Custom, Excise & Service Tax Tribunal
G D Mangalam Exim Pvt Ltd vs Principal Commissioner Of Customs ... on 25 November, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO.1
CUSTOMS APPEAL NO. 50137 OF 2024
(Arising out of Order-in-Original No: 07/2023/VCG/PR.Commr/ICD/Export/ TKDdated
30th May 2023 passed by the Commissioner of Customs (Export), Inland Container
Depot, Tughlakabad, New Delhi)
GD Mangalam Exim Pvt Ltd ......Appellant
6/843 Main Bazar, Mehrauli, New Delhi - 110019
VERSUS
Commissioner of Customs .....Respondent
ICD, Tughlakabad, New Delhi - 110020 WITH C/55612/2023 C/55613/2023 C/55745/2023 C/55746/2023 C/55747/2023 C/55748/2023 C/55749/2023 C/55750/2023 C/55751/2023 C/55752/2023 C/55753/2023 C/55754/2023 C/55781/2023 C/55784/2023 C/55797/2023 C/55798/2023 C/55799/2023 C/50138/2024 C/50139/2024 C/50298/2024 AND C/50299/2024 APPEARANCE:
Shri Mukul Rohtagi, Senior Advocate, Shri G.K. Sarkar and Shri Prashant Srivastava, Advocates for the Appellant Shri S.K. Rahman, Authorized Representative for the Respondent CORAM:
HON'BLE MR JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) DATE OF HEARING: 19.09.2024 DATE OF DECISION: 25.11.2024 FINAL ORDER NOS: 59488-59509/2024 PER: C J MATHEW:
'...The tiny bubble of liquid carbon had been carried up in the slow subterranean river of molten lava through one of the weak spots in the earth's crust, and it had almost, but not quite reached the surface before the laval flow faltered and finally stopped.. While the lava was cooling, the purged bubble of carbon was undergoing an even more marvellous 2 C/50137/2024 & 21 others transformation.... It was perfect, a thing of cold fire so white that it would appear electric blue in good light - but that fire had never been awakened, for it had been trapped in the total darkness across the ages...The forebears of these creatures had not even existed upon this earth when that single pure crystal achieved its present form, but now with each day the disturbance caused by their metal tools set up faint vibrations within the rock that had been dormant so long; and each day those vibrations were stronger, as the layer between it and the surface shrank from two hundred feet to a hundred and then to fifty, from ten feet to two, until now only inches separated the crystal from the brilliant sunlight which would at last bring to life its slumbering fires.', though recognisable as the description of the diamond that the fictional Zouga Ballantyne was serendipitously made to find by the author, is not here because diamonds are somewhere on the periphery of this dispute of several exporters who are aggrieved by the findings in the order of Commissioner of Customs (Exports), Inland Container Depot (ICD), Tughlakabad; it is here because this inimitable poetic narration of caging of fire in a crystal that novelist Wilbur Smith devotes the entire prefacing chapter in Men of Men to, that could, instead, have been prosaically despatched in a couple of sentences, is the stuff of which great creative writing is made. A proceedings under Customs Act, 1962 - concerned with levy and assessment of goods to duties and interdiction of prohibited goods - has no need of either a grand story to bring the full force of permitted retribution to bear on offending goods and persons or of dwelling on the genesis or layered consequences to be excavated if the facts rang true as contrary to stipulations as by law established. And yet, that is the very cavil that Mr Mukul Rohatgi, Learned Senior Counsel 3 C/50137/2024 & 21 others appearing for M/s GD Mangalam Exim Pvt Ltd, urged us to bear in mind to which Learned Counsel, appearing for all the other appellants subjected to notice that culminated in the impugned order 1, joined arguments.
2. The core of the proceedings is not that goods were not exported or that there was no, or incomplete, remittance made by the ostensible buyers of the goods but that payment had been made by the putative buyer, and diamond merchants to boot, to the exporters. On behalf of the several appellants, it was contended that there is neither disavowal of the vested right of the buyers of the exported goods nor legal authority for satisfaction by customs officers in India of overseas buyers having paid for exported goods from their own resources as pre-requisite for such vested right to be contractually acknowledged. Countering this challenge to the scope of powers for assessment and confiscation, Learned Authorized Representative, Mr S Khader Rehman, would have us acquainted with a chain of events and network of persons as necessarily warranting not only the detriments affirmed in the impugned order but also that which were not. These contentions beg the question of arrogating 'price paid or payable by or on behalf of buyer', intended to assure that value of goods are assessed to full extent on imports charged to ad valorem rate in section 14 of Customs Act, 1962, in assessing export goods and also of the extent to which a statute, enacted as the handmaid to entry 83 in the Seventh Schedule of the Constitution to levy and collect duties on import/export goods, is amenable to extension beyond transaction of import or export. Those are the issues to be resolved in disposal of this appeal and before we turn to the rival submissions thereon, a look at the factual conspectus may not be out of place.
1 [order-in-original no. 07/2023/VCG/PR.Commr/ICD/Export/ TKD dated 30th May 2023] 4 C/50137/2024 & 21 others
3. M/s GD Mangalam Exim Pvt Ltd, M/s Konark Exim Pvt, M/s DSM International Pvt Ltd, M/s Sidh Designer Pvt Ltd and M/s Yogmaya Traders Pvt Ltd had exported 13008 consignments of 'readymade garments' to the United Arab Emirates (UAE) from 2008-09 till March 2014 against shipping bills under claim for drawback provisioned for in section 75 of Customs Act, 1962 and 'duty credit scrips' enabled by Focus Product Scheme (FPS)/Focus Market Scheme (FMS) in the relevant Foreign Trade Policy (FTP) notified under the authority of Foreign Trade (Development & Regulation) Act, 1992. The former is paid out by customs authorities at port of export on assurance of realization of export proceeds, as set out in Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, and the latter by the Directorate General of Foreign Trade (DGFT), on application of exporter with exports duly authenticated by customs authorities, for being debited towards duty liability on eligible imports. Though export proceeds had been realized and reported by M/s Punjab National Bank in the prescribed 'bank realization certificate (BRC)', proceedings were initiated in show cause notices of the Commissioner of Customs, Inland Container Depot (ICD) Tughlakabad 2, the Commissioner of Customs, Inland Container Depot (ICD) Patparganj 3, the Commissioner of Customs, Air Cargo Complex (ACC) Delhi 4 and the Commissioner of Customs, Jawaharlal Nehru Customs House (JNCH), Nhava Sheva 5 for recovery of drawback under rule 16/rule 16A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 and of duty foregone on imports against 'duty credit scrips' under section 28AAA of Customs Act, 2 [notice dated 30th March 2016] 3 [notice dated 31st March 2016] 4 [notice dated 2nd June 2017] 5 [notice dated 17th February 2017] 5 C/50137/2024 & 21 others 1962, along with attendant interest, and for penal consequences solely on the ground of ineligibility from not having received the proceeds from the consignees. For disposal of the notices, the first of the officials was appointed as common adjudicating authority to decide on recovery of drawback and of duty foregone in relation to the impugned shipping bills.
4. The goods, claimed to have been procured from companies controlled by one Pawan Kumar, one Yogesh Mittal and one Gopal Sharma, were alleged to have been sourced from elsewhere on the back of alleged transfer of purchase price to others from accounts controlled by these individuals and into which the exporters also allegedly funneled funds that, substantially, was then remitted to accounts of certain diamond traders controlled by a few masterminds. It was concurrently alleged that remittances effected from Hongkong by persons unconnected with consignees, but purporting to be diamond traders though allegedly fronted by Indian residents who made occasional visits to that trading centre, was passed off as proceeds from exports for which M/s Punjab National Bank issued 'bank realization challans' allegedly in breach of framework, notified 6 and amended 7 by Reserve Bank of India (RBI), for reporting of such. On the strength of these, customs authorities sought clarifications from the institutions and agencies concerned owing to which some 1650 certificates were cancelled by M/s Punjab National Bank. Here we are constrained to be approximate as the tabular compilations are not consistent which, though, is no impediment to resolution of the dispute. The proposal for recovery of drawback and of duty foregone was initiated on the strength of deemed failure in repatriating export proceeds and 6 [circular AP(DIR) no. 70 dated 8th November 2013] 7 [amending circular no.100 dated 4th February 2014] 6 C/50137/2024 & 21 others proceedings for confiscation and penalties on the back of misdeclaration of value in shipping bills evidenced by import declaration before UAE customs authorities and low price of purchase paid in India to unknown suppliers. Interestingly, it was reported on behalf of the appellants that, despite suggestion from customs authorities to other agencies for action under respective statutes, no other proceedings are under way. It was also brought on record that, correspondence notwithstanding, the 'duty credit scrips' were not ever invalidated while the cancellation of the 'bank realization certificates' was quashed by judicial order 8 on plaint of the exporters.
5. The adjudicating authority limited the recovery of drawback to ₹ 28,33,16,942 and recovery of duty to ₹ 16,47,27,131 from M/s GD Mangalam Exim Pvt Ltd, recovery of drawback to ₹ 13,51,99,191 and recovery of duty to ₹ 829,94,027 from M/s Yogmaya Traders Pvt Ltd, recovery of drawback to ₹ 11,98,53,939 and recovery of duty to ₹ 5,99,97,102 from M/s Konark Exim Pvt Ltd, recovery of drawback to ₹ 10,39,37,508 and recovery of duty to ₹ 5,26,91,071 from M/s Sidh Designers Pvt Ltd and recovery of drawback to ₹ 6,00,65,535 and recovery of duty to ₹ 3,15,90,357 from M/s DSM International Pvt Ltd on the strength of the remittances deemed to have been not received against the 1650 'bank realization certificates' that were cancelled, while dropping recovery of drawback of ₹ 90,17,87,098 and recovery of duty of ₹ 29,83,82,396 from M/s GD Mangalam Exim Pvt Ltd, recovery of drawback of ₹ 76,89,68,935 and recovery of duty of ₹ 20,83,45,078 from M/s Yogmaya Traders Pvt Ltd, recovery of drawback of ₹ 7,201,99,309 and recovery of duty of ₹ 26,93,87,218 from M/s Konark Exim Pvt Ltd, 8 [order dated 13th March 2020 in civil suit no. 1114/18] 7 C/50137/2024 & 21 others recovery of drawback of ₹ 63,53,52,487 and recovery of duty of ₹ 18,70,76,444 from M/s Sidh Designers Pvt Ltd and recovery of drawback of ₹ 70,12,39,812 and recovery of duty of ₹ 20,44,23,767 from M/s DSM International Pvt Ltd as pertaining to the remaining shipping bills on the finding that the remittances must be presumed to be in order and in accordance with the framework notified by the Reserve Bank of India. Revenue has filed appeals against the dropping of these demands. Individual appellants challenge the imposition of penalty on them and Revenue, too, has disputed the order to the extent that proposals had been dropped on pleas of the individuals.
6. Learned Senior Counsel assailed the findings in the impugned order for relying on the cancellation of 'bank realization certificate' by M/s Punjab National Bank to hold that the drawback paid and duty foregone by use of scrips for imports are liable to be recovered. According to him, the adjudicating authority has disregarded the judicial order quashing that act by the bank and, that too, with feeble justification that status of appeal against such cancellation was not known. He submitted that no adjudicating authority is so above the law as to ignore a particular ruling that is material to facts in the proceedings; such liberty appropriated in adjudication, impugned in appeals filed by, or initiated at the instance of, executive authorities, may not always be disapproved of but that, he contends, is certainly out of place in determination of facts. He submitted that, in any case, it was upto the adjudicating authority to ascertain the status instead of indulging in adverse presumption. He further submitted that the impugned 'bank realization certificates' were withdrawn under pressure from the investigators which neither altered the receipt of payments for the exported goods nor the bank legally obliged to for the 8 C/50137/2024 & 21 others impugned circular of the Reserve Bank of India was held by the Hon'ble High Court of Punjab & Haryana, in Aura Creations v. Reserve Bank of India and another 9, to be devoid of amenability to such interpretation as was placed on that instrument by the show cause notice and adjudication order impugned before us.
7. Mr Rohatgi contended that drawback may be denied, adjusted or, if paid, recovered only for non-receipt of remittances within the prescribed deadline or by recourse to assessment under section 17 of Customs Act, 1962 and, with the former not inferable from facts or circumstances and the latter not having been contemplated at any time, the adjudicating authority has placed his order beyond the circle of legal sanction. As far as recovery of duty foregone was concerned, he averred that section 28AAA of Customs Act, 1962 was intended only for transferring liability to the original holder of 'instrument' but contingent, like in the present circumstances, only to the extent that the ingredients, viz., collusion, willful mis-statement, or suppression of facts, specified therein are evidenced insofar as obtaining of the 'instrument' is concerned and the findings of the adjudicating authority, relying upon an invalidated withdrawal of 'bank realization certificate', are lacking in the wherewithal to proceed any further.
8. Shorn of all the tassels and embroidery, we are required to look into the validity of the recovery determined in the impugned order but, on the other hand, are also required to scrutinize the validity of the demands that were dropped. Considering the narrow circle, limited to the deemed non- repatriation of export proceeds from 1650 consignments, adopted by the adjudicating authority that, with the conclusion of the regulatory 9 [order dated 27th July 2017 in CWP no. 9685 of 2017] 9 C/50137/2024 & 21 others framework of Reserve Bank India on third party remittances trajectorially deeming approval of others, effectively discarded all other marshalled evidence, the appeals of Revenue should, appropriately, be dealt with first. We are surprised by the generality of the relief sought by the reviewing authority that has not even ventured to specify the restoration of demands for each appeal after purportedly subjecting the findings in the impugned order to scrutiny vis-à-vis each noticee. There is demonstrated casualness that does nothing to enhance the quality of review and, at the same, appears to disrespect the appellate process. We are unable to comprehend the consummation wished for in these appeals.
9. Incongruously, the findings against the noticees, though determined on the cancellation of the 'bank realization certificates, has not been challenged by Revenue for having been the sole factor which an appeal, seeking relief on the charges of not having realized export proceeds and claiming to be replete with ingredients that warrant voiding of 'duty credit scrips', and without which the affirmation of the findings against the noticees controverts the other evidence, should have. Review by the competent authority is not limited to demands dropped and detriments unimposed but to the order being legal and proper; if the appeal of Revenue, which not being memorandum of cross-objections, is about findings that are not legal and proper, the implied affirmation of the unchallenged determination undermines their very case. The approval of reliance on the absence of 'bank realization certificates', withdrawn at the behest of the investigation, to justify recovery of drawback and of duty foregone is the millstone attached to appeals of Revenue. Application of mind and attention to detail are the essence of review. Be that as it may, we proceed to examine the grounds on which Revenue seeks restoration 10 C/50137/2024 & 21 others of detriments and consequences proposed in the show cause notice. Before doing so, we may find it worthwhile to familiarize ourselves with the submissions of Learned Authorized Representative.
10. Mr S Khader Rahman elaborated for us the depth and reach of the investigation by drawing our attention to the 'relied upon documents (RUDs)' - comprising statements and inter-agency correspondence - and the picture that emerged therefrom. It would appear from his submissions that Directorate General of Revenue Intelligence (DRI) was activated by inputs on huge local remittances into and out of domestic accounts maintained at a particular branch of a particular bank which, from radial investigations, then unraveled groups of entities - comprising ostensible suppliers of goods, exporters, ostensible buyers in the United Arab Emirates (UAE), remitters from Hongkong, UAE and British Virgin Islands that tied them all to the unknown source of the goods and putative destination of the goods - each controlled by a mastermind and linked by facilitators. Thus it was that, according to him, unobtrusive existence below the layering of the shipping bills and 'bank realization certificates' could not prevent the 'pure crystal of carbon' from emerging and requiring only the final strokes of investigation to lay it bare for grasping. He submitted that the evidence put together, as it must be for the horrifying picture to emerge, is one demonstrative of fraud, conspiracy, illegality and 'roundtripping' deserving of the consequences of recovery of every benefit gained, fine in lieu of confiscation and every penalty invoked in the show cause notice.
11. From his exposition, we gathered that the mastermind of the exporters was Shri Sahdev Gupta, assisted by Shri Nitin Gupta, while the cartel of ostensible suppliers of goods to exporters comprised Shri Pawan 11 C/50137/2024 & 21 others Kumar, Shri Yogesh Mittal, Shri Gaurav Bharadwaj, Shri Gopal Sharma, Shri Tarun Gupta and Shri Tarun Kumar Kavra, who with their network of bank accounts, opened using unsuspecting fronts, through whom Shri Sahil Jain leveraged procurement at the domestic end and provided the invoices that were produced for assessment by customs authorities. This cartel allegedly facilitated the movement of funds to bank accounts of certain diamond traders in India while another set of diamond traders, who had nothing to do with the consignees of goods, nevertheless made payments from abroad into the accounts of the five exporters with M/s Punjab National Bank which was accepted as consideration for the goods in view of the simple system of referencing every consignment with a unique transaction number. According to him, there was evidence of remittances against imports of overvalued diamonds effected from Hongkong. It was also brought to our attention that the accounts of the remitters were allegedly set up by Indian residents who traveled occasionally to Hongkong at the instance of operators at that end while some of the consignees of goods denied all knowledge of any transaction that had their involvement in the declarations and that M/s Al Khat al FirzseLLC and M/s Al Wadi al Saeed General Trading LLC, intended as recipients of nine-tenths of the total exports, had apparently transferred these further in the United Arab Emirates or elsewhere in the world after clearance at values that were unacceptably below the prices declared in the shipping bills.
12. Learned Authorized Representative urged that, with this full picture as the backdrop, the minutiae of each transaction must necessarily be overwhelmed by the presence of the very ingredients both for voiding the remittances received, as not for 'such goods' intended in second proviso to 12 C/50137/2024 & 21 others section 75 of Customs Act, 1962, and for voiding eligibility to exemption available for 'duty credit scrips', as intended by section 28AAA of Customs Act, 1962. He contended that any other approach to the notice, as occurred in the adjudication order, would be compulsion of technicalities superseding the need to protect the economy.
13. To obviate the obvious hearkening of the jurisdiction vested for remedying in Customs Act, 1962, he placed reliance on the decisions of the Hon'ble Supreme Court in SP Chengalvaraya Naidu v. Jagannath10, in Commissioner of Customs v. Candid Enterprises 11, in Commissioner of Customs, Kandla v. Essar Oil Ltd 12 and in Union of India v. Jain Shudh Vanaspati Ltd 13 on nullifying effect of fraud on everything, solemn act included. Likewise, he contended that disruption of the norms of privilege, normally accorded to noticees, by reason of fraud had been approved by the Hon'ble Supreme Court in Ashok Leyland v. State of Tamil Nadu and another 14. According to him, statements before customs officials were conferred with sanctity by the Hon'ble Supreme Court in KI Pavunny v. Asst Collector (HQ), Central Excise Collectorate, Cochin 15. He also placed reliance on the decision of the Tribunal in Arjun Sah v. Commissioner of Customs (Prev), Patna 16 that placed the principles espoused by the Hon'ble Supreme Court in Collector v. D Bhoormull 17 in contemporary context.
14. Doubtlessly, we are at one with the Hon'ble Supreme Court, and with Learned Authorized Representative too, that fraud vitiates 10 [1994 (1) SCC 1] 11 [2001 (130) ELT 404 (SC)] 12 [2004 (172) ELT 433 (SC)] 13 [1996 (86) ELT 460 (SC)] 14 [AIR 224 SC 2836] 15 [1997 (90) ELT 241(SC)] 16 [2021 (375) ELT 241 (Tri-Kolkata)] 17 [1983 (13) ELT 1546 (SC)] 13 C/50137/2024 & 21 others everything, including solemn acts. There is, however, much danger in the Tribunal adopting that sentiment, expressed by the highest court of the land, without ruminating on applicability to the context; the Hon'ble Supreme Court has jurisdiction over all laws while the Tribunal is restricted to commodity tax and service tax. This distinction is of particular significance as 'fraud' is ensconced within recovery under section 28 and under section 28AAA of Customs Act, 1962 which emplaces a particular jurisdiction of limitation subject to finding on facts that 'fraud' was an ingredient in the alleged evasion of duty. In re Chengalrayya Naidu, the Hon'ble Supreme dealt with a dispute under civil law and was anguished by the suppression of relevant document before the courts. In re Candid Enterprises, the Hon'ble Supreme Court was concerned, not about the tax recovery which was remanded for determination by the Tribunal but, with the finding that a decision of the Hon'ble Supreme Court was applied to alienate discretion in condoning delay for denying Revenue opportunity to plead the merit of its case for recovery of duty. In re Essar Oil Ltd, the Hon'ble Supreme Court had before it a matter which, on uncontested facts, was about two mutually exclusive determinations of duty liability - each undeniable on its own set of facts and law - that was decided on applicable 'date of determination of duty' without touching upon the factual circumstances that guided the adjudication order. These clearly were not about recovery of tax but about jurisdictional limitation having been decided on technicality. The fraud that was remarked upon in these decisions is not only contextual but also begs the question of scope for invoking of fraud, in a larger context, by creations of a statute that does incorporate fraud as ingredient for invoking of extended period of limitation, and reach of adjudicating authority, for recovery of duties of 14 C/50137/2024 & 21 others customs.
15. The cited decisions pertain to civil law procedure and the attending presumption that rival litigants be before the court with clean hands. Though there is a large body of judicial authority that considers tax proceedings to be operation of quasi-criminal law but, as not being in the nature of criminal liability which arises from offence against the State in its 'protector' role and not excluded from the civil jurisdiction which arises from grievance between persons over disputed interests, convention, such as in England, of such disputes being taken up in the Chancery Division of the Kings Bench, notwithstanding, immunity from the mandate of civil law presumption in tax litigation, which arises from the 'treasury' role of the State, is not available to either side. In two of the cited cases, the interests of the State were under siege - in one at the threshold by drawing upon a judgement that should have influenced disposal on merits and in the other by contrived directing to one of the two tax outcomes. Hence, the Hon'ble Supreme Court held the procedures and mechanics to be of lesser significance than already determined revenue.
16. We may, at this stage, express our disinclination to accept any allegations relating to imports which have nothing to do the action proposed in the notice. We are also not inclined to be amenable to the suggestion of Learned Authorized Representative that the totality of transactions, including those not impeached in the proceedings, that make up the fraud for several reasons and not the least of which is the statutory circumscribing of recourse to recovery under section 28 or section 28AAA of Customs Act, 1962. The portrayal of fraud, insinuated to convince that 'fraud' so depicted suffices to invoke extended period of limitation under section 28 of Customs Act, 1962 or for deeming ineligibility for availment 15 C/50137/2024 & 21 others of instrument of duty mitigation ab initio under section 28AAA of Customs Act, 1962 without having to establish the enumerated pre-requisite, does not sit well with validity afforded by law for resort to such only upon contingency of collusion, willful misstatement or suppression of facts. That narration of an entire chain of events - especially relying on statements recorded by investigators that, as pointed out by Learned Senior Counsel, was bereft of relevancy engendered by compliance with section 138B of Customs Act, 1962 - reaching behind and foraying ahead of the transaction that was to evince the essential ingredient was found necessary to depict fraud is not consistent with either of the recovery provisions. It is for recoverability of drawback paid and duty foregone, by drawing upon authority alien to customs law, that the narrative of fraud has been erected and, that too, to suggest as sufficing to justify recovery even as three activities that constitute fraud, contextually though, are mandated in section 28 and section 28AAA of Customs Act, 1962. Benefits are, certainly, deniable or truncated upon established finding of overvaluation which, under specific circumstances, may leave little room for doubt that collusion, willful misstatement or suppression of facts inhered therein. Learned Authorized Representative, instead of proceeding within the scope of provisions for recovery, suggests that the narrative of fraud excuses the compulsion of that mandate. If the submission on allusion to fraud as sufficing to justify discard of all circumscribing of jurisdiction is accepted, it would be akin to cart and horse locked perpetually in circular motion that is abhorrent to logic and the law. The larger story of fraud makes for eminently readable fiction but it is only specific contextual fraud that confers jurisdiction to recover. The former does not impress in disposal of an appeal while it is on evidence of the 16 C/50137/2024 & 21 others latter that the statute is transformed into the living spirit of the law. It is, thus, that the citation of judicially determined law does not advance the cause advocated by Learned Authorized Representative.
17. The grounds in appeals of Revenue, against dropping of proposal to recover drawback sanctioned in 11358 consignments, rely upon two contrivances - that the remittances are to be blanked out of existence for having originated from third parties and that such remittances, consequently, are to be deemed as not for 'such goods' as per section 75 of Customs Act, 1962. Section 75 of Customs Act, 1962 is special law, within the statute enabling levy and collection of tax, enshrining commitment of the State to excoriate tax from international transaction engagement upon export 18. Not unnaturally, the failure to repatriate the proceeds of exports disentitles the exporter to the benefits of that contractual undertaking of the State. That a regulatory mechanism, supervised by another agency or institution, was contemplated by the supreme legislative organ, upon incorporating the proviso, as vested in officers of customs to bring the full effect of second proviso to section 75 of Customs Act, 1962 into fruition does not withstand scrutiny either of the letter of the law or the spirit of drawback as a commitment of the State. Oversight of repatriation of proceeds is not within the remit of customs authorities; section 75 of Customs Act, 1962 does not confer such authority either. Whether any other agency under the Government of India is empowered to disacknowledge remittance and, thereby, activate the second proviso to section 75 of Customs Act, 1962 is not discernible from the materials before us. Circulars of the Reserve Bank of India have been cited as authority in the show cause notice as well as submissions of 18 [See final order no. 86108 of 2020 dated 16th December 2020 in Haldiram Foods International Pvt Ltd] 17 C/50137/2024 & 21 others Learned Authorized Representative. Learned Senior Counsel argued that, sans disposition of remittance already received, mechanism has to exist for regularization and suggested that the circulars of Reserve Bank of India referred to on behalf of Revenue do intend so. That is, indeed, the stumbling block: remittance received cannot be wished away except under authority of law and availability of machinery provisions for erasure in the hands of the recipient. There is nothing on record to posit that such proceedings for erasure have been initiated, let alone concluded.
18. It appears to us that a circular intended to acknowledge 'third party' remittance has been inappropriately construed as embargo on such remittances in the past; we characterize it as 'inappropriately' because the clarification, alluded to by Learned Authorized Representative, offered by the Reserve Bank of India has merely stated that 'case-to-case' approval would be the norm in the absence of general permission and that does evince the existence of procedure or mechanism for the same. Customs authorities have presumed against such regularization and, having put the importers to notice, considered that to suffice to arrive at an adverse inference of such approval not being in existence. The reasoning in the impugned order that, in the absence of negation of 'bank realization certificate', conformity with the regulatory requirements would have to presumed is not flawed and the reviewing authority has not been able to put anything on record to suggest otherwise. This, in effect, is the ruling of the Hon'ble High Court of Punjab & Haryana in re Aura Creations, holding that:
"On conjoint reading of the aforementioned circulars, it is beyond doubt that even RBI guidelines are not absolute embargo existed on receipt of the third party payment against the export made from India 18 C/50137/2024 & 21 others as the conditions were imposed only on 08.11.2013 which were relaxed after a few months, i.e., on 04.02.2014. The whole purpose of issuing the circular as spelled out is to ensure the remittances against exporters, much less to promote the international business and permit third party payments, in case, where the exports are made.
There is no ambiguity "before or after" between the period 08.11.2013 to 04.02.2014, thus, for all intents and purposes, the exports made before and after the aforementioned period, the conditions stipulated in the Circular dated 08.11.2013 cannot be insisted and the Banks are obliged to issue certain BRCs, in case of third party payments.
In my opinion, even the exports made between the period aforementioned, in view of the subsequent relaxation, there will be no impediment in issuance of BRCs, the purpose of issuance of BRC being beneficial to the exporter...."
That the rigour of source of payment suggested in the notice, as well as by the reviewing authority and Learned Authorized Representative, is presumption appears evident from the system in vogue which, as set out in the clarifications from, and statements of, bank officials, is 'hubbed', as it were, on the consignment to which a unique number is assigned and is not intended to be kept secret either; the regulatory mechanism requires payments and the view that the introduction of certain conditions at some time bespoke harsher regimes existing earlier is not backed by any authoritative source. This is made more evident by the report 19 of FEMA Snap Audit, covering the remittances in the accounts of the group companies, highlighted in the submissions of Mr Rohatgi. It is not for us to step into regulatory orbit of another agency in the governance mechanism and sit in judgement on the rights or wrongs thereof. We would not be 19 [IBB N Delhi (2254) - Interim Report] 19 C/50137/2024 & 21 others wrong in holding that such lack of jurisdiction seeps down to the adjudicating authorities, too. The prejudice inhering in Revenue administration, loath to concede benefits accorded by tax policy, cannot be imbued into every other regulation or agency unless they be servitors as by law declared. There is no reason to conclude that, during the relevant period, the exporters were required to furnish evidence of 'case to case' approval to surmount rescinding of eligibility for drawback.
19. Furthermore, a plain reading of second proviso to section 75 of Customs Act, 1962 does not advance the case of Revenue that the expression 'such goods' is critical to the purpose, and context, of the insertion thereto. We do not hesitate from re-appreciating the letter of the law as it merely refers to 'sale proceeds' in 'respect of such goods' and 'not received by or on behalf of the exporters in India' in the context of time-limit for such being received and, by deeming it to have never been allowed, enables recovery under the notified Rules. It is clearly intended to convert the reality of 'non-receipt' into non-eligibility ab initio by legislative deeming with time as the determinant. There is no whisper therein either to the source of remittance or to another law for determination of source; indeed, the receipt on behalf of the exporter in India is broad enough to suggest that the contractual undertaking of the State, which drawback is, is not diluted except by non-export or non- remittance. There is, thus, no ground for altering the contours of a transaction for fitment within the specific intendment of section 75 of Customs Act, 1975 by such contrived reasoning.
20. Section 28AAA of Customs Act, 1962, deployed in the appeals of Revenue as authority for recovery of duty foregone, has been set upon the plinth of 'collusion, willful misrepresentation or suppression of facts' 20 C/50137/2024 & 21 others therein that, just as absence of timely remittance does for drawback, ab initio erases eligibility to exemption from duties of customs entitled by possession of instrument for such exemption; a plain reading of this provision makes it clear that there should be sufficient grounds to determine that the said ingredients are established in stages leading to issuance of the instrument and, furthermore, two purposes are intended by this provision, viz., that the exemption was deemed to be not extended ever and recovery of duty foregone from either the actual importer or the person who held the instrument originally is not estopped. The details of utilization of the 'duty credit scrips' are not on record and it is not on record that the importers were proceeded against. It is, therefore, moot if this provision may be resorted to without ascertainment of actual importer and lack of wherewithal to recover from such importer. Here, too, a general narrative of an interesting tale of interplay among characters unknown to the transactional engagement within the purview of Customs Act, 1962, i.e, import of goods or export of goods, does not satisfy as ingredients specified in section 28AAA of Customs Act, 1962 for recourse thereto; one of three should have existed when the application was made to the licencing authority and a state of mind, imagined to be fit for strategem and spoils, as put forth on behalf of Revenue, being in the realm of speculative fiction and anathema to the contingencies that authorize invoking of the conferment therein, is not acceptable alternative. Indeed, the grievance at having been deceived thereby should have been that of the licencing authority and remediable under the law that authored the existence of such authority. Such authority is vested with powers to determine that licence has been inappropriately obtained and such finding activates the contingencies contemplated by section 21 C/50137/2024 & 21 others 28AAA of Customs Act, 1962. Therefore, recourse to recovery under section 28AAA of Customs Act, 1962 against the noticees without such pre-requisite, and on narrative donning the colour of fraud by speculation on events after issue of instrument, lacks validation of law.
21. Both these supra, as well as confiscation under section 111 of Customs Act, 1962 with attendant penalties, rest upon the charge of overvaluation of the goods. Learned Senior Counsel pointed out the assessment under section 17 of Customs Act, 1962 before the goods were permitted for export remains untouched; Learned Authorized Representative has not disputed this. He, however, argued that evidence of overvaluation is not only sufficient but is overwhelming which, to us, begs the question of determination of overvaluation in the absence of legal authority to do so. Customs law is all about assessment of imported and exported goods and all else is but procedural stipulations to ensure that goods are subjected to assessment at the designated time and place. Value is, doubtlessly, crucial to such assessment under section 17 of Customs Act, 1962 when duties are ad valorem but, even if not , assessment, commenced under section 17 of Customs Act, 1962 upon entry made under section 46 of Customs Act, 1962 on import of goods and section 50 of Customs Act, 1962 on export of goods, as the case may be, must be taken to the conclusion intended by law without which neither section 47 nor section 51 of Customs Act, 1962 can operate for removal of the goods from out of control of customs. An assessment may be altered if it has consequences from incorrectness, and in the absence of revision, through one of the processes prescribed in the statute, the determination remains unchanged. The concatenation of facts, even if ringing true, that may permit speculation of incorrect valuation does not suffice to alter the 22 C/50137/2024 & 21 others assessment. On top of that, any determination of overvaluation should pass muster as conforming to section 14 of Customs Act, 1962 by acceptance of declared value or by substitution empowered in Customs Valuation (Determination of Value of Exported Goods) Rules, 2007. It is common ground that there has been neither notice nor finding that the value of the exported goods have been re-determined to ascertain the extent of overvaluation sufficing to restrict both eligibility for drawback as well as 'duty credit scrips' to be used for discharge of duty liability on subsequent imports.
22. It is alleged in the show cause notice that the goods were misdeclared but it is section 113(d) of Customs Act, 1962 that has been invoked for confiscation of goods and held by the adjudicating authority to be so liable for enabling imposition of penalties under section 114 of Customs Act, 1962. Such confiscation is valid if goods prohibited for export are brought into a customs area. We do not find any justifiable reason for confiscation as it has not been evidenced that the goods, as described in the shipping bills, were prohibited for export. Even for sustaining confiscation for having been overvalued, it is necessary that substitute values should have been determined; if that were not, the mandate of law, "(41) "value", in relation to any goods, means the value thereof determined in accordance with the provisions of sub-section (1) or sub-section (2) of section 14"
in section 2 of Customs Act, 1962 would be superfluity. Consequently, it is not ascertained facts or admitted averment that establish overvaluation but resort to the mandate of section 14 of Customs Act, 1962. The notice 23 C/50137/2024 & 21 others is silent on such proposal and neither the price of goods in the local market and the purchase price (even if evidenced which was not) nor the value declared at destination suffices as surrogate for value. The reliance placed on statements, which afford neither factual support nor circumstantial credibility in the absence of resort to section 14 of Customs Act, 1962, as evidence of overvaluation, has no acknowledgement in the scheme of valuation. The decision in re KI Pavunny, cited by Learned Authorized Representative, does not authorize substitution of valuation mechanism with testimony of persons. Indeed, we find it conveniently opportunistic for customs authorities to sanctify declarations made by overseas parties or determination by customs authorities overseas as, respectively, honourable and appropriate while discarding the declarations made at load port, as well as assessment thereto, as dishonored without even venturing, by recourse to adjudicatory jurisdiction set out in law, to justify such oversimplified prioritization. In such circumstances, even if the ascertainment of movement and ultimate destination of the consignments had extended to all 13008 consignments, instead of the 75 referred to overseas missions, any outcome thereof would not matter a whit as export concludes once the goods are landed at the first destination and ceases to conform to export, as set out in section 2(18), or export goods, as set out in section 2(19) of Customs Act, 1962, to thus exclude revision from the purview of Customs Act, 1962 except in circumstances of the clearance effected in section 51 of Customs Act, 1962 having been established - either for incorrect discharge of duty liability or for being prohibited - as erroneous. That is not the circumstance here. As things stand, the narration of investigated ascertainment does not conform to the law on determination of value and 24 C/50137/2024 & 21 others to affirm the contrary, as urged by Learned Authorized Representative, is to sacrifice adjudicatory responsibility at the altar of unaccountable investigation. To clothe these with undeserved rigour stretches preponderance of probability to breaking point; neither can these suffice to represent mathematical approximation which, according to Learned Authorized Representative, has been approved by the Hon'ble Supreme Court in re D Bhoormull and adopted by the Tribunal in re Arjun Sah. Both these decisions were rendered in cases of gold smuggling and not in demand for recovery of duties of customs based on documents; even if mathematical exactitude is not de riguer in adjudication proceedings, it cannot be allowed to rest on documents or statements that fail the test of legal mandate. There is, in consequence, no ground for goods to be held as liable to confiscation under section 113 of Customs Act, 1962 and for recourse to penalties under section 114 of Customs Act, 1962.
23. Taking up the appeals of the aggrieved noticees, we observe that recovery of drawback and of duty foregone is founded on the cancellation of 'bank realization certificate' issued in relation to 1650 shipping bills. The adjudicating authority has held that consequence of cancellation is that remittances were to be deemed as not received with drawback held as never sanctioned and liable to be recovered under rule 16 of Customs, Excise Duties and Service Tax Drawback Rules, 1995. Learned Senior Counsel pointed out that the plea of the noticees that the said cancellations had been set aside by order 20 of the Additional Senior Civil Judge, New Delhi District, in the plaint of M/s Welldone Exim Pvt Ltd (as M/s GD Mangalam Exim Pvt Ltd came to be styled) against M/s Punjab National Bank, was ignored by the adjudicating authority. We take notice 20 [order dated 13th March 2020 in civil suit no. 1114/18] 25 C/50137/2024 & 21 others that the impugned order has proceeded so to do by adopting an argument, familiar to tax authorities in the context of statutory appeal feeding their immutable belief that no order is final unless settled before the Hon'ble Supreme Court. The ground therein that status of further appeal is unknown appears to be firmed on the presumption of every unfavourable order or judgement having, invariably, to be appealed against as the cost of litigation is burdened, unlike in civil suits, on the public. Even if cost-benefit of litigation, especially as the defendant-bank may not have borne any commercial detriment from the order, be beyond the ken of the tax administrator, it was upto the adjudicating authority to ascertain the status of a dispute that the customs authorities were not party to. The imposition of penalty on M/s Punjab National Bank in the face of this order shows scant regard for rule of law and judicial institutions. With the quashing of cancellation of 'bank realization certificate', the sole ground of distinguishment from the other exports vanishes. The demands for recovery of drawback and duty foregone, such as it is, sustained for that reason alone in the impugned order lacks factual support. These consignments revert to the fold of the larger numbers that are covered by appeal of Revenue. That has been held to be without merit on the lack of evidence to advance recourse to recovery of drawback, recovery of duty foregone and confiscation of goods.
24. The appeal of Shri Nitin Gupta of M/s Oak Shipping Services Pvt Ltd impugns the penalty imposed on him for having been ventured upon without notice, without service of documents and without being heard. That should suffice for setting the detriments aside but in the light of lack of sustainability of any of proposals in the notice insofar as confiscation of the exported goods is concerned, nothing remains for recourse to penal 26 C/50137/2024 & 21 others provisions against him. Likewise, the penalties imposed on the other individual appellants fail on the non-sustenance of recovery, both undertaken and proposed, and of the liability of the goods to confiscation.
25. Considering the factual matrix and in circumstances of our findings above, the appeals of Revenue are dismissed and appeals of the exporters and of the individuals allowed.
(Order pronounced on 25.11.2024) (JUSTICE DILIP GUPTA) PRESIDENT (C J MATHEW) MEMBER (TECHNICAL) */as