Invalidated departmental circular requires remand for fresh determination of duty drawback entitlement and penalty liability.

The departmental circular disallowing drawback on exported unlocked/tested mobile phones was set aside by higher courts, removing the sole legal basis for denial of drawback and for penalty actions; accordingly the impugned order denying drawback and imposing penalties is vacated and the matter remitted to the original authority to re-determine entitlement to duty drawback and any penalty liability without reference to the quashed circular. The remand requires fresh consideration of admissibility under the Drawback Rules and reassessment of broker liability absent the invalidated departmental instruction.

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Issues: Whether the impugned order denying drawback and imposing penalties on the customs broker solely on the basis of the departmental circular (F. No. 609/4/2020-DBK/1063 dated 25th September 2020) is sustainable in view of the circular having been set aside by higher courts, and whether the matter should be remitted for fresh consideration of drawback eligibility and consequential penalties.

Analysis: The appeal challenges an order which denied drawback and imposed penalties under Section 114 and Section 114AA of the Customs Act, 1962, relying principally on the departmental circular dated 25th September 2020 concerning non-admissibility of duty drawback on export of unlocked/tested mobile phones. The Tribunal noted that the circular upon which the impugned decision was based has been set aside by the Hon'ble High Court of Delhi and that decision was subsequently confirmed by the Hon'ble Supreme Court; parallel High Court decisions also directed release of drawback without applying the circular. Given that the impugned order was founded solely on the invalidated circular and that the original orders involved sanctioned drawback under the Customs and Central Excise Duties Drawback Rules, 2017, the Tribunal found that the foundational basis for recovery and penalties was eradicated and that the original authority must re-examine entitlement to drawback and any liability for penalties without reference to the quashed circular.

Conclusion: The impugned order is set aside and the matter is remitted to the original authority for fresh decision on (i) entitlement to drawback and (ii) imposition of penalties under Section 114 and Section 114AA of the Customs Act, 1962, in the absence of the impugned circular. The appeal is allowed by way of remand.

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