2007 (5) TMI 16 - SC - Customs

Confiscation of Good - Alleged that the market value of goods under export is much less than the amount of drawback claim and it is rejected by CEGAT Respective Authority set aside the order of CEGAT

Summary

Issues Involved:
1. Confiscation of goods under Section 113(d) and (i) of the Customs Act, 1962.
2. Interpretation and application of Section 76(1)(b) of the Customs Act regarding duty drawback.
3. Determination of the true export value of goods under Section 14 of the Customs Act.

Detailed Analysis:

Confiscation of Goods under Section 113(d) and (i) of the Customs Act, 1962
The core issue was whether goods could be confiscated when their market value was significantly lower than the duty drawback claimed. The Directorate of Revenue Intelligence (DRI) detained several consignments, noting discrepancies in the description, quantity, and value of the goods as disclosed in the bills. The Commissioner of Customs ordered the confiscation of these goods under Section 113(d) and (i) of the Customs Act and allowed their redemption upon payment of a fine. However, the Customs, Excise, and Gold (Control) Appellate Tribunal (CEGAT) overturned this decision, stating that there was no power of confiscation and no evidence suggesting that the goods did not match the material entries in the bills.

Interpretation and Application of Section 76(1)(b) of the Customs Act Regarding Duty Drawback
The appellant argued that the goods were not permissible for export under Rule 3 of the Drawback Rules and that the market value was less than the duty drawback, which contravened Section 76(1)(b) of the Act. The CEGAT's interpretation of Section 113(d) and (c) was challenged, asserting that the show cause notice's contents were not properly analyzed. The Supreme Court referenced the case of Om Prakash Bhatia v. Commissioner of Customs, Delhi, emphasizing that no drawback is allowed if the market price of the goods is less than the drawback amount due.

Determination of the True Export Value of Goods under Section 14 of the Customs Act
The Supreme Court highlighted the importance of determining the true export value of goods as per Section 14 of the Customs Act, which should be read in conjunction with Section 2(41). The value should reflect the price at which such goods are ordinarily sold in international trade, where the seller and buyer have no business interests in each other, and the price is the sole consideration. The Court clarified that even if no duty is payable, the method for determining the value of goods under Section 14 should be followed to ascertain the true export value.

Conclusion
The Supreme Court found that the CEGAT had not considered the larger bench judgment's effect, which had the approval of the Court in the Om Prakash case. Therefore, the order of the CEGAT was set aside, and the matter was remitted back to the CEGAT (now known as the Customs, Excise, and Service Tax Appellate Tribunal) for fresh consideration, keeping in view the principles established in the Om Prakash case. The appeals were allowed to this extent, and similar cases were also remitted for fresh consideration by the CEGAT.