Customs Duty Drawback Recoverable where Sale Proceeds Not Realised, Mere Receipt of Remittance Not Sufficient: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal held that customs duty drawbacks are recoverable when sale proceeds are not realised correctly or have not been followed through properly and that mere receipt of remittance is not sufficient to avail the benefit of drawback.

The appeal dealt with the order that demanded recovery of drawback paid to BA International under Rule 16 of the Customs and Central Excise Duties and Service tax Drawback Rules 1995. The Commissioner imposed penalties under Section 114(i) and (iii) of the Act.

The facts of the case explain that from 1999 to 2003, BA had exported garments while availing the benefit of the drawback scheme. Later, when an order was passed on 26.03.2006, it was found by the Income Tax Department that BA was involved in fraudulent exports. Investigation was initiated and Central Excise, Jaipur was placed as the common adjudicating authority.

The revenue department argued that since BA was not a manufacturer nor an exporter of mentioned items, therefore a fraudulent claimant of the benefit of drawback. The remittance collected were regarding gems and jewellery and were obtained from other persons rather than had been the authentic buyers, as it was claimed.

The appellant argued that even after examinations, no objections were made at the time of export by the custom officers and that there was no proposal to impose a penalty in the show cause notice.

The two member bench comprising Justice DilipGupta (President) and P. V. Subba Rao (Technical) held that the remittances were from persons not connected with the garments exported. The bench further held that as per Rule 16A of the Drawback Rules, the sale proceeds have to be realised and not any remittance would count. Since the purported buyer was not even from the same country in some cases, it is not possible to accept any remittance as the sale proceeds of the goods. Therefore, the tribunal held that recovery of drawback needs to be sustained as there is no prescribed time limit to recover it. However, the penalty under section 114 has been set aside.

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