Legal principle

The customs department has no power under Rule 16 of the Drawback Rules, 1995 or the Valuation Rules, 2007 to re-assess a shipping bill duly assessed at the time of export, because goods already exported are not 'export goods' under Section 2(19) and an assessed shipping bill can be questioned only by appeal under Section 128; moreover, drawback demands must be raised within a reasonable period of five years.

Court decision

The writ petitions were allowed on all three counts — limitation, absence of mechanism, and lack of power to reassess — and the order-in-original dated 25.11.2016 was quashed in favour of the petitioner-exporters and Rajesh Dhanda. The court held that demand for the period 2007-08 to September 2009, raised beyond 5 years from export/assessment, was unsustainable; that the demand under Rule 16 was unsustainable for want of a mechanism; and that the respondent had no power to reassess a shipping bill duly assessed by the proper officer at the time of export.

Facts

M/s Jairath International (proprietorship of Prithvi Raj Jairath) exported textile goods during 2007-08 to April 2012 claiming duty drawback under the Drawback Rules, 1995, filing shipping bills under Section 50 which were examined and assessed under Section 17 (by the proper officer before 8.4.2011, and by verification of self-assessment thereafter) and permitted under Section 51. The DRI investigated, searched premises on 26.4.2012, and alleged fraudulent availment of drawback by grossly overvaluing the goods in export documents. On that basis a show cause notice dated 4.9.2014 proposed rejection of the declared FOB value under Rule 8 of the Valuation Rules, 2007 read with Section 14, re-determination under Rules 6 & 8, and recovery of drawback under Rule 16 of the Drawback Rules, 1995. The Additional Commissioner, by order-in-original dated 25.11.2016, upheld the reduced FOB value, confirmed the drawback demand, and imposed penalties on the exporter-petitioners and on Rajesh Dhanda, alleged to have supplied goods at inflated prices with excess drawback passed on to him.

Key provisions

• Rule 16, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Repayment of erroneous or excess payment of drawback and interest
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 46, Customs Act, 1962 — Entry of goods on importation
• Section 51, Customs Act, 1962 — Clearance of goods for exportation
• Rule 6, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of value where value can not be determined under rules 3, 4 and 5
• Rule 8, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Computed value
• Section 2(19), Customs Act, 1962 — Definitions
• Section 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Rule 2, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Definitions
• Rule 8, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 — Rejection of declared value