2019 (10) TMI 1056 - HC - Customs

Show Cause Notice Quashed: No Authority to Reassess Exported Goods Post-Rule Repeal, Confirms Legal Precedents.

The HC quashed the show cause notice dated 18.12.2018, finding it unsustainable under Rule 16 of the Drawback Rules, 1995, due to its issuance post-repeal ... Recovery of duty drawback already granted - declared FOB value of the goods already exported has been proposed to be rejected - maintainability of petition - HELD THAT:- In the present writ petitions, concededly identical questions as raised in Famina Knit Fabs & Jairath International [2019 (9) TMI 970 - PUNJAB AND HARYANA HIGH COURT] are raised - In both judgments, we have held that inspite of availability of alternative remedy available under 1962 Act, writ petition is maintainable in view of involvement of pure questions of law as well jurisdiction and law enunciated by Hon’ble Supreme Court and followed by this court time and again. While taking cue from Sections 28, 28AAA & 75 of 1962 Act and relying upon judgment of Hon’ble Supreme Court in the case of Commissioner of Central Excise versus Larsen and Toubro [2015 (8) TMI 749 - SUPREME COURT] as well this court in the case of Laqshya Media Pvt. Ltd. Vs State of Punjab and Others [2016 (8) TMI 1460 - PUNJAB AND HARYANA HIGH COURT] we have held that mechanism is absent in Duty Drawback Rules, 1995 thus demand under Rule 16 of Drawback Rules, 1995 is not sustainable. Petition allowed. Issues:1. Quashing of show cause notice rejecting FOB value of exported goods and demanding drawback.2. Effect of repeal of duty drawback rules 1995.3. Absence of mechanism to raise demand of duty drawback.4. Power of Respondent to reassess value of goods already exported.Analysis:Issue 1: Quashing of show cause notice rejecting FOB value of exported goods and demanding drawbackThe Petitioner sought quashing of a show cause notice dated 18.12.2018, which proposed to reject the Free on Board (FOB) value of goods already exported and demanded drawback under Rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. The Directorate of Revenue Intelligence (DRI) alleged that the Petitioner fraudulently availed duty drawback by overvaluing exported goods. The Joint Commissioner of Customs issued the impugned notice, calling for rejection of FOB value and re-determination of value under the Valuation Rules, 2007. The Court examined the case and found that the issues raised were similar to previous judgments, where it was held that the show cause notice issued after 1.10.2017 invoking Rule 16 of Drawback Rules, 1995 was not sustainable. The Court also ruled that the mechanism was absent in the Duty Drawback Rules, 1995, making the demand under Rule 16 unsustainable. Additionally, the Respondent was found to have no power to reassess the value of goods already exported, based on recent legal precedents.Issue 2: Effect of repeal of duty drawback rules 1995The Court considered the effect of the repeal of duty drawback rules 1995 w.e.f. 01.10.2017 on the present case. It was determined that the show cause notice issued after the repeal date invoking Rule 16 of Drawback Rules, 1995 was not sustainable. The Court relied on Rule 20(2) of Drawback Rules, 2017, which saved certain rights/actions accrued under the previous rules. This led to the conclusion that the notice issued post-repeal date was not valid.Issue 3: Absence of mechanism to raise demand of duty drawbackThe absence of a mechanism in the Duty Drawback Rules, 1995 to raise a demand under Rule 16 was a crucial point in the judgment. The Court held that due to the lack of a proper mechanism in the rules, any demand made under Rule 16 was not sustainable. This finding was supported by legal provisions and precedents from higher courts, establishing the invalidity of such demands.Issue 4: Power of Respondent to reassess value of goods already exportedThe question of whether the Respondent had the power to reassess the value of goods already exported was addressed in the judgment. While initially left open in a previous case, the Court, considering recent legal developments, ruled that the Respondent did not possess the authority to reassess the value of goods that had already been exported. This decision was based on the law laid down by the Hon'ble Supreme Court and was a significant factor in quashing the impugned show cause notice.In conclusion, the High Court allowed the writ petition, quashing the show cause notice dated 18.12.2018 and providing detailed legal reasoning for its decision based on precedents and legal principles.