CESTAT Mumbai Grants Customs Exemption On Re-Imported Buffalo Meat, Quashes ₹45.82 Crore Demand

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a customs duty demand of ₹45.82 crore, a redemption fine of ₹6 crore and penalties imposed on a Mumbai-based exporter of frozen buffalo meat.

The case concerned the re-import of meat that had earlier been exported and was subsequently brought back into India before being processed and re-exported.

A Bench of Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban held that Allanasons Private Limited had established the linkage between the goods originally exported, later re-imported, and subsequently re-exported after processing. The Bench held that the company was entitled to the customs duty exemption claimed on the re-imported goods.

The tribunal observed, “This modus operandi adopted by the appellants clearly demonstrates that the correlation between the reimported goods and exportation of those goods upon completion of the requisite processes are established.”

The dispute arose from a show-cause notice issued by Customs authorities. The authorities denied the exemption claimed on the re-imported frozen buffalo meat. They also confirmed a differential customs duty demand of ₹45.82 crore along with a redemption fine and penalties.

The department alleged that the goods had not been returned for commercial reasons. It also alleged mismatches between the exported and re-imported goods, including differences in dates of slaughter, dates of production, place of slaughter, meat types and quantities. According to the department, the company had failed to maintain proper inventory controls to establish the required correlation.

Allanasons contended that only a small fraction of its exports, amounting to approximately 0.22% of total exports, was re-imported because of commercial exigencies. These included rejection by foreign buyers due to packing issues, shortage of funds with buyers, price renegotiations, foreign exchange fluctuations, and similar commercial reasons.

The company further contended that the duty drawback availed at the time of export had been repaid with interest. It also contended that the re-imported goods were transported, processed, and re-exported under the supervision of Customs and Central Excise authorities.

After examining the record, the Tribunal observed that the re-imported goods were cleared under customs supervision and transported to the appellant's facility in sealed containers. The goods were received under departmental supervision and subsequently re-exported after processing under the supervision of Central Excise officers.

The tribunal observed that the documentary record established the linkage between the exported goods, their re-import and their subsequent re-export.

The Tribunal observed, “Thus, under such circumstances, the correlation between the reimported goods and those subsequently exported were clearly established and upon an objective and subjective satisfaction, the bond executed by the appellants was duly cancelled by the department.”

The tribunal further observed that the bonds executed by the appellant at the time of re-import had been cancelled by the department after verification of compliance with the applicable conditions. It held that proceedings seeking recovery of customs duty could not be sustained after cancellation of the bonds.

The tribunal held, “It is a settled position of law that once a bond is cancelled, no demand can be raised alleging violation of conditions of such execution of bond.”

The tribunal also held that the appellant had complied with the requirements applicable to re-imported goods exported under claim of duty drawback. It noted that the drawback benefits had been repaid along with interest at the time of re-import.

The tribunal observed that the benefit available under the relevant exemption notification could not be denied merely because it had not been specifically claimed at the initial stage.

Referring to the appellant's repayment of drawback with interest before clearance of the re-imported goods, it held that the benefit could not be curtailed on that ground.

Concluding that Allanasons was entitled to the exemption claimed on the re-imported goods, the tribunal set aside the impugned order. It accordingly allowed the appeals.

For Appellants: Advocate Anurag Mishra, Sanya Bhatia, Chartered Accountant

For Respondent (Revenue): Shri Mahesh Patil, Authorized Representative (for the Revenue)