DEPB recovery and export over-invoicing require statutory authority and corroborated evidence; retracted confessions alone are insufficient.

Customs recovery of alleged excess DEPB benefit was held unsustainable where no provision in the Customs Act authorised cash recovery from the exporter after transfer of the scrips to third parties, and where the scrips had neither been cancelled by DGFT nor used by the exporter for imports. The allegation of export over-invoicing also failed because the market inquiry and domestic price comparisons did not reliably prove inflated FOB value, and the retracted Section 108 statements lacked independent corroboration and were treated as having doubtful probative value. On that basis, confiscation, redemption fine and penalties were set aside.

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Issues: (i) Whether the Customs authorities could recover the DEPB benefit in cash from the exporter after the DEPB scrips had been transferred to third parties. (ii) Whether the allegation of export over-invoicing was proved so as to sustain confiscation and penalty.

Issue (i): Whether the Customs authorities could recover the DEPB benefit in cash from the exporter after the DEPB scrips had been transferred to third parties.

Analysis: The demand was held to be unsustainable because the show cause notice and adjudication order did not identify any provision of the Customs Act, 1962 authorising cash recovery of the alleged excess DEPB benefit from the exporter. The order distinguished the limited statutory mechanisms for recovery of duty or drawback and held that, where DEPB scrips had been transferred and neither cancelled by the DGFT nor used by the exporter for imports, Customs could not recover the amount from the exporter in cash.

Conclusion: The cash demand of the alleged excess DEPB benefit was illegal and was set aside.

Issue (ii): Whether the allegation of export over-invoicing was proved so as to sustain confiscation and penalty.

Analysis: The conclusion of over-invoicing was found unsupported by reliable evidence. The market inquiries did not conclusively establish inflation of FOB value, domestic market prices were not treated as a safe basis to test export valuation, and the declared values were not shown to be contrary to contemporaneous export values of identical or similar goods. The principal evidence consisted of statements recorded under Section 108 of the Customs Act, 1962, but those statements were retracted and were treated as unreliable in the surrounding circumstances, including the freezing and de-freezing of the bank account and the absence of independent corroboration. The confessional statements were therefore held to have doubtful probative value, and the principle that a confession must be voluntary and free from threat or inducement was applied.

Conclusion: The allegation of export over-invoicing was not proved, and the confiscation, redemption fine and penalties were set aside.

Final Conclusion: The appeals succeeded, and the impugned order was set aside in full, leaving no sustainable basis for the demand, confiscation or penalties.

Ratio Decidendi: A retracted confession cannot be relied upon unless its voluntariness is established and it is sufficiently corroborated by independent evidence, and Customs cannot recover alleged excess DEPB benefit from the exporter in cash without statutory authority.

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