Legal principle

Where the repealing 2017 Drawback Rules contain a specific saving provision in rule 20(2), section 159A of the Customs Act does not apply, and recovery of drawback under rule 16 or 16A of the repealed 1995 Rules cannot be initiated after 01.10.2017 in respect of claims filed and sanctioned before that date.

Court decision

Both appeals were allowed and the Commissioner's order dated 15.11.2023 was set aside: recovery of drawback under rule 16 and rule 16A of the 1995 Drawback Rules was held bad in law, the goods could not be confiscated under section 113, penalties under sections 114 and 114AA on the firm and on partner Ashfaq Anwar Nursumar could not be sustained, and the All Industry Rate drawback could not be denied on the basis of the alleged fake invoices or the section 108 statement.

Facts

M/s Haji's International, a partnership firm, exported garments (mainly to Nigeria) under 699 shipping bills between January 2012 and December 2016, claiming duty drawback at the All Industry Rate under section 75 of the Customs Act read with rule 3 of the 1995 Drawback Rules, and received Rs. 773.86 lakhs, plus Rs. 2,24,93,070 disbursed under rule 16A on 198 shipping bills. Based on a DRI statement of Suhel Parvez Ansari alleging supply of fake procurement invoices, the department issued a show cause notice dated 14.12.2022 seeking recovery of the drawback under rule 16 of the 1995 Rules (the Rs. 2,24,93,070 portion for alleged non-realization of foreign exchange), confiscation of goods, and penalties on the firm and its partner Ashfaq Anwar Nursumar under sections 114(i)/(iii) and 114AA. The Commissioner, by order dated 15.11.2023, confirmed the recovery, confiscated the goods with a redemption fine option, and imposed penalties on both appellants.

Key provisions

• Section 159A, Customs Act, 1962 — Effect of amendments etc of rules regulations, notifications or orders
• Rule 20(2), Customs and Central Excise Duties Drawback Rules, 2017 — Repeal and saving
• Rule 16, Customs and Central Excise Duties Drawback Rules, 2017 — Supplementary claim
• Rule 16, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Repayment of erroneous or excess payment of drawback and interest
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 114(i), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Section 142(1), Customs Act, 1962 — Recovery of sums due to Government
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 113, Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 138B, Customs Act, 1962 — Relevancy of statements under certain circumstances