The Delhi High Court has held that the customs duty drawback against shipping bills cannot be recovered from legal heirs of the deceased proprietor, who was the exporter.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the late husband of the petitioner was the sole proprietor of M/s. L.V. Tools & Components and consequent to his death and closure of the proprietorship firm, no recovery can be effected from his legal heirs in terms of the law propounded by the Supreme Court in the case of Shabina Abraham vs. Collector of Central Excise and Customs.
The petitioner’s husband, late Arun Kumar Goyal effected certain exports during 2009-2014 through ICD Tughlakabad and availed benefit of Duty Drawback Scheme in terms of Section 75 of the Customs Act, 1962 read with the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995.
The petitioner’s husband expired on 17.08.2018, leaving behind the petitioner and two sons. Consequent to the demise, the activities of the firm abruptly stopped. The respondent-department sent a letter in the name of Arun Kumar Goyal, requesting to submit copies of pending 48 BRCs in which total drawback of Rs. 22,62,352 was involved but the letter was returned undelivered by postal authority with the remarks “Kaafi Poochh Taachh Par Firm Ka Pata Nahin Chala”. On verification of exporter’s BRC details at the website, it was found that no e-BRC in respect of the exporter was available there.
A Demand cum Show Cause Notice was issued to the exporter, asking him to explain and to show cause as to why the availed drawback against the shipping bills could not be recovered from him along with applicable interest and why penalty should not be imposed upon him under the Act. The Show Cause Notice was returned ‘undelivered’.
The Order was passed confirming the demand of duty drawback amounting to Rs. 22,62,352 and orders were passed for its recovery along with penalty of Rs. 1,00,000 upon M/s. L.V. Tools & Components.
A recovery notice was issued in the name of the late husband of the petitioner, which has been challenged.
The respondent-department confirmed that out of 48 invoices, remittances against 24 invoices were already received and insofar as the remaining invoices are concerned, petitioner has filed an affidavit pointing out that the remittances against the 8 invoices were substantially received as there were minor differences between the amounts received and the invoiced amounts.
The petitioner that the late husband of the petitioner was the sole proprietor of M/s. L.V. Tools & Components and consequent to his death and closure of the proprietorship firm, no recovery can be effected from his legal heirs.
The department contended that upon the death of the exporter, the recovery proceedings would not abate and that the government dues can be recovered from his properties falling into the hands of his legal heirs by inheritance. The husband of the petitioner was the sole proprietor of M/s. L.V. Tools & Components which affected the exports and claimed duty drawback. Admittedly, he expired on 17.08.2018.
Section 75(1) of the Customs Act stipulates that if the sale proceeds in respect of the goods of which duty drawback has been allowed are not received by or on behalf of the exporter in India within the time stipulated under Foreign Exchange Management Act, 1999, such drawback shall be deemed never to have been allowed and the Central Government may by Rule made under Sub Section (2) specify the procedure for the recovery of adjustment of the amount of such drawback.
The court stated issuance of notice is essential before affecting the recovery of erroneously availed drawbacks. The requirement of issuing notice in the name of a right person and not a dead person is not merely a procedural requirement but is a condition precedent to the notice being valid in law. The notice was issued in the name of the exporter after his death. The notice therefore suffers from fundamental jurisdictional error as it was issued in the name of a dead person and the proceedings initiated consequent to such notice were also proposed in the case of a dead person. No steps
The court while allowing the petition held that no machinery provision in the Customs Act, 1962 has been brought to the notice of the Court which enables the Customs Department to proceed against the legal heirs of a deceased notice/assessee against whom there may be proceedings for recovery of customs duty.
Case Title: Sangeeta Goyal Versus Commissioner Of Customs (Exports)
Case No.: W.P.(C) 13025/2019 & CM APPL. 53138/2019
Date: 06/09/2024
Counsel For Petitioner: Reena Rawat
Counsel For Respondent: Harpreet Singh
