefit is more than 50% of the PMV, it is to be restricted to 50% of PMV. Public Notice No. 10/97 (P.N.), 97-2002 dated 21-5-1997 does not say the DEPB rate is to be applied to PMV. 8. To illustrate let the DEPB rate be 20%. Let FOB value be Rs.100. Exporter can get DEPB credit of Rs.20. But if PMV is Rs. 30 only then DEPB credit will be Rs. 15 only. Annexure A to SCN is prepared with the understanding that DEPB benefit in such circumstances will be only Rs.6 and therefore the entire matter is initiated on wrong understanding of the provisions. 9.The confusion in this matter appears to emanate from circular para 5 of CBEC's circular 77/2002-Cus dated 27-11-2002. Extracts from the circular are given below: "3. The issue has been examined in consultation wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue found that PMV was in fact lower. But the benefit that accrues to the exporter due to wrong declaration of PMV as worked in Annexure-A to the SCN based on a wrong understanding of the Public Notice. 12. The interesting aspect of the O-in-O is that the revision in PMV ordered in the impugned order does not result in excess benefit to the exporter as may be seen from the following rough calculation. 1. FOB Value declared 89621671 2. DEPB benefit at 20%-(actual rate varied from 13% to 20% but for 28 out of 33 Shipping Bills). This si why calculation is stated to be rough. 17924334 3. PMV decided in O-in-O 47422493 4. Maximum DEPB that can be granted @50% PMV 23711246 Since amount at S. No 2 above is less than amount at S. No. 4 above no case of excess DEPB benefit comes out even as per the adjudicated values. So it is obvious that the entire case is based on wrong understanding of facts and law especially the understanding that DEPB benefit is to be restricted to 20% (appr) of Rs. 47422493 as seen from calculations in Annexure A to SCN. Here the submission of the Appellant that DGFT has so far not revised the DEPB benefit is taken note of. 13. Both the sides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes on to argue how goods can be held to be liable to confiscation under section 113 of the Customs Act when material particulars declared are fraudulent. 17. Considered arguments on both sides. 18. The impugned order holds that the FOB value of export goods should have been declared at the price of the goods in the local market. This is without any legal basis. Any exporter is free to sell goods at a profit. So order fixing FOB value to be equal to PMV is hereby set aside. 19. Prima facie, the Present Market Value is not correctly declared. This mistake appears to emanate from wrong understanding of the expression. 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. Whatever is demonstrated in Annexure A to SCN is based on wrong understanding of law. In the circumstance no case warranting confiscation of goods under section 113 (d) and (i) is made out. There is also the issue that the goods were not available for confiscation and hence could not have been confiscated and redemption fine imposed. 20. Since no case to h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
