Duty drawback claims fail without proof of fictitious exports, diversion, or returned proceeds; limitation also barred the proceedings.

Duty drawback, confiscation and penalty proceedings were held time-barred because they were initiated after an inordinate delay and the conditions for invoking the extended limitation period were not established. On merits, the demand also failed because the record did not prove fictitious exports or return of export remittances: the exporter produced shipping documents and bank realisation certificates, the bank re-verified the certificates, and there was no evidence of diversion of goods or repayment of proceeds. The drawback demand, confiscation and penalty were therefore unsustainable, and consequential relief followed.

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Issues: (i) whether the demand of duty drawback and the connected confiscation and penalty proceedings were barred by limitation, and (ii) whether the material on record established that the exports were fictitious or that export remittances had been returned so as to justify denial of drawback and confiscation.

Issue (i): whether the demand of duty drawback and the connected confiscation and penalty proceedings were barred by limitation

Analysis: The proceedings were initiated after a long lapse of time from the point when the customs authorities had already closed the matter and directed defreezing of the bank account. The delay was held to be inordinate, and the ingredients necessary for invoking the extended period were not shown to exist.

Conclusion: The extended period was not available to the Revenue and the limitation issue was decided in favour of the assessee.

Issue (ii): whether the material on record established that the exports were fictitious or that export remittances had been returned so as to justify denial of drawback and confiscation

Analysis: The allegations were found to rest on vague and unsubstantiated material. The exporter had produced shipping documents and BRCs, the bank had re-verified the genuineness of the BRCs, and no evidence was brought to show diversion of goods to a third country or return of export proceeds by the exporter. On the contrary, the record showed that the goods had been exported and the payments had been received.

Conclusion: The merits issue was decided in favour of the assessee and the drawback demand, confiscation, and penalty could not be sustained.

Final Conclusion: The appeal succeeded, the impugned order was set aside, and the assessee was held entitled to consequential relief in accordance with law.

Ratio Decidendi: A drawback demand and allied confiscation or penalty cannot be sustained on conjecture or unverified foreign enquiry material when the exporter has produced export documents and bank-certified realisation evidence and the Revenue fails to prove non-export, diversion, or return of sale proceeds.

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