Retrospective recovery under drawback rules barred where the recovery provision was inserted only after the exports were made.

The Central Excise component of drawback paid on exports made before 06.12.1995 could not be recovered for non-realisation of export proceeds because the recovery mechanism was introduced only later by Rule 16A, inserted on 06.12.1995. The drawback rules, framed under the Customs Act and Central Excise Act, contained no prior enabling provision or procedure for such recovery, and delegated legislation under the Central Excise law could not operate retrospectively. Recovery could not therefore be fastened on drawback already granted before the insertion date, and the demand was held unsustainable with consequential relief.

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Issues: Whether the Central Excise component of drawback paid on exports made before 06.12.1995 could be recovered on the ground that export proceeds were not realized, in the absence of any prior enabling provision or procedure.

Analysis: The composite drawback scheme under the Customs and Central Excise Duties Drawback Rules, 1971 treated drawback as rebate of duty on imported materials or excisable materials used in manufacture for export. The power to frame the rules was traced to Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944. However, Rule 16A, inserted only by Notification No. 72/95-Cus. (N.T.) dated 06.12.1995, introduced the recovery mechanism for non-realization of export proceeds. Applying the principle that delegated legislation under the Central Excise law cannot operate retrospectively, and that a provision inserted later cannot govern earlier transactions, recovery could not be fastened on drawback already paid before the insertion date.

Conclusion: The demand for recovery of the Central Excise component of drawback for exports made prior to 06.12.1995 was held to be unsustainable, and the applicants succeeded.

Final Conclusion: The orders of the lower authorities were set aside and the revision application was allowed with consequential relief.

Ratio Decidendi: A recovery provision inserted into the drawback rules cannot be applied retrospectively to drawback already granted before its insertion, in the absence of an express enabling provision authorising such retrospective recovery.

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