2019 (3) TMI 1827 - Commission - Customs

Excess Duty Drawback claimed - misdeclaration of the Drawback Tariff Classification of the export goods - Ductile Iron Casting - period Oct 2011-Jan 2013 - demand alongwith interest and penalty - prosecution - HELD THAT - Investigations revealed that the applicant firm had resorted to mis declaration of Drawback Tariff Classification of the impugned goods under wrong Heading No. 7325 01 and 7325 10 with a drawback rate of 3%/2.4% instead of a specific Heading No. 7325 15 which has a rate of duty drawback of 2% of the FOB value in order to avail higher and ineligible duty drawback. Investigations culminated in the issuance of the instant SCN demanding ineligible Duty Drawback of Rs. 4, 19, 652/- pertaining to 72 Shipping Bills that were processed at Chennai Sea Port for the period 2011-12 along with interest of Rs. 38, 025/-. Further the SCN demanded ineligible Duty Drawback for 28 Shipping Bills processed at Chennai Sea Port from 4-2-2013 to 3-9-2013 amounting to Rs. 1, 05, 875/- along with interest of Rs. 1, 04, 819/-. Thus the total ineligible Duty Drawback worked out to Rs. 5, 25, 527/- (Rs. 4, 19, 652/- Rs. 1, 05, 875/-) and interest to the tune of Rs. 1, 42, 844/-. The applicant in their application admitted the entire ineligible Duty Drawback availed and paid the same along with applicable interest as demanded in the SCN. An amount of Rs. 4, 19, 653/- demanded in the SCN was proposed to be appropriated towards ineligible drawback from the amount of Rs. 6, 74, 159/- paid on 31-3-2013 in the SCN itself. The Revenue vide letter S. Misc. 18/2017-Drawback dated 2-1-2019 reported that the applicant paid an ineligible drawback of Rs. 1, 05, 875/- and interest of Rs. 1, 04, 819/- and Rs. 38, 025/- on 18-9-2018. Interest - HELD THAT - Interest @ 18% was calculated on Rs. 1, 05, 875/- in the impugned SCN from 4-2-2018 to 3-9-2018 only whereas the payment was made on 18-9-2018. The actual interest payable has to be worked out and paid by the applicant - the Bench is of the view that the applicant has made full and complete disclosure of the duty liability before the Bench co-operated with the investigation and discharged their duty liability as confirmed by the Revenue. Accordingly the Bench considers it as a fit case to settle Duty Drawback at Rs. 5, 25, 527/- along with applicable interest. Penalty - HELD THAT - The applicant had knowingly contravened the Provisions laid down in Section 75 of the Customs Act 1962 read with relevant Drawback Rules issued by the Government of India in this behalf. It is worth mentioning here that the applicant did not approach the Department suo motu for re-crediting the ineligible duty drawback amount claimed by them - But for the intervention and painstaking investigation by Officers of Customs Intelligence Unit Coimbatore the ineligible duty drawback erroneously sanctioned by the Department would have gone unnoticed. The act of the applicant attracts penalty under the Sections of the Customs Act l962 - keeping in view the full and true disclosure of additional duty liability co-operation extended during the investigation and the proceedings before the Settlement Commission the Bench considers this as a fit case for extending partial immunity from penalty to the applicant. Prosecution - HELD THAT - The Bench is inclined to consider grant of immunity from prosecution to the Applicant and Co-Applicant in as far as this case is concerned. Application disposed off.

Issues Involved:
1. Misdeclaration of Drawback Tariff Classification.
2. Ineligible Duty Drawback Claims.
3. Payment and Settlement of Ineligible Drawback.
4. Imposition of Penalty and Interest.
5. Request for Immunity from Penalty and Prosecution.

Detailed Analysis:

1. Misdeclaration of Drawback Tariff Classification:
The applicant, a manufacturer and exporter of Ductile Iron Casting, was found to have misdeclared the Drawback Tariff Classification of their export goods. Specifically, they classified the goods under Tariff item No. 7325 01 and 7325 10 instead of the correct classification 7325 15, resulting in a higher duty drawback rate of 3%/2.4% instead of 2%.

2. Ineligible Duty Drawback Claims:
The misclassification led to the applicant claiming and receiving an excess and ineligible duty drawback amounting to Rs. 6,63,062/- during the period 2011 to 2013. The investigation revealed that the applicant had claimed ineligible drawback from various customs ports, including Chennai Sea Port, Customs House Tuticorin, and ACC Coimbatore.

3. Payment and Settlement of Ineligible Drawback:
Upon being notified, the applicant admitted the mistake and paid the ineligible duty drawback amount of Rs. 6,74,159/- along with part interest of Rs. 11,097/-. They further paid Rs. 1,05,875/- towards the ineligible drawback for 28 additional Shipping Bills and interest of Rs. 1,04,819/-. The applicant filed a settlement application on 20-9-2018, admitting the entire demand and seeking settlement.

4. Imposition of Penalty and Interest:
The Deputy Commissioner issued a Show Cause Notice demanding the ineligible drawback and interest. Despite the applicant's request to settle the matter through the Settlement Commission, an Order-in-Original was passed on 30-10-2018, imposing a penalty of Rs. 52,000/- under Section 114(ii) and Rs. 5,000/- under Section 114AA of the Customs Act, 1962. The applicant paid these penalties on 14-12-2018.

5. Request for Immunity from Penalty and Prosecution:
The applicant sought immunity from further penalties and prosecution, citing their cooperation and full payment of the duty and interest. The Settlement Commission considered the applicant's full and true disclosure, cooperation during the investigation, and payment of duty and interest. The Commission granted partial immunity from penalty, imposing a reduced penalty of Rs. 25,000/- and granted immunity from prosecution under the Customs Act, 1962.

Findings and Order:
The Settlement Commission found that the applicant had made a full and complete disclosure of their duty liability and had cooperated with the investigation. The Commission settled the case, confirming the differential amount of Duty Drawback at Rs. 5,25,527/- and interest at Rs. 1,42,844/-. The applicant was required to pay any additional interest calculated by the jurisdictional Commissioner. The Commission imposed a reduced penalty of Rs. 25,000/- and granted immunity from prosecution, subject to the payment of the penalty within 30 days.

Conclusion:
The Settlement Commission's order emphasized the importance of accurate tariff classification and compliance with customs regulations. The applicant's cooperation and full disclosure played a significant role in receiving partial immunity from penalties and prosecution. The Commission's decision aimed to settle the matter fairly while ensuring compliance with legal provisions.

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