Customs Duty Drawback Recovery u/r 16A initiated after more than 3 years: Madras HC orders to Reconsider [Read Order]

The bench of Justice Abdul Quddhose, despite having the legal precedent of the same court which ruled that the claims beyond 3 years shall be unsustainable, chose to reconsider the matter by protecting the revenue and also ensuring the fair hearing to the petitioner.

The petitioner, M/s. New Sun Innovaation had challenged the Order-in-Original dated 16.12.2023, which sought recovery of ₹74.57 lakh in duty drawback benefits availed against 211 shipping bills for the period from 2004 to 2014. The impugned order was passed following a show cause notice issued on 10.05.2018 several years after the exports had taken place.

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The petitioner contended that the show cause notice itself was time-barred, being issued more than a decade after the export transactions.

The petitioner’s counsel submitted that in M/s.L & T Construction Equipment Ltd.'s case, this Court has agreed with a view taken by the Gujarat High Court pertaining to a duty drawback claim and has held that three years period is the maximum period, which can be considered as a reasonable one for recovery of any amount erroneously paid.

The petitioner further submitted that the impugned proceedings were concluded without a proper opportunity of hearing, as personal hearing notices were allegedly sent to the petitioner’s old address and thus never received.

While the department insisted that it had followed due process, claiming the petitioner had even appeared for a personal hearing and failed to produce documents like Bank Realisation Certificates (BRCs), the Court was not satisfied with the evidence presented.

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The department failed to prove that the personal hearing notices were effectively served. It was revealed that the notices had been returned undelivered and sent to an outdated address despite the petitioner having updated its address, as shown by its DGFT certificate.

The Court observed that even though the department relied on public notices and notice board postings to inform exporters about BRC requirements, such general dissemination could not substitute specific and effective communication in individual adjudication proceedings.

While refraining from outrightly declaring the recovery as unsustainable, the bench chose to quash the impugned order and remanded the matter back to the Assistant Commissioner for fresh adjudication.

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The authorities were directed to grant a personal hearing to the petitioner, consider its plea on limitation, and permit submission of explanations and documents including BRCs.

The Court ordered the proceedings to be concluded within twelve weeks from the receipt of its order and specifically instructed that any further notices must be sent to the petitioner's current address as stated in the writ petition.

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