Judgment:
1. This is an appeal against Order-in-Original dated 9-9-2002 passed by the Commissioner of Customs, Bangalore.
The appellants are engaged in the manufacture of Aluminium cookware and other Household utensils. During the relevant period they had exported 8 PCS Hard anodized Aluminium cookware, which has Polytetra Floroethylene (PTFE) coating inside and Hard Anodizing outside. They classified the goods under S. No. 6 of DEPB scheme, which covers Aluminium utensils (other than those at S. No. 105). They had also exported 3 PCS Fry Pan with PTFE coating inside and painting outside and similar other non-stick items. In respect of these items, which have PTFE coating inside and painting outside they claimed DEPB under S. No. 105. However, DRI conducted investigations and on the basis of the investigations, Revenue proceeded against the appellants. The Case of the Revenue is that the appellants claimed higher rate of DEPB under S. No. 6 instead of claiming under S. No. 105. The DEPB credit was also utilised by the appellants towards import of raw materials for CIF value of Rs. 10,56,436/-. There was an allegation of suppression of facts against the appellants, as it appeared that they had not mentioned that the export products, namely aluminium utensils were PTFE coated on the inside surface and hard anodized on the outside surface. Hence, their action resulted in claiming of excess DEPB credit amounting to Rs. 3,93,743/-. The adjudicating authority after disallowing the excess DEPB credit demanded differential duty of Rs. 3,93,743/- under proviso to Section 28(1) of Customs Act, 1962. Interest under Section 28AB was also demanded. A penalty of Rs. 5,00,000/- was imposed under Sections 112/114/Section 114A of the Customs Act, 1962. The appellants have strongly challenged the findings of the adjudicating authority.
3. Shri K.S. Ravishankar, the learned Advocate appeared for the appellants and Smt Shoba L. Chary, the learned JCDR appeared for the Revenue.
(i). Section 28 of the Customs Act can be invoked only for non-levy, short-levy and erroneous refund of duty.
(ii) The present demand does not cover any of the instances mentioned in Section 28 of the Customs Act. Hence demand under Section 28 is not sustainable.Essar Steel Ltd. v. CCE, Visakhapat-nam, (Tri.-LB) has held that mere debit in DEPB pass book is not sufficient for eligibility of Modvat credit availed on the strength of Bills of Entry. The learned Advocate impressed upon us that the debit in DEPB is not considered on par with payment of duty by cash. That is why the Modvat credit is not admissible. This shows that the DEPB credit cannot be considered as duty. When it cannot be considered as duty Section 28 will not come into the picture. Hence the demand is not sustainable.
(iv) The power for altering the DEPB credit taken is not vested with the Customs authorities. Only the DGFT authorities have the jurisdiction to cancel or vary the DEPB credit after observing the formalities of quasi judicial proceedings. Until and unless that is done, the Customs authorities cannot hold that excess credit has been availed by the appellants.
(v) Till now the DGFT authorities have not initiated any proceedings against the appellants. Our attention was drawn to DGFT's letter dated 4-9-2002 addressed to the Joint DGFT, Bangalore, Cochin, Mumbai etc., wherein in a dispute regarding excess DEPB credit taken in respect of marine exports it was decided that regional licensing authorities may not issue any further SCNs and no action be taken on SCNs that already stand issued. He said no further action had been taken since the issue of that letter. In this case also, unless the DGFT takes action to reduce the DEPB credit taken, Customs cannot do anything. He relied on the following case laws : (i) M.K. Fisheries v. Commissioner of Customs - 2002 (150) E.L.T. 998 (T) (ii) Dear Impex v. CC, Mumbai - [2004 (175) E.L.T. 611 (Tribunal) = 2004 (95) ECC 540 (Tri.)]Kobian ECS India Pvt. Ltd. v. CC, Mumbai - (Tri.-Mum) (vi) Taking us through the relevant documents the learned Advocate urged that they had not suppressed any facts from the department.
The exports were done under proper procedure and the examination has been done by the Customs Officers. The examination report is available in the shipping bills. Moreover, when the department investigated the matter the appellants furnished all the relevant technical material regarding the process of manufacture of the exported items. The thrust of the learned Advocate's argument is S.No. 105 covers aluminium utensils with interior PTFE coating and exterior painting (non-stick) with/without handle. The goods which conform to the above description and manufactured by the appellants had rightly been classified under S. No. 105 only and the relevant DEPB credit was claimed. As regards the goods in question there was no exterior painting even though there was interior PTFE coaling. In other words the impugned goods cannot fall under S. No. 105. They rightly fall under S. No. 6.
(vii) As regards the clarification given by the DGFT in its meeting, it would only apply prospectively and not retrospectively as the goods were exported much earlier.
(viii)Our attention was drawn to Circular 15/97-Cus., dated 3-6-97 wherein the GOI, Ministry of Finance has clarified that the role of customs authorities should be confined to verification of correctness of exporter's declaration regarding description, quantity and FOB value of the export product. It will be for the licensing authorities granting credit to ensure that credit is permitted by them at correct rate notified by the DGFT.4. The learned JCDR said that what is demanded is not the DEPB credit, but the Customs duty. She said that the excess DEPB credit taken had been used for payment of duty on imported goods. Since the excess DEPB credit is not admissible, to that extent there is non-payment of duty on the imported items. Hence what is demanded under Section 28 is only Customs duty and hence the department is well within its right to demand the duty.
5. Further she referred to the letter dated 7-12-2001 from DGFT addressed to DRI wherein it was stated that the DEPB meeting No.17/2002, dated 23-11-2001 decided that the export product under reference would get covered under S. No. 105 of the DEPB Entry. In view of the above position and also the fact that DGFT's clarification in such matters is binding there is no doubt about the excess credit taken.
6. She further said that the fact of PTFE coating was not declared at the time of export. Had they declared this fact, department would not have allowed export under DEPB S. No. 6.
7. We have considered the rival submissions. The main allegation is that the appellants had availed excess DEPB credit by declaring their goods under S. No. 6 instead of S. No. 105. We notice that S. No. 105 refers to utensils with PTFE Coating interior and painting outside. As far as the impugned goods are concerned there is no dispute regarding the fact of PTFE coating inside. However, in the outside they are Hard Anodized and not painted. Only when the goods are painted they would come under S. No. 105. This is evident on a plain reading of the description given in S. No. 105. Under these circumstances, the impugned goods are, prima facie, classifiable under S. No. 6. The revenue urges that the issue is clinched by the clarification given by DGFT vide its letter dated 7-12-2001 as decided in their meeting. In our view, that clarification cannot have retrospective effect.
Moreover, the records do not show any suppression of facts. The goods had been examined by the Customs officers and allowed to be exported.
Hence, there is no justification for invoking the longer period to demand duty. Another important point is that the Customs authorities do not have any jurisdiction to reduce the excess credit taken. The DGFT authorities have the proper jurisdiction. Until and unless the DGFT takes action we cannot even hold that the credit taken is irregular. In view of these facts, we cannot hold that there is short levy of Customs duty in respect of the goods imported by paying duly through the DEPB credit taken. The case laws cited by the learned Advocate and the Ministry's Circular are very relevant. Therefore the OIO cannot be sustained. Hence, we allow the appeal with consequential relief.