Safewater Lines (I) Pvt Ltd Vs Commissioner of Customs (Export) (CESTAT Delhi)
In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi Bench, has set aside a penalty of Rs. 10 lakhs imposed on Safewater Lines (I) Private Limited, a freight forwarder, under Section 114(iii) of the Customs Act, 1962. The Tribunal’s decision, pronounced on June 4, 2025, hinged on the crucial fact that the confiscation of the underlying export consignment, which was the prerequisite for the penalty, had already been set aside in a separate appeal.
Background of the Allegations
The case involved M/s Colour Cottex Pvt Ltd., an exporter of Ready Made Garments, which had entered into contracts with UAE-based buyers: Lagoon Trading LLC, Lagcy Trading LLC, and Royal Readymade Garments. These exports were intended to benefit from the Focus Market Scheme (FMS), a government incentive designed to offset higher freight costs to remote markets like Panama, thereby enhancing export competitiveness. Under the FMS, exporters often offer reduced prices to buyers in designated countries, partially absorbing elevated shipping expenses.
As per the contracts, Colour Cottex was to supply goods on Free On Board (FOB) terms to a location specified by the buyer. Freight forwarders were responsible for shipping as per buyer instructions. Colour Cottex asserted that the buyer would telephonically instruct the export destination, which was Panama in this instance. Consequently, Colour Cottex would send goods and export documents (commercial invoice, packing list) to their Customs House Agent (CHA) for customs clearance for exports to Panama. The CHA would then forward the exporter’s copy of Shipping Bills to Colour Cottex.
