The Delhi High Court has held that no jurisdiction is vested in the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) to hear matters against orders of Commissioner of Appeals on Payments of Duty Drawback.
“The order passed by the CESTAT is void and non est, any refund granted pursuant to such non est order, in our opinion, was rightly demanded by the Revenue”, the Delhi High Court observed.
In cross appeals against the revenue, the Firm impugned a Demand cum Show Cause Notice dated issued by the respondent [Commissioner of Customs (Exports)] demanding recovery of Duty Drawback amounting to ₹54,72,204/-, which according to the respondent was erroneously sanctioned and paid to the Firm.
The Firm also impugned the notice dated 06.07.2021 (hereafter ‘the impugned notice’) issued under Section 128A(3) of the Customs Act, 1962 (hereafter ‘the Customs Act’) calling upon the Firm to show cause why the refund order dated 10.02.2020 passed by the Deputy Commissioner (Drawback), ACC Export Commissionerate, not be annulled or any other order as deemed fit be passed by the Appellate Authority.
The refund of the Duty Drawback was sanctioned pursuant to the order dated 02.11.2018 passed by the Customs Excise and Service Tax Appellate Tribunal (hereafter ‘the CESTAT’).
The Revenue has preferred the appeal (CUSSA No.1/2022) impugning the said order along with applications seeking condonation of delay in filing and re-filing the said appeal. \\
The controversy in the above-captioned matters relates to the refund of a sum of ₹54,80,710/- comprising of ₹26,15,942/- being the duty drawback availed by the Firm plus ₹28,64,768/- as interest, which was deposited by the Firm pursuant to a communication dated 12.03.2014. The Firm had prevailed before the CESTAT and accordingly, the refund was sanctioned.
The Revenue claimed that the same was done erroneously as the CESTAT had no jurisdiction to entertain any appeal relating to Duty Drawback. According to the Revenue, the order passed by the CESTAT is non est and therefore, the sums refunded to the Firm are required to be recovered.
Section 129A of the Customs Act outlines the provisions related to appeals to the appellate tribunal.
SECTION 129A. Appeals to the Appellate Tribunal. – (1) Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order –
(a) a decision or order passed by the [Principal Commissioner of Customs or Commissioner of Customs] as an adjudicating authority;
(b) an order passed by the 23[Commissioner (Appeals)] under section 128A;….
….. [Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in clause (b) if such order relates to, –
(a) any goods imported or exported as baggage;
(b) any goods loaded in a conveyance for importation into India, but which are not unloaded at their place of destination in India, or so much of the quantity of such goods as has not been unloaded at any such destination if goods unloaded at such destination are short of the quantity required to be unloaded at that destination;
(c) payment of drawback as provided in Chapter X, and the rules made thereunder.
The Firm had then filed an appeal before the Commissioner (Appeals) challenging the issuance of a letter.
The Commissioner (Appeals), by order dated 19.06.2014, set aside the letter dated 12.03.2014 and held that the said letter did not refer to any allegations as to how the drawback was wrongly claimed, or disclosed any material about the contravention of the specific provisions of the Customs Act, which rendered the Drawback recoverable from the Firm. It also held that there was no confirmation of the demand against the Firm and no adjudication to that effect was done.
On appeal by the Firm, the Commissioner (Appeals), vide order dated 14.05.2018, set aside the order in relation to release of goods on payment of Redemption Fine of Rs. 50,00,000/- noting that while the goods were liable for confiscation as the Firm being a 100% EOU was ineligible to claim Drawback, confiscation couldn’t be ordered as the said goods were not available.
The Commissioner also reduced the penalty from Rs. 15,00,000/- to Rs. 5,00,000/- on account of the conduct of the Firm noting that it had voluntarily deposited the wrongly availed Duty Drawback along with interest, in full, more so before any notice/demand by the Revenue.
The Commissioner (Appeals) observed that Duty Drawback was not admissible on the goods exported by the Firm, being 100% EOU, by virtue of proviso 2 to Rule 3 of the Drawback Rules.
The Firm challenged the order dated 14.05.2018 passed by the Commissioner (Appeals) before the CESTAT to the limited extent that the penalty imposed had been upheld. The Firm claimed that the Commissioner (Appeals) had noted that the Firm had voluntarily deposited the wrongly availed Duty Drawback and had, therefore, reduced the amount of penalty from ₹15,00,000/- to ₹5,00,000/-.
It was submitted that there was no suppression of any fact, and hence, no penalty should have been imposed.
Pursuant to the order dated 02.11.2018, passed by the CESTAT, the Firm filed an application dated 12.07.2019, seeking refund of the amount, which it had deposited with the Revenue. The concerned Authority, thereafter, issued a refund order dated 10.02.2020.
The counsel for the revenue also submitted that it is a well settled principle that a second show cause notice cannot be issued on the same subject matter. Prior to issuance of the impugned SCN, the concerned Authority had issued a Demand-cum-Recovery letter dated 12.03.2014 on the same issue, which had been set aside by the Commissioner (Appeals) by order dated 19.06.2014. He contended that since the order dated 19.06.2014 had not been appealed by the Revenue, the same had attained finality.
He submitted that despite allegedly misplacing the files, the Revenue kept on harassing the Firm by issuing the impugned SCN and the impugned notice under Section 128A(3) of the Customs Act.
The counsel contended that CESTAT had jurisdiction to entertain the matter as a competent appellate authority and pass the order dated 02.11.2018 since the Firm had filed an appeal (against order dated 14.05.2018) mainly on the question of the penalty imposed and limitation.
The counsel also argued that even if the CESTAT had no jurisdiction to entertain the matter in view of the proviso (c) to Section 129A of the Customs Act, the Revenue had waived its right to object to the same by not contesting the same before the CESTAT or appealing the impugned order.
The counsel for the Revenue vehemently countered the submissions made by the Firm. He submitted that CBEC instructions vide F. No. DGEP EOU/01/2014, dated 01.05.2014 clarifies that an EOU having been issued a Letter of Permission, is not entitled to Duty Drawback whether or not such units have obtained bonding licensing under Section 58 and 65 of the Customs Act.
He further submitted that the proviso to Rule 3 of the Drawback Rules prohibits the availment of
Drawback on export of the goods if such goods are produced or manufactured using imported materials or excisable materials or taxable services in respect of which duties or taxes have not been paid.
The counsel thus argued that the refund order dated 10.02.2020 was reviewed by the competent authority and an appeal was preferred before the Commissioner of Customs (Appeals) for setting aside the said refund order. Pursuant to this, the impugned SCN was issued against the sanctioned refund on the ground that the CESTAT did not have the jurisdiction to adjudicate on a matter relating to payment of Drawback in terms of proviso (c) under Section 129A(1) of the Customs Act.
The learned counsel submitted that the doctrine of waiver does not apply in cases where there is an explicit bar in the Customs Act itself. He stated that it is trite that there cannot be any concession in law.
The Delhi High Court Bench observed that, “We are not persuaded by the contentions advanced on behalf of the Firm. We also do not agree with the view taken by the learned CESTAT, West Zonal Bench, Ahmedabad in Ravi Technoforge Pvt. Ltd. and Ors. v. C.C.-Kandla and Ors.
Chapter X of the Customs Act not only deals with the eligibility as to Drawback but also contains the provision for its recovery in case the Drawback has been paid erroneously. In our view, even though proviso (c) of Section 129A(1) of the Customs Act mentions the word “payment”, the same would also include the recovery of the Drawback.”
“It would be erroneous to accept that the entitlement of the Firm claiming payment of Drawback cannot be considered by the learned CESTAT, but the Revenue’s demand for recovery of the erroneously paid Duty Drawback, can be considered by learned CESTAT.” the bench noted.
The bench thus observed that, “It is well-settled that the order passed by a Court, which does not have the subject matter jurisdiction to adjudicate the issue, would be a nullity. No consent, waiver or acquiescence can confer jurisdiction upon a Court, which is otherwise barred by the statute. The order, passed by a Court having no jurisdiction, is non est and its invalidity can be set up at any stage and in any proceedings.”
It was thus held that, even if it is to be assumed that the Revenue had consented to the learned CESTAT hearing the appeal, the defect of lack of jurisdiction cannot be cured.
Having arrived at the conclusion that the order passed by the learned CESTAT was without jurisdiction, the Revenue, thus, was right in observing that the refund order sanctioned in favour of the Firm pursuant to the order of the learned CESTAT, was required to be reviewed.
The Division Bench of Justice Amit Mahajan and Justice Vibhu Bakhru thus held that, “We are of the opinion that the appeal preferred by the Firm before the learned CESTAT was not maintainable and the order passed by the Tribunal is thus void ab initio.”
Further, it was held that, “The question whether the learned CESTAT can pass the judgment in respect of a case falling under proviso (c) of Section 129A(1)(b) of the Customs Act is answered in the negative. Accordingly, the impugned order dated 02.11.2018 passed by the learned CESTAT is set aside.”
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