Legal principle

An exporter invoking the Central Government's discretionary power under Rule 7A of the Re-export Rules to relax the time limit for a Section 74 drawback claim must come with clean hands, and relief can be refused where the exporter willfully retained wrongly availed CENVAT credit after knowledge of the wrongful claim.

Court decision

The writ petition was dismissed and the CBEC's order dated 18.11.2013 rejecting the time relaxation under Rule 7A was effectively upheld, with relief refused to the petitioner because it did not come to the Court with clean hands.

Facts

M/s Vishal Beverages Pvt. Ltd., a small-scale manufacturer-exporter of PET preforms, imported a machine in May 2007 under a 'Trial Basis to be Exported' declaration for re-export under Section 74 of the Customs Act, paying duty of Rs 11,69,640, and re-exported it on 12.8.2007 within three months of import. It claimed and received drawback of 93.67% of basic customs duty only, while availing CENVAT credit of the excise portion of Rs 8,58,235. A Central Excise audit found the CENVAT credit was wrongly availed contrary to Rule 3(5) of the CENVAT Credit Rules, 2004, and after a show cause notice dated 1.5.2012 the petitioner paid Rs 16,63,308 with interest and 25% penalty. The petitioner's representation seeking relaxation of the time limit under Rule 7A of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 was rejected by the CBEC by order dated 18.11.2013 on the ground that its failure was not for reasons 'beyond the control of the exporter', prompting this writ petition.

Key provisions

• Rule 4, Re-export of imported goods (Drawback of Customs duties) Rules, 1995 — Statements/Declarations to be made on exports other than by post
• Section 74, Customs Act, 1962 — Drawback allowable on re-export of duty-paid goods