CESTAT New Delhi: Drawback Cannot Be Denied For Alleged Forgery By Foreign Buyer Once Goods Are Exported Outside India
Pranav B Prem
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that drawback cannot be denied merely on the ground of alleged forgery by a foreign buyer once goods have been exported under the Customs and Central Excise Duties Drawback Rules, 1995. A single-member bench of Dr. Rachna Gupta (Judicial Member) observed that any subsequent allegation of forgery by the foreign consignee, even if discovered during later investigation, cannot justify denial of drawback when export has already been completed in accordance with law and goods have crossed Indian territory.
Background
The case arose from exports made by M/s Texcomash Export, a proprietorship firm owned by Shri N.K. Rajgarhia, which had made 29 export shipments of children’s garments through the Inland Container Depot, Tughlakabad, New Delhi, and 9 shipments of ladies’ garments through the Mumbai Customs House during 1993–94. During examination at the time of export, the Customs authorities formed the view that the goods were over-invoiced with the intention of claiming inflated drawback. Although the exports were provisionally allowed, the value for drawback purposes was reduced to Rs. 210 per set by the Assistant Collector of Customs. The appellate authority later enhanced the FOB value to Rs. 242 per set, and the department accepted the same.
However, following information from Russian Customs that certain consignments were delivered at Dubai instead of Moscow, a show cause notice was issued to Texcomash Export proposing confiscation of goods and recovery of the drawback amount of Rs. 31,66,822, under Section 75 of the Customs Act, 1962, read with Rules 16 and 16A of the Drawback Rules. It was also alleged that the landing certificates from the Russian buyer were forged.
Arguments
The appellant contended that the goods had been exported and that export proceeds were duly received in India, making the firm fully entitled to drawback. It was submitted that even if delivery was effected in Dubai upon surrender of original bills of lading, it still constituted export to a place outside India as per the definition under the Drawback Rules. It was further argued that Rule 16A of the Drawback Rules, introduced in December 1995, could not be applied retrospectively to exports made in 1993–94. The appellant emphasized that any alleged forgery by a Russian company could not invalidate the claim once the export had been completed and remittances received.
The Department, on the other hand, contended that since the goods did not reach Russia, and as the Reserve Bank of India’s Circular No. 30/1993 prohibited third-country exports financed out of state credit funds, the drawback was rightly disallowed. It also argued that the landing certificates were falsified, making the export proceeds invalid.
Tribunal’s Observations
The bench noted that the drawback rules define export as taking goods out of India to a place outside India, and that once goods leave Indian territory, the exporter becomes entitled to drawback. The Tribunal held: “The moment any good is taken to a place outside India, it amounts to export, and the exporter is allowed to get refund of duty paid on importation of such goods in the form of drawback.” The Tribunal observed that no provision in the Drawback Rules or RBI Circular barred such entitlement, and the remittances received by the appellant had not been disputed. It added that if the RBI had considered the remittances invalid, they would not have been released from the state credit account, which itself negated the department’s stand.
The bench further held that the reliance on Rule 16A of the Drawback Rules, 1995 was misplaced, as the provision did not have retrospective effect and could not be applied to exports made before the rule came into force. It also found no justification for confiscation when the goods had been provisionally released decades earlier. Significantly, the bench remarked: “Any forgery, if revealed during a further investigation being committed by the Russian company vis-à-vis the landing certificate in the light of Drawback Rules in India, is highly insufficient to deny the claim of drawback, specifically when the goods have crossed Indian territory and reached a place outside India.”
Holding that the exports were duly completed and the remittances received, the Tribunal concluded that the appellant was entitled to the drawback amount of Rs. 31,66,822 in respect of nine consignments of ladies’ garments. Accordingly, the order of confiscation and recovery passed by the adjudicating authority was set aside, and the appeal was allowed.
Appearance
Counsel for Appellant/ Assessee: A.K. Jain
Counsel for Respondent/ Department: Rohit Issar
Cause Title: M/s Texcomash Export & Sh. N.K. Rajgarhia v. Commissioner of Customs, New Delhi
Case No: Customs Appeal No. 724 of 2005
Coram: Dr. Rachna Gupta (Judicial Member)
