2015 (3) TMI 946 - CGOVT - Customs

Denial of duty drawback claim - licence fee was paid for right in India and the value of Licence Fee is neither paid nor payable at the time of export - Held that - applicant sought to export goods under claim of drawback for value including value of Licence Fee of US 4000 against which duty was paid at the time of import. Government observes the applicant paid duty at the time of import under protest as the customs authorities at the time of import held that such licence fee should be chargeable to duty. When the applicant paid duty under protest he ought to have sought the option of refund in terms of Section 27(1) of the Customs Act 1962 which he failed to do in this case. Admissibility of drawback is governed by Section 74 of the Customs Act 1962 which requires certain conditions to be fulfilled. Export goods should be identified w.r.t. goods which were imported. Such identification is possible only when such goods are tangible in nature. Identification as required under said Section 74(1)(a) cannot be established for intangible items. In this case Licence Fee for the purpose of export cannot be treated as tangible items so that identity could be established. Government further finds observation of the original authority logical that value of licence fee could be added for charging duty at the time of import as the same is payable at the time of import by exporter (i.e. applicant in this case) to supplier of imported goods. But at the time of export the value of such licence fee is neither paid nor payable by the applicant to the consignee of impugned exported goods and hence the same cannot be realized as foreign currency. The export related benefit are extended to promote the export to earn foreign exchange in lieu of such export. Since in this case the licence fee was for right in India the same cannot be realized in BRC as foreign exchange. Such non-realized amount cannot be claimed for export related benefit like drawback. No infirmity in order of Commissioner (Appeals) - Decided against assessee.

Summary

Issues:
Claim of drawback under Section 74 of the Customs Act, 1962 for duty paid on licence fee, Admissibility of drawback for licence fee, Interpretation of Notification No. 19-Cus./6-2-65, Eligibility of drawback for exported goods, Identification of goods for drawback claim under Section 74, Rejection of drawback claim for licence fee, Compliance with Section 27(1) of the Customs Act, 1962.

Analysis:
The case involved M/s. Star Entertainment Pvt. Ltd. filing for drawback under Section 74 of the Customs Act, 1962 for duty paid on licence fee. The dispute arose when the customs authorities rejected the drawback claim for the licence fee paid on imported goods. The applicant argued that the licence fee should not be deducted for drawback purposes as it was not payable at the time of export. However, the original authority and Commissioner (Appeals) upheld the rejection, leading to a revision application before the Central Government.

The Central Government analyzed the provisions of Section 74 regarding the allowance of drawback on re-export of duty-paid goods. It noted that the identification of goods for drawback claim under Section 74 required tangible items, which the intangible licence fee did not fulfill. The Government agreed with the original authority's reasoning that the licence fee was payable at the time of import and not at the time of export, making it ineligible for drawback as it could not be realized as foreign currency.

Furthermore, the Government highlighted that the original authority had allowed a partial drawback claim on certain tapes but rightly rejected the claim related to the licence fee. It emphasized the promotion of exports to earn foreign exchange and concluded that since the licence fee was for rights in India, it could not be claimed as export-related benefit like drawback. Therefore, the Government upheld the decision of the Commissioner (Appeals) and rejected the revision application for lack of merit.

In conclusion, the Central Government found no infirmity in the order of the Commissioner (Appeals) and upheld the rejection of the drawback claim for the licence fee. The revision application was consequently dismissed, and the decision was finalized accordingly.