AD-I Banks Can Grant Extension For Export Drawback Claims | RBI Direct Approval Not Mandatory | Kerala HC Quashes Rejection Orders
Isabella Mariam
The High Court of Kerala Single Bench of Justice Ziyad Rahman A.A. quashed three orders issued by customs authorities that had declined a claim for drawback benefits. The Court directed the competent customs authority to reconsider the matter afresh after evaluating all relevant documents and materials submitted by the petitioner. The Bench held that "it is not necessary that extension should come from the Reserve Bank of India itself as the AD-I bank are authorized to grant such extension" and stated that if the repatriated amounts fell within the extended period permitted by the authorized dealer bank, the petitioner would be entitled to claim the benefits.
The petitioner, a private limited company engaged in the export of garments to various countries, approached the High Court of Kerala seeking to challenge the rejection of drawback claims pertaining to two specific shipping bills dated 01.07.2014 and 09.07.2014. The drawback claims had been denied on the ground that the export proceeds were received beyond the permissible time limit as specified under Section 75 of the Customs Act, 1962 and Rule 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.
Initially, the Deputy Commissioner of Customs (Drawback) issued an order dated 09.05.2017 (Exhibit P9), rejecting the drawback claim. This was followed by the dismissal of an appeal before the Commissioner of Customs (Appeals) through an order dated 30.07.2018 (Exhibit P12). A further revision petition filed before the competent authority was also rejected via an order dated 25.01.2023 (Exhibit P14). These three orders were assailed by the petitioner in the present writ petition.
The respondents—Union of India, the Commissioner of Customs, and the Deputy Commissioner of Customs—filed a statement asserting that the orders had been passed in accordance with law since the petitioner failed to establish that the export proceeds were realized within the permissible time limit or within a duly granted extension. The respondents relied upon documents issued by the Directorate General of Foreign Trade (Exhibits P3 and P4), which indicated the date of realization of the foreign exchange proceeds as 13.06.2016. They argued that there was no documentary evidence showing that the Reserve Bank of India or any AD-I bank had granted an extension for the delay.
In contrast, the petitioner produced several documents to show that the delay in realization of the proceeds was regularized by the AD-I bank. These included Exhibit P6 (a certificate issued by M/s City Union Bank Limited dated 30.03.2017), Exhibit P10 (a request letter to the bank dated 12.06.2017), and Exhibit P11 (a bank certificate dated 28.06.2018 confirming that all transactions of the petitioner had been regularized and no shipping bills were pending).
The petitioner submitted that, under the applicable Master Circular (Exhibit P15) issued by the Reserve Bank of India, authorized dealer category I banks were empowered to grant extensions for realization of export proceeds, and therefore the requirement under Rule 16A of the Drawback Rules could be satisfied by such bank-issued regularization.
The Court recorded the relevant provisions governing drawback claims, specifically Section 75 of the Customs Act and Rule 16A of the Drawback Rules. The Court observed "even though Rule 16A specifically refers to the extension of the period by the RBI, the Master Circular published in this regard indicates that the RBI authorized the AD-I Banks to grant such extension for the purpose of claiming the benefit of drawback."
Further, the Court noted the contents of Exhibit P6 which, "indicates that the amount receivable as per the two shipping bills... were received by the Bank on 01.07.2014 and 09.07.2014 respectively". The petitioner also produced Exhibit P10, a letter requesting the bank to regularize the delay, and Exhibit P11, a certificate stating that all transactions had been regularized.
The Court stated "Ext.P6 issued by the AD-I bank read with Ext.P11 would clearly indicate that, the period stipulated in Rule 16A stand extended and therefore, the petitioner is entitled to get the drawbacks, as the same falls within the extended period as permissible under the said rules."
It was also "pointed out that, going by Ext.P6 document, the delay in repatriation were only 29 and 20 days respectively in respect of the said shipping bills." Regarding the date 30.01.2016, mentioned in Exhibit P3 and P4, the Court clarified that it referred to the final settlement of all transactions, not necessarily the date of receipt.
Nevertheless, the Court acknowledged that Exhibit P11 did not make a specific reference to the earlier transactions. Thus, the Court held that further examination was necessary: "These are matters to be examined. However, it is to be clarified that, if the amount received by the petitioner as evidenced by Ext.P6 on 29.04.2015 was within the period of an extension as required in Rule 16A, then the petitioner should be entitled to get the benefit of drawback."
The Court concluded that since this aspect had not been adequately considered in any of the impugned orders, a fresh consideration was warranted.
The Court disposed of the writ petition by quashing Exhibits P9, P12, and P14, and directed the third respondent (Deputy Commissioner of Customs - Drawback) to reconsider the claim for drawback.
The judgment stated: "This writ petition is disposed of quashing Exts.P9, P12 and P14 with a direction to the 3rd respondent to reconsider the claim of the petitioner and take a fresh decision after taking into account all the documents referred to in this writ petition and with specific reference to Ext.P6, P10 and P11."
It further allowed the petitioner to submit any additional documents and mandated the authority to complete the process within three months: "It shall be open for the petitioner to produce such further documents before the 3rd respondent to establish the receipt of the amounts covered by the shipping bills referred to above and also the extension of time by the AD-I bank. Such a fresh order in this regard has to be passed by the 3rd respondent within a period of three months from the date of receipt of a copy of this judgment after giving the petitioner an opportunity to be heard."
Advocates Representing the Parties:
For the Petitioners: Sri. M. Balagopal, Sri. R. Sreejith, Smt. R. Devika, Advocates
For the Respondents: Shri. P.R. Sreejith, Standing Counsel
Case Title: M/s. Ginger Fashions Pvt. Ltd v. Union of India & Ors.
Neutral Citation: 2025: KER:39138
Case Number: WP(C) No. 5495 of 2023
Bench: Justice Ziyad Rahman A.A.
