2016 (4) TMI 406 - AT - Customs

Disallowance of drawback claim - Exporter of bicycle parts to Iran, Tehran and Egypt - Jurisdiction - Whether DRI officer is a proper officer to issue show cause notice - recovery of erroneously granted excess draw back in terms of Rule 16 - Held that - as per circular, show cause notices are required to be issued in terms of provisions of Rule 16 of the Customs, Central Excise Duties and Service Tax Draw back Rules, 1995 within the monetary limit laid down in the said circular, before any recovery can be initiated. As such, though there is lacuna in the said Rule 16 inasmuch as the same does not specifically provide for issuance of show cause notice and only refers to the demand made by the proper officer, but the said demand has to be made by the Proper Officer by way of issuance of show cause notice, as per the understanding of the Board also in the relevant portion of the Circular No. 24/11-Cus. By applying the ratio of law, declared by the Hon ble Supreme Court in the case of Commissioner of Customs vs. Syed Ali 2011 (2) TMI 5 - Supreme Court and subsequently followed by various other High Court, it has to be held that DRI officer was not the proper officer for issuance of show cause notice for the purpose of demand of allegedly erroneously granted excess draw back. Therefore, the show cause notice having been issued by ADG, DRI Delhi, is without jurisdiction and consequently the impugned order become void ab initio and cannot be upheld. The same is liable to be set aside on the ground of jurisdiction itself. Merits - Mis-declaration of goods - Value of goods as also port of discharge are contrary to even the procedure adopted by the Customs authorities - As per report of Consulate General of India at Dubai, only small fraction of iron was auctioned by Dubai DHS 31000 equivalent to ₹ 3,10,000/- - Revenue alleged that goods are overvalued as the goods have been examined at the end of supplier also, therefore, it cannot be alleged that goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods. Held that - It was also found that out of 3 merchants/financiers only one company was not found at the address. Further it is found that the Revenue is heavily relied on the statement of Shri Navdeep Goyal representative of shipping agency but he was not made available for cross examination. Therefore, the said statement cannot be relied on. During the course of investigation, it was found that the appellant exported bicycles parts which were procured from various suppliers who processed the bicycles parts. There is no single evidence on record to show that the appellant has manufactured/ used sub-standard raw materials and all the suppliers have admitted that they have provided goods to the appellants. The appellant is a regular supplier/exported various other consignments of bicycles parts of similar nature. No departmental officers were alleged that having conspiracy with the appellants and there is verification report is on record. Therefore, in the absence of any supportive evidence except the report from the Consulate General of India at Dubai which is also not conclusive. In the absence of any such supportive evidence, it cannot be alleged that the appellant has availed excess drawback claim erroneously. Therefore, the demand is set aside on merits. - Decided in favour of appellant with consequential relief

Summary

Issues Involved:
1. Jurisdiction of ADG, DRI to issue show cause notice.
2. Merits of the case regarding the fraudulent export and draw back claims.

Issue-wise Detailed Analysis:

1. Jurisdiction of ADG, DRI to Issue Show Cause Notice:

The primary issue raised by the appellant was the jurisdiction of the ADG, DRI to issue the show cause notice. The relevant legal provision was Rule 16 of the Customs and Central Excise Duty Drawback Rules, 1995, which stipulates that recovery of any erroneous or excess payment of duty drawback must be demanded by a "proper officer" of Customs. The term "proper officer" is defined under Section 2(34) of the Customs Act, 1962, as an officer of Customs assigned specific functions by the Board or the Commissioner of Customs.

The appellant cited the Supreme Court decision in *Commissioner of Customs vs. Syed Ali* (2011), which held that only officers specifically assigned the function of assessment and reassessment of duty in the jurisdictional area where the import occurred could issue notices under Section 28 of the Customs Act. This decision was followed by various High Courts, including the Punjab and Haryana High Court in *Era International vs. Union of India* and the Andhra Pradesh High Court in *Sree Enterprises vs. CC*, which held that DRI officers were not proper officers for issuing show cause notices.

The Tribunal noted that although the Government of India issued Notification No. 41/11-Cus (NT) dated 6.7.11, conferring jurisdiction retrospectively on DRI officers for the purpose of Section 28 of the Customs Act, no such amendment was made concerning Rule 16 of the Drawback Rules. The Tribunal concluded that the DRI officer was not the proper officer for issuing the show cause notice under Rule 16, rendering the notice and subsequent impugned order void ab initio.

2. Merits of the Case Regarding the Fraudulent Export and Draw Back Claims:

Despite setting aside the order on jurisdictional grounds, the Tribunal also examined the merits of the case. The revenue's case was based on the overseas report from the Consulate General of India at Dubai and the statement of Shri Navdeep Goyal, Manager of the concerned shipping line. The investigation revealed discrepancies in the bills of lading, indicating that the goods were shipped to Dubai instead of the declared destinations like Tehran or Egypt. The goods were auctioned at Dubai for a meager amount, suggesting overvaluation to claim higher drawback.

However, the Tribunal found that the statement of Shri Navdeep Goyal lacked evidentiary value as he was not in charge during the relevant period and did not appear for cross-examination. The Tribunal also noted that the goods were examined and found correct by Customs officers at the port of shipment, and no discrepancies were detected.

The Tribunal further observed that the appellants were regular exporters of bicycle parts, and no complaints were received from buyers or Customs authorities in the past. The suppliers of raw materials confirmed the supply of goods to the appellants, and the realization of sale proceeds through proper banking channels was evidenced by bank certificates. The Tribunal concluded that the revenue's allegations of exporting sub-standard goods and misdeclaration were not substantiated by evidence.

Separate Judgments:

The Tribunal delivered separate judgments by its members. One member (Judicial) set aside the impugned order on both jurisdictional and merit grounds, while the other member (Technical) upheld the order on merits but not on jurisdiction. The third member (Technical) agreed with the Judicial member on the jurisdiction issue and on merits, leading to the final order setting aside the impugned order and allowing the appeals with consequential relief.