Export rebate cannot be recovered merely because foreign exchange proceeds were not realised after duly proved export.

Export rebate under central excise law was held independent of later non-realisation of export proceeds under foreign exchange law. Once goods were exported under bond and proof of export was accepted, the bond stood discharged. Because there was no allegation that the goods were diverted or re-imported into India, non-payment by the foreign buyer could not by itself justify recovery of the rebate or sustain the connected penalty. The document therefore treats export-proceed realisation as a separate compliance issue and not a basis for reopening duly completed rebate on exported goods.

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Issues: Whether the rebate recovery and penalty were sustainable when exported goods were duly exported under bond, the export proceeds were not realised because the foreign buyer rejected part of the consignment, and the goods were neither re-imported nor alleged to have been diverted.

Analysis: The liability to realise export proceeds falls within the foreign exchange law regime, whereas rebate on export of goods is governed by the central excise law. Once goods are exported under bond and proof of export is accepted, the bond stands discharged. Non-realisation of export proceeds is a subsequent event and cannot by itself create a liability to recover duty rebate. In the absence of any allegation of diversion of the exported goods or their re-import into India, there is no basis to treat the exported goods as dutiable for purposes of rebate recovery.

Conclusion: The demand for proportionate rebate recovery and the connected penalty were not sustainable and the appeal succeeded.

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