Composite drawback scheme permits recovery where export proceeds are not realised, including both customs and excise components.

Drawback recovery was treated as permissible where export proceeds were not realised, because the drawback scheme under the Customs Act and Central Excise Act was construed as a composite scheme covering both customs and excise components. The inserted proviso to Section 75 created the substantive liability to forfeit drawback on non-realisation of export proceeds, and the later Rule 16A provided valid recovery machinery for that liability. The recovery provision was applied in aid of the earlier statutory liability, so recovery could be enforced for earlier exports as well. The scheme was read to prevent loss of revenue where export proceeds were not received.

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Issues: Whether drawback recovery was permissible where export proceeds were not realised, including in respect of both customs and central excise components, and whether the subsequent recovery machinery could be applied to earlier exports.

Analysis: The drawback scheme was treated as a composite and single scheme framed under Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944. The definition of drawback under the rules covered rebate of duty on imported as well as excisable materials used in the manufacture of exported goods, and Rule 3 made the entitlement subject to the Customs Act, the Central Excise Act, and the Drawback Rules. The proviso inserted in Section 75 by Section 120 of the Finance Act, 1991 created the substantive liability where export proceeds were not realised, while Rule 16A inserted by Notification No. 72/95 dated 6-12-95 provided the recovery machinery. The later machinery provision was treated as enforceable in aid of the earlier substantive liability, and the scheme was construed in light of the object of drawback and the need to avoid loss of revenue when export proceeds were not received.

Conclusion: Recovery of drawback was held valid, including against the excise component, and the order setting aside recovery was not sustained.

Ratio Decidendi: Where the statute has already created the liability to forfeit drawback on non-realisation of export proceeds, a subsequently introduced procedural or machinery rule may validly be applied to recover that liability, and drawback under the scheme is to be treated as a composite concept covering both customs and excise components.

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