2025 (8) TMI 181 - HC - Customs

Order demanding duty drawback recovery quashed for lack of personal hearing and time-barred claim under limitation rules

The HC quashed the impugned order demanding recovery of duty drawback from the petitioner, holding that the petitioner was not afforded a personal ... Recovery of availed duty drawback from the petitioner - petitioner has not received any personal hearing notice from the respondents -Violation of principles of natural justice - HELD THAT:- In the decision relied upon by the learned counsel for the petitioner in M/s. L & T Construction Equipment Ltd.'s case, this Court has agreed with a view taken by the Gujarat High Court pertaining to a duty drawback claim and has held that three years period is the maximum period, which can be considered as a reasonable one for recovery of any amount erroneously paid. In fact as seen from the said decision, this Court had also taken into consideration, the judgment of the Hon'ble Supreme Court in the case of Government of India vs. Citedal Fine Pharmaceuticals [1989 (7) TMI 100 - SUPREME COURT], wherein the Hon'ble Supreme Court has held that any demand by any statutory authority will have to be made within a reasonable period. This Court therefore, held in M/s.L & T Construction Equipment Ltd., [2025 (3) TMI 1513 - MADRAS HIGH COURT] that if the claim is made beyond the period of three years, the claim is unsustainable. However, in the counter filed by the respondents, the respondents have stated that several public notices were issued by the respondents and the petitioner was duly informed about the need for submission of Bank Realisation Certificates for the relevant period, public notices even if given will not suffice the purpose of recovering the availed duty drawback from the petitioner as recovery will have to be made only by following the due procedure established under law. The petitioner has not received the personal hearing notices said to have been sent by the respondents prior to the passing of the impugned order-in-original - The petitioner was not granted an opportunity to submit his explanation as to why they are not liable to refund the availed duty drawback claim - The petitioner categorically contends that the duty drawback claim is barred by limitation in view of the inordinate delay in sending the show cause notice pertaining to the exports made by the petitioner for the year from 2004 to 2014. The impugned order-in-original, dated 16.12.2023 passed by the 1st respondent is hereby quashed and the writ petition is allowed by remanding the matter back to the 1st respondent for fresh consideration on merits and in accordance with law - Petition allowed by way of remand. ISSUES: Whether the demand for recovery of availed duty drawback beyond three years from the date of respective shipments is barred by limitation under the Customs Act, 1962.Whether the impugned order-in-original was passed in violation of principles of natural justice due to non-receipt of personal hearing notices by the petitioner.Whether the issuance of show cause notice after a lapse of more than a decade from the date of exports affects the validity of the recovery demand.Whether public notices and departmental display suffice to inform the exporter of the requirement to produce Bank Realisation Certificates (BRCs) for duty drawback claims. RULINGS / HOLDINGS: The Court held that 'three years period is the maximum period, which can be considered as a reasonable one for recovery of any amount erroneously paid' and that a claim made beyond three years is 'unsustainable.'The impugned order-in-original was quashed because the petitioner was not afforded a 'personal hearing' and did not receive the personal hearing notices, thus violating principles of natural justice.The issuance of the show cause notice after a lapse of more than a decade was found to be barred by limitation, rendering the recovery demand invalid unless reconsidered with due procedure.The Court found that public notices and departmental display alone do not satisfy the requirement for recovery of duty drawback; recovery must be made 'only by following the due procedure established under law.' RATIONALE: The Court applied Section 75(1) and Section 75A(2) of the Customs Act, 1962, and Rule 16A of the Customs and Central Excise Duties Drawback Rules, 1995, alongside established principles of limitation and natural justice.The Court relied on precedent affirming that 'any demand by any statutory authority will have to be made within a reasonable period,' citing the Supreme Court's decision in Government of India vs. Citedal Fine Pharmaceuticals.The Court emphasized adherence to principles of natural justice, requiring that the affected party receive proper notice and an opportunity for personal hearing before passing adverse orders.The Court noted that the respondents failed to prove that the petitioner received the personal hearing notices, which were sent to an outdated address, undermining the validity of the impugned order.The Court directed remand for fresh consideration on merits, mandating that personal hearing notices be sent to the petitioner's current address and that the petitioner be permitted to submit explanations, including the plea of limitation.