Order for Duty Drawback Recovery and Penalty Quashed for Violating Natural Justice; Case Remanded for Fresh Hearing

The HC quashed the impugned order imposing recovery of Duty Drawback and penalty under the Customs Act, 1962, on grounds of violation of natural justice. Since the petitioner paid the amounts under protest and submitted documents showing fulfillment of export obligations, the court held they must be given an opportunity for a personal hearing to contest liability. The matter was remanded to the respondent for fresh consideration on merits, ensuring adherence to natural justice principles. The court did not rule on the substantive merits of the petitioner's claims. The petition was disposed by way of remand to prevent irreparable loss to the petitioner without causing revenue loss to the respondent.

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ISSUES:

Whether the petitioner is liable to pay the Duty Drawback amount and penalty imposed under the impugned order-in-original.Whether the principles of natural justice were violated in the impugned order-in-original by not affording the petitioner an opportunity of personal hearing and to submit explanations.Whether the petitioner fulfilled the export obligations in respect of the subject Shipping Bills.Whether the matter requires remand for fresh consideration on merits and in accordance with law.

RULINGS / HOLDINGS:

On liability, the Court held that the petitioner contends they are not liable to pay the Duty Drawback amount and penalty, having fulfilled export obligations and having paid the amounts under protest.The Court found that the principles of natural justice were not adhered to, as the petitioner was not afforded an opportunity of personal hearing or to submit explanations before passing the impugned order-in-original.The Court accepted that the petitioner submitted Export Realization Certificates and other documents substantiating fulfillment of export obligations, which were not considered before passing the impugned order.The Court quashed the impugned order-in-original and remanded the matter back to the respondent for fresh consideration on merits and in accordance with law, explicitly directing adherence to the principles of natural justice and affording personal hearing to the petitioner.

RATIONALE:

The Court applied the principles of natural justice, emphasizing the necessity of affording an opportunity of personal hearing and permitting submission of explanations before passing adverse orders.The Court recognized the payment of Duty Drawback amount and penalty under protest by the petitioner, noting that no revenue loss was caused to the respondent, thereby justifying the grant of opportunity to the petitioner to defend their case on merits.The Court considered the exceptional circumstances arising from the Covid-19 pandemic and closure of the petitioner's office, which impeded proper attendance to hearings and receipt of notices, as relevant to the procedural fairness.The Court refrained from expressing any opinion on the merits of the petitioner's contentions, leaving the determination of liability to the respondent upon fresh consideration in accordance with law.

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