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2015 (1) TMI 1266 - AT - CustomsRecovery of amount of Drawback under Rule 16A of 1995 Rules - Sale proceeds of export not realised - Appellant realized the sale proceeds of exports through LCs and drawback was paid on the over-valued FOB of export revealed the market enquiry as well as and overseas enquiry. Also the importers were not engaged in export and import and preliminary payments received from 000 Business Kant in Russia were returned back to the said importer - Held that - as Revenue says that preliminary payments received from 000 Business Kant have gone back to the account of said concern but there was no enquiry made to ascertain whether any such payments were remitted by appellants only to that concern from India or any arrangement was made in that behalf. Therefore Rule 16A ibid cannot be invoked but the only rule can be invoked was Rule 16 of 1995 Rules. Confiscation of goods - Under Section 113(d) of Customs Act 1962 - Held that - relating to the exports under Debt Repayment Agreement with the erstwhile USSR export to third country was not allowed and exports were made to countries other than Russia. . Accordingly such exports were made in violation of the instructions issued by the DGFT under para 4.17 of the EXIM Policy 1997-2002 and Para 2.15 and 2.40 of EXIM Policy 2002-07 making the exported goods liable to confiscation under Section 113(d) of the Customs Act 1962 by virtue of Section 11 of the Foreign Trade (Development & Regulation) Act 1992 read with Section 3(2) & 3(3) of the Foreign Trade (Development & Regulation) Act 1992. There is also a violation of Rule 11(1) of the Foreign Trade (Regulation) Rules 1993. Therefore all these violations rendered the goods to be confiscated being the prohibited goods. Period of limitation - Absence of the limitation provisions in Rule 16/16A of 1995 Rules - No open ended litigation to perpetuate. It issued original Show Cause Notice on 27-3-2006 and the Addendum on 31-8-2006 for recovery of drawback relating to the period was 1-10-1999 to 10-10-2003 - Held that - by following the decision of Hon ble High Court of Gujarat in the case of Pratibha Syntex Ltd. v. Union of India 2013 (3) TMI 480 - GUJARAT HIGH COURT and the decision in the case of Padmini Exports Vs. Union of India 2013 (1) TMI 282 - GUJARAT HIGH COURT that drawback erroneously paid being recoverable through Rule 16 of 1995 Rules and there is no prescription of any reasonable period the proceeding is time barred when show cause notice was issued after a reasonable period. Therefore the Show Cause Notice issued on 27-3-2006 does not appear to be beyond a reasonable period results in not time-barred. Imposition of penalty - Held that - so far as imposition of penalty is concerned mens rea plays a vital role to determine quantum thereof. Therefore the penalties imposed by the adjudication without stating any reason as to imposition and determination of quantum thereof appears to be disproportionate in existence of conflicting evidence on record. - Decided in favour of appellant
Issues involved:
1. Jurisdiction of DRI to issue show cause notice. 2. Applicability of RBI Circulars No. 4 and No. 5. 3. Alleged non-supply of non-relied upon documents (NRUDs). 4. Alleged denial of cross-examination. 5. Alleged overvaluation of export goods. 6. Alleged return of advance payments to Russian importers. 7. Confiscation and imposition of redemption fine. 8. Limitation period for issuing show cause notice. 9. Imposition of penalties. Detailed Analysis: 1. Jurisdiction of DRI to issue show cause notice: The Tribunal examined whether the Additional Director General of DRI was a "proper officer" under Section 2(34) of the Customs Act, 1962. It was concluded that only officers specifically assigned functions by the Board or Commissioner of Customs could be considered "proper officers." The Tribunal found that DRI officers were not specifically assigned functions under Rule 16 of the Drawback Rules, 1995, making the show cause notice issued by DRI officials without jurisdiction. This was supported by the Supreme Court's decision in Syed Ali, which emphasized specific assignment of functions to be a proper officer. 2. Applicability of RBI Circulars No. 4 and No. 5: The Tribunal concluded that Circular No. 4, dated 19-5-1999, was applicable to the appellants' exports, as these were outright sales and not consignment-based exports. Circular No. 5, dated 31-5-1999, was found to be inapplicable as it dealt with consignment-based exports of tea and tobacco, not garments. The adjudication based on Circular No. 5 was deemed erroneous. 3. Alleged non-supply of non-relied upon documents (NRUDs): The Tribunal found that the non-supply of NRUDs violated principles of natural justice. The appellants were entitled to these documents to prepare their defense. The Tribunal noted that the documents were not returned to the appellants, as evidenced by their interim reply to the show cause notice. 4. Alleged denial of cross-examination: The Tribunal held that denying cross-examination of authors of statements and market reports violated principles of natural justice. The appellants' right to cross-examine was essential for a fair trial, and the denial of this right caused prejudice to the appellants. 5. Alleged overvaluation of export goods: The Tribunal noted that the adjudicating authority did not objectively examine market enquiry reports or contemporaneous evidence provided by the appellants. The Tribunal emphasized that overvaluation should be determined based on the procedure prescribed under Section 14(1) of the Customs Act and the Valuation Rules, 1988. The lack of objective examination and denial of cross-examination led to a violation of natural justice. 6. Alleged return of advance payments to Russian importers: The Tribunal found no evidence to support the allegation that advance payments received from "000 Business Kant" were returned. There was no enquiry made with RBI or FEMA authorities to ascertain remittance particulars. The Tribunal held that the burden of proof was on the Revenue to establish the return of advance payments, which was not discharged. 7. Confiscation and imposition of redemption fine: The Tribunal held that the goods were not available for confiscation, making the imposition of redemption fine unjustified. The Tribunal relied on the Larger Bench decision in Shiv Kripa Ispat Pvt. Ltd. and other cases, which held that redemption fine is not imposable when goods are not available for confiscation. 8. Limitation period for issuing show cause notice: The Tribunal concluded that the show cause notice issued on 27-3-2006 for recovery of drawback relating to the period 1-10-1999 to 10-10-2003 was not beyond a reasonable period. The Tribunal relied on the Supreme Court's decisions in Citedal Fine Pharmaceuticals and Raghuvar (India) Ltd., which held that in the absence of a prescribed limitation period, actions should be taken within a reasonable period. 9. Imposition of penalties: The Tribunal found that penalties were imposed mechanically without considering mens rea or providing reasons for the quantum of penalties. The Tribunal emphasized that penalties should be proportionate and based on cogent evidence, which was lacking in this case. Conclusion: The Tribunal allowed all the appeals, finding that the adjudication suffered from jurisdictional errors, violations of natural justice, and lack of objective examination of evidence. The confiscation and penalties imposed were set aside, and the appellants were entitled to the drawback claimed.
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