DRAW BACK RULES CANNOT OVERRIDE PROVISIONS OF CUSTOMS ACT, 1962

[Mr. M. GOVINDARAJAN]

     Draw back in relation to any goods manufactured in India and exported, means the  rebate of duty or tax, as the case may be, chargeable on any imported materials or excisable materials used on taxable services used as input services in the manufactured goods. A draw back may be allowed on the export of goods at such amount at such rate, as may be determined by the Central Government subject to the provisions Customs Act, 1962 and the rules made there under; the Central Excise Act, 1944 and the rules made there under and the Finance Act, 1994 and the rules made there under.

     Rule 16 of the Customs, Central Excise duties and Service Tax Draw Back Rules, 1995 provides for repayment of erroneous or excess payment of draw back and interest on demand by a proper officer of Customs.

     Rule 16A provides that where an amount of drawback has been paid to an exporter and if the exporter fails to produce evidence in respect of realization of export proceeds within the period allowed under the Foreign Exchange Management Act, 1999 or any extension of the said period by the Reserve Bank of India, the Assistant Commissioner or Deputy Commissioner of Customs, as the case may be, shall cause notice to be issued to the exporter for production of evidence of realization of export proceeds within a period of thirty days from the date of receipt of the said notice and where the employer does not produce such evidence within the said period of thirty days, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, shall pass an order to recover the amount of draw back paid to the claimant and the exporter shall repay the amount so demanded within thirty days of the receipt of the said order.

     As per Rule 16A only the Assistant Commissioner or Deputy Commissioner of Customs is having jurisdiction to adjudicate on the issue of draw back.   In 'Sun Knitwear Private Limited V. Commissioner of Customs (Adjudication), Mumbai' - 2007 TMI - 858 - Appellate Tribunal Bangalore show cause notice was issued by the Directorate of Revenue Intelligence (DRI) and the Commissioner (Customs) has adjudicated which was challenged by the appellants.

     The appellants received drawback.  The DRI investigations revealed that the appellant had not received the export proceeds within the period allowed.   Therefore show cause notices were issued under Rule 16/16A of the Customs and Central Excise Drawback Rules, 1965 for recovery of the draw back amounts. Penalties were also proposed.   The Commissioner of Customs passed the orders for recovery of drawback amounts.   However he dropped the penal proceedings.

     The appellants challenged the impugned orders of the Commissioner of Customs before the tribunal.  The appellants accepted that foreign remittances in respect of export proceeds have not been realized.   So they argued the cases only on the question of jurisdiction. The contention of the appellant is that Rule 16/16A provides for issue of show cause notices and adjudication only by the Assistant Commissioner of Customs.   In their cases, the DRI officers have issue the show cause notices.   They do not have jurisdiction in the matter.   Further the show cause notices issues were answerable to the Additional Commissioner.  But the Commissioner has adjudicated the cases.   As per the Draw back Rules, the Assistant Commissioner is adjudicate the cases.  The appellants cited five cases as below, which will be discussed in the latter part of this article:

§         M/s Raza Textiles Ltd., V. ITI - AIR 1973 TAX SC 1362;

§         Hukam Chand Shyam Lal V. Union of India & others - AIR 1976 SC 789;

§         Union of India V. Ram Narain Bishwanath - 1997 (96) EKT 224 (SC)l

§         Commissioner of Central Excise, Jaipur V. Alcobex Metals - 2003 (153) ELT 241 (SC);

§         Ramarain Bishwanath V. Commissioner of Customs, Calcutta - 1988 (34) ELT 202 (T)

     The Department contended that according to Sec. 5(2) of the Customs Act, 1962, the power is given to an officer to exercise the powers of his sub ordinates.  Therefore there is no infirmity in the Commissioner adjudicating the case.  It is further submitted that the DRI Officers have been empowered to act as officers of Customs by way of notification issued by the Central Government.

     The tribunal heard the submissions of both sides.  The tribunal analyzed the case laws cited by the appellants and made a comparison with the present case.   In 'M/s Raza Textiles Ltd., (Supra) the apex court has held that no authority, much less a quasi judicial authority can confer jurisdiction on itself by deciding on itself by deciding a jurisdictional fact wrongly.  The tribunal held that this cannot be applied to the present cases for the reason that DRI Officers have been empowered to act as Officers of Customs for the whole of India under Notification 17/2002-Cus (NT) dated 7.3.2002. It is not the case of the appellants that the DRI Officers have usurped the powers themselves.

     In 'Hukum Chand Shyam Lal' case (supra) the telephone connections of certain people were disconnected on account of the fact that the telephones were used to carry on forward trading which was illegal.  In that case, while interpreting Sec.5 of the Telegraph Act and rules 421 and 422 of the Telegraph Rules, the Apex Court observed, "It is settled law that where a power is required to be exercised by a certain authority in a certain way, it should be exercised in that manner or not at all, and all other modes of performance are necessarily forbidden.  It is all the more necessary to observe this rule where power is of a drastic nature and its exercise in a mode other than the one provided, will be violative of fundamental principles of natural justice.  The tribunal held that DRI has been given powers of the Customs Officer for the whole of India.   Just because the DRI issued show cause notice no prejudice is caused to the appellants and they cannot argue that principles of natural justice have been violated.   This is an absurd argument which totally ignores Notification No. 17/2002-Cus (N.T.).

     In 'Ramnarain Bishwanath' case (Supra) the goods were cleared from Bombay Port.   The Supreme Court held that it is the customs authorities at Bombay who have the jurisdiction to decide the valuation of the goods even though the goods were seized in another jurisdiction.   The tribunal held that this case has no applicability in the present case.

     In 'Alcobex Metals' case (supra) the Deputy Collector issued show cause notice under proviso to Sec. 11A when he had no jurisdiction to issue such a notice, because cases involving longer period could be decided only by the Collector.   In such circumstances, the Apex Court held that once the notice is issued under the proviso for longer period, it cannot be treated as notice under main Sec. 11A for shorter period of six months.   The tribunal held that this case will no applicability for the present case.

     In another case of 'Ramnarain Bhiswanath' case (supra) the goods were cleared by the proper officer in one Collectorate but were seized by the Proper Officer of another Collectorate.   The tribunal held that seizure and adjudication by authorities of the later Collectorate is without jurisdiction.   The said case involved interpretations of Customs Act.   The tribunal held that this case also had not application for the present case.

     As regards to the objection raised by the appellants for the Commissioner to adjudicate the case, it is seen that under Sec.5 (2) of the Customs Act, "An Officer of Customs may exercise the powers and discharge the duties conferred or imposed under the Act on any other Officer of Customs who is subordinate to him."  In view of the above provisions it is not illegal on the part of the Commissioner to adjudicate a case where the show cause notice was issued answerable to the Additional Commissioner.  The Assistant Commissioner is subordinate to the Commissioner.   The tribunal thus held that the Drawback Rules cannot override the provisions of the Customs Act.