Custom, Excise & Service Tax Tribunal
Basant Kumar Saraf vs -Kolkata(Port) on 23 April, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 75396 of 2020
(Arising out of Order-in-Appeal No. KOL/CUS(PORT)/134/2020 dated 03.01.2020
passed by the Commissioner of Customs (Appeals), 3rd Floor, Custom House, 15/1,
Strand Road, Kolkata - 700 001)
Basant Kumar Saraf, Proprietor, : Appellant
M/s. Saraf Overseas,
61, Park Street, 5th Floor,
Kolkata - 700 016
VERSUS
Commissioner of Customs (Port) : Respondent
Custom House, 15/1, Strand Road,
Kolkata - 700 001
APPEARANCE:
Shri Sudhir Mehta, Senior Advocate, for the Appellant
Shri Subrata Debnath, Authorized Representative, for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 76015 / 2025
DATE OF HEARING / DECISION: 23.04.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed by Shri Basant Kumar Saraf, Proprietor of M/s. Saraf Overseas situated at 61, Park Street, 5th Floor, Kolkata - 700 016 (hereinafter referred to as the "appellant") against the Order-in-Appeal No. KOL/CUS(PORT)/134/2020 dated 03.01.2020 passed by the Commissioner of Customs (Appeals), 3rd Floor, Custom House, 15/1, Strand Road, Kolkata - 700 001 wherein the Ld. Commissioner (Appeals) has rejected the appeal filed by the appellant.
Page 2 of 11Appeal No.: C/75396/2020-DB
2. The facts of the case are that the M/s. Saraf Overseas (appellant) is a merchant exporter. The appellant exported a shipment of 2392 M.T. of "Indian Cane White Sugar" under Bill of Export No. 08/EXP/RAN/DFIA/07 dated 14.04.2007 to M/s. Ornate Services Ltd., Bangladesh under DFIA Scheme. After the export, the appellant realised that DFIA Scheme was not beneficial to them and wanted to avail the DEPB scheme instead. Accordingly, the appellant filed an application for conversion of the Bill of Export from DFIA scheme to DEPB scheme, which was rejected by the Commissioner of Customs (Preventive), West Bengal vide letter C. No. VIII(48)194/CUS/P/WB/2004/3176P dt. 28.02.2008, issued by AC (Tech). However, the appellant filed a fresh application for conversion of the Bill of Export from DFIA scheme to DEPB scheme before the Assistant Commissioner of Customs, Krishnanagar Customs Division on 30.12.2008 and the same was allowed by the Assistant Commissioner. Later, the said DEPB Licence no. 0210129701 dt. 29.07.2009 obtained by the appellant was sold to M/s. Hansraj Exim & Consultancy Pvt. Ltd. on 26.11.2009, who in turn sold the said license first to M/s. Hindalco Industries Ltd. (unit Birla Copper) and then to M/s. Krishi Rasayan Exports Pvt. Ltd., Kolkata. M/s. Hindalco Industries Ltd. availed duty exemption to the tune of Rs. 6,78,508/- and M/s. Krishi Rasayan Exports Pvt. Ltd. availed duty exemption to the tune of Rs.9,99,983/-. Rs. 17/- remained unutilized.
3. The appellant was issued a Show Cause Notice dated 08.10.2012 proposing withdrawal of the DEPB Licence issued to them on the allegation that the Page 3 of 11 Appeal No.: C/75396/2020-DB appellant has obtained conversion of their DFIA Licence to DEPB Licence fraudulently.
4. On adjudication, the ld. adjudicating authority vide Order No. KOL/CUS/ADC/ADJN(PORT)/116/2018 dated 21.05.2018, inter alia, imposed a penalty of Rs.1,65,000/- under Section 112(a)(ii) of the Customs Act, 1962 on the company, M/s. Saraf Overseas and a personal penalty of Rs.1,00,00,000/- under Section 114AA of the Customs Act, 1962.
4.1. The appellant challenged the said order before the Ld. Commissioner (Appeals), who, vide the impugned order, rejected the appeal filed by the appellant.
5. Aggrieved against the imposition of the above said penalties, the appellant has filed the present appeal.
6. The submissions made by the appellant are summarized as under: -
(i) The ld. adjudicating authority has erred in imposing a penalty of Rs.1,00,00,000/- under Section 114AA of the Customs Act, 1962 and Rs.
1,65,000/- under Section 112(a) (ii) of the Customs Act, 1962, as the conditions required for imposing penalties under the said sections does not exists in this case.
(ii) The penalties have been imposed on the ground of alleged suppression, which is not on record, and which the appellant denies as it would not lead to invocation of Section 114AA of the Customs Act which deals with false statement in a document and fabricated documents. No such Page 4 of 11 Appeal No.: C/75396/2020-DB documents were or could be identified in this case.
(iii) The order of conversion passed by the Assistant Commissioner of Customs was legal and accepted by the Commissioner of Customs (Preventive) and it was not open to the DRI to issue a Show Cause Notice (SCN) and contest the conversion order passed by the Assistant Commissioner of Customs and approved by the Commissioner.
(iv) No quantification of value of the goods covered has been made in the adjudication order and in the said facts and circumstances, imposition of penalty under Section 114AA of the Act could not have been done.
(v)The goods were imported before cancellation of the license and therefore these goods could not have been confiscated.
(vi) Circular No. 04/2004 was contrary to various judgments of the Tribunal and it was rescinded vide Circular No. 36/2010, in which it was acknowledged that Circular No. 04/2004 was contrary to the law and various judgments of the Tribunal. The said Circular could not have been relied upon when it was contrary to the law.
(vii) The office of the CC(P), Kolkata, after getting the whole issue examined in depth by its Special Investigation Unit, had treated the matter as closed as is evident vide letter II(8)17/SIU/CCP/WB/10/526(SIU) dt. 13.06.2011. On the above circumstances, the matter is to be treated as closed.
Page 5 of 11Appeal No.: C/75396/2020-DB
(viii) The AC(Tech)'s letter conveying rejection of conversion by Commissioner without advancing reason for arriving at the said decision. The said letter is not an order signed by commissioner and thus can be treated as illegal, not to be taken as basis for alleging fraud or suppression. Reliance in this regard has been placed on the judgement in the case of M/s. Apple International vs Commissioner of Customs, Nhava Sheva [2000(120) ELT 671 (Tribunal)], M/s. Lubrichem Industries Ltd vs CCE Bombay [1994 (73) ELT 257 (SC)] and other case laws.
(ix) The benefit under DFIA is much higher than that of the benefit under DEPB Scheme. Hence, there has been no unintended benefit availed by appellant. The switching over from DFIA to DEPB is not tantamount to violation of any policy.
(x)There has been no allegation whatsoever in respect of exportation. Hence, benefit of export incentive cannot be denied.
(xi) The Commissioner's order vide letter dated II(8)17/SIU/CCP/WB/10/526(SIU), dt. 13.06.2011 to DRI is binding on the department since the same was not reviewed by the committee of Chief Commissioners.
(xii) The export was made on 14.07.2007 whereas the SCN was received on 13.10:2012 after expiry of 5 years, hence the SCN is time barred on 13.01.2008 and even extended period of 5 years expired on 13.07.2012.
Page 6 of 11Appeal No.: C/75396/2020-DB
(xiii) Penalty u/s 112 and u/s 114AA are not proper as the noticee is not an importer and as such penalty is imposable only on the importer. Further proprietorship firm and proprietor partners cannot be treated as two legal entities; hence, imposition of separate penalty not proper.
(xiv) Duty benefit under DFIA works out to, Rs 43 lacs (approx.) @ 15% of value of authorization whereas in DEPB, the benefit works out to Rs. 16.78 lacs. Hence, the impugned proceedings are to be dropped.
(xv) The application for conversion of Bill of Export from DFIA to DEPB was made under section 147 of Customs Act, 1962 read with Board's Circular No. 51/96 dated 24th October, 1996. However, the said circular was not taken into account and the application was returned without any order-in-original in terms of Board's Circular No. 4/2004 which was not applicable in the instant case.
(xvi) Penalty u/s 114AA is not applicable since the appellant is not a party in the matter of import and no document was filed by them in that regard and the order of conversion has been accepted by the Commissioner (Preventive). Further it was held that the conversion of DFIA shipping to DEPB shipping bill was legal as it is evident from the letter dated 13th June, 2011 forwarded to the DRI.
(xvii) Imposition of penalty u/s 112(a) is improper since DFIA license was validly issued and importation took place during the validity Page 7 of 11 Appeal No.: C/75396/2020-DB period of the license. Reliance in this regard is placed on the decision in the case ofSampat Raj Dugar vs Union of India [1992 (58) ELT 163 (SC)];
7. The Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order.
8. Heard both sides and perused the appeal records.
9. We observe that the appellant has exported goods under the DFIA scheme and later on, wanted to convert the Bill of Export from DFIA scheme to DEPB scheme. An application to this effect made before the Commissioner of Customs (Preventive), Kolkata was rejected by vide letter dated 28.02.2008 which was conveyed by the Assistant Commissioner of Customs (Tech). As the letter was issued by the Ld. Assistant Commissioner and it was not an appealable order, the appellant did not file any appeal against the rejection of their application by the Commissioner of Customs (Preventive), Kolkata. Later, the appellant filed a fresh application for conversion of the said Bill of Export from DFIA scheme to DEPB scheme before the Ld. Assistant Commissioner of Customs, Krishnanagar Division on 30.12.2008 and the same was allowed. Consequently, the appellant has obtained the DEPB Licence No. 0210129701 dated 29.07.2009.
10. We observe that the DRI had taken up the investigation on the ground that the appellant has obtained conversion from DFIA scheme to DEPB scheme by falsely presenting the facts before the Ld. Assistant Commissioner. Accordingly, an investigation was initiated by the SIU wing of the Customs Page 8 of 11 Appeal No.: C/75396/2020-DB (Preventive) Commissionerate. The investigating officers have found that there was no financial implication as benefit available to the appellant under the DFIA scheme was much higher than that of the benefit under DEPB Scheme. Hence, it was concluded that there has been no unintended benefit availed by appellant and the switching over from DFIA to DEPB is not tantamount to violation of any policy.
11. For the sake of ready reference, the communication issued by the Addl. Commissioner of Customs (P&V), CC(P), Kolkata, West Bengal to the Ld. Addl. Director General, Directorate of Revenue Intelligence (DRI), Kolkata Zonal Unit dated 13.06.2011 is reproduced hereinbelow: -
Page 9 of 11Appeal No.: C/75396/2020-DB 11.1. From the above, it is evident that the Ld. Commissioner of Customs (Preventive) has examined the application for conversion from DFIA scheme to DEPB scheme and concluded that the said conversion was proper since the benefit under the DFIA scheme was more than the benefit under the DEPB scheme availed later. Hence, it is evident that there was no violation committed by the appellant in the conversion of the Bill of Export from DFIA scheme to DEPB scheme. Thus, we observe that once the Ld. Commissioner of Customs (Preventive) has examined and concluded that the conversion from DFIA scheme to DEPB scheme is proper and no appeal has been filed against the same, then, no mala fide intention can be attributed to the appellant for such conversion. Hence, we find that the Show Cause Notice issued to the appellant proposing penalty on them alleging fraud and misrepresentation of fact is legally not sustainable. We also observe that the order of conversion passed by the Assistant Commissioner of Customs has been accepted by the Commissioner of Customs (Preventive) as legal and proper and thus, it is binding on the DRI also. Thus, we observe that issue of Show Cause Notice (SCN) and contest of the conversion order passed by the Assistant Commissioner of Customs as approved by the Commissioner, is violation of the principle of res judicata.
12. We also find that in addition to demand of customs duties from the entities which has utilized the DEPB license for importation of goods without payment of customs duties, the Show Cause Notice dated 08.10.2012 has proposed imposition of penalties under Section 112(a)(ii) and Section 114AA of the Customs Act, 1962 on the appellant. The Page 10 of 11 Appeal No.: C/75396/2020-DB present appeal deals only with the penalties imposed on the appellant.
12.1. We observe that Section 114AA of the Customs Act which deals with false statement in a document and fabricated documents. We observe that no such documents could be identified in this case. Thus, we observe that penalty u/s 114AA is not applicable in this case, since the appellant is not a party in the matter of import and no document was filed by them.
We also observe that the order of conversion from DFIA scheme to DEPB has been accepted by the Commissioner (Preventive). Further it was held that the conversion of DFIA shipping bill to DEPB shipping bill was legal as it is evident from the letter dated 13th June, 2011 forwarded to the DRI. Thus, we hold that no penalty imposable on the appellant under Section 114AA of the Customs Act, 1962 and hence we set aside the same.
12.2. Regarding the penalty imposed on the appellant under section 112(a), we observe that there was no dispute regarding exportation of the goods and the consequent benefit available to the appellant under the DFIA scheme. After conversion of the DFIA shipping bill into DEPB shipping bill , the DEPB license was validly issued to the appellant and the importation of the goods using the DEPB license took place during the validity period of the license. In such circumstances, no penalty is imposable on the appellant. We find that this view has been held by the Hon'ble Apex Court in the case of Sampat Raj Dugar vs Union of India [1992 (58) ELT 163 (SC)]. We further take note of the fact that the conversion of the shipping bill has been investigated by the SIU wing of the Customs (Preventive) Commissionerate and they Page 11 of 11 Appeal No.: C/75396/2020-DB have recommended that the matter may be closed. In these circumstances, we find that there is no suppression of fact or mis-statement on the part of the appellant. Thus, we hold that the penalty imposed on the appellant under Section 112(a)(ii) is not sustainable and hence we set aside the same.
13. In view of the above, we hold that the penalties imposed on the appellant in the impugned order under sections 114AA and 112(a)(ii) are not sustainable and accordingly, the same are set aside.
14. In the result, we set aside the impugned order qua imposition of the above penalties on the appellant.
15. The appeal is disposed of in the above manner.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd