2015 (7) TMI 852 - HC - Customs

Denial of duty drawback claim - export consignment on which duty drawback was claimed by the petitioner had not been paid for by the foreign buyer - Held that - once it is inescapable that despite the petitioner s participation before the revisional authority, no other result could have followed, the complaint of breach of natural justice in declining the adjournment sought is of no merit. - The provision relied on from the Handbook of Procedures does not expressly apply to duty drawback. Indeed, duty drawback is covered by Section 75 of the said Act. The second proviso to sub-section (1) of Section 75 of the said Act clearly stipulates that when the payment for an export transaction is not received with the time permitted by the Indian exporter, the drawback would be deemed to never have been allowed unless exceptions are made by rules by the Central Government. Fundamental premise of the petitioner is completely flawed. It does not stand to reason that an exporter whose export transaction has not been paid for by the foreign buyer would jeopardise the Central Government twice over in not only availing of the cover provided by ECGC, which is a government organisation, but also seeking the benefits of the duty drawback under Section 75 of the said Act despite the failed export transaction. The basis for allowing duty drawback is that the economy would gain in the export transaction that would have been completed by the importer who has used some imported components for ultimately manufacturing the goods that are sought to be exported. When the export transaction fails in the sense that there is no accrual of foreign exchange from the overseas buyer, there can be no duty drawback that can be claimed by the exporter unless there is a specific exemption stipulated in any rules made by the Central Government. - Decided against assessee.

Summary

Issues:
1. Duty drawback claim on unfulfilled export transaction.
2. Refusal of adjournment by revisional authority.
3. Interpretation of relevant provisions under Customs Act, 1962.
4. Application of Handbook of Procedures for foreign trade policy.
5. Consideration of breach of natural justice.
6. Justification for disallowing duty drawback.
7. Legal basis for dismissing the petition.

Analysis:
1. The petitioner exported ball pens, claimed duty drawback, but the foreign buyer failed to pay. Despite recovering part of the loss through ECGC, Customs sought to roll back the duty drawback, leading to a series of appeals and revisions.

2. Petitioner argued for adjournment citing Section 122A(2) of the Customs Act, claiming entitlement to three adjournments. However, the revisional authority's decision was based on Section 129DD, not Section 122A, and the denial of adjournment did not result in manifest prejudice.

3. The petitioner referenced clause 2.25.1 of the Handbook of Procedures, asserting ECGC cover should count for benefits. However, duty drawback falls under Section 75 of the Act, which specifies conditions for drawback eligibility, particularly when payment is not received within the stipulated time.

4. The revisional authority's decision was challenged on grounds of natural justice, but the court emphasized that mere procedural lapses do not suffice unless substantial prejudice is proven. The petitioner's participation before the authority negated claims of injustice.

5. The court clarified that duty drawback cannot be claimed if the export transaction fails to generate foreign exchange, unless specific exemptions exist. Seeking benefits under Section 75 after ECGC cover for a failed transaction was deemed unjustifiable.

6. Ultimately, the petition was dismissed with costs, highlighting the flawed premise of claiming duty drawback on unfulfilled export transactions. The judgment underscored the economic rationale behind duty drawback provisions and the need for adherence to statutory requirements.

Conclusion:
The judgment elucidates the legal intricacies surrounding duty drawback claims, procedural fairness in revision proceedings, and the statutory framework governing export transactions under the Customs Act, 1962. It underscores the importance of upholding legal principles and economic considerations in adjudicating disputes related to export incentives and trade policies.