WRONG EXCESS CLAIM OF DUTY DRAWBACK – PLEA OF INADVERTANCE WILL NOT HELP TO ESCAPE FROM PENALTY

A Shipper has claimed Drawback of 7.2% instead of 1% by applying wrong HS code and duty drawback code during year 2011. During 2012 through an Order-in-Original Customs authorities were confiscated the goods under Section 113 of the Customs Act, 1962 on the ground of miscalculation on the entry number on the Drawback Schedule, with an option to redeem the same on payment of a redemption fine of ₹ 75,000/- under Section 125 of the Customs Act. A penalty of ₹ 80,000/- was also imposed under Section 114(iii) of the Customs Act. i.e Confiscation order issued post shipment and goods not physically available

On appeal, the Commissioner of Customs and Central Excise (Appeals), placed reliance on a judgment of the Hon'ble Supreme Court in the case of Commissioner of Customs Vs. Finesse Corporation Inc., reported in 2010 (255) E.L.T. A120 (SC)  held that since the consignment has already been exported and not available for confiscation or redemption, the confiscation order and optional redemption is unsustainable and accordingly, the confiscation and the option of redemption, were set aside. However, the Appellate Authority had found that the petitioner had mis-declared the drawback in serial number with an intention to claim ineligible drawback amount and therefore, confirmed the penalty imposed under Section 114(iii) of the Customs Act.

The Shipper has challenged penalty by way of writ petition before Madras High Court. Let us see Hon’ble Madras High Court important observations ;

When the exporter had admitted of having wrongly quoted the DBK code for the goods and thereafter rectified it itself would amount to misclassification and thereby attempted to export the goods improperly. A mere plea of 'inadvertence' may not absolve the petitioner and grant them immunity from penalty. The discretion of levying penalty is always available with the Statutory Authority under Section 114, whenever such an Authority is of the view that an attempt to export the goods are in such a nature that the goods would be liable to be confiscated under Section 113. Since the Original Authority was of the opinion that the petitioner attempted to export the goods through misclassification, this Court is of the view that the Authority was justified in levying the penalty

The confiscation order, with an option to redeem on payment of redemption fine, was set aside by the Appellate Authority only on the ground that the goods, since already exported, were not available for confiscation and therefore, the confiscation order is bad in law. It was not the finding of the Appellate Authority that the petitioner had not attempted to export the goods improperly. Hence, a mere setting aside of the confiscation order and the option of redemption, will not entitle the exporter to escape his liability from penalty.

M/S. R.S. GRAPHICS VERSUS THE REVISIONARY AUTHORITY AND JOINT SECRETARY TO THE GOVT. OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, MADRAS HIGH COURT, decided on 29.10.2020

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