Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

PJ/CASE STUDY/2010-11/05
17 May 2010

 

 

PJ/CASE STUDY/2010-11/05

 

 

Case Study

 

Prepared By:

CA Pradeep Jain and

Sukhvinder Kaur LLB [FYIC]

 

Introduction: -

 

It is fundamental principle that the show cause notice should be given to the assessee before confirming the demand against him. If the show cause notice is not served on him or it is given at the wrong address then the whole proceeding is not sustainable in eyes of law. This issue is highlighted in this case study.

 

Relevant Legal Provisions: -

 

Section 75 of the Customs Act, 1962: -

75. Drawback on imported materials used in the manufacture of goods which are exported. - (1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under section 51 by the proper officer, or being goods entered for export by post under section 82 and in respect of which an order permitting clearance for exportation has been made by the proper officer], a drawback should be allowed of duties of customs chargeable under this Act on any imported materials of a class or description used in the manufacture or processing of such goods or carrying out any operation on such goods, the Central Government may, by notification in the Official Gazette, direct that drawback shall be allowed in respect of such goods in accordance with, and subject to, the rules made under sub-section (2).

Provided that no drawback shall be allowed under this sub-section in respect of any of the aforesaid goods which the Central Government may, by rules made under sub-section (2), specify, if the export value of such goods or class of goods is less than the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods, or is not more than such percentage of the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods as the Central Government may, by notification in the Official Gazette, specify in this behalf:

Provided further that where any drawback has been allowed on any goods under this sub-section and the sale 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 never to have been allowed and the Central Government may, by rules made under sub-section (2), specify the procedure for the recovery or adjustment of the amount of such drawback.

Rule 16A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995: -

Recovery of amount of Drawback where export proceeds not realised.

Where an amount of drawback has been-

(1) ……………

 

(2)     If the exporter fails to produce evidence in respect of realisation of export             proceeds within the period allowed under the Foreign Exchange Management Act, 1999, or any extension of the said period by the Reserve Bank of India, the Assistant Commissioner of Customs or the Deputy Commissioner of Customs, as the case may be] shall cause notice to be issued to the exporter for production of evidence of realisation of export proceeds within a period of thirty days from the date of receipt of    such notice and where the exporter does not produce such evidence within the said period of [thirty days, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be shall pass an order to recover the amount of drawback paid to the claimant and the exporter shall repay the amount so demanded within thirty days of the receipt of the said order :

Provided that where a part of the sale proceeds has been realised, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realised bears to the total amount of sale proceeds:

 

(3) …………

 

(4)     Where the sale proceeds are realised by the exporter after the amount of drawback has been recovered from him under sub-rule (2) or sub-rule (3) and the exporter produces evidence about such realisation within one year from the date of such recovery of the amount of drawback, the amount of drawback so recovered shall be repaid by the Assistant Commissioner of Customs or Deputy Commissioner of Customs to the claimant.”

 

Section 117 of Customs Act, 1962:-

            “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 penalty”.

M/s Adarsh International Inc v/s Assistant Commissioner of Customs, Jaipur

[Order-in-Appeal No. 02(DK)Cus/JPR-I/2010, Dated 12.01.2010]

 

Brief Facts: -

 

-        Appellant-assessee was engaged in the manufacture and export of ready made garments. They were claiming drawback of duty on the exported goods.

 

-        Against the bill of entry dated 15.04.04, drawback was sanctioned on 04.06.04. However, the Bank realisation certificate was not presented to the Deputy/Assistant Commissioner as prescribed by the provisions.

 

-        Accordingly, the Department issued show cause notice dated 09.06.06 to the appellants for recovery of drawback amount with interest which was sanctioned to them earlier. Penalty under Section 117 of the Customs Act, 1962 was also proposed to the imposed. But the show cause notice was given at wrong address which does not belong to assessee.

 

-        Thereafter the personal hearing was also given at the same address. Thus, the show cause notice and the letter for personal hearing issued by the Department was not replied to by the appellants as it was not actually served on the exporter.

 

-        Even the order-in-original was also passed ordering recovery of drawback amount with interest and penalty. The order was passed on 13.03.08. But it was also sent to same address which does not belong to the appellant.

-        The department initiated the recovery proceeding and they came at the right address of the exporter. He was totally unaware of the facts. He replied that no show cause notice as well as order-in-original was received by him. But the department was bent upon recovery and told him that action against him will be taken. The appellant demanded the copy of order-in-original which was given by the department under compulsion. They were not willing to give the same.

 

-        Thereafter, the appellants filed appeal against the impugned order on 12.01.2009.

 

Appellant’s Contentions: -

 

¨              With regard to maintainability of appeal filed after 10 months, the appellant submit that the appellants were not aware about the issuance of show cause notice, letters of personal hearing as well as the order-in-original because the address mentioned on the same was incorrect. It is submitted that they became aware about the order only on 30.12.2008 and filed the appeal on 12.01.2009. Therefore, the appeal was filed within 3 months from the date of communication of order.

 

¨              It is submitted that as a result of communication with the Department after 30.12.08 the Bank Realisation certificate was submitted and the recovery of drawback should be dropped as per provisions of drawback rules. It was their first and last export consignment and as such they were not aware of filing of BRC with the department. But the drawback Rules provides for submission of BRC at later stage also. Even if the drawback is recovered and BRC is submitted then the drawback will again be sanctioned. Thus, following the same analogy, the drawback will be sanctioned.

 

¨              Accordingly, the appellant prayed that no penalty is imposable on them as the recovery of drawback should be dropped. Reliance was placed Hindustan Coco-Cola Beverage Pvt Ltd v/s Commissioner of Central Excise, Pune [2004 (178) ELT 274 (Tri-Mumbai)], Modern Process Printers [2006 (204) ELT 632 (GOI)], Jaisu Shipping Co. Pvt Ltd v/s Commissioner of C. Ex, Ahmedabad [2007 (217) ELT 296 (Tri-Mumbai)] and Syndicate Shipping Service Pvt Ltd v/s Commissioner of Customs, Chennai [2003 (154) ELT 756 (Tri-Chennai)].

 

¨              It was submitted that it was alleged in the show cause notice that the appellant had contravened the provision of Section 75 of the Customs Act, 1962 however, the appellant had not contravened the said provisions as they had obtained the BRC although submitted belatedly and the sale proceeds have been realized as per the Regulation 9 of FEMA (Export of Goods and Services) Regulations, 2000 therefore, drawback cannot be recovered from them.

 

¨              Appellant further relied upon Rule 16A (4) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 wherein it is provided that the where the drawback amount is recovered from the exporter on account of non-receipt of export proceeds and the export proceeds are realised later on, the exporter may re-claim the drawback on submission of the BRC to the department within one year. Accordingly, it is submitted that as the appellant has already submitted the BRC on 10.11.2008, therefore there was compliance of the legal provisions.   

 

Issue involved: -

 

The involved in the appeal before the Commissioner (A) was that

 

·                Whether the appeal filed after 10 months of passing of the order-in-original is maintainable?

 

·                Whether the recovery of drawback and imposition penalty was sustainable?

 

Order of the Commissioner (A): -

 

The Commissioner (A) held as under: -

 

Ø             The Commissioner (A) noted that the appeal was filed by the appellant after a lapse of about 10 months from the issue of order-in-original in the show cause notice. It was noted that the order dated 13.03.08 was communicated to the appellants only on 30.12.2008.

 

Ø             The explanation given by the appellants that they had not received any show cause notice and the impugned order passed in the same before 30.12.2008. This was because due to clerical mistake the address of the appellants was wrongly mentioned in the show cause notice as well as in the impugned order.

 

Ø             Thus, the Commissioner (A) held that the appellant’s contention was convincing and tenable because their address in the show cause notice, letter of personal hearing and impugned order was wrongly mentioned. It was accepted that the appellants became aware of the same only on 30.12.2008. Thus, it was held that the appeal was filed within time.

 

Ø             The Commissioner (A) further held that the impugned order was passed without following the process of natural justice and without considering the reply of the appellants. Thus, without going into the merits of the case, impugned order is liable to be set aside and an opportunity of hearing is required to be given to the appellants.

 

Decision: -

 

Impugned order set aside and matter remanded to the Adjudicating Authority for deciding the case afresh following the principles of natural justice.

 

Conclusion: -

 

This is a good decision. The principles of natural justice were upheld as the appellant was prevented from replying to the impugned show cause notice by sending of communication by the Department at the incorrect address. Opportunity of hearing is the right of every person and is required to be followed strictly in all matters, especially in the taxation matters. The show cause notice should be served and after the reply, the case should be decided. Even the principle of natural justice requires that the hearing should be given.  

 

****************

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com