Duty drawback recovery from ghee exporters: SC dismisses plea of Collector Customs

ISLAMABAD: The Supreme Court on Tuesday dismissed an appeal of the Collector of Customs about the recovery of duty drawback/ rebate, under Section 21 of the Customs Act, 1969, from the exporters of vegetable ghee.

A three-member bench, headed by Chief Justice Yahya Afridi, on Tuesday heard the appeals of the Collector of Customs Peshawar (Appraisement) against the Peshawar High Court (PHC) judgment.

The Collector of Customs’ lawyer argued that the PHC impugned order erred in holding that no audit or examination of the respondents’ accounts took place, despite the record, including the demand notice and show-cause notice, which clearly indicate otherwise.

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He further contended that the PHC erred by applying the limitation period of three years under Section 32 (3) of the Customs Act, instead of the five years given in Section 32 (3A) of the Act. The High Court incorrectly treated the matter as one under Section 32(3) (about refunds due to inadvertence or error), he added.

Isaac Ali Qazi, appearing on behalf of M/s Yaqout Oil Processing & Extracting Mills Pvt Ltd, Karachi, Bilour Ghee Industry, Uthman Ghee Industry (respondents), said that the department cannot issue a notification with retrospective effect.

The Customs counsel informed that during the scrutiny of record related to rebate/ duty drawback (DD) claims and the determination of liabilities of the respondents, under SRO 1066 (I) 2018, it was observed that the respondents had availed undue benefits of duty drawback, while simultaneously availing concession at the import stage under Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA).

The data of duty drawback claims of various exporters of vegetable Ghee sanctioned from 01-07-2010 to 31-08-2015 was scrutinized by the audit team, which revealed that the respondents were sanctioned excessive duty drawback payments. The same was also observed by an audit team of Directorate General Audit Customs and Petroleum, Lahore for the financial year 2014-15, 2015-16 and 2016-17.

Consequently, the demand notices were served to the respondents for repayment of the excess amount received. However, the demand notices could not be enforced as the Federal Board of Revenue (FBR), Islamabad, had already fixed the repayment ratio.

Accordingly, the matter was referred to the FBR for revision, where it was deliberated upon in light of the import-stage concessions under FTA/ PTA. As a result, SRO 1066(I) 2018 was issued on 27-08-2018 with retrospective effect, prescribing varying rebate/ payment rates for the financial years from 05-03-2009 to 01-07-2014 onwards, with different slabs for each year.

The Customs counsel said that despite the demand notices and repeated reminders, the respondents failed to deposit an overpaid amount of repayment in terms of Section 21-C of the Act.

The matter was therefore placed before the Collector of Customs (Adjudication), Islamabad, who under Section 180 of the Act issued a show-cause notice on 06-03-2019 to the respondent.

The Collector passed the order that the respondent, as per Section 21-C of the Act, was only entitled to the amount paid at the time of import and did not have any right to claim beyond that. He ordered that the respondent pay the amount of Customs Duty they received as overpayment, as determined in the show-cause notice.

The respondents then filed an appeal before the Customs Appellate Tribunal, Peshawar, which passed the judgment in favour of the respondent. It noted that the amendment introduced in SRO (I)/2009 vide SRO(I)/ 2018 was to apply prospectively and not to a past and closed transaction.

The petitioner then filed a Customs Reference before the Peshawar High Court. However, it was dismissed, declaring that the show cause notice under Section 32(3A) was time-barred.

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