Refund on free warranty replacement exports cannot be denied for non-realisation of export proceeds; final refund orders cannot be reopened

Refund or duty drawback could not be denied for free warranty replacement exports where invoices and the underlying arrangement showed that no export proceeds were due, so bank realisation evidence was not required in those circumstances. Once the refund orders had attained finality and were not challenged, the Revenue could not reopen the matter through a separate show cause notice or parallel recovery proceedings. The Tribunal accordingly set aside the impugned order, allowed the appeal, and granted consequential relief.

---

---

Issues: (i) Whether the refund/duty drawback could be denied on the ground that export proceeds were not realised in respect of goods exported as free warranty replacement. (ii) Whether the Revenue could recover the sanctioned refund by initiating parallel proceedings after the refund orders had attained finality.

Issue (i): Whether the refund/duty drawback could be denied on the ground that export proceeds were not realised in respect of goods exported as free warranty replacement.

Analysis: The exports were made under a warranty arrangement and the records showed that the goods were supplied free of cost as replacement parts. The invoices and agreement on record supported the claim that no monetary consideration flowed from the foreign buyers for those replacement goods. In such a situation, the requirement of producing bank realisation evidence could not be insisted upon as a ground to deny the benefit, since no export proceeds were due for recovery in the first place.

Conclusion: The denial of refund/duty drawback on the ground of non-realisation of export proceeds was not justified and was against the appellant.

Issue (ii): Whether the Revenue could recover the sanctioned refund by initiating parallel proceedings after the refund orders had attained finality.

Analysis: The refund orders had already attained finality and had not been challenged by the Revenue. Once such orders stood final, the Revenue could not seek to reopen the matter through a separate show cause notice and parallel recovery proceedings. The attempt to recover the sanctioned refund in that manner was impermissible in law.

Conclusion: The parallel recovery proceedings were unsustainable and the issue was decided against the Revenue.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief, the Tribunal holding that the refund could not be denied on the stated grounds and that parallel recovery proceedings were not maintainable.

Ratio Decidendi: Where export goods are supplied as free warranty replacement and no export proceeds are due, denial of refund on the basis of non-realisation of foreign exchange is unjustified; further, once a refund order has attained finality, it cannot be reopened through parallel recovery proceedings.

---