2024 (12) TMI 540 - AT - Customs

Revenue fails to prove collusion in duty drawback recovery case under Section 28AAA

CESTAT New Delhi dismissed Revenue's appeals for duty drawback and duty foregone recovery based on non-repatriation of export proceeds. The tribunal held ... Recovery of duty drawback and duty foregone based on non-repatriation of export proceeds - cancellation of the ‘bank realization certificates - Applicability of Section 28AAA of Customs Act, 1962 for recovery of duty foregone - levy of penalties - HELD THAT:- Section 28AAA of Customs Act, 1962, deployed in the appeals of Revenue as authority for recovery of duty foregone, has been set upon the plinth of ‘collusion, willful misrepresentation or suppression of facts’ therein that, just as absence of timely remittance does for drawback, ab initio erases eligibility to exemption from duties of customs entitled by possession of instrument for such exemption; a plain reading of this provision makes it clear that there should be sufficient grounds to determine that the said ingredients are established in stages leading to issuance of the instrument and, furthermore, two purposes are intended by this provision, viz., that the exemption was deemed to be not extended ever and recovery of duty foregone from either the actual importer or the person who held the instrument originally is not estopped. A general narrative of an interesting tale of interplay among characters unknown to the transactional engagement within the purview of Customs Act, 1962, i.e, import of goods or export of goods, does not satisfy as ingredients specified in section 28AAA of Customs Act, 1962 for recourse thereto; one of three should have existed when the application was made to the licencing authority and a state of mind, imagined to be fit for strategem and spoils, as put forth on behalf of Revenue, being in the realm of speculative fiction and anathema to the contingencies that authorize invoking of the conferment therein, is not acceptable alternative. Indeed, the grievance at having been deceived thereby should have been that of the licencing authority and remediable under the law that authored the existence of such authority. Such authority is vested with powers to determine that licence has been inappropriately obtained and such finding activates the contingencies contemplated by section 28AAA of Customs Act, 1962. It is alleged in the show cause notice that the goods were mis-declared but it is section 113(d) of Customs Act, 1962 that has been invoked for confiscation of goods and held by the adjudicating authority to be so liable for enabling imposition of penalties under section 114 of Customs Act, 1962. Such confiscation is valid if goods prohibited for export are brought into a customs area. There are no justifiable reason for confiscation as it has not been evidenced that the goods, as described in the shipping bills, were prohibited for export. The decision in KI Pavunny [1997 (2) TMI 97 - SUPREME COURT] does not authorize substitution of valuation mechanism with testimony of persons. Indeed, we find it conveniently opportunistic for customs authorities to sanctify declarations made by overseas parties or determination by customs authorities overseas as, respectively, honourable and appropriate while discarding the declarations made at load port, as well as assessment thereto, as dishonored without even venturing, by recourse to adjudicatory jurisdiction set out in law, to justify such oversimplified prioritization. In such circumstances, even if the ascertainment of movement and ultimate destination of the consignments had extended to all 13008 consignments, instead of the 75 referred to overseas missions, any outcome thereof would not matter a whit as export concludes once the goods are landed at the first destination and ceases to conform to export, as set out in section 2(18), or export goods, as set out in section 2(19) of Customs Act, 1962, to thus exclude revision from the purview of Customs Act, 1962 except in circumstances of the clearance effected in section 51 of Customs Act, 1962 having been established – either for incorrect discharge of duty liability or for being prohibited - as erroneous. With the quashing of cancellation of ‘bank realization certificate’, the sole ground of distinguishment from the other exports vanishes. The demands for recovery of drawback and duty foregone, such as it is, sustained for that reason alone in the impugned order lacks factual support. These consignments revert to the fold of the larger numbers that are covered by appeal of Revenue. That has been held to be without merit on the lack of evidence to advance recourse to recovery of drawback, recovery of duty foregone and confiscation of goods. Levy of penalties - HELD THAT:- The appeal of Shri Nitin Gupta of M/s Oak Shipping Services Pvt Ltd impugns the penalty imposed on him for having been ventured upon without notice, without service of documents and without being heard. That should suffice for setting the detriments aside but in the light of lack of sustainability of any of proposals in the notice insofar as confiscation of the exported goods is concerned, nothing remains for recourse to penal provisions against him. Likewise, the penalties imposed on the other individual appellants fail on the non-sustenance of recovery, both undertaken and proposed, and of the liability of the goods to confiscation. The appeals of Revenue are dismissed and appeals of the exporters and of the individuals allowed. Issues Involved:1. Legality of recovery of drawback and duty foregone based on non-repatriation of export proceeds.2. Validity of cancellation of 'bank realization certificates' and its impact on recovery.3. Authority of customs to assess payments received from third parties as non-compliant.4. Applicability of Section 28AAA of Customs Act, 1962 for recovery of duty foregone.5. Legitimacy of allegations of overvaluation and misdeclaration of exported goods.6. Justification for confiscation and penalties under Sections 111 and 114 of Customs Act, 1962.Issue-wise Detailed Analysis:1. Legality of Recovery of Drawback and Duty Foregone:The core issue was whether the customs authorities had the legal authority to recover drawback and duty foregone based on the alleged non-repatriation of export proceeds. The Tribunal held that the customs authorities overstepped their jurisdiction by assuming authority over repatriation oversight, which is not within their remit as per Section 75 of the Customs Act, 1962. The Tribunal emphasized that the oversight of repatriation falls under the purview of other regulatory bodies and not customs, thereby invalidating the basis for recovery.2. Validity of Cancellation of 'Bank Realization Certificates':The cancellation of 'bank realization certificates' by Punjab National Bank was a pivotal point in the proceedings. The Tribunal noted that the adjudicating authority ignored a judicial order that quashed these cancellations, which was a critical error. The Tribunal concluded that the reliance on these cancellations to justify recovery was unjustified, as the judicial order had effectively nullified the cancellations, thereby invalidating the grounds for recovery.3. Authority of Customs to Assess Third-Party Payments:The Tribunal scrutinized the customs authorities' presumption against third-party remittances. It was highlighted that the Reserve Bank of India's circulars did not impose an absolute embargo on such remittances. The Tribunal found that the customs authorities had erroneously presumed against regularization of third-party payments without any legal basis or established procedure for erasure of such payments. This presumption was deemed inappropriate, and the Tribunal held that the customs authorities lacked the jurisdiction to invalidate these remittances.4. Applicability of Section 28AAA of Customs Act, 1962:The Tribunal examined the applicability of Section 28AAA, which pertains to recovery of duty foregone due to collusion, willful misrepresentation, or suppression of facts. The Tribunal found no evidence that these ingredients were present at the time of obtaining the 'duty credit scrips.' The Tribunal emphasized that the narrative of fraud, as presented by the Revenue, did not satisfy the statutory requirements for invoking Section 28AAA, and thus, the recovery under this provision was not justified.5. Legitimacy of Allegations of Overvaluation and Misdeclaration:The Tribunal addressed the allegations of overvaluation and misdeclaration of exported goods. It was noted that there was no legal determination or re-assessment of the value of goods under Section 14 of the Customs Act, 1962. The Tribunal pointed out that the customs authorities failed to provide evidence of overvaluation through appropriate legal channels, rendering the allegations baseless. The Tribunal concluded that the narrative of fraud was insufficient to establish overvaluation or misdeclaration.6. Justification for Confiscation and Penalties:The Tribunal examined the confiscation of goods under Section 111 and the imposition of penalties under Section 114. It was found that the goods were not prohibited for export, and there was no evidence of overvaluation or misdeclaration that would justify confiscation. The Tribunal held that the penalties imposed on individuals were unwarranted, as the foundational grounds for confiscation and recovery were not substantiated. Consequently, the penalties were set aside.Conclusion:The Tribunal dismissed the appeals of the Revenue and allowed the appeals of the exporters and individuals. The Tribunal's decision was based on the lack of legal and factual support for the recovery of drawback and duty foregone, the improper cancellation of 'bank realization certificates,' and the absence of evidence for overvaluation and misdeclaration. The Tribunal emphasized adherence to statutory mandates and the appropriate jurisdictional boundaries within customs law.