By TIOL News Service

NEW DELHI, OCT 04, 2013: HIND Industries Ltd. is engaged in the export of frozen / fresh chilled meat, the export of which is free under the ITC export policy. However, there is a condition attached to such export that Government appointed Doctor would issue a certificate ante mortem and post mortem of animals at the time of slaughter. The investigation conducted by the Revenue revealed that certain certificates duly signed by the Doctors were found in the appellant's factory at the time of their search and it is also a matter of record that Veterinary Doctors available in the Country were not sufficient to carry on said ante mortem and post mortem investigation. DR also submits that it is not only the signed certificates of the Doctors which was found in the factory but the same were filled with complete details along with the stamps, which were found in the factory thus indicating that the appellants were not fulfilling the said condition of ITC Policy but the same was only being observed by them as empty formality.

On the above basis, proceedings were initiated against applicants for denial of benefit of DEPB scripts obtained by them along with denial of VKGUY (Vishesh Krishi Gram Udyog Yojna) scripts issued to the appellants. Such scrips were obtained to the appellant from DGFT after declaring the exports to them and as they were freely saleable in the market; the same were sold and the buyers of the said scrip's, made in each and every, imports against the same. Proceedings initiated against the appellants resulted in passing of impugned orders by the Commissioner.

The Commissioner has confirmed duty against applicant equivalent to the value of the DEPB scrip and VKGUY scrip. The appellants have strongly contended that Customs have no jurisdiction or authority to deny the benefit of such scrip issued by DGFT and to confirm the duty equivalent to the value of said scrip.

For the above purpose, he has relied upon various decisions of the Tribunal.

Tribunal's decision in the case of Kobian ECS India Pvt. Ltd Vs. CC Mumbai - (2003-TIOL-77-CESTAT-MUM) laying down that if Customs authorities find any irregularity in the exports, they have to report the matter to DGFT authorities for cancellation of the scrip issued to them and it is not within the jurisdiction of the Customs authorities to deny the benefit of said scrip.

Mercantile India vs. CC Chenna i - (2007-TIOL-1085-CESTAT-MAD) laying down that power to recover wrongly availed DEPB scrips by the exporters vests in DGFT and Customs authorities have no power to recover such benefits under Section 28 (2) of the Customs Act, 1962.

Further, Bombay High Court in the case of CC (EP) vs. Jupiter Exports - (2007-TIOL-329-HC-MUM-CUS) has held that Customs duty cannot be demanded from the licence holder and the same can only be directed against the importer who has used such scrips for duty free imports. Para 22 of the said decision further observed that licence issued by DGFT cannot be adjudged to their validity by the Customs authority and unless such licences are cancelled by the licensing authority , they are deemed to be valid.

The Member (J) without going into the other factual and legal aspects was of the prima facie view that Customs authorities can not demand duty from the exporters on any irregularity noticed by them and they should necessarily refer the matter to DGFT authorities for cancellation of such licence. She also noted that law was amended in the 2012 Budget and a new section 28 AAA was introduced. The said section is to the effect that where instrument (defined in the Explanation) stand obtained by an exporter by means of collusion, wilful misstatement, suppression of facts etc., and such instruments are issued by the DGFT, duty can be demanded from the person who obtained such instruments by fraud and mis-representation. However explanation to said section clarifies that said section would be applicable to the use of such instruments after the date of ascent of the President. As such, it is clear that to undo the effect precedent decision of the Tribunal, section 28AAA stands introduced in the Act but the same is only applicable prospectively and not retrospectively. As such, she was of the view that appellant is entitled to unconditional stay.

The Member (T) agreed with her on dispensation of pre-deposit, but he had differences on certain observations, especially jurisdiction of Customs officers.

Pre-deposit waived.

(See 2013-TIOL-1461-CESTAT-DEL)