Realisation of export proceeds not mandatory for drawback on re-exports

We had purchased a duty credit scrip from the market and utilised it for paying duty on import of goods. Later, the authorities discovered that the duty credit scrip was obtained through misrepresentation. Can we be made liable for payment of duty or penalty? Can the goods we imported be confiscated?

No. A licence or duty credit scrip obtained through misrepresentation is voidable but not void till it is cancelled. So long as the transferee had purchased the duty credit scrip duly issued by the competent authority and it was valid on the date of payment of duty by the transferee, the duty demand from the transferee importer, or confiscation or levy of penalty on the transferee importer, cannot be sustained. In this connection, please refer to the case of East India Commercial Co. Ltd. Calcutta vs Collector of Customs, Calcutta 1983 (13) ELT 1342 (SC).  This Supreme Court judgment has been followed in many subsequent cases, such as Deep Exports [2016 (338) ELT 742 (Tri.Del.)], Indian Acrylics Ltd. [2015 (325) ELT 753 9Tri. Ahd)], and Patiala Castings Pvt. Ltd. [2012 (283) ELT 269 (Tri.Del.)].

Under the Served from India Scheme (SEIS), is the duty credit scrip issued on the basis of a Chartered Accountant certificate? Do the authorities put it through any other checks?

The authorities may check the application to examine whether prima facie, the services exported are eligible for the benefits, and for any other obvious errors in the application and the Chartered Accountant Certificate. Besides, as per Para 3.19 of the FTP and Para 3.17of the HBP, 10 per cent of the scrips issued every month will be selected for scrutiny. The authorities can call for the original physical documents for examination in detail. If they find any discrepancies or deficiencies, the applicant will be asked to rectify them. In case of excess availment of rewards, the applicant will be asked to refund the excess claim with interest, in accordance with Para 3.19 of the FTP.

In order to incur a reduced export obligation under the EPCG scheme, we propose to pay IGST on imports of capital goods? Is it allowed?

Yes, provided you do not take input tax credit of the IGST paid. As per Para 5.01(d) of the FTP, “in case Integrated Tax and Compensation Cess are paid in cash on imports under EPCG, incidence of the said Integrated Tax and Compensation Cess would not be taken for computation of net duty saved provided Input Tax Credit is not availed”.

We want to re-export imported goods found defective. As we had not paid the foreign supplier, we had obtained GR waiver from the bank. Can we get drawback of 98 per cent of the duties paid?

Yes, provided you comply with the conditions specified under Section 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. Under the relevant provisions, there is no condition that you must realise the export proceeds.  

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