2026-VIL-1164-MAD-CU
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CUSTOMS High Court Cases

Customs - Limitation for recovery of drawback under Rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 - Petitioner exported textile garments under seven shipping bills in 2011 and availed drawback - Show cause notice for recovery of drawback with interest was allegedly issued in 2018 on the ground of non-production of proof of realisation of export proceeds and the impugned order was passed in 2023 - Petitioner contended that the notice was never served, that no hearing was given and that the recovery proceedings were barred by limitation - Whether recovery proceedings initiated after a lapse of more than seven years from the payment of drawback were within a reasonable period - HELD - Rule 16 empowers the Customs authorities to recover drawback erroneously or excessively paid but does not prescribe any period of limitation. In the absence of an express period of limitation, such power has to be exercised within a reasonable period, which depends on the facts and circumstances of each case. The decision of the Delhi High Court in Rajbir Singh, which declined to apply a general limitation period of three years where there were strong allegations of fraudulent availment, has no application since there is no allegation that the Petitioner fraudulently availed the drawback or suppressed any material fact. The only allegation is failure to produce proof of realisation of export proceeds. No satisfactory explanation was offered for the delay in initiating the recovery proceedings - The Petitioner had also categorically stated that he had closed his export business in 2011 and was no longer in possession of the documents relating to the exports. Recovery proceedings initiated after an unexplained delay of more than seven years cannot be said to have been commenced within a reasonable period - The recovery proceedings are unsustainable, the impugned order is set aside and the Writ Petition is allowed with a direction to refund the amount within four weeks, failing which the amount shall carry interest at the rate of 8% per annum – The petition is allowed
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