The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi Bench, has struck down duty demands and penalties imposed on 21 appellants including a Chartered Accountant (CA) after ruling that Customs authorities had no jurisdiction to declare Duty Entitlement Passbook (DEPB) scrips issued by the Directorate General of Foreign Trade (DGFT) as void.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) rejected the Commissioner’s conclusions, ruling that both the DRI and Customs had acted without authority of law in declaring the DGFT-issued DEPB scrips null and void and such powers rested solely with the DGFT under the Foreign Trade (Development and Regulation) Act.
The case stemmed from a 2008 show cause notice issued by the Directorate of Revenue Intelligence (DRI) alleging misuse of export promotion schemes by exporters through false declarations and fraudulent procurement of DEPB scrips. The scrips were subsequently sold to importers who used them to clear goods at concessional duty rates. DRI further alleged that Bank Realisation Certificates (BRCs) supporting the exports had been fraudulently obtained with the complicity of certain bank officials.
In October 2022, the Commissioner of Customs (Air Cargo Complex, New Delhi) held the DEPB scrips to be ab initio void, demanded customs duty under Section 125(2) of the Customs Act, and imposed penalties under Sections 112 and 114 on importers, bankers, and a chartered accountant.
On the demand of duty under Section 125(2), the Tribunal categorically ruled that the provision does not empower authorities to raise duty demands. “Duty can only be demanded under Section 28 of the Customs Act. Section 125 merely provides an option to pay fine in lieu of confiscation,” the order clarified.
Similarly, penalties imposed on importers under Section 112 were set aside, with the Tribunal observing that the importers had purchased the scrips in good faith and presented them validly at the time of import clearance.
The bench also quashed penalties imposed on five former bank officials of Centurion Bank and a chartered accountant. The DRI had alleged that the bankers facilitated fraudulent BRCs by accepting foreign currency deposits not compliant with RBI’s FEMA regulations.
However, the Tribunal found that neither DRI nor Customs had jurisdiction to question the validity of BRCs issued under RBI’s domain. “If irregularities were suspected, the matter should have been referred to RBI. Customs officers cannot assume powers under FEMA,” the order stated.
Further, since the goods in question had already been exported, they no longer qualified as “export goods” under Section 2(19) of the Act and therefore could not be confiscated under Section 113. Consequently, penalties under Section 114(i) on bank officers and the chartered accountant also fell through.
Key Takeaways
- DRI and Customs exceeded jurisdiction in treating DGFT-issued DEPB scrips as void.
- Duty demand under Section 125(2) of the Customs Act was held unsustainable.
- Importers cleared of penalties, having used DEPB scrips in good faith.
- Bankers and CA exonerated, as Customs cannot adjudicate on RBI-regulated BRCs.
Allowing all 21 appeals, the Tribunal set aside the impugned order and granted consequential relief to the appellants.
Case Details
Case Title: Pankaj Chordia Versus The Commissioner Of Customs, Air Cargo Complex
Case No.: Customs Appeal No. 50453 Of 2023
Date: 27.08.2025
Counsel For Appellant: B.L. Narasimhan
Counsel For Respondent: Girijesh Kumar
