Lark Chemicals Private Limited Vs Commissioner of Customs (General) (CESTAT Mumbai)
Conclusion: Customs Penalty on VABL License Holders was quashed as DGFT Licensing Authorities were unable to unveil no forgery or misuse. There was no indication of action for cancellation having taken by DGFT authorities or any information provided by Revenue that an action was later taken by DGFT authorities.
Held: Assessee-company had purchased Value Based Advance Licenses (VABAL)from the original license holder namely M/s Robinson. The said VABAL licenses were issued in terms of Notification No. 203/92-Cus. dated 19.05.1992 read with the provisions of Export & Import Policy, 1992-1997. On the basis of information received by Customs authorities informing them that certain merchant exporters based in Ahmedabad are misusing VABAL scheme by exorbitantly 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. On further investigation by the Customs authorities, it was found that M/s Robinson had resorted to over-valuation of the exported goods to avail higher/undue VABAL benefit. M/s Robinson procured the exported goods for Rs.1,33,64,004/- from different manufacturers of the pharmaceutical products; the export price of the said goods was declared as Rs. 8,91,90,375/- in the shipping bills; on the basis of said exports, M/s Robinson got eighteen VABAL licenses from the DGFT on post-export basis. As the export obligation was already completed, the said licenses were made transferable by the DGFT. Some of the said licenses were sold to various importers and both the appellants are one of the transferees of such licenses. On completion of investigation, a Show Cause Notice (SCN)dated 20.05.1998 was issued by the Commissioner of Customs. Gujarat to the appellants and other similar ten other transferees of VABAL licenses from M/s Robinson. The Central Board of Excise & Customs (CBEC) vide Notification no. 37/2003-Customs (N.T.) dated 03.06.2003 empowered the Commissioner of Customs (Adjudication), Mumbai as the common Adjudicating Authority. Accordingly, the Commissioner (Adjudication) vide Order-in-Original dated 31.01.2014 adjudicated the case wherein the customs duty in terms of proviso to section 28 (1) of the Customs Act, 1962 was confirmed along with interest. Further, penalty under section 114A of ibid was also imposed on various noticees, and the appellants are part of such noticees on whom duty demand and penalty was imposed. The issue in dispute was to decide whether the denial of benefit of Value Based Advance Licenses (VABAL) to the appellants-transferee of such Licenses was permissible? and whether recovery of customs duty under Section 28 ibid, which was foregone on import on utilizing the VABAL Licenses, that were alleged to have been obtained by the transferor M/s. Robinson by resorting to overvaluation; and whether penalty imposed on the appellants under Section 114A ibid, are legally sustainable or not? In the three VABAL licenses, relating to the appeals before us there was no indication of such action for cancellation having taken by DGFT authorities or any information provided by Revenue that such an action was later taken by DGFT authorities. Thus, in terms of the CBEC instructions too, the impugned order directing the recovery of demand had no legal basis and was contrary to the directions contained in the aforesaid circular. Therefore, the impugned order confirming the duty on assessee and imposition of penalty on them was not sustainable.
