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2015 (11) TMI 503 - CESTAT MUMBAI

2015 (11) TMI 503 - CESTAT MUMBAI - 2015 (325) E.L.T. 599 (Tri. - LB) - 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 sc .....

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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.

Mandates and rules, if not complied with, amounted to goods being exported in contravention of prohibi .....

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ed goods. It is, thus, amply clear that prohibition referred to in other 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 whi .....

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r the Respondent Rep by: Shri A K Singh, Addl. Commissioner (AR) ORDER Per 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 Lo .....

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abric lengths at serial no.43A of the schedule with eligibility at 8.2%. "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 o .....

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of Customs Act, 1962, were also confiscated under Section 113 (d) with 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 M .....

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r of Customs, Mumbai [2006(199) ELT 97 (Tri-Mum)] was also cited to bolster 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 .....

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tention to decisions of the Tribunal in Mercantile India v. Commissioner 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)], Sur .....

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(157) ELT 662 (Tri-Mumbai), Kanhaiya Exports (P) Ltd v. Commissioner of 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 .....

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specific to classification solely for availment of DEPB credit, the jurisdiction 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 20 .....

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Commissioner of Central Excise & Customs, AP v Suresh Jhunjhunwala [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 th .....

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ime being in force." Section 11 of Customs Act, 1962 empowers the Central 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 o .....

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brought into the customs area for examination and clearance thereof as per 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 .....

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o various schemes under the Foreign Trade Policy. 6.3 Disputes relating 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 int .....

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ssioner [2003(155) ELT 423 (SC)]. Our attention was drawn by the learned 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 Cus .....

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ication under Section 11 of the Customs Act, 1962. The use of the word "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 an .....

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urt laid down in Principal Appraiser (Exports) v Esajee Tayabally Kapasi [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 narrowl .....

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be without a logical foundation. Accordingly, the conclusion arrived at 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 Sec .....

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confiscate any goods attempted to be exported contrary to any 'prohibition' 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 .....

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) this would not include any such goods in respect of which the conditions, 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 clear .....

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and Others [(1970) 2 SCC 728] wherein it was contended that the expression '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 .....

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stricting" or "otherwise controlling", we cannot cut down 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 prohibiti .....

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vides. This Rule is to be read along with Section 11(1) of the Foreign Trade (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 cust .....

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yer or consignee in pursuance of which the goods are being exported and 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 amo .....

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hat it was an organized racket to claim fraudulent drawback or an act of 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 .....

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rakash Bhatia in later judgments. 6.8 The decisions of the Tribunal cited 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 o .....

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o seen that the decision in re Om Prakash Bhatia was arrived at after detailed 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 crystal .....

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It is, thus, amply clear that prohibition referred to in other 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. 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 ef .....

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(318) ELT 610 (SC)]. In the latter, the appeal of the Revenue against the 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 benefi .....

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