Zeb
Drawback challenges
Zeb Hasan 7 Nov 2025


Every now and then, a tribunal decision brings clarity to an area of law that has long been muddied by overreach and ambiguity. The recent ruling of the CESTAT, Ahmedabad in Commissioner of Customs vs. Jayant Agro Organics Ltd. is one such instance. It deals with a deceptively simple question — can the customs authorities deny duty drawback merely because a foreign buyer was later accused of forging documents, or because the export invoices appeared inflated? For anyone advising exporters, the answer carries practical weight.


Duty drawback is the lifeline of many export operations. It refunds duties paid on inputs used in exported goods, encouraging competitiveness. But it is also an area vulnerable to allegations of manipulation, especially around over-invoicing and document verification. The Ahmedabad bench faced precisely such a situation — an exporter had shipped goods abroad, followed due export procedures, and claimed drawback. Sometime later, the department alleged that the export price was artificially high, and worse, that the foreign buyer had forged certain papers. The question became whether these allegations, surfacing after the export was completed, could be used to retrospectively deny drawback.


From my reading of the order and the reasoning, what stands out is the tribunal’s insistence on first principles: once the export is complete — that is, the goods have left India’s territorial jurisdiction under a shipping bill duly assessed by the proper officer — the exporter’s entitlement to drawback crystallises. The department’s suspicion about price inflation, or a third party’s forgery abroad, cannot retroactively undo a concluded export. The export transaction, once completed under the supervision of customs, attains finality.


I find that reasoning reassuring because it restores predictability to a regime that often veers into subjectivity. The customs department had claimed that the exporter over-invoiced goods to claim excess drawback. Yet, that very shipment had been examined, permitted, and exported under official supervision. The exporter did not hide the invoice; it was on record. The department accepted it at the time, only to question it later, apparently based on what foreign authorities or buyers communicated. The tribunal saw through that.


The order carefully separates two ideas that are too often conflated — the genuineness of the export and the correctness of the buyer’s conduct abroad. The tribunal observed that the alleged forgery of a landing certificate by a Russian buyer had nothing to do with the Indian exporter’s conduct. The landing certificate is simply evidence of arrival; it is not the trigger for drawback once export is established. Therefore, even if the foreign buyer fabricated something later, it cannot retrospectively nullify the fact that the goods physically left India. The export had occurred, and drawback eligibility followed.


The principle might sound self-evident, but it is remarkable how often exporters get trapped in years of litigation over similar issues. Anyone who has worked with small or medium exporters knows how even a minor procedural dispute can freeze working capital. Once drawback is held up, the entire chain of liquidity breaks. The exporter is forced to fight on technicalities rather than on trade. I have seen cases where a simple suspicion of over-valuation turns into a multi-year proceeding, only for the tribunal to eventually confirm what should have been obvious from day one — that the export was real and the department had already accepted the documents at the time of shipment.


The Ahmedabad bench’s clarity lies in reminding customs officers that their authority has temporal limits. Their right to question valuation exists at the time of assessment; once they let the goods go, they cannot reopen the matter based on external allegations. The law provides mechanisms to question declared values before export — through examination, verification, or even provisional assessment. But to wait until after export, and then build a case around a foreign buyer’s conduct, stretches jurisdiction beyond its legitimate reach.


What also comes through in this case is a subtle reaffirmation of trust in the exporter’s declaration system. Our export promotion framework is premised on the assumption that exporters act in good faith and that their documents, once accepted, should not be endlessly revisited. Of course, this doesn’t mean fraudulent claims must go unchecked — customs can always act where there is evidence of collusion or false documentation. But the burden lies squarely on the department. It cannot rely on vague notions of “possible over-invoicing” or “foreign discrepancies” to deny statutory benefits.


There’s a professional takeaway here for anyone practising in trade or customs law. When we advise exporters, we must stress two complementary points — one, ensure meticulous documentation and transparency at the time of export; two, know your rights once the export is concluded. If goods have been examined and let out of the country under proper documentation, the exporter’s entitlement to drawback becomes vested. Allegations arising later — whether about pricing or about what the buyer did abroad — cannot automatically invalidate that right.


In this case, the department’s case rested partly on communication from Russian authorities who claimed that certain certificates were forged by the buyer. The department tried to tie this back to the exporter, implying complicity or at least benefit from the forgery. But the tribunal held that there was no such link — and that the exporter could not be penalised for what a foreign buyer did independently. This distinction is crucial because trade often involves complex cross-border paperwork, with multiple actors beyond the exporter’s control. If exporters were to be held responsible for every irregularity by a buyer overseas, no one would have the confidence to trade globally.


The decision also reminds us that the drawback scheme is not designed as a moral reward but as an economic incentive. It operates on a statutory formula, not on the department’s discretion about the exporter’s virtue. Once the formulaic conditions are met — goods exported, duties paid, shipping bill filed, EGM closed — the benefit must follow. Courts have repeatedly held that administrative suspicion cannot replace legal proof. The Ahmedabad bench reinforced that by saying drawback cannot be denied merely because the department later “believes” that the invoice value was inflated or that a foreign buyer engaged in forgery.


To me, this ruling is less about a single exporter’s victory and more about reinforcing systemic balance. The customs department’s vigilance is essential, but it must be exercised within the law’s boundaries. Exporters, especially smaller ones, often lack the leverage to contest arbitrary denials. They depend on predictable enforcement. A case like this shows that tribunals are willing to draw that line firmly. It brings a measure of certainty to an area that has too long depended on post-facto suspicion.


In professional practice, I’ve noticed how often these disputes arise not from fraud but from administrative hesitation. Officers fear being blamed for “releasing” a shipment that later turns controversial, so they hedge their bets by withholding drawback. But the legal position, as reaffirmed here, is that once export is complete and no misdeclaration is proved, drawback must be released. The entire export ecosystem depends on that assurance. Otherwise, compliance loses meaning — if every accepted invoice can later be doubted, exporters are left in permanent limbo.


From a legal standpoint, the tribunal’s approach aligns with earlier precedents that emphasise finality in export assessments. It echoes principles from the Vishal Exports Overseas Ltd. and Gaurav Pharma line of cases, where courts held that drawback cannot be withheld once the export transaction is completed in accordance with law. The reasoning ties back to the Customs and Central Excise Duties Drawback Rules, 1995 — particularly Rule 3, which provides for grant of drawback on goods exported. Nothing in those rules authorises post-export denial merely because of third-party allegations.


The decision also indirectly comments on the limits of inter-departmental communication. In this case, it appears the department acted on reports received from abroad. Such inputs are valuable, but they cannot automatically dictate domestic legal conclusions. The tribunal rightly treated them as information, not evidence. Indian law still requires proof of wrongdoing under its own standards before depriving an exporter of a statutory benefit.


What I particularly appreciate about this judgment is its grounded tone. It doesn’t romanticise exporters or vilify the department. It simply insists that the law must be applied as written. Once an export is shown to have taken place — meaning the goods left India under a valid shipping bill — the department’s jurisdiction ends. Drawback eligibility is not conditional on what the buyer does next or whether the goods fetch a profit abroad.


I think this decision should encourage a more balanced conversation about risk and responsibility in international trade. There is always a tension between preventing misuse and facilitating business. The ideal regulatory system does both — it deters fraud without paralysing genuine exporters. This judgment, in its own way, pushes us closer to that ideal by setting a boundary on retrospective suspicion.


There’s also a human dimension worth noting. For many exporters, especially those outside metropolitan hubs, drawback claims are not abstract accounting items — they are survival lines. A delayed refund can mean delayed salaries, stalled procurement, or even closure. When customs holds up drawback over speculative concerns, it punishes precisely the group the policy was meant to help. The tribunal’s insistence that finality attaches once export occurs is therefore more than a procedural stance; it’s a reaffirmation of fairness in administration.


In an increasingly globalised market, we also need to rethink how responsibility is apportioned across borders. The foreign buyer’s alleged forgery here illustrates the limits of control an exporter truly has. Beyond a point, the exporter must rely on the integrity of its counterpart. The tribunal recognised this reality. It refused to hold the exporter liable for conduct that occurred in another jurisdiction, under another legal system, after the goods had left India. That’s a refreshingly pragmatic understanding of global commerce.


The message for practitioners is clear. When advising clients facing denial of drawback on such grounds, focus on the timeline — when did the alleged irregularity occur, and who had control at that stage? If export was duly completed under customs supervision, subsequent foreign events are irrelevant. Equally, stress the need for exporters to keep impeccable records — shipping bills, bank realisation certificates, correspondence with buyers — so that their compliance trail speaks for itself. Documentation remains the best defence against hindsight suspicion.


Ultimately, the CESTAT Ahmedabad ruling re-centres the debate around legality and evidence rather than conjecture. It recognises that exporters operate in a complex world where they can control compliance but not outcomes. By reaffirming that drawback cannot be denied on grounds of alleged forgery by a foreign buyer once goods are exported, the tribunal has drawn a clear line between what customs can police and what lies beyond its jurisdiction.


Reading the judgment, one can sense an implicit nudge to both sides — to exporters, to stay scrupulously compliant; to customs, to exercise restraint once their role is complete. That equilibrium is what keeps trade running smoothly. And in that sense, this case is not just about a refund; it’s about respect for process.


I find this kind of decision encouraging as a professional. It reminds me that even in the most technical corners of tax and trade law, principles of fairness and finality still hold sway. In an era where regulatory narratives often oscillate between over-enforcement and leniency, such clarity restores balance. It reminds both practitioners and administrators that law, at its best, is a safeguard against arbitrariness — not an instrument of it.

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