Duty drawback on free shipping bills requires fair discretion, hearing, and a reasoned order before rejection.

Free shipping bills may be considered for All Industry Rate duty drawback without conversion, subject to the Commissioner's discretion under the proviso to Rule 12(1)(a) of the Customs, Central Excise and Service Tax Drawback Rules, 1995. That discretion must be exercised fairly, after hearing the claimant, and by a speaking order giving cogent reasons. A bare rejection without reasons or indication of hearing is contrary to natural justice and is not sustainable. The impugned communication was set aside and the matter remanded for fresh decision in accordance with law.

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Issues: Whether the rejection of the request for allowing All Industry Rate of duty drawback on free shipping bills, without conversion, was sustainable.

Analysis: The communication rejecting the request contained no reasons and did not indicate that the appellant had been heard. The governing circular clarified that free shipping bills could be considered for All Industry Rate drawback without conversion, subject to the Commissioner's discretion under the proviso to Rule 12(1)(a) of the Customs, Central Excise and Service Tax Drawback Rules, 1995. That discretion had to be exercised fairly and through a speaking order disclosing cogent reasons. The impugned order was found to be wholly bereft of justification and therefore contrary to the principles of natural justice. The authorities and circulars relied upon by the respondent were held to be distinguishable and inapplicable on the facts.

Conclusion: The rejection was not sustainable. The impugned communication was set aside and the matter was remanded for fresh decision in accordance with law and after granting an opportunity of hearing.

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