The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the officers of Directorate of Revenue Intelligence (DRI) can issue show cause notice (SCN) in drawback cases.
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that since DRI officers were also appointed as officers of Customs, as per the law laid down by the Supreme Court in its Review Judgment on Canon India – II, the circular would also be applicable to them and it cannot be said that they do not have jurisdiction to issue SCN in the case of drawback. Moreover a circular does not have the same force as that of a notification issued under the Act, appointing officers of Customs and cannot override it.
The Directorate of Revenue Intelligence (DRI) investigated the alleged fraudulent export activities by M/s. SSK Knit Apparels, Tirupur. It appeared that the firms were fictitious, export values were inflated, and undue drawback benefits were claimed without realizing export proceeds. A show cause notice (SCN), dated 06.10.2006 was issued by DRI to the Custom House Agent/ Customs Broker (CHA/ CB), appellant for allegedly filing shipping bills without verifying declarations and other such acts facilitating the wrongful drawback claims of Rs. 1,05,81,796.
The OIO confirmed recovery of the drawback amount along with interest from the exporter. A penalty of Rs.5,00,000/- was also imposed on the appellant herein i.e. M/s. Manasa Impex Services under section 114(iii) of the Customs Act.
The appellant contended that the SCNs were issued by DRI. The DRI Officers are not competent officers to issue these notices in terms of Section 75 of the Customs Act, 1962, read with Rule 16 and Rule 16A of the Central Excise and Service Tax Drawback Rules, 1995.
The department contended that the jurisdiction issue relied upon by the Advocate concerns the recoverability of irregular availability of drawback from exporters by invocation of Rule 16 and where the SCNs have been issued by D.R.I. However, the issue in the present appeals is whether penalties can be imposed under Section 114/117 of the Act on CHAs and other persons who have facilitated the fraud. Hence the appeals must fail on the grounds of challenging the issue of SCN by DRI. Further, mens rea is not a required ingredient for imposition of penalty under section 114 of the Act and hence penalty has been correctly imposed.
The tribunal held that section 117 pertains to an act for which no express penalty is elsewhere provided for such contravention or failure. The section will not apply to the present case where allegations against the appellant pertain to their duties as a CHA/ CB and are covered by the CHALR which is a special law and will prevail over a general provision. Further the section also includes the act of abetment, which has not been demonstrated by revenue to have been done by the appellant. Hence the charge fails and the section is of no relevance to the facts of the case.
Case Details
Case Title: Manasa Impex Services Versus Commissioner of Customs (Preventive)
Case No.: Customs Appeal No. 290/2009
Date: 21.08.2025
Counsel For Appellant: S. Murugappan, Advocate
Counsel For Respondent: Anandalakshmi Ganeshram
