Legal principle

Where DGFT has issued export incentive licences that remain valid and uncancelled, customs cannot use Section 28AAA to recover duty by disputing the SION classification that DGFT accepted, and an exporter may choose the more beneficial of two applicable entries.

Court decision

The Gujarat High Court dismissed the Revenue's appeal, holding that no substantial question of law arose. The CESTAT order setting aside the duty demand of Rs. 4,09,01,859, the confiscation and the penalties stands. The question of customs' power under Section 28AAA was kept open, as noted in Bharat Rasayan.

Facts

Sanstar Bio Polymers Ltd exported 'Liquid Glucose Concentrate (Food Grade)' between February 2015 and July 2016 and claimed Duty Free Import Authorisation (DFIA, a licence to import inputs duty free) by declaring 'Maize (Corn) Starch' as the input under SION (Standard Input Output Norms) Entry E22. DGFT Ahmedabad issued 7 DFIAs, which were sold to others who used them. DRI said the real input was raw maize under SION E76, since powdered starch was never used. A show cause notice of 30.12.2016 demanded duty forgone of Rs. 4,09,01,859 under Section 28AAA, with confiscation under Section 113(i) and penalty under Section 114(iii). The order of 31.01.2018 confirmed this, but CESTAT Ahmedabad set it aside on 07.12.2022. Customs appealed to the Gujarat High Court under Section 130.

Key provisions

• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases