Drawback on exported mobile phones survives where unlocking is only configuration, and delayed show-cause action fails.

Unlocking or activating mobile phones before export was treated as mere configuration to make the goods usable, and not as the goods having been "taken into use" under the drawback rules; on that interpretation, drawback remained available. A clarificatory circular taking the contrary view was held unsustainable in light of the binding High Court interpretation. The article also notes that a show-cause notice issued more than four years after the export-related events, without adequate justification, made the resulting demand and penal proceedings unsustainable. The adjudication order was consequently set aside and relief followed.

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Issues: (i) Whether unlocking or activating mobile phones before export amounts to goods having been "taken into use" so as to disqualify drawback under the applicable drawback rules; (ii) Whether the demand and consequential penal action could be sustained despite issuance of the show-cause notice after an extended delay.

Issue (i): Whether unlocking or activating mobile phones before export amounts to goods having been "taken into use" so as to disqualify drawback under the applicable drawback rules.

Analysis: The relevant proviso to the drawback rule was construed in light of the binding interpretation already given by the High Court, which held that unlocking or activating a mobile phone is only configuration to make the product usable and does not amount to "taken into use". The clarificatory circular taking the contrary view was held unsustainable, and the Tribunal treated that interpretation as having attained finality.

Conclusion: The phones were not treated as "taken into use", and the appellant remained entitled to drawback.

Issue (ii): Whether the demand and consequential penal action could be sustained despite issuance of the show-cause notice after an extended delay.

Analysis: The notice was issued more than four years after the export-related events, and no adequate justification for such delay was accepted. In that setting, the proceedings for recovery and penalties were held to be unsustainable.

Conclusion: The delayed show-cause notice and the consequential demand and penalties were held unsustainable.

Final Conclusion: The appeal succeeded, the adjudication order was set aside, and the appellant obtained consequential relief.

Ratio Decidendi: Unlocking or activating mobile phones for export is mere configuration and not "taken into use" under the drawback rules, and an unjustified long delay in issuing the show-cause notice renders the consequent demand and penalties unsustainable.

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