2026-VIL-1495-CESTAT-CHE-CU
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  2. 2026-VIL-1495-CESTAT-CHE-CU

CUSTOMS CESTAT Cases

Customs - Inflation of the FOB value and availment of excess DEPB benefits - Recovery of excess DEPB benefit under Section 28 of the Customs Act, 1962 - Deduction of Bunker Adjustment Factor (BAF) and Currency Adjustment Factor (CAF) - Appellants are manufacturers and exporters of viscose yarn and cotton blends who availed export incentives under DEPB Scheme - During scrutiny Department found that freight actually paid to liners was higher than freight declared in shipping bills resulting in inflation of FOB value and consequential availment of excess DEPB benefits - Department alleged that Currency Adjustment Factor and Bunker Adjustment Factor are required to be deducted from CIF value and recovery was sought under Section 28 of Customs Act 1962 - Whether recovery of alleged excess DEPB benefit under Section 28 is permissible - HELD - The Revenue proceeded on the premise that BAF and CAF, being charges recovered by the shipping lines towards variations in fuel costs and foreign exchange rates respectively, necessarily form part of freight and, therefore, have to be deducted from the CIF value along with insurance for determining the FOB value for DEPB purposes - The controversy is directly covered by decision of this Tribunal in Cheran Spinners Ltd. wherein on identical issue concerning deduction of CAF and BAF for determination of FOB value and recovery of alleged excess DEPB benefit under Section 28 it was held that recovery under Section 28 was not permissible - Customs Authorities do not have jurisdiction to reduce excess credit taken as DGFT authorities have proper jurisdiction. DEPB credit is not duty and same cannot be realised under Section 28. Power to recover DEPB credit wrongly availed by exporter is vested in DGFT - The demand in question arises from allegation that exporter obtained DEPB credit in excess of entitlement on account of incorrect determination of FOB value and nature of alleged liability cannot be altered by describing DEPB as customs duty exemption. The nature of the alleged liability cannot be altered merely by describing DEPB as a customs duty exemption - Once basis of demand under Section 28 fails, consequential demand of interest and penalties cannot survive – The impugned orders confirming recovery are set aside – The appeals are allowed
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