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Rainbow Silks, Delta Logistics Versus Commissioner of Customs (Export) ACC, Mumbai

2015 (11) TMI 503 - CESTAT MUMBAI

Confiscation and penalty – Misdeclaration – Overvaluation to claim higher DEPB rates – Whether the provisions of sections 113(d) and 114 of the Customs Act, 1962 are invocable in the case of export under Duty Entitlement Pass Book (DEPB) scheme or not - Held that:- DEPB scrip is issued by the field offices of the Director General of Foreign Trade on the basis of value and description of export goods in accordance with the scheme envisaged in Chapter IV of the Foreign Trade Policy for the relevan .....

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nce with its availability for taking out of India and, thus, completing the process of export. Generally, the verification of particulars filed in the shipping bill is exclusively in the hands of the proper officer of Customs whose reports are relied upon by other agencies and offices of the Government of India.

Mandates and rules, if not complied with, amounted to goods being exported in contravention of prohibition under other laws and hence crystallizing the liability to confiscat .....

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sections of the Customs Act, 1962 are not limited to those notified under section 11 of the same Act. Prohibition has a much wider connotation that traverses beyond Prayag Exporters. - misdeclaration of quantity, description or value with intent to claim benefits under schemes in the Foreign Trade Policy would bring such goods within the prohibition envisaged in the Foreign Trade (Development and Regulation) Rules, 2003 which allows section 113(d) and section 114 to be invoked for confiscation .....

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er C J Mathew The issue to be decided by this Larger Bench is whether the provisions of sections 113(d) and 114 of the Customs Act, 1962 are invocable in the case of export under Duty Entitlement Pass Book (DEPB) scheme or not. 2. Briefly stated the facts leading up to this reference are: the appellant, M/s Rainbow Silks, filed shipping bill no. 7010127 dated 22 nd October 2008 through their Customs House Agent, M/s Delta Logistics at Air Cargo Complex Mumbai for export of goods described as &qu .....

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"Sarees", on the other hand, are entitled to only 6.6% being classifiable as "made-ups" at serial no. 43B and thus entitled to DEPB credit of ₹ 252209.89 against the claimed amount of ₹ 313972.87. Consequent upon the detection of the misdeclaration purportedly to secure undue benefit of duty-free imports, proceedings were proposed to be initiated for confiscation of the goods and imposition of penalty. The appellant waived the right to be issued with show cause n .....

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option to redeem the same on payment of fine of ₹ 75000. Penalties were imposed on the exporter and Customs House Agent. The goods were redeemed and penalty paid by the appellant-exporter before export of the goods. The appellant, thereafter, filed an appeal against the impugned order and another appeal was filed by M/s Delta Logistics against the personal penalty imposed on them; both these came up before the Single Member Bench of this Tribunal. 3. The single Member Bench hearing the two .....

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ter this claim. The Bench also noted the argument of the learned Authorized Representative that section 50 of the Customs Act, 1962 required declaration of description and that the exporter had attempted to misdeclare with intent to avail undue benefit under DEPB scheme. Citing the decision of the Tribunal in Asian Exports v. Commissioner of Customs (Export), Mumbai [2009 (238) ELT 85 (Tri-Mum)], which accepted the argument of Revenue that proceedings under sectin113 and 114 were valid when over .....

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of Customs, Chennai [2007 (215) ELT 158 (Tri-Chennai)], Malboro Electronics Pvt. Ltd. v. Commissioner of Customs, Jaipur [2005 (190) ELT 404 (Tri-Del)], Ramayan Impex v Commissioner of Customs (Exports), Nhava Sheva [2005 (189) ELT 446 (Tri-Mum)], Commissioner of Customs (EP), Mumbai vs Prayag Exporters (P) Ltd [2003 (155) ELT 4 (SC)], Suresh Enterprises vs Commissioner of Customs, Mumbai [2005 (179) ELT 466 (Tri-Mum)], Suresh Jhunjhunwala v Commissioner of Central Excise & Customs, Hyderab .....

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Customs (Port), Kolkata [2006(204) ELT 295 (Tri-Kol)], Hewlett Packard India Sales (P) Ltd v Commissioner of Customs, Bangalore [2009 (241) ELT 545 (Tri-Bang), Commissioner v Hewlett Packard India Sales (P)_ Ltd [2005 (316) ELT A32 (Kar)], Laxman Overseas v Union of India [2010 (252) ELT 513 (Del)], Hindustan Aeronautics Ltd v Commissioner of Customs, Bangalore [2010 (258) ELT 534 (Tri-Bang)], Kanji Shavji Parekh (Cal) P Ltd v Appraiser Customs, Postal Appraising Deptt [2010 (262) ELT 83 (Cal), .....

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sdiction to initiate penal action vested exclusively with the authority under the Foreign Trade (Development & Regulation) Act, 1962 and that the invoking of Section 113 of the Customs Act, 1962 was, for that very reason, improper. 5. Learned Authorized Representative placed reliance on Commissioner of Customs, Lucknow v GP Jaiswal [2015 (318) ELT 610 (SC)], GP Jaiswal v Commissioner of Customs Lucknow [2004 (167) ELT 206 (Tri-Del)], Yash Exports Inc v Commissioner of Customs, Lucknow [2005 .....

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2006 (203) ELT 353 (SC)] and Gurcharan Singh v Directorate of Revenue Intelligence [2008 (224) ELT 497 (SC)]. 6. We feel that the task before this Bench will not be advanced any further by examination of most of these cited decisions of the Tribunal. The existence of what appears to be contrary decisions is the reason for constitution of this Larger Bench and mere enumeration of these for either side cannot be expected to throw light sufficient to resolve the dilemma. It would be more advantageo .....

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entral Government, by notification, to prohibit, absolutely or conditionally, the import or export of any goods. Section 2(33) of Customs Act, 1962 defines "prohibited goods" to be any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force. 6.2 We also note that DEPB scrip is issued by the field offices of the Director General of Foreign Trade on the basis of value and description of export goods in accordance with .....

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er section 51. Thereafter goods are loaded on the designated conveyance in accordance with its availability for taking out of India and, thus, completing the process of export. Generally, the verification of particulars filed in the shipping bill is exclusively in the hands of the proper officer of Customs whose reports are relied upon by other agencies and offices of the Government of India. We also observe that section 113 of Customs Act, 1962 which contains the provisions relating to confisca .....

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to jurisdiction to confiscate export goods and to impose penalty thereon have travelled to this Tribunal on many occasions in the past and the decisions in these cases have relied upon relevant pronouncement of the Hon'ble Supreme Court. Accordingly, the dismissal of the appeal of Revenue in re Prayag Exporters Pvt Ltd [2004 (163) ELT A113 (SC)] by Hon'ble Supreme Court in the absence of any justifiable reason to interfere with the decision of the Tribunal regarding the non-applicability .....

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Authorized Representative to the elaborate discussion in the judgment rendered by the Hon'ble Supreme Court in re Om Prakash Bhatia in contrast with the limited direction in re Prayag Exporters Pvt Ltd. 6.4 It would appear that the short point considered by the Hon'ble Supreme Court in re Prayag Exporters was whether the consistent position taken by the Tribunal in allowing the invoking of section 113 (d) of the Customs Act, 1962 only when goods in question were prohibited or dutiable n .....

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quot;prohibition" in other clauses of section 113 was also assigned the same meaning as prohibited. This appears to have been the consistent stand of the Tribunal that the Hon'ble Supreme Court did not find it necessary to interfere with. On behalf of the appellant-exporter, the learned Counsel would submit that reliance should not be placed on the decision of the Hon'ble Supreme Court in re Om Prakash Bhatia and other Tribunal decisions, notwithstanding that it was chronologically .....

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[1995 (80) ELT 3 (SC)], and followed by the Tribunal in Sripad Upadhyay v CC Chennai [2001 (138) ELT 768 (Tri-Chennai), that mere filing of Shipping Bills will not suffice for initiating these proceedings but that goods must be presented for clearance as a pre-requisite for deciding whether these, being dutiable or prohibited, had contravened the provisions of Section 113. 6.6 The consistent stand of the Tribunal in narrowly interpreting the scope of section 113(d) as stated supra, and endorsed .....

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by the Hon'ble Supreme Court in re Om Prakash Bhatia could not be ignored any further solely on the ground that the dismissal of the review petition of Revenue in re Prayag Exporters virtually overruled the former. The observations of the Hon'ble Supreme Court on the scope of the work 'prohibition' in re Om Prakash Bhatia is: "6. Next - as the order of confiscation of goods is passed by referring to Section 113(d) of the Act, we would refer to the same. It reads as under :- .....

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bition' imposed by or under the Act or any other law for the time being in force. Hence, for application of the said provision, it is required to be established that attempt to export the goods was contrary to any prohibition imposed under any law for the time being in force. 8. Further, Section 2(33) of the Act defines "prohibited goods" as under :- "prohibited goods" means goods the import or export of which is subject to any prohibition under this Act or any other law .....

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ns, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either 'absolutely' or 'subject to such conditions' to be fulfilled before or after clearance, as may be specified in the notification, the import or export of t .....

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ion 'prohibition' used in Section 111(d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955. The Court negatived the said contention and held thus :- "...What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to "any prohibition imposed by any law for the time being in force in this country" is liable .....

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the amplitude of the word "any prohibition" in Section 111(d) of the Act. "Any prohibition" means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From item (I) of Schedule I. Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues." Going on to discuss the contraventions that would be .....

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rade (Development & Regulation) Act, 1992, which inter alia provides that no export or import shall be made by any person except in accordance with the provisions of this act, the rules and the orders made thereunder and the export and import policy for the time being in force. Rule 11 reads thus :- "11. Declaration as to value and quality of imported goods. - On the importation into, or exportation out of, any customs ports of any goods, whether liable to duty or not, the owner of such .....

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shall subscribe to a declaration of the truth of such statement at the foot of such bill of entry or shipping bill or any other documents." Hence, it cases where the export value is not correctly stated, but there is intentional over-invoicing for some other purpose, that is to say, not mentioning true sale consideration of the goods, then it would amount to violation of the consideration of the goods, then it would amount to violation of the conditions for import/export of the goods. The p .....

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deliberate over-invoicing the readymade garments. Hence, the authority imposed redemption fine as well as levied penalty. In our view, this finding arrived at by the authorities below cannot be said to be, in any way, unreasonable which would call for interference by this Court in this appeal". In view of the above, the dichotomous impact of the two decisions has no further ground to subsist. 6.7 In our opinion, three aspects require to be considered in the above context: (a) that the deci .....

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d by the learned Counsel to canvass the contention of the exporter-appellant place reliance on the decision of the Hon'ble Supreme Court in re Prayag Exporters which was prior to the decision of the Hon'ble Supreme Court in re Om Prakash Bhatia. The Tribunal, however, held that the former would prevail owing to subsequent dismissal of the review petition filed by the Revenue in which the latter decision was brought on record as a ground for reconsideration. The review re-examined the ori .....

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tailed consideration of the word "prohibition" in section 113(3) of Customs Act, 1962. Having discussed the mandates prescribed in the Foreign Exchange Management Act and the rules framed under the Foreign Trade (Development & Regulation) Act, 1962, it was held that these mandates and rules, if not complied with, amounted to goods being exported in contravention of prohibition under other laws and hence crystallizing the liability to confiscation under section 113(d) of Customs Act .....

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of the Customs Act, 1962 are not limited to those notified under section 11 of the same Act. Prohibition has a much wider connotation that traverses beyond Prayag Exporters. Accordingly, in Gurucharan Singh, the Hon'ble Supreme Court observed "It not only takes within its sweep the goods which are prohibited under the Customs Act but also under other Acts." It is, therefore, impossible to ignore the binding effect of the decision in re Om Prakash Bhatia particularly after May 2003 .....

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he decision of the Tribunal was allowed holding that contravention of Rule 11 of Foreign Trade (Development & Regulation) Rules, 2003, which required the exporter to declare, inter alia, the value, quality description of the goods, would render the export goods liable to confiscation for having been exported contrary to any prohibition. While the Tribunal had relied upon the decision in re Prayag Exporters to give benefit to the exporter, the Hon'ble Supreme Court relied upon its own dec .....

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