DEPB credit and misdeclaration in exports: duty recovery needs granted credit and positive evidence, not inference alone.

Unutilised DEPB credit cannot be recovered as customs duty under section 28 when the credit has not been granted by the licensing authority, though misdeclared intercepted goods remain liable to confiscation and redemption fine. For earlier export consignments, duty demand and penalties cannot be sustained on inference alone where no samples were drawn and no test report or other positive evidence established misdeclaration. The stated principle is that customs recovery must match the legal status of the benefit claimed, while allegations of misdeclaration require affirmative proof.

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Issues: (i) Whether DEPB credit claimed for the intercepted consignments could be disallowed and duty demand raised under section 28 of the Customs Act, 1962 when the credit had not been granted by the licensing authority and the goods were found not to conform to the declared description. (ii) Whether the duty demand, confiscation and penalties in respect of earlier exported consignments could be sustained in the absence of sample testing or other positive evidence showing misdeclaration.

Issue (i): Whether DEPB credit claimed for the intercepted consignments could be disallowed and duty demand raised under section 28 of the Customs Act, 1962 when the credit had not been granted by the licensing authority and the goods were found not to conform to the declared description.

Analysis: The export goods declared as Eau De Perfume were found, on test, to contain alcohol above the limit prescribed in the SION for that description. On that basis, the goods were not eligible for the claimed DEPB benefit and were liable to confiscation for misdeclaration. However, since the DEPB credit had not actually been credited by the licensing authority, there was no justification for recovery of that amount as customs duty under section 28. The proper course was to take up the matter with the licensing authority under the foreign trade regime.

Conclusion: The DEPB credit demand under section 28 was set aside, but confiscation of the goods was upheld, with redemption on payment of fine.

Issue (ii): Whether the duty demand, confiscation and penalties in respect of earlier exported consignments could be sustained in the absence of sample testing or other positive evidence showing misdeclaration.

Analysis: For the earlier consignments, no samples were drawn and no test reports were available. The demand was founded only on a statement that earlier exports were identical to the later intercepted goods. Misdeclaration in prior exports could not be presumed by implication. In the absence of positive evidence establishing that the earlier consignments also violated the declared conditions, denial of DEPB benefit and consequential duty and penalty proceedings could not be sustained.

Conclusion: The duty demand for the earlier consignments and all consequential penalties were set aside.

Final Conclusion: The appeal succeeded in part. The demand relating to the earlier exports was annulled, while the finding of misdeclaration for the intercepted consignments, their confiscation, redemption fine and penalties were maintained.

Ratio Decidendi: Customs cannot recover unutilized DEPB credit as duty under section 28, and a charge of misdeclaration for earlier exports must be supported by positive evidence, not inference alone.

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