2018 (1) TMI 30 - HC - Customs

Recovery of Duty Drawback - Rule 16A of the Customs & Central Excise Duty Drawback Rules, 1995 - Held that - reliance placed in the case of Surinder Singh Versus Union of India & Others 2016 (10) TMI 566 - SUPREME COURT , where it was held that Rule 16A is a clarificatory provision clarifying the position of law which already exists in the form of Section 75 of the Customs Act, 1962, and therefore, will have retrospective effect - the recovery u/s 16A is not permissible - petition allowed.

Summary

Issues:
Challenge to duty drawback recovery order under Customs Act, 1962 - Retrospective application of Rule 16A of Duty Drawback Rules, 1995 - Export done before rule enactment - Jurisdiction of Customs authorities - Validity of show cause notice under Section 16A.

Analysis:
The petitioners, engaged in garment export, challenged a duty drawback recovery order of ?31,55,816 by Assistant Commissioner of Customs. The petitioners received Duty Drawback of ?32,81,895, with ?31,55,816 related to unrealized exports. The petitioners appealed to Commissioner (Appeals) and Ministry of Finance, both dismissed. The High Court considered the retrospective application of Rule 16A of Duty Drawback Rules, 1995, in light of the Supreme Court's ruling in Surinder Singh v. Union of India, 2016. The High Court observed that Rule 16A, introduced in 1995, clarified existing law under Customs Act, 1962, regarding drawback recovery when export proceeds were not realized.

The Court noted the contention that the rules were not applicable during the exports done between March to May 1995, as the rules came into force on May 26, 1995. The department's case relied on an extension granted for export recovery until November 13, 1996, during which no foreign exchange was received. The Court emphasized that the purpose of duty drawback is defeated if foreign exchange is not received. The respondents argued against the petitioners' claim based on the timing of export and rule enforcement.

The Court considered the show cause notice issued under Section 16A, emphasizing the distinction between Customs and Excise Components of drawback. The authority's order under Section 16A was analyzed, with the Court accepting the petitioners' argument that Section 16A cannot have retrospective effect, aligning with the Surinder Singh case. Consequently, the Court allowed the writ petition, quashing the show cause notice dated November 26, 1997, based on the retrospective effect of Rule 16A as clarified by the Supreme Court.

In conclusion, the High Court's judgment focused on the retrospective application of Rule 16A of Duty Drawback Rules, 1995, in the context of duty drawback recovery for unrealized exports. The Court's decision was influenced by the Supreme Court's interpretation in Surinder Singh case, emphasizing the need for foreign exchange realization for duty drawback eligibility and the non-retrospective nature of Section 16A. The judgment provided clarity on the jurisdiction of Customs authorities and the validity of show cause notices under relevant sections.