2025 (6) TMI 1289 - HC - Customs

Declination of drawbacks claimed by the petitioner for the exports made by him by way of two shipping bill - entitlement to drawback on exports made given the delay in realization of export proceeds beyond the stipulated period under Section 75 of the Customs Act 1962 - sufficient evidence to prove - whether there is any extension of time by the AD-I Bank? - HELD THAT - According to the petitioner Ext.P11 was issued in response to Ext.P10 wherein it is mentioned by the AD-I bank that all the transactions of the petitioner has now been regularised. All the export repatriation of the petitioner were regularized and at present there is no pending shipping bills for payment for the said exporter. Thus based on the aforesaid documents the specific case advanced by the learned counsel for the petitioner is that Ext.P6 issued by the AD-I bank read with Ext.P11 would clearly indicate that the period stipulated in Rule 16A stand extended and therefore the petitioner is entitled to get the drawbacks as the same falls within the extended period as permissible under the said rules. When going through the impugned orders it is discernible that the documents referred to above could not be considered because evidently Ext.P11 was obtained by the petitioner after original order which is Ext.P9. Moreover Ext.P11 does not contain a specific reference to the earlier transactions and therefore the mere production of the same by itself cannot be an indicator of the fact that there was an extension of time by the AD-I bank as stipulated in Rule 16A. These are matters to be examined. However it is to be clarified that if the amount received by the petitioner as evidenced by Ext.P6 on 29.04.2015 was within the periof of an extension as required in Rule 16A then the petitioner should be entitled to get the benefit of drawback. It is also to be noted that going by Ext.P15 Master Circular it is not necessary that extension should come from the Reserve Bank of India itself as the AD-I bank are authorized to grant such extension. Therefore the question as to whether the receipt of the amount as evidenced by Ext.P6 was on the basis of extension as contemplated under Section 16A is a matter which requires to be considered. Since such a consideration is could not be made in any of the impugned orders it needs to have a reconsideration. Conclusion - The extension of time for realization of export proceeds under Rule 16A can be granted by AD Category-I banks authorized by the RBI not solely by the RBI. This writ petition is disposed of quashing Exts.P9 P12 and P14 with a direction to the 3rd respondent to reconsider the claim of the petitioner and take a fresh decision after taking into account all the documents referred to in this writ petition and with specific reference to Ext.P6 P10 and P11 - petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the petitioner is entitled to drawback on exports made, given the delay in realization of export proceeds beyond the stipulated period under Section 75 of the Customs Act, 1962 and Rule 16A of the Central Customs and Excise Duties and Service Tax Drawback Rules, 1995;
• Whether the extension of time for realization of export proceeds required under Rule 16A can be granted by the AD Category-I bank, or only by the Reserve Bank of India (RBI);
• Whether the petitioner has produced sufficient evidence to prove that such an extension of time was granted by the AD-I bank in respect of the export proceeds;
• Whether the impugned orders rejecting the drawback claim were legally sustainable in light of the documents produced by the petitioner;
• The proper procedure for recovery of drawback amounts where export proceeds are not realized within the prescribed or extended time period;
• The extent to which the delay in repatriation of export proceeds affects the entitlement to drawback, and the proportionality of recovery in such cases.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to drawback under Section 75 of the Customs Act and Rule 16A of the Drawback Rules

The legal framework governing drawback claims is Section 75 of the Customs Act, 1962, which permits exporters to claim drawback on export goods subject to fulfillment of prescribed conditions. Rule 16A of the Central Customs and Excise Duties and Service Tax Drawback Rules, 1995, specifically addresses the recovery of drawback amounts where export proceeds are not realized within the time limit prescribed under the Foreign Exchange Management Act, 1999 (FEMA), including any extensions.

The Court examined the provisions of Rule 16A, which mandates recovery of drawback if export proceeds are not realized within the prescribed period or any extension thereof, subject to a procedure involving notice and opportunity to produce evidence. The rule also provides for proportional recovery where only part of the proceeds are realized, and for repayment of recovered drawback if proceeds are subsequently realized within the permitted period.

The Court noted that the petitioner's drawback claim was declined on the ground that the export proceeds were realized beyond the stipulated period, and no valid extension of time was proven.

Issue 2: Authority to grant extension of time for realization of export proceeds

Rule 16A refers to extensions of the realization period granted by the Reserve Bank of India. The petitioner contended that, as per the Master Circular (Ext.P15), AD Category-I banks are authorized by the RBI to grant such extensions for the purpose of drawback claims.

The Court acknowledged that the Master Circular indicates that extensions can be granted by AD-I banks, and thus it is not mandatory that only the RBI itself grant such extensions. This interpretation broadens the scope of who can authorize extensions, which is critical to the petitioner's claim.

Issue 3: Sufficiency of evidence of extension of time granted by the AD-I bank

The petitioner relied on documents Ext.P6, P10, and P11 to establish that the AD-I bank granted an extension of time for realization of export proceeds. Ext.P6 was a certificate from the AD-I bank indicating receipt of amounts corresponding to the shipping bills on specified dates. Ext.P10 was a communication from the petitioner requesting regularization of delayed remittances, and Ext.P11 was a response from the AD-I bank stating that all transactions had been regularized and no pending shipping bills remained.

The respondents argued that Ext.P11 was obtained post the original order (Ext.P9) and did not specifically refer to earlier transactions or explicitly confirm the extension of time under Rule 16A. They relied on documents (Ext.P3 and P4) from the Directorate General of Foreign Trade indicating the date of realization as 13.06.2016, without evidence of any extension granted.

The Court observed that the impugned orders did not consider Ext.P11 and related documents, and that the question of whether the extension was validly granted by the AD-I bank required fresh examination. The Court emphasized that if the amounts evidenced by Ext.P6 were received within an extended period as contemplated under Rule 16A, the petitioner would be entitled to drawback.

Issue 4: Application of law to facts and procedural fairness

The Court found that the impugned orders (Ext.P9, P12, and P14) failed to consider the petitioner's documentary evidence of extension and receipt of export proceeds within the extended period. The Court noted that the petitioner should be given an opportunity to produce further evidence to substantiate the claim of extension by the AD-I bank.

The Court directed reconsideration of the claim by the 3rd respondent, with a fresh decision after taking into account all relevant documents, including Ext.P6, P10, and P11, and allowing the petitioner to produce additional evidence. The Court mandated that the fresh order be passed within three months after hearing the petitioner.

Issue 5: Treatment of competing arguments

The Court balanced the petitioner's reliance on the Master Circular and bank communications against the respondents' reliance on official trade documents and the absence of explicit extension evidence. It found that the petitioner's documents raised a plausible case for extension, which was not adequately addressed by the authorities. The Court refrained from deciding the factual correctness of the extension but emphasized the need for a proper adjudication on the merits.

3. SIGNIFICANT HOLDINGS

The Court held:

"... even though Rule 16A specifically refers to the extension of the period by the RBI, the Master Circular published in this regard indicates that the RBI authorized the AD-I Banks to grant such extension for the purpose of claiming the benefit of drawback."

"... the question as to whether the receipt of the amount as evidenced by Ext.P6 was on the basis of extension as contemplated under Section 16A is a matter which requires to be considered. Since such a consideration could not be made in any of the impugned orders, I am of the view that it needs to have a reconsideration."

"... the petitioner should be entitled to get the benefit of drawback if the amount received as evidenced by Ext.P6 was within the period of an extension as required in Rule 16A."

The Court quashed the impugned orders (Ext.P9, P12, and P14) and directed the 3rd respondent to reconsider the petitioner's drawback claim afresh, taking into account all relevant documents and permitting the petitioner to produce further evidence, with a decision to be rendered within three months.

The core principles established include:

• The extension of time for realization of export proceeds under Rule 16A can be granted by AD Category-I banks authorized by the RBI, not solely by the RBI;
• The burden lies on the exporter to produce evidence of such extension to claim drawback;
• Administrative orders rejecting drawback claims must consider all relevant documentary evidence, including subsequent communications from banks;
• Where procedural lapses occur in adjudication, courts may remit the matter for fresh consideration rather than decide on the merits themselves;
• Proportional recovery of drawback applies where only part of export proceeds are realized within the stipulated or extended period.