Export proceeds must be realised to retain drawback; independent foreign exchange proceedings do not prevent recovery under customs law.

Realisation of export proceeds within the prescribed period was a mandatory condition for retaining drawback under the Customs Act and Drawback Rules, so non-realisation made the drawback recoverable. Independent proceedings under the Foreign Exchange Regulation Act did not affect that statutory consequence, and dropping those proceedings did not confer immunity from recovery. The condition for receipt of the full export value could not be waived or relaxed on the ground of negligence by a banker or other agency. The recovery orders were therefore sustained and the writ petition failed.

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Issues: (i) Whether proceedings under the Foreign Exchange Regulation Act, 1973, when dropped, affected the validity of recovery of drawback under the Customs Act, 1962 and the Customs and Central Excise Duties Drawback Rules, 1995; (ii) Whether the condition regarding realisation of export proceeds could be waived or exempted so as to retain the drawback amount.

Issue (i): Whether proceedings under the Foreign Exchange Regulation Act, 1973, when dropped, affected the validity of recovery of drawback under the Customs Act, 1962 and the Customs and Central Excise Duties Drawback Rules, 1995.

Analysis: The proceedings under the Foreign Exchange Regulation Act, 1973 were treated as independent penalty proceedings, distinct from the recovery of drawback under Section 75(1) of the Customs Act, 1962 read with Rule 16A of the Customs and Central Excise Duties Drawback Rules, 1995. The dropping of the foreign exchange proceedings did not alter the statutory consequence under the drawback regime, especially where the export proceeds had not been realised within the prescribed time.

Conclusion: The recovery proceedings were valid and remained unaffected by the dropping of the foreign exchange proceedings, in favour of Revenue.

Issue (ii): Whether the condition regarding realisation of export proceeds could be waived or exempted so as to retain the drawback amount.

Analysis: The drawback scheme made realisation of the full export value within the stipulated period a mandatory condition, and Rule 8 of the Foreign Exchange Rules, 1974 did not provide for waiver on the ground of negligence of the banker or any other agency. The Government also recorded that the condition relating to realisation of sale proceeds could not be waived or relaxed. Since the export proceeds were not received within time, the drawback amount became recoverable.

Conclusion: No waiver or exemption was available, and the refusal to relax the condition was upheld, in favour of Revenue.

Final Conclusion: The impugned recovery orders were sustained and the writ petition failed.

Ratio Decidendi: Where realisation of export proceeds within the prescribed period is a statutory condition for drawback, non-realisation makes the drawback recoverable, and the dropping of independent foreign exchange proceedings does not confer immunity from such recovery.

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