Whether the draw back amount has to be recovered from the assessee on account non submission of BRC within stipulated period of six months of export and whether delay of 26 days in filling the appeal is condonable or not?

PJ/Case Study/2012-13/33

CASE STUDY

Prepared By: CA Neetu Sukhwani &
Kavita Thanvi

Introduction:-

The appellant had not furnished the proof of realization of export proceeds (Bank Realisation Certificate) within the period allowed under Section 8 of FEMA, 1999 read with Regulation 9 of FEMA (Export of Goods & Services) and RBI regulations in respect of drawback claimed as regards Shipping Bill No. 477 dated 11.05.2010 to the department in respect of exports made through ICD, Concor, Bhagat ki Kothi, Jodhpur. Thus, the Department urged that the amount of drawback availed in respect of all such exports is liable to be recovered from the appellant under the provisions of Rule 16/16A of the Customs and Central Excise Duties Drawback Rules, 1995 read with Section 75 of the Customs Act, 1962. It is clear that the mistake of non submission of BRC within stipulated time is a procedural error and can be rectified any time and the same has been rectified by the assessee by filling the copy of BRC.

M/s Artefact Art India v/s Deputy Commissioner of Customs, Jodhpur
[Order-In-Appeal no. 02 (RDN) Cus/JPR-II/2012 dated: 07.09.2012]

Relevant Legal Provisions:

Section 8 of FEMA, 1999:- “Save as otherwise provided in this act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.”

Regulation 9(1) of Foreign Exchange Management (Export of Goods & Services) Regulation, 2000:-

“The amount representing the full export value of goods or software exported shall be realised and repatriated to India within six months from the date of export.”

Provided that where the goods are exported to a warehouse established outside India with the permission of Reserve Bank, the amount representing the full export value of goods exported shall be paid to the authorised dealer as soon as it is realised and in any case within fifteen months from the date of shipment of goods.

Provided further that the Reserve Bank, or subject to the directions issued by the bank in this behalf, the authorised dealer may, for a sufficient and reasonable cause shown, extend the said period of six months or fifteen months as the case may be.

Customs Act, 1962:-

Second Proviso to sub-section (1) of Section 75:- Where any drawback has been allowed on any goods under this sub-section and the sales proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999, such drawback shall be deemed to have been never to be allowed, and liable to be recovered as provided under the Customs and Central Excise Duties Drawback Rules, 1995/ Customs and Central Excise Duties & Service Tax Drawback Rules, 1995.

Section 75 A(2):- Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable under this act or the rules made thereunder, the claimant shall, within a period from two months from the date of demand, pay in addition to the said amount or drawback, interest at the rate fixed under section 28 AB ibid and the amount of interest shall be calculated for the period beginning from the date of payment of such drawback to the claimant till the date of recovery of such drawback.

SECTION 117. Penalties for contravention, etc., not expressly mentioned. – Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding one lakh rupees.

SECTION 128.  Appeals to Commissioner (Appeals). – (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a Commissioner of Customs may appeal to the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order :

Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.

(1A)   The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

(2)   Every appeal under this section, shall be in such form and shall be verified in such manner as may be specified by rules made in this behalf.

Issue: - Following issue was made before the Commissioner:-

Whether the draw back amount has to be recovered from the assessee on account non submission of BRC within stipulated period of six months of export and whether delay of 26 days in filling the appeal is condonable or not?

Brief Facts:-

The appeal has been filed by the assessee, M/s Artefact Art India under Section 128 of the Customs Act, 1962, against OIO No. 12/2011-12 dated 24.09.2011 passed by the Deputy Commissioner of Customs, Jodhpur. The appellant has also filed condonation of delay of 26 days under Section 128 of the Customs Act, 1962.
The appellant had exported Wooden Furniture falling under Chapter 94 of Central Excise Tariff Act, 1985 through ICD Concor, Bhagat Ki Kothi, Jodhpur and DBK amounting to Rs. 15439/- was paid to them by the competent authority in respect of SB no. 477 dt. 11.05.2010 of FOB value of 462002/-.
Show Cause Notice was issued to M/s Artefact Art India alleging to recover drawback allowed to them in respect of SB No. 447 due to non submission of proof of realisation of export proceeds i.e. Bank Realisation Certificate (BRC) within the stipulated time period. But in reality, export proceeds were realised but due to communication gap between the assessee and its CHA, the same could not be filed and neither reply could be filed in respect of SCN issued. The adjudicating authority vide impugned order directed for recovery of DBK amounting to Rs. 15439/-. It was held that the appellant was also liable to pay interest as per the provisions of Section 75 of the Customs Act, 1962. Penalty of Rs. 5000/- was also imposed under Section 117 of the Customs Act, 1962 for not submitting any proof of the receipt of export proceeds against export made against the shipping bill. Being aggrieved with the impugned order the appellant has filed this appeal.

Assessee’s Contentions:-

Assessee made following submissions before the Commissioner (Appeals):

Ø The appellant submit that the impugned Order in Original issued by the Adjudicating Officer is wholly and totally erroneous and is liable to be set aside. Further they submit that the learned Deputy Commissioner in the impugned order has held that the sale proceeds were not realized by them within stipulated period of 6 months allowed under Section 8 of FEMA, 1999 read with Regulation 9 of FEMA (Export of Goods & Services) and no extension was granted by the RBI or authorized foreign exchange dealer. Therefore, as per second proviso to sub-section (1) of Section 75 of the Customs Act, 1962, the drawback sanctioned to them was recoverable from them.

In this regard they submit that the sale proceeds of the export of goods on which duty drawback amounting to Rs. 15439/- was claimed and sanctioned, were realized within the stipulated period of six months. It is submitted that they have furnished the Bank Realization certificate of the receipt of sale proceeds relating to Shipping Bill 477 dated 11.05.2010 before the Assistant Commissioner, Customs ICD, Jodhpur vide their Letter on 09.11.2011. The said letter bears the stamp of receipt in the department which is dated 09.11.2011. Thus, it is clear that not only they have realized the sale proceeds within the stipulated period of 6 months and there is no delay but also that the Bank Realization certificate has already been submitted to the Department. Therefore, the very base on which the impugned show cause notice was issued to them does not exist as the allegation leveled therein is not true. Therefore, the impugned order by which the drawback was sought to be recovered is required to be set aside.

Ø It was submitted that although the payment was received by them within time period prescribed however, there was a communication gap between them and their Custom House Agent (CHA). This communication gap was responsible for the non-furnishing of the Bank Realization certificate with the department by them within reasonable time. Therefore, they were prevented from giving reply to the impugned show cause notice. They submit that there was no mala fide intention in not submitting the BRC within time to the Department. It is submitted that there was genuine reason as explained hereinabove which had prevented them from furnishing the BRC to the Department as well as from filing reply to the show cause notice. Therefore, it is submitted that taking this factor into consideration, the impugned order-in-original should be set aside and relief should be granted to them.

Ø The appellant further submit that there is no violation of the statutory provision. The sale proceeds of the export made for which Drawback was claimed were received within time. The only violation was of a procedural nature i.e. delay in furnishing the Bank Realisation Certificate (BRC) within time to the Department. It is submitted that for the procedural infraction the substantive benefit of Duty Drawback cannot be denied to them for which they are eligible. Further, hon’ble Gujarat High Court in the case of CCE, CC & ST, Daman Vs J J Polyplast Ltd [2010-TIOL-136-HC-AHM-CX] has recently held that the substantial benefit cannot be denied for the procedural lapse which can be rectified at any point of time. The analysis of said decision makes it clear that the procedural lapses which can be rectified anytime cannot be a ground to deny the benefit otherwise available to the assessee. In the instant case, the “filing of Bank Realisation Certificate” is a procedural lapse which was rectified by them by filing the copy of BRC. The delay in filing of BRC was not intentional and it was rectified by submission of the BRC. Thus, the above decision of hon’ble Gujarat High court is equally applicable on them and its benefit should be extended to them.

Therefore, for mere procedural infraction substantive benefit cannot be denied. Therefore, the impugned order requires to be set aside.

Ø Further they submit that in the impugned order it has been held that they are liable to pay the interest as per provisions of Section 75A of the Customs Act, 1962. In this regard, they submit that there was no delay in realization of export proceeds. Therefore, the Duty Drawback claimed was not required to be recoverable from them. They have rightly been granted the duty drawback. The only issue was that they were prevented with good reasons from furnishing the bank Realization certificate with the Department. This also has been done by them. They have furnished the BRC with the department. Therefore, no interest liability arises. They are not liable to pay the interest. Therefore, the impugned order demanding interest in terms of Section 75A of the Customs Act, 1962 is liable to be set aside.

Ø The appellant further submit that in the impugned order penalty of Rs. 5000/- has been imposed on them under Section 117 of the Customs Act, 1962 for not submitting any proof of the receipt of export proceeds against export made against the shipping bill no. 477. In this regard, they submit that they have submitted the proof of receipt of export proceeds against the export made against the afore-mentioned shipping bill to the Department on 09.11.2011. The only issue is that the BRC was submitted belatedly. It is reiterated that they were prevented from furnishing the BRC within time because there was a communication gap between them and their CHA which has caused the delay. But ultimately, it was furnished with the department. It has been held by hon’ble Tribunal in case of M/s Honeywell Technology Solutions Lab Pvt Ltd (EHTP) Vs CC, Bangalore [2008-TIOL-1607-CESTAT-BANG.] that procedural infractions do not entail imposition of penalties.

Reasoning of the Commissioner (Appeals):-

The Commissioner (Appeals) held as follows:-
ü In respect of the request of condonation of delay of 26 days in filling of the appeal they held that Section 128 of the Customs Act, 1962 provides that appeal before the Commissioner (Appeals) shall be filed within sixty days of receipt of such order of decision. This section empowered the Commissioner (Appeals) to allow the appellant to file appeal within next thirty days if he satisfied that appellant was prevented by sufficient cause from presenting the appeal within the specified period of sixty days. By considering the circumstances given by the appellant in application for condonation of delay, they find that cause shown for delay in filling the appeal by the appellants appears to be genuine. Therefore in exercising the power given under Section 128 of the Customs Act, 1962, they condoned the delay of 26 days in filing of appeal and allowed the appeal.
ü In regard to the main issue of the appeal, they find that the appellant had contended that the remittance in respect of subjected shipping bills no. 477 dt. 11.05.2010 have been realized within stipulated time period of 6 months as provided under Regulation 9(1) of Foreign Exchange Management (Export of Goods & Service) Regulation, 2000 and in support they had submitted the photo copy of Duplicate BRC issued by Oriental Bank of Commerce. By going through the said certificate they observed that the sale proceeds of the goods exported against Shipping Bill no. 477 dt. 11.05.2010 was realized by 11.06.2010 i.e. within one month. As such there is no violation of Foreign Exchange Management (Export of Goods & Service) Regulation, 2000. They held that the only mistake occurred is that the same could not be produced before the adjudicating authority at the time of reply of Show Cause Notice or personal hearing. This is a procedural lapse which is rectifiable and was rectified by filling the same on 09.11.11 with the adjudicating authority and before them. In this regard they have also gone through the judgement delivered by the Hon’ble High Court in case of CCE, CC & Service tax, Daman vs. JJ Polyplast Ltd (2010-TIOL-136-HC-AHM-CX) in which it was held that procedural lapse which can be rectified any time, should not result in denial of admissible credit. In the instant case the filling of BRC is a procedural lapse which was rectified by the appellant by filling the copy of BRC and the delay in filling of BRC was not intentional. Thus they held that the drawback was admissible to the appellant to the extent of Foreign Exchange realized.
ü Further they held that from the perusal of BRC, it has been noticed that the FOB value of $10500.05 was to be realized in respect of said SB whereas $10466.55 was realized. As such the appellant is entitled for drawback to the extent of Foreign Exchange realized and the amount in excess of drawback admissible, if any is recoverable under Rule 16/16A of the Customs & Central Excise Duties Drawback Rules, 1995 read with the second proviso to sub section (1) of section 75 of the Customs Act, 1962 along with interest under section 75A (2) of the Customs Act, 1962.
ü They further observed that the adjudicating authority has imposed penalty of Rs. 5000/- upon the appellant under section 117 of the Customs Act, 1962 for violation of the aforesaid provisions for non-realization of FOB value within the stipulated period. Since the amount of $33.5 has only been realized short, the amount of penalty is liable to be reduced. Thus they reduced penalty to the extent of Rs. 1000/- and allowed the appeal accordingly.

Decision:-

Appeal allowed.

Conclusion:- This is yet another case which draws the analogy that procedural lapses should not come in way for availing any genuine benefit granted to the assessee. Therefore, mere delay in filing of BRC could not result in denying the benefit of drawback when the same is genuine and correct.

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PJ/CASE STUDY/ 2012-13/33
01 December 2012

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PJ/CASE STUDY/ 2012-13/33
01 December 2012