• Dated 18^th September, 2026

GOODS ALREADY EXPORTED FROM INDIA ARE NOT LIABLE TO CONFISCATION UNDER SECTION 113 OF THE CUSTOMS ACT; CONSEQUENTIAL PENALTIES UNDER SECTION 114 SET ASIDE BY CESTAT

BRIEF FACTS:

The petitioner, a garment designing company, intended to export garments to its customer in the USA. Although the petitioner had obtained an Importer Exporter Code (IEC) from the DGFT, it had not obtained GST registration and was new to the export business. Accordingly, the petitioner approached Nitco Air Express, a freight forwarder, for assistance in handling the export and Customs clearance formalities. Nitco represented that the goods could be exported through another exporter and accordingly undertook the export process. However, instead of filing the shipping bills in the petitioner's name, Nitco filed the shipping bills in the name of Hiba Enterprises by using its IEC, without the knowledge or consent of Hiba Enterprises. Consequently, the garments belonging to the petitioner were exported to the USA using Hiba Enterprises' IEC. During the course of investigation, the Department found that Nitco had used the credentials of Hiba Enterprises for exporting goods belonging to various parties, including the petitioner. Thereafter, the Department issued a Show Cause Notice to the petitioner and other noticees alleging improper export and use of another person's IEC. The adjudicating authority held the goods liable to confiscation under Section 113 of the Customs Act, ordered recovery of duty drawback amounting to ₹1,810 along with applicable interest, and imposed penalties under Sections 114 and 114AA on the petitioner and its directors, Ms. Himalyani Gupta and Mr. Gaurav Gupta.

ASSESSEE'S CONTENTION:

The petitioner contended that it had not received any duty drawback and, therefore, recovery of the drawback amount of ₹1,810 along with interest from the petitioner did not arise. It was submitted that no shipping bill had been filed in the petitioner's name and, consequently, no drawback could have been credited to the petitioner's account. The petitioner further contended that the goods had already been exported and were therefore no longer liable to confiscation under Section 113 of the Customs Act. With regard to the penalties, the petitioner submitted that neither the petitioner nor its directors had filed any documents, made any statements, or furnished any declarations before the Customs authorities. The shipping bills had been filed by Nitco using the IEC of Hiba Enterprises without Hiba's knowledge, and the petitioner, being new to the export business, had relied upon Nitco for handling the export formalities. Accordingly, there was no knowledge or intention on the part of the petitioner or its directors to make any false or incorrect declaration, and therefore the penalty under Section 114AA was also not sustainable.

DEPARTMENT'S CONTENTION:

The Department, through its Authorised Representative, supported the order passed by the adjudicating authority and subsequently upheld by the Commissioner (Appeals). The Department's case was that the goods had been exported under the IEC of Hiba Enterprises instead of the petitioner's own IEC, and therefore the export was in violation of the applicable Customs and Foreign Trade provisions. On this basis, the Department sought to sustain the denial and recovery of duty drawback of ₹1,810 along with interest, as well as the penalties imposed on the petitioner and its directors under Sections 114 and 114AA of the Customs Act, 1962. The Department also supported the finding that the manner in which the goods were exported using another entity's IEC rendered the goods liable to confiscation under Section 113 and consequently attracted the penal provisions under Section 114.

DECISION:

The Tribunal held that the recovery of duty drawback of ₹1,810 from the petitioner was not sustainable, as the shipping bills had been filed using the IEC of Hiba Enterprises and, therefore, the drawback would have been credited to the account of the IEC holder. Since no shipping bill had been filed in the petitioner's name, there was no basis for recovering the drawback from the petitioner, unless the Department could establish that the drawback had actually been paid to the petitioner. The Tribunal further held that the goods had already been exported out of India and, therefore, had ceased to be "export goods" within the meaning of Section 2(19) of the Customs Act. Accordingly, such goods were no longer liable to confiscation under Section 113, which applies to export goods. Consequently, the penalties imposed under Section 114 also could not be sustained. With regard to the penalty under Section 114AA, the Tribunal observed that the petitioner and its directors had neither filed any documents nor made any statements or declarations before Customs. The shipping bills containing the incorrect IEC were filed by Nitco. Since there was no evidence establishing that the petitioner or its directors had knowledge or intent to make a false declaration, statement or document, the penalty under Section 114AA was also held to be unsustainable. Accordingly, the Tribunal allowed all three appeals and set aside the impugned order with consequential relief

BTA's COMMENT:

The Tribunal allowed the appeals and set aside the impugned order with consequential relief. The decision clarifies that goods which have already been exported out of India cannot be treated as "export goods" for the purpose of confiscation under Section 113 of the Customs Act, and consequently, penalties under Section 114 cannot be sustained. Further, penalty under Section 114AA requires evidence of knowledge or intent to make, sign or use a false or incorrect declaration or document. In the absence of such evidence against the petitioner and its directors, the penalty under Section 114AA was also set aside. The Tribunal also held that recovery of drawback from the petitioner could not arise where the drawback was not credited to the petitioner's account.

Case Reference- Himalyani Gupta Vs Commissioner of Customs, ACC Exports, New Delhi [Final Order Nos. 51391-51393/2026 in Appeal Nos. C/50468, 50471, 50472/2026, decided on 24-8-2026]

Author: Madhurima Bose