The Delhi Bench High Court has held that duty drawback to the exporter is not allowable in the absence of sale proceedings.
Respondent no.1 issued the impugned communication to the banker of R K Overseas,the petitioner i.e., IndusInd Bank Limited [“bank”], which in substance, prevented the bank from making any debit entries in the account maintained with it by the petitioner and no “outward transactions” would be permitted in the said account until further communication was received in that behalf from respondent no.1. The petitioner has assailed the impugned communication on the ground, that it has been issued without the authority of law.
Based on the intelligence developed by DRI, Mumbai, it surfaced that the petitioner was part of a syndicate, which was involved in fraudulent/unlawful availment of duty drawback, by taking recourse to bogus dummy Importer Exporter Codes [“IECs”].
A perusal of the impugned communication would show, that all that it prevented was the outward flow of money, by prohibiting the bank from making a debit entry in the petitioner’s account maintained with it. There was no bar on the petitioner’s banker from receiving remittances from foreign buyers.
Section 75 of the Act, in which the provision for grant of duty drawback is embedded, is founded on the fact that sale proceeds are received by or on behalf of the exporter within the time frame allowed under the Foreign Exchange Management Act, 1999 [“FEMA”], else it is deemed to never have been allowed, save and except in such circumstances or conditions as is provided in the rules framed by the Central Government. The power to frame rules is provided in sub-section (2) of Section 75 of the Act.
It was observed that duty drawback has been paid to the exporter but admittedly, up until now, sale proceeds have not been received against such exports, and therefore the deeming provision incorporated in the second (2nd) proviso to Section 75 of the Act will kick in, where the duty drawback is deemed never to have been allowed.
While disposing of the petition, Justice Rajiv Shakdher and Justice Tara Vitasta Ganju allowed the petitioner to operate the impugned bank account, asthere was no legal impediment, given the fact that the provisional attachment orders which were issued to make course correction have outlived their legal efficacy.
The Court held that “in case the petitioner can obtain sale proceeds against the subject exports, it will have the liberty to approach the concerned authority for release of duty drawback, finally or provisionally, in the event, the adjudication qua the petitioner is not over within the timeframe indicated above. If approached, the concerned authority will take a decision vis-à-vis such request, as per law.”
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