Duty drawback on job-work exports upheld where the DTA owner, not the EOU/EPZ unit, was treated as exporter.

Duty drawback was held admissible on readymade garments manufactured on job-work basis in an EOU/EPZ because the export was treated as that of the DTA owner, not the EOU/EPZ unit, and the EOU exclusion in the drawback notifications therefore did not apply. Confiscation and penalty for alleged misdeclaration in the drawback shipping bills were also not sustainable, as no separate misstatement of description, value, or quantity was established once the exporter's legal character was accepted. Penalty against the EPZ unit and the appellant likewise failed, since the alleged absence of permission and the relied-upon statements did not furnish a valid basis for penal action. The recovery order with interest and penalties was set aside.

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Issues: (i) Whether duty drawback was admissible on readymade garments manufactured on job work basis in an EOU/EPZ and exported by the DTA owner; (ii) whether the goods were liable to confiscation and penalty on the allegation of misdeclaration in the drawback shipping bills; (iii) whether penalty could be sustained against the EPZ unit for want of permission and against the appellant on the basis of the relied-upon statements.

Issue (i): Whether duty drawback was admissible on readymade garments manufactured on job work basis in an EOU/EPZ and exported by the DTA owner.

Analysis: The applicable drawback notifications excluded goods manufactured and/or exported by an EOU in the contemplated sense, but the garments in question were found to be owned by the DTA unit and exported on drawback shipping bills filed by that owner. The reasoning turned on the nature of the transaction, the treatment of the raw material supplier as the manufacturer for job-work garments, and the conclusion that the fabrication on domestic raw material in bonded premises did not amount to manufacture of warehoused goods so as to attract the EOU exclusion. On that basis, the export was treated as an export by the DTA owner, not as an export by the EOU/EPZ unit.

Conclusion: Duty drawback was held admissible in favour of the assessee.

Issue (ii): Whether the goods were liable to confiscation and penalty on the allegation of misdeclaration in the drawback shipping bills.

Analysis: The alleged misdeclaration rested on the absence of deletion of certain clauses in the shipping bill declaration and on the assumption that the EOU/EPZ units were the manufacturers and exporters. Once the owner, manufacturer, and exporter were found to be the DTA unit, the premise for invoking confiscation under the customs provisions and penalty for misdeclaration failed. The finding also noted that no separate material misstatement of description, value, or quantity of the exported goods was established.

Conclusion: Confiscation and penalty were not sustainable.

Issue (iii): Whether penalty could be sustained against the EPZ unit for want of permission and against the appellant on the basis of the relied-upon statements.

Analysis: The alleged failure of the EPZ unit to obtain permission for job work was held insufficient by itself to attract penalty, since the act complained of was only preparatory and not an attempt to export. The record also did not support the adverse finding that permission had not been granted, and the denial of cross-examination was not accepted as a valid basis to sustain the order. Accordingly, the foundation for the penalty on the EPZ unit and the appellant was not made out.

Conclusion: Penalty was not sustainable against either appellant.

Final Conclusion: The order recovering drawback with interest and imposing penalties was set aside, and both appeals were allowed with consequential relief.

Ratio Decidendi: Where the DTA owner is found to be the exporter and the goods are not shown to have been exported by the EOU/EPZ unit in the relevant legal sense, drawback cannot be denied on the EOU exclusion, and confiscation or penalty cannot rest on a misdeclaration premise that is not borne out by the actual legal character of the export.

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