Legal principle

Section 113 authorises confiscation of only 'export goods' (section 2(19)) — once goods are exported they cease to be export goods and become exported goods — so penalties under sections 114 and 114AA cannot stand absent proof of confiscability and, for section 114AA, of knowledge or intent to use false documents.

Court decision

All three appeals were allowed and the impugned order was set aside with consequential relief: the drawback recovery from Dewar could not stand, and the penalties under sections 114 and 114AA on all three appellants were set aside.

Facts

M/s Dewar World Design Pvt Ltd, a garment design firm of Himalyani Gupta and her son Gaurav Gupta, wished to export sample garments (declared FOB value Rs 9.26 lakh, drawback claimed Rs 1,810) to a customer in the USA but had no GST registration, so freight forwarder Nitco Air Express filed shipping bills in the name of Hiba Enterprises using its IEC without Hiba's knowledge or consent. After investigation, the Additional Commissioner held the goods liable to confiscation under sections 113(i) and 113(ia), ordered recovery of the Rs 1,810 drawback with interest under sections 75/75A(2)/28AA and Drawback Rules, and imposed penalties of Rs 5,000 each on all three appellants under sections 114(iii) and 114AA. The Commissioner (Appeals) upheld the order, and the three appellants appealed to the Tribunal.

Key provisions

• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Section 50, Customs Act, 1962 — Entry of goods for exportation
• Section 125(1), Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 75A, Customs Act, 1962 — Interest on drawback
• Section 113(i), Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Rule 16, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Repayment of erroneous or excess payment of drawback and interest
• Section 114(iii), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Rule 17, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Power to relax