TMI Blog2015 (1) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed and exports were made to countries other than Russia. . Accordingly such exports were made in violation of the instructions issued by the DGFT under para 4.17 of the EXIM Policy, 1997-2002 and Para 2.15 and 2.40 of EXIM Policy, 2002-07, making the exported goods liable to confiscation under Section 113(d) of the Customs Act, 1962 by virtue of Section 11 of the Foreign Trade (Development & Regulation) Act, 1992 read with Section 3(2) & 3(3) of the Foreign Trade (Development & Regulation) Act, 1992. There is also a violation of Rule 11(1) of the Foreign Trade (Regulation) Rules, 1993. Therefore, all these violations rendered the goods to be confiscated being the prohibited goods. Period of limitation - Absence of the limitation provisions in Rule 16/16A of 1995 Rules - No open ended litigation to perpetuate. It issued original Show Cause Notice on 27-3-2006 and the Addendum on 31-8-2006 for recovery of drawback relating to the period was 1-10-1999 to 10-10-2003 - Held that:- by following the decision of Hon’ble High Court of Gujarat in the case of Pratibha Syntex Ltd. v. Union of India 2013 (3) TMI 480 - GUJARAT HIGH COURT and the decision in the case of Padmini Exports Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst them. Such adjudication gave rise to the consequences hereinafter described against which they came in appeal before Tribunal. Having heard all the appeal analogous and noticing common facts in issues involved and common evidence used against all of them in adjudication, all the appeals are disposed by this common order. 2.1 In the appeals filed by the exporter, M/s. Hem Chand Gupta and Sons and its proprietor Shri Jaydev Gupta, they have challenged following consequences of Adjudication :- (i) Confiscation of the ready-made garments valued ₹ 58,02,22,972/- exported by M/s. Hem Chand Gupta and Sons made under Section 113(d) and 113(i) of the Customs Act, 1962 and imposition of fine of Rupees six crores on M/s. Hem Chand Gupta Sons in lieu of confiscation since goods were not physically available for confiscation. (ii) Drawback amount of ₹ 6,58,22,845/- availed by M/s. Hem Chand Gupta and Sons was ordered to be recovered under Rules 16 and 16A of the Customs and Central Excise Duties Drawback Rules, 1995 and demand thereof raised. (iii) Interest on the drawback demanded was ordered to be recovered in terms of the provisions of Section 28AA rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in Kotka Port. Freights were collected by the shipping line for that destination only. The shipping lines mentioned final destination as Russia/Rostov on the Bill of Lading issued by them. They transported none of the consignment to the declared destination in Russia. Further it was reported by Consulate General of India in Moscow, Russia that Central Enforcement Department vide letter dated 11-7-2005 informed that the consignees in Russia were not engaged in export or import and the advances paid by them were returned back to their account. (b) In few instances buyers at the port in turn disposed off/sold the goods to other clients (not relatable in any way to the buyers originally indicated in the shipping/customs documents in India) in other countries and at times in Russia. There was also gross overvaluation of the exported readymade garments. (c) The amounts claimed to have been received as sale proceeds were not sale proceeds of the goods exported and L/Cs were fraudulently encashed by the exporters for which they were not eligible to claim any drawback against the goods exported by them as tabulated in Annex-A and B to the SCN. (d) The amount receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an associate and connected with the business of the Indian exporters, who prima facie, was only incidentally involved in the movement of the export goods and who ostensibly stood nothing to lose by the outcome of enquires undertaken by the DRI. (i) One Shri Jaidev Gupta was the mastermind behind fraudulent exports of the goods appearing in Annex-A and B to the impugned show cause notice. He managed and controlled all the activities to perpetuate fraud including Customs clearance of the exported goods. The goods exported in the name of the above two firms, were shown to have been routed through Dubai, Bander Abbas and Kotka port to Russia. But the exports were actually destined to these ports and disposed off in the local market or diverted to countries other than Russia. Accordingly the exported goods did not reach Russia. Such act resulted in violation of Circular No. 30, dated 28-9-1993 and A.D. (G.P. Series) Circular No. 4, dated 5-9-1999 issued by Reserve Bank India. (j) The General Manager, Punjab National Bank International Banking Division, New Delhi stated that had the bank been in the knowledge of manipulations/forgery, particularly on the basis of documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were: M/s. Miracle shipping live and M/s. See House Shipping line as well as Sea Sky. He categorically stated that : (i) In the bill of lading. Port Rashid, Jabel Ali, Bander Abbas and Kotka were shown as port of discharge and Rostov/Russia was shown as final destination. (ii) Sea freight was paid by foreign buyer and ports of destination were mentioned as per foreign buyers telephonic address. Agents of buyers used to receive their goods at the Port of discharge and forward the same from there to Russia on the strength of bill of lading and other export documents. (iii) According to the Russian buyers they preferred to take delivery of the exported goods at the port of discharge for onward transportation through big trucks/trailers since such mode of transport attracted less cost of transportation than the cost charged by shipping lines. (iv) Against the question asked to Shri Jaidev Gupta as to why the final destination of the exported goods were shown as Rostov/Russia in the documents submitted to the bank when the Russian buyers used to take delivery of the same at the Port of discharge, he stated that after opening of L/C by the Russian buyers in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vealed that 4 containers were received at Shaheed Rajai Port at Bander Abbas. Goods were loaded from those containers and were loaded in different containers and sent back to Dubai on instruction from one Mr. Gandhi of M/s. Auto Trans Shipping Co. LLC, Dubai. Consulate General of India in Bander Abbas received reply from port authority that only one different container was received in Bander Abbas by a ship named Clipper which was destined to Afghanistan and was cleared by M/s. Rohtash and TUOS Co. 7.8 Enquiry with High Commission of India in London revealed that by letter dated 10-12-2004, Finland Customs informed that some containers had arrived at Kotka port on different dates and were transferred to Aurbind International Customs warehouse ILP International Logisitics. From these warehouses the consignments were transferred/transported to Russia. However the consignments were not the same as compared to the name of the consignments named in shipping bills at the time of export from India. There was also value difference in goods. 7.9 Ld. Adjudicating Authority found that the country of origin of the goods in some cases was China. Arguments on Behalf of Appellants 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational in Appeal No. C/47/2009. Both the appellants were manufacture exporters and made export of garments during the period 1-10-1999 to 10-10-2003. Against such exports, they were paid drawback to the tune of ₹ 6,58,22,845/- and ₹ 7,96,78,663/- respectively. 8.5 Ld. adjudicating authority proceeded to adjudicate the matter misconceiving that Circular No. 5, A.D. (G.P. Series), dated 31-5-1999 issued by Reserve Bank of India (RBI) shall be applicable to the case of the exporter appellants while Circular No. 4, A.D. (G.P. Series), dated 19-5-1999 only governed the exports made by both the exporter appellants under settlement against repayment of state credit of Russia. The Circular No. 4 requires the Russian Central Bank to nominate a bank in Russia for issuing Letter of Credit (LC) in favour of exporter. The exporter in India was required to export negotiating LCs through nominated bank of RBI, so that the export proceeds are reimbursed by RBI to the nominated bank of India for ultimate payment to the exporter appellants against LCs. Accordingly, there was no direct payment made by the importer in Russia to the exporter in India. The nominated bank for the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . adjudicating authority in Page 94 of appeal folder (Page 64 of Order-in-Original) committed grave error in making adjudication following Circular No. 5. He further relied on para 38.12 at Page 73 of Order-in-Original (running Page 103 of appeal folder) and para 38.15 at Page 75 of Order-in-Original to contend that the adjudication proceedings made on wrong premises of Circular No. 5 is liable to be discarded. According to appellants, when the authority had invoked a wrong circular, his findings have become erroneous for which those are liable to be set aside. 8.9 Arguing on the point of jurisdiction, ld. counsel submitted that DRI is not empowered to issue notice under Rules 16 and 16A of Drawback Rules, 1995. He supports such contention placing reliance on the judgment of Apex Court in the case of CC v. Syed Ali [2011 (265) E.L.T. 17 (S.C.)]. He specifically submits that paras 14 and 15 of the judgment say that it is only the officers of Customs, who are assigned the functions of assessment, which of course would include re-assessment, working under jurisdictional collectorate within whose jurisdiction Bill of Entry or baggage declarations had been filed and the consignments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom RBI brining out allegation that there was no realisation of the export proceeds. Appellants case is not the case of unrealised export proceeds. He further submits that this aspect of law has been well explained by the Hon ble High Court of Allahabad in the decision reported in Mayfair Leather Exports Pvt. Ltd. v. Union of India [2011 (272) E.L.T. 193 (All.)]. He relies on para 19 thereof in this behalf. 8.12 It was submitted on behalf of the appellant that Rule 16 is invokable where there was any erroneous excess payment of drawback made. But that is also not the case of Revenue against appellants. Revenue has simply proceeded under Circular No. 5 to make allegations against the appellants without examining the basic elements of Rules 16 and 16A of Drawback Rules, 1995. Added to that, when the present practice of Revenue is to issue notice for exercising power under Rules 16 and 16A by jurisdictional officer but not by DRI, that shows that the Department has acted in excess of its jurisdiction contrary to the law laid down in the case of Syed Ali (supra) by the Apex Court. An example of issuance of such Show Cause Notice was cited by him placing a copy of Show Cause Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court of Gujarat in the case of Padmini Exports v. Union of India (supra) is a good period which is to be followed. That cannot be given go-bye. Following such principles, when original Show Cause Notice was issued on 27-3-2006, the recovery goes back to the period 27-3-2003. Accordingly, major part of the recovery is time barred. Alternatively, if the addendum is considered, which was issued on 31-8-2006, the recovery gees to 31-8-2003. That also takes away the major part of the recovery from the adjudication. But none of the authority below followed the principles laid down by the Apex Court either in the case of Govt. of India v. Citedal Fine Pharmaceuticals (supra) or in the case of Collector of Central Excise, Jaipur v. Raghuvar (India) Ltd. (supra). He further cited that recently in the case of CCE, Chandigarh v. Sawan Mal Shibu Mal Steel Rolling Mills, even Hon ble High Court of Punjab and Haryana has prescribed the limitation period in absence of law relating to limitation on penalty as reported in 2014-TIOL-1769-SC-P H-CX = 2015 (315) E.L.T. 24 (P H). 9.1 On the second day of hearing, ld. Counsel for appellant submitted that there was gross violation of natural j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This results in denial of the process of natural justice. It was submission of ld. Counsel that NRUDs may be irrelevant for Revenue but is relevant to the assessee to raise defence. Therefore, the Authority acting contrary to Board Circular has grossly violated natural justice. 9.5 Ld. Counsel further relied on the decision of the Hon ble High Court of Allahabad in the case of Novamet Industries v. Union of India - 2008 (227) E.L.T. 363 (All.) = 2009 (13) S.T.R. 108 (All.). Placing para 28 of the judgment, he says that this is a valuable right and that cannot be denied. He further relied on the decision of the Tribunal in the case of Sri Vasavi Industries Limited v. CCE, Bolpur - 2009 (234) E.L.T. 475 (Tri. - Kolkata) to submit that non supply of documents results in violation of natural justice. Further, reliance was placed in this regard on the decision of the Hon ble High Court of Madhya Pradesh in the case of Mulji Gokuldas v. CCE, Madras - 2000 (126) E.L.T. 44 (M.P.). Paras 3 and 4 of the said judgment was placed to show that without supply of documents, appellant cannot be pressed to suffer. 9.6 Appellant s further submission was that on the basis of decision in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear . He made up his mind in para 25.2 to bias the mind of Adjudicating Authority. Similarly, using the word such in para 23.3 of show cause notice, the authority further biased by his pre-determined version. All such elements raised bias against the appellant in view of the word used no trace of reason are logic, justifying that such a transaction could have any economic rationale . This clearly throws light that the Notice Issuing Authority has pre-conceived notion to allege against the appellant so that the adjudication process shall be made with a bias against appellants. Following such tactics, the Notice Issuing Authority biased the mind of Adjudicating Authority. To support his contention. ld. Counsel relied upon the judgment of Apex Court in the case of ORYX Fisheries Private Limited v. Union of India - 2011 (266) E.L.T. 422 (S.C.). Emphasis was placed on paras 22, 23 and 27 of the judgment. 9.12 According to the appellant, reasonable opportunity to defend can be said to have been given if the appellant is told about the totality of the charges leveled against him or entire allegation is made clearly in the SCN without the practice of issuance of Addenda. The Invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er against different consignments. Russia being a land locked country, the goods went through intermediary ports, i.e. Bandar Abbas (Iran), Jabal Ali (Dubai), Kotka (Finland) and Llychebisk (Ukrain). Upon arrival of the goods in those Sea ports, consignments moved to Russia by road. 9.16 Inquiry made with Customs abroad resulted with reporting of the arrival of consignments in Kotka. Apart from the goods sent by sea, 14 consignments were sent by air customs. Customs Authority did not doubt any of the air shipments. Entire methodology of shipments is explained by appellant in Pages 239 to 257 of appeal folder and no complaint of non receipt of consignment was received by shipping agencies. This proves that the appellants have exported goods to Russia. 9.17 Reliance was placed on Pages 96 and 97 of the appeal folder to submit that the Dubai Customs Report showed non receipt of certain consignments. But that is unbelievable for the reason that shipping agencies have sent the goods to the destination and remittances came from Russia. Bank realization also proved export realisation. Therefore, allegation of no shipment is ruled out. Relying on Page 93 from the appeal folder, appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orough investigation and cogent evidence to make allegations, the Authority proceeded with a predetermined mind against appellant. Incomplete investigation was informed by letter dated 21-6-2004 of Consulate General of India. That does not bring out any allegation against appellant. Accordingly, the RUD-26 has no evidentiary value. It has come to record that the Russian importers have genuinely imported goods from India which was established by Happy Life General Trading Co., as appearing in the communication of Consulate General of India. 10.3 Ld. Counsel also submitted that the investigation made its exercise on the basis of the hearsay evidence which is contrary to law and the show cause notice based on such hearsay evidence is detrimental to the interest of the justice. Placing Page 128 of the appeal folder and drawing attention to para 24.1, he submits that the investigation observations were not supported by any cogent evidence. Therefore without any evidence which can speak for itself, the appellants cannot be held deterrently. To be more specific he draws attention to Page 1051 of RUD-27 to submit that the whole content therein was without evidence. He relies on the Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd. v. C.C.E., Chandigarh - 1997 (89) E.L.T. 123 (Tri.) affirmed by Supreme Court in 1999 (106) E.L.T. A67 (S.C.) to submit that for no rebuttal by revenue to the contentions of the appellant in para 6.10 at Pages 198 and 199, that is admitted by Revenue. Hence appellant cannot be held guilty. 10.7 Appellant further submitted that in case of any allegation made, burden of proof is on the person alleging the same. The person who alleges has to bring the evidence to show that the other side committed offence or omission or made breach of law. Revenue has failed to discharge its burden of proof to show that appellants had received advance payment. Similarly revenue failed to show evidence as to how the money has gone to different accounts in Russia and who has remitted that money. In absence of established channel of remittance and identity of the persons who remitted money from India to Russia, no allegation of sending back of money to A/c of 000 Business Kant can sustain and appellant is not liable to answer. There was no allegation of Hawala transaction in the show cause notice. In the case of Uniworth Textile Ltd., 2013 (288) E.L.T. 161 (S.C.) and in the decision of UOI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 18 of the Customs Act, 1962 read with the Valuation Rules of 1988 for which such allegation cannot be made against appellant. Accordingly he submitted that once there is a codified law in this country any value declared abroad is liable to be discarded. That is the ruling of the Tribunal in the case of Ajay Apparels v. C.C. (Port) Kolkata, 2006 (204) E.L.T. 131 (Tri. - Calcutta) - Paras 3.2-3.4. Appellant did not inflate the value at all and once the value declared in shipping bill is realized through bank, the value so declared should be adopted by Customs. Relying on para 9 of the Apex Court decision in the case of C.C., N.C.H., Mumbai v. Vishal Exports Overseas Ltd., 2007 (209) E.L.T. 331 (S.C.), appellant says that when there is no dispute on bank realization, Revenue has no option to adopt any value at its choice and any whimsical adoption shall be contrary to the decision of the Supreme Court. He further relied on the decision of the Tribunal in the case of Frost International Ltd. v. C.C., Export (JNCH), Mumbai, 2006 (206) E.L.T. 451 (Tri.-Mum.) affirmed by Supreme Court in 2007 (215) E.L.T. A103 (S.C.). 10.11 Appellants submitted that Delhi Bench of Tribunal has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial jurisdiction was well defined by Notification No. 17/2002-Cus. (N.T.), dated 7-3-2002. By virtue of these two Notifications, they were competent enough to act as proper officers of customs in terms of the meaning of Section 2(34) of Customs Act, 1962. This is exactly the observations of the Hon ble High Court of Gujarat in para 30 of the judgment in the case of Swathi Menthol Allied Chemicals Ltd. v. Joint Director, DRI [2014 (44) Tax Man.com 79 (Guj.) = 2014 (304) E.L.T. 21 (Guj.)]. This contains all the Notifications finding place in para 26 of the said judgment. The Apex Court in the case of CC v. Syed Ali [2011 (265) E.L.T. 17 (S.C.)] has not taken into consideration these two Notification while delivering judgment therein. That judgment was delivered on 18-2-2011 and soon after that on 6-7-2011, Notification dated 6-7-2011 was issued. That made amply clear that the intelligence officers are also empowered to exercise the power under Sections 17 and 28 of Customs Act, 1962 as proper officers of customs under Section 2(34) of Customs Act, 1962. 11.2 Ld. DR further submitted that Notification dated 7-3-2002 itself had defined jurisdiction of the intelligence officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te credit to be utilised for export of goods to Russian Federation only. No third country exports are to be permitted to be financed out of such payment of credit . Therefore, the whole allegation was based on the basis of Circular No. 4 of RBI. Mere mentioning of Circular No. 5 in adjudication order does not invalidate the adjudication. It was clearly brought out to the notice of the appellant that violation was made by the appellant returning back the money to the importer and that established that there were no exports made to Russia. That invited the consequence of law. The details of the return of money was brought out in the addendum dated 31-8-2006 forming part of the original Show Cause Notice dated 27-3-2006. To support his contention, he says that addendum has not impaired right of the noticee to defend and relied on the decision of Hon ble High Court of Karnataka in the case of Gemini Dyeing and Printing Mills Ltd. v. CC, Bangalore [2014 (304) E.L.T. 51 (Kar.)]. Para 28 of the judgment was specifically placed to show that reading of Show Cause Notice dated 27-3-206 and addendum dated 31-8-2006 does not materially affect the allegations made against appellant. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of specific names of persons, who were required to be cross-examined, Revenue was handicapped to proceed. When the appellant was not clear, it lost its right of cross-examination following the ratio laid down in the judgment cited in the adjudication order. Further, appellant did not show the reason why cross-examination was sought. He further submitted that some persons were abroad and it was not possible to call them as witnesses for cross-examination. 11.10 On the point of market enquiry, it was submitted by Revenue that Page 93 of appeal folder shows how appellant made over-valuation of the export to be enriched by the claim of drawback at the cost of Revenue. Even Page 19 showing para 23 of the adjudication order (at Page 48 of appeal folder) brings out by Table No. 2 how there was lower value declared to Dubai Customs while higher value was declared to Indian Customs. Further, Table No. 3 shows that containers stated therein were not received in Dubai. Appellant s modus operandi of no delivery of goods in Russia was proved. Such modus operandi also shows that the appellant declared higher value of the goods not reached Russia but claimed the drawback unlawfully. 12.1 Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Ltd.) - 2009 (235) E.L.T. 587 and the decision in 2001 (130) E.L.T. 404 (S.C.). 13.1 Copies of the proceeding recorded from 27-10-2014 to 31-10-2014 were provided to both sides in the Court on 12-11-2014. Revenue submitted that grievance of the appellant that NRUDS were not supplied has no basis when Page Nos. 123, 124 and 125 of investigation record is read. Annexure C available at Page 125 on the investigation record, is crux of the issue. This categorically shows that the documents referred in that particular page formed part of Annexure C to the addendum dated 31-8-2006, issued to the appellant. Hardly, within a week of issuance of addendum, the documents were returned back to the appellant. Even the undated Page 124 also shows that the NRUDs were returned back on 7-9-2006. There is no dispute about the return of NRUDs. Even the appellant was rightly served the Show Cause Notice and the documents covered by the Show Cause Notice dated 27-3-2006 were returned back as per acknowledgement dated 27-3-2006, appearing at Page 123 of the investigation record. The documents referred to in Page 123 were NRUDs which were returned upon completion of investigation. Similarly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a party from USA who made consignments to a consignee in Russia, who was different from the consignee claimed by the appellants. That throws lights that the appellant did not make any export by the Carnet referred to in the letter at Page 1064 to Russia. Page 130 of appeal folder read with para 25.1 of the show cause notice brings out the allegations came out from Pages 1064, 1073 and 1074 of volume 5 of the paperbook. 14.4 Shri. Sanjay Jain, ld. DR further submitted that the signatures appearing on the fax messages are matter of fact and no question thereon was ever raised by the appellant at any stage before the authority below. Therefore, they do not have right to raise any issue on signature of the Authority as different or veracity of fax message before this Court at this stage. 14.5 Ld. DR submitted that so far as the pleading of the appellant that Circular 5 was applied to make adjudication, that is devoid of merit for the reason that wrong mentioning of circular does not vitiate proceeding, following the ratio laid down - 1996 (82) E.L.T. 441 (S.C.). He further states that investigation has already asked for certified copy of the concerned letters issued by Russian C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, allegation of violation of RBI s circular has no basis because of clarification of RBI given by letter dated 2-11-2010. Added to that, his further reply to Revenue s contention is that title over goods vests on importer upon filing of shipping bill. To make such proposition of law, he relied on the judgment in the case of British India Steam Navigation Company Limited v. Shanmulgha Vilas Cashew Industries and Ors. - 1990 (3) SCC 481. He places para 13 and 14 of the said judgment to fortify his argument that shipping Bill when filed, export is made and title over the goods passes to the importer. This complies to the requirement of RBI Circular No. 4, further clarified by letter dated 2-11-2010 of RBI (copy filed along with miscellaneous application). 15.4 Shri Sarkar, ld. Advocate further submitted that copy of the letter dated as 11-7-2005 at Page No. 11 submitted by Revenue brings out that OOO FIRMA Ageti, OOO Orlam , OOO Leotek Company , OOO Alroas Trading and OOO Stronytehinter were reported by the Russian Customs to have made no export-import operations during the period 2000-2005. This is wrong because Page No. 146 relating to Hemchand Gupta and 161 relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended by law as proper officer . Therefore para 14 of Syed Ali judgment categorically says that to discharge function of proper officer under proper section that officer should have been notified for the purpose of that section. In the present case, the officer who exercised power to issue notice was not the officer notified under Section 2(34) of Customs Act, 1962 to be a proper officer for the purpose of Rule 16 of the Drawback Rules, 1995. Reading para 16 of Syed Ali judgment, he submitted that it is categorically held that an officer notified under Sections 4 and 5 of the Act does not ipso facto become a proper officer under Section 2(34) of the said Act unless he is specifically notified to be so. In the present case, the officer who exercised the power under Rule 16A of the Drawback Rules, 1995 was not the proper officer notified under Section 2(34) of the Act. 16.3 Bringing out a difference to the principle laid down in Sri Meenakshi Apparels Pvt. Ltd. v. CC, Mumbai - 2010 (258) E.L.T. 481 (Kar.) and in Sun Knitwear P. Ltd. - 2010 (10) S.T.R. 523 (Tri.-Bang.), ld. Counsel submitted that these two judgments were rendered much before Syed Ali judgment which is noted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has categorically held that drawback is an incentive but neither it is Customs duty nor Central Excise duty. Such incentive flows from the scheme of duty drawback declared by the Central Government in terms of Section 75 of the Customs Act, 1962. Therefore neither Section 28 of Customs Act, 1962 nor Section 11A of Central Excise Act, 1944 nor Section 73 of Finance Act, 1994 apply to the Drawback Rules, 1995. At this stage he stated it would be beneficial to reproduce para 17 of the judgment of Liberty India to appreciate the rationale behind duty drawback as under :- 17. The next question is - what is duty drawback? Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials, of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of Section 75 of the Customs Act re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and do not rule out movement of goods from Dubai to Russia. 101 containers left for export to Russia, 27 were via Kotka and 74 containers were via Dubai. Investigation has failed to prove that no export was made to Russia. Explaining that it is not necessary that importer should only receive goods. He explained that documents placed by Revenue showing address of USA consigner does not make any difference in law following the decision of Hon ble Kerala High Court in the case of Proprietor, Carmel Exports Import v. CC, Cochin - 2012 (276) E.L.T. 505 (Kerala). He placed reliance on para 15 of the judgment which reads under : 15. Coming to the submission that the appellant is only a name lender for the import of goods by one Anwar, we shall presume for the time being that the appellant is only a name lender, but the actual beneficiary of the import is one Anwar. We called upon learned counsel for the respondents to place the relevant provision which prohibits such an activity on the part of an Import Export Code Number holder. Learned counsel for the respondents categorically made a statement that he is not able to place any such prohibition in law except Section 7 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i and Jogia Hajam - AIR 1964 SC 1184. Submitting that addendum is baseless, he says that according to ratio laid down in para 29 of the judgment in the case of Gemini Dying and Printing Mills Ltd. v. C.C.E. - 2014 (304) E.L.T. 51 (Kar.), Revenue failed to establish that addendum has substance of the main show cause notice. 16.12 It was further explained by Sri Sarkar that Russian customs documents were used under presumption in adjudication which is not prosecution. Revenue does not get benefit under presumption unless that is proved with precision in a prosecution. He further submits that evidence gathered by the Revenue is subject to test by cross-examination. But that was not allowed those have no evidentiary value. 17. Heard both sides and perused the record. Issues came up during hearing 18. The contentions raised by appellants in the course of hearing involved various issues like that DRI (Notice issuing authority) has no jurisdiction to issue the notice following the decision of the Hon ble Apex Court in the case of CC v. Syed Ali [2011 (265) E.L.T. 17 (S.C.)] (supra) goods exported were in accordance with Circular No. 4 of RBI without Circular No. 5 being appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuine exports made as evident from shipping bills. Penalty is not impossible in absence of any cogent evidence against appellants. Without cogent evidence of alleged over-valuation, denial of drawback is unjustified; contemporaneous evidences adduced by appellants were ignored; Bill of lading issued upon shipment was proof passing of title of goods and property therein transferred to Consignee. On all these grounds adjudication was assailed to be bad and uncalled for. However principal issues are dealt by this order considering that the secondary issues were covered by principal issues. Finding and conclusion by Tribunal 19. Both the appellants were manufacturer of garments and exporter thereof to Russian importer under Repayment of State Credit during the period 1-10-1999 to 10-10-2003 through Dubai, Bander Abbas, Llychebisk (Ukrain) and Kotka since Russia is a land lock country not connected by sea. They were procuring minor quantities of garments from market to make export thereof while major quantity of garments were manufactured by them in their own manufacturing units. Several consignments were exported by them in 101 containers during the above period covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. At those ports goods were cleared by agents of importers furnished declaration and it was their obligation to transport the goods from port of discharge to Russia. The shipments to Russia through Kotka port were discharged at Finland and thereafter the consignments were destined to be transported to Russia by Road. 21.2 Customs has not examined the routing of the goods from Finland to Russia threadbare container-wise and shipping bill wise. Bald conclusion was drawn on the basis of overseas enquiry report stating that one shipping bill covering goods delivered at Finland were transported to different places. The destination of such routing did not come to record nor details of buyers and sellers enquired by Revenue. 21.3 So far as shipment to Russia through the port of discharge at Dubai, Bander Abbas and Llychebisk (Ukrain) are concerned, Revenue s allegation was that upon clearance of the goods thereat, those were diverted to different places. But, neither extensive enquiry was conducted to locate trail of transport of goods nor destination of delivery thereof or the buyers to whom the goods were delivered were identified. Neither cogent or credible evidence in that res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption under Section 139 of the Customs Act, 1962, the basic facts is to be laid. Even though they bear serial number and stamp of Japan Customs, the fact remains that they are copies of copies and indisputably bear no signature of the exporter, the forwarding agent, the stevedore or the Custom Officer; no signature at all of any of them. The discrepancy in regard to copies bearing the seal of Customs, Hon ble Supreme Court accepted majority view of Tribunal. In the present case the overseas report suffering from above defects became in-admissible in evidence and failed to be credible. Further there was apparent difference in three signatures of same Officer of foreign agency on three different reports. Even here was change of designation apparent from one of the reports [Ref: Letter dated 11-7.2005 - Pages 1223-1224 of SCN enclosed to letter dated 3-10-2005 of Embassy of India in Moscow, letter dated 21-2-2006 of Central Enforcement Department of Russia - Page 1663 of SCN, letter dated 28-4-2006 of Central Enforcement Department of Russia - Pages 1636-1637 of SCN] Return of preminary payments to 000 Business Kant 22.1 Although Revenue alleged that the preliminary pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany , 000 Alros Trading . Accordingly allegation of Revenue remained in myth without discovery of truth. No complaint from Reserve Bank of India nor from Punjab National Bank on the LCs opened and paid came to record. 22.3 It is also held by Apex Court in the case of Uniworth Textiles Ltd. v. C.C.E., Raipur - 2013 (288) E.L.T. 161 (S.C.) that it is cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulder of the one alleging. In the case of UOI v. Ashok Kumar Ors. - (2005) 8 SCC 760 it is held that it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges. The allegations of mala fides are more often easily made than proved, and the very seriousness of such allegation demand proof of a high order of credibility. In the present case, allegation of return of money remained unproved by Revenue. 22.4 If contentions of Revenue that preliminary payment received by appellants from 000 Bank Kant , Moscow has gone back to the account of the later and no export was made to that concern, as reported by overseas enquiry report dated 28-4-2006 of the Central Enforcement Department of Russia is accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-imbursement from General Manager, Deposits Accounts Department (DAD), RBI, Mumbai. The nominated bank in India in respect of the appellants was Punjab National Bank (PNB) as per Annexure-I to the Circular No. 4. The nominated bank was to submit the claim to RBI and RBI was to make payment to the nominated bank. RBI was to make payment to the nominated bank subject to availability of balance in the Central account of BEFA with RBI. Funds from repayment of state credit were prescribed by the Circular to be utilized for export of goods to Russian Federation only and no third country exports were permitted to be financed out of funds from such repayment of State Credit. When pleading of appellant is that Russia is land locked country and exports were to be made through Dubai, Bander Abbas and Kotka, in absence of any contention and evidence from Revenue to repel such argument it is difficult to hold that export was made to third country and when Revenue did not find any evidence of diversion of goods to any third country. 23.2 The revised procedure prescribed by Circular No. 4 came into force in respect of LCs opened from 1-7-1999 only. The LCs opened upto 30-6-1999 were to conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates and notified from time-to-time. This is in consonance with the change in rate of excise duty and customs duty. 24.2 The character and nature of drawback was explained by Apex Court in para 17 of the Judgment in Liberty India v. Commissioner of Income Tax - 2009 (241) E.L.T. 326 (S.C.) holding that drawback is an incentive. Therefore it is not refund of duty to the manufacturer. The said paras 16 and 17 of the Judgment read as under : 16. DEPB is an incentive. It is given under Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralize the incidence of customs duty payment on the import content of export product. This neutralization is provided for by credit to customs duty against export product. Under DEPB, an exporter may apply for credit as percentage of FOB value of exports made in freely convertible currency. Credit is available only against the export product and at rates specified by DGFT for import of raw materials, components, etc. DEPB credit under the Scheme has to be calculated by taking into account the deemed import content of the export product as per basic customs duty and special addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shall at the time of export of the goods - (a) state on the shipping bill or bill of export, the description, quantity and such other particulars as are necessary for deciding whether the goods are entitled to drawback, and if so, at what rate or rates and make a declaration on the relevant shipping bill or bill of export that - (i) A claim for drawback under these rules is being made; [(ii) in respect of duties of Customs and Central Excise paid on the containers, packing materials and materials and the Service Tax paid on the input services used in the manufacture of the export goods on which drawback is being claimed, no separate claim for rebate of duty or Service Tax under the Central Excise Rules, 2002 or any other law has been or will be made to the Central Excise authorities :] [Provided that if the Commissioner of Customs is satisfied that the exporter or his authorised agent has, for reasons beyond his control, failed to comply with the provisions of this clause, he may, after considering the representation, if any, made by such exporter or his authorised agent, and for reasons to be recorded, exempt such exporter or his authorised age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the deficiency memo, the same will be treated as a claim filed under sub-rule (1) for the purpose of Section 75A. For computing the period of one month prescribed under (4) Section 75A for payment of drawback to the claimant, the time taken in testing of the export goods, not more than one month, shall be excluded. Subject to the provisions of sub-rules (2), (3) and (4), [(5) where the exporter has exported the goods under electronic shipping bill in Electronic Data Interchange (EDI) under the claim of drawback, the electronic shipping bill itself shall be treated as the claim for drawback. 24.7 At the time of export, an exporter is required to state on the shipping bill or bills of export the description, quantity and necessary particulars to exhibit whether the goods were entitled to drawback and if so at what rate and make a declaration with relevant shipping bill of the export that a claim of drawback under 1995 Rules is made. The claim of drawback is to accompany copy of export contract or letter of credit (LC) as the case may be. 24.8 Rule 16 of 1995 Rules has empowered a proper officer of customs who has acted as such under Section 51 or 82 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimant and the exporter shall repay the amount so demanded within thirty days of the receipt of the said order : Provided that where a part of the sate proceeds has been realised, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realised bears to the total amount of sale proceeds Where the exporter fails to repay the amount under (3) sub-rule (2) within said period of [thirty days] referred to in sub-rule (2), it shall be recovered in the manner laid down in Rule 16. Where the sale proceeds are realised by the exporter after (4) the amount of drawback has been recovered from him under sub-rule (2) or sub-rule (3) and the exporter produces evidence about such realisation within a period of three months from the date of realisation of sale proceeds, the amount of drawback so recovered shall be repaid by the Assistant Commissioner of Customs or Deputy Commissioner of Customs to the claimant provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India : Provided that - (i) the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvokable because the officer who issued the Show Cause Notice was not a proper officer. Such contention gave raise to the issue whether Asst. Director General of DRI was a proper officer. The term 'proper officer has been defined in Section 2(34) of the Act, which reads as under :- proper officer , in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs; [Emphasis supplied] 25.2 Interpretation of the term proper officer by Apex Court in the case of Commissioner of Customs v. Sayed Ali, 2011 (265) E.L.T. 17 (S.C.) in Para 13 of the judgment is as under : 13. Section 2(34) of the Act defines a proper officer , thus : 2. Definitions. - (34) proper officer , in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs; It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would be proper officers in terms of Section 2(34) of the Act. Specific ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man Pawan Others [AIR 1954 SC 340], where a proceeding is made without jurisdiction both territorial and substantial that results in failure of justice and lack of jurisdiction brings the order to nullity. Similarly, relying on the judgment in the case of Jagmital Sain Bhagat and Others v. Director of Health Services, Haryana Others [2013 (10) SCC) 136], appellants submission was that jurisdiction of the Court cannot be conferred by consent of parties or acquiescence or waiver. 25.7 Law is well settled that if a court has no jurisdiction over a matter, but passes an order, it would amount to nullity. When the legislature intended to confer jurisdiction to perform certain specific assignment that has to be done by assigning and not merely by consent. The question of lack of jurisdiction can be raised at any stage of the proceeding. Once the forum is found to have no jurisdiction, the finding of the court becomes irrelevant and becomes non-executable. Neither an authority nor a court can derive jurisdiction apart from statute. Therefore, the proper officer to perform certain function under the respective provision of law has to be conferred jurisdiction in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the very insertion of sub-section (11) to Section 28 is in challenge before the Hon ble High Court of Delhi in W.P. (C) No. 441/2013 in the case of Mangli Impex. 26.2 Revenue relied on the decision in the case of Sun Knitwear Pvt. Ltd. v. CC, (Adjudication), Mumbai [2008 (10) S.T.R. 523 (Tri. - Bang.)] to submit that DRI officials had power to issue Show Cause Notice under Rule 16/16A of 1995 Rules. With great respect it may be stated that law declared in the case of Syed Ali (supra) holds the field. The judgment in Sri Meenakshi Apparels Pvt. Ltd. v. CC, Mumbai [2010 (258) E.L.T. 481 (Kar.)] was rendered on 30-8-2010, which was before the decision in the case of Syed Ali made on 18-2-2011. Therefore, law declared in the case of Syed Ali applies in terms of Article 141 of the Constitution. 27.1 Under Section 17(2) of the Customs Act, 1962, the proper officer conducts verification of the self-assessment of the goods assessed, to satisfy as to, whether self assessment was done correctly or re-assessment is warranted. Upon examination and satisfaction of shipping bills he allows the export consignment to leave India in terms of under Section 51 of the Act, issuing let ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Accordingly, in absence of the power being vested under Section 51 of the Act with the DRI officers, they fail to exercise jurisdiction under Section 75 of the Act as well as Rule 16 of 1995 Rules. 27.4 There is another aspect of the matter which can be looked from the angle of sub-section (11) inserted to Section 28 of the Act. This sub-section came into statute book by Section 2 of Customs (Amendment and Validation) Act, 2011 with the legislative mandate that the persons appointed as officers of Customs shall be deemed to have and always had the power of the assessment under Section 17 and shall be deemed to have been and always had been proper officer for the purposes of this section. Even this amendment does not speak whether the officer envisaged by sub-section (11) of Section 28 shall be the proper officer for the purpose of Section 75 of the Act to perform the functions under Rule 16 of 1995 Rules. Sub-section (11) of Section 28 was introduced on 16-9-2011. Hon ble High Court of Delhi in Writ Petition (C) No. 441/2013 in the case of Mangli Impex by an order dated 4-2-2013 observed that there appears to be an apparent conflict between the explanation 2 which appeared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in Section 5(2) of the Customs Act, 1962 on the other. But in the case of Syed Ali (supra), a detailed discussion on the interpretation of Section 2(34) of the Act was made and it is held that an officer of customs if assigned certain functions by Board or commissioner can only perform such functions. The decision of Hon ble High Court of Allahabad in the case of Raghunath International Ltd. v. Union of India [2012 (280) E.L.T. 321 (All.)] was looked into. This decision was rendered on 21-5-2012 under Central Excise Act, 1944 without considering the law laid down by Hon ble Supreme Court in the case of Syed Ali (supra), which is a latest decision with logical reasons stated therein analysing the meaning of proper officer under Section 2(34) of the Act. This clearly throws light that the word proper officer used in various parts of the Customs law scattered through different provisions therein needs specific assignment to be performed under different sections of the Statute to serve respective purpose of the relevant sections. The meaning of proper officer given under Section 2(34) in Customs Act, 1962 does not exist in Central Excise Act, 1944 due to different object of bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to prohibited goods. This is also made dear by Apex Court in Shekih Mohd. Omer v. Collector of Customs, Calcutta and Others [(1970) 2 SCC 728 = 1983 (13) E.L.T. 1439 (S.C.)] wherein it was contended that the expression prohibition used in Section 111(d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955. The Court negatived the said contention and held thus : - What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to any prohibition imposed by any law for the time being in force in this country is liable to be confiscated. Any prohibition referred to in that section applies to every type of prohibition . That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression any prohibition in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions prohibiting , restricting or otherwise controlling , we cannot cut down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the value of the goods. It was, inter alia, held that the definition of prohibited goods in Section 2(33) of the Act indicates that if the conditions prescribed for import or export of the goods are not complied with, it would be considered to be prohibited goods . It was held that for determining the export value of the goods, it is necessary to refer to the meaning of the word value as defined in Section 2(41) of the Act and the same must be determined in accordance with the provisions of sub-section (1) of Section 14 of the Act. The Court observed thus : ...For determining the export value of the goods, we have to refer to the meaning of the word value given in Section 2(41) of the Act, which specifically provides that value in relation to any goods means the value thereof determined in accordance with the provisions of sub-section (1) of Section 14. Section 14 specifically provides that in case of assessing the value for the purpose of export, value is to be determined at the price at which such or like goods are ordinarily sold or offered for sale at the place of exportation in the course of international trade, where the seller and the buyer have no inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exports v. C.C. Calcutta in 1999 (112) E.L.T. 400 (Tri.) affirmed by Supreme Court reported in 2005 (184) E.L.T. A36 (S.C.), C.C.E., Mumbai v. Finesse Creation Inc. reported in 2009 (248) E.L.T. 122 (Bom.) and the High Court in the case of C.C. Amritsar v. Raja Impex Pvt. Ltd. reported in 2008 (229) E.L.T. 185 (P H). Overvaluation 33. There was also an allegation that FOB was inflated to get higher drawback. Against the contention of the appellants that on a number of occasions, market enquiries were conducted by customs authorities and in all cases wherever market enquiries were conducted, the declared values were found to be in consonance with the market price, was rejected by ld. Adjudicating authority for no good reason. The only reason stated by that Authority was that the same did not relate to the goods shipped or covered in the impugned Show Cause Notice. Appellant also contested that during the course of investigation, DRI had resumed a number of samples from the premises of the appellants for the purpose of enquiry and recorded statements from certain persons. But copies of those statements were not give to the appellants. Ld. adjudicating authority discarded such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish that true export value was stated in the shipping bills. Section 14 of the Act contemplates that the price at which such like goods are ordinarily sold or offered for sale in the course of international sale that would be value of goods. 36. Keeping in view of the aforesaid guidelines, value of exported goods ought have been determined following the principle laid down in para 16 of the judgment by Hon ble Supreme Court in the case of Siddachalam Exports Pvt. Ltd. (supra) which is reproduced as under for convenience of reading : - 16. It is settled that the procedure prescribed under Section 14(1) of the Act and particularized in Rule 4 of the 1988 Rules has to be adopted to determine the value of goods entered for exports, irrespective of the fact whether any duty is leviable or not. It is also trite that ordinarily, the price received by the exporter in the ordinary course of business shall be taken to be the transaction value for determination of value of goods under export, in absence of any special circumstances indicated under Section 14(1) of the Act and Rule 4(2) of the 1988 Rules. The initial burden to establish that the value mentioned by the exporter in the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the exporter had failed to produce any evidence to establish that export value stated in the shipping bills was the true export value. In our opinion, both the said authorities have failed to apply the correct principles of law and therefore, their orders cannot be sustained. 20. Resultantly, for the reasons as enumerated, the appeal is allowed; the orders passed by the CESTAT and the Commissioner are set aside and the matter is remitted back to the adjudicating authority for fresh consideration in accordance with law, after affording adequate opportunity of hearing to the exporter. The entire exercise, in terms of this order, shall be completed within six months from the date of receipt of a copy of this judgment. Needless to add that we have not expressed any opinion on the merits of the opinion rendered by M/s. Skipper International or on the conduct of the exporter in not adducing any evidence in support of the export value stated in the shipping bills in question, [Emphasis supplied] Limitation 38. It was also the contention of the appellants that in absence of the limitation provisions in Rule 16/16A of 1995 Rules, there cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Hon ble Court in the case of Pratibha Syntex Ltd. (supra) has observed that the Show Cause Notice having been issued after a period of more than three years from the date of drawback claimed cannot by any stretch of imagination be said to have been issued within a reasonable period of time. Accordingly, the Show Cause Notice was held to be bad on the ground of time bar and the adjudication arising from that notice became unsustainable. In the present case, original Show Cause Notice was issued on 27-3-2006 and the Addendum was issued on 31-8-2006 for recovery of drawback relating to the period was 1-10-1999 to 10-10-2003. Therefore the Show Cause Notice issued on 27-3-2006 does not appear to be beyond a reasonable period. Accordingly, the plea of time bar is untenable. Imposition of penalty 41. So far as imposition of penalty is concerned mens rea plays a vital role to determine quantum thereof. That aspect was not looked into in the adjudication. Mechanically penalties have been imposed in page 77 of the adjudication order without stating any reason as to imposition and determination of quantum thereof, which appears to be disproportionate, in existence of conflicting e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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