CESTAT Delhi- The confiscation of exported goods under DFIA Scheme by the Customs authorities was deemed improper

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Delhi provided relief to M/s Kothari Products Limited and M/s Pan Parag India Limited regarding allegations of misuse of the Duty-Free Import Authorization (DFIA) Scheme.

Background of the Case:

The exporters, M/s Kothari Products Limited and M/s Pan Parag India Limited, were accused of improperly benefiting from the DFIA scheme by not declaring the technical characteristics of essential oils in their exported pan masala and gutkha products. The Customs authorities initially confiscated the exports, labeling them as “prohibited,” and imposed penalties on the companies and their directors.

Tribunal’s Decision:

The Tribunal, after thorough consideration, concluded:

Export Products Not Prohibited: The non-declaration of technical specifications for inputs on shipping bills did not render the exported pan masala and gutkha as “prohibited” goods under the Foreign Trade Policy (FTP) or Customs Act.
No Misuse of DFIA Scheme Proven: The tribunal observed no substantial evidence showing the exported products were directly linked to duty-free imported inputs. Moreover, the Tribunal highlighted that most inputs were sourced domestically.
Penalty and Confiscation Invalid: As no exemption was claimed at export, and because the alleged conditions were related to imports rather than exports, the tribunal ruled that the penalties and confiscations were unlawful.
Double Jeopardy: The Tribunal also noted that similar allegations had already been adjudicated by DGFT authorities, making further penalties from Customs unjustified.

Key Takeaways:

The ruling reinforces that non-compliance with certain procedural export declarations does not automatically classify goods as “prohibited” under the law.
Clear distinction upheld between compliance requirements for imports versus exports.
The Tribunal emphasized procedural fairness, protecting exporters from multiple penalties for the same set of allegations.

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Source: CESTAT Delhi

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