Legal principle

'Reasons are heart and soul of an order' — a statutory power such as the Central Government's Rule 7A power to relax the drawback rules must be exercised fairly by a reasoned order, and a short delay (here 22 days beyond the six-month Rule 5 limit) caused by reasons beyond the exporter's control deserves condonation.

Court decision

The writ petition was allowed in favour of the petitioner: a writ of certiorari quashed the letter dated 3.10.2005, the 22-day delay was condoned, and mandamus was issued directing the respondent to pay Rs.18,74,035/-; any recovery by adjustment was declared null and void, payment was to be made within four weeks, failing which interest at 12% per annum would run until payment; no costs.

Facts

A firm imported photographic colour films paying customs duty of Rs.19,12,281/- (bill of entry dated 16.4.2003) and re-exported the same goods within about four months to an overseas buyer, M/s Jamaica Trading EST, vide shipping bill dated 12.8.2003. On its Section 74 Customs Act, 1962 claim, it received drawback/refund of Rs.18,74,035/- on 8.4.2004. The department issued a show cause notice treating the payment as erroneous because the claim was filed six months and 22 days after the export order, beyond the three months extendable by a further three months under Rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. The Assistant Commissioner confirmed recovery of Rs.18,74,035/- under Rule 7 of the Rules read with Section 28 of the Act, and the appeal was dismissed by the Commissioner (Appeals). The petitioner's subsequent Rule 7A application to the Central Government met only a cryptic letter dated 3.10.2005 stating the request 'has not been considered'.

Key provisions

• Rule 7A, Re-export of imported goods (Drawback of Customs duties) Rules, 1995 — Power to relax
• Rule 5, Re-export of imported goods (Drawback of Customs duties) Rules, 1995 — Manner and time of claiming drawback on goods exported other than by post
• Section 74, Customs Act, 1962 — Drawback allowable on re-export of duty-paid goods
• Rule 7, Re-export of imported goods (Drawback of Customs duties) Rules, 1995 — Repayment of erroneous or excess payment of drawback and interest
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded