In a recent ruling, the Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed the Customs Penalty on VABL License Holders as the DGFT Licensing Authorities were unable to unveil no forgery or misuse.
The appellants are M/s Lark Chemicals Private Limited, Mumbai, and M/s Micro Labs Limited, Bangalore, and they have appealed against Order-in-Original passed by the Commissioner of Customs (Adjudication), Mumbai.
The appellants are engaged in the manufacture of pharmaceutical products.
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Based on the evidence received by the custom authorities that certain merchant exporters based in Ahmedabad are abusing the Value-Based Advance Licenses (VABAL) scheme by outrageously over-invoicing their exports, thereby claiming duty-free benefits on imports in collusion with manufacturers, search operations were conducted on various premises, and certain incriminating documents were recovered pertaining to exports.
After the investigation was completed, a show cause notice ( SCN ) was issued by the Commissioner of Customs, dated 20.05.1998 in which the customs duty under Section 28 (1) of the Customs Act, 1962, was confirmed along with interest. Further penalty under Section 114A of the Customs Act 1962.
The appellants who were aggrieved by the above order approached the CESTAT for relief.
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The counsel on behalf of the assessee contended that until such time a license is canceled by the licensing authority, even a license obtained by fraud or misrepresentation is valid in law. The counsel on behalf of the assessee submitted that the only condition that applies to the appellants, of the relevant notification in respect of VABAL is that the license should have been made transferable.
The main issue that revolves around this case is whether the denial of the benefit of VABAL to the appellants-transferee of such licenses is permissible and the recovery of customs duty and penalty imposed are maintainable.
The CESTAT bench held that the impugned order confirming the duty on the appellants and imposition of penalty on them is not sustainable for the three VABAL licenses, relating to the appeals before the CESTAT bench, there is no indication of such action for cancellation having been taken by DGFT authorities or any information provided by Revenue that such an action was later taken by DGFT authorities.
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The CESTAT bench, comprising of S.K Mohanty and M.M. Parthiban, set aside the impugned order and allowed the appeal.
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