2003 (1) TMI 184 - AT - Customs

Summary

Issues Involved:
1. Entitlement to duty drawback for goods manufactured by 100% EOUs/EPZ Units.
2. Alleged fraudulent claim of duty drawback by M/s. LSLL.
3. Liability for confiscation of exported goods.
4. Recovery of duty drawback and imposition of interest.
5. Penal action against M/s. LSLL and associated entities.
6. Interpretation of relevant notifications and provisions of the Customs Act, 1962.

Summary:

1. Entitlement to Duty Drawback:
The primary issue was whether M/s. LSLL was entitled to duty drawback for goods manufactured by 100% EOUs/EPZ Units. The Tribunal found that the raw material supplier, M/s. LSLL, should be considered the manufacturer under Rule 4(3) of the Central Excise Rules, 2002. The Tribunal referred to a meeting chaired by the Commissioner of Customs, Bangalore, which confirmed that the owner of the goods (M/s. LSLL) should file the shipping bill and be eligible for the drawback. Therefore, the Tribunal rejected the Commissioner's findings and upheld the entitlement of M/s. LSLL to the duty drawback.

2. Alleged Fraudulent Claim:
The Show Cause Notice alleged that M/s. LSLL fraudulently claimed duty drawback without disclosing that the goods were manufactured by 100% EOUs/EPZ Units. The Tribunal found that the goods were correctly declared and the drawback amounts were rightfully sanctioned. The Tribunal did not uphold the Commissioner's finding of fraudulent claims.

3. Liability for Confiscation:
The Commissioner had ordered the confiscation of goods u/s 113(i) of the Customs Act, 1962, deeming them liable for confiscation as they were not physically available. The Tribunal found that M/s. LSLL was the owner, manufacturer, and exporter of the goods, and there was no requirement to declare the goods as manufactured by EOUs/EPZs. Therefore, the Tribunal did not uphold the liability for confiscation and the associated penalties u/s 114(iii).

4. Recovery of Duty Drawback and Imposition of Interest:
The Commissioner ordered the recovery of duty drawback along with interest, considering the payments erroneous. The Tribunal found that the drawback amounts were correctly sanctioned and paid by the proper officer, and thus, the recovery order was not sustainable.

5. Penal Action Against M/s. LSLL and Associated Entities:
Penalties were imposed on M/s. LSLL and M/s. LLIL u/s 114(iii) of the Customs Act, 1962. The Tribunal found that the penalties were uncalled for as the goods were correctly declared and exported. The Tribunal also noted that the denial of cross-examination of deponents by the Commissioner was not justified.

6. Interpretation of Relevant Notifications and Provisions:
The Tribunal examined the exclusion clauses of Notfn. No. 67/98-Cus. (NT) and 31/99-Cus. (NT) and found that the goods were not manufactured in a warehouse u/s 65 of the Customs Act, 1962. The Tribunal concluded that the goods were not covered by the exclusion clauses and upheld the entitlement of M/s. LSLL to the duty drawback.

Conclusion:
The Tribunal set aside the entire order of the Commissioner, including the recovery of duty drawback with interest and the penalties imposed on M/s. LSLL and M/s. LLIL. The appeals were allowed with consequential benefits.