2016 (5) TMI 1192 - AT - Customs

Jurisdiction - Whether the show-cause notice issued by DRI for recovery of erroneously granted drawback in terms of Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 can be held valid show-cause notice - Held that - in the case of Era International v. Union of India 2011 (8) TMI 885 - Punjab and Haryana High Court wherein the Hon ble Punjab and Haryana High Court following the decision in the case of CC Vs. Sayed Ali 2011 (2) TMI 5 - Supreme Court has held that the preventive office cannot be the proper officer for issuance of show-cause notice to seize the goods. As no such amendment was made under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 in respect of issuance of show-cause notice. In fact, the amendment dated 6.7.2011 was made only in section 28 was retrospective with effect from 16.9.2011 and the circular CBEC dated 31.5.2011 was only for the amendment limited for proper officer under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995. The said circular did not consider that the DRI officers are to be the proper officers under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 but as no retrospective amendment carried out in the said rule so far as conformation of jurisdiction by DRI officers for issuance of show-cause notice is concerned, therefore, the DRI officers have no jurisdiction to issue show-cause notice for recovery of erroneously drawback claim under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995. Demand of duty and imposition of penalty - Section 114 of the Customs Act, 1962 - - Fraudulent export of bicycle parts under export execution (sic promotion) scheme like drawback DEPB etc. - Availed excess drawback claim erroneously - Held that - the impugned goods was examined at the port of shipment and no single discrepancy was detected in regard to description, quality, quantity or value of the goods. All the consignments were examined found to be correct and the goods were assessed, thereafter let export order was issued. Further, it is found that no incriminating documents found by DRI during the course of search at the residence of various partners or the officers of the appellants. The only allegation against the appellant is that the Consulate General of India at Dubai has given report showing that only small fraction of iron was auctioned by Dubai DHS 31000 equivalent to ₹ 3,10,000/-. It was also found that out of 3 merchants/financiers only one company was not found at the address. The allegation of the Revenue is that the goods overvalued as the goods have been examined at the end of the supplier also. Therefore, it cannot be alleged that the goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods. I further find 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, I do agree for setting aside the demand on merits. - Decided in favour of appellant with consequential relief

Issues Involved:
1. Jurisdiction of ADG-DRI to issue the show-cause notice.
2. Merits of the case regarding the fraudulent claim of duty drawback.

Issue-wise Detailed Analysis:

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

The primary issue revolves around whether the Additional Director General (ADG) of the Directorate of Revenue Intelligence (DRI) had the proper jurisdiction to issue the show-cause notice under Rule 16 of the Customs and Central Excise Duty Drawback Rules, 1995. The appellants contended that the DRI was not the proper officer as defined under Section 2(34) of the Customs Act, 1962, which specifies that only officers assigned specific functions by the Board or Commissioner of Customs can be deemed proper officers. The judgment referenced the Supreme Court's decision in Commissioner of Customs v. Sayed Ali, which held that only officers assigned specific functions of assessment and reassessment of duty within their jurisdiction could issue such notices. The DRI officers were not retrospectively authorized under Rule 16, unlike the amendment made to Section 28 of the Customs Act. Consequently, the show-cause notice issued by the ADG-DRI was deemed without jurisdiction. This was reinforced by the CBEC Circular No. 24/2011-Cus, which did not recognize DRI officers as proper officers under Rule 16 for issuing show-cause notices.

2. Merits of the Case:

a. Examination and Export of Goods:
The goods in question, bicycle parts, were examined and cleared by Customs officers at the port of shipment, with no discrepancies found in terms of description, quality, quantity, or value. The appellants provided evidence of regular exports and no prior complaints. The goods were procured from various suppliers who confirmed their supply, and no incriminating documents were found during searches by the DRI.

b. Statements and Overseas Inquiry:
The case relied heavily on the statement of Shri Navdeep Goyal, a shipping line manager, who claimed discrepancies in the bills of lading. However, as he did not appear for cross-examination, his statement was not considered reliable. The Consulate General of India in Dubai reported that some consignments were auctioned for a meager amount, suggesting overvaluation. However, the appellants argued that the goods were routed through Dubai for transshipment and provided evidence of advance payments through proper banking channels, countering allegations of hawala transactions.

c. Allegations of Fraud:
The Revenue's case was based on the assumption that the goods were overvalued and abandoned in Dubai to claim higher drawbacks fraudulently. However, the appellants provided bank realization certificates and evidence of genuine transactions with overseas buyers. The investigation did not conclusively prove that the goods were substandard or junk, and the appellants' regular export history supported their defense.

Separate Judgments:

Member (Judicial):
The Member (Judicial) found the show-cause notice issued by the DRI without jurisdiction and set aside the order on this ground. Additionally, on merits, it was concluded that the Revenue failed to provide sufficient evidence to prove fraudulent claims of duty drawback, leading to the appeals being allowed.

Member (Technical):
The Member (Technical) disagreed, arguing that the DRI had jurisdiction based on Notification No. 17/2002-Cus (NT) and that the fraudulent nature of the transactions was evident from the investigation. The Member upheld the recovery of the drawback and penalties imposed.

Third Member (Judicial):
The Third Member (Judicial) agreed with the Member (Judicial) on both jurisdiction and merits, emphasizing that the DRI officers did not have the authority to issue the show-cause notice under Rule 16 and that the Revenue's case lacked sufficient evidence of fraud.

Conclusion:
In view of the majority order, the appeals were allowed on both jurisdictional grounds and merits, setting aside the impugned order and providing consequential relief to the appellants.

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