By TIOL News Service

MUMBAI, JUNE 24, 2015: BASED on an intelligence that the appellant was involved in illegal exports and fraudulently claiming undue DEPB benefits by way of willful mis-statement of FOB value of textile article/fabrics exported; one live consignment which arrived for export through ICD, Miraj was intercepted and the samples from the consignment were drawn under Panchnama to ascertain the correctness of the description.

The samples were tested in the laboratory of Bombay Textile Research Association, Mumbai (BTRA), who vide their report dated 31/07/2006 stated that the PMV of the product was Rs.96/- per meter whereas the FOB value as declared in the shipping bill by the exporter was Rs.284/- per meter.

Further investigation was undertaken and the documents relating to the earlier exports made by the appellant were scrutinized and the samples drawn on earlier occasions were called for. It was noticed that no samples were drawn.

After recording statements, Revenue issued a show-cause notice to the appellant for wrongful claim of DEPB benefits on fifty shipping bills. The departmental officers were also issued show-cause notice for imposition of penalties under the provisions of Section 114 of the Customs Act, 1962.

The adjudicating authority held against the appellant, its partners and also against the three departmental officers. The DEPB credit, which was allowed to the appellant was reduced, penalties were imposed on the appellants.

All the appellants are before the CESTAT against this order.

It is their submission that all the allegations have been suitably addressed by the appellant inasmuch as the DEPB, which were claimed were post export and the cancellation of the DEPB licence was not on the ground of over valuation of the goods; the amounts which were received from M/s. AI Fardan Exchange House has to be treated as remittances made against the exports made by the appellant through the proper banking channel.

It is further submitted that the overseas inquiry report which allegedly indicatives overvaluation was not furnished at all;that The BTRA report on which reliance was placed can only help the department as to ascertain whether the goods sought to be exported were technically textile articles or otherwise and the BTRA is not competent to report on the composition of the product sought to be exported; the address of the unit manufacturing textile articles situated in GIDC was given to the investigating authorities at the beginning itself but was not investigated and instead of verifying the said premises, the office premises was verified and the conclusion was drawn that the such unit is non-existent; that the overseas inquiry information cannot be considered as documents in terms of Section 139(c) of the Customs Act, 1962; that the adjudicating authority has merely rejected the value declared by the appellant but did not determine the value based upon identical or similar goods being exported from India; that the entire sale proceeds have been received by the appellant through the Central Bank of India and Union Bank of India and both banks issued certificates; the same is realized through proper banking channels in Nostro Account of their Bank at New York.

The Counsel appearing for the three departmental officers inter alia submitted that there is no evidence on record that these officers played any role in exporter's alleged act, which were beyond their knowledge and jurisdiction and as such the case made out against the exporter by the DGFT and customs have no remote nexus with the charge of collusion and connivance. It is also informed that one of the departmental officers was proceeded against in disciplinary proceedings for negligence of duty but the Chief Commissioner, Pune as appellate authority vide order dated 18/11/2014 dropped all the charges except for non drawing of samples from the export consignments. Further, the CBEC Circular No. 10/97-Cus dated 17/04/1997 puts no condition of drawing samples and Customs Notice No. 75/2001 dated 22/06/2001 puts only optional condition of sample's drawing for all kinds of exports.

The AR submitted that the expert body BTRA has ascertained the value which is based upon the technical expertise &cannot be discarded as BTRA is recognized by the Ministry of Textiles; that actions of the exporter and their partners are very suspicious inasmuch as they have forged the remittance certificates and got DEPB licence from DGFT; that if transactions are genuine, there is no reason to forge BRCs, purchases could not be verified as no information was available;the officers have played manipulative roles and hence penalties have been imposed on them.

The Bench after considering the submissions observed -

Merits - case of Appellant exporter & partners :

+ We find that the adjudicating authority, while discarding the value of the goods which have been exported, has relied upon mainly the overseas inquiry conducted, certificate of BTRA and the action of the exporters regarding submitting false BRCs for obtaining DEPB licence, is erroneous for more than one reason.

+ The Charts C-1 & C-2 annexed to the show-cause notice purportedly supposed to be collated from the overseas inquiry does not have any signature of the officers. It is pertinent to note that these reports as per Chart annexed at C-1 & C-2, the basis was not divulged to the appellant to defend against such inquiry. In our considered view, the adjudicating authority should have given copy of the overseas inquiry conducted by the department, if any, so that the appellant could have defended or put forth his views on the same. To that extent, we find that the order seems to have been passed in violation of the principles of natural justice.

+ Secondly, we find that the samples which were drawn by the departmental authorities on the consignments which was intercepted and sent to BTRA, the queries were regarding the technical description of the samples whether they would fall under the category of textile and textile articles; but it seems BTRA had opined that the goods are particular description and additional information as to the correct ex-factory value was also given. At this stage, we have to record that goods sought to be exported were suit length and valuation as declared by the appellant was Rs.284/- per meter, while the department has worked out the value of Rs.23/- per meter for DEPB benefits. How this value is worked out is not forthcoming from the records. We also find that the adjudicating authority has not redetermined the value based upon any acceptable norms as per the Customs Act. It is also to be recorded that identical consignments of textile articles was exported by the same M/s. Ruchika International and the value declared was accepted by the department in order-in-original dated 31/12/2009, which we were informed was not contested in the higher judicial forum.

+ Thirdly, no contemporary value of identical or similar goods were brought on record in order to ascertain the contemporaneous prices of the goods sought to be exported. In the absence of above, we find that the impugned order is passed in violation of principles of natural justice and needs reconsideration by the adjudicating authority…

Merits - case of Departmental officers

++ Penalties have been imposed on them under the provisions of Section 114 of the Customs Act, 1962. The said penalties are imposed on the ground that the appellants had abetted the over valuation of the goods exported. In the entire records, we find that there is no abetment on the part of officers inasmuch as all the shipping bills were signed after examining the documents which were attached. The shipping bills and the documents attached and produced before these three departmental officers were indicating the prices, which they felt were correct in the facts of these cases and being recently posted may have lacked in training in clearance of export goods ; even otherwise, the only violation which was highlighted in the impugned order was these officers have indicated that they have drawn the samples and maintained the records, but in fact they have not done so; for the charge of abetment. In our view, violation to perform the duty of scrutinizing or examining, non-drawing of samples, at the best can be held as dereliction of duty which can be proceeded in terms of Central Civil Services Rules, 1965.

++ We find that one of the Officers' case Chief Commissioner has dropped the proceedings initiated against Shri. A.J. Ghode…. In the facts and circumstances of these cases we have to hold that the officers were not in collusion or connivance with the exporter for over valuation of the goods sought to be exported.

The appeals filed by the three departmental officers was allowed that filed by the appellant exporter and its partners was allowed by way of remand to the adjudicating authority.

(See 2015-TIOL-1224-CESTAT-MUM)