Mere Procedural Lapse Not Penal Offence in Excess Customs Duty Drawback Claim: CESTAT Quashes Penalty u/s 114 & 114AA [Read Order]
CESTAT Bench orders Consequential Relief whilst Setting Aside Penalties under Customs Act, 1962
Penalty - cestat - taxscan
Penalty - cestat - taxscan
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Chennai has set aside penalties imposed on appellant and its Managing Director for allegedly availing excess duty drawback by understating freight charges in export shipping bills.
The appellant, Janani International Pvt. Ltd., exported cotton made-ups on a CIF/C&F basis and claimed drawback after deducting freight and insurance from the declared value. The Directorate of Revenue Intelligence (DRI) alleged that the actual freight incurred was higher than the amounts declared, leading to an excess drawback of ₹10.19 lakh. A show cause notice was issued proposing recovery of the amount, confiscation of goods, and penalties under Sections 114 and 114AA of the Customs Act, 1962.
Appearing for the appellant, Advocate A. Niraikulam argued that actual freight was unknown at the time of filing the shipping bills, and average freight was declared as permitted under CBEC Circular No. 44/2000-Cus. He submitted that the excess drawback was voluntarily repaid along with interest even before issuance of the show cause notice, and that there was no willful misdeclaration or fraudulent intent.
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The department, represented by Anandalakshmi Ganeshram, maintained that the appellant firm had wrongly declared the freight amount and continued to avail ineligible excess drawback fraudulently. She further contended that the Managing Director of the appellant firm never informed Customs about the undue receipt of drawback on account of mis-declaration of freight.
The Tribunal, presided by Vasa Seshagiri Rao (Technical Member), observed that declaring average freight in such cases was in accordance with the Board’s Circular. It was noted that while the appellants failed to review and rectify the freight declaration post-export, such lapse did not amount to misdeclaration. The Tribunal found no evidence of intentional wrongdoing or personal involvement of the Managing Director.
Accordingly, the CESTAT held that the penalties under Sections 114 and 114AA were unsustainable and ordered them to be set aside, while upholding the recovery of excess drawback and interest already paid.
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