M/S Nexage Innovations A Partnership Firm, And Anr vs. The Deputy Commissioner Of Customs, And Ors

Held

The Court held that the "Risky Exporter" tag was affixed without notice to the petitioner, violating principles of natural justice. Given that the petitioner had complied with the demand to reverse the ITC and pay the penalty, continuing the tag without fresh material was not justified. The Court found no basis to continue branding the petitioner as a "Risky Exporter" solely on the basis of past issues with suppliers, especially after compliance. The Court directed the competent authority of the 2nd respondent to remove the "Risky Exporter" tag within three weeks. Regarding the pending duty drawback and IGST refund claims, the Court directed the appropriate respondents to process these claims within three weeks. However, if the Department had doubts regarding the petitioner's entitlement, they were required to issue a notice to the petitioner and provide an opportunity to be heard before making a final decision. The Court emphasized that action must be taken in accordance with the law.

Facts

The appellant, M/s. Nexage Innovations, filed a writ petition seeking removal of the "Risky Exporter" tag from the Indian Customs EDI System, issuance of a no objection letter, and release of pending duty drawback and IGST refunds. The "Risky Exporter" tag was imposed because some of the petitioner's suppliers were suspected of being non-existent, leading to scrutiny of Input Tax Credit (ITC) availed from them. The petitioner reversed the ITC credit of Rs. 11,85,781.26 along with a penalty of Rs. 1,77,867.18 and submitted proof of payment. Despite this, the tag remained, prompting the writ petition. The High Court noted that granting interim relief would amount to granting the main relief and, with the parties' consent, decided to dispose of both the appeal and the writ petition.

Key Issues

1. Whether the "Risky Exporter" tag, affixed without prior notice to the petitioner, should be removed, particularly after the petitioner reversed the disputed ITC and paid the penalty, in light of the principles of natural justice and the absence of fresh material justifying the tag? (Section 14 of the Customs Act, 1962, and principles of natural justice). 2. Whether the authorities are obligated to process the pending duty drawback and IGST refund claims, and if so, under what conditions? (Provisions of the Customs Act, 1962, and GST law). Petitioner's arguments: The petitioner contended that the "Risky Exporter" tag was imposed without following due process, violating principles of natural justice. They argued that having reversed the ITC and paid the penalty, the basis for the tag was removed, and its continuation was unjustified. They also sought directions for the release of pending refunds and duty drawbacks. Revenue's arguments: The respondents argued that the petitioner's reversal of ITC and payment of penalty amounted to an admission of guilt. They stated that the decision to remove the tag rested with the 2nd respondent and that they had no information about any other adverse findings against the petitioner.