Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 528

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
P.A. Augustian, Judicial Member, Pullela Nageswara Rao, Technical Member
Midas Treads (India) Pvt Ltd. – Appellant
Versus
Commissioner of Customs, Cochin – Respondent
Customs Appeal No. 20942 of 2019|Customs Appeal No. 20943 of 2019|Customs Appeal No. 20944 of 2019|Customs Appeal No. 20945 of 2019

Advocates:
For the Appellants/Petitioners:Mr. G. Shivadass, Sr. Advocate, Mr. Rishab. J, Advocate
For the Respondents: Mr. M. Sreekanth, Asst. Commr. (AR)

Procedural violations like forged ISO certificate do not justify denying substantive duty benefits under DFIA/AA schemes if export obligations discharged via compliant test reports and no diversion alleged.

Headnote:(A) Customs Act, 1962 - Sections 28, 114A, 117 - Foreign Trade (Development & Regulation) Act, 1992 - Sections 14A, 15 - Customs Notifications Nos. 40/2006-Cus, 96/2009-Cus - Duty Free Import Authorisation (DFIA) and Advance Authorisation (AA) schemes - Forged ISO certificate and manipulated test reports alleged for availing duty benefits - No in-house lab for testing composition - Export obligations discharged with EODCs issued by licensing authority - Samples drawn and test reports available showing compliance with SION - ISO certification provides only procedural relaxation for avoiding sampling delays per Circular No. 57/1997-Cus - Not mandatory condition for schemes - No allegation of diversion of imported materials - SION norms are guidelines, not fixed formula - Mere procedural violation does not justify denial of substantive benefits or invocation of extended limitation - Prior penalty paid for similar lapse under separate proceedings - Penalties on co-noticees unsustainable without proof of personal involvement. (Paras 26-30)

(B) Export Promotion Schemes - Circular No. 57/1997-Cus - In-house test results acceptable if ISO 9002 certified, but where samples drawn by authorities and test reports confirm technical characteristics matching inputs under schemes, such reports relied upon - No presumption of non-compliance with SION absent adverse findings. (Para 26)

Facts of the case:
Appellant manufacturer-exporter availed DFIA (2007-09) and AA (2012-15) schemes for duty-free import of raw materials used in exporting pre-cured tread rubber etc. - Alleged forged ISO certificate (dated 2006 instead of 2009) and manipulated test reports without actual testing - No in-house lab observed during search - Duty demand, interest and penalties confirmed by Commissioner - Appeals challenged findings.

Findings of Court:
Impugned order set aside - Export obligations fulfilled - EODCs attained finality - Test reports from drawn samples compliant - No diversion - Procedural lapse regarding ISO insufficient to deny benefits.

Issues: Whether forged ISO certificate and alleged fake test reports justify recovery of duty benefits under DFIA/AA despite discharged export obligations, valid EODCs and compliant test reports from department-drawn samples - Jurisdiction of Customs vs. licensing authority - Invocability of extended limitation.

Ratio Decidendi: Substantial scheme benefits not deniable for procedural non-compliances like invalid ISO where samples tested and reports confirm SION compliance - No diversion alleged and EODCs final - SION indicative only - Prior penalty bars double jeopardy.

Result: Appeals allowed.

Table of Content
1. factual background of export schemes and allegations of forgery. (Para 1 , 2 , 4)
2. appellant's arguments on dfia/aa schemes and notifications. (Para 3 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12)
3. judicial precedents supporting export obligation fulfillment. (Para 13 , 14 , 15 , 16)
4. defense against forged iso and test reports validity. (Para 17 , 18 , 19 , 20 , 21 , 22)
5. respondent's contentions on fraud and procedural violations. (Para 23 , 24)
6. court's analysis rejecting forgery claims and upholding benefits. (Para 25 , 26 , 27 , 28 , 29)
7. appeals allowed, impugned orders set aside. (Para 30)

PER : P.A. AUGUSTIAN

The issue in the present appeals is regarding demand of customs duty and interest on the ground that the test report submitted by the Appellant are forged.

2. The brief facts are the Appellant is manufacturing various products and also exporting pre-cured Tread Rubber, Rubber compound sheets, etc. Alleging that for the period from 2006-2009, Appellant had used forged ISO certificate for availing the benefit of DFIA/DEPB Scheme and they were not having in-house lab for testing the composition of exported final products, investigation conducted and statements were recorded from various persons and Show Cause Notice dated 15.03.2018 was issued. Thereafter Adjudication Authority as per the impugned Order dated 23.04.2019 confirmed the demand and also imposed penalty on Appellant and co-noticee under various provisions of Finance Act, 1994.

Aggrieved by said order, present appeals are filed.

3. When the appeals came up for hearing, Learned Sr. Counsel draws our attention to the impugned order where duty was confirmed and penalty imposed only on the ground that on examination of the laboratory facilities by the DRI during the search operation, it was observed that the Appellant did not have a facility to test the composition of their finished goods. The test reports were manipulated to avail the benefit of DFIA/AA scheme by showing the composition of export goods as prescribed by Standard Input Output Norms (SION). On scrutiny of the copy of the ISO certificate submitted to Customs authorities for the finalization of the AA licenses, it was found that the effective date of the certification had been forged for availing benefits under AA/DFIA schemes. The agency that has issued the aforesaid ISO certificate, M/s DAS Certification (1) Pvt. Ltd., was not authorized to issue ISO 9000 certification in line with the guidelines issued vide Circular No. 57/97 dated 31.10.1997 read with Appendix 6 notified by the DGFT vide Public Notice No. 97(RE- 2007)/2004-2009 dated 04.01.2008. Learned Sr. Counsel for the Appellant also draw our attention to the various schemes prevailing at the relevant time and submits that Appellant had obtained license under Duty Free Import Authorization (DFIA) during the period 2007-2009 and Advance Authorization (AA) during the period 2012-2015. Under the DFIA scheme, the Appellant has opted for replenishment mode, i.e. the goods were exported and then the raw materials used for the manufacture of exported goods were imported. The Appellant obtained 3(three) DFIA licenses in terms of Para 4.2 of the Foreign Trade Policy ("FTP") for the period 2007-09 and availed benefits amounting to Rs. 36,32,331/-under the said scheme. The details of the DFIA licenses along with the corresponding EODCs are tabulated below:-

4. The Appellant fulfilled the export obligations against the aforesaid licenses and accordingly, the Export Promotion ("EP") copies were issued by the Customs authorities and the same were submitted to the Director General of Foreign Trade ("DGFT") for obtaining Export Obligation Discharge Certificate ("EODC"). Thereafter for the period of 2012-15, the Appellant obtained 11(Eleven) AA licenses and undertook import of goods by availing duty benefit of Rs. 6,16,28,577/-. The finished goods manufactured using the imported raw materials were exported under 400 shipping bills. The details of

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