Rangoli International Pvt. Ltd. v. Union of India & Ors.

1. The petitioner has filed the present petition, inter alia, impugning an order dated 21.10.2021/22.10.2021 (hereafter ‘the impugned order’) passed by the Additional Secretary to the Government of India, Ministry of Finance (the Revisional Authority), whereby the petitioner’s revision application [case bearing F. NO. 375/135/DBK/2018-RA captioned M/s Rangoli International Pvt. Ltd. v. Commissioner of Customs (Export), ICD, Tughlakabad, Delhi], was rejected.

2. The petitioner is, essentially, aggrieved by the demand for refund of the duty drawback amounting to ₹43,03,415/- availed by the petitioner against goods exported during the period 03.05.2013 to 28.06.2013, along with interest.

3. The petitioner had exported goods to Dubai during the aforementioned period and had availed of duty drawback in respect of the said exports. Admittedly, the petitioner did not receive the export proceeds in foreign exchange against some of the shipments. In this context, the Customs Department issued a show cause cum demand notice dated 26.04.2016, calling upon the petitioner to show cause why the amount of duty drawback aggregating ₹43,03,415/- availed by it in respect of certain Shipping Bills (ten in number) as listed in the annexure to the notice, not be recovered in terms of the proviso to Subsection (1) and Clause (ab) of Sub-section 2 of Section 75 of the Customs Act, 1962 (hereafter ‘the Customs Act’) read with Rule 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (hereafter ‘the Drawback Rules’). In addition, the petitioner was also called upon to show cause why penalty not be imposed under Section 114 of the Customs Act.

4. It appears that the petitioner did not respond to the said show cause notice. The said show cause notice was adjudicated and the Adjudicating Authority passed an order dated 17.08.2016 confirming the demand of ₹43,03,415/- along with interest on account of the duty drawback availed in respect of export shipments against which remittance in foreign exchange was not received. The Adjudicating Authority also imposed a penalty of an equivalent amount of ₹43,05,415/- under Section 114 of the Customs Act.

5. A plain reading of the said order dated 17.08.2016 indicates that the petitioner had neither responded to the show cause notice nor availed the opportunity of a personal hearing. The petitioner claims that it did not receive the notices scheduling personal hearings.

6. Aggrieved by the order-in-original dated 17.08.2016, the petitioner preferred an appeal before the Commissioner of Customs (Appeals). The said appeal was rejected by an order-in-appeal dated 13.08.2018.

7. It was contended that the order-in-original dated 17.08.2016 was passed in violation of the principles of natural justice and no notice dated 15.07.2016 issued by the Adjudicating Authority granting a personal hearing was received by the appellant. The appellant also claimed that it had Bank Receipt Certificates (BRCs) evidencing receipt of export proceeds against some of the shipping bills as listed in the annexure to the show cause notice.

8. The Appellate Authority did not accept the petitioner’s contention. He had noted that the personal hearings were scheduled by the Adjudicating Authority on three separate occasions but none had appeared on behalf of the appellant. Further, the appellant had not filed any response to the show cause notice either. The Appellate Authority also noticed that the notices fixing personal hearings were sent at the same address as the order-in-original dated 17.08.2016 and the show cause notice. Admittedly, the show cause notice and the said order were received by the appellant and therefore, the contention that it had not received the notices granting personal hearings appeared to be “a weak plea and an afterthought”. The contention that the appellant had realised the export proceeds in respect of some of the Shipping Bills in question was also rejected as, despite sufficient opportunity, the appellant had failed to produce proof of receipt of export proceeds (BRCs). The Appellate Authority, accordingly, rejected the appellants appeal.

9. The petitioner filed a revision application against the said order before the Revisional Authority, which was dismissed by the ex parte impugned order.

10. The learned counsel appearing for the petitioner has assailed the impugned order on three grounds. First, that the impugned order was passed in violation of the principles of natural justice as the petitioner was not heard. Second, that the petitioner had written off the unrealised bills in terms of the RBI Circular dated 12.03.2013 [RBI AP (DIR Series) Circular No.88]. He submitted that the petitioner was entitled to write off unrealised export bills up to a maximum of 10% of the total export proceeds realised during the previous calendar year. The petitioner had barely written off 0.6% of the unrealised bills, which was well within the permissible limit. He contended that there was no requirement to refund the duty drawback in terms of the RBI Circular as duty drawback is not an export incentive. Third, he contended that the petitioner was not required to refund the duty drawback in terms of Rule 16A(5) of the Drawback Rules.

11. We find no merit in the contention that the impugned order in original was passed in violation of the principles of natural justice. The petitioner was afforded adequate opportunity to be heard. It is not disputed that the hearings were scheduled on 22.05.2016, 25.07.2016 and 28.08.2016. However, the appellant had not appeared on either of the hearings.

12. Insofar as the petitioner’s challenge to the recovery of duty drawback is concerned, we find that the ground now sought to be urged was not urged before the Adjudicating Authority, the Appellate Authority, or the Revisional Authority. The order-in-appeal indicates that the petitioner had challenged the order-in-original dated 17.08.2016 on three grounds. First, that the same was passed in violation of the principles of natural justice as the petitioner was not afforded any opportunity of being heard. Second, that the petitioner had received remittances against most of the Shipping Bills in question but the reconciliation of BRCs with the Shipping Bills was taking some time. Third that receipts were adequately protected by the cover provided by Export Credit Guarantee and the duty drawback was not recoverable in terms of Rule 16A(5) of the Drawback Rules. It was not the petitioner’s case that drawback is not an export incentive. The Revision Application filed by the petitioner indicates that the principal ground urged by the petitioner was in terms of Rule 16A(5) of the Drawback Rules, duty drawback is not available. The petitioner also claimed that on a conjoint reading of Rule 16A(5) of the Drawback Rules and the RBI Circular dated 12.03.2013, the petitioner was entitled to write off unrealised portion of the drawback.

13. Although it is apparent that the petitioner had not raised the issues which are now sought to be raised before this Court, we consider it apposite to examine the same.

14. The RBI Circular dated 12.03.2013 relied upon by the petitioner is of no relevance to the controversy. In terms of the said Circular, Reserve Bank of India (RBI) liberalized the procedure for writing off the amounts receivable by exporters in respect of the export shipments. In terms of the said procedure, exporters were provided greater flexibility to write off the amounts due from overseas entities and the Authorised Dealers were also given wider latitude to accept requests from exporters to write off unrealised export invoices subject to the conditions as specified in the said Circular. It is material to note that the said Circular was issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (hereafter ‘FEMA’) and it does not affect the obligations under any other enactment. Any amount written off in terms of the Circular would not be considered as non-compliant with the provisions of FEMA but the same did not affect the exporter’s obligations under other enactments. The contention that write off of unrealised bills in terms of the RBI Circular dated 12.03.2013 also absolved the petitioner from refunding the duty drawback availed by the petitioner, is without merit.

15. It is relevant to refer to Section 75 of the Customs Act, which contains provisions regarding drawback. The second proviso to Section 75 is relevant and reads as under: “PROVIDED FURTHER that where any drawback has been allowed on any goods under this subsection and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall except under such circumstances or such conditions as the Central Government may, by rule, specify, be deemed never to have been allowed and the Central Government may, by rules made under subsection (2), specify the procedure for the recovery or adjustment of the amount of such drawback.”