2012 (8) TMI 381 - AT - Customs

Tribunal denies duty drawback claim, orders conversion of shipping bills

The Tribunal held that the appellant was not eligible for the claimed duty drawback under serial nos. 73.29 and 73.30 of the Drawback Schedule. The ... All-industry rate of drawback - interpretation of Drawback Schedule aligned with Customs Tariff chapter heading - classification under Customs Tariff chapter heading as determinative of drawback eligibility - mis-declaration in export documents - confiscation under section 113 - penalty under section 114(iii) - admission of additional evidence before appellate authority - conversion of drawback shipping bills to DEPB by application under section 149All-industry rate of drawback - interpretation of Drawback Schedule aligned with Customs Tariff chapter heading - classification under Customs Tariff chapter heading as determinative of drawback eligibility - Eligibility of the exported goods for all-industry rate of drawback under serial nos. 73.29 and 73.30 of the Drawback Schedule as it stood at the relevant time - HELD THAT: - The Tribunal held that the Drawback Schedule is chapter-wise and the first two digits of the serial number indicate the Customs Tariff chapter under which the goods must fall to claim the specified all-industry rate. Consequently, a product must both fall under the relevant Customs Tariff chapter and conform to the serial description to be eligible. The exported items (including steering knuckles and other motor-vehicle parts) were held to fall under Chapter 87 (CTH 87.08) and not under Chapter 73; therefore they were not covered by serial nos. 73.29 or 73.30 and were ineligible for drawback. The Tribunal distinguished authorities cited by the appellant as factually different and noted the Ministry's circulars which show the Drawback Schedule's alignment with chapter headings and later with HS at four-digit level, reinforcing that matching a description alone is insufficient where chapter alignment is absent. [Paras 7]The appellant is not eligible for duty drawback at all-industry rates under serial nos. 73.29 and 73.30 on the impugned goods.Mis-declaration in export documents - confiscation under section 113 - Whether the exported goods are liable to confiscation for not corresponding in a material particular with the entry made under the Act and for being falsely entered for drawback - HELD THAT: - The Tribunal found that the export documents (shipping bills and invoices) did not state the correct description of goods but instead used descriptions corresponding to Chapter 73 entries to claim drawback, whereas the goods actually classifiable under heading 87.08 were motor-vehicle parts subjected to extensive post-forging operations. Such mis-declaration rendered the goods liable to confiscation under section 113(i) and (ii). The Tribunal also explained that liability to confiscation is a legal consequence and does not require actual seizure of the goods to be determined. [Paras 7]The impugned goods are liable to confiscation under section 113; however, as the goods have already been exported and are not available for confiscation, the redemption fine imposed in lieu of confiscation cannot be sustained.Penalty under section 114(iii) - mens rea not required - Imposability and quantum of penalty under section 114(iii) on the appellant and its officials for acts rendering goods liable to confiscation - HELD THAT: - The Tribunal applied section 114(iii), noting that mens rea is not a prerequisite for imposition of penalty; once goods are liable to confiscation, penalty may be imposed for acts or omissions that rendered them so. The fact that central excise officers examined the goods does not absolve the exporter from correct declarations before customs; such examination may only be relevant to quantum. Considering the export nature of the transaction and the circumstances, the Tribunal reduced the penalty on the main appellant from Rs.50 lakhs to Rs.20 lakhs and set aside the penalties imposed on two named officials, observing they did not personally gain from the wrong claim. [Paras 7]Penalty sustained in principle; main appellant's penalty reduced to Rs.20 lakhs and penalties on two officials set aside.Admission of additional evidence - relevance of Ministry notings - Admissibility of additional evidence consisting of Ministry notings and representations placed on record by the appellant - HELD THAT: - The Tribunal refused to admit the additional evidence. It noted the Ministry had itself advised the appellant to await the CESTAT decision and that notings in Ministry files are not a substitute for statutory interpretation. Reliance was placed on authority that where statutory provisions are clear, file notings are not relevant. The appellant had also obtained the notings informally and had not established their source. Accordingly the miscellaneous application to admit such evidence was rejected. [Paras 5, 6]Application to admit additional evidence rejected.Conversion of drawback shipping bills to DEPB - application under section 149 - Whether the appellant may convert the drawback shipping bills to DEPB shipping bills - HELD THAT: - The Tribunal observed that the appellant had not sought conversion before the adjudicating authority and no finding was recorded below. Conversion requires an application under section 149 of the Customs Act; since no such application had been made, the Tribunal declined to decide the matter on merits and directed that the appellant may make an application for conversion with supporting documents, whereupon the adjudicating authority shall consider it in accordance with law after giving a reasonable opportunity. [Paras 7]Leave to apply for conversion under section 149; adjudicating authority to decide any such application in accordance with law.Final Conclusion: The Tribunal held that the exported motor-vehicle parts were not eligible for all-industry drawback under serial nos. 73.29/73.30 for the period 6-3-03 to 15-5-03, that the exported goods are liable to confiscation though the redemption fine in lieu of confiscation is set aside as the goods are not available, that penalty is sustainable in principle with reduction of the main appellant's penalty to Rs.20 lakhs and partial setting aside of penalties on certain officials, rejected the appellant's application to admit additional Ministry notings, and permitted the appellant to apply for conversion of the shipping bills to DEPB under section 149 to be decided by the adjudicating authority. Issues Involved:1. Eligibility for all industry rate of drawback under serial nos. 73.29 and 73.30 of the Drawback Schedule.2. Liability of the exported goods to confiscation.3. Imposition of fine and penalty.4. Conversion of drawback shipping bills to DEPB shipping bills.5. Admission of additional evidence.Detailed Analysis:1. Eligibility for All Industry Rate of Drawback:The primary issue was whether the exported automobile parts were eligible for the all industry rate of drawback under serial nos. 73.29 and 73.30 of the Drawback Schedule. The appellant, a manufacturer of automobile parts, had exported items such as machined crankshaft, forged crankshaft, steering knuckle, front axle beam, valve body, and stub axle, claiming drawback under the aforementioned serial numbers. The appellant argued that the goods matched the descriptions in the Drawback Schedule and had been verified by central excise officers. However, the Tribunal found that the goods, particularly the steering knuckles, were classified under heading No. 87.08 of the Customs Tariff, which was not eligible for the claimed drawback rates. The Tribunal emphasized that the Drawback Schedule was aligned with the Customs Tariff at the chapter level, and the goods must fall under the specified chapter to be eligible for the drawback. Consequently, the Tribunal held that the appellant's claim lacked substance and merit.2. Liability of the Exported Goods to Confiscation:The Tribunal examined whether the goods were liable to confiscation under Section 113 of the Customs Act, 1962. It was found that the appellant had mis-declared the goods in the shipping bills and export invoices to claim ineligible drawbacks. The goods were actually classifiable under heading No. 87.08 and did not correspond to the declared entries under serial nos. 73.29 and 73.30. The Tribunal held that the goods were liable to confiscation under Section 113(i) and (ii) of the Customs Act due to the mis-declaration and ineligible drawback claims.3. Imposition of Fine and Penalty:The Tribunal addressed the imposition of fine and penalty on the appellant. It was noted that the goods had already been exported and were not available for confiscation. Therefore, the imposition of a fine of Rs. 2 crore in lieu of confiscation was set aside. Regarding the penalty, the Tribunal found that the appellant had knowingly mis-declared the goods to claim undue drawbacks, rendering them liable to penalty under Section 114(iii) of the Customs Act. However, considering the circumstances, the penalty on the main appellant was reduced from Rs. 50 lakhs to Rs. 20 lakhs. The penalties on the officials of the appellant firm were set aside, as they did not personally gain from the wrongful claims.4. Conversion of Drawback Shipping Bills to DEPB Shipping Bills:The appellant requested the conversion of the drawback shipping bills to DEPB shipping bills. The Tribunal noted that this plea had not been raised before the adjudicating authority, nor had an application been made under Section 149 of the Customs Act. The Tribunal directed the appellant to make an application for conversion, which the adjudicating authority should consider in accordance with law and after providing a reasonable opportunity to the appellant.5. Admission of Additional Evidence:The appellant sought to introduce additional evidence related to representations made to the Finance Ministry. The Tribunal rejected this application, citing that the notings in the Ministry's file were not relevant to the case pending before the CESTAT. The Tribunal emphasized that the interpretation of the Drawback Schedule should be based on the language used therein, not on the Ministry's notings.Conclusion:The Tribunal concluded that the appellant was not eligible for the claimed duty drawback under serial nos. 73.29 and 73.30 of the Drawback Schedule. The exported goods were liable to confiscation, but the fine in lieu of confiscation was set aside due to the goods not being available. The penalty on the main appellant was reduced, and penalties on the co-appellants were set aside. The appellant was directed to apply for the conversion of shipping bills if permissible under the law.