Delhi High Court upholds customs drawback recovery stating bank balance is not proof

The Delhi High Court delivered a judgment restoring a customs department drawback recovery order, holding that the mere presence of money in a bank account fails to serve as conclusive proof of export proceeds realization. The court clarified that the customs department possesses the statutory empowerment to independently examine whether exporters are legally entitled to retain export benefits without infringing upon the Reserve Bank of India's jurisdiction under the Foreign Exchange Management Act (FEMA). Duty drawback schemes refund customs and excise duties paid on inputs used in manufactured export products, but these benefits are strictly contingent upon the actual repatriation and realization of foreign exchange within stipulated timelines.

Exporters often assume that general bank liquidity satisfies export-proceeds compliance, but revenue authorities require unambiguous, traceable documentation linking inward remittances directly to specific shipping bills. Allowing customs authorities to scrutinize these realizations ensures that public funds disbursed as export incentives are backed by actual foreign currency inflows. Exporters and their legal advisors must maintain pristine audit trails reconciling every shipping bill with its corresponding bank realization certificate.

Compliance teams should prepare comprehensive documentation to satisfy customs inquiries independently of standard banking records. Bottom line: clear proof of export proceeds realization is essential to prevent painful drawback recoveries by customs authorities.