Tribunal Grants Drawback Claims and Interest to Terai Overseas for Delayed Customs Action

Tribunal rules in favor of Terai Overseas, entitling them to drawback claims and interest due to departmental delays in reclassification of exported goods.

In a significant judgment by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) Eastern Zonal Bench, Kolkata, M/s. Terai Overseas Private Limited has been granted drawback claims and interest due to delays caused by the Customs Department in processing their claims. The judgment addresses the conversion of Duty Exemption Entitlement Certificate (DEEC) shipping bills to drawback shipping bills, where the department's delay in granting conversion led to financial implications for the exporter.

The Tribunal, comprising Shri R. Muralidhar, Member (Judicial), and Shri K. Anpazhakan, Member (Technical), found that the appellant, Terai Overseas, was entitled to drawback claims under the classification of CTH 6102 for knitted readymade garments. The Tribunal ruled that the appellant was eligible for a drawback rate fixed at 10% of the FOB value, subject to a maximum of Rs. 45 per piece. This decision comes after the department's failure to provide valid reasons for classifying the goods under multiple subheadings without conducting proper tests or providing evidence.

The Tribunal further clarified the eligibility for interest on delayed sanction of drawback claims. It ruled that interest is payable for eight shipping bills from three months after the Tribunal's order in 2001. For the remaining shipping bills, interest is payable from three months after the rejection order dated October 17, 2018, until the date of sanction of the drawback. This decision was based on the fact that the department delayed the conversion process without any fault on the part of the exporter.

The Tribunal relied on precedents, including the cases of Vedanta Ltd. and Sandvik Asia Ltd., to grant interest for delays caused by the department in finalizing claims. The judgment underscores the responsibility of the Customs Department to act timely and provide valid reasons for any reclassification of exported goods, failing which exporters are entitled to compensation for delays.

This judgment is expected to have significant implications for exporters facing similar issues with the Customs Department, reinforcing the need for timely processing of claims and clear communication of decisions.

Bottom Line:

Exporters are entitled to drawback claims and interest for delays in granting such claims, where the delay is not attributable to the exporter and the department fails to act on time or provide valid reasons for reclassification of goods.

Statutory provision(s): Customs Act, Public Notice No. 5/1995, Circular No. 36/2010-Cus.

M/s. Terai Overseas Private Limited v. Commissioner of Customs (Port), (CESTAT)(Eastern Zonal Bench: Kolkata)(Regional Bench) : Law Finder Doc Id # 2813965