Drawback-penalty

[arbs sarma]

Dear sirs

We offered discounts to foreign customers subsequent to export which resulted in short realisation of export proceeds. During audit on being pointed out by dept we paid excess Drawback along with interest. Now dept is asking us to pay penalty.

Query:

Are we liable for penalty , if so, under what section and up to what extent.

[Suryanarayana Sathineni]

Dear Friend,

There is no such express provision for imposition of penalty in case if the excess DBK with interest from the date of sanction to the date of payment of such excess DBK.

However, you can better ask the officers under what Rule, they are asking you to pay penalty.

Best Regards

Suryanarayana

[KASTURI SETHI]

Sh.Surya Narayana Ji,

Sir, In Central Excise and Service Tax, if any assessee gets excess amount of refund from Govt. because of assessee's wilful error, Section 11 A and 11 AC and Section 73 and Section 78 respectively can be invoked for recovery and imposition of penalty. Similarly, if excess drawback is sanctioned because of assessee's error, SCN can be issued for penalty under Sections 114 A and 114 AA of the Customs Act, 1962 after all drawback and rebate claims are also kinds of refund.(If you think there is no such provision for imposition of penalty for wrongful drawback claimed and sanctioned.) This is my view.

[KASTURI SETHI]

Sh.Surya Naryana Ji,

With reference to my reply dated 9.5.16, I am looking forward to your views.

Thanks & regards.

K.L.SETHI

[Suryanarayana Sathineni]

Dear Sethi Ji,

Kindly refer Rule 16 A ( Recovery of amount of Drawback where export proceeds not realised. -) of The Customs, Central Excise Duties and Service Tax Drawback Rules, for more clarity.

Best Regards

Suryanarayana

[KASTURI SETHI]

Sh.Surya Narayana Ji,

Thank you, Sir.

AI Summary

Drawback penalty exposure where post export discounts cause short realisation; recovery under Rule 16A and penalty provisions may apply. Post export discounts caused short realisation of export proceeds, leading to excess drawback which was repaid with interest; department seeks penalty. No express provision was identified specifically for penalising excess drawback with interest, though penalty may be pursued by issuing a show cause notice under Customs provisions treating drawback as a form of refund. Recovery of the drawback where proceeds are unrealised is governed by Rule 16A of the Drawback Rules.