The Delhi High Court has held that since export proceeds have been realized within the stipulated period as prescribed in Foreign Exchange Management Act, 1999 (FEMA), the exporter entitled for duty drawback and there is no justification for freezing of the bank account of the exporter.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the exporter had made payments to the local supplier through banking channels, which is evident from his bank statement. There appears to be no investigation regarding the payments made by the petitioner to the local supplier and therefore the view taken by the Revisional Authority regarding non-existence of the local supplier is not based on a proper investigation.
Table of Contents
Background
The petitioner is a sole proprietorship firm, engaged in the export of handicrafts.
The petitioner had exported 24 consignments of brass, copper and iron handicrafts to foreign buyer M/s. Metal Masters, UAE. Petitioner availed duty drawback on the export of aforesaid 24 consignments. The drawback of Rs. 89,77,007 was assessed and duly allowed to be credited to the petitioner’s bank.
On the basis of information received from IndusInd Bank, Moradabad Branch that the petitioner had multiple receipts in their bank accounts, which were claimed to be the duty drawback receipts, an enquiry was conducted and as a consequence of the same, the bank account of the petitioner was frozen by the Department.
During enquiry, it was revealed that the exports were affected by the petitioner, having claimed to have purchased the exported goods from another firm named M/s. Maxwell Impex, which on enquiry, was found out to be non-existent.
It was noticed that the export proceeds against the subject exports was not from consignees but from third parties.
A Show Cause Notice was issued to the petitioner for the recovery of drawback availed amount of Rs. 79,45,653/- in terms of Rule 16/16A of the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995 read with Section 76(1)(b) of the Customs Act, 1962 along with interest as applicable under Section 75A(2) read with Section 28AA of the Act. It was confirmed by the Additional Commissioner of Customs. Penalty of Rs. 1,50,00,000 was also imposed on the petitioner under Section 114AA of the Act.
The petitioner filed an appeal before the Commissioner (Appeals), which was rejected. The revision application also came to be dismissed.
Arguments
The petitioner contended that the goods were exported in accordance with law and no provision of Customs Act was violated. Petitioner had made appropriate declarations at the time of export, and that is why, the goods were allowed to be exported and “Let Export Order” (LEO) was granted by the Customs Department.
The petitioner contended that all the export documents were in order and in compliance with the Act. No objection in respect of quality, quantity and weight were ever raised by the Customs and the entire export consignment was found as per declaration made by the petitioner. Every single penny of foreign exchange has been received by the petitioner and DGFT has issued all the BRCs of the petitioner.
The petitioner contended that the order passed by the Revisional Authority is devoid of merit and without any basis, inasmuch as, no independent findings have been returned for upholding the Order and Order-in-Appeal and the penalty imposed is against the principles of natural justice. The order has been passed arbitrarily and without application of mind and is therefore liable to be quashed and set aside.
The department contended that the money, said to have been received as export proceeds, was not from the consignee but from a third party, which was not mentioned as ‘Notifier’ before the Customs Authority at the time of filing of shipping bills.
The department contended that the amount of US$ 121886,60 out of total proceeds of US$ 1125500.64 had been received from the consignee M/s. Metal Masters while the rest of the payment was received from three other entities which were not notified as third parties in the export documents. Neither the petitioner nor the bank submitted any documents to support the third party payments and the entity from whom the export goods were purchased, was non-existent.
Relevant Provisions
RBI Master Circular No. 14/2014-15 dated 01.07.2014 permits third party payments for export transactions subject to certain conditions specified in B-2(v) of the Circular. Every condition has been fulfilled by the petitioner. The petitioner had submitted a copy of Tripartite Agreement dated 05.10.2014, which was signed between the petitioner and buyer M/s. Metal Masters, as per which, petitioner was to receive payments from M/s. Bright View General Trading LLC, UAE, M/s. Radya Baqer Trading LLC, UAE, Galaxy Impex HK Ltd., Hong Kong and Allied Trend (HK) Trading Ltd., Hong Kong and the copy of the said Tripartite Agreement was submitted at the Office of the Customs Department and also with the banker of the petitioner i.e. Kotak Mahindra Bank Ltd.
The drawback shall not be allowed in case the sale proceeds in respect of the exports are not received in India within the time allowed under Foreign Exchange Management Act, (FEMA) 1999.
However, RBI Master Circular No. 14/2013-14 dated 01.07.2013 (proceeded by Master Circular No. 14/2014-15 dated 01.07.2014) (RBI Circular) vide Rule B.2(V) permits the receipt of foreign remittances from an entity other than consignee of the exported goods subject to the conditions prescribed therein.
Conclusion
The court has held that the entire export proceeds having been realized within the stipulated period from the date of export as evident from the e-BRCs, petitioner is entitled to the grant of duty drawback.
The court quashed the revision order with the directions to the department to defreeze the bank account of the petitioner held at IndusInd Bank, Moradabad Branch.
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Case Details
Case Title: M/S Innovative Crafts Versus Union Of India
Case No.: W.P.(C) 14232/2022 & CM APPLs. 43462/2022, 45597/2022
Date: 15/10/2024
Counsel For Petitioner: Akhil Krishna Maggu
Counsel For Respondent: Sunil Kumar Pandey
