Customs — excess drawback recovery and reassessment · F2J-C-2928
M/s Bhati & Company v. Union of India & Ors. with Latiyal Handicrafts Pvt. Ltd.
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Holding (ratio)
Drawback paid on self-assessment cannot be recovered directly under section 75A(2) where the alleged excess arises from classification; the assessment must first be lawfully reassessed and the amount crystallised.
Operative order (extract)
Both petitions were allowed and the recovery orders set aside, with liberty to proceed under sections 17 and 18 if otherwise permissible.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
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Complete searchable judgment text
[2026:RJ-JD:39000-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 19673/2022
CNR: RJHC010901972022 | URN: CW / 39386U / 2022
M/s Bhati & Company, E-524-526, MIA, Basni Phase-II, Jodhpur
Rajasthan Through Its Partner And Authorised Signatory
Jagmohan Singh Bhati Son of Sh. Vijay Singh Ji Bhati Aged 51
Years Resident of A-25, Shastri Nagar, Jodhpur (Raj.).
----Petitioner
Versus
1. Union Of India, Through The Additional Secretary To The
Government Of India, Ministry Of Finance, Department Of
Revenue, 14, HUDCO, Vishala Building, B-Wing, 6th Floor,
Bhikaji Cama Place, New Delhi-110066.
2. The Commissioner (Appeals), Office Of The Commissioner
(Customs And Central Excise), NCR Building, C-Scheme,
Jaipur-302005.
3. The Assistant/deputy Commissioner, Custom Department,
ICD RAJSICO, Bhagat Ki Kothi, Jodhpur (Raj.).
----Respondents
Connected With
D.B. Civil Writ Petition No. 14320/2022
CNR: RJHC010661192022 | URN: CW / 28614U / 2022
Latiyal Handicrafts Pvt. Ltd., Unit-I, Near Kanhaiya Goshala, Pal
Road, Jodhpur (Raj) Through Its Director And Authorised
Signatory Dev Narayan Ranga Resident of 57, Jawala Vihar Opp.
Kothari Hospital, Chopasani Road, Jodhpur (Raj.).
----Petitioner
Versus
1. Union Of India, Through The Additional Secretary To The
Government Of India, Ministry Of Finance, Department Of
Revenue, 14, HUDCO, Vishala Building, B-Wing, 6th Floor,
Bhikaji Cama Place, New Delhi-110066.
2. The Commissioner (Appeals), Office Of The Commissioner
(Customs And Central Excise), NCR Building, C-Scheme,
Jaipur-302005.
3. The Assistant/deputy Commissioner, Custom Department,
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ICD RAJSICO, Bhagat Ki Kothi, Jodhpur (Raj.).
----Respondents
For Petitioner(s) : Mr. Suresh Kumbhat
Ms. Sheetal Kumbhat
Mr. Naman Bhansali
Ms. Yoshita Ramawat
Ms. Gunjan Purohit
For Respondent(s) : Mr. Rajvendra Sarasawat
Mr. Jitesh Kumar Suthar
Mr. Rishabh Dabhich
HON'BLE MR. JUSTICE MUNNURI LAXMAN
HON'BLE MRS. JUSTICE SANGEETA SHARMA
Reportable Order
12/08/2026
1. The issue involved in these two writ petitions is common.
Therefore, both the writ petitions are being taken up for disposal
by this common order.
2. The facts of the cases disclose that in the case of M/s Bhati &
Company, the petitioner had exported handicrafts/artistic wooden
furniture items under six shipping bills commencing from
13.05.2011 to 20.05.2011 and in the case of Latiyal Handicrafts
Pvt. Ltd., the petitioner had exported handicrafts/artistic wooden
furniture items under seven shipping bills commencing from
13.10.2009 to 25.05.2011. While making self-assessment on
shipping bills, the petitioners have classified the goods exported
under Drawback Schedule Nos.9401 and 940399 by describing
such goods as handicrafts/artistic wooden furniture items. The
proper classification for the shipped items falls under Drawback
Schedule No.442101 under the Drawback Schedule Notification.
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3. The petitioners in respect of each shipping bill, carried out
self-assessment, under Section 17 of Customs Act, 1962
(hereinafter referred to as “Act of 1962”). In the said self-
assessment, they described different classification instead of
proper/correct classification under the drawback schedule. As a
result, the excess payments of drawbacks amounts were claimed
and paid to the petitioners.
4. In the Audit, they found misclassification of goods exported.
Pursuant to the audit objection, the respondents issued a show
cause notice dated 25.03.2013 for recovery of excess drawbacks
on the premise that such payment was erroneously paid by
invoking Section 142(1) read with Section 75A of Act of 1962, and
Rule 16 of the Customs and Excise Duties And Service Tax
Drawback Rules, 1995 (hereinafter referred to as “Rules of
1995”).
5. The petitioners submitted their replies to the show cause
notices and, thereafter, the respondents passed orders,
determining the amount of excess drawback paid and initiating
recovery thereof. The said orders were challenged in appeal,
however, the appeals were also unsuccessful. Subsequently, the
Revisional Authority, in exercise of the revisional powers, set aside
the orders passed by the original authority as well as the Appellate
Authority and remanded the matters for fresh consideration.
Aggrieved by the same, the present writ petitions have been filed.
6. The main contention of learned counsel appearing for the
petitioners is that the invocation of Section 75A(2) of the Act of
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1962, on the premise that recovery is sought to be made in
respect of the excess payment of drawback is misconceived. It is
contended that the present case is not one of excess payment, but
a case of payment made on the basis of self-assessment. The
further contention of counsel for the petitioners is that once a self-
assessment is done under Section 17 of the Act of 1962, the
respondents are required to accept or verify the same and, if the
respondents find that self-assessment is not correct, they can also
proceed for reassessment. After such a reassessment, if any
liability is crystalised, they can draw the recovery proceedings
under Section 75A (2) r/w 142(1) of Act of 1962. In the present
case, recovery was directly done without going for reassessment,
which is without a jurisdiction, and seeks to intervene in the
impugned order.
7. The learned counsel appearing for the respondents submits
that the payment of excess drawback was result of
misclassification of goods. As per the shipping bills, the goods
exported were handicrafts and artistic wood furniture, which is not
in dispute. The classification was wrongly applied to such goods,
so as to claim excess drawbacks, and the said incorrect
classification was noticed by the Audit Department, and they
found that excess drawbacks were erroneously paid on account of
wrong classification. Therefore, they directly invoked the Section
75A r/w Section 142 of the Act of 1962. According to him, the
impugned order is only remand order, whereby the original
authority is required to reconsider the case of the respondent, and
the contention which they have canvassed before this Court can
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also be canvassed before the original authority. Therefore,
interference of this Court is unwarranted.
8. Heard both sides extensively and gone through the
documents relied upon by both parties.
9. The facts which are not in dispute are that the petitioners
have self-assessed based on the shipping bills. The shipping bills
clearly indicate that the goods exported were handicrafts and
artistic wooden furniture. In the self-assessment, they classified
the goods under Drawback Schedule Nos.9401 and 940399. The
respondents’ stand is that the goods exported falls under
Drawback Schedule No.442101. The drawback schedule with
respect to above schedule contains as follows:
Seats (other than those of heading 9402)
Schedule No.9401 whether or not convertible into beds, and
parts thereof.
Schedule Other furniture articles made out of other
No.940399 material including wood, bamboo or cane
Schedule
No.442101 Handicrafts/Artware of wood
Looking at the schedule, the goods which were exported under
shipping bills fall under category of “handicrafts/artware of wood”
the appropriate schedule no. 442101 and not no.9401 and
940399. The petitioners have misclassified the goods under
different head of drawback schedule, instead of correct heading.
10. Now, the question that arises is whether, once a self-
assessment was made and accepted based on the misclassification
of the goods exported, the authority can directly invoke the power
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under Section 75A of the Act of 1962 without first resorting to
reassessment as required under Section 17 thereof. In this regard,
it is appropriate to refer to Sections 17, 18, 50 and 51 of the Act
of 1962.
“17. Assessment of Duty:-
(1) After an importer has entered any imported
goods under section 46 or an exporter has
entered any export goods under, section 50 the
imported goods or the export goods, as the case
may be, or such part thereof as may be necessary
may, without undue delay, be examined and
tested by the proper officer.
(2) After such examination and testing, the duty,
if any, leviable on such goods shall, save as
otherwise provided in section 85, be assessed.
(3) For the purpose of assessing duty under sub-
section (2), the proper officer may require the
importer, exporter or any other person to produce
any contract, broker's note, policy of insurance,
catalogue or other document whereby the duty
leviable on the imported goods or export goods,
as the case may be, can be ascertained, and to
furnish any information required for such
ascertainment which it is in his power to produce
or furnish, and thereupon the importer, exporter
or such other person shall produce such
document and furnish such information.
(4) Notwithstanding anything contained in this
section, imported goods or export goods may,
prior to the examination or testing thereof, be
permitted by the proper officer to be assessed to
duty on the basis of the statements made in the
enter relating thereto and the documents
produced and the information furnished under
sub-section (3); but if it is found subsequently on
examination or testing of the goods or otherwise
that any statement in such entry or document or
any information so furnished is not true in respect
of any matter relevant to the assessment, the
goods may, without prejudice to any other action
which may be taken under this Act, be re-
assessed to duty.”
“Section 18. Provisional assessment of
duty:-(1) Notwithstanding anything contained in
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this Act but without prejudice to the provisions of
section 46 and section 50:-
(a) where the importer or exporter is unable
to make self-assessment under sub-section
(1) of section 17 and makes a request in
writing to the proper officer for assessment; or
(b) where the proper officer deems it
necessary to subject any imported goods or
export goods to any chemical or other test; or
(c) where the importer or exporter has
produced all the necessary documents and
furnished full information but the proper
officer deems it necessary to make further
enquiry; or
(d) where necessary documents have not been
produced or information has not been
furnished and the proper officer deems it
necessary to make further enquiry,
the proper officer may direct that the duty
leviable on such goods be assessed provisionally if
the importer or the exporter, as the case may be,
furnishes such security as the proper officer
deems fit for the payment of the deficiency, if any,
between the duty as may be finally assessed or
re-assessed as the case may be, and the duty
provisionally assessed.
(1A) Where, pursuant to the provisional
assessment under sub-section (1), if any
document or information is required by the proper
officer for final assessment, the importer or
exporter, as the case may be, shall submit such
document or information within such time, and
the proper officer shall finalise the provisional
assessment within such time and in such manner,
as may be prescribed.
(2) When the duty leviable on such goods is
assessed finally or re-assessed by the proper
officer in accordance with the provisions of this
Act, then:-
(a) in the case of goods cleared for home
consumption or exportation, the amount paid
shall be adjusted against the duty finally
assessed or re-assessed, as the case may be,
and if the amount so paid falls short of, or is in
excess of [the duty finally assessed or re-
assessed, as the case may be, the importer or
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the exporter of the goods shall pay the
deficiency or be entitled to a refund, as the
case may be;
(b) in the case of warehoused goods, the
proper officer may, where the duty finally
assessed or re-assessed, as the case may be,
is in excess of the duty provisionally assessed,
require the importer to execute a bond,
binding himself in a sum equal to twice the
amount of the excess duty.
(3) The importer or exporter shall be liable to pay
interest, on any amount payable to the Central
Government, consequent to the final assessment
order or re-assessment order under sub-section
(2), at the rate fixed by the Central Government
under section 28AA from the first day of the
month in which the duty is provisionally assessed
till the date of payment thereof.
(4) Subject the sub-section (5), if any refundable
amount referred to in clause (a) of sub-section
(2) is not refunded under that sub-section within
three months from the date of assessment, of
duty finally or re-assessment of duty, as the case
may be, there shall be paid an interest on such
un-refunded amount at such rate fixed by the
Central Government under section 27A till the
date of refund of such amount.
(5) The amount of duty refundable under sub-
section (2) and the interest under sub-section (4),
if any, shall, instead of being credited to the Fund,
be paid to the importer or the exporter, as the
case may be, if such amount is relatable to:-
(a) the duty and interest, if any, paid on such
duty paid by the importer, or the exporter, as
the case may be, if he had not passed on the
incidence of such duty and interest, if any,
paid on such duty to any other person;
(b) the duty and interest, if any, paid on such
duty on imports made by an individual for his
personal use;
(c) the duty and interest, if any, paid on such
duty borne by the buyer, if he had not passed
on the incidence of such duty and interest, if
any, paid on such duty to any other person;
(d) the export duty as specified in section 26;
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(e) drawback of duty payable under sections
74 and 75.”
“50. Entry of Goods for Exportation. (1) The
exporter of any goods shall make entry thereof
by presenting to the proper officer in the case of
goods to be exported in a vessel or aircraft, a
shipping bill, and in the case of goods to be
exported by land, a bill of export in the
prescribed form.
(2) The exporter of any goods, while presenting a
shipping bill or bill of export, shall at the foot
thereof make and subscribe to a declaration as to
the truth of its Contents.”
“51. Clearance of Goods for Exportation.
Where the proper officer is satisfied that any
goods entered for export are not prohibited
goods and the exporter has paid the duty, if any,
assessed thereon and any charges payable under
this Act in respect of the same, the proper officer
may make an order permitting clearance and
loading of the goods for exportation.”
11. As per Section 17 of the Act of 1962, every exporter entering
any export goods under Section 50 of the Act of 1962, shall self-
assess their duty, if any, leviable on such goods. The proper
officer, may verify such self-assessment. In the event, the proper
officer is not agreeing with the self-assessment, he has to proceed
for re-assessment as per the Section 17(4) of the Act of 1962. If
the re-assessment is accepted by the exporter, there is no need to
pass any speaking order whereas in case the re-assessment is not
accepted, the Officer is required to pass a speaking order
determining the duty leviable on such goods.
12. Section 18 of the Act of 1962, is a provision which enables
the proper officer to pass assessment order provisionally; later,
final assessment order. There are four enumerated circumstances
under which the provisional assessment can be done under
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Section 18 of the Act of 1962. One of the ground is, if request is
made by the exporter to pass an assessment order instead of self-
assessment, the proper officer is required to pass assessment
order as required under Section 18 of the Act of 1962.
13. Section 75A (2) of the Act of 1962, deals with recovery of
erroneous payment, or any payment otherwise recoverable under
the acts or rules made thereunder. It is relevant to refer to section
75A(2) of Act of 1962 which reads as follows:
“75A. Interest on drawback:-
(1)……
(2) Where any drawback has been paid to the
claimant erroneously or it becomes
otherwise recoverable under this Act or the
rules made thereunder, the claimant shall,
within a period of two months from the date of
demand, pay in addition to the said amount of
drawback, interest at the rate fixed under
section 28AA and the amount of interest shall be
calculated for the period beginning from the date
of payment of such drawback to the claimant till
the date of recovery of such drawback.”
14. The present proceedings emanate from a show cause notice
issued under Section 75(2) of the Act of 1962, on the assumption
that the drawbacks paid to the petitioners were erroneous.
Accordingly, the authorities proceeded to determine and recover
the alleged erroneous amount. Such action is contrary to the
scheme of the Act. As long as the self-assessment remains in
force and has not been challenged, the payment should be
deemed to have been made on the basis of such self-assessment,
notwithstanding the fact that such self-assessment may have
resulted from misdeclaration or misclassification. If any such
misdeclaration or misclassification is subsequently found, resulting
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in the excess payment of drawback, the authority may have
recourse to Section 17(4) of the Act of 1962 or may invoke the
provisions of Section 18 of the Act of 1962 for conducting a
further inquiry.
15. Admittedly, in the present case, they have not invoked the
provisions under Sections 17 and 18 of the Act of 1962. They have
directly proceeded under Section 75A (2) of the Act of 1962.
Section 75A of the Act of 1962, is intended to recover the amount
which is erroneously paid or recoverable under this act or rules
made thereunder. This provision can be invoked in the present
facts of the case only after crystallization of amount as
consequence of reassessment and not before.
16. The present case was proceeded with as if it was an
erroneous payment. But, in fact, it is not a case of erroneous
payment, but a case of payment pursuant to self-assessment,
though, such self-assessment was a result of wrong classification
of the goods exported. In that case, the authority should have
invoked the provisions under Section 17(4) of the Act of 1962, if
permissible, instead of Section 75A of the Act of 1962. The entire
proceedings are directly resorted to which action is misconceived.
As long as the reassessment is done and proper determination is
made, such an amount cannot be said to be a recoverable amount
under the Act, which they have not done.
17. Therefore, the impugned original proceedings are result of
misapplication of law and the same are unsustainable. The
Revisional Authority, as well as Appellate Authority failed to
consider this aspect of the provisions, resulting in the impugned
orders. Therefore, the impugned orders are liable to be set aside.
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18. In the result, the writ petitions are allowed. The impugned
orders dated 05.01.2015 and 24.10.2021, are set aside. The
liberty is given to the respondents to have recourse to Sections 17
and 18 of the Act of 1962, if law permits them.
18. Pending application(s), if any, shall also stand disposed of.
(SANGEETA SHARMA),J (MUNNURI LAXMAN),J
68-69/SHIVANI
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