The Delhi High Court (HC) in its recent judgment refused to allow duty drawback against pre-deposit under section 129E of the Customs Act, 1962.
Colour Cottex Pvt Ltd, the petitioner is engaged in exporting readymade garments. It exported the said goods under 211 Shipping Bills during the period 01.01.2014 to April 2015. It was claimed duty drawback of approximately ₹10.16 crores. The petitioner claimed that the uploaded the details of nine Shipping Bills on the DGFT portal. Although the duty drawback in respect of the exports under the said Bills was sanctioned, the same has not been disbursed.
It was stated that the officials of respondent no. 1 conducted search operations on the premises of the petitioner on the allegation that the petitioner had wrongfully claimed the benefit of the ‘Focus Market Scheme.’ After the investigations were conducted, respondent no.1 issued a show-cause notice.
The Commissioner passed an order, dropping proceedings for confiscation of goods and recovery of duty drawback of ₹10,16,78,637/-. Further directed recovery of ineligible Focus Market Scrips of ₹1,58,44,432/- and further imposed a penalty of ₹50,00,000/- under Section 114(iii) and 114AA of the Customs Act, 1962.
The petitioner requested for release of the duty drawback, which was due in respect of the aforementioned Shipping Bills (nine in number), the details of which were uploaded on the DGFT Portal, on 28.07.2015.
The petitioner filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) against the order dated 15.09.2021 which was not been entertained as yet for want of pre-deposit of the requisite amount. The petitioner requested that the amount of duty drawback be adjusted against its liability to make a pre-deposit in terms of Section 129E of the Customs Act, 1962 (‘the Customs Act’).
Mr Singh, counsel appeared for the respondents, stated that in respect of the remaining four shipping bills, remittances have not been received and duty drawback in respect of those Shipping Bills cannot be released at this stage. Further stated that there is no provision under the Customs Act for adjustment of any amount due to an exporter against the obligation to make a pre-deposit to pursue an appeal under Section 129E of the Customs Act, 1962.
Justice Vibhu Bakhru and Justice Amit Mahajan held that the relief directing adjustment of duty drawback against the petitioner’s obligation to make a pre-deposit under Section 129E of the Customs Act is not permissible. The nature of a claim for duty drawback is materially different from the nature of the deposit required to avail a right of the appeal as provided under the Customs Act.
The Court granted liberty to the petitioner to utilize the funds received for complying with its obligation to make a pre-deposit to maintain an appeal before the CESTAT.
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