Proceedings Under Rule 16/16A Drawback Rules Are Merely Execution Proceedings; Cannot Modify Value In Shipping Bills: CESTAT

Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) stated that the proceedings to recover the drawback under Rules 16/16A of the Drawback Rules are in the nature of execution proceedings, and they cannot be used to modify the value or any other parameter in the Shipping Bills.

In this case, the assessee/appellant is an exporter. It had exported garments of declared FOB value of Rs. 1,06,84,417/- on 24.10.2009 and claimed drawback as applicable and was also granted drawback accordingly.

Thereafter, DGRI initiated an investigation and concluded that the goods were over-invoiced with a view to availing an ineligible drawback.

DRI concluded that the exported garments were actually of inferior quality and they were exported by over-invoicing to avail ineligible drawback.

The Joint Commissioner issued a Show Cause Notice to the assessee. The Additional Commissioner passed the OIO confiscating the goods exported by 8 shipping bills under section 113 (d) and 113 (i) read with section 50 of the Customs Act, 1962.

Since the goods had already been exported and were not available, he did not impose any redemption fine. He also ordered recovery of the drawback under Rule 16 of the Customs and Central Excise Duties Drawback Rules, 1995, along with interest and imposed penalties on the appellant under section 114 (iii) and 114AA of the Customs Act, 1962.

The assessee submitted that Rule 16 of the Drawback Rules provides for recovery of wrongly paid drawback, while Rule 16A provides for recovery of the drawback if export proceeds were not realised. In this case, the drawback was paid as per the Shipping Bills cleared by the customs authorities and the export proceeds were realised and BRCs were issued by the bank. Therefore, no recovery of the drawback could be made.

The revenue submitted that the appellant had bought cheap, inferior goods in the local market and exported them, indicating highly inflated prices in the Shipping Bills to avail ineligible drawback. The drawback availed is recoverable under Rules 16 and 16A of the drawback Rules, along with interest. The exported goods were liable to confiscation under Section 113 and, as they were no longer available, no redemption fine was imposed.

As per the Tribunal once the goods have been exported after processing and assessment of the Shipping Bill, the assessment can only be modified through one of the five methods available in the Act viz., an appeal to Commissioner (Appeals) under section 128, a demand of duty through a notice under section 28, finalization of provisional assessment under section 18, amendment of documents under section 149 or correction of errors under section 154. Each of these methods has limitations and will not apply in every case. The shipping bills disputed in this appeal were not modified through any of these methods.

The bench observed that since the BRCs have been issued by the bank in respect of the invoices and they were not modified or withdrawn by the bank, it must be accepted that the remittances have been received as per the invoices. Therefore, no recovery of drawback under Rules 16/16A can be done in this case.

Goods which have already been exported are not 'export goods' and hence they cannot be confiscated under section 113, added the Tribunal.

In view of the above, the Tribunal allowed the appeal and held that no penalty can be imposed under Section 114.

Case Title: M/s Simran Exports v. Commissioner of Customs (Export), New Delhi

Case Number: CUSTOMS APPEAL NO. 50268 OF 2021

Counsel for Appellant/ Assessee: Ms. Garima Agarwal

Counsel for Respondent/ Department: Shri Shiv Shankar

Click Here To Read/Download The Order