Delhi HC Flags Rampant Misuse Of Duty Drawback Scheme By Exporters, Says No Limitation For Proceeding Against Availment Of Excess Duty

It is a unique scheme to encourage exports and allows refund of customs and excise duties that are paid by the exporters on specified products.

The said duty drawbacks are claimed under Sections 74 and 75 of the Customs Act, 1962.

This scheme however, a division bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta noted, has become the subject of misuse by some traders/ exporters who make fraudulent exports merely with a view of availing the benefits under the scheme.

“Fraudulent exports could be in various forms including (i) filing of fake documents, (ii) over-valuation of goods that have been exported and (iii) the exporters themselves being completely nonexistent etc., Several cases have come before the Court where such duty drawbacks have, in fact, been availed of, which is detected by the Customs Department subsequently,” it observed.

The Court has however also clarified that the relevant rule on the aspect of limitation, i.e. Rule 16 of the Duty Drawback Rules, 1995 does not prescribe any specific period of limitation for proceeding against availing of excess duty drawback.

As such, it held, “in the absence of a prescribed period of limitation being provided by the statute, the general limitation period of three years cannot be presumed to apply by default, especially when there are strong suspicions as to the fraudulent availment of duty drawbacks and knowledge of such availment is acquired much later.”

The ruling comes in a petition preferred by an exporter against the order issued to it alleging that his company created parallel invoices with different valuations for the same exports.

One set of invoices was submitted to the Delhi Chamber of Commerce and the other set, with the overvalued price (to the tune of 2700%), was submitted to the Department only with the intention to claim a higher duty drawback.

Stand of the Petitioner was that the exports dated back to 2013-15 and the impugned SCNs have been issued only in 2021. This, according to the Petitioner, is beyond the period of limitation.

At the outset, the High Court noted that no issue of the limitation was raised by the Petitioner in its reply to the SCN.

It further noted that the difference (in duty drawback invoices) might have come to the notice of the Department much later after the assessment was conducted.

“Accordingly, the issuance of the impugned SCN cannot be held to be barred by limitation,” it held and disposed of the matter with liberty to the Petitioner to avail alternate statutory remedy.

Appearance: Mr. Anurag Soan, Advocate for Petitioner; Mr. Arnav Kumar, CGSC with Mr. Priyam Gandhi and Ms. Savi Garg, Advocates for R-UOI. Mr. Gibran Naushad, Sr. Standing Counsel with Mr. Harsh Singhal and Mr. Suraj Shekhar Singh, Advocates for R-2. Mr. Avijit Dikshit, Standing Counsel for R-4 & 5. Mr. Jatin Singh, Sr. Standing Counsel with R-7.

Case title: Rajbir Singh v. Union Of India & Ors.

Citation: 2025 LiveLaw (Del) 484

Case no.: W.P.(C) 4496/2025

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