2019 (10) TMI 458 - AT - Customs

Duty Drawback - classification of goods in the drawback schedule - export of goods - PV Suitings along with woven fabrics of synthetic staple fibre containing 85% or more by weight of synthetic staple fibre - whether the goods exported by the appellant will fall under Sl No 551202A of the Drawback Schedule or under 551502A? HELD THAT - From the plain reading of the two entries it is quite evident that for the goods to fall under heading No 551202A they should contain by weight 85% or more of synthetic staple fibres and for classification under 551502A they should contain 85% or more of manmade staple fibre. Chapter Note 1 to Chapter 54 of the Schedule to Customs Tariff Act 1975 - the manmade fibres include both artificial and synthetic fibres. However for the classification purpose distinction has been made artificial fibres and synthetic fibres . Hence the above referred entries of Drawback Schedule when use the phrases synthetic staple fibre and manmade fibre they definitely refer to the distinction between the synthetic and artificial fibres. Confiscation - redemption fine - HELD THAT - Since the goods have been held liable for confiscation under Section 113(h)(i) of the Customs Act 1962 penalty under Section 114 of the Customs Act 1962 is justifiable. From plain reading of the section 114 reproduced below it is evident that penalty under the said section is impossible in respect of the goods held liable for confiscation and it has nothing to do with the actual confiscation of the goods. The goods have been misdeclared by describing them in a manner to avail excess drawback the goods were liable for confiscation and hence the appellants who were responsible for making such incorrect declaration liable to penalty. Confiscation and redemption fine set aside - other parts upheld - appeal allowed in part.

Issues Involved:
1. Classification of exported goods under the Drawback Schedule.
2. Recovery of excess drawback claimed.
3. Appropriation of deposited differential drawback amount.
4. Recovery of interest on the differential drawback amount.
5. Confiscation of goods cleared under incorrect drawback claim.
6. Imposition of penalties on the exporter and its director.

Issue-wise Detailed Analysis:

1. Classification of Exported Goods under the Drawback Schedule:
The primary issue was whether the exported goods should be classified under Sl No 551202A or 551502A of the Drawback Schedule. The appellant claimed drawback under Sl No 551202A for "Dyed Woven fabrics of synthetic staple fibres, containing 85% or more by weight of synthetic staple fibres." However, investigations revealed that the goods contained a blend of polyester and viscose (65/35, 69/31, 70/30), which should be classified under Sl No 551502A for "Other woven fabrics of synthetic staple fibres, containing 85% or more by weight of manmade staple fibre and/or manmade filament yarn (grey)." The distinction between synthetic and artificial fibres was crucial, with polyester classified as synthetic and viscose as artificial. The tribunal upheld the revenue's classification under Sl No 551502A based on material evidence, including procurement records and loom cards, which showed that the exported woven fabrics contained less than 85% synthetic staple fibres.

2. Recovery of Excess Drawback Claimed:
The Commissioner ordered the recovery of the differential drawback amount of Rs. 10,33,516/- claimed in excess by the exporter under Rule 16 of the Customs, Central Excise and Service Tax Drawback Rules, 1995. The tribunal upheld this recovery, noting that the appellants had misdeclared the goods to claim a higher drawback rate under Sl No 551202A instead of the correct Sl No 551502A.

3. Appropriation of Deposited Differential Drawback Amount:
The Commissioner ordered the appropriation of the differential drawback amount of Rs. 9,92,544/- deposited by the exporter during the investigation. The tribunal found this appropriation justified as it was part of the excess drawback amount claimed by the appellants.

4. Recovery of Interest on the Differential Drawback Amount:
The tribunal upheld the recovery of interest on the differential drawback amount from the date of disbursement to the date of payment under Section 75A of the Customs Act, 1962. This decision was supported by precedents, including the case of P V Vikhe Patil SSK, which emphasized that interest on duty evaded is compulsory, even if the evasion was not intentional.

5. Confiscation of Goods Cleared Under Incorrect Drawback Claim:
The Commissioner ordered the confiscation of polyester viscose blended woven fabrics amounting to Rs. 9,74,45,269/- cleared under the incorrect drawback claim, with an option to redeem the goods on payment of a redemption fine of Rs. 1,00,000/-. However, the tribunal set aside the order of confiscation and redemption fine, relying on the decision in Shiv Kripa Ispat Pvt Ltd, which held that goods not available for confiscation or released without bond/security cannot be confiscated.

6. Imposition of Penalties on the Exporter and Its Director:
The Commissioner imposed a penalty of Rs. 1,00,000/- each on the exporter and its director under Section 114(ii) of the Customs Act, 1962. The tribunal upheld these penalties, stating that the goods were liable for confiscation due to misdeclaration, and the appellants were responsible for making incorrect declarations to avail excess drawback.

Conclusion:
The tribunal modified the impugned order to the extent of setting aside the confiscation of goods and the imposition of redemption fine. However, it upheld the classification under Sl No 551502A, recovery of excess drawback, appropriation of deposited amount, recovery of interest, and imposition of penalties. The appeals were dismissed with the modifications as stated.

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