𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Category: Punjab & Haryana High Court

Punjab & Haryana High Court Quashes Customs Duty Drawback Recovery
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 04.05.2026

Punjab & Haryana High Court Quashes Customs Duty Drawback Recovery

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

This article explores a significant legal judgment from the Punjab & Haryana High Court in the case of M/s Famina Knit Fabs vs. Union of India & Ors. The case centers on a textile exporter who challenged a show cause notice issued by customs authorities regarding alleged overvaluation of exported goods and irregularities in duty drawback claims. The judgment addresses critical issues in customs law, including limitation periods, the effect of repealed rules, and the machinery for recovery of duty drawback.

Background of the Case

M/s Famina Knit Fabs, a partnership firm, exported textile goods between June 2010 and March 2013, claiming duty drawback under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. The exporter filed shipping bills, and customs officers physically verified the goods and assessed their value. The Directorate of Revenue Intelligence (DRI) later investigated the firm, alleging fraudulent overvaluation to claim excess duty drawback. Based on DRI’s findings, a show cause notice was issued in February 2018, demanding repayment of duty drawback and proposing to re-determine the value of exported goods.

Key Legal Issues Raised

The petitioner raised four main legal issues:
1. Limitation Period for Issuing Show Cause Notices: Whether the notice was barred by limitation, as it was issued more than five years after the exports.
2. Effect of Repeal of Drawback Rules, 1995: Whether proceedings under repealed rules could continue after the introduction of Drawback Rules, 2017.
3. Absence of Mechanism for Demand of Duty Drawback: Whether Rule 16 of Drawback Rules, 1995 provided a complete mechanism for recovery of excess or erroneous drawback.
4. Power to Reassess Value of Already Exported Goods: Whether customs authorities could reassess the value of goods after export.
Court’s Analysis and Findings

1. Maintainability of Writ Petition

The court held that since the issues pertained to jurisdiction (limitation, repeal, mechanism, and reassessment), the writ petition was maintainable under Article 226 of the Constitution, despite the existence of alternative remedies.

2. Limitation Period for Duty Drawback Demand

The court emphasized that even when no specific limitation period is prescribed, actions must be taken within a “reasonable period.” Drawing from Section 28 of the Customs Act, 1962 (which allows a maximum of five years for issuing notices in cases of fraud), the court held that any notice issued beyond five years is barred by limitation. In this case, the show cause notice was issued more than five years after the exports and DRI investigation, making it invalid.

3. Effect of Repeal and Saving Clause

The Drawback Rules, 1995 were repealed and replaced by Drawback Rules, 2017, which included a saving clause (Rule 20). The court found that Rule 20 only saved pending applications or claims for goods exported before the new rules commenced. Since Famina Knit Fabs’ drawback claims were already settled before 2017, the saving clause did not apply, and Section 159A of the Customs Act could not be invoked to continue proceedings under repealed rules.

4. Absence of Recovery Mechanism in Rule 16

Rule 16 of Drawback Rules, 1995 requires repayment of excess or erroneous drawback but does not prescribe a mechanism for determining or demanding such recovery. The court cited Supreme Court precedents, holding that in the absence of machinery provisions, demands are invalid. Rule 16A provides a mechanism for recovery when export proceeds are not realized, but Rule 16 does not cover situations like the present case.

5. Power to Reassess Value of Exported Goods

The court clarified that customs authorities do not have the power to reassess the value of goods after export unless specific provisions exist, as seen in other statutes (e.g., Income Tax Act, VAT Acts). The assessment at the time of export is final, and reopening is not permitted under the Customs Act or Drawback Rules.

Conclusion and Impact

The Punjab & Haryana High Court quashed the show cause notice issued to Famina Knit Fabs, setting a precedent that:
- Show cause notices for recovery of duty drawback must be issued within five years from the date of export.
- Repealed rules cannot be used for recovery unless specifically saved by the new rules.
- Recovery mechanisms must be clearly prescribed in the law; otherwise, demands are invalid.
- Customs authorities cannot reassess the value of goods after export without explicit statutory power.
This judgment provides clarity and protection for exporters, ensuring that customs authorities follow due process and respect limitation periods. It also highlights the importance of clear legislative mechanisms for recovery and reassessment in customs law.

Source: Punjab & Haryana High Court

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May 4, 2026
Punjab & Haryana High Court Mandates Strict Compliance with Section 9D
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 11.04.2026

Punjab & Haryana High Court Mandates Strict Compliance with Section 9D

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.

On June 21, 2016, the Punjab and Haryana High Court delivered a landmark judgment in the case of M/S Jindal Drugs Pvt. Ltd. and Anr vs Union of India and Anr (CWP No. 12714 of 2016). This case revolved around procedural compliance under Section 9D of the Central Excise Act, 1944, and the principles of natural justice. The judgment has significant implications for adjudication proceedings under the Central Excise Act, particularly concerning the admissibility of statements recorded during investigations.

Background of the Case

The petitioners, M/S Jindal Drugs Pvt. Ltd., operated manufacturing units in Jammu and Kashmir, which were exempted from duty payment under Notification 56/2002-CE dated November 14, 2002. The exemption allowed the petitioners to claim refunds for duties paid from their Personal Ledger Account (PLA). Between November 2007 and March 2010, the petitioners claimed refunds amounting to ₹48,10,79,820.

The Revenue issued a Show Cause Notice (SCN) alleging that the petitioners had fraudulently claimed refunds without manufacturing any finished products. The SCN proposed recovery of the refunded amount along with interest and penalties. During the adjudication process, the petitioners contended that the adjudicating authority had violated Section 9D of the Central Excise Act by relying on statements recorded during the investigation without following the prescribed procedure.

Key Legal Issues

The case primarily revolved around the following legal issues:
1. Compliance with Section 9D of the Central Excise Act, 1944:
  - Whether the adjudicating authority followed the mandatory procedure for admitting statements recorded during investigations as evidence.
2. Principles of Natural Justice:
  - Whether the petitioners were given an opportunity to cross-examine witnesses whose statements were relied upon by the Revenue.
Legal Principles Established

1. Mandatory Compliance with Section 9D

Section 9D governs the admissibility of statements made before a gazetted Central Excise Officer during investigations. The court emphasized that:
- Statements are admissible only under specific circumstances outlined in Section 9D(1)(a), such as when the person who made the statement is dead, cannot be found, or is incapable of giving evidence.
- If these circumstances do not exist, the statement can only be admitted under Section 9D(1)(b) after the person is examined as a witness before the adjudicating authority and the authority forms an opinion that admitting the statement is in the interest of justice.
2. Principles of Natural Justice

The court underscored the importance of natural justice, particularly the right to cross-examine witnesses. It held that:
- Statements recorded during investigations cannot be relied upon unless the assessee is given an opportunity to cross-examine the makers of those statements.
- Failure to provide this opportunity renders the statements inadmissible as evidence.
3. Evidentiary Value of Statements

The court ruled that statements recorded during investigations lose their evidentiary value unless the procedure prescribed under Section 9D is followed. Adjudicating authorities must rely on general principles of evidence, as affirmed by the Supreme Court in C.C. v Bussa Overseas Properties Ltd.

Court’s Directions

The High Court directed the adjudicating authority to:
1. Summon the makers of the statements relied upon by the Revenue.
2. Examine the witnesses in chief before the adjudicating authority.
3. Provide the assessee with a copy of the examination-in-chief.
4. Allow the assessee to cross-examine the witnesses.
5. Exclude statements from evidence if the prescribed procedure is not followed.
Outcome

The court ruled in favor of the petitioners, directing the adjudicating authority to strictly adhere to the procedural requirements of Section 9D and the principles of natural justice. The writ petition was disposed of with these directions, effectively granting relief to the petitioners.

Implications of the Judgment

This judgment serves as a reminder to adjudicating authorities to strictly follow the procedural safeguards outlined in Section 9D of the Central Excise Act. It reinforces the importance of natural justice in adjudication proceedings and ensures that statements recorded during investigations are not used as evidence without proper examination and cross-examination.

Conclusion

The judgment in M/S Jindal Drugs Pvt. Ltd. vs Union of India is a significant milestone in the interpretation of Section 9D of the Central Excise Act, 1944. It highlights the mandatory nature of procedural compliance and the need to uphold the principles of natural justice in adjudication proceedings. This case will undoubtedly serve as a precedent for similar cases in the future, ensuring fairness and transparency in the adjudication process.

Connected Matter

CESTAT Allahabad Sets Aside Penalties in Alleged Onion Export

Source: Punjab & Haryana High Court

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April 11, 2026
Punjab & Haryana High Court Upholds DFIA Conversion Under Section 149 of Customs Act
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.01.2026

Punjab & Haryana High Court Upholds DFIA Conversion Under Section 149 of Customs Act

This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.

On February 15, 2023, the Punjab and Haryana High Court delivered a significant judgment in the case of Commissioner, Customs ICD, GRFL vs. Mrs. Bectos Food Specialities Ltd. This case revolved around the conversion of Duty Drawback shipping bills to Duty-Free Import Authorization (DFIA) Scheme, a matter that has been a subject of legal contention for years. The judgment not only upheld the rights of exporters but also clarified the legal position regarding the time limit for such conversions under Section 149 of the Customs Act, 1962.

Background of the Case

The respondent, Mrs. Bectos Food Specialities Ltd., is a manufacturer of biscuits and cookies, exporting goods under the Duty Drawback Scheme. The dispute arose due to a notification dated August 1, 2013, which mandated that inputs used in the manufacture of export products under the DFIA Scheme must be imported and utilized in the export of goods. This notification led the respondent to export goods under the Duty Drawback Scheme during the period from November 13, 2013, to November 20, 2015.

However, the notification was later declared ultra vires by the Punjab and Haryana High Court in the case of M/s Pushpanjali Floriculture Pvt. Ltd vs. Union of India (2016). Following this, the respondent applied for the conversion of their exports from the Duty Drawback Scheme to the DFIA Scheme. The application was rejected by the Adjudicating Authority based on the Central Board of Excise and Customs (CBEC) Circular dated September 23, 2010, which imposed a time limit for such conversions. The respondent then filed an appeal before the Appellate Tribunal, which ruled in their favor, allowing the conversion subject to the reversal of benefits taken under the Duty Drawback Scheme along with interest.

Key Legal Question

The primary question before the High Court was whether the conversion of Duty Drawback shipping bills to DFIA Scheme could be allowed, especially when the application for conversion was rejected on the grounds of limitation as per the CBEC Circular.

Court’s Observations

The High Court referred to Section 149 of the Customs Act, 1962, which allows amendments to import/export documents at the discretion of the proper officer, provided the amendment is based on documentary evidence that existed at the time of export or import. Importantly, the Court noted that Section 149 does not prescribe any time limit for such amendments.

The Court also referred to the judgment of the Gujarat High Court in the case of M/s Lykis Limited vs. C.C. Mundra and M/s Mahalaxmi Rubtech Ltd. vs. Union of India, which had attained finality. In these cases, the Gujarat High Court held that the time limit prescribed by the CBEC Circular was merely procedural and could not override the statutory provisions of the Customs Act. The Court emphasized that any policy or circular imposing a time limit for conversion of shipping bills is ultra vires if it contradicts the Customs Act.

Key Takeaways from the Judgment
1. No Time Limit for Conversion Under Section 149: The Court reiterated that Section 149 of the Customs Act does not prescribe any time limit for the conversion of shipping bills. Any circular or policy imposing such a limitation is not legally binding.
2. Precedents from Gujarat High Court: The Punjab and Haryana High Court relied heavily on the judgments of the Gujarat High Court, which had already ruled in favor of exporters in similar cases. These judgments have set a precedent that time limits imposed by circulars cannot override statutory provisions.
3. Rights of Exporters: The judgment is a significant win for exporters, as it ensures that they can seek conversion of shipping bills without being restricted by arbitrary time limits set by non-statutory circulars.
4. Dismissal of Appeal: The High Court dismissed the appeal filed by the Customs Department, upholding the Appellate Tribunal’s decision to allow the conversion of shipping bills from Duty Drawback Scheme to DFIA Scheme.
Implications of the Judgment

This judgment has far-reaching implications for exporters and the Customs Department. It reinforces the principle that statutory provisions take precedence over procedural guidelines issued through circulars. Exporters who face similar issues can now rely on this judgment to seek conversion of their shipping bills without being constrained by time limits that are not explicitly mentioned in the Customs Act.

Moreover, the judgment highlights the importance of judicial precedents in shaping the interpretation of laws. By referring to the Gujarat High Court’s rulings, the Punjab and Haryana High Court has ensured consistency in the application of legal principles across jurisdictions.

Conclusion

The Punjab and Haryana High Court’s decision in the Commissioner, Customs ICD, GRFL vs. Mrs. Bectos Food Specialities Ltd. case is a landmark ruling that upholds the rights of exporters and clarifies the legal position on the conversion of shipping bills under Section 149 of the Customs Act, 1962. By dismissing the appeal of the Customs Department, the Court has set a precedent that will benefit exporters and ensure fair treatment under the law. This judgment is a testament to the judiciary’s role in safeguarding the interests of businesses and ensuring that statutory provisions are not undermined by procedural guidelines.

Source: Punjab & Haryana High Court

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January 3, 2026