The Supreme Court on Tuesday dismissed an appeal filed by the Collector of Customs regarding the recovery of duty drawback/rebate from vegetable ghee exporters under Section 21 of the Customs Act, 1969.
According to media reports, a three-member bench, led by Chief Justice Yahya Afridi, heard the appeal against a decision by the Peshawar High Court (PHC). The Customs department had contested the PHC’s ruling, which had declared the department’s claim for recovery as time-barred.
The Customs counsel argued that the PHC’s judgment was flawed, claiming that the audit and examination of the respondents’ accounts had taken place, contrary to the court’s findings. The counsel also contested the application of a three-year limitation period under Section 32(3) of the Customs Act, asserting that the correct provision was Section 32(3A), which prescribes a five-year period.
The defense counsel, representing M/s Yaqout Oil Processing & Extracting Mills Pvt Ltd, Bilour Ghee Industry, and Uthman Ghee Industry, argued that the department could not issue a notification with retrospective effect, emphasizing that the matter pertained to earlier years and was thus governed by different legal frameworks.
The issue at hand stemmed from the scrutiny of duty drawback claims from 2010 to 2015. The Customs department found that certain exporters, including the respondents, had received excessive duty drawback payments while benefiting from concessions under the Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA). An audit of these claims revealed that the exporters had received overpayments.
As a result, the Customs issued demand notices requiring repayment of the excess amounts. However, enforcement of these notices was delayed due to conflicting rulings from the Federal Board of Revenue (FBR) and the application of SRO 1066 (I) 2018, which introduced retrospective amendments to rebate and payment rates for several years.
The Peshawar High Court had previously dismissed the case, ruling that the show-cause notice issued by the Customs department under Section 32(3A) was time-barred. The court found that the department’s claim to recover overpaid duty rebate was invalid due to the time lapse.
The Supreme Court’s decision upheld the PHC’s judgment, reaffirming the dismissal of the Customs department’s appeal and rejecting its claim for recovering the overpayment from the exporters.
