2011 (5) TMI 718 - HC - Customs

Proof of realization of export proceeds - duty drawback - held that - once the RBI after examining the matter issued the letter dated 25-5-2004 indicating in clear words that the shipment bills of the petitioner were written off without surrender of duty drawback, the proper course available to the Customs Department was to drop the recovery proceedings. The RBI has clearly stated in his counter affidavit that the letter dated 25-5-2004 was issued in accordance with the provisions of relevant Rules and Act. Thus the stand of the RBI supports and strengthens the case of the petitioner. - Decided in favor of assessee.

Summary

Issues Involved:
1. Competence of customs authorities to issue a show cause notice.
2. Interpretation of Rule 16A of the Customs and Central Excise Duties Drawback Rules, 1995.
3. Applicability of Reserve Bank of India (RBI) circulars and permissions.
4. Legal validity of the recovery proceedings initiated by the customs authorities.

Detailed Analysis:

Competence of Customs Authorities to Issue Show Cause Notice:
The primary question addressed was whether customs authorities can issue a show cause notice for the recovery of duty drawback without receiving relevant information from the RBI. The court emphasized that Rule 16A (as it stood prior to its amendment on 15-2-2006) clearly states that a show cause notice can only be issued "on receipt of relevant information from the Reserve Bank of India." The customs authorities failed to show any information received from the RBI, making their actions unauthorized and erroneous.

Interpretation of Rule 16A of the Customs and Central Excise Duties Drawback Rules, 1995:
The court noted that Rule 16A, prior to its amendment, explicitly required the receipt of relevant information from the RBI before issuing a show cause notice. The court emphasized that the rule's language was clear and unambiguous, and it was not within the court's purview to add or alter the statute's language. The court cited precedents to underline that statutory provisions must be interpreted as they are, without judicial amendments.

Applicability of Reserve Bank of India (RBI) Circulars and Permissions:
The petitioner argued that the RBI had extended the time for realization of export proceeds and eventually allowed the write-off of export bills without the surrender of duty drawback. The court examined the RBI's circulars and the Handbook of Procedures, which permitted authorized dealers to write off export bills upon the production of documentary proof from the Export Credit Guarantee Corporation of India (ECGC). The court found that the RBI had acted within its powers under the Foreign Exchange Management Act (FEMA), which overrides the Customs Act in such matters.

Legal Validity of the Recovery Proceedings Initiated by the Customs Authorities:
The court found that the customs authorities had issued the show cause notice and initiated recovery proceedings prematurely, without awaiting the extended period for realization granted by the RBI. The RBI's letter dated 25-5-2004, which allowed the write-off without surrender of duty drawback, was binding and should have led to the cessation of recovery proceedings. The court held that the customs authorities' actions were legally infirm and quashed the impugned orders and recovery proceedings.

Conclusion:
The court concluded that the customs authorities acted beyond their jurisdiction by issuing a show cause notice without receiving relevant information from the RBI. The court quashed the impugned orders and consequential recovery proceedings, thereby allowing the writ petition. The judgment emphasized adherence to statutory provisions and the overriding effect of special enactments like FEMA over general laws like the Customs Act.