2016 (2) TMI 320 - CGOVT - Customs

Customs rules: No retrospective application of amended Rule 16A(5) to 2008 exports

The Government upheld the lower authorities' decision that the amended Rule 16A(5) of the Customs, Central Excise Duties, and Service Tax Drawback Rules, ... Recovery of duty drawback granted earlier due to non realization of foreign exchange - scope of sub-rule (5) of Rule 16A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 introduced as per Notification No. 30/2011 - retrospective effect to be given or not - Held that:- as Rule 16(A)(5) of the Customs, Central Excise and Service Tax Drawback Rules, 1995, as amended, was made effective w.e.f. 11-4-2011 only and all export proceeds due to be realized prior to this date would not be covered by the relaxation provided thereunder. The provision of sub-rule (5) of Rule 16(A) ibid have rightly been held to be inapplicable by the lower authorities in the present case. The lower authorities have concluded that write off of foreign exchange on default of foreign buyer and compensation of the same by way of ECGC does not entitle the exporter to drawback benefit. It is an undisputed fact that at the material time i.e. the period to which the impugned Shipping Bills belong and the period when the realization of export proceeds become due pertains to a period when the said RBI circulars and provisions of FTP 2009-14 were in force and Rule 16A(5) did not exist. The detailed findings of lower authorities regarding recovery of drawback amount in view of the said RBI circulars have also not been challenged by the applicant and Government finds that such findings of lower authorities and orders thereof continue to hole ground. Recovery of drawback with appropriate interest confirmed - Decided against the appellant. Issues Involved:1. Applicability of Rule 16A(5) of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995.2. Retrospective effect of amendments beneficial to the assessee.3. Compliance with procedural and substantive laws.4. Validity of RBI circulars and Foreign Trade Policy provisions in the context of drawback recovery.Issue-wise Detailed Analysis:1. Applicability of Rule 16A(5) of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995:The applicant contended that despite failing to realize foreign remittance, their loss was compensated by the Export Credit Guarantee Corporation (ECGC) and their authorized dealer, Canara Bank, wrote off the requirement of the export sale proceeds realization. They argued that the drawback availed should not be recovered as per the amendment made in Rule 16A by the insertion of sub-rule (5) via Notification No. 30/2011, dated 11-4-2011. However, the lower authorities held that the eligibility under said sub-rule (5) is applicable only for exports made after 11-4-2011 and not before that. The Government examined the statutory provisions and noted that the amended Rules came into effect only from 11-4-2011, whereas the impugned exports pertain to February/March 2008. Therefore, the provision of sub-rule (5) of Rule 16A, which came into effect only from 11-4-2011, cannot be extended to exports of 2008. The contention regarding the retrospective nature of said sub-rule (5) of Rule 16A was found untenable.2. Retrospective Effect of Amendments Beneficial to the Assessee:The applicant argued that amendments beneficial to the assessee could have retrospective effect, citing various case laws including the Himachal Pradesh High Court's decision in CCE v. Himachal Aluminium Pvt. Ltd. and the Supreme Court's ruling in Rochiram & Sons v. Union of India. However, the Government noted that the facts of the case differed from the cited judgments as an entirely new rule was introduced, and the notification clearly stated that the amendment would come into force from 11-4-2011. Thus, the principle of retrospective effect did not apply here.3. Compliance with Procedural and Substantive Laws:The applicant submitted that procedural laws might be retrospective unless shown to the contrary, and that the amended rule should apply as the demand notice was issued on 15-4-2014. The Government, however, held that the law prevailing on the date of issue of the show cause notice would apply, and since the amended Rule 16A(5) came into effect only from 11-4-2011, it did not apply to the exports of 2008. The Government emphasized that the simple and plain wording of applicable statutory provisions should be strictly adhered to, and no liberal interpretation was permissible.4. Validity of RBI Circulars and Foreign Trade Policy Provisions:The lower authorities had also considered various RBI circulars and the Foreign Trade Policy (FTP) 2009-14, concluding that write-off of foreign exchange on default of a foreign buyer and compensation by ECGC did not entitle the exporter to drawback benefits. The Government noted that these provisions were in force during the period of the impugned exports and that Rule 16A(5) did not exist at that time. The detailed findings of the lower authorities regarding the recovery of the drawback amount were not challenged by the applicant and were upheld by the Government.Conclusion:The Government found no infirmity in the impugned Order-in-Appeal confirming the recovery of the drawback with appropriate interest and upheld the same. The Revision Application was rejected as devoid of merit.