Legal principle

A demand of duty drawback under Rule 16 of the Drawback Rules, 1995 pursuant to a show cause notice issued more than five years after export/assessment or after 01.10.2017 (when the 1995 Rules stood repealed) is not sustainable, and the department has no power to reassess the value of goods already exported.

Court decision

All three writ petitions were allowed and the impugned orders-in-original dated 31.3.2019 (CWP Nos. 14846 & 14867 of 2019) and 2.5.2019 (CWP No. 15329 of 2019) were quashed, in favour of the petitioner-exporters, following the court's earlier judgments in Famina Knit Fabs and Jairath International.

Facts

The petitioners were manufacturer-exporters of textile goods who exported during 2010-2011 to 27.12.2012 (and 2010-2013 in one petition), claiming duty drawback under the Drawback Rules, 1995; officers physically verified the goods and permitted export under Section 51 of the Customs Act, 1962, with drawback released post-export. The DRI searched the petitioners' premises on 27.12.2012 alleging fraudulent overvaluation of exports. On that basis, the Additional Commissioner of Customs (Export) issued show cause notices dated 17.4.2017 and 30.7.2018 proposing rejection of declared FOB value under Rule 8 of the Valuation Rules, 2007 read with Section 14 of the Customs Act, re-determination under Rules 6 & 8, and recovery of drawback under Rule 16 of the Drawback Rules, 1995. The adjudicating authority passed common order-in-original dated 31.3.2019 and order dated 2.5.2019 upholding reduced FOB value, confirming the drawback demand, and imposing penalties on the exporters and their partners/directors.

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 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Rule 8, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Computed value
• Rule 8, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 — Rejection of declared value
• Section 51, Customs Act, 1962 — Clearance of goods for exportation
• Rule 20(2), Customs and Central Excise Duties Drawback Rules, 2017 — Repeal and saving
• 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