2025 (11) TMI 141 - AT - Customs

Exporter entitled to drawback on nine garment consignments; export deemed on goods leaving India; Circular No.30/1993 does not bar

M/s Texcomash Export & Sh. N.K. Rajgarhia Versus Commissioner of Customs, New Delhi

CESTAT (AT) allowed the appeal, holding the exporter entitled to drawback on nine consignments of garments despite non-delivery in the named foreign ... Entitlement to claim drawback in respect of 9 shipments of ladies garments which did not reach Russia - HELD THAT:- The moment any good is taken to a place outside India it amounts to export and the exporter is allowed to get the refund of duty paid on importation of such goods in the form of drawback. No rider in the entire drawback rules is found with respect to any condition including that of Circular No. 30/1993 dated 28.09.1993. There is no denial on the part of the department that the remittances were received by the appellant. Had the Circular No. 30/1993 being binding in case of no third country exports the RBI would not have released the remittance in Indian rupees out of the state credit funds. This observation is sufficient to falsify the findings in the impugned order in original. It is also observed from the show cause notice itself that there has been an understanding that 9 containers shipped by Texcomash Export from Delhi to Moscow were to be taken delivery in Dubai itself on surrendering the original bills of landing by the party concern. It was observed to be a normal practice and as per law also delivery could be effected if the original bills of landing were surrendered (para 30 of show cause notice) recites the same. Not only this there were the Landing certificate issued with respect to these consignments as well that too from the Russian company. Any forgery if revealed during a further investigation being committed by the Russian company vis-a-vis the Landing certificate in the light of Drawback Rules in India is highly insufficient to deny the claim of drawback specifically when the goods have crossed Indian territory and to reach to a place outside India. Department has failed to produce any statutory provision or any other evidence to support the findings of the impugned order. The reliance on Rule 16A of Customs & Central Excise Duties Drawback Rules 1995 is also not appropriate. The provisions do not have any retrospective effect. The exports in question were made at the time prior those rules came into effect. Hence denying drawback invoking the Rule 1995 to the export of the year 1993-94 is otherwise not legally permissible. The amount of Rs. 31,66,822/- as was already refunded by the appellant - exporter to the department is wrongly appropriated by the adjudicating authority below. Finally, the order confiscating the goods has no legs to stand upon when admittedly the goods were allowed to be released provisionally in the year 1995-96 itself. The appellant is entitled to the said amount of drawback on 9 consignments of ladies garments exported by the appellant to a place outside India - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the exporter was entitled to drawback in respect of nine export shipments (ladies garments) that, according to the department, did not reach the declared foreign consignee but were delivered in a third country (Dubai). 2. Whether the adjudicating authority could disallow drawback and confiscate goods by invoking Rule 16/16A of the Customs and Central Excise Duties Drawback Rules, 1995 (and related provisions of the Customs Act) in respect of exports made in 1993-1994, including questions of retrospective application and limitation. 3. Whether reliance on Reserve Bank of India Circular No. 30/1993 and alleged contravention of FERA/RBI instructions (state credit repayment funds/third-country export financing) justified denial of drawback and confiscation under Sections 75, 76 and 113 of the Customs Act. 4. Whether the Show Cause Notice was issued by a competent officer under the Drawback Rules, and whether any jurisdictional defect vitiated the proceedings (including applicability of later Supreme Court authority concerning DRI competence). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to drawback where goods were delivered in a third country (did export occur 'to a place outside India'): Legal framework: Drawback Rules define 'Drawback' as refund of duty paid on importation in terms of section 74 of the Customs Act and define 'export' to mean taking out of India to a place outside India (Rule 2(a) and (b)). Sections 75-76 of the Customs Act deal with recovery/disallowance of drawback where conditions for entitlement are not met; Section 113 deals with confiscation. Interpretation and reasoning: The Tribunal emphasizes the plain-language test of the Drawback Rules: once goods are taken out of India to a place outside India, they qualify as export for drawback purposes. The record showed delivery orders and the fact that goods were allowed to be released provisionally at the time of export. The Tribunal found no statutory rider in the Drawback Rules conditioning entitlement on subsequent delivery to the declared consignee or on absence of third-country delivery. Further, the RBI had released remittances in Indian rupees from state credit funds, undermining the department's position that RBI rules made such receipts non-export proceeds for drawback denial. Precedent treatment: The Tribunal considered authorities relied on by parties but distinguished them to the extent they involved different factual or regulatory matrices (e.g., cases addressing specific RBI circular application or differing timelines). No precedent was overruled. Ratio vs. Obiter: Ratio - export for drawback is established when goods are taken out of India to a place outside India; subsequent delivery in a third country does not per se defeat drawback entitlement where exports left Indian territory and remittances were received. Obiter - observations on practices concerning surrender of original bill of lading and forgery allegations by foreign authorities not being decisive under Indian Drawback Rules. Conclusion: The Tribunal held the exporter entitled to drawback for the nine consignments because the goods had been taken out of India and remittances were received, and the department failed to point to any statutory provision in the Drawback Rules negating drawback on the stated facts. Issue 2 - Applicability of Rule 16/16A (1995 Drawback Rules) and retrospectivity/limitation: Legal framework: Rule 16 and newly inserted Rule 16A of the Drawback Rules, 1995 provide mechanisms for recovery of drawback found to be inadmissible. Principle of non-retrospectivity governs enactments and amendments unless expressly made retrospective. Interpretation and reasoning: The Tribunal found Rule 16A (notification dated 06.12.1995) and the Drawback Rules, 1995 (effective 26.05.1995) could not be applied retrospectively to exports effected in 1993-1994. The exports in question predated the later rules; the department relied on Rule 16A to recover drawback paid earlier, but the Tribunal held such invocation lacked legal basis where the rule was not in force at the time of export/claim. The Tribunal also treated limitation arguments and prior administrative decisions/orders (including Government/appeal orders fixing FOB value) as relevant background facts undermining the department's reliance on later rules. Precedent treatment: Decisions cited by parties regarding non-retrospectivity and applicability of RBI/FERA provisions were noted; the Tribunal relied on the established legal principle that rules cannot be given retroactive effect absent express language. Ratio vs. Obiter: Ratio - Rules introduced after the date of export cannot be applied retrospectively to deny previously-claimed drawback; therefore Rule 16A could not justify disallowance/appropriation for exports made in 1993-94. Obiter - discussion of specific prior case law cited by parties insofar as distinguishing factual matrices. Conclusion: The Tribunal held invocation of Rule 16A and similar post-dating provisions was not legally permissible to deny drawback on the contested shipments; consequently appropriation of amounts refunded earlier by the exporter was incorrect. Issue 3 - Effect of RBI Circular/FERA on drawback entitlement and confiscation under Customs Act: Legal framework: RBI Circular No. 30/1993 restricted financing of third-country exports from state credit repayment funds. FERA provisions (Section 73, etc.) and customs provisions (Sections 75, 76, 113, 114) were invoked by the department to ground denial/penal measures. Interpretation and reasoning: The Tribunal examined the department's contention that remittances received out of state credit funds and alleged contravention of the RBI circular deprived the exporter of export proceeds status and rendered the goods liable to confiscation. The Tribunal observed that the RBI had approved/released remittances in Indian rupees; had the circular operated to prohibit such treatment, RBI would not have released funds. The Tribunal further held that even if foreign authorities later found landing certificates forged, such foreign findings do not automatically negate entitlement under Indian Drawback Rules where goods had left Indian territory and statutory entitlement under domestic rules was otherwise established. The Tribunal found that the department failed to produce statutory provision or convincing evidence to link RBI circular/FERA contravention to automatic denial of drawback or to sustain confiscation under Section 113 on the facts before it. Precedent treatment: The department's reliance on FERA/RBI-related decisions was considered but found distinguishable where those cases did not involve recorded RBI remittance release or had different fact patterns. Ratio vs. Obiter: Ratio - alleged contravention of RBI circular/FERA does not automatically disentitle an exporter to drawback where remittances were received and domestic Drawback Rules are otherwise satisfied; confiscation cannot be sustained on such ground absent clear statutory linkage and evidence. Obiter - observations on interplay of foreign findings (e.g., Russian Customs) with domestic entitlement determinations. Conclusion: The Tribunal concluded RBI circular/FERA arguments did not justify denial of drawback or confiscation on the present facts; the department's findings on this ground were inadequate. Issue 4 - Competence to issue Show Cause Notice and jurisdictional validity: Legal framework: Drawback Rules prescribe competent officers for issuance of show cause notices; recent Supreme Court authority concerning competence of DRI officers was raised by the department but was argued by the appellant to be inapplicable due to differing temporal/regulatory contexts (post-2011 notification relied upon by Supreme Court). Interpretation and reasoning: The Tribunal noted the appellant's contention of jurisdictional vice - SCN issued by ADG, DRI - and the appellant's argument that later Supreme Court decisions grounded on Notification No. 44/2011-Cus did not apply to SCNs issued in 2000. The Tribunal did not rest its decision solely on this jurisdictional objection but observed other substantive defects in the department's case (see Issues 1-3) and found that on the merits the department had not made out a case for disallowance/confiscation. The Tribunal therefore set aside the impugned order without detailed reliance on the competence point as the dispositive reason. Precedent treatment: The Tribunal acknowledged apex Court authority cited by the department but distinguished its application on the basis of different foundational notification and temporal scope. Ratio vs. Obiter: Obiter - jurisdictional observations were treatment adjunctive to the main reasoning; the ultimate decision was made on substantive entitlement and rule-applicability grounds rather than on a strict competence ruling. Conclusion: Any jurisdictional objection was not essential to the disposal; the Tribunal allowed the appeal on substantive grounds, setting aside disallowance/appropriation and the confiscation order. Overall Conclusion The Tribunal held that the exporter was entitled to drawback on the nine consignments of ladies garments exported in 1993-1994: (i) the exports met the Drawback Rules' definition of 'export' once goods were taken out of India; (ii) post-dating Drawback Rules/Rule 16A could not be applied retrospectively to deny drawback; (iii) alleged contravention of RBI/FERA instructions and subsequent foreign findings did not legally negate domestic drawback entitlement on the facts; and (iv) appropriation of amounts earlier refunded and order of confiscation were unsustainable. The impugned order disallowing drawback in respect of the nine consignments and ordering confiscation was set aside and the appeal allowed.