2024 (9) TMI 334 - HC - Customs

Recovery of drawback benefit availed along with applicable interest and penalty - demand notice issued against deceased person - Effect of the death of the exporter on recovery proceedings - HELD THAT - Section 75(1) of the Act stipulates that if the sale proceeds in respect of the goods of which duty drawback has been allowed are not received by or on behalf of the exporter in India within the time stipulated under Foreign Exchange Management Act, 1999, such drawback shall be deemed never to have been allowed and the Central Government may by Rule made under Sub Section (2) specify the procedure for the recovery of adjustment of the amount of such drawback. The issuance of notice is sine qua none before affecting the recovery of erroneously availed drawback. The requirement of issuing notice in the name of a right person and not a dead person is not merely a procedural requirement but is a condition precedent to the notice being valid in law. Such notice was issued in the name of the exporter on 28.09.2018, after his death. The notice therefore suffers from fundamental jurisdictional error as it was issued in the name of a dead person and the proceedings initiated consequent to such notice were also proposed in the case of a dead person. No steps were taken to bring the legal heirs of the deceased/exporter on record at the time of issuance of the Demand cum Show Cause Notice. The issue of the validity of a notice issued against a dead person is no longer res integra. Since the Show Cause Notice dated 28.09.2018 was issued against a dead person and the Order-in-Original has been passed against the dead person without bringing on record his legal representatives, therefore, the Order-in-Original confirming the demand of duty drawback amounting to Rs. 22,62,352/- and penalty of Rs. 1,00,000/- and the subsequent notice of recovery are liable to be set aside. The Since the Show Cause Notice dated 28.09.2018 was issued against a dead person and the Order-in-Original has been passed against the dead person without bringing on record his legal representatives, therefore, the Order-in-Original confirming the demand of duty drawback amounting to Rs. 22,62,352/- and penalty of Rs. 1,00,000/- and the subsequent notice of recovery are liable to be set aside. Petition allowed.

Summary

Issues:
1. Recovery proceedings initiated against the petitioner.
2. Validity of the Demand cum Show Cause Notice issued against a deceased person.
3. Effect of the death of the exporter on recovery proceedings.
4. Legal heirs' liability for government dues.
5. Compliance with procedural requirements in recovery proceedings.

Analysis:
1. The Writ Petition sought relief from recovery proceedings initiated against the petitioner following a Demand cum Show Cause Notice. The petitioner's late husband, an exporter, availed duty drawback benefits under the Customs Act, but after his demise, the respondent initiated recovery proceedings against him, leading to the present challenge.

2. The issuance of the Demand cum Show Cause Notice against a deceased person was challenged on the grounds that it lacked jurisdictional validity. The notice was issued posthumously, without involving the legal heirs of the deceased exporter, which was deemed a fundamental error. Legal precedents were cited to highlight the importance of issuing notices to the correct person and the consequences of failing to do so.

3. The death of the exporter raised questions regarding the continuation of recovery proceedings and the liability of legal heirs for government dues. The petitioner argued that no recovery could be sought from the deceased's legal heirs based on legal principles established by previous court decisions, emphasizing that the law did not provide for such recovery from legal heirs in this context.

4. The judgment delved into the legal framework governing recovery proceedings and the obligations of legal heirs in cases of deceased exporters. Citing relevant statutes and case law, the court emphasized the procedural requirements for recovery and the necessity of involving legal heirs in such proceedings to ensure due process and legal validity.

5. Ultimately, the court sided with the petitioner, ruling in favor of quashing the recovery proceedings initiated against the deceased exporter and setting aside the Order-in-Original confirming the duty drawback demand and penalty. The judgment underscored the importance of adhering to procedural norms and ensuring the involvement of legal heirs in recovery actions against deceased individuals to uphold legal integrity and fairness.