Drawback and interest on late export proceeds

[imran khan]

Dear Sir, i got sanctioned drawback in June, 2015 but not received export proceeds till 2018. Customs department sent a letter on 15.01.2019 for submitting the BRC. Now i got the export proceeds in March, 2019. BRC is generated now. What are my liabilities now. Whether i have to pay the interest from 2015 to March 2019?

[KASTURI SETHI]

It is a procedural lapse for not applying for extension of time for producing BRC.Read Rule 18(4) and Rule 19 of Drawback Rules, 2017 effective from 1.10.17. Also the following case laws:-

Refund of drawback not to be denied if sale proceeds realized within period extended ex post facto

The Supreme Court Bench comprising Hon’ble Mr. Justice H.L. Dattu and Hon’ble Mr. Justice Chandramauli Kr. Prasad on 4-5-2012 dismissed the Petition for Special Leave to Appeal (Civil) No. 27806 of 2010 filed by Birinder Kaur Bajwa against the Judgment and Order dated 29-4-2010 of Delhi High Court in Writ Petition (C) No. 6600 of 2008 as reported in 2010 (255) E.L.T. 511 (Del.) = 2010 (4) TMI 96 - DELHI HIGH COURT [Birinder Kaur Bajwa v. Director (Drawback), Department of Revenue].

The Delhi High Court in its impugned order had held that the refund of drawback amount recovered by Department with interest @ 6% could not be denied by applying Rule 16A(4) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 since said Rule was not applicable when sales proceeds realized within extended period, though such extension granted was ex post facto.

[Birinder Kaur Bajwa v. Director (Drawback), Department of Revenue - 2017 (350) E.L.T. A173 (S.C.)] = 2012 (5) TMI 769 - SUPREME COURT

[imran khan]

Sir, (KASTURI SETHI), thanks for your reply.

In the above case no extension was taken for realization of export proceeds. Now when export proceeds received in march 2019 and date of sanction of drawback is June,2015. As explained by you sir, Customs department is also saying that now i need not refund the amount of drawback but the interest from June, 2015 to till the date of realisation i.e. March, 2019, have to be paid as i do not have any extension from RBI. Please clarify whether i have to pay the interest or not.

[KASTURI SETHI]

You received drawback claim against the export of goods which have actually been exported. Drawback claim is not against BRC Hence no interest is recoverable..BRC is documentary evidence which you got late. It is not a case of non-receipt of export proceeds. It is not a case of non-receipt of BRC. It is a case of delay of receipt of BRC. You are not responsible for that.. Govt. is very liberal regarding export. Goods stand exported. It is a fact. You are to prove that there was reasonable cause for inordinate delay in receipt of BRC.. That was beyond your control.

Rule 19 of Drawback Rules empowers the Central Govt to relax from operation of any rule in this context. Drawback claim sanctioning authority can waive interest if you are able to convince the circumstances beyond your control.

In view of above, interest can be waived off.

[imran khan]

Sir, thanks for your guidance.

But sir its not the case of receiving BRC late. I have received payment (export proceeds) late, in March, 2019 in my Bank Account and got BRC realized within 15 days.

Now when i got payment late, after 4 years after the export. should i approach drawback sanctioning authority, requesting for waive off the interest. Please guide.

[KASTURI SETHI]

Pl. refer to your latest query. It means you have retained Govt. money with you for four years. So go through the provisions of the Customs Act, 1962.

In terms of Section 75 A(2) of the Customs Act, 1962 read with Section 28 AB where any drawback is paid to the claimant erroneously or it has become otherwise recoverable under the Customs Act or Drawback Rules, the claimant shall, on demand pay the said drawback amount within two months from the date of demand with interest @13% per annum (this rate may have been increased by now) from the date of payment such drawback to the claimant till the date of recovery of such drawback.

. So interest has to be paid.

AI Summary

Drawback interest liability when export proceeds are realized late - interest may be payable; waiver possible under rule 19. Issue: whether interest is payable when drawback was sanctioned but export proceeds and BRC were realised only after several years. Drawback entitlement relates to exported goods and the BRC is proof of realisation; delay in obtaining it is a procedural lapse but may justify waiver under the Drawback Rules where delay was beyond the claimant's control. Separate statutory recovery provisions permit recovery of drawback with interest from the date of payment until recovery unless the sanctioning authority exercises its relaxation power to waive interest.