The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the custom authorities cannot question the discharge certificate issued by Directorate General of Foreign Trade (DGFT) in respect of the obligation to be fulfilled by the appellant under EPCG License.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the custom authorities could not have questioned the discharge of the export obligation given by DGFT to the appellant in respect of the EPCG License dated 29.12.1994 in the absence of any prior determination regarding the said License by the DGFT.
The bench held that once it is held that the custom authorities had no jurisdiction to issue the show cause notice, the confiscation of goods or the imposition of penalty upon the appellant or upon Sunil Wadhwani, Director of the appellant, does not arise.
The appellant/assessee is in the business of manufacturing of audio cassettes, video cassettes and CDs. The appellant is also engaged in the sale of products for home consumption as well as exports outside India.
In the year 1994, the appellant sought to import certain capital goods required for the manufacturing of products under the Export Promotion Capital Goods Scheme in terms of the Import Policy 1992-1997.
The EPCG License imposed an obligation on the appellant to export products worth USD $2,482,135 within five years from the issuance of the License. The appellant also furnished a bank guarantee of Rs. 1,06,07,000/- equal to 100% of the duty saved. The appellant claims that it manufactured CD-ROMs specified in the EPCG License dated 29.12.1994 and exported them to fulfill the export obligation stipulated in the License.
The export obligation was fulfilled by the appellant by also exporting the CD-ROMs through third parties like Sundram Exports, a merchant exporter. Sundram Exports purchased the CD-ROMs from the appellant and exported the same worth US $1,945,600.
The DGFT confirmed that the appellant had fulfilled their export obligation against EPCG License. The appellant was, therefore, free from the bank guarantee and the letter of undertaking dated 16.01.1995.
The confirmation of demand of Rs. 47,38,817/- on the appellant in respect of EPCG License dated 29.12.1994 with interest and penalty and with an option to the appellant to redeem the goods on payment of redemption fine of Rs. 11 lakh and imposition of penalty of Rs. 2 lakhs on Sunil Wadhwani has been assailed in these two appeals.
The appellant contended that the export obligation under the EPCG License dated 29.12.1994 had been fulfilled by the appellant within the time granted by DGFT and so the duty demand is not sustainable.
The department contended that it is a case of fraud and wilful collusion and as fraud vitiates everything, there is no infirmity in the impugned order.
The tribunal held that custom authorities cannot go behind the benefits availed, in the absence of any adjudication having been undertaken by DGFT. In other words, an action for recovery of benefits claimed and availed would have to necessarily be preceded by an order of the competent authority under the FDTR Act that the certificate or script had been illegally obtained.
Case Details
Case Title: M/s. Super Cassettes Inds. Ltd. Versus Commissioner of Customs
Case No.: Customs Appeal No. 296 Of 2006
Date: 03.01.2025
Counsel For Appellant: B.L. Narasimhan
Counsel For Respondent: Rajesh Singh
