Customs Duty Drawback Fraud: Delhi HC Allows Appeal on 'Beneficial Owner' Applicability with Pre-deposit Adjustment [Read Order]

The High Court of Delhi, allowed an appeal by the petitioner against penalties and demands in a customs duty drawback fraud case, held that the term ‘beneficial owner’ applied since the Show Cause Notice ( SCN ) was issued after the 2017 amendment, and permitted adjustment of the ₹2 crore already deposited toward the pre-deposit.

Neeraj Bhanupratap Singh,appellant-assessee, filed a petition under Articles 226 and 227 of the Constitution of India challenging the Order-in-Original dated 11th July 2025, by which the Adjudicating Authority had imposed penalties and raised demands.

The case arose from a Show Cause Notice issued on 8th March 2024, alleging that the appellant was involved in a duty drawback fraud. Investigations revealed that he controlled 56 entities using multiple Import Export Codes (IECs) obtained through forged KYC documents.

These entities were used to export highly overvalued goods to claim undue duty drawback benefits and IGST refunds. The goods were allegedly procured from the black market, and fake high-value invoices were generated with the help of an associate to support export valuations before Customs.

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Out of the 56 entities, 36 were confirmed to be under the appellant’s control. Based on recorded statements and seized documents, the Adjudicating Authority imposed penalties totaling ₹1,34,96,000.

The petitioner counsel, argued that the petitioner was wrongly treated as the beneficial owner of the entities and considered an ‘exporter’ under Section 2(20) of the Customs Act, 1962. He stated that the term ‘beneficial owner’ was added to the definition only in 2017 and could not be applied for the period before the amendment.

He also argued that the petitioner was not given a proper hearing and was denied the right to cross-examine witnesses.

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Justice Prathiba M Singh and Justice Shail Jain observed that since the SCN was issued on 8th March 2024, after the 2017 amendment, the term ‘beneficial owner’ could be applied to the petitioner. As the petitioner’s counsel agreed to approach the Commissioner (Appeals), the court did not make further observations on merits.

The court allowed the petitioner to file an appeal before the Commissioner (Appeals) by 15th October 2025 and directed that it should not be dismissed as time-barred and must be decided on merits. It also clarified that the observations made would not affect the final decision of the appeal.

The petitioner’s counsel stated that more than ₹2 crores had already been paid during the investigation and requested a waiver of pre-deposit. The court directed that the deposited amount be adjusted for filing the appeal and disposed of the petition along with pending applications.

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