The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has asserted that after assessed shipping bills culminate in issuance of Let Export Order and actual export of the goods, Customs cannot re-open or modify that assessment except through the specific statutory mechanisms recognized under the Customs Act, 1962, and in the absence of recourse to such mechanism, the Commissioner has no power to re-determine value, alter the description of exported goods, or rework the basis of export benefits. Further, re-determination of assessable value under the Customs Valuation Rules does not alter the FOB transaction value on which DEPB scrips are issued by DGFT.
The CESTAT also laid down that goods already exported cannot be confiscated under Section 113 of the Customs Act, 1962, and where the duty demand itself fails, penalty under Section 114A must also fail. It additionally held that penalty under Section 114AA cannot be sustained merely because Customs does not accept the declared value, when the declaration reflects the exporter’s transaction value and remittance realization position.
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The Division Bench comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) observed that once the shipping bills were assessed under Section 17 of the Customs Act, 1962 and the proper officer issued clearance for export under Section 51, and the goods were actually exported, they ceased to remain “export goods” within the meaning of Section 2(19). As a result, there could not be any fresh assessment or re-assessment of those shipping bills after export.
The Tribunal noted that an assessment could be modified only through legally recognized methods such as an appeal under Section 128, a notice under Section 28 in an appropriate case, finalization of provisional assessment under Section 18, amendment under Section 149, or correction of clerical errors under Section 154, and none of those routes had been validly adopted here.
The Tribunal further observed that DEPB scrips were issued by DGFT as a percentage of the FOB value, and not on the basis of any assessable value re-determined by Customs under the Valuation Rules. It explained that FOB value is the transaction value agreed between the exporter and the overseas buyer, and that if Customs re-determines value for assessment purposes, that does not alter the underlying transaction value or the exporter’s obligation to realize foreign exchange. On that reasoning, the Commissioner was held to have erred in denying the DEPB claim and in ordering recovery of customs duty to the extent DEPB scrips had been utilized, because Customs had no locus standi to issue or deny DEPB scrips.
The Tribunal also found that confiscation of goods already exported under Section 113 was “highly misplaced”, because Section 113 applies to “export goods”, and once the goods are taken out of India, they are no longer export goods and move beyond the territorial jurisdiction of the Customs Act. It similarly held that the penalty under Section 114A could not survive because the duty demand under Section 28 itself was unsustainable, and that penalty under Section 114AA was also not justified merely because Customs chose to re-determine value, especially where the appellants had declared their transaction value and claimed to have realized remittance accordingly.
Briefly, M/s Mungad Strips & Alloy Pvt Ltd. and M/s Jiji Industries Ltd. had exported goods described as “Aluminium Alloy Conductors” and, in the case of Mungad, also “Cross Linking Agent” during the period December 2010 to January 2011 under the Duty Entitlement Passbook Scheme, and obtained DEPB scrips linked to the FOB value declared in the shipping bills. After investigation by DRI/DGCEI, the Department alleged that the goods were exported at inflated values to obtain higher DEPB benefits, issued a show cause notice, and the Commissioner rejected the declared export value, re-determined the value under Rule 8 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, changed the description of the goods, ordered confiscation under Section 113(d) and Section 113(i) of the Customs Act, 1962, denied the DEPB claims, demanded customs duty to the extent DEPB credit had been used, and imposed penalties under Section 114A and Section 114AA.
The appellants challenged the order on the grounds that the export proceeds had been realized through banking channels, the shipping bills had already been assessed, the Let Export Orders had been issued, the goods had been exported after examination/supervision by the authorities, and the Department had never challenged the shipping bills in appeal. They also argued that once export had taken place, Revenue could not reopen the assessment of the shipping bills or recover duty based on the DEPB scrips already used.
