2025-VIL-1834-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs – Section 114 of Customs Act, 1962 – Rule 16A of Customs and Central Excise Duties and Service Tax Drawback Rules, 1995 – Export of readymade garments – Allegation of fraudulent exports – Recovery of drawback – Appellant had exported readymade garments by availing benefit of Drawback scheme and drawback was paid to it – Investigation conducted by Income Tax Department revealed that Appellant was involved in fraudulent exports – After further investigation, Commissioner ordered for recovery of Drawback paid to Appellant under Rule 16A of the Rules and imposed penalty under Section 114 of the Act – Whether order of recovery of drawback under Rule 16A of the Rules is sustainable – HELD – First assertion of department is that Appellant had claimed drawback as a manufacturer exporter, but no manufacturing activity was ever carried out at its premises. On verification by officers, no manufacturing activity had ever been carried out at premises of Appellant. No evidence had been placed by Appellant to show that it was actually a manufacturer and had not mis-declared itself as manufacturer exporter. To be eligible for drawback, remittance must be for exported goods. There were at least four remittances recorded in impugned order had no relation to exports. Fact that above remittances were from persons not connected with garments exported had not been denied by Appellant. Order of recovery of drawback under Rule 16A of the Rules is sustained – Appeal partly allowed - Imposition of penalty – Whether penalty under Section 114 of the Act imposed on Appellant is sustainable – HELD – Penalty under Section 114 of the Act can be imposed for acts or omissions which render export goods liable to confiscation under Section 113 of the Act. Impugned order did not confiscate goods under Section 113 of the Act nor did it hold that any goods were liable to confiscation and hence, penalty cannot be imposed under Section 114 of the Act. Penalty imposed under Section 114 of the Act is set aside.
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