Jurisdiction u/s 28AAA of Customs Act not invokable without Cancellation of License Procedings Initiated by DGFT: CESTAT [Read Order]

M/s Colour Cottex Pvt. Ltd., the appellant has filed the appeal to challenge the order passed by the Commissioner ofCustoms, ICD-Export, Tughlakabad confiscating the goods exported through 211 Shipping Bills under section 113 (d), (g) and (i) of the Customs Act, 19623 but as the goods were not physically available for confiscation nor cleared under a bond, redemption fine in lieu of the confiscation has not been imposed.

The Commissioner has also confirmed recovery of an amount equivalent to ineligible Focus Market Scrip under section 28AAA of the Customs Act with interest. Penalty has also been imposed upon the appellant under section 114(iii) and section 114AA of the Customs Act. The amount of drawback under rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 has been dropped.

The appellant claimed benefits on goods exported through 211 shipping bills during the period of dispute from April 2013 to August 2015. All the export documents in possession with the appellant established that the Goods were exported to Panama.

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An investigation was initiated by the Commissioner (Export), ICD, Tughalkabad, New Delhi, on the alleged misuse of the benefits of the FMS and other licenses issued under Chapter 3 of the Foreign Trade Policy 2009-14. The appellant claims that later it came to know that the Goods were actually not exported to Panama. The appellant enquired with the buyer regarding change in the country of destination. It was informed by the buyer that they had directed Imran Mirza, proprietor of the Freight Forwarder, to deliver the consignments to Jebel Ali.

The appellant further claimed that during investigation it could not be established that the appellant was involved in changing the country of destination, except the statement of Imran Mirza. In his statement Imran Mirza stated that he himself amended the Shipping Bills at the direction of the exporters.

A show cause notice dated September 09, 2017 was issued inter alia proposing to demand ineligible benefit availed under the FMS equivalent to Rs. 1,58,44,432/- under section 28AAA of the Customs Act with interest. It also proposed to impose penalties under sections 114AA and 114 (iii) of the Customs Act on the appellant.

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The issue that arises for consideration is whether jurisdiction under section 28AAA of the Customs Act could have been invoked without the DGFT having initiated process for cancellation of the license and whether adjudication could be done as the DGFT did not cancel the instrument.

A two member bench of Justice Dilip Gupta, President and P. V. Subba Rao, Member (Technical) found that after referring to the FTP 2015-20, the Delhi High Court held that it provides in paragraph 2.57 that it would be the decision of the DGFT on all matters pertaining to interpretation of policy, provisions in the handbook of procedures and so it would be impermissible for the customs authority to deprive a holder of the instrument the benefits that can be claimed, absent any adjudication of declaration of invalidity by the DGFT.

The Tribunal held that the impugned order is without jurisdiction as the DGFT has neither cancelled the instrument nor even initiated proceedings for cancellation of the instrument.

The Tribunal held that the impugned order is without jurisdiction as the DGFT has neither cancelled the instrument nor even initiated proceedings for cancellation of the instrument. 

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