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2025 (5) TMI 801 - HC - CustomsEOU - Seeking revocation of the alert dated 13th February 2020 and the release of the pending duty drawbacks - HELD THAT - The order of CESTAT came to be challenged before this Court in Commissioner of Customs Air Cargo Export v. M/s Sans Frontiers 2023 (12) TMI 695 - DELHI HIGH COURT and M/s Sans Frontiers v. Commissioner of Customs (Exports). The said two proceedings were decided finally on 12th December 2023 in which the Court has observed that the demand was made within a reasonable period when the Department came to know of the wrong availment of the said duty drawbacks. In respect of the belated issuance of the Show Cause Notice the Court deemed it appropriate to refrain from adjudicating on the said issue. The said judgement was challenged before the Supreme Court by the Petitioner in M/s. Sans Frontiers vs. Commissioner of Customs Air Cargo Export wherein a stay has been granted by the Court. In view of the fact that the judgment dated 12th December 2023 has been stayed there can be no justification for holding back of duty drawbacks - Let the duty drawbacks be now released to the Petitioner within a period of 30 days in accordance with law. Petition disposed off.
The core legal questions considered in this judgment include: (1) Whether the alert placed on the Import Export Code (IEC) of the petitioner justified the withholding of duty drawbacks; (2) The validity of the Show Cause Notice (SCN) dated 24th August 2015, particularly the invocation of the extended period of limitation for recovery of duty drawbacks; (3) The consequences of the appellate and revision proceedings before Customs authorities and tribunals, including the effect of the orders passed by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and the High Court; (4) The impact of the Supreme Court's stay on the High Court's December 2023 judgment on the release of duty drawbacks; and (5) The entitlement of the petitioner to the release of pending duty drawbacks in light of the above proceedings.
Regarding the first issue, the legal framework involves the Customs Act and the Foreign Trade Policy provisions governing duty drawbacks and the procedural safeguards related to alerts or suspensions on IECs. The Department placed an alert on the petitioner's IEC on 13th February 2020, leading to the withholding of duty drawbacks. This alert was subsequently removed by the Customs Department, indicating that the initial justification for withholding was no longer valid. The Court examined the sequence of events and noted that the alert was linked to ongoing appellate proceedings but was eventually lifted. The Court reasoned that since the alert was removed, the continued withholding of duty drawbacks lacked justification. The petitioner's grievance filed via CPGRAMS and the subsequent communications confirmed this factual matrix. The Court applied the law to the facts by directing the release of duty drawbacks, emphasizing that no valid alert or suspension should impede the petitioner's legitimate claims. The second issue concerns the validity of the Show Cause Notice dated 24th August 2015, which invoked the extended period of limitation to recover duty drawbacks allegedly wrongly availed by the petitioner during 2006-07 to 2013-14. The relevant legal provisions include the Customs Act's limitation period rules and the principles governing extended limitation for recovery of duties. The CESTAT had earlier set aside the SCN on the ground that the extended period of limitation was not invokable because the petitioner had voluntarily deposited the duty drawback amount along with interest upon departmental objection in 2014. The Tribunal's order expressly stated that "under the facts and circumstances the extended period of limitation is not available to the Department" and allowed the appeal, entitling the petitioner to consequential benefits. The Court's interpretation affirmed that the Department could not rely on extended limitation after the petitioner's bona fide deposit and communication. This finding was critical in establishing the petitioner's right to duty drawbacks and negating the Department's demand. Thirdly, the appellate and revision proceedings before Customs authorities and the High Court were analyzed. The Department challenged the CESTAT's order before the High Court in connected writ petitions and appeals. The High Court, in its December 2023 judgment, declined to adjudicate on the limitation issue, noting that it had been decided in favor of the Revenue by the Commissioner (Appeals) and was pending before the revision authority under Section 129DD of the Customs Act. The Court granted the petitioner an opportunity to file a revision petition and directed that it not be dismissed on limitation grounds, allowing all grounds including limitation to be raised and decided on merits. This approach balanced the rights of the Revenue and the petitioner, ensuring procedural fairness. The Court's reasoning recognized the peculiar facts where the Revenue had initially not objected and had sanctioned refunds post-CESTAT order, thereby preventing the petitioner from being left remediless. The fourth issue relates to the Supreme Court's intervention. The petitioner challenged the High Court's December 2023 judgment before the Supreme Court, which admitted the appeal and granted a stay on the impugned judgment and related notices. The Supreme Court's order effectively suspended the operation of the High Court's directions, creating a legal impasse. The High Court, in the present proceedings, acknowledged this stay and concluded that since the judgment was stayed, there was no justification for continued withholding of duty drawbacks. The Court directed the release of the pending duty drawbacks within 30 days, subject to the outcome of the Supreme Court appeal. This demonstrates the principle that interim reliefs and stays at the apex court level have overriding effect and that administrative action inconsistent with such stays cannot be sustained. Finally, the entitlement of the petitioner to the release of pending duty drawbacks was considered in light of the above issues. The petitioner had been engaged in export activities for nearly 30 years and had exited the Export Oriented Unit (EOU) scheme in 2014 with proper formalities. The duty drawbacks were being paid until June 2020 but were withheld following the alert and departmental actions. The Court found that the withholding was unjustified post removal of the alert and in view of the Supreme Court stay on the adverse judgment. The petitioner's claim for Rs. 9,13,596/- pending duty drawbacks was thus upheld. The Court directed release within 30 days, emphasizing that such release is subject to the final decision in the pending Supreme Court appeal, thereby preserving the rights of both parties pending final adjudication. The Court addressed competing arguments by the Department that justified withholding based on alerts and limitation grounds, and the petitioner's contention of entitlement to duty drawbacks and procedural impropriety in withholding. The Court's treatment was balanced, respecting the appellate and revision processes, while ensuring that the petitioner was not unduly prejudiced by administrative delays or procedural technicalities. It upheld the principle that legitimate claims should not be withheld without valid cause and that procedural safeguards must be observed. Significant holdings include the following verbatim excerpts and principles: "Under the facts and circumstances the extended period of limitation is not available to the Department, as the appellant had deposited on being so pointed out, along with interest, which is an admitted fact." "We do not consider it apposite to decide in the facts of the present case as to whether the SCN dated 24.08.2015 was issued belatedly or not since the said issue had been decided in favour of the Revenue by the order passed by the Commissioner (Appeals), and has not been adjudicated upon by the revision authority having jurisdiction under Section 129DD of the Customs Act." "In view of the fact that the judgment dated 12th December 2023 has been stayed, there can be no justification for holding back of duty drawbacks." Core principles established include: - The extended period of limitation cannot be invoked where the duty drawback amount has been voluntarily deposited along with interest upon departmental objection. - Alerts placed on Import Export Codes must be justified and removed promptly if found baseless, failing which legitimate duty drawback claims cannot be withheld. - Appellate and revision remedies under Customs law must be allowed to be exercised on merits, including limitation issues, without procedural dismissal. - Interim stays by the Supreme Court override lower court orders and administrative actions, mandating compliance with the stay. - Pending final adjudication, legitimate claims for duty drawbacks should not be unduly withheld, and administrative delays must be remedied. Final determinations on each issue are as follows: 1. The alert on the petitioner's IEC was unjustified after its removal, and thus withholding of duty drawbacks on this ground was improper. 2. The Show Cause Notice invoking extended limitation was invalid as per CESTAT's order, entitling the petitioner to benefits. 3. The petitioner was granted opportunity to file revision under Section 129DD, and limitation cannot be a ground for dismissal of such revision. 4. The Supreme Court's stay of the High Court's December 2023 judgment suspends adverse consequences, necessitating release of duty drawbacks. 5. The petitioner is entitled to release of pending duty drawbacks within 30 days subject to the outcome of the Supreme Court appeal.
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