2008 (4) TMI 151 - AT - Customs

Draw back Rules is not subject to Customs Act so there is no time limit for the recovery of the erroneously paid drawback - Heading (7323) which cover steel items will also cover stainless steel items unless otherwise specified so stainless steel items are eligible for drawback only under heading 7323, not u/h 8215 items which are not used for handling food/drink are not classifiable u/h 8215 for drawback Spoons, tongs or table ware items are classifiable u/sh 821501 of DBK schedule

Issues Involved:
1. Classification of Exported Goods
2. Applicability of Drawback Rates
3. Recovery of Erroneously Paid Drawback
4. Imposition of Redemption Fine
5. Imposition of Penalty

Detailed Analysis:

1. Classification of Exported Goods:
The primary issue was whether the exported stainless steel kitchenware and tableware should be classified under Heading 7323 or 8215 of the Drawback Schedule. The appellants argued that their products, being stainless steel, should fall under Heading 821501, which covers stainless steel items. However, the tribunal found that stainless steel is a type of steel and thus can be included under Heading 7323, which covers articles of iron or steel. The tribunal applied the doctrine of ejusdem generis, concluding that items like spoons and forks (food/drink handling articles) fall under Heading 8215, while items like jars and plates (food/drink storing articles) fall under Heading 7323.

2. Applicability of Drawback Rates:
The appellants contended that the higher drawback rate under Heading 821501 should apply to their stainless steel products. However, the tribunal held that only specific items listed under Heading 8215, such as spoons and forks, are eligible for the higher rate. Other items like jugs and plates, being storage articles, should be classified under Heading 732303, which has a lower drawback rate.

3. Recovery of Erroneously Paid Drawback:
The tribunal addressed whether the recovery of erroneously paid drawback was time-barred under Section 28 of the Customs Act. It was concluded that Rule 16 of the Drawback Rules, which governs the recovery of such amounts, does not prescribe a time limit and is not subject to Section 28 of the Customs Act. The tribunal relied on the Supreme Court decision in CCE, Jaipur v. Raghuvar (India) Ltd., which held that specific rules like Rule 16 are not subject to general provisions of the Act regarding time limits.

4. Imposition of Redemption Fine:
The tribunal found that imposing a redemption fine was not justified as the goods had already been exported and were not available for confiscation. Citing various case laws, it was held that redemption fines cannot be imposed when the goods are not available.

5. Imposition of Penalty:
The tribunal set aside the penalties imposed on the appellants under Section 114 of the Customs Act, finding no evidence of contumacious conduct or willful misdeclaration. The appellants had a bona fide belief that their stainless steel goods were eligible for the higher drawback rate under Heading 8215. The tribunal referenced the Supreme Court ruling in Hindustan Steel v. State of Orissa, which states that penalties should not be imposed for technical or venial breaches of legal provisions.

Conclusion:
The tribunal upheld the recovery of the excess drawback amount of Rs. 45,36,349/- with interest but set aside the redemption fine and penalties imposed on the appellants. The goods were correctly classified under Heading 732303 for items like jugs and plates, while items like spoons and forks fell under Heading 821501. The tribunal emphasized that Rule 16 of the Drawback Rules does not prescribe a time limit for recovery, and thus, the recovery was not time-barred.

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