2018 (8) TMI 1940 - CGOVT - Customs

Recovery of Duty Drawback - Section 74 of Customs Act, 1962 - claim rejected mainly on the ground that they had re-exported the imported goods after few days of importation, the padlocks are used by customers for years and it was not possible that 7.5 lakh locks could be re-exported by the applicant after collecting from so many customers - HELD THAT - The re-export of the imported brass padlocks is not disputed by the Revenue authorities and the recovery of duty drawback is ordered by the original authority and upheld by the first appellate authority merely for the reason that the applicant did not produce any evidence to establish that they had not used these goods prior to re-export thereof. However, no such objection had been raised earlier by the original sanctioning authority and instead the drawback amount had been granted on being satisfied about the admissibility of drawback of duty to the applicant. The reason for re-examining this issue later on is not revealed in the order-in-original and if the respondent had any doubt regarding use of the imported goods before re-exporting the same the onus was on the Revenue authorities to establish that the imported goods were not re-exported as such. But no such evidence has been mentioned in both order-in-original as well as order-in-appeal. Instead, the entire case has been decided at the lower level on the ground that the applicant could not produce any evidence to prove that the imported goods were not used by them prior to re-export thereof. The doubt of the Revenue authorities regarding use of the padlocks is not even supported by the Appraiser and the Assistant Commissioner of Customs in their reports who had examined the goods at the time of re-export. Even the reasoning given by the applicant that it was not possible to use the 7.5 lakh locks in a period of 12 days to 60 days and collect the same from the customers for re-export sounds fully convincing. Revision allowed.

Summary

Issues:
1. Recovery of duty drawback under Section 74 of Customs Act, 1962
2. Lack of evidence regarding non-use of imported goods before re-export
3. Jurisdictional authority to issue recovery order

Analysis:

Issue 1: Recovery of duty drawback under Section 74 of Customs Act, 1962
The case involved the applicant importing brass padlocks and subsequently re-exporting them, claiming duty drawback under Section 74 of the Customs Act, 1962. The Deputy Commissioner of Customs initially allowed the drawback, but a show cause notice was later issued for recovery of duty drawback amounting to ?3,46,711 along with interest. The recovery was based on the lack of evidence provided by the applicant to establish that the imported goods had not been used before re-export. The Government observed that the re-export of the goods was not disputed, and the recovery was ordered solely due to the absence of evidence regarding non-use of the goods prior to re-export.

Issue 2: Lack of evidence regarding non-use of imported goods before re-export
The revision application contended that it was not feasible for the applicant to re-export 7.5 lakh locks after using them, as claimed by the Revenue authorities. The applicant argued that the goods were checked by Customs officials before re-export, and no discrepancies were found. The Government found merit in the applicant's argument, highlighting that the Revenue authorities failed to provide evidence supporting their doubt regarding the use of the padlocks before re-export. The lack of such evidence raised questions about the basis for the recovery order and the decision-making process at the lower levels.

Issue 3: Jurisdictional authority to issue recovery order
The Government noted that the recovery action was taken without challenging the initial sanctioning order of the Deputy Commissioner of Customs before the Commissioner (Appeals). It was emphasized that direct recovery orders issued by Assistant/Deputy Commissioners without setting aside the original sanctioning order through the appropriate appeal process were legally questionable. Such actions were deemed as reviewing their own orders, which was beyond their jurisdiction under the Customs Act, 1962. Consequently, the Government concluded that the order-in-appeal passed by the Commissioner (Appeals) was erroneous and set it aside, allowing the revision application.

In conclusion, the judgment highlighted the importance of providing evidence to support recovery actions, the need for proper jurisdictional procedures in issuing recovery orders, and the significance of thorough examination before upholding recovery decisions.