Establishment of No Limitation Period under Rule 16 Drawback Rules and Mandate to Exhaust Statutory Remedy

1. Introduction

The Delhi High Court in RAJBIR SINGH v. UNION OF INDIA & ORS. (2025 DHC 2557-DB) considered a writ petition under Article 226 challenging Show Cause Notices (SCNs) and an Order-in-Original (OIO) issued against an exporter under the Duty Drawback Scheme. The Petitioner, proprietor of M/s Abhishek EXIM India, was accused of filing parallel invoices—one set at true value submitted to the Chamber of Commerce and another set grossly inflated submitted to the Customs Department—to claim excess duty drawback. The key issues were:

Whether Rule 16 of the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995 prescribes any limitation period for recovery of excess or erroneous drawback.
Whether a writ under Article 226 is maintainable when an alternate statutory appellate remedy under Section 128 of the Customs Act, 1962 remains unexhausted.
Whether the impugned SCNs and OIO, issued many years after the alleged exports, are time-barred or vitiated by procedural infirmities.

2. Summary of the Judgment

The Bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta dismissed the writ petition on the following grounds:

Rule 16 of the Drawback Rules contains no express limitation period; hence a general three-year bar cannot be imported when fraudulent availing of benefits comes to light later.
The Petitioner’s own conduct—creation of parallel invoices with a 2,700% markup—demonstrated mala fide intent, and no substantive reply on merits was offered in the SCN proceedings.
Writ jurisdiction is discretionary and should not be exercised where a statutory appeal under Section 128 of the Customs Act exists and remains unexhausted.
In line with precedent (e.g., Sans Frontiers (2023 SCC OnLine Del 7913)), the Petitioner was relegated to the appellate forum rather than being afforded relief in writ jurisdiction.

The petition was disposed of, permitting the Petitioner to file an appeal before the Appellate Authority without prejudice to any observations by the High Court.

3. Analysis

3.1 Precedents Cited

M/s S.J.S. International v. Union of India (Guj HC, 9 Dec 2021) and Raghav International v. Union of India (Guj HC, 22 Feb 2023): Held that limitation under Rule 16 could not be presumed when statute is silent. Petitioner relied on these cases, but the Delhi High Court distinguished them on facts and emphasized the absence of any expressed bar.
Commr. of Customs v. Sans Frontiers (2023 SCC OnLine Del 7913): Addressed belated issuance of SCN under Rule 16 and directed that parties be relegated to statutory revision under Section 129DD, rather than entertaining writs. The present Bench applied the same principle of exhausting statutory remedy before invoking writ jurisdiction.

3.2 Legal Reasoning

The Court’s reasoning can be broken down into three pillars:

Statutory Text and Limitation: Rule 16 provides for repayment of “erroneous or excess payment” but contains no express time-limit. In tax and customs law, a limitation period must be expressly enacted; absent such prescription, recovery can be initiated once fraud or error comes to light, subject to reasonableness and principles of natural justice.
Fraudulent Conduct: The Department unearthed two invoices for the identical consignment of polyurethane soccer balls—one at USD 0.36, the other at USD 9.70—revealing a 2,700% overvaluation. The Petitioner failed to offer any substantive rebuttal on this core allegation in the SCN proceedings, undermining his plea of innocence and justifying the reassessment and penalties.
Writ Jurisdiction vs. Statutory Remedy: Article 226 is an extraordinary remedy. Where a specific appeal or revision exists (Section 128 Customs Act, Section 129DD for revision), the Court will customarily direct the aggrieved party to exhaust that remedy first. This respects legislative intent and established doctrine of alternative remedy.

3.3 Impact on Future Cases

This decision clarifies and cements several important principles:

Rule 16 claims in the Duty Drawback Rules are not subject to a default limitation period; recovery can be sought whenever excess drawback is discovered, especially in fraud cases.
Exporters must maintain transparent and consistent documentation. Use of parallel or fake invoices will invite late challenges, confiscation, heavy penalties, and foreclose writ relief.
Tax and customs litigants should first exhaust statutory appeals or revisions before approaching the High Court under Article 226.

4. Complex Concepts Simplified

Duty Drawback Scheme: A refund mechanism that rebates customs and excise duties paid on inputs used in exports, to enhance competitiveness of Indian exporters.
Show Cause Notice (SCN): A formal notice requiring a party to explain or “show cause” why a proposed adverse order should not be passed against it.
Order-in-Original (OIO): The adjudicating officer’s final decision on SCN, determining liability, recovery, and penalties.
Article 226: The provision empowering High Courts to issue writs for enforcement of fundamental rights and for any other purpose, but exercised sparingly where alternative remedies exist.
Section 128 Customs Act: Provides an appeal mechanism to the Commissioner (Appeals) against an OIO.

5. Conclusion

The RAJBIR SINGH judgment establishes that:

Rule 16 of the Drawback Rules contains no statutory limitation period; customs authorities may initiate recovery proceedings when excess drawback is discovered, especially in cases of fraud.
Writ jurisdiction under Article 226 will generally be declined if a statutory appeal or revision remedy is available and unexhausted.
Exporters must adhere strictly to valuation norms and avoid any manipulation of documentation or invoices, lest they face confiscation, recovery of duties, interest, and steep penalties.

The decision reinforces legislative intent behind the Drawback Scheme—to promote genuine export trade—and underscores judicial reluctance to entertain writs that circumvent statutory appellate processes. It will guide exporters, legal practitioners, and customs authorities in future disputes involving alleged misuse of duty drawbacks.