Recovery under Section 28AAA cannot proceed before DGFT cancels FPS/DEPB scrips; tribunal set aside the demands.

Whether recovery under the Customs recovery provision may be initiated without prior cancellation of export scrips was resolved by applying the statutory recovery mechanism together with Board and DGFT instructions requiring cancellation of FPS/DEPB instruments before recovery. The Tribunal found no record of DGFT cancellation and distinguished authorities where scrips were fraudulent or already cancelled; accordingly the departmental demands for duty, redemption fine and imposition of personal penalties were premature and contrary to administrative instructions, and the appeals were allowed with the demands set aside for all parties.

---

---

Issues: Whether duty, redemption fine and penalties can be imposed and recovery proceeded under Section 28AAA of the Customs Act, 1962 in respect of FPS/DEPB scrips without prior cancellation of those scrips by the issuing authority (DGFT).

Analysis: The Tribunal examined statutory recovery provision and Board/departmental instructions including Circular No. 334/1/2012-TRU dated 01.06.2012 and the DGFT Office Memorandum dated 26.12.2017 which advise that action for recovery under the provision may be initiated only after the instrument (DEPB/FPS scrip) has been cancelled by DGFT. The Tribunal considered authorities cited by the parties, including a CESTAT decision and the Supreme Court decision relied upon concerning forged or cancelled scrips, and distinguished cases where scrips were shown to be fraudulent or cancelled. The factual record does not show that DGFT has initiated cancellation of the scrips in question. In the absence of cancellation by DGFT, the departmental demand for duty, redemption fine and imposition of personal penalties was found to be premature and contrary to the Board's instructions and the cited authorities.

Conclusion: The appeals are allowed; demands for duty, redemption fine and personal penalties are set aside for all parties. The decision is in favour of the assessee.

---