Drawback recovery under repealed rules and penalties failed where the later saving clause was limited and confiscation lacked basis.

Recovery of excess drawback or non-realisation of export proceeds under Rules 16 and 16A of the 1995 Drawback Rules was held inapplicable after the 2017 Drawback Rules commenced, because Rule 20 saved only limited contingencies and the later saving provision showed a different intention. Denial of drawback on alleged fake procurement invoices was also rejected where exports had been assessed, Let Export Orders issued, and the statement of an alleged intermediary was not tested under section 138B of the Customs Act. Confiscation of already exported goods and penalties under sections 114 and 114AA failed for want of a valid confiscation basis and proof of knowing use of false documents.

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Issues: (i) whether recovery of drawback could be made under Rule 16 and Rule 16A of the 1995 Drawback Rules after the commencement of the 2017 Drawback Rules; (ii) whether the drawback claim could be denied and the goods confiscated on the basis of alleged fake procurement invoices and related statements; and (iii) whether penalties on the appellant and its partner were sustainable.

Issue (i): Whether recovery of drawback could be made under Rule 16 and Rule 16A of the 1995 Drawback Rules after the commencement of the 2017 Drawback Rules.

Analysis: Rule 20(1) of the 2017 Drawback Rules caused the 1995 Drawback Rules to cease to operate, and Rule 20(2) saved only the specific situations expressly mentioned therein. Recovery of excess drawback and recovery for non-realisation of export proceeds under Rules 16 and 16A were not among the saved contingencies. Section 159A of the Customs Act, 1962 could apply only where no different intention appeared, but the limited saving in Rule 20(2) manifested a different intention. The proceedings were also not initiated prior to 01.10.2017, as the show cause notice was issued only on 14.12.2022. The confirmation of demand under the repealed rules was therefore legally unsustainable.

Conclusion: Recovery under Rule 16 and Rule 16A of the 1995 Drawback Rules was not maintainable and the demand failed.

Issue (ii): Whether the drawback claim could be denied and the goods confiscated on the basis of alleged fake procurement invoices and related statements.

Analysis: The exports were cleared on assessment and Let Export Orders were issued, and the drawback was claimed at the All Industry Rate under section 75 of the Customs Act, 1962 read with Rule 3 of the 1995 Drawback Rules. In such a situation, the drawback could not be questioned merely on the allegation that the goods had been procured against fake invoices. The statement relied upon from the alleged intermediary could not be used against the appellant when the statutory procedure under section 138B of the Customs Act, 1962 was not followed. Further, confiscation under section 113 of the Customs Act, 1962 was not permissible for goods already exported out of India.

Conclusion: Denial of drawback and confiscation of the exported goods were unsustainable.

Issue (iii): Whether penalties on the appellant and its partner were sustainable.

Analysis: Penalty under section 114 of the Customs Act, 1962 presupposes valid confiscation, which was absent. Penalty under section 114AA of the Customs Act, 1962 also required knowing use of false or incorrect declaration, statement or document in customs transactions, which was not established on the facts found by the Tribunal.

Conclusion: The penalties imposed on the appellant and its partner were not sustainable.

Final Conclusion: The impugned adjudication was set aside in entirety, the drawback demand and related penalties did not survive, and the connected appeals succeeded.

Ratio Decidendi: Where a later repeal-and-saving provision expresses a limited saving and a different intention, recovery or enforcement under the repealed drawback rules cannot be sustained under the general saving provision of the Customs Act, 1962; ancillary confiscation and penalties based on the same unsustainable foundation must also fail.

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